A Rates Sche(
Page 22
Page 23
If you've noticed an error in this article please click here to report it so we can fix it.
_1 le Based on Cost Plus
Profit
Solving the Problems of the Carrier
AT the conclusion of the previous article in this series I drew attention to the fact that, when the lead mileage exceeds 50 it becomes necessary to provide for the expenditure involved because the vehicle is away from its home base. I showed that a fair average figure to allow for this was is. 6d. per ton. In compiling a schedule of rates for distance in excess of 50 miles, therefore, it becomes necessary immediately to increase the rate by is, 6d. per ton and that is superimposed upon the rate calculated by the procedure already described.
When the lead has extended by approximately another 80 miles it is likely that a second night's allowances and expenses will be incurred and a further Is. 6d. per ton must, therefore, be added and so on at intervals of approximately 80 miles.
Another point now arises—what provision is to be made for the po.4sibility of obtaining return loads? In my opinion, the Leeds Schedule fails, certainly as a permanent measure, also as a war-time measure, in the fact that no such provision is made. I am aware that Mr. Wood, in his explanation of the' scheme, puts forward what at first sight appears to be a sound reason for this omission.
From my own personal contact with Government authorities in various departments, when questions of rates for specific traffics have arisen, it has been made clear to me that the principle of payment on the basis of oneway loads is quite unacceptable. Moreover, in many cases such a course would mean that the operator was making excessive profits, in as much as that whenever return loads are obtainable—and they are not infrequent—be is being paid twice over for the mileage covered, There is a question of Government policy to be considered and that involves discouragement of empty running.
When There Is No Real Profit In a Return Load That is not to imply that over lead-mile distances the haulier should be paid at a rate calculated on the assumption that he can always obtain return loads. That, of course, is not the case. 'Moreover, it is an established fact that, until a certain lead-mile distance is exceeded, there is no real profit in a return load. Whatever profit might seem to be earned is offset by the delays involved in obtaining the return load and in disposing of it at the end of the jpurney, as well as by the fact that detours and a certain amount of empty running are unavoidable, except in special cases.
• From personal observations I have come to the conclusion that, in drawing up such a schedule as this, the following is a reasonable provision to make for the probability of earning a profit by picking up a return load.
Until a lead mileage of 100 is reached there should be no such provision. At 100 miles a diminution of the standard rate by 5 per cent, is a fair allowance on amount of the probability of earnings from return loads. At 120 miles that percentage increases to 10, at 140 to 15, at 160 to 20 and at 180 to 25—the maximum.
These are average allowances. It is impossible to be more accurate, because prospects of return loads differ according to the return route travelled. The allowance is graded in the manner described, because experience has demonstrated that it is only as the lead-mileage increases that reasonable profit on a return load becomes a practical possibility.
Table VIII gives a schedule of rates per ton. In compiling it provision has been made for these additions, on
account of subsistance allowances, etc., at the rate, of le. 6d. per ton at mileages of 50, 130, 210, 290 and 870. That is to say, at each of these distances the rate is stepped up by Is, 6d. per ton.
At mileages of 100, 120, 140, 160 and 180 successive deductions of 5 per cent. are made from the basic rate, so as to provide for the fact that a certain amount of profit is likely to accrue from return loads.
A brief scrutiny of these figures discloses that to make these alterations in rates arbitrarily and precisely at the mileages noted, brings about anomalies which make the schedule impracticable. Art 139 miles lead, for example. the rate is quoted at £2 6s. 10d., but at 140 miles lead, because of the deduction of 5 per cent., the rate is only £2 9s. 10d. This is more strikingly shqwn in the diagram, Fig. 2, wherein the full line is a diagram of the rates set out in Table VIII.
Obtaining a Rates Rise
Gliadually from .Mile to Mile
The problem now is how to get over that difficulty. At first it might be thought reasonable to draw a straight line from the beginning of the diagram to the end and take that as the basis for the schedule, so that the rates rise evenly with the lead mileage throughout. A little consideration will suffice to show that a schedule arrived at by such a procedure is not sufficiently accurate. At 180 miles, for instance, the rate pea. ton would be nearly 6s. more than it should be and at 100 miles it is about Ss. less than it should be.
A more satisfactory method of arriving at a mean 13 that defined in Fig. 3, wherein, for clarity, a different scale is adopted for the rate than that in Fig. 2, so that divergencies are more marked. It is then easy to see that, by splitting the difference at those mileages where the rate falls and drawing a line through the points thus obtained, a fair average is obtainable and the rate rises gradually from mile to mile. Gradually, but not evenly, because to increase the rate evenly throughout would not meet the needs of the case.
It is by the application of that method that the rates set out in Table IX have been reached. These are put forward in all seriousness as rates which could reasonallty be applied to the conveyance by road of normal traffics in unit loads of from 6 tons to 14 tons. By " normal traffics" is meant those classes which.. take approximately 10 minutes per ton to load or unload, there being also provision for 15 minutes at terminals for turning the vehicle round, signing documents, and so on.
The next point to consider is the provision for part loads for journeys on which, to use the popular term, there are several pick-ups" and "drops."
It is not by any means easy, indeed, I would almost go so far as to state that it is impossible, to calculate with
any degree of accuracy what should he the additional :harge for a part-load consignment. One thing is quite :ertain, namely, that the majority of those operators who operate large vehicles over long distances and who are willing occasionally to pick up a small consignment of . I ton or so here and there; greatly underestimate the additional 'cost of that procedure.
Seriarate Consignments Cannot Be Overlooked In Charges' In consequence, the rates they charge for these small consignments are inadequate. It is, indeed, the frequent and just complaint of express carriers, who have specialized in the conveyance of small consignments, that their reasonable and fair rates are undercut. whenever a long-di;•.tance operator picks up a part load, in this way.
These long-distance operators are apparently under the impression that, as a vehicle is running from point to point with a load which is nearly, hut not quite, equal to its capacity, the cost of conveying a separate consignment is negligible and can be charged at /ery little, if any, more than the basic rate per ton for the unit load. That is not the case.
The rate per ton for a 12-ton consignment, full load for a 12-ton lorry, over 88 lead miles is 32s.-6d., so that the revenue is £19 10s. That amount covers the total cost of the journey, including terminals. It also allows a reasonable, but not by any means excessive, amount ot profit.
If the load be made up of two consignments, one of 11 tons and another of 1 ton, extra cost is "incurred because of the time for the extra pick-up and drop, as well as for any increased mileage involved in a detour to collect or set down that additional consignment.
The time for the extra pick-up, that is to say for getting the )oad and signing documents, etc., is probably not less than that for the unit load of 12 tons-15 minutes. Similar
time is involved in the delivery of that small consignment. It is more than probable that at -least a couple of miles extra has to he run in order to deliver this 1-ton load, so that altogether t h e operator is involved in • the extra cost of 30 minutes standing time
and two miles runhin.
For the 12-tonner, at 9s. 6d. per hour and Is. 3d. per mile and travelling over the two miles at 12 m.p.h., the extra cost is 4s. 9d. at :terminals, plus 4s. id. for tie total travelling, that is 8s. 10d. The charge for that odd ton should be, therefore, not 32s. 6:I.., but actually £.2 13. 44.
If the small consignment happened to be of 2 tons then that 8s.10d. could be spread over the 2 tons, so that the rate per ton would be 32s. 6d. plus, say, 4s. 6d., that is
to say, 41 17s. That is the method by which extra charges for part load, should be calculated. I do not now propose to go any further into that aspect ef• the subject, as MY object has been achieved, namely, that of putting up a constructive criticism of the unit-load rates set out in the Leeds Schedule.
Points to Conslc(er In Making Provision for Demurrage One more point must be raised, that is the extent of the provision for deniurra,ge. I am of opinion that it is not sufficient to charge for demurrage at the normal rate for standing time only. Demurrage is excessive standing time and the charge should be, to a certain extent, Fenal. Moreover, it is a fact that the vehicle could be earning More for its owner if it be on the move and we are entitled to take that into consideration in assessing the charge.
It is also a fact that if a vehicle be unduly delayed the effect is likely to be disorganization of the week's work for not only that vehicle but for others in the fleet.
Because of these facts I think that the minimum charge for demurrage should be douVe the normal standing cha-ge. Moreover, the charge for demurrage is the full charge for, the vehicle. It does not matter what is the weight of theconsignment. The charge for demurrage, if the appropriate loading or unloading time for that consignment be exceeded, is that for 14 tons if it be a 14-ton vehicle, for 12 tons if it he a 12-tonner, and 'so" on. It is on that basis
that rates for demurrage must be assessed, S.T.R. '