WHO IS TO PAY FOB ITURN LOADS?
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Continuing Investigation into the Problem of Deciding the Critical Mileage Up To Which There Should be No Provision for a Return Load in the Rate for the Outward Traffic
THE all-absorbing question in connection with the scheduling of standard rates for haulage is to what extent should provision he made in the rate for revenues obtainable from return loads, There is a body of opinion which inclines to the view that no consideration should be given to that matter in assessing rates. In my view that is entirely wrong, because it will create an artificial standard of rates, so high as to be unattainable under ordinary commercial conditions.
The difficulty, as I see it, is that a schedule of rates which takes return loads into consideration cannot be built up on a radial basis. It must be from point to point, for the reason that whilst over a route from A. to B there are abundant opportunities for return loads which must inevit
4 ably depress the economic rate, the fact that over the route from A to C no return loads are available makes the rate agreed upon from A to B unprofitable. In other words, the rate from A to C must be higher than that from A to B, although the distance be the same.
In tackling this problem of deciding what has to be done about the return load, it has been suggested (see last week's issue) that, as a preliminary, a critical mileage should be agreed. Up to this there should be no allowance made for return loads, the argument being that over short distances it is more profitable to come back empty than to waste time picking up a second load.
Trial and Error to Arrive at the Critical Mileage In the previous article I showed that there was no formula by which we could arrive at this critical mileage, the only way being by trial and error. I took as an example a 5-ton lorry, which is the type mostly used for short-distance haulage. I assumed a standard period of -40 mins. for loading and 40 mins, for unloading and found that over I5-mile lead it was clearly preferable not to search for a return load, but to come straight back and work on the basis of one-way traffic.
The method by which I arrived at that conclusion is illustrated by the following further examples, tried out by way of arriving at a figure for this critical mileage.
The question of average speed between terminals enters into the discussion. Over the 15-mile lead I assume that the average speed would be 15 m.p.h., because haulage over such a distance would, in the main, be in congested areas, It will be appreciated that as the length of lead increases, the average speed will also increale, although not, of course, in the same proportion, because the speed throughout the first 12 to 15 miles will still be about 15 m.p.h. revenue must It" not less than £2 Os. ld. That is equivalent to Sc. per ton. Two journeys can comfortably be completed in one day, so' that the daily revenue is approximately £4.
Secondly, I assume the same distance and conditions with this modification—that a return load is collected. Allow a delay of half an hour between delivering the first load and collecting the second, assume that the loading and unloading times for the second load are the same as before, and that there is a further delay of half an hour after delivering the return load, before beginning to collect the second outward load.
The time involved in the round journey is as follows:40 mins. loading, If hrs. travelling on the outward journey,
40 ruins., unloading, 30 mins, to the second place where the return load is to be taken aboard, 40 mins, loading that, I hr. 15 mins. travelling, 40 mins, . unloading, 30 mins. getting back to the place where the second outward load is to be collected.
The total time is 6 hrs. 10 mins, and at 3s. 6d. per hr. that must be charged at Li Is. 7d. In addition, there is a total of 40 miles at 8d., which is £1 Os. 8c1. The minimum revenue must thus be £2 8s. 3d. which, on the basis of a regular 10 tons per journey, would involve a charge of 4s. 10d. per ton.
Assessing Revenues When Return Loads are Dealt With
In assessing revenues, where return loads are taken into consideration, it is not practicable to assume that there will always be a full load or, alternatively, that there will always be A. load' available. To allow for deficiencies in that respect 331 per cent. lutist be added to the calculated rate, -which brings that 4s. 10d. us to 6s. 6d.
The expectation of daily revenue, hoWever, is that indicated by the net rate of 4s. 19d. and, as ills possible to do only one journey per day, that revenue totals £2 Sc. 3d. Over a 20-mile lead, therefore, it 'seems that it is more profitable to make no attempt to collect a return lead.
In this connection., another point of interest arises. Is it justifiable, when assessing a rate for traffic—which does not take up the full 8-hour day-to charge for eight hours, bearing in mind that this job has the effect of imfnobilizing the vehicle for that length of time, as is the case in this example?
If we take the full 8 hrs. then the time charge should be %1 8s., and with the mileage charge at 41 6s. 8d. it means that the revenue should be 42 44s. Ed., the net rate Sc. 6d. and the actual rate 7s. 4d. That is a point which requires serious consideration, although at the moment it dogs not affect our argument, because it is still clear that it is more profitable to take only one-way traffic over a 20-mile lead, the daily revenue then being 44, as against 42 14s. 8d., if a return load be sought.
Continuing. the process of hit-or-miss search, it is wcirth while to note the details in connection with the 25-mile lead, as another point of importance rises there. Over that distance:, I have assumed an average speed of about 18 m.p.h. so that the point-to-point time for the 25 miles is l hrs. That means that the round journey, without picking up a return load, will take 4 hrs. 20 ruins. The total revenue per journey, assessed in the same way as above, must be 22 8s. 6d., which is equivalent to 9s. 9d. per ton. Two journeys can just, and only just, be squeezed into one day and the revenue i9 thus 24 17s. per day.
If a return load be collected the time necessary is 6 hrs. 40 ruins., the revenue per day, calculated as above, 2.2 16s. 8d., and the gross rate-that is to say the rate including provision for the 33. per cent. addition-is 7s. 2d. A point of interest here is the growing divergence between the rate which must be charged in connection with one-way traffic and that for, two-way traffic.
Nearing the End of the Search for the Critical Distance Even if, in the case of the two-way traffic, the vehicle be charged out at the full 8 hrs., the revenue becomes only 43 As. 4d. per day and the gross rate must be Sc. 3d. per ton.
It is now becoming clear that the critical distance for which we are searching is that within Which it 'is just possible to complete two journeys per day, without endeavouring to find a return load. Whether that -point has been reached in 25 miles, 'or whether it can go up to 30 miles, in which case the calculated time for the journey is 4 hrs. 40 mins, and the total time for two journeys 9 hrs. 20 mins., depends-, to some extent, upon conditions.
If 30 m.p.h. be expected, and if it be possible, under the conditions, regularly to complete two journeys per day, then the rate will have to be 1 is. 3d. and the revenue per day £5 12s. ad.
When one journey only can be accomplished in a day then it is profitable to spend the balance of the time in picking up a return load, as, for example, when the distance is 40 miles. Over that mileage a round journey without picking' up a return load will take 5i hrs., the rate will be
14s. 6d. per ton and the.revenue 23 12s. 7d. per day. If, because one journey only is possible, it be regarded as reasonable to charge the full rate for the standing time of the vehicle for 8 hrs., the revenue is increased to 44 is. 4d, per day, but the rate must be 16s. 3d. per ton.
If a return load be collected, the total time Oecessary • for the round journey becomes 8 hrs. 10 mine., the revenue is 44 is. lid, and the gross rate Ils, per ton. Over that distance it is clearly preferable to pick up a return load.
But here a new difficulty arises. On the basis of cost plus profit, the rate for a 30-mile lead, making no attempt to obtain a return load, must be at least 1 ls. 3d. per ton, but over a 40-mile lead-taking a return load into consideration-the traffic can be carried at lls, per ton.
How, in any standard schedule of rates, are those two going to be reconciled, bearing in mind that it has already been shown that over routes from which no return loads are available the rate would have to be at least 14s. 6d.possibly as much as 16s. 3d.? That is something which
propose to deal with in a subsequent article.
Consideration for the Customer Who Provides Two-way Traffic Meantime, there is another factor which should have consideration in this connection. There'has grown up a custom in the trade, and it is a reasonable one, of giving consideration to a customer who provides a load in both directions. That consideration has taken a form of a differentiation between the ordinary rate for a return load and the rate charged to the customer who Provides two-way traffic. There is justification for that in as much as over_ the class of journey we have been considering there is an hour saved over the rotind journey, _because the vehicle has not to travel from one point to another to pick up a return load or, afterwards, when that return load has been delivered.
That would mean • a saving, of 3s. 6d. over the round journey, which is equivalent• to a rebate of 8d. per ton on the return-load traffic, provided, of course, that 5 tons be carried. That is all very well in the present state of affairs in the industry, but it is questionable whether it would be practicable under conditions which will prevail when rates for all kinds of traffic are statutory. The point,.. however, is worth bearing in mind.
It is important to note that any modification of the time necessary to load and unload may materially affect the above conclusions. TS figure of 40 mins. is arrived at by making an'allowance of 6 mins, per ton for loading and unloading, plus 10 mins, at each end of each journey for making contacts, signing, documents, sheeting down, turning the vehicle round, and so on.
In the previous article I showed that, in special circumstances, when the loading and unloading times were much shorter than the above, the tendency was towards making it less and less profitable to take the trouble to collect return loads. Nevertheless; the period taken of 40 mins, at each end for a 5Lton load is fair and might quite easily be stipulated as standard, in relationto scheduled rates.