Solving the Problems of the . Carrier
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Subsidies Needed to Establish Rates for Long-distance Haulage
Costs for Long-distance Haulage Do Not Fluctuate Materially: Potential Profits Vary Considerably and Only Subsidies Can Solve the Problem Thus Involved
AT. the close of my last „week's article, I pointed out that difficulties in the way of the national application of stabilized rates existed in connection with longdistance haulage, as well as with regard to local haulage. I demonstrated in that and previous articles, that the way to deal with rates for local haulage was to localize them: The need for that dowse arises because local conditions, affecting ease of operation, and local costs, differ from district to district. To attempt to apply a national rate to local traffic would create anomalies so serious as to make the whole rates structure unstable and certain to collapse
after a short while. .
Nom, obviously, local conditions can have only a mMor effect on long-distance haulage costs and -rates. (It must be recalled that I have ruled out the case of the ownerdriver as being exceptional.) The factors which make it impracticable to stabilize long-4istance haulage rates, on a ton-per-mile basis, without any differentiation to allow for routing condition, have already been hinted at in a couple of articles dealing with long-distance haulage rates, which appeared in the issues of "The Commercial Motor" dated
August 13 and 20 last.
It may be useful briefly to refer to the arguments which were uSed in these articles, and the conclusions to which I came. The most important thing is that I assumed that return loads were available throughout 'the year to the extent of 661 percent. of fullloads.
When the Overtime Factor Has to be Considered Next, I assumed that, for leads in excess of 74 miles,
a week's work would be three return journeys. There would, of course, be overtime to be worked when the lead exceeded 100 miles, but none for distances shorter than that. The capacity to-complete three return journeys per week would, I aSstimed, cease 'when the lead distance reached 200 miles.
One return journey per day, or six per working week. Would be possible, assuming return lOads be sought, and, in 66f per cent, of the journeys, .found, up to a maximum lead distance of 60 miles. The minimum distances which need to be considered in this connection showed to be 20 miles, because, for shorter distances, the operator would still need to charge for a full day's work. The rate for a 20-miles lead; in fact, is the minimum.
There is, in the foregoing, a gap., Six journeys per week, carrying an average proportion of return loads, can be made so long as the lead mileage does not exceed 50. Three round journeys per week, with return loads, can be covered if the lead be 75 mites.
For the intermediate distance, 51-miles to 74-miles lead, it is not possible, without exceeding the speed Emit, and it has been agreed in these articles that no law-breaking • is permissible, to pick up a return load in a single day, save in exceptional circumstances, when loading and/or unloading.. is especiallyeasy. Nor is it practicable or profitable to leave the vehicle to pick up a return load and
stay out for the night, • Over leads between these limiting distances, therefore, one-way loading only is practicable. That, of course, considerably increases the rates for loads over these distances, because there is no return load to help out.
The result is a corresponding gap in the rates schedule's. For lead distances of from 20 to 50 miles the rates were shown to be 7s. 9d. rising to 11s7Sd. per ton. For 60 miles, however, there is a jump to £1 4s. 9d. per ton, rising to £1 7s. 9d. per ton for 70 miles. At 75-miles lead, hoWever,• when return loads can again be carried, the rate falls to £1 Os. 5d., rising streadily again to £1 17s. 10d. for 200 miles. .
The true effect of these conflicting conditions on a rates schedule compiled strictly on a cost plus profit basis is shown in the accompanying diagram, which also indicates the way in which I propose to get over the difficulty. It is, like so many similar suggestions, a compromise. I continue the line 1-1 until it reaches zero mileage. I then work out my.final schedule of rates according to the one straight line and, as a result, arrive at a basic minimum rate of 13s. 2.id. per ton for a 20-miles lead,
• rising by led. per ton for each additional mile lead. In presenting this schedule, I made this comment or qualification. The application of a schedule such as this will mean that operators will make handsome profits on carrying traffic over 20 to 60 lead miles—provided that the . proportion of return loads be 661 per cent.—but will be at a loss, or maybe, will only just meet expenditure, on-traffic extending over leads which range between 50 to 75 miles.
Satisfactory Rates-assessment
Method for the General Haulier In the case of a general haulier whose lead mileageis not in any way limited and who is just as likely to be carrying traffic over a 50-miles lead (or less than 50' miles) as over one of from 60 to 70 miles, this method of assessing .rates would prove to be quite-satisfactory.
In the case, however, of an operator ,who, for some reason or other—Possibly the operation of the Road and Rail Traffic. Act and its system of licensing—operates almost continuously within the 60-70-miles band, the results Would not turn ont to be so pleasing. They would, in fact, be disastrous.
I then proceeded to establish *hat has been-put forward, in several quarters, as a saving clause. It .has been stipulated, having in mind some of the effects of a too-rigid application of a rates schedule, that, whereas. the basic schedule of rates is applicable only where return loads are available and can be carried in the proportions already quoted, some provision will have to be made for compensa,tion to operators who convey traffic over routes where no such good fortune in the way of frequent return loads is ever' 'encountered or where, as in ,the case. of operators. whose vehicles are running over this 60-70-miles lead, the conditions which are encountered are of such a nature that return loads cannot be carried.. .
Now, as a matter of fact, I do not attach a great deal of importance to that brief span of apparently unrenaunerative mileage. I am quite confident that, taking the rough with the sniooth, hauliers will be able to arrange for one job to compensate ,for another. It is normal for a certain amount of " marrying" to take place, linking short leads with long ones, unprofitable rims with extra .profitable runs,
and so on. • . •• • What I am concerned with is the case of those hauliers, and there are many of them,. Who must obtain most of their traffic from routes over which this 661 per c,ent. pmportion of return loads ,does not apply. Indeed, this percentage figure is itself open to question. It is an average figure, one which, within my knowledge, applied in peace time to most of what I might term the " popular" trunk routes. Even so, it was liable to fall short over some, even if it was exceeded ovel others. Here, again, we have to accept the position that, in most cases, an operator using a poor
route was able to obtain traffic on a good one' also, so that the 621 per cent.. and-the rate based on, that, percentage, would apply.
Such routes as London JO Leeds, London to Manchester or Liverpool. London to Birmingham, Leeds to Glasgow, Manchester or Liverpool to Glasgow, and Leeds to Birmingham, • would provide traffic' in such quantities as to afford.
return loads in the proportion of 80 to 90 per cent. of ' the maximum. London to Cardiff and London to Bristol , are exaittples of routes the fraffic over which would not suffice to provide the average of 66* per cent. '
A concern operating over all these would be conteut with a rate based on the 661 per cent, ratio, and be willing to Work the 'London to Bristol and London to Cardiff routes in with the others. (It used to be possible to obtain loadings in excess of 66* per cent, of the maxi; mum from -these routes, but much of the return traffic was unremunerative and Was carried at
rates which were cut very low.) • • But, suppose a man, by limitations of
his licence or " operating permit " is coinf° pelled to 'operate over the Bristol route and 3/ no other. The distance, say,„ is '130 miles, and the rate, according to the schedule.
He is operating a 7-8-tonner; according to the' conditions specified in the previous , articles. That is to say, he makes -three return journeys per week. On' the outWard journeys he carries full loads Of 7+ tons, which total 22+ tons per week.' On the return, his total-tonnage-average, week by week-is nine only. His weekly
traffic is thus 311 tons, for which he receives £44 4s. 7d. 'His costs are the .same as those of any other operator, for even if he has no establishment for obtaining return loads he uses the facilities of the clearing houses and the result is very much the same. He "spends, aecording-to my view, £8 is. 6d, per week on standing charges, £27 .13s. 3d. on running costs, £6 on establishment costs (or commissions to clearing houses), 1 ls. 8d. on overtime and £1 10s. on subsistence allowances and expenses. The total ia £43 16s. 5d., leaving a margin, for net profit, of 85. per week-obviouSly not enough. Compare these figures with those of, say, a man on the Leeds to London route, whereon, save in times of slump, 95 per cent, return loads is a reasonable expectation. The distance is approximately 200 miles and the standard rate is £1 17s. 10d.
The tonnage carried is 221 from Leeds to London and 211 back-average again, of course.The total, is 44 tons and the revenue is £83 8d. The total cost is £58 19s. 7d., made up by £8 is, 6d, standinae. charges, £41 6s..6d. running costs, £6 establishment costs, £2 is. 7d. overtime and £1 10s. subsistence allowances and expenses. The net profit is thus £24 5s. Id. per week, which is 41 per cent. of Iris expenditure.
That is a proportion which most of us would undoubtedly like to earn. It is not 'one, however, which could be put forward as reasonable. Yet the rate itself, which affords such a profit is a reasonable one if it is to be widely applicable. Furthermore, it is reasonable if operators on unprofitable routes are to be subsidized by others more fortunately placed. In order to appreciate how such a scheme would work-supposing it ever comes into operation which I.very much doubt-figures for a good route, an average route, and a poor roilte must be compared. • . Take the same length of route, namely, 200 miles, and take the above set of figures as applying to a good route, that is to say a profit of £24 5s. id, per week. For the average route we can take the figures from Table I in the previous article. The cpst per week is £58 19s. 7d,, the tonnage 37+ tons per week at £1 17s. 10d. per ton, which gives a revenue of £70 15s. 6c1., showing a net Profit of £11 15s. 'lid.
For the poor route, assume that the return-load proportion is only 25 per cent, of the outgOing. The operating cost is still £58 19s. 7d. The tonnage is 22+ in the outward direction and only 5+ on the return, a total of 28 tons altogether. The rate is still the standard. one of £1 17s. 10d., so that the revenue is £52 1'9s. 4d. This operator, therefore, working at the standard rate, is losing £6 Os. 3d. per week. ■ Theoretically, according to this idea of subsidizing a poor route from a profitable one, the first operator should contribute to the fund any excess of profit over the standard of £11 15s. lid. that is a suna Of £12 9s. 2d.
Unfortunately, the third operator over the poor route will not find that -£12 9s. 2d. sufficient. If he is to be . given the standard profit of £11 15s. Ild, per week then he needs altogether that sum plus his loss of £6 Os, '3d. per week. He would, therefore; expect to draw from the subsidy fund as much ars £17 16s. 2d. per week.
What we have to hope for is, of course, that there will be a sufficient number of profitable routes to make it possible for the fund to provide all that money for the poor operator. If that be not so then, presumably, the profit ratio and the rates' will have to be revised throughout in order to allow for that difference to be made rip.