The Antidote to
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RATE CUTTING
IAM nowadays meeting many hauliers who tell me that the old conditions of cut-throat competition are rapidly returning and ask me what should be done about it. In response I am putting into operation a plan I tried once before. Instead of accepting from readers casual complaints that rate-cutting prevails in a particular area, they should write to me and specify the circumstances exactly. No harm could possibly be done. The name and address of the delinquent need not be mentioned.
If and when I receive sufficient information, I will make each particular example the subject of an article, or part of an article, in this series, the article to be written in such a manner tha't•it would show the haulier who was doing work of the kind described at the rates quoted that he was losing money.
Success will not, of course, attend every effort of this kind, but quite often it will bear fruit. Usually, no doubt, the success will come later. If a man be unwittingly offering his services below cost, once that fact has been brought before him he will turn the matter over in his mind and in due course an upward trend of rates is bound to result.
Where, of course, rate-cutting is deliberate, either with the object of finding temporary work for a vehicle normally busily employed but out of commission for a time, or where the cutting is due to neglect and false economies in expenditure and maintenance, then, of course, no argument will prevail.
For my part I must have authentic information sufficiently comprehensive for me to deal with the case thoroughly. I must be sure that 1 am really confronted with an example of rate-cutting and not dealing with one of those cases where the seemingly low rate is legitimately quoted and is profitable, being made so because of certain special advantages.
Information Required I must know the material carried, the distanee it is conveyed, the propect of regularity of return loads, the rate paid for the return loads, and size and type of vehicle habitually used. I also like to learn whether the vehicle is regularly worked throughout the week, what, if any, are the delays, how long it takes to load and unload the commodity in question and• whether there are certain specific conditions as to the times of opening and closing of warehousesor railway goods yards. In certain circumstances, this' may have the effect of converting a day's work into that of a day and a half. I also want to know whether the work is such as to necessitate the employment of a man additional to the driver.
It is no use, sending me examples such as the following. A haulier quoted me prices, which, according to him, were being paid in his district:-Bricks, 9s. 6d. per 1,000; tiles and lime, 5s. 6d. per ton; cement, 5s. per ton; sand and gravel. 4s, per cubic yard. Nothing is said about the size of vehicle being used, the conditions of loading, and whether or not help was given at the terminals. Unless I have all that information I cannot state whether or not the rates quoted were too low. It is quite possible that the conveyance of certain kinds of brick at 9s. 6d. per 1,000 in 10-ton or 14-ton consignments can show a handsome profit, whereas, of course, if the same rate were expected for the conveyance of bricks 1,000 at a time in a two-tonner, the work can be carried on only at a serious loss. The haulier 'complaining must surely realize this.
Now is' a time when inevitably there is a considerable demand for bricks for the housing drive, but one of the B22 difficulties is that there is apparently a shortage. This reacts in such a way as to affect prices which a haulier should charge for their conveyance.
The peculiarity of the road haulage industry manifests itself, however, in that instead of an operator's taking advantage of the demand for his services and maintaining rates at a reasonable and profitable level, he vies with his competitors in cutting charges until they reach a point at which they actually involve a direct loss on every individual load carried.
These conditions apparently are rife, as witness next the haulier's letter I have before me. It is, the writer says, extraordinary to see how those who obviously must know better fall in with the rest and give their services away. He quotes the case of a taxicab proprietor who charges, and regularly obtains, a fare of £1 12s. 6d. for a certain journey, but who is nevertheless carrying 2,000 bricks on a five-ton lorry (considerably overloading the vehicle, incidentally) over the identical route for £1 8s. 6d. This man must know that he is not making a fortune with his taxicabs at £1 12s. 6d. for the journey in question, yet he gives the services of the other vehicle for considerably less than the taxicab rate, although it is much more expensive to run, and loads it after a fashion which is bound to prove more costly in the end. '
Supply Irregular
It is often the case, I am told, that a dozen lorries stand in yards waiting their turn for loads of bricks. Part of the reason for this is that the supply is not continuous. gather that the reason is largely shortage of labour.
Bricks weigh 31tons per 1,000. Hauliers with five-ton lorries are carrying 2,000 bricks at a time and they are being paid at the following rates: For a 6-mile lead 8s. per 1,000 For an 8-mile lead .. ... 10s. per 1,000 For a 15-mile lead ,.. .. 12s. 6d. per 1,000 Now let us see how theseprices compare with operating costs, remembering that because of the arduous nature of the work, petrol and oil consumption is high, the wear of tyres rapid, and repair bills and depreciation must inevitably he excessive. Any extra cost of operation because of rough going is further exaggerated by the fact that the vehicles are regularly overloaded to upwards of 25 per cent, above their capacity and are, moreover, driven roughly.
In the first place I will keep my cost figures to a minimum. For running costs I will assume the following:-Petrol and Oil, 2d. per mile; tyres, Id.; repairs, 14d.; depreciation 10.;
total 51d. per mile. • The standing charges, again estimated in extreme moderation, are:----Tax, 12s. per week; wages (including provision for insurance and holidays with pay), E5 16s.; insurance (third-party only), 10s. per week; garage rent, 5s.; total £7 3s, per week, or 3s. 3d, per hour.
An average of an hour per 1,000 bricks for loading is a fair estimation, in view of the fact that it may be necessary to wait some time to be loaded.
Half an hour may be needed to unload; hr. is not excessive for a return journey of 12 miles over a six-mile lead. The total time is thus 34 hours, costing, at 3s. 3d, per hour, 12s. 3d. For the running, 12 miles at 5d. ,per mile is 5s. 6d., so that the total bare cost of operation of the vehicle is 17s.9d., which is equivalent to 8s. 101d. per hour, the operator, according to ray information, is receiving 8s. 6d. For the eight-mile lead the total time will be extended by 4-hr. to four hours, costing 13s. In addition, there are 16 miles at 54d. per mile, 7s. 4d.; so that the total cast is 20s. 4d, per load or 10s. 2d. per 1,000, as against a revenue of !Os.
For the 15-mile run, the loss to the operator is much greater in proportion, as can be antEcipated merely from a comparison of the rates offered. On this the travelling time is likely to be I/ hrs., and the total is therefore 4/ hrs., which at 3s. 3d. is equivalent to 14s. 7/d. The vehicle runs 30 miles at a cost of 50., which is 13s. 9d.; and the total cost of a round journey is thus £21 8s. 4/d., which is equivalent to 14s, 2/d. per 1,000. The operator is doing the work for 12s, 6d. per 1,000, so that he is subject to asloss of Is. 81d. per 1,000 bricks or 3s. 4/d. per journey.
The question arises as to what would be fair rates for the work. In order to arrive at these figures I must first revise and complete the schedule of standing charges. Those given above are deficient as regards four of the five items, one being that of interest on first cost. The funning cost of 50. per mile may be taken as still applying.
The standing charges should really read:-Tax, 12s. per week; wages, £5 16s.; insurance (comprehensive policy), El; garage rent, I5s.; interest on first cost. '7s.; establishment costs, £2; giving a total of £10 5s. per week.
20 Per Cent. Profit .
There is still the question of profit to be considered, and I am of the opinion that 20 per cent, on cost is the minimum that should be expected. This means that the total revenue must comprise £12 bs. on time charges, which is approximately 5s, 6d. per hour. The mileage charge, allowing 20 per cent. for profit, must be 60. per mile run.
In the case of the eight-mile haul, the time taken is 4 hrs. assessed at 3:i hrs„ which at 5s. 6d. per hour is fl Os. 7/d. Add 6s. 6d. for the 12 miles at b/d. per mile and the total charge per journey becomes £1 7s. 4/d., which is 13s. 81d. per 1,000. That is a fair and proper charge.
In the case of the eight-mile-haul, the time taken is 4 hrs. and for that the charge should be El 2s., plus 16 Miles at 60., which is 8s. 8d.; total fl 10s. 8d. or 15s. 4d, per-1,000. For the 15-mile lead, occupying 4/ hrs., the time charge is £1 4s. 9d. and the mileage charge 16s. 3d., making a total of £2 1s, per load or £1 Os. 6d. per 1,000.
My correspondent quotes particulars of .absurd rates for
the haulage of chippings (road material) and gravel_ The reference to chipping,s, embodies certain details of the haulage of that material over a 52-mile lead for which he says 15s. per ton was expected. The material was loaded by chute, but he said in making provision for loading time consideration should be made for the fact that there was' usually a queue at the loading places.
As regards the method of unloading, chippings are shovelled out. Readers not well acquainted with this class of work might like to be advised that road chippings are, more often than not, deposited by the roadside in heaps. There are several heaps to one load, so that the unloading may actually occupy quite a considerable time, depending upon the size and number of the heaps.
will take it that unloading is to be effected in this way and assume that the time necessary is 10 mins. per ton. For loading I will take an average of / hr. per load, Small Vehicle's Drawback
This is a case where the size of the vehicle is going to he an important factor. It takes practically no longer to load 14 tons of chippings from a chute than it does to load three tons, so that the operator of a small vehicle is at a disadvantage for that reason alone. Then there is the undeniable fact that, other things being equal, the larger the vehicle the less the cost of transport per ton.
With a large vehicle the standing charges are usually, so great in comparison with those of smaller vehicles that if there be any delay at terminals or, if the loading and unloading times be comparatively long, and again the leads be over shaft distances, then the medium-sized vehicle is more econorniCal. With a fairly long lead, as in this ease, such a' disadvantage will not apply. Another, however, will. It :s
' that for vehicles weighing unladen up to three tons the speed limit is 10 m.p.h., whereas for heavier vehicles the speed limit at present is 20 m.p.h. It may be argued that I might safely ignore the speed limit, 'as do most of the drivers of larger vehicles. 1 am not, however, taking that course for two reasons. First, • beCause it is wrong in principle for me to assume any wisdom in consistent breaking of the law, secondly, because I have no doubt that the watching of lawbreakers of this description will gradually be tightened up. I will deal in the next article with the details of the way in which these problems will be considered.