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CHEAP RATES BY BLUFF
A Haulier Tries to Evolve a Scheme for Rate-cutting Whilst Keeping Outside Minimum Figures for
Weekly Earnings
AFREQUENT criticism of The Commercial Motor Tables of Operating Costs is that whilst they embody accurate data of costs and charges, there is no direction given for ensuring that these charges shall be acceptable to hauliers' customers.
"The rates you suggest are all right," I am told, "but how can we get them?"
A plain, blunt answer is this : that getting profitable rates is a matter of business acumen, failure to do so being a sign, if not an actual proof, of commercial ineptitude.
To make that answer in every case would, however, go to show a corresponding ignorance of prevailing conditions, so far as certain classes of haulage are concerned, and since I rather pride myself on my wide and accurate knowledge of those conditions, it is only rarely that I am able to answer in such unequivocal terms.
The road-transport industry is beset with difficulties, some of its own making, some which have been thrust upon it. Many of them are of such a nature as to determine rates and fares, regardless of whether those rates and fares are sufficient to afford an adequate profit. Some of this is due to the capacity of unscrupulous buyers of transport for putting up a bluff and frightening the haulier into accepting rates below those which, knowledge of costs apart, he feels instinctively are insufficient. The bluff usually takes the form of claiming that a competitive haulier will do the work for less than the quoted figure.
The strength of the position of the man who puts up such a bluff is augmented by two factors. First, it has, for so long, been the practice of hauliers to quote for work according to the elementary process of offering to do it for a little less than the other fellow, that the haulier who is subjected to this bluff feels in his bones that the statement is only too ' likely to be true.
Secondly, only the minority of small hauliers is really acquainted with figures of cost; the majority, therefore, is uncertain of itself, and particularly vulnerable to an attack of the nature indicated by this particular bluff. Briefly, fear and ignorance combined make it next to impossible for the haulier to "call the bluff."
Of late, this procedure on the part of the customer has taken a new guise. It should be realized that, at long last, hauliers here and there are getting together and formulating some sort of policy in this matter of rates and fares. A variety of reasons has served to bring this about. One, I am happy to be able to state, is the series of addresses on the subject which I am delivering under the auspices of The. Commercial Motor. These are making hauliers "rates-and-cost conscious."
Another is the foreshadowing effect of the T.A.C. Report. Area committees of both A.R.O. and C.M.U.A. are at work on the much-discussed rates structure and, in the conferences which they are having with their members, are impressing upon them the importance of trying to make real profits from their businesses.
D8 In consequence, buyers of transport are encountering a little more resistance to their efforts to brow-beat hauliers. They now threaten to purchase their own vehicles and dispense altogether with the services of the haulier, if he does not become more pliant.
In most cases this is just as much a bluff as the other. But there is just enough likelihood of the customer meaning what he says, to frighten the average haulier. Indeed, in some industries there is a tendency for C licences to be taken out and for transport users to buy their own fleets.
What will happen, of course, is that certain trades will tend more and more to develop their own means for transport to the detriment of the interests of the haulier, whilst others, hitherto prone to that course, will discover that the work can be much better and more economically performed by the specialist haulier.
They will hand it to him with relief.
Haulage of some commodities is passing from the trader (ancillary user) ; haulage of other commodities is coming, in greater quantities, to the road-haulage industry—being relinquished (gratefully, be it noted) by the ancillary user.
This is a complex problem and the present is not an appropriate occasion for its full discussion. Those hauliers who are becoming a little worried by this threat of the customer to buy his own fleet should bear the following points in mind :—Cost is not invariably the deciding factor : convenience often predominates. Most traders, merchants, manufacturers and the like are becoming increasingly aware and afraid of the compli cations attendant on the operation of a fleet of motor vehicles. More and more are they appreciating the legal pitfalls in complying with the regulations.
They do not like the occasional or possibly rare visits of the traffic inspectors. They are becoming more than willing, in a good many cases, to pay to be relieved of these responsibili ties. The businesslike haulier should bear this last fact in mind when he is quoting and when, perhaps, he is arguing the question of comparative costs before a potential customer.
Even on the question of cost, the haulier can often score, and heavily, too. In this connection the economy of a high weekly mileage is of importance. The ancillary user is handicapped by the fact that he cannot usefully cover an economic distance each week. The haulier, serving several tradesmen, can do so, with advantage.
Take the case of a vehicle, the average operating cost of which is .summed up in the figures: £5 per week standing charges and 4d. per mile running cost.
The ancillary user, operating such a vehicle, in circumstances which limit his useful weekly mileage to
240—and that is a fairly representative figtme—must find £9 per week for vehicle operating costs alone. In addition, he has certain establishment costs, and these will probably amount to 10s. per week average throughout the year. The total cost of his transport is thus £9 10s. per week, which is equivalent to 9id. per mile.
A haulier, taking this trader's work in with that of other customers, will, perhaps, cover 61:710 miles per week on an average throughout the year. Assuming that his operating costs are the same as those of the ancillary
user, and they are actually likely to be less, then his total vehicle operating cost is £15 per week, made up of 25 standing charges and 600 miles at 44. per mile, which is 210. His establishment expenses may be about 21 per week, so that his total expenditure in connection with the operation of this vehicle is £16 per week. His cost per mile is thus 6.44. and there is thus a margin of 3.1d. per mile between his cost and that of the ancillary user. Out of that amount he can quote competitive rates and still make a profit.
Actually, a considerable number of ancillary users would be willing to pay the full 9f 4. per mile and rid themselves of the responsibility to which I have referred above. S.T.R.