Solving the Problems of the Carrier
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Milk Haulage Rates A Challenge
Emphasizing and Extending the Claim, made in a Recent Article on Milk Haulage Rates, that the Haulier Members of the Joint Haulage Committee are not Doing Enough for Milk Hauliers
THE article in "The Commercial Motor" dated October 26, criticizing the haulier members of the Joint Haulage Committee, the business of which is to hear appeals by hauliers for better terms in connection with milk haulage, has created quite a stir. It brought action, but, unfortunately, not of the right kind.
Meetings have been held, in London and in the West Midlands, at which votes of confidence in these committee members were passed. Moreover, exception was taken to "a certain criticism which had been published and which was claimed to be a complete misconception of the facts." Further, I have been informed that one member of the committee has stated that "The Commercial Motor" has apologized for the publication of the article.
I am not in the least impressed by the votes of confidence. I know too much of the views-of so many milk hauliers who were not present at the meetings and were, therefore, unable to vote. I have seen and conversed with some of them since the votes were passed.
Logically, equal importance attaches to the "exception " taken. The facts were as stated in the article, and I ani going over them again in the hope that I shall make them clear.
It is not true that "The Commercial Motor" apologized for the previous article. If proof be needed of that it is afforded in the publication of this article. Let me cite the facts. The Milk Marketing Board, in assessing what it claims to be fair rates for milk haulage, makes an allowance of lid. per mile run to cover establishment costs (" overhead expenses ") and profit, but the haulier members of the Joint Haulage Committee are fully aware that lid. per mile is quite inadequate for that purpose and does not leave a reasonable margin of profit to . the haulier; the haulier members of the committee have not insisted on that figure of lid. being increased.
The figure of lid. has applied for some considerable time; it has not been revised and there is no apparent likelihood of its revision.
An Excellent Memorandum on Milk Haulage To prove this, I must refer to a memorandum prepared a little while ago for Associated British Milk Carriers, Ltd., an organization which originated in what was then the A.R.O. and is now, so far as matters such as milk haulage are concerned, the R.H.A. Mr. C. W. E. Windsor-Richards is quoted as being responsible for its compilation.
I reviewed this memorandum in full, giving all the information it contained, in an article in "The Commercial Motor" dated April 21, 1944. I wrote that it was a fine piece of work, and I am not prepared to depart from that opinion.
• In that document, Mr. Windsor-Richards summarized what, presumably, he regarded as operating costs of a fleet • of 10 vehicles engaged in milk haulage. He dealt, among other things, with establishment charges, or overhead costs, and his assessment of these costs, a fair and reasonable one, for the fleet of 10 vehicles, was £1,625 per annum.
As there are 260,000 three-half-pennies in £1,625, which, in Mr. Windsor-Richards's opinion, means that the overhead costs of 10 vehicles are equivalent to lid. per mile, if the vehicles cover 26,000 miles per annum each on the average.
Mark well, this is lid. per mile for overhead costs only It should be clearly understood that there is no provision for profit in this figure.
Whilst it is not true to state that the overhead costs per vehicle are the same, no matter what may be the number of vehicles in a fleet, it is just as untrue to suggest that, in a fleet of vehicles numbering less than 10, the overhead costs per vehicle must be less. On the contrary, they might easily be more, and justifiably so.
At any rate, the Milk Marketing Board does not differentiate: the lid. per mile allowance for overhead costs and profit appears to apply without distinction of persons or size of fleet.
The above memorandum was widely circulated. It -was certainly in the hands of every member of the Joint Haulage Board and was available to every milk haulier member of the A.R.O.
I am, therefore, justified in claiming that a fair average figure of overhead costs for a milk haulier's vehiele, covering 26,000 miles per annum in that branch of traffic, was lid. per mile, exclusive of profit.
If the mileage be less than 26,000 per annum, or 500 per week, the overhead cost per mile is more than lid. If, for example, the vehicle runs only 400 miles per week, the over head cost rises to I.875d., or lid. • On the other hand, if the vehicle runs more than 500 miles per week, the average overhead cost will probably be less than Id. per mile. If" the weekly mileage be 600, for example, that is, 31,200 miles per annum, the overhead cost per mile would, on this basis of calculation, be lid. per mile, .
We must now, therefore, produce a supplementary fact or two, in order to arrive at a satisfactory conclusion. What we want to know is, whether the average milk-carrying vehicle runs more than 500 miles per week, or less. Fortunately, I have sufficient information to enable me to arrive at a reasonably satisfactory figure.
Data for Fleets of Milk-haulage Vehicles 1 have before me operating data relating to the fleets of 33 milk hauliers, owning a total of 80 vehicles. They are located in Essex, Lancashire, South Wales, Scotland, Nottinghainshire, Yorkshire, Leicestershire, Cheshire, Cornwall and Shropshire, and can, therefore, be taken as covering the country.
The information I have thus collated has been collected since January, 1938, when the Milk Marketing Board took the first public steps in the rationalization of milk haulage. It is the, result of personal contact and investigation, so far as 25 of the operators are concerned, and direct correspondence for the remaining eight. I have included' all the information I have and cannot, therefore, be charged with selecting cases which are most suitable to my argument, and it is fair to claim that these hauliers and the information represent a cross-section of the industry. It is equally fair to suggest that the members of the committee have access to similar information and are, therefore, cognizant of the facts.
The average weekly mileage of a milk haulier's vehicle is shown to be 440, or 22,880 miles per annum. On that basis. the average overhead cost, exclusive of profit, is seen to be 1.7d, per mile, i.e., slightly lessthan lid. per mile. The meaning of this is, supposing agreement is come to with the Milk Marketing Board on the vehicle-operating cost figures (I have been told that has been known to occur) the average operator is at a foss of id. per mile for every mile run, if his .overhead costs are not less than those fairly and reason= ably estimated by Mr, Windsor-Richards.
The haulier members of the Joint Haulage Committee must be aware of that. While I have the figures before me I may as well look a little deeper into them and clarify the position still further.
Of the N vehicles, concerning the operation of which I have. data, 37 run mileages below the critical weekly mileage of 500. That means that more than 46 per cent. of them lose money on this allotment of lid. per mile. Twelve of them. i.e., 15 per cent., average 300 miles per week or under. Their overheads are thus in the region of 2id. per mile and they stand to lose Id. per mile on that assessment.
One.unfortunate operator has a .vehicle covering only 180 miles per week, so that his overhead costs for that vehicle, according to this method, can be taken as approximately 4d. per mile, thus showing a dead loss of 21d per mile. On the other hand, another of these operators has a vehicle covering 800 miles per week. His overhead costs, according to this same formula, are less than Id. per mile, and he has a margin of profit equal to rather more than Id. per mile.
An important logical inference can be drawn from the figures already given, but before. I deal with that, I wish to delve a little deeper into the present subject.
It is important to try and assess what the figure for overhead costs and profit should be, taking, for the time being, the mileage of 500 per week, and assuming that the actual overhead costs, exclusive of profit, amount to lid. per mile, as they would on. Mr. Windsor-Rrchards's figures.
To-day, a fair assessment of the vehicle operating costs— a 30 m.p.h. machine carrying 5-6-ton loads—is 10d per mile. Add lid. for overheads and we get an all-in figure of 110. per mile. I maintain that, for work of this description. which is arduous and hard on the vehicles and tyres, and involves the operator in seven days' work per week all the year round, the reward,' in the shape of profit, should be not less than 15 per cent. on his costs. Add 15 per cent, to llid. and we get 13.225d. The net profit is thus 1.725d., nearly lid., and the figure which the Milk Marketing Board should, therefore, use is 3itl. per mile for overhead costs and profit, instead of the present figure of lid.
Calculate the amount in another way. In pre-war days, in an endeavour to simplify calculations of rates and charges, in order to help hauliers who were not good at figures, I gave them the simple formula: get to know what your vehicle operating costs are, and add one-third of that to cover your overhead costs and profit. That fraction of one-third wa's no haphazard guess: it was a proportion which I had found to apply in the majority of medium classes of operation. It would suit the average milk-haulage conditions.
Applying that to the case of a 5-6-tonner covering 500 miles per week and costing, as above, 10d. per mile to run, the amount to he allowed for overhead costs and profit would be 3id., which is not so far from the 31d. reached by the alternative method.
It should be perfectly clear that the Milk Marketing Board method of assessing overhead costs and profit is utterly and fundamentally wrong• in principle, as well as in amount. That is the important logical inference to which I referred above.
An operator's overhead costs do not vary according to the mileage run by his vehicles. There is no justification whatever for assuming that they do, There is no link of any sort between mileage run and overheads. Overhead' costs are, in effect, a fixed charge and are thus greater, per mile, as the weekly mileage falls.
A fair method would be that suggested above, namely, to
add a percentage to the ascertainable vehicle operating costs. According to that method, and taking 30 per cent. instead of the 33i per cent.. mentioned above, the amount would work out as follows, for a 5-6-tonner —At 200 miles per week, c.p.m., Is. 4d., allowance for overhead and profit, 4.8d. per mile; at 300 m.p.w., e.p.m., ls. Id., allowance 3.9d.; at 400 m.p.w, 1 !id. and 3.444at 500 m.p.w., 10d and 3d.; at 600 m.p.w., 9fcl.. and 2.85d.; and at 800 m.p.w., 81d. and 214:1.
More simply, allow in the case of such a vehicle doing 200 m.p.w a total payment of• is. 8.8d.. per mile, so that if the gallonage be just over' 10 per mile, the rate should be 2d. per gallon. At 300 miles per week, Is. 4.9d. per mile, say, 1.7d. per gallon. At 400 miles per week, Is. 2.65d. per mile, or 117-4d. per gallon. • At 500 Miles per. week, is. Id. per mile, or 1.3d. per gallon. At .600 miles per week, is. 0.35d. per mile, or 1.2d. per gallon and at 800 miles per week, llid per mile, or 1.14d. per gallon. Given average conditions of working and a gallonage. of 10 per mile, these rates are not far off the mark.
Here is a story told to me by a friend of mine who happened to be spending a few days of his holiday with a small farmer,
in the country; he was old and not very strong. The son, on whom he would have been relying to do the rougher work of the farm, was in the Army.
My friend got up fairly early one morning and found the farmer returning from a journey with a horse and cart. He said to him: "You've been up early this morning. What have you been doing? " The farmer replied: "Oh, I have
been taking the milk down to That is about 3i miles away."
"But why do you have to take it so far?" asked my friend. "Surely there is a good highway at the end of the road to your farm?
"Yes," replied the farmer, "and there was a time when all that I needed to do was to take the milk there, and stand it on a wooden platform at the end of my farm road. That was when a haulage contractor. used to collect the milk. But he fell out with the Milk Marketing Board because they would not give him as much for carting the milk as he wanted and the Board itself took it over. It will not allow vehicles to come up this road and I have to take the milk 3i miles to the main road at —. That is why I have to get up so early in the morning."
Milk hauliers, who know how insistent the Milk Marketing Board is that a haulier must suit the farmer's convenience in picking up his milk, even if it means going down an unmade road to collect the milk, will sec the import of that story. S.T.R.