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Wave of Enthusiasm

22nd March 1957, Page 58
22nd March 1957
Page 58
Page 58, 22nd March 1957 — Wave of Enthusiasm
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Which of the following most accurately describes the problem?

MOUNTING curiosity about the significance of the new railway charges scheme may have helped to stimulate the latest wave of enthusiasm among hauliers on the subject of rates. That the railways can see their way fairly clearly ahead is apparent from the paper read last week to the Institute of Transport by Mr. A. A. Harrison, chief charges officer, British Railways central staff, although his view on the future is to .a surprising extent a reflection from the past.

Attempts by the road haulage industry to put their own rates in order are also based upon previous attempts. The memory of past failures has tended to hold up progress. Instead of looking for a new line of approach, operators assume that lack of information has been the obstacle. They call for more facts and figures, without a clear idea' of the use that should be made of them. .

The collection, of data about costs and about existing rates merely emphasizes the great variety of the one and the difficulty, of finding out the truth about the other. The practice is to ignore variations and prevarications, and to divide the residue of what may be called normal costs into two parts, according to whether they are regarded as standing charges or running costs. From these basic figures can be calculated the theoretical cost per mile, or per ton, or per week, and the addition of a margin for profit should give a fair price.

-.Except when vehicles are hired on a time-and-mileage basis, the calculations are not of much use as a practical guide. Particularly they do not take into account the volume of traffic. When a vehicle is as often empty as not, the economic rate must be a good deal higher than that acceptable to the operator whose vehicles are nearly all well loaded. There are other complicalions in rate-fixing, including terminal delays, the amount of handling required, 'and the .factor known as ." loadability " in the new •jargon for which the British Transport Commission must take responsibility.

Tennioal Delays The problem of the volume of traffic is the most important, as well as the most intractable. It is possible to estimate what handling is required, and what size vehicle is required for a consignment that is m8re bulk than weight. The customer may agree that it is not unreasonable to make a charge for terminal delays. It is not always easy to convince him that he should pay more because the operator cannot easily find a load back. His temptation is to find another operator who is himself looking for a return load, and a rate-cutting war is not far off.

Several methods have been suggested to allow for empty running. They presuppose that an operator is able to estimate the extent to which his vehicles will be fully loaded on the average when travelling between two parts of the country. If he has a table of standard rates that provides for full loads the whole time, he can multiply them for each journey by a fraction representing the estimated amount of empty running. For example, where a vehicle is likely to be running empty for one quarter of the trip, the rate would be 11 times the standard.

Most operators base their own rates on some such

calculation, or on a process that leads to a similar conclusion. If this could be chine universally, there would be an almost ideal state of affairs. Prices would direct traffic into the channels where it was roost convenient and economic for the operator, and usually for the customer. It need hardly be added that the golden age where this would be possible has not yet dawned, and seems no nearer than it did 30 years ago or more, when hauliers first began to discuss rates among themselves.

Control of the rate-cutter must be the first step in working out a practical rates policy. The long-distance hauliers' committee' now functioning as a standing committee of 'the Road Haulage Association should have the establishment of control as one of their principal aims. Publication by the committee of sub= sequent issues of their directory ,should be combined with an attempt to get agreement on rates among all the members.whose names appear. -Failure, to keep the agreement might mean the deletion of the nanies of offending members. .

Less of a Science Hauliers are right in feeling that they have very little time in which to put their charges in order. The railways' scheme comes into force on July 1, and Mr. Harrison has given more than a hint of some of the changes that may be expected. Ratemaking, he el:insiders, will be more of an art and less of a science than ever. The emphasis will be on "net revenue; not gross." The problem will be to get as much as possible Of the traffic.-" where there can be a substantial margin over the assessed direct cost:" When road operators do this, it is stigmatized as skimming the cream, but Mr. Harrison does not use the phrase.

He speaks of the attraction of the two-part tariff idea," more familiar to the users of gas and electricity. The customer pays a fixed charge, whether or not he uses the railways, and his traffic is then carried at rates Much below the normal. The inducement is to spread the fixed charge over as large a volume of traffic as . possible.. In putting forward, this idea, Mr. Harrison was apparently encouraged by Mr. S. C. Bond, national chairmatt of the Traders' Road Transport Association, who has said that the more that higherclass traffics are carried by rail, "the cheaper finally will be the generality of railway rates."

The Commission intend to study their competitors ass well as their customers. "Where there is a strong competition for traffic," says Mr. Harrison, "which is, on the face of it, suitable for rail conveyance, it is often just as important to know what the competitor's costs are likely to be as to know about the railway costs."

Hauliers will echo the sentiment. It will be more than ever necessary for them to take railway charges into account when assessing their own. A resort to rate-cutting would be a policy of desperation; the railways could easily leave Operators to encompass their own ruin.

Long-distance hauliers in particular should study Mr. Harrison's paper carefully. They should not be above taking, a hint or two from him. For example, a group of operators might combine to offer their own two-part tariff to a big customer. This would be an ingenious way of defeating the rate-cutter.


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