The Urgent Problem of Clearing Houses
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By H. Scott Hall, M.I.T.A.
THE subject of clearing houses is acutely controversial. Some operators say they are anathema, whilst others bless them. Moreover, the curse, or blessing, comes alike from reputable hauliers. It is not the case that it is only those hauliers who themselves are not beyond reproach who anathematize the clearing houses.
At one time it was true to state that no less than 90 per cent. of clearing houses were consistently illrun, every one of that number being guilty of sharp practice, and making the bulk of its profits by fleecing small hauliers. '
Conditions now, however, are vastly improved, so far as that aspect of clearing 'houses is concerned. They are, nevertheless, far from perfect. Far too many 'of them take advantage of the haulier, and, in one way or another, deprive him of either his traffic or his just dues. Some outstanding names in that department of the road-transport industry are execrated throughout the length and breadth of the country.
To, retort, as some clearing houses do, that many hauliers are in the habit of filching clearing-house customers by going direct to those customers and cutting clearing-house rates, is no answer.
Clearing Houses of Value to Hauliers
Clearing houses are, moreover, in my opinion, an essential part of the structure of road-haulage industry. They are a help to hauliers, especially to most of those small operators who cannot afford the expense of a network of depots, but who, nevertheless, if they are to continue in business, must be able to contact some organization, in each big centre to which they take loads, to obtain return traffic.
The clearing houses are equally useful to traders who have traffics— widely fluctuating in , quantity—. which they desire to have moved at short notice.
In meeting these two requirements the clearing houses perform, in normal times, a useful function. If they • be valuable in that way in peacetime, their utility in tines of war is intensified. Indeed, it was tile Great War of 1914-1918 which gave birth to clearing houses. They were established under the agis of Chambers of Commerce; at the request of the Ministry of Munitions, to cope with the enormously increased traffics brought into being as the result of war • conditions, and to ensure the maximum use of the limited number of vehicles then available.
I have, indeed, always thought that if the Ministry of War Transport had tackled the road-transport problem of the present war by taking advantage of the clearing houses, organizing them and controlling their operation, there would have been no need for the H.N.T.P. or, indeed, of any pools. For, after all, the II.N.T.P. is a clearing-house organization, superimposed (and, for that reason, largely superfluous) on the organization already in existence.
A Stigma That Must Be Removed
It may well be that the reason for ignoring the clearing houses was because, in many instances, they have a bad name. If that be so it emphasizes the urgency of getting rid of the stigma which lies upon this department of the industry.
Starting with the hypothesis that clearing houses, in some form or other, are essential, what should be done to eliminate the evils of the system and thus to encourage more effective employment of these agencies? • The formation of the National Conference of Road, Transport Clearing Houses was a step in the right direction. It is unfortunate that, included in its membership, there are some of those clearing houses the methods of which are, to say the least, to be deprecated.. Certainly the aims and objects of the Conference are commendable. Were they to be achieved there would be little room for criticism of. clearing-house operation. The Conference is, however, powerless without the aid of the hauliers' associations, for a reason that,at present, is insuperable.
The greater proportion of what is, in effect, clearing-house traffic is dealt with by operators who will not acknowledge the fact, and steadfastly refuse to be regarded as clearing houses or to join the Conference.
Probably 95 per, cent. of the large goods-carrying companies in the country, certainly that percentage of those.engaged in trunk haulage, act to some extent as clearing houses. The percentage is growing, because many clearing houses which had few or no vehicles are acquiring haulage businesses.
Their refusal to acknowledge this status is undoubtedly due, in part, to the stigma which still attaches to the name clenring house. It may also be because they -find the terms and conditions which are recommended by the conference to be unacceptable and, again, they are probably already members of one of the hauliers'. organizations and do not see why they should join another.
I have no knowledge of the fact, but it is surely reasonable to assume that reprehensible methods of operation which prevail in some clearing houses are also practised by those hauliers who do clearing-house work, but who fight shy Of the _name.
It should be clear, having in mind the above conditions, that any process of reform must be wide enough in its scope to embrace all forms of clearing house.
Subcontracting Must Be Investigated
Expressed in another form, it is subcontracting in all its forms which must be investigated, reorganized and strictly controlled. Furthermore, it is difficult to avoid the conclusion that licensing, in some form or other, is inevitable.
Remembering the major difficulty just referred to, it would seem that the licences should, be issued, not to clearing houses as such—probably it would be preferable for the term to fall into disuse—but to "Transport Contractors." It should be stipulated that any operator who subcontracts to an extent of more than, say, 10 to 15 per cent. of his total turnover, must be licensed. •
The credentials of any operator applying for a " contractor's " licence should be carefully scrutinized with reference to not only the extent of his subcontracting, but also with regard to his previous conduct and present status. Having_been awarded his licence, the " contractor " shall be at liberty to subcontract to any extent and deduct an agreed commission from the full rate which he,receives for the traffic. Most clearing-house repre. sentatives seem to opine that the minimum discount should be 12i per cent., a circumstance which inclines, me to suggest, that it should be the maximum.
As it is not advisable to disturb the normal procedure whereby many operators are in the habit, from time to time, of subcontracting odd lots of traffic, without making a regular practice of 11; there should also be a limited licence, to be issued to those, when subcontracting is less than 10 or 15 per cent. of their total turnover. They should be allowed to deduct no more than 5 per cent. commission.
Commission Difference That is Reasonable This differentiation in the percent
age commission allowed is a reasonable one. The " contractor " who' 'sets himself out to subcontract any appreciable portion of his traffic provides facilities and gives service which relieves the subcontractor of considerable expenditure. It also involves the contractor in not inconsiderable expense, so much so, in fact, that, if he does his part, his net cdnimission is probably not more than about 5 per cent, of the rate.
It should be the duty of the authority having the power to grant or withhold a " contractor's " licence, to include, in his investigation of the qualification of the applicant, an inquiry as to the extent' of the facilities he is prepared to provide.
Both " contractors " and " limited contractors" will have to be compelled to 'advertise their status as such on all notepaper, billheads, contract notes, waybills and the like. It seems obvious that neither should be allowed to act as subcontractors, that would permit of the multiplication of discounts—one of the evils that this plan is devised to eliminate.
With this scheme in operation, all
A licensees, after the war, will be comprised in three classes, "contractors," " subcontractors " and " operators," the last-named being those who habitually carry all their own directly obtained traffics in their own vehicles. The B licence should, in any rase, be abolished. I have always held that opinion and have -never seen any reason to revise it.
The plan cannot, of course, be
fully operated or even -begin to be successful unless it be accomplished by some control of rates. In the extremely unlikely event of haulage rates being stabilized and made
statutory immediately or shortly after the war is over, that part of the problem would be solved. Every haulier would, presumably, know the proper rate for the traffic and if he be a subcontractor would appreciate that he must accept that rate less 121 per cent. if he be working for a fully licensed " contractgr," or less 5 per cent. if he takes the traffic from a "limited contractor."
The practice of the haulier in going direct to customers and cutting rates would be eliminated, for it would be illegal to carry at less than the statutory rate. He can still go direct to the customer, and if he does and can obtain and retain the traffic because he gives better service, then good luck to him, provided that he, for his part, finds no cause for complaint if he finds it difficult, subsequently, to eke out his traffic because no " contractor " will employ him.
In the' probable absence of any statutory control of rates, it should be made a condition of the granting of a licence that all subcontracted traffic should be invoiced in multiple form, of which one should go to the customer and another to the subcontractor, sothat the latter may know exactly what the "contractor " receives for doing the job. The subcontractor's rate is that amount less 12i or 5 per cent., as the case may be.
Rate Cutting Easy to Prevent
The case of a subcontractor going direct to a customer and cutting the rate can, with these conditions prevailing, be dealt with easily and drastically. Presumably there will be a strong, almost 100 per cent. association of "contractors." They can decide to punish a subcontractor who misbehaves in this way by collectively agreeing to refuse him any further traffics, that ban to remain in force for some stipulated period, or until he agrees to mend his ways. There would, naturally, have to be careful investigation of any alleged offence.
The foregoing is, of course, but the rough framework of a scheme. It is by no means all my own work. -Actually, it is the outcome of a number of talks with operators of all degrees, clearing-houses as well as those who are most violently opposed to clearing-houses; operators who run trunk services and subcontract as well as subcontractors and operators who pride themselves upon the fact that they, neither subcontract or deal with clearing-houses.
I shall judge of its merit by the amount of critiCism I receive. The more the criticism, the better I shall believe it to be.
On one point there can be no dis agreement, especially in view, of recent occurrences, namely, that the subject requires full ventilation, with a view to clarification. Moreover, it cannot be denied that the problem is a pressing one and that the need for its solution is urgent. At the very least, some such scheme should be a part of the post-war reconstruction plan for the industry.
It is to be regretted that there is no refefence to it in the long-term policir recently prepared by the S.J.C., for it should be clear that no reshuffling of the associations can be complete without proper recognition of the place in the scheme of things for the clearing-house, or its equivalent.
Government's Attitude to Clearing-houses
The foregoing matter was written before the official announcement of the new Government scheme for the control of long-distance road haulage, and, as is now known, this scheme, in its original guise, presents little in favour of clearing-houses. However, there have since been meetings on this matter, one as recently as last Tuesday, when the clearing-houses put forward to the M. of W.T. their suggestion for consideration, but the results will probably not be available until after "The Commercial Motor" has gone to press.
There are several points of view which; in the circumstances, need to be emphasized. In many cases, the interests of thesmall operator and the clearing-house are practically identical, and often the former has been able to exist mainly because of the latter.
There is little doubt that certain hauliers would prefer to be based upon clearing-houses, as they may fear that the same consideration would not be forthcoming if they became attached to larger operators or combines. A great many traders throughout the country have been in the habit of using clearing-houses to a considerable extent, and both they and the Ministry may well be saved a mass of detail work, because the traders would not then have to contact various unit controllers for traffic going in diverse directions. It must be remembered that these dealers, in traffic usually have no real interest in vehicle operation and can, therefore, be regarded as unbiased in the selection of vehicles for particular classes of work.
The many years' experience which lie behind many of these institutions have undoubtedly afforded them full opportunities of gathering knowledge which should not be wasted just at a time when it might prove of great value.