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'Arbitrary price fixing means inefficiency'

2nd February 1968
Page 60
Page 60, 2nd February 1968 — 'Arbitrary price fixing means inefficiency'
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by John Darker • Top managers are often out of their depth when negotiating transport rates by road and rail. And most business men think that whatever help they may need from consultants in other respects, they are endowed with a special talent for bargaining.

Those were points made last week by Mr. G. D. R. Davies, a leading expert on transport rates negotiation, at a one-day seminar for transport managers arranged by Davies and Robson, transport and distribution consultants. Theme of the seminar was "Forward planning in commerce and labour relations". Mr. G. F. A. Wilmot, of London University, presided.

Mr. Davies stressed that there were no trade secrets involved in defining sound principles for negotiation. In a long experience of road and rail rate negotiations he was convinced it was best to be straightforward. This was the best form of cunning —the crafty negotiator was completely baffled by it.

Traders, said the speaker, must do their homework before engaging in rate negotiations with transport providers. Service requirements should be defined and any necessary improvements in relation to existing service pinpointed.

The negotiator should know the basic operating costs of the transport organization. Road operating costs could be worked out from published tables and direct rail costs could be assessed with considerable accuracy.

A common situation was where the carrier knows his "floor" price below which he would lose money by carrying the traffic and the "ceiling" price above which he would lose the traffic to competitors. The carrier aims for a price as near to the "ceiling" as possible and if the trader is to negotiate a price close to the "floor" patience and an accurate assessment of the basic costs involved will pay dividends.

Mr. Davies said that current legislation suggested that the National Freight Corporation would develop into a virtual monopoly unless a future government reversed the policy. He thought the NFC could increase "their share of the cake" at any time by offering to do local distribution at rates below anything now offered to independent hauliers. Arbitrary price fixing meant inefficiency and the capitalist system could not work if the price of transport could not be adjusted to market pressures.

Mr. J. F. Hooper, senior lecturer in business administration, Ealing Technical College, spoke on "The value of business games in road transport". Business games had been defined as "a dynamic training exercise using a model of a business situation". They played an increasing part in management education, particularly in America. He was collaborating with the Davies and Robson • organization in devising the first business game for road transport managers in this country.

Experienced transport management was expensive to hire, said Mr. Hooper. Training was cheaper, for it enabled mistakes to be rectified in the class room.

In his lecture, "Labour relations—efficiency and productivity", Mr. E. L. Williams, managing director, Williams Bros. (Queensferry) Ltd., stressed the importance of good communications within the firm.

Mr. Williams thought boards of directors ill-advised to appoint a transport manager by selecting the best driver or traffic clerk. The high labour content of road transport meant that expertise in labour relations could yield dividends.

Mr. Williams said he strongly believed in accurate measurement of work content. If a job could be done in six hours it should be done; it was wrong to pay drivers—as so many hauliers did—for II hours whether or not a job took 11 hours.


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