Solving the Problems Th of the Carrier
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e Influence of Roac Speed on Rates
IN last week's issue I discussed the performances of a 10-ton vehicle over three specified route, comparing
those -that were possible when the speed limit of 20 m.p.h, was enforced, with some actual results which can be achieved only when that limit was ignored. The three routes were: A to B, 108 miles; A to C. 192 miles, and A to D.210 miles.
Making no allowances whatever for return loads, I showed that the rates per ton which must be charged under the
former conditions, that is, when adhering to the legal speed limit, were £1 lls., £2 .11s. 6d. and £2 16s. Under actual Conditions, ignoring the speed limit, the rates can be reduced to £1 6s. 6d., £2 2s. and £2 6s.
These rates are calculated on the assumption that the vehicle costs 8s. 6d. per hour for standing charges and establishment , expenses, plus 6d. per mile running costs. A profit of 20 per cent. was added to those amounts and the rate assumed to be 10s. per hour, plus ' 7d. per mile.
Now, the purpose of the preceding article was to show the risk of calculating stabilized rates on the basis of current charges, having in mind the fact that the latter are assessed on the basiss of journeys run at illegal speeds. I gave the warning that rates so assessed would prove uneconomical when speed limits are again strictly enforced. There are, however, other aspects of the prOblem involved in these rates comparisons.
For example, on the face of it, it seems as though it would be preferable, from the haulier's point of view, to stick to the 20 m.p.h. limit and charge rates accordingly. The net profit per ton would then. be Ss., 8s. 6d, and 95. 4d., approximately, as compared with 4s. 6d., 7s. and 7s. 6,1., respectively. That, at least, is the apparent benefit of the slower speeds. The conditions, indeed, compare with those relating to Government contracts, on the cost plus 10 per cent. basis, because, as the rate is calculated on the basis of cost plus 20 per cent., the longer the journey takes
the more it costs and the greater the profit. .
But this increase in profit is only apparent, and not real, as can be ,shown by considering the amount of traffic which can be moved per week in the contrasting circumstances.
In the case of the shortest route, for example, from A to B (108 miles). Travelling. at speeds within the legal limit a round journey takes 17 hours, so that three can be completed in one week. The tonnage carried per week is, thus, 30 and at 5s. per ton profit that vehicle will earn £7 10s. per week net.
On the other hand, if the speed limit be ignored, the round journey is completed in 12 hours. Four journeys per week can 'thus be run and the tonnage carried each week is increased to 40. At 4s. 6d, per ton the net profit per week is £9, an increase of £1 10s. per week.
Or again, taking the longer journey from A to C (192 miles); at the slow speed it takes 26 hours, so that two journeys per week are all that are possible. The tonnage is 20 per week and the net weekly profit, at 8s. 6d. per ton, is 48 10s. At the higher speed, taking only 17 hours for the return journey, three journeys caq be completed in the week. . The tonnage is thus increased to 30 and the" weekly net profit, at 7s. per ton, to £10 10s. A similar result would come of a comparison of the figures for the longest journey of 210 miles, from A to D.
Now, consider this problem from yet another angle. The various rates suggested above for the traffic are all easily calculated on the basis of cost plus profit, the latter at the rate of 20 per cent, on outgoings. I have blandly stated that the rate from A to B, in the case of a vehicle travelling at speeds within the legal limit, shall be £1 1 ls. lithe speed laws be ignored, the rate, I have said, can be £1 6s. 6d. I should, perhaps, have been more precise. I should have stated that those are the rates which must be obtained if the stipulated profits are to be earned.
; It is; unfortunately, the case that rates are seld.Orn agreed upon such a simple and, for the haulier, eminently satisfac
tory basis. Some operators are able to obtain remuneration for their services which is sufficient to provide that 20 per . cent. Even they, however, do not earn that minimum on all traffic. On some the margin is less than 20 per cent..
and the deficiency is made good by the better rates which they get for hauling other goods. The deciding factor in all cases is far from being a simple arithmetical calculation of ,cdst plus profit.. It is mainly competition, but a good second to that is—whisper it, please—what the traffic will hear. The experienced haulier, when qtroting, also takes into consideration such matters
as bulk,* ease of handling, risk of damage, and so on, but, even, so, he cannot ignore a competitive rate, unless he can offer a better service and, as is most important, convince his customer that his service is worth the extra cost.
As for the factor " what the traffic will bear," every haulier is as familiar with the terms ." high-grade traffic "
and "low-grade traffic " as is any railwayman. To a large extent, indeed. these terms have been banded on from the railways and the grading has been effected by the haulier competing with the railways on rates.That is a fact, and there is no Sense in trying to blink facts.
One thing is clear. If a haulier is to mix his qualities, of traffic, carrying high-grade and low-grade goods, so that
his net profit may be sufficient to make his business pay, then a high percentage af his journeys must be such as will enable him to pick up return loads.
If he runs from Leeds to London with machinery or textiles, both of which are high-grade traffics which will stand a good rate, then he can view with equanimity the prospect of carrying cement, a low-grade traffic, on the return trip.
If he is going to be able to make a reasonable profit, however, he must give careful consideration to the time element. In other words, the factor of speed, already shown to be important, now becomes almost over-riding.
Let me go back to the original proposition, assuming that legal speeds be not exceeded, and attempt to assess the pos sibilities of profit-making if a return load is to be picked up.
Dealing first with the journey from A to B, a lead mileage of 108. It was assumed that the loading time was two hours, the travelling time 6/ hours*, and the unloading time two hours, a total of 104 hours-one full day's work: The operator must now pick up a return load. That will, in all probability, involve a short journey from the delivering point for the outward load. The distance may.
be anything from one mile to 50; assume it to be five miles. In city'traffic that will take from 20 to 30 minutes. Loading time, if it be low-grade traffic, will probably be short, perhaps five minutes. per ton plus 10 minutes turn-roundan hour altogether.
The return journey will take as long as the outward journey-61 hours. Allow another hour for unloading and half-an-hour to get back to the garage and the total is 94 hours-another day's work.
The total time is, thus, 20 hours and the mileage 226. If he is to earn the minimum profit I have specified he must, realize, from the two loads, 10s. per hour and 7d. per mile. That is •£.16 I25. (to the nearest shilling). The average rate must, therefore, be 16s. 8d. per ton. In other words, if he can get £1 per ton for the outward load he will be content with 13s. 4d. or 13s. 6d. for the return low-grade traffic. If, in one week, he takes three outward loads and brings back two return loads, his earnings wal £43 10s. His total time is 57 hours and his total milrage 668. His cost is, therefore, £40 18s. 6d. His net profit is only £2 us. 6d., which is not much for a 10-ton lorry. If he gets a return load every time his revenue is increased to £50 5s. and his cost is 442 95. His profit is thus £7 16s., which is considerably better. There is a point here which I hope to be able to stress in a future article, namely, the enormous difference which the loss of one back load per week can make to the earning capacity of a vehicle on • tong-distance traffic.
Now consider the same journey, assuming that the speed limit be ignored and that the running time be in accordance with the experience of my friendly critic, namely four instead of six,and-ahalf hours. The outward journey now takes only eight hours in all. The driver will, therefore, be able to pick up the return lead and be well on the way home before he puts up for the night after, say, 104 hours. The complete round journey, including the time spent at B, in getting from delivering the outward load to picking up the return load, and in getting from the delivery point of the return load to the home garage or pickingup point for the next outward load, will be 15 hours.
If four outward and three back loads be carried, the total time will be 57 hours and the distance 894 miles. The earnings necessary to cover that, at 10s. per hour and 7d. per mile, must be £54 11.s. Ikl.
If the rates obtained be those already named, viz., £1 per ton on the outward journey and 13s. 6d. on the return trip, the revenue will be 440 for the outward load and £20 5s. for the return traffic, a total .of £60 5s., which is more than is needed to show the minimum profit.
Actually, the average rate per ton could be as low as 15s. 9d. per ton-say, 18s. 6d, for the outward load and 13s. for the return trip. On that basis, the weekly earnings, assuming that four round journeys per week are completed and that a return load is carried on three of them, , will total £56 10s. The operator's all-in costs are at the rate of 8s. 6d. per hour and 6d. per mile. The total, for 57 hours and 894 miles, is £46 1.1s. 6d., leaving a margin, for net profit, of £9 18s. 6d. per week.
On those occasions when a fourth return load is carried the revenue is increased by £6 10s. to 1163. The cost also increases, because the figures for time and mileage now become 60 hours and 904 miles. The cost is £48 2s. and the net profit £14 18s. The extra benefit of an additional back load is thus again emphasized.
To complete the story, it is now necessary to assume that rates for this traffic be stabilized at 18s. 6d. and 13s. as being profitable under current conditions, which, as is obvious from the figures given me by one friend, do not provide for dhservance of the speed limits. Further, assume that after the war the 20 m.p.h.
limit remains unaltered, and is strictly enforced, in the same manner as that of 30 m.p.h. for longdistance coaches, namely, by checking up on journey times.
The operator's schedules will then become those set out earlier in this article. He will take three outward loads of 10 tons each, at the rate of 18s. 6a., earning 227 15s., and will bring back two loads, at 13s., earning £13, so that his total weekly revenue will be £40 15s. ' The cost will be as before, £40 18s. 6d., so that he will be losing 3s. 6.1. per week. Even in those weeks when he brings back three return loads his revenue will be no more than £47 5s. and his cost £42 9s., so that, on those rare weeks he will not be making £5 per week profit. ^ The moral, I think, is clear. The industry must either press strongly for the speed limit for heavy vehicles to be increased to 30 m.p.h. or those who are now so busily engaged on building rates structures must assess those rates with the 20 m.p.h. limit prominently in mind.
Of these suggestions the former is to be preferred, having in view the prospect of the keen competition which road: transport operators are likely to have to face after the war. S.T.R.