Milk Haulage Rates Topical Problem
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Milk Hauliers Will Find, When Contracts are Renewed on October
Next, That the Conditions May Not Be the Same as Those.
Previously Prevailing
FOR many years, the Milk Marketing Board has been trying to persuade hauliers to get together and organize the transport of milk in any one area, regarding the traffic as a whole,rather than as something which may be split up indiscriminately amongst a number of individuals. The Board has always maintained that the total cost of milk haulage could be reduced by what is known as the rationalization of transport. What it has in mind is that, in certain areas at least, there is a good deal of overlapping, and if this could be eliminated the total cost would be reduced.
The rationalization that the Milk Marketing Board has in mind would thus involve the interchange of hauliers' customers, so that no two hauliers would be running over the same routes, as is now the case.
Now whilst apparently little has, as yet, been done in that direction, rationali7ation has taken-place in another sense. The Ministry of Food has taken control and milk producers, that is to say farmers, will be relieved of the liability of delivering their milk to consuming centres, their responsibility ending on delivery at the collecting depot or other destination determined by the Ministry of Food.
Position of the Haulier Under the New Arrangements
So far as the haulier is concerned, the Outcome will probably be that whilst he may continue to collect from his usual customers—after entry into the usual contract-he may have to deliver the milk to a depot different from that to which he has been, hitherto, accustomed to make his deliveries.
In future, each buyer of milk will obtain his supplies from a compact self-contained district and the collection of -milk in that area will be organized on the most 'economic 'basis under the direction of the Ministry of Food. No other buyer will be allowed to intrude upon that area. Each must acquire his milk within the district specified by the Ministry.
It is not clear to what extent the Ministry will take a hand in the control of the transport of the milk, within eadh area, to the depot concerned with supplies from that area. That remains to be seen. So far as readers of this journal are concerned they are principally interested first, of course, in .obtaining traffic from their usual customers and. secondly, in seeing that they obtain rates which will show a fair and reasonable profit.
• On the face of it, it does seem that the calculation of a fair rate for the haulage of milk should be one of the simplest of the problems of rates assessment within the industry. The number of gallons which the haulier is able to collect per mile run by his vehicle should surely be an accurate indication of the price he should get, given agreement first upon what is the operating cost of that vehicle— including provision for establishment charges—and what is a fair margin of profit. • If it be agreed that the all-in cost per vehicle employed on milk haulage is 10d. per mile, and that a fair margin of profit is 20 per cent., then the haulier must obtain'ls. per mile for the use of his vehicle. If his average annual mileage be 20,000, and his tool gallonage in a year is 240,000, then the average figure in gallons per mile throughout the year is 12 and he should be paid id. per gallon; In the foregoing figures,. I have stressed that the period over which the calculation must be made is one year. That is essential because the supplies of milk vary so widely between summer and winter. The gallonage during the summer may be twice that in the winter.
There are, admittedly, factors which complicate the issue, particularly this one. An operator having three vehicles, say, may with these lorries be able to cope with the total maximum gallonage produced by his customers—. in the early summer. If he has no other traffic those vehicles will be only partially engaged during the winter, which may involve him in a loss, even if thd rate be calculated in the simple straightforward manner exemplified above.
At the same time, it can hardly be expected that the farmer will be agreeable to pay for haulagefacilities which he does not use and it seems as though his answer to the haulier will be: well, it is up to you to find work for your vehicles during the winter when I have not as much milk for you to carry.
How Hauliers May Arrive at Their Minimum Charges
In view .of the fact that milk haulage rates are topical just now, I indicate, in the accompanying tables, the method by which any, haulier may arrive at his minimum charges for this work. The figures are taken from the current issue of "The Commercial Motor" Tables of Operating Costs and, as such, are, in effect, sufficiently accurate to meet the needs of -most operators. Any haulier, however, who has accurate data of his own costs is advised to substitute his own figures for those quoted, wheii he will arrive at results which will be sufficient to justify his charges in any dispute which inay arise.
Table I gives the fixed charges, including establishment costs and overheads, per week. They relate to the type of vehjcle most commonly employed on this traffic, that is to say, a 5-tonner weighing less than 3 tons unladen, and, therefore, legally permitted to travel at 30 m.p.h. So that the data may be of maximum use, the information is classified under three heads, according as to whether the operator is working in a Grade I. Grade II, or Grade III area. It will be noticed that I accept the argument that besides wages there are other items of expense which vary according to the district in which the vehicles are operated. Insurance is less in rural areas than in industrial areas, and overheads or establishment costs are usually ,less in •a Grade III than in a Grade II area, and, again, less' in a Grade II than in a Grade I area. In the lower part of the same Table the weekly charges are reduced to a cost per mile basis for mileages ranging from 300 to 600 per week.
In Table II are set out the running costs per mile for the same type of vehicle, and these, like the figures in Table I.
are differently assessed to meet the conditions 'prevailing in the three graded areas.
In Table III the results of the calculations in Tables I and II are combined to give the total running costs per mile for different mileages from 300 to 600 per week inclusive. In addition, I have indicated what the vehicle should earn per mile.
In arriving at that figure I have taken what I regard to be the irreducible minimum of profit which a haulier should earn on this class of work, namely, 15 per cent, on the total expenditure. The figures, in. this Table, for revenue per mile correspond with the figure of Is. per mile quoted at the commencement of this article. It is on these figures, taken in conjunction with the average gallonage per mile, over a year, that the haulier should calculate what his rate should be.
The Amount of Net Profit that the Haulier will Earn In answer to any queries as to the reasonableness of that 15 per cent. profit, Table IV is coinpiled. It shows what the haulier will earn by way of net profits if he opera,tes under the conditions named, if his costs are the same as those which I have set out, and if he gets the revenue per mile which he is recommended to obtain in Table III. No one will contend that the net profit per week shown is out of the way.
In Table V all the information in Tables I, II and III is summarized in such a manner as to enable the rate per gallon to be assessed. The method may easily be demonstrated by selecting a simple example. Take the case of a vehicle which is operating in a Grade I area, covering an average mileage of 500 per week and conveying an average gallonage throughout the year of 5,000Clearly, that vehicle is transporting an average of 10 gallons for every mile tttn. Referring to Table III, it is noted that the revenue the 'operator should obtain per mile is 12.66d. The revenue per gallon must, therefore, be 4.27d., a small fraction more than lid. per gallon. The other figures for rate per gallon have been assessed in precisely the same way.
When the Vehicle is Not Used Entirely for Milk Haulage
Now, this point arises. In the foregoing calculations. and in the Tables, it is assumed that the vehicle is entirely confined to the haulage. of milk. That may n6t always be the case, but if not, a rough approximation to the appropriate charge may easily be made, using the data in these Tables.
For example, assume that a vehicle is actually running 600 miles per week on haulage, of which only 400 miles are concerned with milk transport.Then it will be sufficient if the operator applies a 600 miles a week figure in assessing what his rates should be to give him a corresponding profit. This might even be used if it be suggested that the haulier shonld charge different rates, winter and summer (this suggestion has, in effect, been made from time to time). Assume that in the summer his vehicle is fully employed
600 miles per week, carrying 5,000 gallons per week, then,
in a Grade I area, his rate would be 1.38d. per gallon. In the winter he covers 600 miles per week but only 400 miles are on milk haulage, during which he collects 3,000 gallons. Referring to Table III he notes that for 600 miles pir week his revenue should be 11.7d. per mile. During the 400 miles on which he is carrying milk his gallonage per mile is 74. His rate must he 74 ,divided into 11.7 which is 1.56d., or a little more than lid. per gallon.
Similar use of the figures can be made if return loads be available. In that case, the operator must divide his mileage fairly as between the distances on milk traffic and those on other traffic, assessing the rates as described -above.