More Thoughts on a Schedule c Caulage Rates
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. Solving the Problems of the Carrier
Extending the Investigation Into the Problem of Payment for Return Loads to Take Long, distance Haulage Into
Considerdtion
IN an article which appeared in " The Commercial Motor " dated September 12, I concluded a preliminary survey of the subject of assessment of standard rates for road haulage, with particular reference to traffic carried over distances . which would, except in unusual circumstances, permit the vehicle to return to its home depot each evening.
The special pfohlem I had in mind, in composing the 'series of articles in question, was the extent to which it would be practicable, in fixing a rates schedule, to take the revenue from return loads into consideration.
There is a good deal of misunderstanding with regard to this problem of return loads. In the Preliminary article, I stated the belief that it would not be practicable to boild a rates structure on the basis of charging in each direction for the whole journey, making no allowance, in the assessment of any rate, for the prospect of a return load. I was severely criticized for that and it is quite clear that this aspect of the matter needs further explanation. What I have in mind can best be illustrated by an example.
Suppose that a rate be scheduled at 43 per ton for traffic which normally moves in 10-12-ton loads, over a distance of 200 miles. That rate has been calculated on the assumption that the Vehicle costs is. 3d. per mile to run, that being an inclusive figure providing for establishment costs, subsistence allowances and other sundries. The pro4 shown is thus 20 per cent, on the actual expenditure, being 3d. per mile. The revenue, carrying a lOad of 10 tons, will be £30 and the net profit•£5 per journey. .
If the vehicle makes two round journeys per week it travels 800 miles, the total. all-in-cost is £50, the revenue £60 and the net profit £10 per week.
Favourable Conditions that are Seldom Encountered
Now suppose, for the sake of argument, that without materially adding to the cost, it is possible for this yehicle on every occasion to pick up a return load of the same tonnage. Suppose, too, that the rate fixed for that traffic, assessed in the same way as above, is also '£3 per ton. The revenue per round journey thus becomes £60. The cost is Still only £25, so that there is a net profit of £35 on an expenditure of £25.
Nice work if you can get it. Nice work, so long as you can get it, is, perhaps, the better way of putting it. My view is that, whilst in exceptional circumstances, it might be possible to run under such favourable conditions, that state of affairs could not possibly prevail for long.
What is overlooked by those people, who suggest that the revenue from return loads must not be taken into consideration .when assessing rates, is that what we are doing is trying to fix a schedule which shall be permanent. Moreover; that it shall be affected at only rare intervals by some alteration in the basic conditions upon which the rates have been fixed, such as, for example, by changes in the cost of materials, or in wages.
If any schedule of rates be fixed on a scale which will afford opportunities of such fantastic profits as those indicated above, conditions must rapidly arise which will make it necessary materially to alteiwthe schedule of rates. Any frequent alteration is bound to cause disturbance in the industry and is something which we want to avoid at all costs.
All kinds of things might arise to disturb a rates structure • founded on these unstable principles. One is certain to happen. There will be a concentration of the energies of hauliers, 30 far as is possible, on those routes which show these remarkable—and non-commercial--profits, to the neglect of other routes where such return loads cannot be had.
Any such tendency will inevitably have the effect of. undenninifig the econorniC structure of industry and create conditions which no Government can 'allow to prevail. The upshot will be interference from above and, therefore, disturbances of the kind from which the industry has suffered for so long and from which it is earnestly desirous .being delivered.
I do think, therefore, that in building up a rates structure which, is to be permanent—and unless it be permanent it is not going to be of any benefit to the industry—some consideration must be had to the prospect of return loads.
Odd Reactions to the Need for a Rates Schedule
Whenever I have tried to put this aspect to haulier friends of mine their reaction has invariably been such as to demonstrate that they have not appreciated the real significance of a tales schedule and the total effect that such a schedule must have on the manner of conducting their operations. Nearly always someone says: " But if you are going to allow return loads you are going to upset the rates structure, because what is a return load for one man is an outward load for another."
It is most difficult to impress these hauliers with. the fact that when the rates structure is celnplete, return loads, in the sense that is implicated in the above objection, will not exist. There will be fixed rates for all traffics and it will not he open for a man coming into a district to quote a rate for a return load which differs in any way from the schedule.
What I am trying to make clear is that standard rates for traffics, and over routes, in connection with which there is regular prospect of return loads, must, if the rates schedule is going to be a commercial success, be lower than those relating to other traffic and routes in connection with which there is little or no prospect of return loads.
How little this aspect of the matter is understood is shown
bY a letter which was published in " The Commercial Motor ",dated October 3. In that letter, the writer objected to my making any attempt to such differentiation as I have just described. In support of his argument, he mentioned. the fact that, some vehicles would be tied up owing to the fact that they had to bring back empties.
• Surely that is a case in point where, because of nature of the traffic, it ii impossible to earn any revenue from return loads and, in such circumstances, the rate must be higher than that relating to traffic in connection with which there is no need to bring back empties, so that the vehicle can pick up a profit-earning load on the return journey.
The Profitable Minimum Mileage for Return Loads
I must admit that, in preparing the first series of articles, I did get something of a surprise inasmuch as I found that, given standard conditions of loading and unloading— it is inevitable that such conditions must be standardized— if we are to standardize rates, it would rarely be profitable to consider return loads over any distance up to 70 miles, carrying 5-ton loads. I have found that, owing to the loss of time in travelling for the return load and picking it up, delivering it, and returning to the starting point, for the outward load, it is far better for the operator to concern himself with the outward load only and return at once to the home depot for another outward toad.
It follows, therefore, that in scheduling rates it will not be practicable to consider the potential revenue from return loads at all, up to and including a distance of 70 miles. I now propose to extend the investigations which were commenced in that series of articles and to ascertain how far these conditions are altered when the journey is of such a length that the vehicle cannot return to its base within a working day. I-propose to commence with a radial mileage of 60 and to consider, this time, maximum-load four wheeler carrying 7-8 tons.
The first thing that is necessary is for us -to be agreed on. the operating costs and establishment cLarges which, to-day, are involved for a vehicle of that capacity. The initial cost will be in the neighbourhood of £1,200. Depreciation, therefore, on the basis of a 200,000-mile life will be 1.44d. That will apply only if the annual mileage exceeds 48,000. If, as is likely, the mileage is only half that total then some provision must be made for obsolescence, and I would set the figure for depreciation at 2.32d. The vehicle should average not less than 12 m.p.g. of oil fuel at, say, is, 8d. per gallon, so that the cost per mile for firel will be 1..50d. A set of tyres will cost £30, and on the basis of a 3,000-mile life that is approximatel 0.75d. per mile. Lubricating oil I will take at 0.10d. and repairs and maintenance at 1.25d.
The total running cost is thus 5.92d., which is sufficiently near to 6d, for us to take that as the actual figure. The charge per mile should be not less than 71d., on the understanding that all the establishment costs are going to be loaded on to the hourly charge. •
The standing charges, in connection with a vehicle of this type on long-distance haulage, will approximate to the following:—Road Fund tax, ,R1 6s. per week; wages; including insurances and provision for holidays, as well as subsistence allowance, £6 4s.; garage rent, 7s. 6d.; insurance, AI 16s.; interest on capital outlay, £1; establishment costs, at the rate of 12s, 6d. per week per ton of pay-load, £5; total £15 15s, 6d. That, on the basis of a 48-hour week, is 6s. 7d. per hour, and adding 20 per cent, for profit gives a figure of nearly 85. per hour-as the charge.
Demurrage Must Be Charged for Big Terminal Delays
The rates for any work done by this vehicle must, there fore, be assessed on the basis of 8s. per hour, plus per mile run, with the proviso that, in the case of excessive delays at terminals, demurrage should be charged at not less than 12s. per hour.
It will be helpful to conclude this article with a trial assessment for a rate over the minimum mileage (60), assuming that there is no attempt to obtain a return load. Of the total distance, five miles at eachend will "probably be through congested areas, and the average speed over that distance will not exceed 10 m.p.h., so that we may take one hour for 10 of the 60 miles. The remaining 50 miles will probably be run at an average of 20 m.p.h., that is a further 21hours, making 34hours, in all for the 60 miles. For loading and unloading times I propose to use the formula which I described in the previous series, that is to say 10 minutes at each end for routine inquiries. signing of documents, etc., plus six minutes per ton of pay-load, that is nearly an hour at each endand art hour for a 7-8-ton pay-load is reasonable. The total time for a round journey, therefore, with no delays on account of return leads, is two hours at terminals, plus seven hours' travellihg—nine hours in all. The charge at 8s. per hour for the time is £3 12s., and at 7id. per mile for the 120 miles, £3 15s., a total of £7 7s. That, as near as makes no matter, is £1 per ton, The total revenue is £7 7s., the net cost is' £5 19s. 30., so that the profit avail
able to the operator is £1 7s. 9d. S.T.R.