STABILIZED RATES and the effec
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Df the RETURN-LOAD PROBLEM
Solving the Problems
of the Carrier
When It 'Pays to Pick Up Return Loads Over Short Mileages. At What Point in Catering for Return Loads Does Rate-cutting Commence?
AT the close of my article in last week's issue I made rather a rash statement, to the effect that below a lead mileage of 80 it was not practicable to pick up 'a return load, That is a belief held by a good many operators and they base their view on the fact that you cannot, within a legal working day, make. a journey of approxi-. mately 80 miles with a load, deliver it, pick up another load,
and return. . , ,. It might just be possible to do that if loading and 'unloading conditions, for both outward and return loads, be most propitious, but as that is likely to happen so infrequently it is outside they region of practical politics. It has been held that it is better to get a vehicle back to its own headquarters each night than to have it out and away looking for return loads.
However, the problem is not quite so simple and stfaightforwatd as that. Indeed, when it is gone into in detail the figures seem to contradict the above deduction, as I shall show.
Rates Assessment and Its Relation to Over-speeding The return load problem has always been a controversial one and, before spending some time upon it, there is one point I had better clear up. Mosfreaders will remember the short series of articles (concluded a few weeks ago) in which I gave extracts from the log books of a large operator engaged on trunk services.
I was taken to task by an old and valued reader because, on calculating the times for one of the journeys described in the first. article, he observeci that, although it was obviously a 20 m.p.h. machine, the average speed was well ovei that figure—I forget whether it was 21 or 23 m.p.h., but that is of no consequence. He had evidently not appreciated that I was dealing with facts, and drew the conclusion that I was encouraging over-speeding by :endeavouring to assess a rate on the basis of time-keeping which would involve breaking the law.
In replying to his letter, I pointed out that these were • extracts from operators' records and merely confirmed what everyone 'knows, namely, that most 20 m.p.h. vehicles on long-distance work do undoubtedly break the law as regards speeds.
However, in this series of articles I am dealing with the problem of assessing rates as they should 'be after the war and would confirm here and now that it is definitely the principle of "The Commercial Motor," and one to which I myself have always adhered, that, in tackling the problem of rates assessment, the provisions must be such that the driver is not called upon to exceed the speed limit to deliver his loads in the times taken as a basis for calculating the rates.
The Air Ministry's Reaction to Legal Speed Limits
Curiously enceigh, confirmation of this attitude is exemplified in a recent agreement between the Air Ministry and' the Standing Joint Committee, concerning the rates for the conveyance of sand and gravel. The footnote to that agreement reads: " The Air Ministry recalls that the haulage -• Cates assessed under this agreement were based on running . speeds within the limits prescribed by law, and therefore reserves the right to make adjustments in individual cases where it is evident that the speed limit has been exceeded.–
I believe that principle to be correct, notwithstanding that I am, as already stated, well aware of the fact that there is little observarite of the speed-limit regulations by drivers of vehicles on -long-distance haulage. It seems to me to be inevitable that when the war is over and the M.O.W.T. and others have time, opportunity, andlabour . to deal with this business of speeding, steps will be taken rigorously to apply the law. , If the authorities take no action, it is reasonable to expect, judging from past experiences, that hauliers' competitors will not overlook the opportunity afforded of objecting to the licences of operators whose vehicles run at excessive speeds. They did it before the war and they will do it when 'the war is over.
Having said my little piece about speed limits, let me get back to the realities 61 the problem I am discussing.
In the first place, let me deal with this question of whether it is practicable and economical to endeavour to obtain return loads on lead mileages of less than SO. Take a. lead of 75 miles: Assume that the vehicle being used is a 7-8-tonner and that the loading and unloading times approximate to thoie specified in the previous article, totalling three hours for the two operations. Assume, also, that this is an after-the-war type 7-8-tonner which can legally travel at 30 m.p.h., so that its average speed over a 75-mile lead, through industrial and fairly heavily trafficked districts, will be somewhere between 20 and 24 m.p.h.
If the driver be not instructed to pick tip a return load, he can, -within an 11-hour maximum day, be travelling for eight hours, having used three hours of the 11 for loading and unloading, and in that time he can comfortably make the return journey of 150 miles in all. If, however, he attempts to pick up a return load, 41 hours of the time will he taken up in loading and unloading the outward load and in loading the return load, leaving 61 hours, which is not time enough for him to be sure of getting back to his home town.
The load in any event, will have to be taken off the next day, so that, in the absence of supplementary loading staff, this journey will break into two days. Actually, the full time needed for conveying the two loads out and home will he between 13 and 14 hours—approximately a clay and a half.
One-way Loading versus
-Return-load Arrangements • What would probably develop would be the habit of taking a load out one day and bringing another back the next day so that three round .journeys would be made per , week with the return loads, as against six journeys per week with one-way loading. In which case, assuming that 71 tons be 'carried in each direction, the weekly tonnage will be the same-45 tons per week—whichever policy be adopted.
If it be assumed that a rate has been fixed for loads carried over a 75-mile lead, Then tne revenue would be the same, but here is the factor that must be given careful consideration. The expenditure by the operator who makes only three journeys per week is considerably less than that of the other, although the revenue is the same in both cases.
The first man has to pay overtime to the extent of approximately £1 4s. per week; the other would be involved in payments of subsistence allowance and other expenses of about the same amount or, possibly, rising to 41 10s, per week.
Now, the first vehicle—that which goes out and home each day and carries an outward load only—covers 900 piles per week and the total operating costs, according to " The Commercial Motor" Tables of Operating Costs, are £37. Add establishment charges of £6 and £1 4s, for overtime, and the total expenditure is £44 4s.. per week.
The other vehicle, making-'only three round journeys per week, but carrying a load in each direction, runs 450 miles in that time, and the corresponding costs figures are :— Vehicle operating costs, £24; establishment charges, £6; subsistence allowance and expenses, £1 10s., a total of £31 10s.
If it be assumed that the rate per ton for both classes of traffic is £1, the revenue is £45 per week, so that the operator who takes traffic in one direction only earns a net profit of I6s. per week, whilst the other, catering for return leads, but doing only three round journeys per week, makes a net profit of £13 10s. per week.
It should be observed that there is no suggestion of ratecutting here on the return load. It has, for the moment, . been assumed that the rate has been fixed at £1 per ton, which, in point of fact, is not an unreasonable rate for that length of lead.
The second operator, moreover, is much better off in more ways than one than the first. Besides making a handsome profit, his vehicle is engaged , on work which is well within its capacity, With no reed for speeding, 'and it is likely to last nearly twice as long as the other machine.
The arguments, therefore, seem tq be much in favour of . •
working on the basis of return loads, even supposing that the return-load operator be unfortunate in that he was not always able to pick up a back load. Assume that happens once per week so that, instead of carrying 45 tons, he only carries 371 tons. He still shows a profit of £6 per week, as against the other fellow's 16s., and still retains the advantage of easy work for his vehicle and his driver.
When the Basis of Working is Cost Plus Profit Now, let me tackle the same problem from another angle. Let me try to assess a rate for the traffic on the basis of cost, plus profit.
First, take the case of the operator who deals with oneway traffic only. 1-1.js costs, as I have shown, total £44 4s. per week, and, adding 20 per cent. for net profit, we get £53 4s. That is his revenue for carrying 45 tons, and, in order to obtain that, he must be. paid at the rate of
.3s. 8d. per ion (to the nearest penny).
The other operator, doing only three journeys per week but' getting a return load, expends £31 10s. per week, and, adding 20 per cent., gives us £37 16s. as the revenue he would expect. -If he carries return loads every'journey, his weekly tonnage is 45 and he can carry the traffic at 16s. 10d. per ton (again to the nearest penny).
If he misses one return load per week, his costs remain the same and he must still earn the same revenue of £37 16s. per week, so that his rate per ton must be a fraction over £1. Now, according to the above figures, the first operator is earning a net profit of £9 per week and the other fellow only £6 6s. per week; this raises another most interesting point. The above rates are based on cost, plus profit, and the man who does the biggest mileage and puts himself to the greatest expense is, according to that rather theoretical formula, able to earn a bigger profit per week than his competitor who operates more carefully and cuts his costs.
I know what will at once be a criticism of this statement. It will be that the fellow who charges 16s, 10d. or even £1 per ton is, obviously,, rate-cu.tting, because the appropriate rate is El 3s. 8d, Although to me, and probably to-quite a number of readers of this article, it is obvious that XI rather than £1 3s. 8d. is the practicable rate, there •are many diehards in the industry who still insist that a rate must be based on one-way loading only and that any attempt to take return loads into consideration is to encourage rate-cutting.
Economic Aspectof the Situation Should Not Be Overlooked
Those who take that view entirely ignore the plain corn-mercial economic aspect of the situation. If a haulage contractor can carry the traffic one way only for £1 3s. 8d., then quite a number of Glicensees, whose traffic they are carrying can take it themselves in their own vehicles, cap-ying loads in one direction only, for less money. They have not to face the dead weight of establishment costs, which fall upon the haulier, and they need look for no profit upon the operation of their vehicles. It is clearly the business of the haulier so to operate as to reduce his charges to a reasonable and competitive minimum and thus justify his existence.
Apart from these considerations,, there is, of course, the further point that whereas £1 per ton may be a competitive rate, £1 3s. 8d. per ton may be out of the question, in so far as that aspect of charges is concerned.
One more point, for consideration next week, is this. I have, in previous articles, been discussing Haulage over leads • of from 160 to 200 miles. It is possible, without breaking the law and using a 30 m.p.h. vehicle carrying 71 tons, to make three return journeys per week over a lead as long as 200 miles, although that is almost a maximum.
I have just shown that it is profitable to make no more than three journeys per week over a lead as short as 75 miles and that, it seems to me, offers a new basis for the calculation of rates over those dislances. Just. what I mean by that and how it works out in practice is the subject for another article. S.T.R.