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WHY THE FLAT RATE PER TON-MILE IS IMPRACTICABLE

31st January 1941
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Page 20, 31st January 1941 — WHY THE FLAT RATE PER TON-MILE IS IMPRACTICABLE
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Which of the following most accurately describes the problem?

IN Table I, which is reproduced herewith from last week's article on this subject,_ is a summary, in the form of figures, of some of the arguments I put forward against the proposal to take a flat rate per ton-mile, for -all sizes of vehicle, as a basis for a scheme of stabilized rates fat road haulage. It may possibly be urged that the weakness in my arguments, in so faias they are supported or exemplified in these figures, is that all the vehicles concerning which data is given, are assumed to cover the same number of miles per week.

. It is an axiom that the bigger the weekly mileage the \ less is the cost per mile, and, therefore; the less is the cost per ton-mile. Smaller vehicles can be made to run more miles per week than the larger ones. Not only—in the case of one of them at least—is the legal limit,10 m.p.h. more than it is for the others, but, assuming that the time taken to load per ton is the same throughout, the terminal delays of the larger vehicle must be longer, which circumstance tends to diminish the weekly mileage.

It might be that the advantage of being able to cover a greater number of miles per week would be sufficient to offset the disadvantages of these smaller vehicles, as depicted by the figures in Table I.

It is worth while looking into this suggestion. The argument is likely to weigh most heavily in favour of the smallest machine, the 5-tonner, because, presumably, it is of the 30 m.p.h. type. For the sake of simplicity. I pro • pose still to assume that`all are working on the same route, from Leeds to London, approximately 200 miles in each direction.

Period 'Allowed by the Schedule

for Loading and Unloading It will be recalled that one of the conditions of the proposed rates schedule is that there should be an allowance of 20 minutes per tea for loading and a like peridd for unloading. At the risk of confusing the issue it is, prob-• ably, of interest to be a little more explicit about this condition. The period of 20 minutes is an allowance, and not an arbitrary claim that 20 minutes per ton is likely to be necessary.

The proposal is that the flat rate per ton-mile, whatever it my be, is to apply, without modification, so long as the loading and/or unloading time does not exceed 20 minutes per ton. That period is, in effect, free loading time. If it be greater, the, excess is. to be charged for as demurrage.

Making, in the first place, the assumption that the 20 'minutes per ton is needed, the following times apply to the two extreme sizes of vehicle, the 5-ton, 30 m.p.h. machine and the 15-ton eight-wheeler.

In the ease of the former, 3 hours 20 minutes is needed for these two operations: that period of time is what may be called the terminal delay. If the legal limit be not exceeded by much, an average speed of 28 m.p.h, can be taken to apply. In that case, the actual travelling time, in one direction, is 7 hours 10 minutes, so that for a complete one-way journey the time is 101 hours. Three round journeys (out-and-home) can thus be completed in a full six-day week, and the total time will be 63 hours. The mileage per week will thus be increased to 1,200.

On the other hand, taking the case of the 15-thriller, 10 hoUrs will be necessary to load and unload and 11 hours for the one-way journey of 200 miles. It will thus be possible in a week to make one round journey in 42 hours, or, on an average, three single journeys per week of 63 hours-15 hours overtime. TLe mileage is thus 600.

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Now the operating cost of the small machine is to be assessed as follows :—The standing charges per week, according to The Commercial Motor Tables of Operating Costs, total £5 19s. 3d. For the 15 hours' overtime there must be an addition of £1 7s. to the foregoing, making a total of £7 6s, 3d.

The running cost per mile, according to the same authority, is 5.27d. and for 1,200 miles that is £26 7s. The total operating cost per week is, thus, £33 13s. 3d. Add for establishment charges as before, £3 per week and the total expenditure per week is seen to be £36 13s. 3d. Profit on that expenditure at 20 per cent. is £7 6s. 9d., so that the total revenue must be £44 per week. That is equivalent to 8.8d. per mile run. If the vehicle be carrying full loads in both directions the ton-mileage per week is 30 times 200, which is 6,000, and the rate per tonmile must thus be lid.

Availability of Return Loads and Terminal Delays

If return loads be available only to the extent of 50 per cent. of the outward loads there is, of course, some saving of time, because there are no terminal delays for the return journey on every other trip. Alternatively, those delays are more brief because a full load is not taken aboard. Making due allowance for that, as well as for the reduced ton-Mileage per week, it can be shown by calculation, which it is not necessary to include here, that the rate per ton-mile will have to be nd.

The operating coet of the 15-tonner, again according to The Commercial Motor Tables of Operating Costs and allowing for the employment of a 'second-man, is £37 us. per week. To that must be added £2 15s. 2d. for overtime for 15 hours for the two men, making a total pf £39 16s. 2d. Add overheads, as before, at £9 and we get £48 10s. 2d., then profit of £9 15s. 3d., giving £58 Ils. 5d. as the revenue which must result. That is equivalent to 23.43d. per mile run, 1.56d. (just over Ild.) per ton-mile with 100 per cent, loading and lid, per mile with 50 per cent, back loading.

The rates per ton will have to be 37s. 6d. for the 5twiner and 31s. 3d. for the 15-tanner.

It is clear, therefore, that even if full allowance be made fpr differentiation in speed and weekly mileage capacity, there is still tto great a difference in the rate per ton-mile to allow of both vehicles being satisfactorily included in any schedule of rates, based upon a single ton-mileage figure, to be applicable to both.

Now take anotheeaspect of the Matter. Previously, consideration has been given only to differences in size of vehicle. It is now necessary to see what effect the length of journey is likely to have. In the original proposals, witch gave rise to this article, it was suggested that local rates should apply up to only a distance of 15 miles and even that, I thought, was too great.

It is to be assumed, therefore, that a lead of 35 miles would be subject to the same flat rate per ton-mile as one of 200 miles. A typical journey, which may serve as an example, is that between Manchester and Liverpool, a distance of 35 miles.

In order to make my point, it is necessary now to tonsider dne vehicle only, say the 5-tonner, and see what the ton-mileage must be for this route and how it compares with that arrived at in connection with the 200-mile lead.

The period for terminal delay will be the same as before— a total of 3 hours 20 minutes for loading and unloading. The travelling time can be taken as 1 hour 40 minutes, because it is not to be expected that an average speed of 28 m.p.h. can be maintained over that particular journey Which, notwithstanding the new Manchester-Liverpool road, involves traversing a considerable mileage of congested streets. The total time for a single journey is thus five hours and it is just possible to make a double journey; or a round trip, in a day of 10 hours. In a week, therefore, of 60 hours, there will be six round trips and the Weekly • mileage will be 420.

The operating cost will be as follows :—For standing charges £5 19s. 3d., plus 14s. id. for overtime, giving a total of £6 13s. 4a. The limning cost, 420 miles at 5.36d. per mile, is £9 7s. 8d. and the total operating cost £16 1s. Add overheads, £3 per week, and we arrive at the total weekly cost, which is £19 1. Profit at 20 per cent, of outgoings was £3 16s. and the weekly revenue should reach £22 17s. That is 13d, per mile run. The rate per ton-mile for 100 per cent, loading will have to be 2.6d. and the rate per ton-mile, if only 50 per cent, back loads can be reckoned on, must be at least aid. This compares with 21d. per.ton-mile on the longer journey.

Closer Examination Makes -the Suggestion More Unattractive It is, thus, even more difficult to apply a flat rate per ton-mile, taking different distances into account, than it is if difference in vehicle size be taken into account. The more this suggestion of a flat rate per ton-mile is examined the less attractive does it become.

The difficulty of reconciling rate for traffic carried, on the one hand in large vehicles and on the other in small vehicle's, is by no means new. It does not arise, in connec.tion with only rating per ton-mile. As a factor, it militates against the use of that unit and against any flat rate per ton, per mile, per parcel or per unit of time. Whatever scheme of rates be proposed must take that factor into account and make full provision for it.

It is no exaggeration to state that I have found, in respect of hundreds of complaints of rate-cutting, That the trouble arose because an operator using a big vehicle was commencing to carry traffic hitherto conveyed in small vehicles. It should be appreciated, and I think has been shown above, that where full loads are obtainable, large vehicles can operate at lower rates than small ones and yet continue to make a fair and reasonable profit.

The railways have the same problem and have met it by differentiating between rates for•cOnsignments of full truck loads and for consignments which are less than full truck loads. t is met, in applying the railway scale Of rates, by putting small consignments into higher rated groups' in the classification of goods.

For instance; common bricks, if I am not mistaken, normally came into Class 2 of the railway classification, if they be offered in loads of not less than 6 tons. If less than a 6-ton load be offered • modifications 'are made as follow load of 4 tons or over, but less than 6 tons, is put into Class 7; a load of not less than 2 tons, but less than 4 tons, into Class 10;a load of less than 2 tons into Class 12.

e What this means, in terms of rate per ton, can be appreciated by this example, Suppose that the rate for a particular journey for 6 tons of bricks be 9s. 3d. per ton, then if the merchant sent only 5 tons, the rate would be 15s. 6d., if 3 tons, 19s. 2d. and if only 1 ton, 25s. 10d.

That is the logical way of dealing with the problem, if goods be classified according to the railway scheme. We do not, however, want to adopt the railway classification. It is much too cbmplicatal and I believe the railway companies would be glad if any way of simplifying it could be

suggested. • .

Why There Should Be -No Need for Classifying Goods My point is that if vehicles be classified according to some rational basis and rates be assessed according to size of vehicle, there should be no need to classify goods. That is, of course, provided that the classification of the vehicles includes not only the,sorting of vehicles, according to size, but also according to type, and provided, too, as was specified in connection with this flat rate per ton-mile scheme, that goods-in-transit insurance can be 'arranged at a .reasonably low rate to cover all classes of traffic.

It is known that the practice has grown up—in respect of regular traffics at least—of using certain types and sizes of vehicles for certain traffics, so that, although exceptions arise, generally it is known that traffic is moved in loads of a certain tonnage and that it requires a certain type and size of vehicle for its conveyance.

If vehicles be classified and rated accordingly, then this more or less settled custom will automatically provide a rate for the goods. The rule is not a precise one, but it can 1:ie approximated within reasonable limits. All that is needed, therefore, is a brief classification of vehicles and the compilation of a rates book giving rates for 'each. The problem of differentiation in cost, as between long and short leads, can be tackled at the same time by apply ing a tapering scale, so. that if the rate for the use of a 5-tonner over a 30-mile lead be is, 3d., that rate could be reduced to as little as 9d. in the case of a 200-mile lead, and so on.

• The basis for any such schedule of rates is that which I have been advocating for nearly a -score of years, namely,, to assess the value of the vehicle and its use on the basis of time and mileage—a given rate per hour for the use of the vehicle and' its personnel, plus a rate per mile for every mile covered in respect of any particular job or route.

All but one class of haulage, that of " smalls," in which each vehicle load consists of a number oft consignments can be dealt with according to this time-and-mileage method. The same basis can, indeed, be used for calculat ing rates for " smalls." The calculation will be a little More difficult on account of the intrusion of -a number of complex factors, but the basis, the underlying principle, is nevertheless the same.

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