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The New Zealand Railways Magazine, Volume 1, Issue 7 (December 15, 1926)

Business Getting for the N.Z. Railways

page 60

Business Getting for the N.Z. Railways

Up till comparatively recent years the Railway had practically a monopoly of the land transport business of New Zealand, but the position has been changed by the advent of road motor vehicles together with the improvement of the roads.

Road motors are now able to compete, with more or less success, for the conveyance of commodities that are chargeable by rail at the higher rates. These competitors skim the traffic, catering for the lines that suit them; they fix rates to suit themselves and, generally, impinge on the business of the Railway. The latter meanwhile is required to fix rates applicable to all; to run regular timetables; and to conform to numerous restrictions and regulations not, as yet, applicable to its competitors. In addition, the Railway is compelled to convey many classes of goods at exceedingly low rates for developmental purposes in the interests of the community as a whole. If the same obligations were imposed on our competitors and they had to convey classes of traffic such as coal, firewood, road metal, etc., and pay their share towards the upkeep of the road bed which they destroy, it would be impossible for them to undercut as they are now doing. It is worthy of note that the cost of Railway track maintenance averages £369 per mile per annum.

However, we have to face the problem as it exists. These competitors are seeking a share of the Railway's revenue, a portion of which goes towards the payment of our wages. If the revenue falls some of us may lose our jobs. On the other hand, if the business increases the staff must benefit. We have already made things very interesting for our competitors, but we must not relax our efforts. It is incumbent upon all of us to do everything possible to increase the business of the huge concern of which each one of us forms a part.

We are a team of 18,000 and, whatever our particular tasks are, the ultimate object is to do something to assist in conveying goods or passengers from one point to another. We profit from the satisfaction of doing a good job in a manner which reflects credit on the whole organisation and which enables us to hold our heads up in the community. Each one of us must see to it that he is not the weak member who causes the team to fail.

The art of selling transport is now one of the most important phases of the activities of any Railway system which is in competition with other means of transport. One of the most essential features of the transport selling business is Service and this is undoubtedly being realised more and more by the staff. The public, realising we are out to give the best service possible, are appreciating the fact and responding in a marked and gratifying manner. We must continue to make our customers and prospective customers realise we are out to “deliver the goods” and make the Railways such a convenience that they will not look elsewhere for their transportation. An improvement in service is more effective than a striking advertisement. Let us hold our business by courtesy and helpfulness and efficient performance of our duties. We must know our customers and treat them with understanding. We should know all the details of our organisation and be in a position to discuss these intelligently. The transportation problem is one of the most interesting problems of the present day.

We will shortly be co-operating with Railway Advisory Boards, comprising representatives of the public working in co-ordination with the Railway Department to the mutual interests of both. These Boards will require a deal of detailed information, and we must be ready with it. We must be prepared to put our side when seeking co-operation in such matters as truck circulation, full loading of wagons, and working seasonal traffic to best advantage, but we will require to be well up in all phases of the business in order to interest those who wish to co-operate.

To make the Department efficient it is essential that it should function easily and with elasticity. We should take unimportant regulations as a guide only and interpret them with discretion. We cannot afford to be slaves to rules; a liberal interpretation of a rule may change an unfriendly customer into a friendly one. Remember, a pleased customer means a regular customer and a regular customer means regular revenue. If we are unable to meet a request, let us fully explain the reasons for refusal. Our customers generally are reasonable and appreciate a reasonable explanation.

The humble parcel pays over £409,000 a year in freight. Let us treat parcels gently as if they were our own; weigh, charge and account accurately. Freight on goods brings in £4,500,000 a year. Let us study our price list—the page 61 tariff—avoid errors, and be ready with helpful explanations of the rates. Passenger fares produce over £2,500,000 a year. We have numerous competitors for this part of our business. Perhaps the privately owned motor is as great a competitor as the commercial vehicle for the passenger traffic, and the only way to make the owners of such vehicles patronise us is by supplying such a service as will induce them to leave their cars in the garages.

Do not be tied up with precedent. We are now on a business basis. Many members must have ideas for securing additional business. Let them produce them. Every avenue for new business is worth exploring, as is every avenue for economy. If a member has not the necessary data for the purpose of going into the details of a scheme, he may readily obtain it from headquarters. In a country such as ours, efficient transport is the life-blood of industry and it ranks second only to production.

Sutherland Falls, Milford Track (1904 feet)

Sutherland Falls, Milford Track (1904 feet)

The Railways are the only transport organisation able to handle the business on a large scale and the more business they get the less the overhead costs are per unit. Our enormous interest charges and standing costs are going on all the time, no matter how small the traffic may be. The more business we have, the more these costs are distributed. This may better be exemplified by the following figures. Of the total annual operating expenses of over £6,000,000, £1,144,385 or 18.56 per cent, is for Maintenance of Way and Works; £105,064 or 1.71 per cent, is for the Maintenance of Signals; 21.27 per cent, is for maintenance of rolling stock. Interest charges, which are rapidly increasing, totalled last year to the huge sum of £1,913,310. None of these charges increase to any great extent with increased traffic.

Now dealing more in detail with the matter of adjusting rates to secure new business or retain business that is attacked, the most important point to be considered is the conservation of our present revenue. We could without a doubt, secure practically all the transport business by embarking on a rate war, but would it pay?

In connection with passenger traffic, we could at once, by lowering charges, greatly increase our volume of business. But the first consideration must be, what proportion of the present passenger revenue—exceeding two and a half million pounds—would be lost, and would this loss be likely to be recouped by the extra traffic, taking into account the additional operating costs? There is, however, need for careful estimating in considering fare reductions.

There is need for the same care in considering seasonal or sectional cuts in fares. The probability is that many intending passengers would wait for the excursion fares to the detriment of the Railway revenue. Then again it is frequently advocated that there should be cheap rates between certain points on one or two days a week. The chief consideration in such a case would be whether the effect would not be merely the diversion of a considerable portion of the traffic to the particular days on which the cheap fares were operative.

There are a great many considerations in connection with the fixation of local or special rates for goods traffic, these rates being generally fixed to meet competition, but in some instances to meet certain circumstances of the business or for developmental purposes. Here, again, the most important consideration is the conservation of existing revenue. Those who have not studied the question ask frequently why the rates are not cut lower than those of our competitors. They forget that there is already a considerable traffic by rail, and that, in most cases, although a cut in rates page 62 would secure the traffic, the cost would be too great; that is, there would be more loss on present revenue than there would be gained by new business after taking into account the cost of haulage and handling. Some say, why not cut the rates to eliminate competition, and then raise the rates again? They forget that if such were done the competition which was possible before would immediately be revived, and we would again lose the traffic and, at the same time, lose the confidence of our customers.

In fixing local rates we have to consider the important effect of rate reflection. We might by a local rate catch all the traffic and thus eliminate competition to a particular locality, but the charges to other stations, by a combination of the local rate and ordinary rate onwards, would be so far reduced as to more than counteract the gain aimed at. Sometimes, however, a rate may be prevented from reflecting by providing for collection and delivery and including the cost thereof in the rate.

On the road to Paradise (Southern Lakes District. New Zealand)

On the road to Paradise
(Southern Lakes District. New Zealand)

I have frequently been asked why the Department does not fix a rate that would be applicable only to a particular station and that its use be not permitted in conjunction with another rate. Such, however, would be almost impracticable. Consider the following instances:—

Christchurch-St. Andrews (110 miles) 1 ton at class “A” = 72/7d.

But the charges are computed as under:—

Christchurch-Timaru (100 miles) 1 ton at special rate = 37/1d.

Timaru-St. Andrews (10 miles 28 chains) at class “A” = 11/2d.

Total 48/3d.

The saving, by applying the combined rates, is therefore 24/4d. per ton. To secure such an advantage it would pay a consignee to arrange for an agent in Timaru to receive the goods there and reconsign them to St. Andrews. Then again the special rate was fixed to combat sea competition and the object would be lost if the rate applied to Timaru traffic only, as it would be more profitable to ship to Timaru and then rail or cart to St. Andrews.

The margin of profit to competitive services should be carefully estimated. From information obtained it has, in a number of instances, been ascertained that competitors would find it impossible to continue. Such being the case the Department has waited until the competitive service went out of business through force of circumstances, whereas, if special rates had been fixed, such action might certainly have hastened the end of the competition, but the lower railway rates would have been perpetuated. It may be thought that these statements are made with a view to discouraging suggestions in regard to special rating. Such, however, is not my intention; but the points mentioned are so often overlooked that it is well to draw special attention to them.

Reverting again to the question of local rating to combat competition or foster traffic, it is essential to ascertain whether a contemplated rate is likely to prove profitable. In most cases this will be readily known to the staff, but, should there be a doubt, the Department is, with its accounting and statistical methods, able to say to within a few pence per ton to what extent a proposed rate will prove profitable or otherwise. Important considerations in this connection are:—

Volume and regularity of traffic.
Minimum loading per truck and bulk in proportion to weight.
Margin on trains for additional tonnage.
Special train loads.
Seasonal or off season traffic.

page 63

Trend of empty wagon haulage, not overlooking the wagons required for returned empties conveyed at very low rates.

Possibility of return traffic in manufactured goods from conveyance of raw materials.

Any business that can be obtained during the quiet season should be eagerly sought after. The Department has to maintain an enormous plant, much of it to meet the business at peak loading periods.

An essential point often overlooked by even keen business concerns is the basis for charging freight. Practically all railway goods traffic is charged on actual dead weight, while by other means of transport the basis is frequently on measurement, generally 40 feet per ton, or sometimes a ton of something less than 2,240 lbs. The following is given as an instance:—1 package, weight 10 cwt. rate 50/- per ton. The charges by rail would be 25/-; the same package might measure 80 feet, i.e., 2 tons and the charge at 20/- per ton would be £2 0.s. 0d. Very often an intending consignor considers only the rate per ton, and does not go into the question as to whether the basis for charging will be at weight or at measurement. Another matter for consideration is the freight charges on returned empties. In some cases our very low charges for returned empties would more than counteract higher charges for the original packages.

In an article of this kind I do not think our friends, the feeder carriers, should be overlooked. Their interests are identical with our own and we are working in close co-operation with them. They are doing useful work and rendering us valuable assistance. Generally speaking they have recognised the necessity for keeping their charges to and from rail as low as possible, and, so far, there is only one instance where it has been found necessary for the Government to provide its own feeder service. I learn in conversation with motor salesmen that they prefer to sell to feeder carriers, as their instalments are usually more regularly paid than those of carriers competing with the railway. Traders too, are realising the value of the feeder carriers. Their incomes are circulated in the towns in which they reside, while the same benefit is not derived from competitors residing in other towns. While on this subject it is interesting to note that, in at least one New Zealand town, feeder carriers and the Railwaymen will not deal with traders who patronise competitors of the Railway. This attitude might well be extended.

Ljungstrom Turbane Locomotive—Argentine State Railways

Ljungstrom Turbane Locomotive—Argentine State Railways

The alertness and keenness of the staff in the matter of business getting is very much in evidence to one who, like myself, is constantly travelling in connection with Commercial Branch matters. The remark applies not only to the traffic branch staff but to all grades. The staff are in close touch with local affairs and the benefit of their local knowledge is extremely valuable. The Business Agents are only too pleased to exchange ideas. Merely chance remarks have led to sources of considerable revenue, therefore do not hesitate to bring your ideas under notice.

As a representative of the Commercial Branch, I would like to say in conclusion that the members of the Commercial Branch, although they come very much into the limelight, do not take more than their fair share of the credit for what is being done to foster business and to improve relations with the public. We acknowledge we are only part of a big team comprising the manufacturers and sellers of transportation. We, the salesmen, could not succeed without the whole hearted co-operation we are experiencing. We are all working together in the interests of the community as a whole per medium of that great national utility—The New Zealand Railways.