RATES DELIBERATIONS
Page 10
Page 11
If you've noticed an error in this article please click here to report it so we can fix it.
fogged by detail at Warrington during my recent visit to Lancashire. An owner-driver put what, on the face of it, seems a pertinent question. At one time, he said, his experience with tyres on a lorry carrying 4-5-ton loads was that he was likely to obtain from a set a life of 20,000 miles or thereabouts. At that time he was engaged on local short-distance haulage. A change of conditions arose, however, 'and he diverted his attention to longdistance transport. He has not yet worn out the first set of tyres on this new class of work
and it appears likely that he will run
upwards of 60,000 miles before a Solving al change becomes necessary..
"How," he asked, "is that difference going to be taken into consideration in the stabilizing of rates? "
At the meeting, the chairinan, Mr. W. D. Broadbent, most courteously relieved me of the trouble of answering the question by dealing with it himself in his own particular way. Unfortunately, I had not the opportunity of meeting this haulier again and discussing the point with him. Someone else in the audience, however, did meet me afterwards and raised it anew. "I will deal with the question as put," I said, "although I think that to consider minor details such as this is really quibbling and beside the point. I shall give you my views on the way, to regard the subject when I have answered your question. Briefly, this difference in expense of operation as regards one item does not really affect the question of stabilized rates to anything like the same extent as might seem likely." "But you have always insisted that operating cost of the vehicle is the first essential in building up a rates structure." "Quite. But I will show you, first, that this seemingly tremendous difference in tyre cost does not make A22
of the
much difference to a stabilized rate; secondly, that it is almost certain to be offset by some other item of expense, which will tend to equalize the basis of rates calculation. "Let me compare the figures, using the data which I gave you this evening in 'my. address. When the operator who asked the question was concerned with local haulage, his vehicle was probably covering about 300 miles per week, in which case the basic figures for operating cost would be, as I gave them, £5 8s. per week for standing charges, plus 300 times na. per mile for running costs. e Problems
"You will remember that in that
figure of 31d. for running cost I assumed 20,000 miles per set from the tyres. His total cost of operation will amount to £9 12s. 5d. per week and if a third of that sum, which is £3 4s. id., be added for establishment costs and profit, the figure of £12 16s. 6d. for a minimum weekly revenue is reached. That is strictly in accordance with what I told you earlier this evening." "That is just the point," interrupted one of those present. "This man is going to save at least id. a mile on tyres and, what is more, he is doing a fairly big mileage per week, and the bigger the Mileage the more important does that id. become." "Suppose we assume some figure for his weekly mileage," I said. "How many miles do you think this fellow is doing?"' "I should say he's doing somewhere between 700 and 750 miles a week," suggested somebody else. "Very good," I said. "I'll take 720. Now, if I take my own figures for running costs and stick to the 31c1 per mile, his total 'operating costs work out to this: multiply 31d. by 720 and you get £10 2s. .6d.
Add £5 8s. for the standing charges; the total is £15 10s. 6d. A third of that sum for establishment charges and profit is £5 3s. 6d. and the minimum revenue he ought to earn is thus £20 13s.
"Now, supposing he is saving /d. a mile on tyres. That economy will bring his running cost down to 31d. per mile,. always assuming that some of his other items are not greater than the figures I quoted you to-night. Actually, one or Other of them is likely to be higher, but I will give you the benefit of the doubt.
"His total running costs will now be 720 times Thltd., which is £9 7s. 6d. His standing charges will remain as before, £5 8s., and his total operating cost will • thus be £14 15s. 6d. Add, again, a third for establishment charges and profit, that is to say, add £4 18s. 6c1, • and . . . ."
"Now, there's where I think you're making a mistake already," said somebody. "You're going to allow that man only £4 18s. 6d. per week for gross profit, as against £5 3s. 6c1., so that, in a sense, you are penalizing him because he is getting better service from his tyrei."
Point Not Overlooked.
ri had not overlooked that point," I said, "hut I thank you, all the same, for bringing it up. I will come back to it in a minute. Meantime, I would like to proceed on the orthodox lines.
"If I add this 24 18s. 6d. to the £14 15s. 6d., I get £19 14s. as the minimum revenue which this fellow ought to earn, taking into consideration the diminished running cost resulting from the longer life that his tyres are giving him.
"Now, the difference between the two figures for minimum weekly revenue is 19s. You are well aware. all of you present, that long-distance haulage brings in its train certain extra expenses, which have not to be met by the man whose vehicles never go more than 50 miles from his door. One item alone, lodging allowance for the driver when he is away from home, may, in some weeks, wipe out the whole of that 19s. When it doesn't, there are such items as trunk calls, sundry extra maintenance costs, because little defects have to be remedied at repair shops on the road, and other items of expenditure like that, which, unfortunately, are apt to be forgotten."
"That's quite right," came from several of those present.
"Now I will take up the point already raised-that a man ought not to be condemned to earn less profit in a week merely because .his operating expenses are favourable. Instead of adding £4 18s. 6d. as gross profit, I will add the original £5 3s. CA. Then his minimum revenue totals £19 19s. and the difference between that and my original figure of £20 13s. is only 14s. per week.
"And now I would like to come back to my original criticism of this query. To my mind, the question is almost entirely beside the point. I do not believe that any schedule of rates which results from the deliberations of you and your friends in the associations will be rigid. There will be allowance made foi local conditions, for one thing, and, in any event, as I think you will agree, any schedule of rates relating to lOng-distance haulage will have to be calculated on a basis differing, perhaps considerably, from those relating to local operations."
" I don't quite like that idea," objected one of those present. "If you're going to have flexibility, you're going to open the door to rate-cutting and we shall be nearly as badly off, under those conditions, as we are now."
Rates Structure Must Be Flexible.
"I don't agree," I said. "I think there will have to be a margin, but I think it will be something like the margin which is allowed in a machine shop in reference to the finished sizes of parts. There will be a " plus" or "minus," an allowance over or under the fixed rate to make adequate allowance for special conditions.
"What you will get out of this stabilization, and I think it will be a valuable result, will be a standard of haulage rates. That is something that you have never yet had in the industry, and something that, at the same time, you most certainly need -now more than ever before."
But, on account of limitations of space, the story of this conversation will have to be continued in a sub sequent article. S.T.R.