Solving the Problems of the Carrier
Page 39
Page 40
If you've noticed an error in this article please click here to report it so we can fix it.
Can There Be Rate-cutting?
A Long-headed Yorkshire Haulier Attacks Charley's Claim that Without Scheduled Rates There Can Be No Charge of Rate-cutting
CONTINUING his analysis of the attitude of Charley and Bill towards the possibility of stabilizing road rates, my Yorkshire friend, George, next tackled their opinions from a new angle. I see, he said, Charley states that, in his view, there can be no rate-cutting if there be no fixed rates, and that to fix rates will be to start a flood of cutting. Charley must surely in this be giving reign to his sense of humour.
There is no doubt, in my mind, that rate-cutting is possible, notwithstanding the absence of a rates schedule. In my view, any operator who works to the bone is guilty of rate-cutting. If, of two hauliers, A holds the opinion that he can quote a low rate because his costs are low, whereas the other, 13, with higher costs, regards A as a rate-cutter, the probability is that B is right and that A has not assessed his ccets correctly. In this matter Charley, who is obviously speaking with his own experiences only in mind, is without authority: Speaking from memory. I believe I am collect in stating that, just prior to the war, the distribution of vehicles amongst hauliers in the Yorkshire area was something like two-and-a-half vehicles to each operator. Charley, therefore, by his own showing, is v. ell above the average; he might fairly be described as an influential operator.
There is, naturally, a large number of these " average " operators, and an outstanding characteristic of the business methods of most of them is their apathetic attitude towards any discussion of costs of operation. That attitude, mot-cot:Tr, is the direct outcome of complete ignorance of the subject. [I think this statement is, in general, fairly accurate..S.T.R. J
Ignorance Lies Behind Hauliers' Reluctance to Discuss Costs
Hauliers will not discuss costs because they feai.to expose their igaorance of the subject. Many of them, indeed, would not do so lest, on close examination of their own costs, they, and others in competition with, them, would find they had been working for nothing, that is to say, they had been rate-cutting.
Another prevalent characteristic -of the average haulier in the years immediately preceding 1940 was suspicion—
suspicion of all competitors. Rates were not discussed because each man feared that if he disclosed them a competitor would step in, underquote, and take away the business. Moreover, often there were good grounds for that belief.
The outcome of those conditions can readily be imagined, even by those who were not participants. Rates were not founded ori costs—they could not be, because so few amongst average hauliers knew what their costs were. They were assessed by the simple process of ascertaining—or guessing—what a competitor was receiving, and offering to carry the traffic for less. If that be not rate-cutting I do not know the meaning of the word. In my opinion, that picture, which accurately portrays the state of the industry in pre-war days, at least with regard to its procedure in rates assessment, completely refutes Charley's statement that rates cannot be cut unless there be a schedule.
Charley's opinion that it is impracticable to stabilize rates can just as easily be shown up, and, again, by facts. Rates for certain traffics have been fixed, and wherever and whenever that has happened the hauliers concerned haw had nothing but praise for those who have been responsible.
In most parts of the country such traffics as sugar beet, livestock, dead meat, coal, sand and gravel, and bricks. have, for some time, been carried at fixed rates. It is true . that these are all local or domestic traffics; nevertheless, it is also true that, once the schedules became operative no one desired to return to the old freely competitive ways.
Can you guggest harder nuts to Crack than farmers, and and and, gravel and brick merchants? Many of them. in fact, fought tooth and nail the introduction of standard rates—and why? They did so because they realized that. once rates were agreed and made public, so that every haulier knew what the charge would he, bartering and, even victimization—their weapon for. years—would be lost to them for ever.
It is, therefore, correct to state that the principle of the application of fixed agreed rates has already been established. Such rates are in use by a representative proportion of the industry.. Experience has proved that they are not merely efficacious but also that they are necessary.
I am willing to admit that the application of the same methods to long-distance traffic is not likely to prove so simple. The outstanding difficulty is the return-load problem. To suggest, however,that that problem is insoluble, or that it is impossible to agree upon a schedule of rates for long-distance traffic, is tantamount to admitting that the road-haulage industry is incapable of running itself.
It must be acknowledged that, prior to the war, the position had almost been reached where it was impossible to differentiate between_ outward and return loads._ What I mean is that so desperate Were hauliers to obtain return loads that outward traffics from any centre of distribution were being filched by incoming hauliers, accepted by them, and carried at suicidal rates. The process had gone on for so bang that "return-load rates " had become the rate for traffic in all directions.
The development of the system of running trunk services to a time schedule tended to.aggravate these conditions. A vehicle had to leave at a given time, load or no load. Any traffic at any rate was better than no traffic, and consignors were by no means slow to realize tills fact arid take advantage of it. Only the minority of operators had the organization necessary to ensure that return loads were available on the conclusion of every outward journey.
Did the War Act as Salvation of the Industry?
Such a state of affairs could not last indefinitely, and a break was bound to come soon. It may well be that the war, and the complete revolution of traffic conditions which it wrought, saved the industry—at least for a time.
The only practical way to run any business is to assess charges or prices on the basis of cost plus profit. Rates for haulage must be calculated on just that basis. For a nationalechedule of rates the average cost per unit of the industry must be the yardstick, not that of some particular operator.
It is utterly impracticable to attempt to apply either the methods or the rates of the railway companies. When the railway rates experts are asked how they have arrived at the rate for a traffic they nearly, always reply that the 'guiding factor is the flow of traffic, in other words, the bulk. A close investigation of the facts nearly always reveals that the competition of road hauliers was the decider.
The railways had possibly less cause for satisfaction with the pre-war position as regards rates than we ,had. If it • were possible for them to start afresh—with a clean sheet as it were—and build up a new schedule, the first things to be scrapped would, in all probability, be the exceptional rates and agreed charges. Indeed, I believe it has already been stated that they are reluctant to extend exceptional rates to new traffic.
That condition, in my view, can he taken as a definite indication that the time is ripe for road transport to produce its own independent schedules based, as I have already Said, on average figures for costphis profit. Charley.'s citation of 'traffic to Carlisit, and his suggestion that the existence of many such routes, on which -there is
cvery little bplk traffic, is a bar to the establishment of a rates schedule, does not hold water.
If we take It for granted, as I think we must, that the ,standard rates for long-distance traffic are assessed on the basis that there must be allowances for earnings from regular return loads, then, obviously, provision must be made for exceptional routes. If, on analysis of the traffic, it be found that on any particular route return loads are so scarce that the standard rates arc, for that reason, unremunerative, all that will be necessary is for an agreed and approved percentage to be added to the statutory rate for the distance. It must be agreed that the rate from Leeds to London, a good traffic route, cannot reasonably be expected to apply to a route of the same length' over which return loads are few and far between.
Return Loads Will Not Confuse Invoice On the other hand, if, on Occasion, a return load be available over the secondary route, as it might be called, the invoice can be modified with little trouble. There is little or no complication involve& in this procedure and the work is well within the capabilities of the clerical staff employed by every reputable haulier operating a trunk service.
I see that Charley expressed the fear that if and when rates became statutory, they would be maximum and not minimum rates. Surely that is absurd. The fixation of rates as maximum would at once defeat the object of rates stabilization, which, I assume, is to prevent uneconomic working. If reference be made to the practice of those
• industries which have adopted the prinCiple of fixed prices, it will be found that those prices are minima. It is open to a merchant who offers an article of better quality than standard, or gives improved service, to charge more than the standard price, or rate, as the case may be. Experience has shown it is true, that in times of a slump the minimum becomes also the maximum. Even so, if the .minimum continues to be enforced, as presumably it will be, the schedule has the effect of putting a bottom in rates below which no one can or dare quote. That, to my mind, will be a good thing, worth, in itself, all the trouble needed
to bring about this stabilization of rates.
Clients Would Value Standardized Rates In the long run, too, the haulers' customers, the merchants and traders whose gds he carries, would come to appreciate the advantages of standardized rates. Transport costs are a part of the expense which must be taken into consideration when fixing the selling price of an article. Given standard haulage rates, the assessment of that item of cost will be simplified and an uncertain factor in competition will be eliminated. Moreover, the existence of agreed—and known—rates would have prevented the exploitation which occurred in the early days of the war, when many hauliers took advantage of the fact that vehicles were in short supply and increased their charges to an exorbitant extent. Legiti•mate increases in rates, justified by increasing costs, can always be arranged once the basis of costing and assessment is agreed. S.T.R.