EMATIC STUD »F SHIPPING BLVIN S. KETCHUM, A.B.. Pd.M. II.. I Ml SHIPPERS' PRBICHT SERVICE TA|iA];ii:gt|WmIl^ni^^ Class H FS 7(^l Book - H ^ Copyright 1^° COPYRIGHT DEPOSIT. THE SYSTEMATIC STUDY OF SHIPPING ELVIN S. KETGHUM, A.B., Pd.M. Director. THE SHIPPERS* FREIGHT SERVICE CHICAGO De Bower«Ghapline Co, PUBLISHERS OF UNIVERSITY TEXT BOOKS Copyright, 1909 By DEBOWER-CHAPLINE GO. ©CI.A251431 THE SYSTEMATIC STUDY OF SHIPPING By ELVIN S. KETCHUM, A. B., Pd. M. This lesson discusses conditions which make two freight rates possible for the same goods; intent of Interstate Com- merce Act; survey of course; why shippers lose freight money; how shippers may secure lowest rates; why trained traffic men are indispensable; duties of Traffic Managers. All business is practically divided into four kinds of activ- ity. Man cannot create matter; but he may change Ws form, move it from one place to another, preserve it for a period of time or sell it, changing the property right. Coal in the strata of the earth is practically worthless. After the miner has tunneled into the vein, broken down the coal, loaded it on the car, and delivered it to the tipple, it is worth 50 cents to $1.00 a ton. That same coal in some parts of the country is worth ;^io.oo to ^12.00 per ton. What has caused the advance in price ? It is the same coal in the same form. The only difference is that its location in relation to market has been changed. This is what the economists call a ''place utility." The agency which produces a place utility is transportation and it is a fixed value in the cost of all manufactured goods and every article of commerce. The business man must consider three things in deter- mining his profits. The cost of production on 'Torm utility," the cost of marketing his goods or '^possession utility" and the cost of distribution, or "place utility/' The cost of distribu^ tion or freight charges is today one of the most uncertain costs in estimating profits and one of the most important because it determines the selling price. It is logical to predict that most 2 THE SYSTEMATIC STUDY manufacturers can produce the same quality of goods at about the same price, but if one of them gets a lower cost of distri- bution through lower freight charges, he has excellent chances of putting his competitors out of business. Most every trust concern today is an example of the application of minimum freight charges in crushing competitors. This is why the master of freight rates is the master of markets, and the reason some concerns can afford to pay TraiKic Experts who know every angle of the Freight Traffic business, salaries ranging from $5,000 to ^25,000 per year. The conditions which, in many cases, produce two freight rates for the same goods, are those which existed before the Interstate Commerce Act was passed, conditions which the passage of the Act did not alter or change in any particular, and conditions which confront practically every railroad and shipper in the country at the present time. Plainly stated, these conditions are the demands of special interests and communities for lower rates for their shipments than are applied to the shipments of the public at large. It has, from time immemorial, been accepted as an eco- nomic law of trade that the man who purchased a large quan- tity was entitled to a lower price than the man who purchased a smaller quantity. This sentiment is one which is deep- rooted in the minds of the business public, and it is necessary for railroads in making rates for the transportation of freight to recognize this sentiment, the statute regulating interstate commerce to the contrary notwithstanding. It is in the man- ner which has been adopted by the railroads to meet this demand of the shipping public, and at the same time con- form to the letter of the law, that the average shipper finds opportunity to secure for himself lower freight rates than would otherwise be applied to his traffic. 1 he methods and practices of railroads that have been in effect for years were completely overturned by the act regu- lating commerce. According to the publication and post- ing clause of the new act, it was made illegal to offer any rate OF SHIPPING 3 which was not previously published and posted for the benefit of all shippers. Prior to the advent of the Interstate Commerce Act very few tariffs were published. Each line published local tariffs showing rates between stations on their lines and through rates to a few of the larger jobbing centers without regard to how these through rates affected intermediate points where rates were arbitrarily made with no reference to their proportionate mileage of the through haul. Special rates were issued by circular and not published at all, and contracts for drawbacks and rebates were made without the knowledge of anyone but the parties interested and the clerks in charge of the rebate claim department. It was a hard matter for railroads to adjust themselves to the new conditions imposed. Rates had been made upon the basis of "what the traffic would bear." Into this entered as factors the question of competition and the building up of industries along the line of the railroad which would ulti- mately produce increased traffic, and, as in every other business enterprise, the volume was the determining factor in making the rate. There was, prior to the enactment of the law regu- lating interstate commerce, no long and short haul clause acts as a deterrent factor in the making of rates. The shipping public were dealt with in the same way and upon the same general principles that governed in other lines of business enterprise. The rule was, get the business. Get it at a profit if you can, but get it. If it appeared, for example, that a certain lumber shipper could make a contract involving the sale of a great many cars of lumber at a certain point providing he could sell at a certain price, he and the railroad representatives on whose line he was situated would get together and arrange for a rate that would enable the lumber dealer to get the business and the railroad to get a haul at a profit, even if it were small. Each road had certain prorating arrangements with their connections whereby they were at liberty to make what rates they felt necessary to secure certain traffic, provided, of course, that the earnings 4 THE SYSTEMATIC^STUDY did not fall below a certain minimum for each line. In cases of competitive business and at times when traffic was light, even better terms than these were made. Such a rate was called a special rate, issued in the interest of a certain firm on a definite article traveling between defined territories. If, in the making of such a special rate, it was found that it was lower than a special offered to some other concern shipping the same commodity from the same point, there might be trouble if it came to the knowledge of the other party, so the shipments were billed at the same special rate as already in effect, and a rebate or drawback was given to take care of the difference. This was the situation in deaitn^ witk- large traffic in carload lots. The same condition pertained to large shippers of less than car lots, but it had to be dealt with in a different manner in many cases. Suppose in the same town there were two large concerns, the one larger than the other, receiving or shipping large quantities of merchandise freight, as it is called, or less than car lots. To issue special rates to cover the var- ious articles they receive from various points or to do the same for shipments to all points of the compass was an impracti- cability. In these cases, to secure the business and insure getting all of it, one line would offer a rebate of a certain per- centage on all freight bills paid when coming from territory where they had pro-rating arrangements, and the amount of rebate or drawback would be regulated by the volume of traffic and the amount of freight paid. There was nothing criminal about this. It was a common law of business as applied to every other commercial enter- prise, and there was nothing peculiar in the fact that the rail- roads of the country recognized that the buyer of a large quantity of transportation was entitled to a lower rate than the buyer of a small quantity. It is an economic fact that large quantities can be handled at a lower price proportionately than smaller quantities, and this was the rule which regulated the making of special concessions of every character before the establishment of the Interstate Commerce Act. OF SHIPPING 5 Here is the basis of the whole study of traffic. Here we come up with the things which makes study of the traffic situation profitable. Here is where the transportation interests of the country must meet the Federal laws. Here is where, for a time at least, they fell down and here is where, in studying how they finally readjusted themselves to the situation, you get the knowledge of how to save money on freight shipments. The one purpose of a railroad is the production of profit. That is where it is like everything else in the way of business enterprise. But in the carrying out of its purpose its func- tions are different from those of other business ventures. It meets with and has to deal with more perplexing problems than others. Part of these arise from its desire to increase its traffic. Some of them arise from competition and some from the fact that it is what is termed in law a common carrier, i. e., it is obliged to receive freight for shipment and cannot decline it at its option. In its desire to create traffic, the railroad has done more for the upbuilding of the country than perhaps all other factors combined. They stimulate the building of industries along their lines to the end that it may thereby increase traffic. In making rates for these arid other large interests which are or may be located along its right of wa)^ or in the towns on the line of its railroad, it has to consider the fact that if it can, through the establishment of low rates, enable the shippers along its line to increase their business it creates a two-fold benefit; it builds up the business of its patrons and at the same time it prevents the business and the traffic from going elsewhere, thus increasing the earnings of the railroad. This is not purely a selfish business proposition, as it sometimes has to be done with no profit for the time being, or at a very slight profit. The great aim of every railroad is to have full train loads both going and coming, and in the newer sections of the country and because of conditions which we cannot enter into here, this is a problem, and a problem which is productive of competition and the cutting of rates. 6 THE SYSTEMATIC STUDY As a common carrier it cannot carry on its plans with the same freedom of movement that is possible to other forms of business enterprise, and this is because it is a quasi-public corporation, gaining its charter from the various states and often various and sundry other rights, which become valuable on the theory that a railroad is put into commission to serve the people and build up the business interests of the country. It is as a common carrier that the Interstate Commerce Act deals with the railroads, and in placing all shippers on the same plane for the transportation of all their freight, the law has placed an obstacle in the way of the railroads, which, with all their planning, they cannot wholly get around. It is in the publication of tariffs, for the benefit of the shipping public, that they have struck the hardest snag, and it is because they cannot prevent conflict of rates in the issuance of tariff^s, that the study of traffic becomes one of profit and value to the average shipper. Experiences, however, show that the conditions which ex- isted before the enactment of the Interstate Commerce Act still exist, and that these conditions are such that the rail- roads must meet them by the issuance of special rates with this difference, that now the methods of their issuance is changed to conform to the law. Naturally, if the railroads were at such pains to keep them from the eyes of the general public when they were not by law compelled to offer one shipper the same rate as the other, they will be at no less pains in their issuance at this time when it is possible for anyone to take advantage of these special concessions and secure such benefits for themselves as are intended to apply to the ship- ments of others. These are some of the many conditions which make the systematic study of shipping necessary. Few people realize the importance of the cost of distribution. Transportation is the largest single item of expense in the world. It costs over two thousand million dollars annually. This is over $2$ for every man, woman and child in the United States. It is OF SHIPPING 7 10 per cent of the value of all manufactured articles. It is five times the surplus and capital of all the National Banks in this country. No nation or corporation on earth spends in a single year a sum which compares with it. Freight dis- crimination is one of the foundations of trust. Yet it is claimed that 90 per cent of all of this money is spent by shippers who do not know whether they are being charged correctly or not. Conservative traffic experts estimate that shippers lose ^^50,000,000 to ^100,000,000 annually in over- charges and errors. This vast amount of money is earned by one set of men merely because the other set of men lack the information which could save it. The number of tariffs, rulings and regulations pertaining to the shipment of goods filed every day represent about 600 pages of printed matter of the size of a regular letter-head. The time has come when it is absolutely necessary for shippers to learn the difi^erence between the **net price" and the "list price" for shipping goods. It is a common fault of shippers, whose attention every now and then is directed to errors in shipping which produce overcharges and often cause them to lose sales — to lay the blame at the door of the carriers. It is a wrong assumption to place upon the sellers the responsi- bility of looking after the interests of the buyer. Yet that is precisely what a great many shippers do when buying trans- portation. The railroads are selling, the shippers buying transportation, and it is the business of the shipper to look after his own end of the trade. The systematic study of the science of shipping is indis- pensable and it opens up a new field of business endeavor both profitable and full of opportunity. It is a field in which the demand for trained men is greater than the supply and one which has hitherto been closed to the average man except through long and tedious apprenticeship. It is a subject which may be reduced to concrete form in a series of Techni- cal Lessons, Lectures and Text Books. These principles which govern the handling of freight traffic and through which a 8 THE SYSTEMATIC STUDY saving in freight charges is produced supply a want, created by the Interstate Commerce Act, which has been felt by every shipper and every clerk identified with shipping details throughout the country. The position of Traffic Manager, or expert, for shipping concerns, is one that pays well and commands respect. The man who occupies this position is thrown into close contact with his employer, as the development of new territory, the meeting of competition and the making of sales often depends upon his knowledge and ability to make them possible. In the hands of men of ability, this technical information is the stepping stone to positions of even greater responsibility and profit, as the traffic and sales departments are closely allied. Better, hov/ever, than anything else which may be said to the young man entering upon this field of work, is the fact that everyone who masters this information from the very outset is put upon a higher plane than the ordinary beginner in commercial service, and commands the pay of a trained man. Aside from the demand for trained traffic men in private service, there is a wide field among railroads for men who command the knowledge requisite to the quoting rates to all points in the country. Rate clerks get better pay than the average of railroad employes, and there is a constant demand for competent men. The shipping clerk or other employee connected with the details of freight shipping, who wishes to advance himself and earn more salary, is given an opportunity fully as great. It will open to these an avenue of escape from the drudgery of mere manual labor and enable them to com- mand through increased knowledge, positions of greater re- sponsibility. In pursuing this study, therefore, the student should bear in mind the importance of the work, and seek to apply the principles to the immediate needs of his business. A careful study of the Interstate Commerce Law will be made with its applications. This will be correlated with the regulations and rulings of the Interstate Commerce Commission, together OF SHIPPING 9 with the decisions of the courts under the Federal Act. The Technical Lessons will take up a thorough study of the classi- fication territories with the application of rates in each of them. In computing the lowest freight rate a thorough knowledge of the geographical locations is of paramount value. The country, for the purpose of rate making, is divided into terri- tories and then again sub-divided many times. Within these territories are what are known as "common points," which serve as a basis from which rates are figured to towns within a certain radius, and these rates to common points are used as maxima. There are three general divisions of the country for this purpose, named after the classifications which govern on traffic within their boundaries. They are Official Classifi- cation territory. Southern Classification territory and Western Classification territory. These are again sub-divided and various portions put under the control of Committees and Associations, composed of representatives of the railroads operating within these territories, and these Associations and Committees in turn determine how rates shall be made and what towns shall be used as points on which to base rates. We give here a rough outline of the divisions of the country so divided, which is not complete in all details, but will serve as a guide to give the student an idea of part of the plan which, while seeking to simplify rate making for railroad usage and to establish a common basis for rate computation which will be acceptable to all lines interested, really complicates the situation for the understanding of the average shipper. The Official Classification territory has two general divi- sions called the Trunk Line territory and Central Traffic Association territory. The first extends its boundaries from the Atlantic seaboard to the Niagara frontier, or what is known as the western terminal of Trunk Line territory, and the latter extends from Chicago east to the same boundary. The divid- ing line is fixed by the gateways known as the Niagara frontier, which are Buffalo, Black Rock, Erie, Salamanca, Pittsburg, 10 THE SYSTEMATIC STUDY Parkersburg, W. Va., and Wheeling. Rates east and west- bound within these territories are established upon a percentage basis, the foundation being the New York-Chicago rate, which is 100 per cent. All other rates within this territory east and west are determined upon their relative mileage to the terminal points, New York and Chicago. Rates from Trunk Line territory south-bound are based upon what are known as the Virginia Cities, i. e., Richmond, Petersburg, Lynchburg and Norfolk, Va., and in some instances upon the Ohio River crossings. Rates from Central Traffic Association territory east- bound are based upon the Chicago-New York rates, and the seaboard towns, Boston, Philadelphia and Baltimore, are figured at fixed difi^erentials, higher or lower than New York. Rates south-bound from Central Traffic Association terri- tory are governed by the Official to the river, but the Southern Classification may be used to Mississippi Valley territory, when it makes a lower rate. On south-bound shipments from this territory rates are all based on the Ohio River crossings; Louisville, St. Louis, East St. Louis, New Albany, Jefferson- ville, Cincinnati, Cairo, Thebes, etc., and to some few points on Virginia City combinations. Southern Classification territory has within it the South- eastern Freight Association, Southeastern Mississippi Valley Association, The Joint S. E. M. V. Association and S. E. F. Association, the Associated Railways of Virginia and Carolina and Central Kentucky territory. These divisions are defined carefully in our lessons which follow. The various divisions of this territory are due to water competition with the Ohio, and Mississippi Rivers, and with similar competition existing on the Atlantic seaboard and with waterways running inland therefrom. The basing points to and from this territory are the Ohio River crossings, Virginia cities and common points within the territories such as New Orleans, etc. Exceptions to the classi- fications are named in the article which defines the scope of Classification influence. OF SHIPPING 11 Western Classification territory embraces a large number of Associations and Committees, the more important of which are the Trans-Missouri Freight Committee, Western Trunk Line, Southwestern Freight Committee, Trans-Continental Freight Bureau, Arkansas Freight Committee, and Indian Territory and Oklahoma Conference Committees. Basing points to and from this territory are the Mississippi and Missouri River points, Minnesota Transfer and common points within the territory such as Denver, Spokane, Salt Lake, Arkansas and Texas common points, etc. Some common points within each of these territories may be used as bases for figuring low combinations. In making tariffs at the outset the common points in the various territories are taken as the maxima and other rates based thereupon. After these have been issued for a time they become a permanent basis and all other rates are affected by their variations. In the issuance of these first tariffs, the rates are carefully compiled with due regard to avoiding conflict and the long and short haul clause, taking into con- sideration all factors such as mileage, competition, etc., and these tariffs then become recognized figures for transportation cost. Such tariffs are broad and comprehensive, cover all towns, all classes and general commodities, and are the founda- tion of railroad charges billed against freight carrying. Railroad clerks use them and the public get them for the computing of freight cost, and in this matter — "list" price becomes established for the transportation of freight. Hardly are these issued, however, before the demands of competttton^ the demands of certain interests for lower rates and such like factors compel the issuance of other rates, which tend to lower the cost for transporting freight. Frequently these changes are made to the common points on special commodities and sometimes on classes, and in their issuance the tariff only names changes to the basing point, although by so doing all rates within a certain radius are affected. Rates beyond and intermediate become susceptible of change in consequence, 12 THE SYSTEMATIC STUDY but as the public does not know of this, the old rates are charged and an overcharge results, even though it be un- known to the shipper. This discussion of the classification territory is not very clear to the beginner and it is mentioned here just to show that a systematic study of the application of rates is necessary for the securing of lowest freight charges. A full and com- plete description of each of the classification territories with all their divisions, and the application of rates in them will be taken up in detail later in the course. The Interstate Commerce Act, which placed at the disposal of the shipper the tariffs and other sources of information as to the cost of transportation, was not a railroad measure; in fact, it is commonly accepted that the railroads were opposed to it. It was a measure enacted for the benefit of the shipper of the country. It compelled the railroads to publish their rates for the benefit of all, but it also placed upon the shipper the responsibility of using the tariffs if he wanted to secure the benefits which the law was designed to provide for him. Let us consider the results of this publication clause of the act regulating Interstate Commerce and we shall understand both why the railroads make errors and why it is imperative that the shipper look after his own interests in buying trans- portation if he desires to secure the lowest rate of freight. Most overcharges are due to errors. Most errors are due to three things: (i) the common tendency of all employes to make mistakes; (2) to the immense amount of detail involved in properly billing the charges against freight and in rating shipments, and (3) to the want of full and complete files of information or adequate time to make use of them. The number of tariffs in effect today among the various railroads of the country run into millions. The major classi- fications embrace 23,000 separate and distinct items, a large part of which acquire different classification when differently packed and described. The larger part of the tariffs issued are called commodity tariffs, being in effect special rates applied OF SHIPPING 13 to special classes of freight. These are issued by the various railroads to meet peculiar conditions, which demand lower rates for certain industries and individuals producing large tonnage, but which are applicable to shipments of any one whose freight so travels as to make it possible to take advan- tage of them. No railroad attempts, nor would it be practicable, to change the description of freight or suggest other methods of packing it which would produce lower rates, nor does any railroad carry a complete file of all the tariffs of all lines, yet this is practically what would have to be done if the railroads were to secure to the shipper the lowest rate of freight. Often it would mean the loss of freight. How unreasonable, then, for the shipper to expect it. It is a human impossibility for railroad rate clerks to cor- rectly quote rates on all the various articles shipped every day from any of the large cities to widely distributed territory. The bill clerks merely bill charges against freight according to the description given by the shipper, and do not attempt to figure the lowest rate that may be applied. A shipper on a carload of goods was recently overcharged ;^i4i.29 because the goods were billed under the wrong classifications. It is unreasonable to expect the railroad clerks to look up the lowest rates for the shippers. They haven't the time. In asking railroad clerks to look after the shipper's interests you are asking them to serve two masters — and one of them pays no salary. What, then, is the remedy } The answer is simple enough. Each shipper must look after his own interests. Let us sug- gest how it can be done and with economy. The opportunity has been afforded through the Interstate Commerce Act. When the railroads were compelled to abandon rebates and special preferential rates through the enactment of the Inter- state Commerce Act, it was not contemplated that this law would do away with the conditions which made these rebates and special rates necessary, but it was intended that if they were re-issued after that act became a law, that they should 14 THE SYSTEMATIC STUDY be in compliance with the law, which gave to every shipper the right to take advantage of such rates if his freight traveled in a direction which made it possible, and if he knew how to secure the "net price." Now here was the opportunity which the law created to place all shippers on an equal footing. But the means for using it properly were lacking. The law created the opportunity, but it could not compel shippers to make use of it. Those who did, profited in so doing. Those who did not, lost an advantage. The new law did away with rebates. It could do away with preferential special rates. It could not alter the condi- tions which made them necessary. The necessities of certain communities, the necessities of certain individuals and of particular classes of traffic demanded special recognition at the hands of the railroads. The law, however, made it im- possible that these concessions should prefer any one shipper or community or class of interest above another. All must be privileged to take advantage of such special concessions when opportunity afforded. The wise few realized that the railroads must meet these con- ditions and proceeded at once to make use of their privileges. They employed traffic experts and paid them good salaries to secure such advantages as the publication clause of the law afforded. It is significant that the very ones who had profited by the rebates, special rates, etc., prior to the enactment of the Interstate Commerce Act were the first to profit by the provisions above mentioned. Is there no significance in the fact that they are still employing experts and paying out money that they may profit through their employment } Yet the law is strictly conformed to. These shippers possess no advantage which is not by right the privilege of every other shipper — if they would exercise their right. The law created the opportunity. Why did not all ship- pers make profitable use of it ? Well, some would not and many could not. Those who would not were those who be- lieve the passage of a law is a cure for the evils at which it is OF SHIPPING 15 aimed. They forget that laws are but instruments, valueless unless used. Those who could not wer^ those who could not command the service ot experts, and they are many. Experts were scarce. There was no school for their production save the slow school of experience. It ground them out slowly and the demand soon exceeded the supply. We have indicated how errors occur among the railroads. It is almost impossible for them to remedy conditions so as to prevent them, and the reasons for that are stated, but with the shipper it is different. Any railroad rate clerk will tell you that if he had charge of but one class of shipment he could and would rate them properly with little chance of error. This is precisely the conditions facing the shippers and our instruction tells him how to do it. Each shipper has for classification a limited number of articles. He ships to a defined territory, save in a few cases. Therefore, it is possible for him to make an exhaustive study of the classifications and rates and to maintain a complete file of all the tariffs which in any way affect the cost for carrying freight — ^if he knows how to do it. It seems a simple thing to read the tariffs. It is a complex study requiring knowledge of a peculiar kind to study them profitably. The fact that errors are made by men whose business it is to be familiar with the rate situation is prima facia evidence. The further fact that experts are employed to do this work for certain ship- pers is complete proof. These conditions have created a new department in busi- ness known as the Traffic Department. The man in charge of this department is known as the Traffic Manager or expert. The Traffic Manager for private shippers is, like the Traffic Manager for a railroad, a student of transportation conditions. The study of freight traffic is made possible by the Interstate Commerce Act; it is made necessary by the attitude of the carriers of the country towards this Act. The purpose of the act regulating interstate commerce was to compel the railroads to offer the same facilities and the same rates to all shippers, 16 THE SYSTEMATIC STUDY whether small or great. The attitude of the railroads is antag- onistic to this. Their position is very clearly defined by the president of a prominent eastern road, who says that there is no more justice in regulating the price which the carriers should charge than in fixing the price at which one of the mills along the line of his road should sell its product. This being the position taken by the railroads, it will be seen that if there is any way in which they can comply with the requirements of the law and at the same time prevent the attainment of the ends which it sought to accomplish, they would adopt that plan. This explains how in many cases there has gradually crept into existence two sets of rates for carrying freight, a **list" and a **net" price, the one a high rate, the other, a lower one, both published in due form and both legal rates. It shows why these two rates, one, the higher, is known to every one, while the lower is known to but a few, and in doing this it explains how the few secure advantages over the many without securing rebates or any concession to which all are not entitled. It explains how this can be done without conflicting with the law, yet in a manner that per- cludes most shippers from securing the very benefits which the framers of the law hoped to assure to them. It explains why almost every shipper (at least go per cent of all) are at some time and in some way losing money through errors which a careful study and understanding of the traffic situation would correct; losses which it is not always possible and which at no time is it the business of the railroads to prevent. The systematic study of these conditions is of positive and real benefit to every shipper and it shows that the vital weakness of the Interstate Commerce Act, so far as the great mass of shippers is concerned, lies in the measure of publicity given to the published rates of the carriers and not in the want of power vested in the Commission to enforce its decisions, for if the public were to know to just what extent it had been hood- winked in the matter of freight charges there would be no force on earth that could stop them from securing legislation OF SHlPPliNG 17 which would empower some authority to readjust rates when it could be shown that they work an injustice to any shipper or any body of shippers. The Industrial Traffic Manager is the man who looks after the shipper's interests. Created by the Interstate Com- merce Act, nurtured by the necessities of business, he has grown to full stature and is now an important factor in modern business building through his ability to secure profits — decrease expense and increase revenue — by the study of the freight question as it affects the shipping interests of the country. He does not secure rebates. It would be foolish to entrust that duty to him, as it would put a powerful club in his hands without giving any hold on him as an accomplice. He does, however, study railroad methods of meeting the con- .ditions which have faced them since the passage of the Inter- state Commerce Act, and if, in doing so, he secures profit for his employer through the application of rates which were not intended to be applied to his traffic, but were designed for special traffic, he has full warrant of the law for so doing, and is amply justified. He knows how to classify goods to secure the lowest rates; he knows when it is necessary to route shipments in order to protect the lowest rates; he understands the method of rail- roads in handling claims and in consequence is able to collect more claims than the average shipper. He knows when the classificationof a product works an injustice to the shipper and to whom to make an appeal and how to make that appeal to secure the desired results; he understands the combinations to produce lower freight rates, and he knows when it is possible to secure lower rates or special concession on large shipments and how to proceed for the purpose of securing such concess- ions. In short, a Traffic Manager possesses a knowledge which produces a profit to his employer over and above what is spent upon his salary. If this were not true the demand for traffic men would not be increasing out of all proportion to the supply, and the keenest business men in the country would not 18 THE SYSTEMATIC STUDY be paying salaries ranging from ^5,000 to ;^25,ooo per year to men who are equipped with this knowledge. The title of traffic manager has been adopted by shipper for the men who have charge of freight departments of their business, and in this they have followed the lead of railroads, which, since the Interstate Commerce Act has been passed have designated by this title the men who study to figure the cost for carrying and to issue the prices at which the railroads carry the various classes of commodities and merchandise which are offered them by the shipping public. I In purpose, the shipper's traffic manager and the traffic manager of the railroads are engaged in the same work, namely, that of producing profit for their employers. Years ago, when the Interstate Commerce Act first became a law, there were very few men in private service called traffic managers. At that time their chief function was to "shop" for lower rates, working competing railroads against each other to the end that they might secure for the carrying of their freight the lowest possible charge. Today a traffic manager has nothing to do with the question of rebates, and secures special rates only in a legal way, a way that is open to every shipper if he under- stands the ropes and knows how to go about it. But the position of the traffic manager has grown important owing to the complex conditions which have arisen in the rate situation since the passage of the Interstate Commerce law. Notwithstanding the declaration that there shall be no special preferential rates and no rebates, it is nevertheless true that the railroads are compelled by the demands of various shipping interests to differentiate between those shippers which produce large tonnage and those of minor importance. In other cases the necessities of the railroad itself for the develop- ment of traffic compel the issuance of what are practically special rates for the purpose of building up industries along the lines of their road. Knowing this to be a fact, the traffic manager studies the situation that confronts him with relation to the demands of OF SHIPPING 19 the business interests which he represents and takes advan- tage of the situation thus created for the production of lower rates than would otherwise be applied to his traffic. Today every concern that is progressive must have some one that is competent to pass upon the railroad rates, for the reason that the freight charges affect the original cost of manu- factured goods, and the price at which manufacturers and merchants can deliver their wares to a large degree determines the making of sales and the extension of the territorial limits within which they may legitimately sell goods. It is strange that this has not been apparent to the great body of shippers when you consider that the freight expense amounts to lo per cent of the cost of all the manufactured goods in the United States; that it is equal to one-half of all the money spent on labor connected with the manufacture of articles for sale and that it is more than the entire general ex- pense. Do you think for a moment that any merchant would pay so little attention to any other factor affecting the cost of his product which played so important a part, not only in fix- ing the original cost, but also in so large a degree affects his power to market his products. It is because this has been real- ized by a few of the more progressive merchants that they have employed traffic experts to study this freight question, and as other concerns come into competition with them and realize that there must be some material advantage gained through such employment, the demand for knowledge upon this subject increases. What the traffic manager does then is to produce a profit for his employer over and above the expense which is attached to his position. He makes an intimate study of the character of the goods which are shipped, he carefully studies the classi- fication of these articles, not only as they are described in the general classification, but also as they are described in com- modity tariffs, these being special rates affecting the cost for transporting the product in which he is interested. In con- sultation with the sales manager of the concern he studies to 20 THE SYSTEMATIC STUDY see if it be not possible to extend the territorial limits within which goods are sold, and to this end it becomes necessary for him to understand what competition is encountered by the firm in selling goods. In cases where large sales are likely to be the result he frequently finds that the profits resulting from such sales will admit of the absorption of differences between the freight rates which his concern is paying and that of some competitor located at a nearer jobbing or shipping center. In other cases where it is not possible to do this and the traffic is desirable from a railroad standpoint he makes an en- deavor to secure from the railroads special commodity rates to enable his concern to sell in territory which is not legitimately their own. In this way he increases the selling power of the merchant and produces a profit that would not otherwise exist. He studies the rulings of various railroads and in figuring rates finds combinations which frequently lessen the cost of transportation. It is the rule of the traffic manager (strange as it may seem) to accept no tariff as an authority unless he finds, after careful examination, that it produces the lowest rate. This is true both on incoming and outgoing freight. It is his duty to furnish instructions to the shipping clerk, both as to the way goods should be described and packed and, in special cases, as to how they should be routed. One of the important items in selling goods at the present time is the quick delivery of shipments, and he makes it his business to become familiar with the time taken by railroads to deliver shipments from his factory to the various territories to which goods are consigned. If his shipments are unreasonably delayed from one cause or another, he devises a tracing system which will tend to produce quicker delivery. This may seem unimportant, but with the large concerns it is a very important item indeed. Some concerns, through lack of system of this character, lose every year in the various goods which are sold for charges sums ranging from ^5,000 upwards. The traffic manager's peculiar knowledge of the methods which are employed by railroads in handling freight enables Ol SHIPPING 21 him to handle loss and damage claims expeditiously, and in order that he may collect the maximum amount of claims of this character with the minimum of expenditure he must have this knowledge, and in addition must understand the laws which affect common carriers, fixing their liability for loss and damage in the transportation of freight. The same knowledge of the methods in vogue among railroads in handling over- charges is largely productive of profit. He knows just what is necessary to enforce the collection of a claim for an over- charge, he knows what papers to send, to whom to send them and is wise enough (if he be wise at all) to make a reputation for sending no claims which have not a just and reasonable basis for presentation. In other words, a traffic manager is really a legal traffic specialist looking after the interests which he represents, to see that their business is conducted in the most economical and satisfactory manner. All this service of the traffic manager is made possible by the Interstate Commerce Act. It is made necessary by the attitude of the railroads toward that act and the system which they have put in force to meet the various conditions which confront them in the handling of traffic. These conditions, which in many cases result in the production of a lower cost for transportation, are thoroughly covered in the course of instructions of the School of Interstate Commerce. 22 QUIZZES ON SYSTEMATIC 1. How does the cost of transportation compare with other public expenses ? 2. Discuss the estimated number of tariffs and their effect on overcharges ? 3. Why are the railroads not blameworthy for many of the overcharges ? What is the shipper's duty in respect to secur- ing lowest rates ? 4. What responsibility did the passage of the Interstate Commerce Act place on the shipper in respect to tariffs ? 5. What are the three most important reasons for over- charges ? 6. What can you say of the number of major classifications of goods ? Can commodity tariffs be used by all shippers ? 7. How do the railroad rate clerks bill shipments ? Why are they liable to bill overcharges ? 8. What opportunity to save money did the passage of the publicity clause of the Interstate Commerce Act give all shippers ? 9. What fundamental condition will always exist which will make it possible for shippers who make the effort to secure the same rates as their competitors ? 10. What clause in the Interstate Commerce law makes it possible for all shippers to receive the same rate ? 11. How may a shipper organize his Traffic Department so that he will obtain the lowest freight charges ? 12. How do the duties of the Traffic Manager for the shipper differ from those for the railroad ? 13. How do some shippers secure advantages over others without rebates or violating the letter of the law ? 14. What is the vital weakness of the Interstate Commerce Act? 15. Why is the Traffic Manager a profitable man to each large shipper and what are his chief duties ? STUDY OF SHIPPING 23 1 6. What industrial conditions have created the position of Traffic Manager and how do his duties differ from what they were a few years ago r 17. The freight charges on most articles equal about ten per cent of the cost of production. Why have shippers given so little attention to this matter ? 18. How does the Traffic Manager co-operate with the Sales Manager to build business and extend the market for their goods ? 19. How does the Traffic Manager speed up shipments and handle cases where goods are lost in transit ? 20. How does he collect claims promptly and secure many favors which the shipper would not otherwise enjoy ? ■ r.opr nsi TO CAT o^v NOV 13 11909 LIBRARY OF CONGRESS lllll::llllliJII!llllllllillllllll 10 021 048 264 71