When Do Return Loads Become Profitable?
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There Appears to be a Minimum Distance Below Which it is Unprofitable to Carry Return Loads; the Question Arises, What is That Minimum Distance ?
OUT of a critical letter from a correspondent, referring to my article on the R.H.A. proposals for a national rates schedule, has arisen the need to examine the question of return loads with the object of ascertaining what is the lead distance below which it is unprofitable to carry such loads. The criticism, which was published in full in my last week's article, did not ask that question, but it suggested it, inasmuch as it drew attention to a feature of the R.H.A. rates which made no provision for return loads until the lead distance exceeded 20 miles. he correspondent challenged that and was apparently of opinon that any operator of experience and ability could quite profitably carry return loads over that distance.
Other criticisms of the article were dealt with in my contribution for last week, in which I demonstrated that, so far as a 15-mile lead is concerned, it is manifestly unprofitable except in unusual circumstances with which, obviously, the R.B.A. was not dealing, to convey return loads profitably. It was actually shown that the earnings of a vehicle were, in general, greater if no return loads be carried.
In arriving at that conclusion, I accepted the R.H.A. figures for time and mileage charges of 7s. per hour and 5d. a mile respectively for a 6-tonner. I differed, however, from the bases of calculation used by the R.H.A., first as regards terminal delays, which I cut below those stipulated, and then as regards average point-to-point speeds, which I set above those stipulated in the Interim Report. It is worthy of note that these modifications would have the effect of making it more profitable to carry return loads, if that be possible at all.
Finding the Critical Mileage for Return Loads The method by which I arrived at that decision will be illustrated by the following examples, tried out by way of arriving at a figure for the critical mileage for which we are searching.
Touching the point of average speeds between terminals, I assumed that it be 15 m.p.h. over the 15-mite lead, taking the view that, generally speaking, haulage over that distance would, as to quite a considerable proportion of the distance, be in congested areas. It should be appreciated that as the length of the lead increases the average speed will also increase, although not, of course, in the same proportion. Although the speed for the first 12 to 15 miles may average 15 m.p.h. (10 m.p.h. according to the R.H.A.), as the lead mileage increases a greater proportion of the distance would normally be through less-congested areas, when a better maximum speed can be maintained for longer periods.
I now propose to test the possibilities of a 20-mile lead, and for that distance I shall assume that the average speed over the whole journey is 16 m.p.h.
First let us assess the rate and earnings per day without endeavouring to find a return load. The travelling time for the full 40 miles at 16 m.p.h. will be 21 hours. The total time at terminals will be, as in the previous example, ti hours, so that the full period is 4 hours.
I arrive at this figure for terminal delays by allowing six minutes per ton plus 10 minutes for the signing of documents, sheeting up, turning the vehicle and getting into or getting out of The loading bay. For a 6-ton load that would actually give me 46 minutes, but for simplicity I shall say that 45 minutes will be sufficient, that is, 45 minutes at each end, or 11 hours altogether.
In order to assess the rate per ton for a jo.urney such as this, taking as a basis cost plus profit and using the 7s. per hour and 5d. per mile figures mentioned above, we must take for four hours at 7s which is ft 8s., and 40 miles at 5d., which is 16s. 8d., giving us a total of £2 4s. Sd. That is 7s. 6d. per ton to the nearest penny: and the vehicle earns £4 10s. per day to the nearest shilling. Now assume the same conditions as regards distance, loading and so on, but reckon that arrangements are made for a return load to be collected. I assume that between delivering the first load and picking up the return load there is a delay of 15 minutes and that 2 miles are covered in travelling from one place to the other.
Similarly, at the other end there is a further 15 minutes and 2 miles extra between delivering the return load and getting back to the original starting point for the next out ward load. .
It is also assumed that the time necessary for loading and unloading the return load is the same as in the case of the outward load. It means that the additional time involved in collecting, bringing back and delivering the return load is 2 hours: 11 hours for the loading and unloading and half-anhour for the extra travelling at each end, so that we have 6 instead of 4 hours and 44 miles (including the two extra miles at each end) instead of 40 miles.
The total charge must thus be made up of 6 hours at 7s., which is £2 2s., plus 44 miles at 5d. (I8s. 4d.), a total of £3 Os. 4d. That is the minimum revenue which, on the basis of a regular 12 tons per round journey, will involve a charge of just over 5s. per ton.
What is Meant by the Balance Loading Factor In assessing revenues, however, where return loads are taken into consideration it is not praCticable to assume that there will always be a return load or, alternatively, that there will always be such a load available. To allow for deficiencies in that respect, what the R.H.A. calls a " balance loading factor" must be introduced, and, according' to my view, it means that 331 per cent, must be added to the calculated rate, which brings that 5s. up to 6s. 4d. per ton.
There is, therefore, a saving in the rate to the customer because he is now asked to pay only 6s. 44. instead of 7s. 6d. per ton. The outlook for the haulier, however, is nothing like so good, for he has taken 6 hours on the round journey and, as a result, cannot complete two such journeys in the day. Therefore, unless he be fortunate enough to have a job for the vehicle to do in the remaining time at his disposal, his earnings are limited to £3 Os. 4d, if he carries a return load, compared with £4 10s. if he does not bother to get return loads.
In this connection, another point of interest arises. Is it justifiable when assessing a rate for traffic-which does not take up a full 8-hour day, but which is such that it is impossible for the operator to put his vehicle to practicable use for the balance of that time-to charge for 8 hours? In this case, for example, if it be not possible for the operator to find other work, then the vehicle can be said, in effect, to have been taken out of his hands for 8 hours and not merely for the 6 hours which is the actual time occupied.
If we take the full 8 hours, then the time charge should be £2 16s., and with the mileage charge still remaining at 18s. 4d. the total will be £3 14s. 4d., which involves a net charge of 6s. 5d. per ton and an actual charge (including, the piper cent. on account of the balance loading factor) of Ss. 7d. per ton. In other words, the charge to the customer when a return load is carried would be more than if no return load be carried. The earnings of the haulier would still be no more than £3 14s. 4d. with a return load, as against £4 10s. per day without a return load.
Continuing the process of hit or miss, it is worth while to note the details in connection with a 25-mile lead, as another point of importance arises there. Over that distance I shall assume that the average speed is 18 m.p.h., so that the pointto-point time for the 25 miles is I hours. That means that the return journey, without picking up a return load, will be 4/ hours-3 hours for travelling, 11 hours for terminals. The total revenue required for the journey, estimated in the same way as previously, should be 12 12s. 4d., the rate per ton 8s. 6d., and the revenue per day-it will be possible just to get in two journeys-£5 4s. 8d.
If a return load had been collected under conditions similar to those already laid down, the time would have been 6+ hours and the revenue per day, assuming that 61 hours was all that was charged for, only £3 8s. The net rate per ton would he 5s. 8d., and the gross rate, allowing for the balance loading factor, 7s. 3d. Once again the customer benefits, but the haulier loses, and a considerable amount, too.
Even if, as in the case of two-way traffic, the vehicle be charged out for the full 8 hours the revenue would still be no more than £3 I8s. 6d., the net rate 6s. 7d. per ton, hut the actual rate charged to the customer 8s. 9d. per ton, that is 3d. more than when no return load is sought or obtained.
The important point in connection with this example is this The vehicle can just complete the two journeys per day with a 25-mile lead. Obviously, if that lead be extended to any considerable distance it would not be possible to make two journeys per day, even if no return load be collected. On the other hand, it may still be possible to pick up a return load and get back with the vehicle within permitted hours. It almost looks as though that is the condition which, in any set of circumstances, fixes the minimum mileage below which it does not pay to go for return loads.
Obviously, a good deal depends on the actual loading and unloading time and upon the total travelling time-if, for example, the legal speed limit be exceeded and it is possible to extend this minimum distance up to 40 or even more miles.
When the Lead Distance is Too Great for Two Round Journeys Per Day It is of interest, before leaving the subject, to take an example of a lead distance over which two round journeys per day are impossible even without return loads, to try out the rates and earnings (a) without a return load and (b) with a return load.
Take 45 miles as an example. For the travelling time for the 90 miles I shall assume 4+ hours. Add the I+ hours assumed in the previous examples as terminal periods and we get a total time of 6 hours, just too long for it to be possible to complete two journeys in a day.
Now, without a return load, the rate will be made up of 6 hours at 7s., which is 42s., plus 90 miles at 5d. (37s. 6d.), a total of 79s. 6d., which is 13s. 3d. per ton. The revenue earned by the vehicle is just short of £4, and that without making any charge for the balance of the 8-hour day left, as it were, unused. If a charge be made on the basis of 8 hours instead of 6 hours, then the rate will have to go up to 15s. 7d., and the daily revenue of the vehicle will be £4 13s. 6d.
If a eturn load be collected under the conditions previously described, then there will be an additional 2 hours added to the time and 4 miles to the distance, so that we must charge for 8 hours at 7s., which is 56s., plus 94 mass at 5d., which is 39s. 2d. The total is £4 15s. 2d., and that is the revenue earned by the vehicle, now, of course, more than when no return load is picked up. The net rate for carrying the 12 tons would be 8s.. and adding the 33+ per cent., on account of the balance loading factor, we get 10s. 8d. as being the appropriate rate. Under those conditions it is, obviously, more profitable to pick up a return load, and it does seem, on the loading and unloading times I have taken and the average speeds expected, that round about 35 to 40 miles-depending on other conditions-is the minimum distance below which it does not pay to collect return loads.
When the one customer provides regular return loads between the same points, so that there is no extra travelling and no delay at either end, then conditions are more favourable than .;t out above. Then, it is quite possible that the minimum distance may quite profitably be extended. That is something which only experience cart decide.
There is, or used to be before the war, a custom in the trade-and quite a reasonable one-for giving some consideratizm to such a customer. This usually takes the form of a differentiation in the ordinary rate for the return load and for the customer.who provides two-way traffic. There is justification in that, because over the class of journey I have been considering' there is half-an-hour saved on the • round journey, as well as 4 miles' running. That is because the vehicle has not to rug from one point to another to pick up a return load, or, afterwards, when that return load has been delivered. That would mean a saving in time equivalent to 3s. 6d. and Is. 8d. for mileage, a total of 5s. 2d., which is equal to nearly 6d. per ton an the total traffic carried.
I must again stress the importance of the figures I have used for calculating loading and unloading time, that is, 6 minutes per ton carried plus 10 minutes for making contacts, signing documents, sheeting down and turning the vehicle round, and so on.
Not Profitable to Carry Return Loads Over a 20-mile Lead In the previous article I showed that, in special circumstances, when the loading and unloading times be much shorter than above, the tendency was towards making it less profitable to take the trouble to collect return loads, at least within the same minimum mileage. At any rate, I think I have demonstrated that the claim made by the writer of the letter that the average haulier could profitably carry return loads over a 20-mile lead is not correct, unless there be something specially favourable in the conditions prevailing.
Just how the R.H.A. Rates Committee came to fix 20 miles as the minimum distance is not clear, nor are we in a position to judge the correctness of that selection without knowing the conditions it had in mind.
On the face of it, according to the calculations which the correspondent set out in his letter, a round journey on a 20-mile lead with no provision for picking up return loads would appear to take 8 hours, made up of "terminal running and shunting," 1 hour; "loading and delivery," 3 hours; "running," approximately, 4 hours.
I must say that the time allowance appears to be ample, but, again, without knowledge of what was in the minds of the members of the Rates Committee when they arrived at these conclusions, it is not possible to pass judgment.
S.T.R.