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 ^ ^PPUSn IIVHGE I 
 
 ^K '653 East Main Street 
 
 ^^S Rochester. New York 14609 USA 
 
 ^g (716) 482 - 0300 - Ptione 
 
 ^B (716) 288- 5989 - Fox 
 
A 
 C 
 C 
 
Modern Business 
 
 CANADIAN EDITION 
 
 A SERIES OF EIGHTEEN TEXTS, ESPECIALLY PREPARED 
 
 FOR THE ALEXANDER HAMILTON INSTITUTE COURSE IN 
 
 ACCOUNTS, FINANCE AND MANAGEMENT 
 
 EDITED BY 
 
 JOSEPH FRENCH JOHNSON 
 
 DKA!(, N«W YORK CNIVKIISITY Bl'Hiiol. olf COMUKRCK. AcCiilNTS AND FINANCE 
 NEW VunK CITV 
 
 Title Axilhor 
 
 APPLIED ECONOMICS James Mayor 
 
 ORGANIZATION AND MANAGEMENT Lee Galloway 
 
 SELLING U. S. BcTLEB 
 
 CREDITS Lee Gallowat 
 
 TRAFFIC S. J. McLean 
 
 ADVERTISING Lee Gallowat 
 
 BUSINESS CORRESPONDENCE . . G. B. Hotchkiss 
 
 ACCOUNTING PRACTICE . . . . l^^° Greenclingeb 
 
 I E. \V. Wright 
 
 CORPORATION FINANCE . . . . ( ^^'"-liam H. Locgh 
 
 l Fred W. Field 
 
 MONEY AND BANKING . . . ./ ^ ^'"' ^^""^ Howard 
 
 I W. W. SWAXSON 
 
 BANKING PRACTICE E. L. (Stewart PA-rraRsox 
 
 FOREIGN EXCHANGE f FRaxklin Escher 
 
 I E. L. Stewart Pattersox 
 f Thomas Coxwat 
 INVESTMENT AND SPECULATION i Albert Atwood 
 
 I Fred W. Field 
 
 INSURANCE (Edward R. Hardt 
 
 I Fred W. Field 
 
 REAL ESTATE /Walter Lixdxer 
 
 ■ I E. W. Wright 
 
 AUDITING Seymour Walton 
 
 COST ACCOUNTS Stephen W. Oilman 
 
 COMMERCIAL LAW Walter S. Johxsox 
 
Selling, Credit 
 and Traffic -^^ 
 
 PART I: SELUNG AND BUYING 
 
 BY 
 
 RALPH STARR BUTLER 
 
 AssaTAMT nomio* or auionss AoimnnBATiON m tmb urnvzurry or Wisconsin 
 
 PART II: CREDIT AND THE CREDIT MAN 
 
 BY 
 LEE GALLOWAY 
 
 AssuTANT noriMOB or cnoooicc and inoustbt m mw voix mivnsm kwml 
 or comoaci, Accomm and miAMCB 
 
 REVISED BY 
 W. W. SWANSON 
 
 AUOCIATC PROrESaOB or POUTICAL MtaNCS IN QUEENS UNIVERUTT 
 
 PART III: CANADIAN TRAFFIC 
 
 BY 
 
 HONORABLE S. J. McLEAN 
 
 mMBBi or BOAio or kauway ooiaaisioiaas roB camada 
 
 Modern Business 
 
 Canadian Edition 
 
 Volume ill 
 
 ALEXANDER HAMILTON INSTITUTE 
 NEW YORK 
 
 \ 
 
f^/f 
 
 C V 
 
 ComnoRT, 1011, mi 
 ALEXANDER HAMILTON INSTITUTE 
 
 CarTMOiiT, 1012. it 
 ALEXANDER HAMILTON INSTITUTE 
 
 CoPTmiOHT, 1913, IT 
 
 ALEXANDER HAMILTON INSTITUTE 
 
 COPTBIORT, 1914, IT 
 
 ALEXANDER HAMILTON INSTITUTE 
 
 COMBIOBT IN GbIAT BmTAIN, 1014, •¥ 
 
 ALEXANDER HAMILTON INSTITUTE 
 
TABLE OF CONTENTS 
 
 PART I: SELLING AND BUYING. 
 
 CHAPTER L 
 
 THE FACTORS IN DISTRIBUTION. 
 nonoN 
 
 1. Importance of Problem of Distribution 1 
 
 8. Traditional Factors in Distribution 8 
 
 8. Consumer g 
 
 4. Retailer 4 
 
 5. Jobber 5 
 
 6. \^anufacturer a 
 
 7. Semi-Jobbers and Manufacturing Wholesalers ... 6 
 
 8. Selling Problem of Retailers 7 
 
 9. Retail Selling by Means of Salesmen Calling upon Con- 
 
 sumer 8 
 
 10. Peddler * g 
 
 11. Canvasser •• 
 
 IS. Specialty Salesman 10 
 
 CHAPTER II. 
 RETAIL SELLING AND MAIL ORDER BUSINESS, 
 
 is. Retail Stores 18 
 
 14. Advantages of Selling Through a Retail Store . . .14 
 
 15. Disadvantages of Selling Through a Retail Store . . 15 
 
 16. Advantage in Purchasing Power 16 
 
 17. Siae Is Most Important I7 
 
 18. Retail Selling by Mail Ig 
 
 19. Advantages of Retail Selling by the Mail-order Method 19 
 
 20. Disadvantages of Retail Selling by the Mail-order 
 
 Method 22 
 
 21. Combinations of Retail Selling Methods . . . . «8 
 
 V 
 
CONTENTS 
 
 HcnoM 
 2S. 
 SS. 
 S4. 
 25. 
 86. 
 
 CHAPTER III. 
 SELLING AT WHOLESALE. 
 
 tAtm 
 
 Selling Problem of Jobber S5 
 
 Two Methodii of Wholesale Selling S6 
 
 Wholesale Selling by Salesmen . .' 27 
 
 Wholesale Selling by Mall SO 
 
 Combination of Wholesale Selling Methods .... 80 
 
 CHAPTER IV. 
 PROBLEMS OP MANUFACTURER. 
 
 57. Manufacturers' Selling Methods 81 
 
 58. First Problem of the Manufacturer 81 
 
 89. Factors in Solution of First Problem 88 
 
 SO. Nature of the Product M 
 
 SL Business Policy or Expediency S8 
 
 89. Advantages of Making Direct Sales Only to Jobbers 85 
 
 88. Disadvantages of Making Direct Sales Only to Jobbers 86 
 
 84. Advantages of Making Direct Sales Only to Retailers . 87 
 
 85. Disadvantages of Making Direct Sales Only to Retailers 88 
 
 86. Advantages of Making Direct Sales Only to Consumers 88 
 
 87. Disadvantages of Making Direct Sales Only to Con- 
 
 sumers 88 
 
 88. Second Selling Problem of Manufacturer .... 89 
 
 89. Declining Importance of Middleman 40 
 
 40. Jobber's Place in Merchandising System .... 41 
 
 41. Agents, Commission Merchants, and Brokers ... 48 
 
 CHAPTER V. 
 SALES DEPARTMENT ORGANIZATION. 
 
 42. Principles of Organisation 46 
 
 43. Retail Sales Department Organization 47 
 
 44. Merchandise Manager 50 
 
 45. Buyers 52 
 
 46 Sales-people 58 
 
 47. Variations in Departmental Organization .... 55 
 
 48. Advertising Department 57 
 
CONTENTS 
 
 ▼U 
 
 49. 
 BO. 
 Al. 
 fiS. 
 08. 
 fi4. 
 0fi. 
 
 MM 
 
 Lack of Uniformitj in WholeMle Selling Organiiationt 58 
 
 Manager of Departnwnta 00 
 
 Department Managen 01 
 
 Specialty Salesmen CI 
 
 General Salesmen OS 
 
 Jobber's Advertising Department .04 
 
 Special Application of the Suggestive Wholesale Selling 
 
 Organisation OS 
 
 CHAPTER VI. 
 MANUFACTURERS' SALES DEPARTMENT ORGANIZATION. 
 
 50. Dependence of Manufacturers' Selling Organiiation 
 
 Upon Selling Methods 07 
 
 57> Two Differences Between Manufacturers' and Whole- 
 salers' or Retailers' Selling Organiiations ... 00 
 
 58. Sales Manager 70 
 
 50. Superintendents of Different Kinds of Selling Activities 71 
 
 00. Salesmen 7S 
 
 01. Branch-Houses li 
 
 OS. Agents 7S 
 
 08. Manufacturers' Retail Stores 78 
 
 04. Mail-order Department 78 
 
 05. Relation of Sales and Advertising Departments . 78 
 
 00. Credit and Traffic Departments 75 
 
 07> Method of Adapting the Manufacturers' Selling De- 
 partment Organisation Chart 70 
 
 CHAPTER VII. 
 
 METHODS OP SECURING COOPERATION BETWEEN SELLING 
 AND OTHER DEPARTMENTS. 
 
 08. Necessity of Inter-departmental Cooperation ... 78 
 
 00. Use of Tact in Securing Cooperation 70 
 
 70. Profit-sharing to Induce Cooperation 81 
 
 71. Committee System as an Aid to Cooperation ... 82 
 
 72. Executive Committee 84 
 
 78. Factory Committee 87 
 
viii CONTENTS 
 
 UCnON PAGE 
 
 74. Sales Committee 88 
 
 75. Advertising Committee 60 
 
 76. Office Committee 89 
 
 77. Variations in System 90 
 
 78. Practical Results of Committee System 90 
 
 r 
 
 CHAPTER VIII. 
 THE SALES MANAGER. 
 
 79. Purpose of Selling Campaign 92 
 
 80. Two Chief Factors in Selling Campaign .... 93 
 
 81. Qualifications of a Sales Manager 94 
 
 82. Selection of Salesmen 95 
 
 83. • System as an Aid in Selection 96 
 
 84. Personal Interview 99 
 
 85. Appearance 99 
 
 86. Conversational Ability 100 
 
 87. Force. — General Information and Intelligence . . .100 
 
 CHAPTER IX. 
 METHODS OF TRAINING SALESMEN. 
 
 88. Training of Salesmen 102 
 
 89. Training in Principles of Salesmenship 103 
 
 90. Training in Construction and Uses of Goods to be Sold 105 
 
 91. Three Methods of Training Salesmen 106 
 
 92. Employment in the Factory Best Method . . . .107 
 
 93. Training in Selling Methods 108 
 
 94. Standard Selling Talks 109 
 
 95. Adaptation of Standard Selling Talks Ill 
 
 96. Meeting Problems Peculiar to a Business . . . .112 
 
 CHAPTER X. 
 SUPERVISION OF SALESMEN. 
 
 97. Sales Manager's Duties 114 
 
 98. Supervision over Particular Sales 114 
 
CONTENTS 
 
 u 
 
 99. 
 100, 
 101. 
 102. 
 lOS. 
 104. 
 105. 
 106. 
 107. 
 108. 
 109. 
 110. 
 
 Supervision over General A«tivitie> 114 
 
 Personal Interviews 115 
 
 Keeping in Touch with 'Salesmen by Letter . . .116 
 
 Competitive Schemes to Promote Selling Efficiency . 116 
 
 House-Organs 119 
 
 Selling Conferences 120 
 
 Other Duties of Sales Manager 121 
 
 Compensation of Salesmen 121 
 
 Salesmen's Expenses 123 
 
 Assignment of Sales Territories 124 
 
 Keeping in Touch with Salesmen 125 
 
 Knowledge of the Business as Factor in Promoting 
 
 Sales Department Efficiency 126 
 
 CHAPTER XI. 
 REPORTS AND DUTIES OF SALESMEN. 
 
 111. Credit Reports 128 
 
 112. Purpose of Salesmen's Reports 128 
 
 118. A Typical Salesman's Report .129 
 
 114. Salesmen Must Observe Closely ISO 
 
 115. A Typical Statistical System ISl 
 
 116. Salesman's Part in Promoting Sales Department Effi- 
 
 ciency 188 
 
 CHAPTER XIL 
 PRINCIPLES OF SALESMANSHIP. 
 
 117. Definition of Salesmanship 186 
 
 118. Who Is a Salesman? 186 
 
 119. Steps in a Sale 188 
 
 120. Attracting Attention 188 
 
 121. Arousing Interest 141 
 
 122. Creating Desire 143 
 
 123. Inducing Resolution and Inciting to Action . . . .144 
 
 124. Importance of Steps in a Sale 14^^ 
 
X CONTENTS 
 
 CHAPTER XIII. 
 
 QUALITIES OF THE SALESMEN. 
 
 sKcnow p^„ 
 
 lii'). Factors in a Sale 14g 
 
 12^i. Personality of Salesmen 148 
 
 1'27. Inclination for Work I49 
 
 128. Mental Ability 150 
 
 129. General Education 151 
 
 130. Health 152 
 
 131. Importance of Appearance I53 
 
 132. Honesty I54 
 
 133. Sincerity I55 
 
 134. Fidelity 156 
 
 135. Courtesy 15g 
 
 130. Industry 157 
 
 137. Open-mindedness 158 
 
 138. Persistence I59 
 
 13y. Tact 159 
 
 140. Initiative 100 
 
 141. Knowledge of the Business 16l 
 
 142. Confidence 1q4 
 
 143. Enthusiasm 1q5 
 
 144. Opportunities in Salesmenship 166 
 
 145. 
 14*;. 
 147. 
 148. 
 149. 
 150. 
 151. 
 152. 
 153. 
 154. 
 155. 
 156. 
 
 CHAPTER XIV. 
 THE BUYER AND HIS WORK. 
 
 Buying the Universal Business Activity 168 
 
 Scope of Buyer's Duties 169 
 
 Buyer's Problems 170 
 
 Two Opposing Considerations I70 
 
 Financial Considerations 172 
 
 Possibility of Depreciation 172 
 
 Illustrations I73 
 
 The Task of the Buyer 173 
 
 Speculative Buying I74 
 
 Qualifications of Buyer 174 
 
 Knowledge of the House by Which Buyer Is Employed 174 
 
 Knowledge of Manufacturing Processes 175 
 
 L 
 
CONTENTS xi 
 
 racnoN KMm 
 
 157. Familiarity with Departmental Divisions of House . 176 
 
 158. Acquaintance with Important Employes 176 
 
 159. Knowledge of Demand 177 
 
 160. Buyer for Wholesale or Retail Store 178 
 
 101. Knowledge of Goods to be Purchased 179 
 
 162. Judging Future Prices 181 
 
 163. Knowledge of Sources of Supply 182 
 
 164. Importance of Location of Various Houses . . . .183 
 
 165. Ability of Salesman's House to Keep His Promises . 183 
 
 166. Credit Rating of Seller * 184 
 
 167. Important to Know Costs 184 
 
 168. Selling Methods of Houses Dealt With 185 
 
 169. Variable Price Scales 186 
 
 170. Tact in Buying 186 
 
 171. Friendly Relations with Salesmen 187 
 
 172. Other Qualities Important for Buyer to Possess . .188 
 
 173. Who Should Do the Buying? 188 
 
 174. Factory Purchasing Agents . .189 
 
 CHAPTER XV. 
 SYSTEM IN BUYING. 
 
 175. General Systems and Specific Conditions . . . .191 
 
 176. Requirements of an Adequate Purchasing System . .192 
 
 177. Subject Index 192 
 
 178. Firm Index 194 
 
 179. Necessity of Cross-references for Buying Data . .195 
 
 180. Catalogue File 196 
 
 181. Quotation File I97 
 
 182. Order Record 198 
 
 183. Placing Orders 200 
 
 184. Tracing Orders 201 
 
 185. Checking Deliveries 202 
 
 186. Checking Partial Deliveries 203 
 
 187. Checking the Invoice 204 
 
 188. The Perpetual Inventory 206 
 
 189. Modification of the Typical Purchasing System . . . 208 
 
 190. System in Retail Buying 208 
 
 191. The Jobber's Purchasing System 210 
 
Xll 
 
 CONTENTS 
 
 PART II: CREDIT AND THE CREDIT MAN. 
 
 CHAPTER I. 
 
 NATURE OF CREDIT, 
 
 sccnoN 
 
 1. Relation of Confidence to Business 212 
 
 2. Contracts Support Confidence 213 
 
 S. Money a Sign of Economic Progress . . . , . .214 
 
 4. Bargains Wliich Involved Future Delivery . . . .215 
 
 5. The Relation of Money to _ Credit 2 16 
 
 6. Banking and Credit 217 
 
 7. Relation of Credit to Panics and Depressions . . .217 
 
 8. Different Degrees of Business Confidence Represented 
 
 by Different Credit Instruments 219 
 
 9. Time as a Factor in Credit 221 
 
 10. Various Classes of Credit 222 
 
 11. 
 12. 
 13. 
 14. 
 15. 
 16. 
 17. 
 18. 
 19. 
 20. 
 21. 
 22. 
 
 CHAPTER II. 
 DIVISIONS OF CREDIT. 
 
 Varieties of Business Credit 225 
 
 Personal Credit 226 
 
 Why a Personal Credit System Is Not Well Organized 226 
 
 Reasons for Not Making Proper Inquiries .... 227 
 
 Relation of Personal Credit tc Other Credits . . . 232 
 
 Effect of "Too Ready Credit" upon the Consumer . . 233 
 
 Other Abuses of Credit 234 
 
 Mercantile Credit 235 
 
 Factors That Hive Changed the Credit System . . 237 
 
 The Custom of Dating 238 
 
 The Book Account gga 
 
 Two Methods of Assigning Accounts 241 
 
 CHAPTER III. 
 DIVISIONS OF CREDIT (Continued). 
 
 23. Capital or Investment Credit .... 
 
 24. Elements of Safety in Capital Credit . . 
 
 243 
 
CONTENTS 
 
 ziu 
 
 MCnON 
 
 25. 
 S6. 
 27. 
 28. 
 29. 
 SO. 
 
 Principal Forms of Capital Credit 245 
 
 Principal Sources of Capital Funds 346 
 
 Banking Credit and Its Relation to Commercial Credit . 246 
 
 Limitation of Bank Credit 247 
 
 The Credit Latitude of a Bank and a Mercantile House 248 
 "Business Paper" and "Loans and Discounts" . . .249 
 
 CHAPTER IV. 
 FUNCTIONS OF A CREDIT DEPARTMENT. 
 
 81. The Fort ng of Credit Estimations .252 
 
 82. Credit Extension in the Wholesale Trade . . . ,258 
 38. Granting Credit by a Manufacturing Firm . . . .254 
 
 84. The Giving of Credit by a Retail House 255 
 
 85. Installment House Credits 256 
 
 86. 
 
 87. 
 
 88. 
 
 89. 
 
 40. 
 
 41. 
 
 42. 
 
 48. 
 
 44. 
 
 45. 
 
 46. 
 
 47. 
 
 48. 
 
 49. 
 
 50. 
 
 51. 
 
 52. 
 
 53. 
 
 54. 
 
 CHAPTER V. 
 SOURCES OF CREDIT INFORMATION. 
 
 Three Essentials in Credit Giving 258 
 
 Methods of Investigation g5g 
 
 Testing the Reliability of a Statement 259 
 
 An Example of Statement Analysis 269 
 
 The Reporter and Ihe Traveling Representative . . 270 
 The Salesman as a Gatherer of Information . . . 272 
 
 Agency Method 273 
 
 The Commercial Agency gw^ 
 
 How Information Is Collected 275 
 
 Content of the Agency Reports 277 
 
 Methods by Which the Information Is Distributed . . 278 
 
 Cost of the Agency Service 279 
 
 Sources of the Information t^jQ 
 
 Kinds of Reports ^so 
 
 Criticism of Agency Methods and Services . . . .281 
 Credit Cooperative Methods— Special Agencies . . 284 
 
 Advantages of Interchange System 291 
 
 Banks as Sources of Information 292 
 
 Attomey-at-law ggg 
 
XVI 
 
 CONTENTS 
 
 CHAPTER VI 
 CREDIT PROTECTION 
 
 SECTION PAQB 
 
 55. Efforts to Secure Protection 296 
 
 56. Credit Insurance 297 
 
 57. Business Houses Classified by Credit Underwriters . 298 
 
 58. Arguments in Favor of Credit Insurance 299 
 
 59. Weak Points in Credit Insurance SOO 
 
 60. National Bankruptcy Laws SOI 
 
 61. Advantages of the Present Law SOS 
 
 62. Meaning of Recent Amendments 304 
 
 6S. Future of tlie Bankruptcy Law S06 
 
 64. Credit Men's Associations S07 
 
 65. National Associations 308 
 
 66. Importance of Credit Men's Associations Sll 
 
 67. Relation of the Credit Man to the Firm 312 
 
 68. An Illustrative Method — The Mail, Index Cards, etc. . 31 S 
 
 69. Collection Methods 317 
 
 70. Suspended Accounts 318 
 
 71. Analysis of Credit Information 319 
 
 72. Credit Associations in Canada 325 
 
 73. Bankruptcy Procedure in Canada 326 
 
 74. Some Evils of Canadian Bankruptcy Laws .... 329 
 
 75. Liquidation in England 332 
 
 PART III: TRAFFIC 
 
 CHAPTER I 
 CANADIAN TRANSPORTATION 
 
 1. Early Waterways 835 
 
 2. Improved Hig! ways 337 
 
 .*?. The Canadian Railway System 338 
 
 4. Western and Northwestern Railroads 340 
 
 5. Expansion of Canadian Railway System 340 
 
 6. Influence of Trimk Lines 341 
 
 7. Railway Geography 343 
 
 8. Freight Resonrces 344 
 
 9. Distribution of Railway Mileage 346 
 
CONTENTS 
 
 xvu 
 
 BBCnON PAOB 
 
 10. Potential Railway Traffic 846 
 
 11. Actual Traffic ., 8*7 
 
 12. Traffic Interrelations of Canada and the United States . 849 
 
 13. Volume of Tranbit uvement 850 
 
 CHAPTER II 
 FREIGHT CLASSIFICATION 
 
 14. Classification Fundamental 853 
 
 15. How Classifications Are Built 856 
 
 16. Classifications of the United States 357 
 
 17. Canadian Classification 858 
 
 18. International Traffic 859 
 
 19. Expansion of Canadian Classification 360 
 
 20. Quantity Differences 362 
 
 21. Car Measurements 864 
 
 22. Cost of C. L. and L. C, L. Shipments 365 
 
 23. Uniformity in Canada 866 
 
 24. Mixing Privilege 367 
 
 25. Effect on Shippers and Consumers 368 
 
 26. Factors Affecting Classification 871 
 
 27. Value of the Article 372 
 
 28. Bulk and Weight 874 
 
 29. Risk Attached to Carriage 374 
 
 80. Facilities and Equipment Required 875 
 
 81. Classification in Operation in Canada 877 
 
 82. False Classification and Complaints 380 
 
 CHAPTER III 
 FREIGHT RATES 
 
 88. Importance of Freight Traffic 381 
 
 84. Railway Rates of Universal Interest 382 
 
 85. Competition 883 
 
 86. Compared with Mercantile and Manufacturing Business 384 
 
 37. Evils of Parallel Lines 385 
 
 88. The West Shore Case 387 
 
 39. "Postage Stamp" Rates 887 
 
 40. Distance Rates 889 
 
XVUl 
 
 CONTENTS 
 
 ■Et-riow ,^0, 
 
 41. Rates Based on Capitalizntion ggo 
 
 42. Physical Valuation as a Rate Basis 891 
 
 43. Cost of Service 3Q2 
 
 44. What is Cost of Senice.> 394 
 
 45. What the Traffic Will Bear . . . * . . . . .397 
 
 46. Principle Applied in Department Stores 393 
 
 47. Applied to a Newspaper 393 
 
 48. Practical Meaning of the Term 399 
 
 49. View of Canadian Manufacturers' Association . . . 401 
 
 CHAPTER IV 
 FREIGHT RATES IN PRACTICE 
 
 50. Class Tariffs and Commodity Tarififs 404 
 
 51. Comparisons of Freight Traffic 406 
 
 52. Component Factors of a Rate 408 
 
 53. Distance as a Factor in Rates 411 
 
 54. Competition of Lines of Different Lengths .... 414 
 
 55. Differential Rates 41 5 
 
 56. Water Competition 41g 
 
 57. Changing Centers of Population 419 
 
 58. Compc'.ition of Port 420 
 
 59. Market or Trade Competition 421 
 
 60. Improvements in Roadbed and Rolling Stock .... 423 
 
 CHAPTER V 
 PHASES OF RATES AND TARIFF 
 
 61. Freight Tariffs and the Railway Act 426 
 
 62. Standard Tariff 426 
 
 6S. Special and Competitive Tariffs 430 
 
 61. Transcontinental Rates 433 
 
 65. Distributive Rates 435 
 
 66. International Rate Case 436 
 
 67. Town Tariffs in the East 438 
 
 68. Some Objections Overcome 439 
 
 69. Export and Import Rates 442 
 
 70. Low Import Rate Justified 442 
 
CONTENTS xix 
 
 BicnoN PAOB 
 
 71. Problem in Canada 448 
 
 72. Import Rate Anomalies 444 
 
 73. Attitude of Railways 445 
 
 74. Transit Arrangements, Stop-off, etc 446 
 
 75. Changing Destination in Transit 449 
 
 76. Concentration Rates 450 
 
 77. Special Rate Reductions 451 
 
 78. Cartage Sen-ice 451 
 
 CHAPTER VI 
 PASSENGER RATES 
 
 79. Water and Port Competition in Passenger Traffic . . . 454 
 
 80. Distance Important Factor 455 
 
 81. Time Element 455 
 
 82. Expensive Stations 456 
 
 83. Other Factors 457 
 
 84. Passenger Business in Practice 459 
 
 85. Passenger and Freight Receipts Compared .... 460 
 
 86. Density of Traffic 461 
 
 87. Effect of Economic Depression on Passenger Business . 462 
 
 88. Capacity of Cars 463 
 
 89. "Deadweight" 464 
 
 90. Passenger Rates and the Railway Act of Canada. . . 466 
 
 91. Standard Rates in Effect 467 
 
 92. Different Kinds of Passenger Tickets 468 
 
 93. Sleeping-car service 470 
 
 94. Classified Passenger Rates 47 1 
 
 95. Passenger Classes in Europe 472 
 
 96. Difficult to Compare Traffic Here and Abroad . . . 474 
 
 CHAPTER VII 
 PRACTICAL PHASES OF RAILWAY BUSINESS 
 
 97. Common Law Obligations of the Railways . . . .476 
 
 98. Bill of Lading and its Conditions 477 
 
 99. Liability 478 
 
 100. Ins^irance 480 
 
XX CONTENTS 
 
 BSCnON " BjjMi 
 
 101. Liability as a Warehouseman , . 480 
 
 lOS. Loss and Damage 4gl 
 
 lOS. Payment of Charges 4g| 
 
 104. Forms of the Bill of Lading 482 
 
 105. Due Diligence 484 
 
 106. Actual Car Movements 484 
 
 107. Demurrage 485 
 
 108. Causes of Demurrage 486 
 
 109. Demurrage and Car Shortage 487 
 
 110. A Matter of Controversy 489 
 
 111. Higher Demurrage Charges 490 
 
 112. Average Demurrage 493 
 
 118. Reciprocal Demurrage 495 
 
 114. Railway Interrelations and per Diem Charge . . . . 497 
 
 115. Interswitching 499 
 
 116. The Work of the Claims Department 501 
 
 CHAPTER VIII 
 EXPRESS SERVICE 
 
 117. Express Service and its Scope 505 
 
 118. Early History of Express Companies 506 
 
 119. Express Companies in Canada 508 
 
 120. Arrangements with Railways 309 
 
 121. Express Classification 510 
 
 122. Value, Weight and Space 511 
 
 123. Conditions of Carriage 512 
 
 124. The Standard Mileage Tariffs 514 
 
 125. Differences in Traffic Conditions 516 
 
 126. Four Standard Tariffs 516 
 
 127. Local and Transfer Tariffs 518 
 
 128. Rates as Affected by Quantity 51 9 
 
 129. Freight Rate as a Basis 520 
 
 ISO. Special Circulars 521 
 
 131. The Graduate Table 522 
 
 132. Rates Not Uniform 523 
 
 133. Single Through Rates 524 
 
CONTEXTS 
 
 zzi 
 
 CHAPTER IX 
 INLAND WATER TRANSPORTATION 
 
 SECTION '*« 
 
 1 tH. Water Transportation as a Rrgulator of Raten . . . Sib 
 
 1S5. Efficiency of Waterways 5*7 
 
 186. Canal Terminals *** 
 
 1S7. Effect of Highway Costs 349 
 
 188. Canadian Lake and Canal Route 3«9 
 
 1.S9. From Georgian Bay to Montreal 530 
 
 140. Ottawa System 582 
 
 141. No Canal Tolls 53* 
 
 142. Great Lakes Traffic 532 
 
 148. The Upper Lakes 583 
 
 144. Character of Freight 584 
 
 143. Canadian Grain 53.'i 
 
 146. Lake Vessels 536 
 
 147. Formation of Canada Transportation Lines, Ltd. . . 5'M 
 
 148. Advent of Large Vessels 537 
 
 149. Loading and Unloading 538 
 
 150. Combined Inland and Ocean Traffic '■''9 
 
 l;il. Lake Rates ' 
 
 152. Comparison Between Lake and Canal Movements . . v\ 
 
 153. 
 
 154. 
 
 155. 
 
 156. 
 
 157. 
 
 158. 
 
 159. 
 
 160, 
 
 161. 
 
 162. 
 
 163. 
 
 164. 
 
 CHAPTER X 
 
 FOREIGN TRADE AND OCEAN TRANSPORT.\TION 
 
 Canada's Foreign Trade 544 
 
 Imports from Great Britain 545 
 
 United States Imports 545 
 
 From France 546 
 
 From Mexico 546 
 
 Canadian Tonnage 547 
 
 Ballast 548 
 
 Principal Ports 549 
 
 Montreal Harbor 550 
 
 Opinion of Mr. Ross 551 
 
 Insurance and the St. Lawrence Route 552 
 
 Subsidies of Steam Ships 554 
 
'«» CONTENTS 
 
 •♦K<T|ON • 
 
 I(i3. Factor. Affecting Ocean Traffic and Rates . . ^s' 
 
 166. Charter Party " ' ^^'.. 
 
 167. Space and Weight - . . USH 
 
 168. Ocean Traffic Dislingnished Ironi Railway Traffic -iio 
 
 169. Effect of HarvcHts ' . . ! " .1.10 
 
 170. Condition* of C'nrriagp .r,' 
 
 171. Ocean Rates a« AiT.cting Cnnndn . . . . . , ,sii3 
 
 172. Lumber Rates • • . • 
 
 i73. Position of Carriers 1/j. 
 
 174. Rate " Conferences •• . . -r' 
 
 It a. New Ocean Routes -^- 
 
 176. Hudson Bnv Railway ... • • • 
 
 177. Pacific Route ■•......],' sll 
 
 178. Panama Canal 560 
 
PAflB 
 . 33;. 
 
 . 55ti 
 . 358 
 . !i!i9 
 . 33f) 
 . 36<) 
 . 563 
 . 3Cl 
 . 3()4 
 . 363 
 . 3fi7 
 . 3()7 
 . 3()8 
 . 369 
 
 PART I: SELLING AND BUYING 
 
 CHAPTER I 
 
 FACTORS IN DISTRIBUTION 
 
 1. Importance of problem of distribution. — The 
 problem of distribution must be solved by every success- 
 ful business organization. In all industries the profits 
 ultimately depend on the ability to sell goods advanta- 
 geously. A factory taay possess every facility for eco- 
 nomical production, but unless the selling methods of 
 the manufacturer are carefully designed to meet the 
 peculiar requirements of the product and of the market, 
 the business can not be conducted at a profit. In like 
 manner, a non-manufacturing industry must finally 
 look for its profits to the development of economical 
 and suitable methods of marketing. The two great 
 branches of merchandising — ^buying and selling — ^must 
 receive at least equal attention in such an organization 
 if it is to attain the maximum degree of profit-making 
 efficiency. In any business, therefore, the proper devel- 
 ' opment of the sales department and the satisfactory 
 solution of the peculiar selling problems that it has to 
 meet are vital to the success of the enterprise. 
 
 The problem of distribution is constantly becoming 
 more difficult of solution. In former times trade 
 channels were definitely established, and the manu- 
 facturer had little choice of selling methods. Each 
 class of distributers occupied a fixed place in the chain 
 of distribution, and there were but few attempts to open 
 
 III— I 1 
 
Si^LLING AND BUYING 
 
 new lines of contact between the producer and the 
 market. Competition was not so keen as it is to-day. 
 Fewer people, proportionately, were engaged in mer- 
 cantile pursuits. The business acumen of former in- 
 dustrial leaders was devoted to the exploitation of new 
 countries and new regions, rather than to the intensive 
 development of a constantly narrowing market. The 
 power of advertising as a great force in distribution 
 was little appreciated, and it had scarcely begun to 
 exercise its far-reaching influence on the long estab- 
 lished traditions of marketing. Under these conditions, 
 the problem of selling was a comparatively simple one. 
 The manufacturer had but to adopt the usual methods, 
 and there was little tendency to question the necessity or 
 the value of the services rendered by the distributer. 
 
 To-day conditions are altered. There is little respect 
 for traditional methods as such. Every producer and 
 every distributer seeks the largest possible market at 
 the least possible cost; and he consciously selects the 
 methods that are best suited to his particular case, 
 without regard to prevailing customs, unless expediency 
 or their real value dictates a compliance with them. 
 Intense competition makes it necessary for the man who 
 has something to sell, to cultivate relatively unimportant 
 markets that he would have disdained in the old days, 
 and he finds in advertising an ally that makes it possible 
 for him under certain circumstances to develop the sell- 
 ing methods that seem to be best suited to his individual 
 requirements, whether those methods follow established 
 usage or not. 
 
 The problem of selling has two phases: first, the de- 
 termination of the market; second, the selection of 
 methods for reaching the market. In the case of cer- 
 tain classes of distributers we shall find that their 
 
FACTORS IN DISTRIBUTION 3 
 
 market is determined for them because of the nature of 
 their activities. Every seller, however, must meet the 
 question of selling methods, and most of those who have 
 anything to market must also definitely determine upon 
 the field they are to cultivate. 
 
 2. Traditional factors in distribution. — For many 
 years it was generally conceded that there were normally 
 six factors to be considered in the distribution of most 
 commodities. These factors were as follows : 
 Manufacturer 
 Commission merchant 
 Jobber 
 Wholesaler 
 Retailer 
 Consumer 
 At present, however, except in a comparatively few 
 lines of business, the chain of distribution has been 
 shortened. The commission merchant or broker re- 
 mains an important factor chiefly in the various branches 
 of the textile industry, and in the distribution of raw 
 food products. The functions of the jobber and the 
 wholesaler have largely lost their distinctive features, 
 and the two words are practically interchangeable in 
 business usage. As a consequence of this simplification 
 of the typical chain of distribution, it is necessary to 
 consider in detail the selling problems of only three 
 classes of distributers— the manufacturer, the jobber, 
 and the retailer. These, with the consumer, are the 
 normal factors to be considered in any discussion of 
 marketing problems and methods. 
 
 3. Consumer. — It is necessary to establish a definite 
 meaning for the name of each of these classes, before 
 we consider in detail the selling problems of each. A 
 consumer, according to the Century Dictionary, is "one 
 
4 SELLING AND BUYING 
 
 who destroys the exchangeable value of a commodity by 
 using it." In other weds, he buys goods for consump- 
 tion and not to sell them again. This definition is so 
 simple that there ought to be no difficulty in deciding 
 who is and who is not a consumer. There is, however, 
 frequent diflPerence of opinion on this point. For in- 
 stance, the retail grocer may insist that a hotel or a 
 restaurant is a consumer, and that, as a consumer, it 
 should buy its supplies from the retail dealer instead of 
 from the jobber. The wholesale grocer, on the other 
 hand, may maintain that the hotel is in reality a dealer 
 because it sells, although in altered form, most of the 
 food that it buys. In general business usage, the term 
 consumer means the "ultimate consumer"— the individ- 
 ual that uses the things he buys for himself and does 
 not sell them again either in their original or altered 
 form. 
 
 4. Retailer.— The term "retailer" is derived from 
 two words meaning "to cut again." It was originally 
 applied to a class of middlemen who purchased cloth by 
 the piece or in quantities and then cut off smaller 
 amounts for sale to consumers. Speaking generally, 
 the modern retailer is a distributer who sells to the con- 
 sumer, as distinguished from a distributer who sells to 
 dealers. Of course, one distributer who would other- 
 wise be classed as a retailer may sell, at times, to other 
 dealers. When he does so, however, he must be classed 
 as a jobber in those particular transactions, and not as 
 a retailer. A retailer may also sell to manufacturers, 
 as when a retailer hardware merchant, for example, sells 
 supplies to a building contractor. This does not alter 
 his classification. Any one who sells goods can be 
 classed as a retailer when he does not sell to other deal- 
 ers; and for practical purposes it is convenient and suf- 
 
FACTORS IN DISTRIBUTION 
 
 ficiently accurate to consider a retailer as a distributer 
 who sells chiefly to consumers. 
 
 5. Jobber. — A jobber may be defined as one who 
 buys, usually in quantities, for the purpose of selling 
 the same goods again, without alteration, to other 
 dealers. Tiiese dealers may be either other jobbers or 
 retailers. But whenever one who is otherwise a job^^er 
 sells goods to a consumer, so far as that particular 
 transaction is concerned he ceases to be a jobber and 
 becomes a retailer. We have already suggested that 
 there was formerly a clear distinction between the func- 
 tions of the jobber and the wholesaler. The jobber 
 bought "jobs" — odd lots at particularly favorable 
 prices, and disposed of them sometimes to wholesalers 
 and soinetimes to retailers. The jobber usually had no 
 regularly established market, while the wholesaler ordi- 
 narily supplied a more or less permanent list of custo- 
 mers. This distinction no longer exists. There is, 
 however, even to-day, a slight difference in the meaning 
 of the terms, which it is well at times to bear in mind. 
 The jobber always buys the finished goods which he 
 sells again to dealers. The wholesale dealer, on the 
 other hand, may manufacture the goods which, when 
 finished, he sells in quantities to the trade. A manu- 
 facturer who sells his product directly to retail dealers 
 would more properly be classed as a manufacturing 
 wholesaler than as a jobber. This distinction, however, 
 is not generally r2Co,^nized in the business world, and, 
 as the selling problems of the jobber and the whole- 
 saler are identical, it is permissible to use the terms in- 
 terchangeably in a general consideration of selling 
 methods. 
 
 6. Manufacturer. — For the purpose of considering 
 problems of distribution, we shall use the word "manu- 
 
6 SELLING AND BUYING 
 
 facturer" to indicate a business unit that has charge of 
 the combined activities of producing and of marketing 
 goods. It includes those producers who manufacture 
 from raw materials as well as those who purchase al- 
 ready manufactured articles and work them up into 
 different forms or assemble them with other parts in the 
 production of a larger or different article. For in- 
 stance, each of the following types may be considered 
 as a manufacturer: 
 
 1. The farmer who raises wheat and puts the raw 
 product on the market. 
 
 2 The miUer who purchases wheat and produces 
 flour. 
 
 3. The baker who purchases flour and uses it in the 
 manufacture of bread. 
 
 Any one who produces something and sells it is a 
 manufacturer. So a publisher is a manufacturer; like- 
 wise the small, one-man, cigar factory; as well as a great 
 concern like the American Tobacco Company. If, how- 
 ever, any producer solves the sales problem by making 
 arrangements to dispose of his entire product 
 to some individual or to some company that 
 is to take the entire responsibility of market- 
 ing it, then the original producer need not be 
 considered from the standpoint of selling. There are 
 so-called sales companies that make a specialty of dis- 
 posing of a manufacturer's entire output, and in certain 
 branches of the textile industry commission houses con- 
 tract to distribute the products of the mills. In these 
 cases the manufacturer really has no problem of distri- 
 bution, and the agency that handles the products in the 
 open market has to meet the problems that the manu- 
 facturer would otherwise have to face. 
 7. Semi-jobbers and manufacturing wholeaalers.— 
 
 k 
 
FACTORS IN DISTRIBUTION 7 
 
 In many cases a business house can not be classified e?> 
 clusively as a manufacturer, a jobber, or a retailer. lU 
 methods of distribution may permit its classification 
 under two or even all three of these headings. If a 
 manufacturer sells only to jobbers, he can not be classi- 
 fied otherwise than as a manufacturer. If he sells also to 
 retailers, he is a wholesaler as well as a manufacturer; 
 and if, in addition, he distributes his product directly to 
 the consumer, he must also be considered as a retailer. 
 A business house that sells to consumers as well as to 
 dealers, is both a jobber and a retailer, or a "semi-job- 
 ber," as it is usually called. Of late years it has become 
 customary for many wholesale houses to enter the 
 manufacturing field for themselves. Such houses may 
 be rightfully termed "manufacturing wholesalers," or 
 even "manufacturing jobbers," although the latter 
 phrase is not strictly accurate. We shall see later that 
 this invasion of the field of the manufacturers by whole- 
 sale distributers has been productive of many serious 
 complications in the problem of marketing methods. 
 
 It is our purpose to consider briefly some of the sell- 
 ing problems of the retailer, the jobber, and the manu- 
 facturer, and to suggest the more important advantages 
 and disadvantages of the selling methods that are open 
 to each class. 
 
 8. Selling problem of retailers. — We have already 
 suggested that the problem of selling has two phases: 
 first, the determination of the market; and second, the 
 selection of methods for reaching that market. The re- 
 tailer is not concerned with the first of these two phases. 
 Because of his natural position in the system of distri- 
 bution, he is not required to make a definite selection of 
 the class to which he is to sell. As a retailer, he must 
 sell chiefly to consumers. Or, expressing the idea dif- 
 
« SELLING AND BUYING 
 
 ferently and perhaps more acurately, his market is con- 
 fined to those who are not dealers in the things he has to 
 sell. With his natural market determined for him by 
 the terms of tJie definition of the class to which he be- 
 longs, he has only to consider the various methods of 
 reaching that market, and to select the method or 
 methods that best meet the requirements of his individual 
 case. Normally, there are three ways of distributing 
 goods at retail: 
 
 Salesmen or canvassers to call upon the consumer 
 
 Retail store 
 
 ]Mail-order method 
 
 9. Retail selling by mems of salesmen calling upon 
 consumer.— Before the development of town life, when 
 people generally were able to supply their limited 
 wants by direct barter with their neighbors, the itiner- 
 ant merchant practically controlled such merchandising 
 as existed outside of the comparatively few metropolitan 
 centers. It is probable that there were traveling mer- 
 chants before there were any towns at all, and this class 
 of dealers can therefore be considered as the originators 
 of the merchandising system. They went from tribe to 
 to tribe, and later from town to town and even from 
 country to country, displaying their wares before any 
 possible purchaser they might chance to meet. 
 
 10. Peddler.—There are three modern prototypes of 
 the itinerant merchant. The first of these is the ped- 
 dler, who still supplies out-of-the-way communities with 
 many of the necessities of life. The characteristic 
 feature of his activities is that he carries his stock of 
 goods with him, calls on those who may be interested in 
 his wares, and makes immediate delivery of the goods 
 that are purchased. This method of distribution, al- 
 though useful and important in a primitive state of 
 
FACTORS IN DISTRIBUTION 9 
 
 society, is obviously iinsuited to modern conditions, ex- 
 cept in unusual cases. Its one advantage is that the 
 customer can purchase at his own door. He is saved 
 the necessity of doing anything except to pay the price 
 and receive the goods. The business of an itinerant 
 dealer, however, must always be conducted on a small 
 scale. Unless operated in connection with some other 
 method of distribution, it can never develop to anj great 
 extent, and, therefore, it can never seriously compete 
 with other distributers who are able +o effect the econo- 
 mies that are always incident to large-scale business. * 
 11. Canvasser. — A second type of the modern itiner- 
 ant merchant is the canvasser who solicits orders from 
 house to house, but who does not carry his stock with 
 him. The book-agent is an example of this type. Sell- 
 ing by means of personal solicitation of the consumer 
 is expensive, and it can be attempted only when the 
 article to be sold carries a large profit. This method of 
 marketing is successfully employed when the article is 
 so little known that its merits must be presented person- 
 ally to each prospective purchaser, and when it is im- 
 possible or inexpedient to rely upon printed advertising 
 to create a demand. A business of this sort need not 
 necessarily be conducted on a small scale. There are 
 some exceedingly prosperous business houses that have 
 made a careful study of this method of distribution and 
 have built up national organizations of house-to-house 
 solicitors. Publishers of books and maps, and manu- 
 facturers of stereoscopes do an immense business of this 
 sort chiefly in rural and semi-rural districts; and some 
 mail-order houses, like the Larkin Company, for ex- 
 ample, have used this method of selling successfully to 
 supplement their catalogue business. Nevertheless, its 
 possibilities are limited. There is a prejudice against 
 
10 
 
 SELLING AND BUYING 
 
 the house-to-house solicitor. His powers of salesman- 
 ship have so often been enlisted m the support of arti- 
 cles of questionable merit that the vendor with a 
 strictly reputable proposition often finds his usefulness 
 limited by the prejudice that exists against his seUinff 
 methods. ® 
 
 12. Specialty salesman.— A third type of the dealer 
 who takes his wares directly to the consumer may be 
 *^!™!lf specialty salesman, for lack of a better name. 
 Ihe difference between him and the house-to-house solic- 
 itor IS principally one of degree and not of method. 
 Instead of calling upon everybody, he carefully selects 
 his prospective customers and centers his attention upon 
 them. This slight difference, however, is unimportant. 
 It seems to be a far cry from the persistent solicitor for 
 Lives of the Presidents" to the highly paid commercial 
 ambassador who secures a railroad's order for fifty 
 thousand dollars worth of locomotives, but so far as 
 their selection of trade channels and their fundamental 
 selling methods are concerned, tliey must be placed in 
 approximately the same classification. They both deal 
 directly with the consumer, and they both ignore the 
 retail store and the mail-order method of distribution. 
 They both are modern prototypes of the ancient itiner- 
 ant merchant. The one adopts this method of market- 
 ing because he believes that it is good policy to do so— 
 the other, because the nature of his goods demands it. 
 
 A specialty salesman, in the sense in which we are 
 using the term, usually handles a line that is of so techni- 
 cal or complicated a nature that it must be carefully ex- 
 plained to the consumer before he can be induced to 
 purchase. An example of this class is the adding-ma- 
 chine salesman. He often has to prove to the prospec- 
 tive purchaser that an adding-machine is necessary in 
 
FACTORS IN DISTRIBUTION 
 
 11 
 
 the "prospect's" business, and then he has to prove that 
 his particular machine is preferable to any other. The 
 same is true of the life insurance solicitor. Sometimes 
 an article that is originally introduced to consumers by 
 specialty salemen becomes so well known that it is later 
 handled profitably through the medium of regular re- 
 tail stores. In some lines, however, the specialty sales- 
 men are continued long after the article has become 
 perfectly familiar to the public. This is usually the 
 case when the demand is comparatively limited and the 
 competition is severe. The typewriter business illus- 
 trates this condition. 
 
 In certain instances there is no other selling method 
 possible than direct contact with consumers by the use 
 of salesmen to solicit their business. Locomotives, 
 obviously, could not be sold in a retail store or by mail. 
 It is equally obvious that not much life insurance would 
 be sold if every man who ought to carry insurance were 
 left alone to discover his own need and to call at the 
 office of the agent on his own initiative; although adver- 
 tising can do much to supplement the work of the solici- 
 tor in this as in other fields. The insurance business, 
 however, presents peculiarities that are not typical of 
 ordinary merchandising. Speaking generally, very 
 high-priced articles can probably be sold more success- 
 fully and economically by personal solicitation of the 
 consumer than by any other method. In the case of 
 low-priced articles, however, the method is undoubtedly 
 expensive and appreciably increases ^he cost of the 
 goods to the consumer. A dealer entering upon a busi- 
 ness in which this selling method is customary would 
 ordinarily have to adopt the same method to get his share 
 of the trade. There are many business houses, how- 
 ever, employing only store salesmen assisted by effec- 
 
la 
 
 SELLING AND BUYING 
 
 tive advertising, who have competed successfully with 
 other houses in the same line who relied solely upon their 
 outside salesmen. Under normal conditions it would be 
 a mistake to inaugurate an expensive system of local 
 and traveling salesmen to sell goods to consumers if 
 competitive conditions did not clearly demand it. 
 
CHAPTER II 
 
 RETAIL SELLING AND MAIL ORDER BUSINESS 
 
 18. Retail stores. — The retail store is of almost equal 
 historic importance with the itinerant merchant as a 
 means of reaching the consumer. For many years after 
 the development of town life and before the days of 
 cheap and easy means of communication, the local shops 
 practically controlled the distribution of goods at retail. 
 Its advantages proved to be so remarkable that even the 
 modem development of land and water transportation 
 has scarcely affected its influence; and to-day certainly 
 90 per cent of such staples as groceries, clothing, drugs, 
 dry-goods, etc., are still distributed through the retail 
 store. In considering the advantages and disadvan- 
 tages of this method of marketing, it is necessary to 
 have in mind an establishment that confines its activities 
 strictly to what is usually termed "over the counter" 
 trade. It may, and it usually does, receive some orders 
 by telephone, and it frequently delivers goods to cus- 
 tomers. Its delivery clerks may call upon the regular 
 customers and solicit their orders for the day, although 
 this expensive custom is being supplanted by the in- 
 creasing use of the telephone. Retail dealers in certain 
 rural districts stock up wagons with salable merchan- 
 dise and dispose of the load by making house-to-house 
 calls upon the farmers in the neighborhood; and very 
 many retail establishments combine selling by mail with 
 the ordinary distribution through regular store chan- 
 nels. The typical retail store, however, does neither of 
 
 13 
 
14 
 
 SELLING AND BUYING 
 
 these thin^, and it is the typical retail store that we 
 are now considering. This arbitrary limitation of the 
 meaning of the term should be can- fully borne in mind 
 dunng the discussion of selling methods. 
 
 14. Advantages of selling through a retail store.— 
 
 1. The purchaser likes to see what he is buying. He 
 can go to the store and actually pick out the article he is 
 to get. He does not run the risk of dissatisfaction that 
 is sometimes connected with ordering from sample or 
 from a catalogue description. Or, if the customer 
 does not visit the store, he can order by telephone and 
 discuss goods and prices in detail with the dealer. 
 
 2. The store and the consumer's residence are usually 
 conriparatively close together. Delivery can be made 
 without the delay that is frequently incident to the proc- 
 ess of ordering from a distant distributer. 
 
 8. The store-keeper, particularly in a small town, is 
 ordinarily on friendly terms with most of his cus- 
 tomers. He can readily build up a clientele of personal 
 friends and acquaintances whose good will is valuable. 
 A long period of fair-dealing, of course, will also estab- 
 lish a good-will for the establishment that dea^^ at long 
 range with its customers, but the influence of a distant 
 dealer upon his customer'? can never be so strong as that 
 which the local merchant has upon his neighbors. 
 
 4. As the patronage of the retail store is generally 
 limited and local, the owner is in a position readily to 
 adapt his stock to local needs, and to hold trade by 
 catering to individual and neighborhood peculiarities*. 
 A certain men's furnishing store in one of the small cities 
 of the country maintains a careful card record of the 
 peculiarities and tastes of each of its regular customers. 
 n hen a man enters the store to buy a hat, he is im- 
 mediately offered a hat of the same style that has ap- 
 
RETAIL SELLING 
 
 \!i 
 
 pealed to him before; and when the dealer wants to dis- 
 pose of an odd lot of shirts, he sends personal notices to 
 his customers who wear the sizes that are included in 
 the lot. No inducements of price elsewhere could per- 
 manently alienate the customers of this store. 
 
 3. In the case of error in fillinfr the order, or dissatis- 
 faction of any sort with the goods that are delivered, the 
 adjustment can l)e made more quickly by the local store 
 than by its distant competitor. "Satisfaction guaran- 
 teed, or money refunded" is becoming the slogan of a 
 constantly increasing list of local retail establishments, 
 and the store that adopts this policy has a strong hold 
 upon its customers. 
 
 6. The local retail store is an important factor in the 
 business life of the community. Its owner is usually a 
 resident of the city in which it is located. Its force of 
 employes is largely recruited from its immediate vi- 
 cinity. Their prosperity depends upon its success, and 
 they form a most effective force of personal advertisers. 
 The owner can appeal to civic pride in urging support 
 of home institutions against out-of-town competition. 
 The civic consciousness of American communities is be- 
 coming a force to be reckoned with, and the local mer- 
 chant can use this spirit to his own advantage. 
 
 7. The granting of credit to consumers usually re- 
 (juires familiarity with their economic condition. The 
 local dealer can acquire this more easily than anyone 
 else; accordingly, it is more customary for credit to be 
 extended by local merchants than by mail-order houses. 
 If the retail store-keeper does grant credit j he has a hold 
 upon his trade that can not be secured by mail-order com- 
 petitors who customarily do a strictly casli business. 
 
 15. Disadvantages of selling through a retail store. — 
 1. Its field for development is necessarily limitet. 
 
16 
 
 SKLLINC, AND BUYING 
 
 outside of it. in " e.H',r uu""*' *''"'f'"<^' "P'^'-'-te 
 reached a c erta^tt ' X'^^^'^"^' After it ha. 
 
 growth is limi : stri ?i, ; the r'T"^"*' "^ f"^'-" 
 
 triet that is direct v ,1/ . *velopme„t of the dis- 
 is .situated. ^ """^ *° *''^ '-««'■■'>■ in which it 
 
 ^J^z'-j.z :r re;: r "^, '-""'-- ■' ^^ 
 
 ■ ss condition, A """'"''f*^'^ '>>' adverse local busi- 
 
 -dustrial dXrbat J™ Tt ^'"'^ .°^ "'"^ -™- 
 
 severely the trade Of vVme^rant'L^:"' '" '"'^^* 
 3- If it does a crdit 1. ' *'"' '^'"""'"'■ity. 
 
 t-rough had debt;::^' i-zr::;;:,™-' r^-.'- 
 
 vantage with resn«.t t„ •» .. ' " '" *' « d sad- 
 
 petitofs. ^ *" "' ^P»t-™sh" mailorder com- 
 
 otl'er™Mrn!:an' "Sfo''"t"" '""" " Jo""- - 
 in prices with Z distr butr' 'tb '/k ""' "'""''^ ^""P^t^ 
 ing connections Th td ^ """ """''^ *■«» buy 
 
 der house, because^t L . "' '"'""" """ "" '"'"■'-°^- 
 sell the tel retaU ore T r"*'"" '""'^^' ""> ""der. 
 >.e un ,,,_ ..though it'- tren"::!'™"™ '"'■'"' 
 
 trihi^'btrsia^"^ ^"'"— ■^''- « -^.v 
 
 'argely deter^Cd hv twl T T'"'^'' ""'"« ?"- « 
 which he buys the Ids and T.^"'- '""^ P™ "* 
 
 «i"-- It is imposfble ;o"^' T**' *"' ""■' '"' <'«'ribu. 
 
 ""vantages posses^d brtKr fT, *"' "''"■•™ 
 n.ail-ordcr house with res pit t" "^'ff"'' «nd the 
 Kitlier of these classc, IfT! • ™" °' distribution. 
 
 -llingandope^a ~n^:t^^^^^^^ "'"•^' •"•- '-" 
 "f certain articles under certan .v'*""' "' '"-^ ^'''■^ 
 ^^ -. inherent advantay::rtrX:U:'t 
 

 RETAIL SELLING 
 
 17 
 
 must be with respect to its j)urchasing power. There is 
 nothing in the nature of the mail-order house that gives 
 it the power to command more direct buying connections 
 than the local retail store can command. Normally, the 
 retail dealer in staple lines buys from a jobber. Nor- 
 mally, also, the mail-order house that buys the same 
 goods, in the same quantities, must likewise purchase 
 from a jobber. 
 
 If traditional trade channels were as much respected 
 now-a-days as they were only half a century ago, 
 the discussion of this subject could end here. It is, 
 however, coming more and more to be the case that 
 the ability to command direct buying connections de- 
 pends solely on the ability to buy in quantities. In 
 other words, many manufacturers prefer to sell to job- 
 bers, because the jobber usually can buy in larger 
 quantities than the average retailer; but if the business 
 of a retailer reaches such proportions that he can buy 
 in as large quantities as the ordinary jobber, some manu- 
 facturers are often willing to sell directly to him and to 
 allow him practically the same price that the jobbers 
 have to pay. There are many retail establishments 
 whose buying power is far greater than that of the 
 average jobber; and thus, because of their immense dis- 
 tributing facilities, they are able to purchase a large list 
 of articles directly from the manufacturers. It makes 
 no difference whether they are local retail merchants or 
 mail-order distributers — the ability to buy in quantities 
 is frequently all that determines the price and secures 
 for them direct buying connections. 
 
 17. Size is most important. — The general question, 
 therefore, finally resolves itself into this: Which is the 
 more likely to develop to such a size that it can com- 
 mand direct buying connections and the resultant lower 
 
 III — 2 * 
 
18 
 
 SELLING AND BUYING 
 
 prices— a local retail establishment or a mail-order 
 house? When the question is presented in this form, it 
 can not be denied that the advantages lie with the mail- 
 order house, when the conditions with respect to capital 
 and managerial ability are equal and the article to be 
 sold lends Itself equally well to either method of distri- 
 bution. This is true simply because the number of peo- 
 ple who may be considered possible customers of the 
 local retail store is necessarily limited, while the possible 
 area of operations of the mail-order establishment is 
 practically unlimited. If, therefore, a large mail-order 
 house makes better prices than a small retail store, it is 
 not because one is a mail-order house and the other is a 
 retail store. It is chiefly because one is large and the 
 other is small. 
 
 The small mail-order house (of which there are many) 
 labors under the same selling disadvantages as the 
 small retail store. The common custom of making the 
 general statement that mail-order houses can usually 
 undersell local retail stores is due to two things: first 
 the mistaken idea that all mail-order houses are large' 
 and second, the fact that mail-order dealers ordinarily 
 confine their operations to districts where they are not in 
 direct competition with large retail establishments. 
 
 18. Retail selling hy mail— The most recently devel- 
 oped system of distribution of goods at retail is the mail- 
 order method. The application of the mail-order princi- 
 ple during the past ten or twenty years has had an ex- 
 traordinary growth. It has probably been the most im- 
 portant factor in the re-arrangement of selling methods 
 and the a tered attitude toward traditional trade- 
 channels, which are characteristic of modern merchan- 
 dising. Possibly its most marked influence is seen in the 
 movement among a large number of manufacturers to 
 
RETAIL SELLING 
 
 19 
 
 free themselves from dependence on the middleman and 
 to add the functions of a retailer to their ordinary 
 manufacturing activities. The jobber and the purely 
 retail distributer, too, have found the mail-order method 
 of selling immt tisely effective in increasing their area 
 of influence and in developing new lines of contact with 
 the consumer. 
 
 The remarkable growth in the mail-order business 
 has been fostered by two important commercial develop- 
 ments—the cheapening and quickening of methods of 
 communication and transportation, and the remarkable 
 growth in the realization of the possibilities of advertis- 
 ing. To order anything by mail fifty years ago was to 
 invite delay and dissatisfaction, and to solicit mail orders 
 was to arouse suspicion and distrust. The dignifying 
 of advertising and the achievements of steam and elec- 
 tricity have changed all this. To-day there is probably 
 not an article of common or uncommon use whose pur- 
 chase can not be effected by a customer a thousand miles 
 away abnost, if not quite, as satisfactorily as if it were 
 bought directly over the counter of a retail store. 
 
 19. Advantages of retail selling by the mail-order 
 method. — 
 
 1. Physically speaking, the field for development is 
 practically unlimited. Operations can extend as far as 
 the postal, telegraph, freight, and express systems reach. 
 
 2. As has been already suggested, the unlimited field 
 for development makes it possible for the mail-order 
 house to grow to larger proportions than the local retail 
 store, whose customers must necessarily come from a 
 narrowly defined area. Because increased size means 
 increased buying power, the large mail-order house is 
 sometimes able to make a better price to the consumer 
 than the small local establishment can profitably meet. 
 
no 
 
 SKLLING AND BUYING 
 
 3. Its wide area of operations frees the mail-order 
 house from the influence of purely local conditions of 
 busmess depression. Only a wide-spread industrial or 
 financial difficulty can seriously affect its business For 
 example, if there were a prolonged strike of mi rs in 
 the anthracite coal region, every retail store in Scranton 
 and in the other towns of the district would suffer 
 severely because of the decreased buying power of its 
 customers. If there were a mail-order house in Scran- 
 ton, however, that operated generally throughout the 
 i.ast, Its trade in the anthracite region would probably 
 be only a small part of its entire business, and decreased 
 returns from that district would not seriously affect its 
 total sales. 
 
 4. The only overhead charges of a mail-order house 
 are usually incurred in the maintenance of offices and 
 warehouses. Sample-rooms and sales-rooms are not 
 needed. 
 
 5. Large stocks need not be carried. As a matter 
 of fact, many articles listed in mail-order catalogues are 
 not carried in stock at all. When orders for these arti- 
 cles are received, they are forwarded to the manufac- 
 turer and shipment is made directly from the factory to 
 the customer. This is one of the greatest advantages of 
 the mail-order method of distribution. The local retail 
 store frequently ties up its capital in large quantities of 
 slowly moving stock. It has to have on hand the goods 
 for which there is likely to be any demand, and its cus- 
 tomers are usually unwilling to wait until the dealer can 
 order from his jobber the things that thev want. When 
 they order from a mail-order house, however, they ex- 
 pect some delay in delivery of the goods, and the mail- 
 order dealer has opportunity to secure outside of his 
 stock the articles ordered that he may not have on hand 
 
 
RETAIL SELLING 
 
 81 
 
 6. The cost of a selling organization is saved. 
 
 7. There is an element of chance about ordering from 
 a mail-order house— a speculative interest in the value to 
 be received— whidi seems to attract trade. A con- 
 sumer may see an article many times in his local store 
 without becoming interested in it; while the same article 
 offered for sale in a mail-order catalogue or advertised 
 attractively in some publication may arouse in him a 
 desire for its acquisition. The appearance of the actual 
 article may not be so effective in arousing interest as a 
 picture of it coupled with an alluring description. 
 
 8. The catalogue of the mail-order dealer represents 
 his entire stock. This catalogue is always accessible in 
 the home of the consumer. It is a more simple matter 
 to turn its pages than it is to gain a knowledge of the 
 complete stock of a store by personal inspection. The 
 mail-order purchaser, therefore, is likely to order a 
 larger assortment of merchandise than the "over-the- 
 counter" customer. The consumer wishes, perhaps, to 
 order a single article. He looks up prices and grades in 
 the mail-order catalogue. While doing so he involun- 
 tarily sees advertisements of other articles that may in- 
 terest him, with the result that his order usually includes 
 a greater assortment than he at first intended ordering. 
 The mail-order house would not have this advantage if 
 all retail clerks were real salesmen. Too frequently 
 they merely supply the customer's expressed require- 
 ments, and make no effort to interest him in anything 
 except what he asks for. The retail store clerk should 
 take a lesson from the jobber's traveling salesman who 
 usually canvasses the retailer's entire stock before he is 
 convinced that he has secured the largest possible order. 
 
 9. The mail-order business, with few exceptions, is 
 conducted on a strictly "cash in advance" or "cash on 
 
.-••^ 
 
 22 
 
 SELLING AND BUYING 
 
 
 delivery basis. Customers do not expect credit and 
 
 avoids bad debts, and, to this extent, has an advanw 
 over h,s local, credit-granting competitor. * 
 
 msinl~ ir"^"""*' " "■" "f» "f *'" mailorder 
 bus mess. Heavy expenditures for publicity are abso- 
 
 thl tstTT J" ™? ™'" "'- -l-ses -a"e 
 the cost of sellmg by mail fully as great as the cost of 
 other methods of distribution. 
 
 2. The mail-order house must combat the active an- 
 
 in which It operates. It must do this, cluefly, by lower 
 pnces, superior goods, and efficient service. It is hl^ 
 pered on all sides by the organized oppo tion ^f ^Z 
 
 secu- tr f f «f««n'»tions is often sufficient to 
 
 Xl^^ ™'' °' *"' ''"^^'"'"'"'^"* °^ tymailtder 
 
 8. It is difficult to build up a clientele of steady loval 
 
 eustomers of the house. This can be accomplished onfy 
 
 The local retail store has the advantage in this matter. 
 4. it ,s often maintained that the development of the 
 
 S"cosro^;""-^ '" ""^ "^"""'^y '"'^ been'iinde.:d by 
 3lTo b.V'T"'""'^'"'"" "' •""••'^''K'' that are to^ 
 uT L . 1 """"""'""y l-y freight. This opens 
 "P the whole question of the parcels post and of the 
 
RETAIL SELLING 
 
 S3 
 
 regulation of express rates. Many retail and jobbing 
 interests maintain that a lower cost of transporting 
 small packages will work solely to the advantage of the 
 mail-order concerns and will increase the competitive 
 difficulties of the local retail stores. Other business in- 
 terests urge that the local establishments will be as 
 greatly benefited as the great central mail-order 
 houses, because it will then be possible for the re- 
 tail stores to increase their own field of operations 
 by developing iiiail-order departments of their own. 
 Whether or not cheaper and easier means of parcel 
 transportation will be of greater advantage to the 
 present mail-order houses than it will be to the pres- 
 ent retail stores, the fact remains that it will probably 
 result in a more general application of the mail-order 
 principle. 
 
 21. Combinations of retail selling methods. — ^We 
 have seen that there are three standard ways of selling 
 goods at retail: by salesmen to call upon consumers, by 
 the retail store, and by the mail-order method. The ad- 
 vantages and disadvantages of each method have been 
 briefly discussed. Every dealer who wishes to sell at 
 retail must make a definite selection of one or more of 
 these methods of distribution. His choice is by no 
 means lunited to one. As a matter of fact, the most 
 successful retail establishments are Inose that utilize 
 more than one means of reaching the consumer. Some 
 retail dealers maintain store rooms and also send out 
 solicitors to call upon consumers and to induce them to 
 visit the store. Pianos are frequently sold in this way. 
 
 A particularly effective combination of retail selling 
 methods is that of the retail store with the mail-order 
 business. Marshall Field & Company, of Chicago, and 
 John Wanamaker, of New York, dre two well-known 
 
^ 
 
 84 
 
 SELLING AND BUYING 
 
 Si'"—" tr? -' r * ' " 
 
 , .°"le o ' ' «^°"'"' '" "«= "<"■" the counter" 
 
 tomers possessed by any suc^stf;! f, :^1;t ^f 
 
 uable advert s no- as«!Pt f«,. +i, -i \ * ^*^" 
 
 txiisaig asset tor the mail-order narf r^f ^v^ 
 
 bus.ness. One department helps the sales oft^e otht 
 
CHAPTER III 
 
 SELLING AT WHOLESALE 
 
 22. Selling problem of jobber. — We have seen that 
 the retailer is concerned with only one of the two phases 
 of the selling problem. He does not have to select his 
 market. Because he is a retailer, he must sell to con- 
 sumers. His sole concern is with the methods by which 
 he can reach his market. The same is true of the job- 
 ber. As a jobber, his activities are confined to selling 
 to those who purchase in order to sell again. If he does 
 sell to the consumer — in other words, if he does both a 
 wholesale and a retail business — his problem as a re- 
 tailer is exactly that of the man who sells only at retail. 
 
 The dealer who sells both to dealers and to consumers 
 is usually called a semi-jobber. There are many suc- 
 cessful houses that conduct a dual business of this char- 
 acter; but ordinarily it is inexpedient for a distributer 
 to attempt to sell the same line to dealers and to con- 
 sumers in the same locality. When such an attempt is 
 made, it is obvious that the semi- jobber must be pre- 
 pared to meet the particularly active competition and 
 antagonism of the exclusively retail dealers in the dis- 
 trict in which he operates as a retailer. The strictly re- 
 tail stores always strenuously resent the invasion of 
 their field by one who is doing also a jobbing business. 
 If there is one wholesale grocery in a city, for example, 
 the retail grocers of that city normally give it their sup- 
 port, because of the convenience of being able to replen- 
 ish their stocks at short notice. If the wholesale house 
 
 25 
 
86 
 
 SELLING AND BUYING 
 
 begins to sell at retail, however, either surreptitiously 
 or openly—in other words, if it strives to compete with 
 Its own customers— it will have difficulty in retaining 
 the patronage of the retail grocers of the city. 
 
 There are some branches of merchandising in which 
 trade lines are not very sharply drawn, and semi-job- 
 bers in these goods frequently flourish and are able to 
 build up a profitable retail and wholesale trade in the 
 same district. In such staple lines as groceries, dry- 
 goods, drugs, and hardware, however, when semi-job- 
 bers have acliieved great success, it has been mainly in 
 those cases in which the wholesale trade of the dealer is 
 with merchants located outside of the city where he con- 
 ducts his retail business. 
 
 23. Two methods of wholesale selling.— The typical 
 method of cal-rj'ing on the strictly wholesale activities 
 of the jobber is by means of salesmen who call upon the 
 retail trade. The use of traveling representatives of a 
 wholesale house is probably as old an institution as the 
 wholesale house itself. There are some branches of the 
 jobbing trade, however, in which traveling salesmen 
 have not always been an important factor. Even to- 
 day it is the custom for buyers of some lines of goods to 
 make periodical visits to the central markets and to or- 
 der only after personal inspection of the jobbers' stocks. 
 Formerly this custom was much more general than it 
 is at the present time. Now it is confined chiefly to 
 hnes m which the idea of style plays an important part, 
 iiuyers of clothing, millinery, and similar goods usually 
 make frequent trips to style centers— New York, 
 Chicago, and the European capitals, for example— in 
 order to be sure that their purchases will be according 
 to the prevailing mode. Jobbers in these lines in the 
 trade centers, therefore, are chiefly concerned with the 
 
SELLING AT WHOLESALE 
 
 «7 
 
 problem of encouraging the visits of customers to their 
 establishments. They must maintain an adequate 
 house selling force. Even in these cases, the employ- 
 ment of a certain number of traveling salesmen is 
 usually essential. The duty of the traveling repre- 
 sentatives is to solicit the trade of those dealers who do 
 not come to the city to buy, as well as to encolirage the 
 visits of those who do. 
 
 Most wholesale selling is done by local or traveling 
 salesmen. The competition in jobbing channels is ex- 
 tremely severe, and it is generally considered that the 
 house that does not go out after the business with com- 
 petent representatives can not compete with the house 
 that does. In opposition to this general contention, 
 however, there are some examples of marked success in 
 wholesaling, which has been achieved simply by advertis- 
 ing in periodicals and by the judicious use of catalogues 
 and circulars. Accordingly, two possible methods of dis- 
 tributing goods at wholesale must be considered — by 
 salesmen and by mail. Some of the exclusive advan- 
 tages of each of these two methods of wholesale selling 
 are listed below. 
 
 24. Wholesale selling by salesmen. — 1. The jobber 
 can develop a personal, friendly relation with the trade 
 through his representatives. The effect of this is simi- 
 lar to the effect of the personal relation that the retail 
 dealer often sustains to his customers. A purchaser, 
 whether he is a consumer or a retail dealer, usually 
 places his order where he can get the best service and the 
 most satisfactory goods at the lowest price; but when 
 two or more houses offer him approximately the same 
 terms, the same price and quality, and the same serv- 
 ice, his personal relations with the sellers or with the 
 representatives of the sellers is frequently the determin- 
 
f8 
 
 SELLING AND BUYING 
 
 ing factor in the plaein^ of his order. Personality is 
 tc.-(lay ahnost if not <,uite as strong a factor in sales- 
 iiiiiiislii|i as It ever was. 
 
 2. Thf saksina,, can Rive his employer information 
 re«anlm„ the credit of his customers which may be of 
 hnancml benefit to the house. He can also be of ma- 
 tenal assistance in the matter of collections. When a 
 customer through willfulness or carelessnew is slow in 
 meeting his obligations, it is sometimes difficult to effect 
 a settien,ent by corres|K.„dence without losing the 
 
 otTh, " °V^. '"="""""" »'""""«'• ™f can 
 often be accomplished more easily by the persoiml visit 
 ol a tactful representative. 
 
 8. A salesman can usually secure a larger order from 
 a retailer than the dealer would ordinarHy send in by 
 mad If he were ordering only from a catalogue. We 
 have seen that the reverse of this is true in the case of 
 the sale of goods at retail. The retail clerk is not trained 
 to draw the customer's attention to everything of pos- 
 sible interest in the stock of the store, and the customer 
 ™"ld no give him the time to do so even if the clerk 
 had the traming and ability. The efficient jobbers' 
 sa esman however, does not leave a dealer until he has 
 canvassed the entire stock, so far as his line is concerned 
 He IS not satisfied with an order until he is sure that 
 It ^ntains all the iten.s that the dealer can wisely pur! 
 
 4. The salesman is frequently better acquainted with 
 general merchandising conditions than are ?he deaferTto 
 whon, he sells For that reason he is often in a pLt 
 t.o„ to assist his trade by giving valuable suggestrm 
 regarding the stock to be purchased and theTetC 
 o make ,t move. Particularly in the smaller towns o 
 the country the dealers are accustomed to rely grelt^y 
 
SELLING AT WHOLKSALE 
 
 t9 
 
 upon the traveling salesmen for information about 
 styles and fashions and novelties. If a salesman has 
 demonstrated his trustworthiness in this -espect, many 
 of his customers rely upon his judgment to a remark- 
 able degree. It is true that a mail-order jobber can 
 develop this same confidence, and he can be of similar 
 service to his customers, but he can not do so as quickly 
 or as effectively as the jobber that sells through sales- 
 men. 
 
 5. Most wholesale selling is done by means of samples 
 that are carried by the salesmen. The mail-order job- 
 ber must make sales by the attractiveness of the pictured 
 and printed descriptions of his goods. 
 
 6. Few jobbers do extensive advertising. At the 
 present time it is not generally considered necessary if 
 the territory is well covered by traveling salesmen. 
 
 25. Wholesale selling by mail— I. A large sales or- 
 ganization is not required. 
 
 2. A jobber's salesman frequently acquires so strong 
 a personal influence with his customers that he can carry 
 the trade of some of them to any house with which he 
 may become connected. In this way, a jobber who 
 sells through salesmen runs the risk of losing some of 
 his customers whenever a salesman for any reason 
 leaves his employ. The mail-order jobber avoids this 
 risk. 
 
 3. The supervision that a jobber can exercise over his 
 salesmen is necessarily limited. Their statements and 
 selling methods may be such at times a^ to reflect dis- 
 credit upon the employer. The catalogue and corre- 
 spondence of the mail-order jobber are his only repre- 
 sentatives. He risks the reputation of his house only 
 to those who are under his direct supervision. 
 
 4. Unless the mail-order jobber's advertising ex- 
 
30 
 
 W 
 
 SELLING AND BUYING 
 
 pense .s eqna] to the cost of maintaining a force of sales- 
 men, he sho.,1,1 be able to make lowef priceTthln the 
 jobber who sells through salesmen. It i^ as dan' rou, 
 to generahze on this point as it is to make generate 
 ments about the relative selling expenses of a W ^ 
 tail store and a retail mailorder distributer Th» 
 art. es sold, the location of the dealer, tldrtls in^h: 
 
 very tew that employ salesmen that do not also k..,P 
 
 In "SJanr' rr^^^^ *'^^' ^"^*-- ^^^^^^^^ 
 
 mail Many jobbers are beginning to advertise in 
 
 m^hod of .^ntJwIrUr c:t:er;rs Std 
 some who esale dealers to publish "house organs^wTeh 
 
 mucn matter of general interest that they mav be 
 cUssed as valuable additions to periodical bLi^ess lit 
 erature Competition is keen in the jobbing field and 
 with a few exceptions, the greatest successes won bt 
 
 ders. This combmahon of the two methods of whole- 
 sale sellmg ,s particularly advantageous in the clr of 
 
 large territory and widely scattered customers. 
 
CHAPTER IV 
 
 PROBLEMS OF MANUFACTURER 
 
 27. Manufacturers' selling methods. — ^We have seen 
 that the retailer and the jobber are concerned with only 
 one of the two general phases of the problem of distri- 
 bution. They are not called upon to select the class of 
 customers to whom they are to sell their goods, because 
 the meaning of the terms, retailer and jobber, deter- 
 mines for them the general nature of their activities. 
 The retailer sells to consumers and the jobber sells to 
 dealers. These two classes of distributers have to con- 
 sider only the best methods of reaching their natural 
 market. The manufacturer, on the other hand, has a 
 more complex selling problem to solve. He must first 
 decide to what class or classes he is to sell his product, 
 and he must then select the best means of reaching the 
 market that he has chosen. 
 
 28. First problem of the manufacturer. — Generally 
 speaking, the manufacturer's first selling problem is to 
 determine whether he will sell his product to the job- 
 ber, to the retailer, or to the consumer. Shall he con- 
 fine his direct sales to one of these classes exclusively, 
 or will it be advantageous to place his goods directly 
 with two or all of them? The problem is an impor- 
 tant one, because on its solution depends, first, the selec- 
 tion of economical methods of marketing the product, 
 and, second, the attitude of the wholesale and retail trade 
 toward the manufacturer, and the degree to which their 
 cooperation can be secured in the distribution of his 
 
 81 
 
32 
 
 SELLING AND BUYING 
 
 goods. As a matter of fact, however, the small manu- 
 facturer frequently does not feel the necessity of sol . in;r 
 th,s prob em. He may, for example, devote his chief 
 energies to securing orders from the retail trade, and 
 yet he may willingly accept orders from jobbers and 
 consumers as well. This may be due to a definite and 
 knovvnpohcy of dealing directly with any one who 
 wants h,s goods, but it is more often due to the lack of 
 a definite pohcy in this regard. The small manufac- 
 turer s goods may be relatively of little importance in 
 the general market. When this is the case, retailers and 
 jobbers may not be sufficiently interested in them to de- 
 velop either a friendly or an antagonistic feeling to- 
 ward them on account of the selling methods of the 
 manufacturer. The problem of making a definite se- 
 lection of a market, however, is a vital one with the pro- 
 ducer who IS selling a well-knov n article over a wide 
 territory. Every manufacturer who hopes to develop a 
 sectional or a national distribution, no matter how smaU 
 his present business may be, should realize that an early 
 and satisfactory solution of this problem will be a val- 
 uable asset, when his product becomes standard and of 
 sufficient importance in the trade to merit the definite 
 support or antagonism of distributers. 
 
 29. Factors in solution of first problem.— There are 
 several considerations that may influence a manufac- 
 turer m the selection of the immediate market for his 
 goods. Chief among them are the two following- 
 
 1. The nature of the product itself. For instance, 
 Its torm, size, bulk, price, or use. 
 
 2. Trade conditions and considerations of policy or 
 expediency that are not based on the physical character- 
 istics of the product. 
 
 The application of these two classes of considerations 
 
PROBLEMS OF MANUFACTURER 
 
 88 
 
 is best indicated by concrete illustrations. The two ex- 
 amples that follow illustrate the effect of the nature of 
 the product on the selling methods of the producer. 
 
 30. Nature of the product.-^The dressed-meat in- 
 dustry requires modern refrigerating facilities at local 
 distributing points. When the central packing-houses 
 began to extend their territories, these local refriger- 
 ating facilities were not to be found. Accordingly the 
 packers established their own warehouses and offices at 
 convenient shipping points throughout the country. 
 From these branch-houses, sales and deliveries are made 
 directly to the retailer. 
 
 An adding machine is so complicated a piece of 
 mechanism and its many uses are as yet so little known 
 to the general public, that it would be inadvisable for 
 the manufacturers to depend for its distribution on job- 
 bers and retailers of office supplies. These dealers 
 could not give it the special attention necessary to en- 
 able them to learn and present its many selling points. 
 The mauMfacturers must endeavor to educate the public 
 directly about the use and value of the machine. Ac- 
 cordingly, the producers usually sell directly to the con- 
 sumer either through branch houses and their own sales- 
 men, or through agents who are closely connected with 
 the manufacturing companies. 
 
 These two examples illustrate the effect of the 
 nature of the product on the manufacturer's selection 
 of the class to which he is to sell his products. The con- 
 sideration of business policy or expediency in the solu- 
 tion of the problem is illustrated by the following cases. 
 31. Business policy or expediency.— The jobber is 
 an important factor in the grocery trade; probably 90 
 per cent of the groceries consumed in this country are 
 distributed through the wholesale grocer. His in- 
 
SELLING AND BUYING 
 
 fluence, therefore, is great, and his cooperation valuable. 
 The largest laundry soap factory in the United States 
 has for many years refused to sell its products directly 
 to any one not conducting a strictly wholesale business. 
 It is true that the manufacturer's salesmen solicit or- 
 ders from retailers, but these orders are always taken for 
 the account of some jobber; and even when the ship- 
 ment is large enough to be made directly from the fac- 
 tory to the retailer, the wholesale grocer named by the re- 
 tailer secures his full jobbing profit on the transaction. 
 This system of selling is typical of the attitude of many 
 manufacturers who seek the active cooperation of the 
 jobbers by recognizing them as legitimate factors in dis- 
 tribution. In return for their loyalty to the wholesale 
 dealer, the manufacturers ask that the jobber push their 
 goods instead of those of other producers who may sell 
 directly to retailers or even to consumers. 
 
 The iron and steel companies have largely ceased sell- 
 ing to middlemen, because the dealers began quoting 
 prices for future delivery that were lower than the pro- 
 ducer themselves could quote. This caused attempts 
 at speculative manipulation of prices, which were de- 
 moralizing, and forced the manufacturers to keep con- 
 trol of prices by selling directly to consumers. 
 
 It has already been suggested that some manufac- 
 turers do not find it necessary to confine their direct 
 sales to the jobber, the retailer, or the consumer. The 
 small manufacturing organization that has to secure an 
 immediate distribution, without much regard for the ef- 
 fect of its selling policy on its later development, is fre- 
 quently willing to sell its goods directly to both classes 
 of distributers and to consumers as well. It may sell 
 to consumers at a maximum price. From this figure it 
 may allow one discount to the retailer and a still larger 
 
PROBLEMS OF MANUFACTURER 85 
 
 discount to the jobber. It has been explained in a pre- 
 ceding paragraph that, for a comparatively small fac- 
 tory, and even for a larger one in some lines of business, 
 this policy is entirely proper and is the only one that can 
 be pursued to advantage. The large organizations that 
 have adopted this method of distribution, however, are 
 chiefly those engaged in industries in which trade lines 
 have never been strictly drawn. The publishing busi- 
 ness is a case in point. Some publishers sell to whole- 
 sale book dealers; they also sell directly to retail stores 
 through their own salesmen; and they sell directly to 
 consumers by means of house-to-house solicitors. In 
 his turn, the jobber to whom the publisher sells, may 
 also sell directly both to the retail trade and to con- 
 sumers as well. This situation is by no means uni- 
 versal in the book business, but it is typical of the con- 
 dition that might exist in all lines if manufacturers in 
 general did not recognize the customary trade channels. 
 In some lines, it is highly desirable for the manufac- 
 turer to select one of the three possible classes of cus- 
 tomers that we have been considering, and to confine his 
 direct sales strictly to that class. The branches of busi- 
 ness in which this policy is most advisable are those in 
 which the jobber plays an important part, such, for 
 example, as the great staple lines of groceries, dry goods, 
 hardware, and drugs. Some of the advantages and dis- 
 advantages of the various means of distribution open to 
 manufacturers in these and similar fields are as follows: 
 32. Advantages of making direct sales only to job- 
 hers.—l. The manufacturer recognizes the jobber as a 
 legitimate factor in distribution, and refuses to compete 
 with him by seUing to retailers or consumers. Accord- 
 ingly, the manufacturer can expect the active support 
 of the jobber's skiing organization in the distribution 
 
si 
 
 SELLING AND BUYING 
 
 of his product. It is to the jobber's advantage t. 
 push the goods of the manufacturer who adopts thi, 
 
 2 Because the manufacturer can expect the jobbe] 
 to sell h,s goods for him. and to take an active interest ir 
 them, the manufacturer does not need to maintain t 
 large selhng organization. 
 
 3. The manufacturer's accounting and order systems 
 are much simplified. If, for instance, he is doing a na- 
 tional business in a grocery specialty, he has accounts 
 merely with the 2,.500 or 3,000 wholesale grocers, in- 
 stead of with the quarter of a million retail grocers in 
 the United States. 
 
 33. Disadvantages of making direct sales only to job- 
 ^ers.—l The manufacturer can not foUow the distri- 
 bution of his goods beyond the jobber's stock. Many 
 jobbers operate over an extensive territory. Therefore 
 the manufacturer can not learn definitely where his 
 goods go finally into consumption. If he advertises in 
 order to mterest the consumer and retailer, he can not 
 determine definitely the effect of the advertising in any 
 particular locality. He does not know accurately the 
 extent to which demand is increasing or decreasing in 
 any given section, and his efforts to stimulate business 
 by local advertising, therefore, can not be accurately di- 
 rected. '^ 
 
 2 There are many manufacturers that support the 
 jobber by selling directly only to him. He is supposed 
 to give equal support to all of them in return. He may 
 push one manufacturer's products for a period, and 
 then discard them for a different line. This prospect 
 need not be feared if the quality of the goods has been 
 sufficiently impressed upon the public to have built up 
 a steady demand for them; but the possibility is one that 
 
PROBLEMS OF MANUFACTURER 87 
 
 must certainly be considered by the manufacturer whose 
 products are little known. 
 
 3. JMany jobbers' salesmen are paid on a commission 
 basis. Their compensation is based on the amount of 
 profit that can be figured on the goods they sell. Ac- 
 cordingly they will sell mainly the goods that pay the 
 largest profit, no matter how willing the jobber may be 
 to return the support of the loyal manufacturers. If 
 their goods do not pay as good a profit as other lines, he 
 can not force his salesmen to sacrifice their own imme- 
 diate financial interests. 
 
 34. Advantages of making direct sales only to retail- 
 ers.— I. Goods sold to a retailer can generally be con- 
 sidered as being consumed in or near the retailer's town. 
 Hence the manufacturer can determine accurately the 
 growth or loss in business at any point, and he can di- 
 rect his advertising accordingly. The manufacturer 
 who sells to the retailer is in a better position to judge 
 and to influence demand than is the manufacturer who 
 sells only to the jobber. 
 
 2. The retailer who is a real merchant can often sell 
 whatever he wants to sell, without too much regard for 
 popular demand. This statement is subject to fre- 
 quent exceptions, but it applies in many cases. If a 
 manufacturer sells to retailers, his salesmen must call 
 upon the dealers frequently. A manufacturer's sales- 
 men are trained to secure the dealer's cooperation; their 
 one purpose is to enlist his support for the particular 
 line they are handling. The jobber's salesmen, on the 
 other hand, are often asked to give their attention to so 
 many hnes that it is impossible for them adequately to 
 press the advantages of any particular one. 
 
 3. An increasing number of large retailers refuse to 
 purchase through a jobber. Their support is usuaUy 
 
38 
 
 SELLING AND BUYING 
 
 valuable, and it can be gained only by direct selling 
 3o. Disadvantages of making direct sales only to re 
 tatlers—l. If the jobbers can not have the exclusive 
 sale of an article, they naturally work against it and dis 
 courage Its purchase by retailers. In many instance, 
 the jobber exercises a strong influence over tlie retailer 
 and in such cases the jobber's support, even though i1 
 may be passive, is to be preferred to his active antag- 
 onism. * 
 
 2. Selling directly to retailers necessitates the main- 
 tenance of an extensive selling organization. The trade 
 must be covered frequently enough to neutralize, as far 
 as possible the effect of the jobbers' salesmen's activity 
 m behalf of other lines. 
 
 8. The accounts carried are many. If credit is 
 granted, the system must be extensive, and the accounts 
 must have close watching. The financial condition of 
 many retailers is not strong, and bad debts are likely to 
 be more frequent than when direct sales are confined to 
 wholesale houses. 
 
 36. Advantages of making direct sales only to con- 
 surners.-!. The manufacturer can determine accu- 
 rately the response to his advertising in any given 
 district. He has an absolute check on variations in de- 
 mand and can apply the needed stimulus to the business 
 exactly where it may be needed. 
 
 2. The manufacturer can retain control of the 
 market. In other words, he can make prices and estab- 
 b h a good will" without danger of the prices being 
 cut by dealers, and the "good >.^11" being impaired by 
 ^e^unauthorized action of some irresponsible middle- 
 
 37. Disadvantages of making direct sales only to con- 
 sumers.~i. As soon as a "direct to consmner" business 
 
PROBLEMS OF MANUFACTURER 
 
 89 
 
 becomes large enough to be a strong competitor of 
 wholesale and retail dealers, it is made the object of con- 
 certed attack by the interests with which it competes. 
 Sometimes the influence of the dealers is strong enough 
 to result in legislative action adverse to the manufac- 
 turer. 
 
 2. If the consumers are reached by salesmen, the cost 
 of the necessary selling organization must be very great. 
 The same thing is true of the advertising expense if the 
 business is of the mail-order variety. 
 
 8. A "direct to consumer" business conducted on a 
 credit basis involves a complicated system of accounts, 
 and the risk of loss through bad debts is in proportion 
 to the number of accounts carried. If it is conducted 
 on a cash basis, it loses the trade of the large number of 
 people whose patronage the local dealer holds by grant- 
 ing them credit. 
 
 38. Second selling problem of manufacturer. — ^We 
 have suggested some of the advantages and disadvan- 
 tages of the possible solutions of the first phase of the 
 manufacturer's selling problem. After he has deter- 
 mined whether he is to sell to the jobber, the retailer, or 
 the consumer, or to any two or to all of them, he must 
 choose methods of reaching the market that he has se- 
 lected. If he is to sell to jobbers, he may do so either 
 through salesmen or by mail. The mail-order method 
 of selling to jobbers, however, is so little used that its 
 advantages as compared with those of the method of 
 selling through salesmen need not be considered in de- 
 tail. Ordinarily the manufacturer who seeks to enlist 
 the co-operation of the jobber must do so by personal 
 solicitation. If a manufacturer sells to the retailer, the 
 selling methods that are open to him are exactly the 
 same as those that are open to the jobber; and if he sells 
 
40 
 
 SELLING AND BUYING 
 
 to the consumer, he can make his choice of the sam. 
 methods of distribution that are open to any one wh( 
 seeks to sell ginnls at retail. The advantages and dis 
 advantages of the various possible methods of wholesale 
 and retail distribution have already been considered. 
 
 89. Declining importance of middleman.— lieceni 
 years have witnessed many changes in manufacturers' 
 selhng methods. The number of manufacturers who 
 are leaving the middleman entirely out of their schemes 
 ot distribution is constantly increasing. The wonderful 
 development of modern advertising has made it possi- 
 ble for the manufacturer to talk directly to the people 
 who use his goods, and Mghly successful "factory-to- 
 consumer" enterprises are to be found in nearly every 
 line of industry. As marked as this movement is, how- 
 ever, it is not more important than the increasing tend- 
 ency on the part of manufacturers to recognize the re- 
 tailer as a legitimate distributer, but to eliminate one of 
 the other traditional factors in distribution from their 
 system of selling. In order to strengthen their own 
 position and to meet, in some degree, the general com- 
 plaint against high prices that are freque My attributed 
 to the handling of the necessaries of life by superfluous 
 middlemen, many manufacturers have abandoned the 
 policy of relying exclusively upon the wholesale mer- 
 chant for the distribution of their products. They are 
 seeking more and more to find a direct market among 
 the retail trade. The declining importance of the job- 
 ber may be traced, in part, to the following causes: 
 
 1. The growth of publicity and the complexity of ad- 
 vertising campaigns have made it necessary for the 
 manufacturer to have an accurate check on the effent 
 ot h.s advertising, and to be sure that the work is fol- 
 lowed up by the necessary selling activities. Neither 
 
PROBLEMS OF MANUFACTURER 
 
 41 
 
 of these things is possible when the manufacturer sells 
 only to the jobber. The manufacturer who employs 
 sale-»r*:n to solicit retailers' orders to be filled for the 
 account of jobbers, is, of course, able to follow up local 
 advertising effectively. Even he, however, is at a great 
 disadvantage in checking up the actual effectiveness 
 of his publicity. 
 
 2. The larger scale on which business is being done — 
 the increased investment of capital — has inclined the 
 manufacturer to seek the closest possible connection with 
 the consumer. Unless a product is in general demand, 
 there are uncertainties involved in marketing it entirely 
 through jobbing channels. Manufacturers are fre- 
 (luently unwilling to risk these uncertainties despite the 
 many advantages that are offered by distribution 
 through the wholesale trade. 
 
 3. The increasing purchasing power of retailers is an 
 important factor in the changing status of the jobber. 
 Many manufacturers have no interest in the maintenance 
 of trade lines. If they sell only to jobbers, it is simply 
 because they do not care to deal in the small quantities 
 that the retailer often wishes to buy. If the retail trade, 
 however, develops sufficient buying power, it is an en- 
 ticing market for the manufacturer who is willing to 
 sell to anj one who can handle the required quantity of 
 his product. There are a great many retailers whose 
 purchasing power is much larger than that of the av- 
 erage jobber. Frequently they will not purchase from 
 a jobber; and if their trade is to be secured, they must 
 be sold directly. 
 
 40. Jobber's place in merchandising system. — De- 
 spile the tendencies that are responsible for the lessen- 
 ing importance of the jobber, it is improbable that he 
 will ever be eliminated from the merchandising system. 
 
I! 
 
 48 
 
 SELLING AND BUYING 
 
 He occupies a definite and important place. Withoui 
 the jobber the small neighborhood retail store could not 
 exist. Consider, for example, a typical grocery store. 
 Its stock n!ay include from a few hundred to several 
 thousand different articles, which are probably produced 
 by hundreds of manufacturers. Except in the quick- 
 selling staple lines, it has on its shelves only a small sup- 
 ply of each article. Let us imagine that there is no job- 
 ber from whom the stock can be purchased, and that the 
 retailer has to buy everything from the manufacturers. 
 In the first place, he would have to deal with as many 
 manufacturers as there are different lines in his stock. 
 It IS easy to imagine the difficulty the average dealer 
 would have in keeping complete assortments in stock 
 under these conditions. 
 
 In the second place, he would have to purchase each 
 article in much larger quantities than he does from the 
 jobber. Few manufacturers would care to sell him a 
 half case of extra quality canned goods or a dozen bot- 
 tles of olive oil. The increased size of his stock would 
 make it necessary for him to have a warehouse, which 
 means additional expense; it would require heavier total 
 purchases than the average dealer's capital would per- 
 mit; and, even if his capital was sufficient, it would 
 mean tying up a considerable portion of it in a large 
 amount of slowly moving merchandise. 
 
 The average dealer could not do a profitable business 
 under these conditions. As conditions actuaUy are, 
 however, the retailer can make almost all of his pur- 
 chases from one jobber; there can be and frequently is 
 a cordial understanding amounting to more than a mere 
 buying and selling relation between retailer and jobber 
 which IS of advantage to both in their credit relations; 
 the retailer can usuaUy buy as much or as little as he 
 
PROBLEMS OP MANUPACTURER 4§ 
 
 pleases; and he can renew any portion of his stock on 
 short notice. Furthermore, the jobber's salesman calls 
 fre(|uently on his customers; he can help the retailer to 
 keep a varied, well-selected stock; and he is in a position 
 to assist the dealer in many ways by his knowledge of 
 conditions in the trade and by his suggestions regarding 
 nimle- i merchandising methods. In short, the jobber 
 cariics the retailer's surplus stock for him, and enables 
 him to do a profitable business on small capital. As 
 long as the public finds the neighborhood retail store a 
 necessary convenience, the jobber must continue to be a 
 vital factor in the distribution of many staple goods. 
 Even the development of the chain-store principle will 
 not seriously aflFect his importance. Every chain-store 
 organization must have a central supply house, and this 
 central supply house is, for practical purposes, to be 
 considered as a jobber, because it serves the stores in its 
 organization in precisely the same way as the ordinary 
 jobber serves the independent stores with which he deals. 
 41. Agents, commission merchants, and brokers. — 
 The normal chain of distribution that we have been con- 
 sidering is sometimes varied by the introduction of 
 agents, commission merchants, and brokers. These oc- 
 casional factors in the marketing of merchandise, how- 
 ever, have no peculiar selling problems to solve. They 
 are to be classed as wholesale or retail dealers, according 
 to whether they sell directly to retailers or to consumers; 
 and their selling problems are exactly the same as those 
 of other jobbers and retailers. In some instances they 
 stand between the manufacturer and the jobber, and in 
 such cases their selling problems are, of course, the same 
 as those of manufacturers who distribute through whole- 
 sale dealers. 
 
 In the textile trade, for example, and particularly in 
 
** SELLING AND BUYING 
 
 its cotton goods branch, the customary practice is for a 
 miU to dispose of its entire product to or : ; , ore com- 
 mission houses. These commission houses then seU the 
 cloth on commission usually to jobbers, or possibly also 
 to retailers or to consumers, in accordance with individ- 
 ual sellmg policies. The commission house, therefore, 
 so far as its selling problems are concerned, is in the 
 same position as the manufacturer, and it can be consid- 
 ered merely as the manufacturer's representative in the 
 distribution of the products of the factory. 
 
 When one who has something to sell, whether he is a 
 manufacturer, jobber, or retailer, elects to distribute his 
 goods through agents, brokers, or commission mer- 
 chants, instead of through a selling organization of his 
 own. It IS usuaUy because he would be at a disadvantage 
 in attempting to get into direct touch with his customers. 
 This disadvantage might be occasioned by one or more 
 of the following causes: 
 
 1. Limited capital. Some textile manufacturers sell 
 their product through commission houses because their 
 capital is not sufficient to enable them to carry on their 
 business otherwise. The commission houses advance 
 them a portion of the selling price of the cloth before it 
 IS actually sold. 
 
 2. Limited demand. In a smaU city there would not 
 be a sufficient market for office safes, for example, to 
 justify a manufacturer'? representative giving his entire 
 time to the local trade. A merchant engaged chiefly in 
 some other line of business, however, could profitably 
 act as the manufacturer's agent and carry a smaU stock 
 of safes to supply the local demand. 
 
 8. Unfamiliarity with the market. The instance of 
 the average individual who wishes to seU real estate is a 
 case in point. 
 
PROBLEMS OF MANUFACTURER 
 
 45 
 
 4. Peculiar organization of the market. For in- 
 stance, stocks, bonds, and produce are usually purchased 
 in quantities only through organizations known as ex- 
 changes or boards of trade. Trading on these ex- 
 changes or boards of trade is confined to members, who 
 are commonly termed brokers. An individual having 
 commodities of this sort to sell would ordinarily have to 
 do so through the agency of a broker. 
 
CHAPTER V 
 
 SALES DEPARTMENT ORGANIZATION 
 
 42. Principles of organization.— The sales depart- 
 ment organization of a dealer or manufacturer reflects 
 his selling policy. Its characteristics are determined by 
 the seUmg methods that have been adopted. A manu- 
 facturer who sells directly to jobbers, retailers, and con- 
 sumers, requires a selling organization that difl'ers rad- 
 ically from the one that would suffice if he distributed 
 his products exclusively through wholesale dealers. 
 Likewise a strictly local retail store does not need the 
 same sort of organization that would be required if it 
 sold goods by mail as well as over the counter. This 
 does not mean that a retail dealer, for example, must 
 necessarily have a larger force of employes to handle 
 a combined mail-order and over-the-counter business 
 than would be sufficient to conduct either one of these 
 activities alone; nor does it mean that a manufacturer 
 could not use the same salesmen to sell in many in- 
 stances successfully both to jobbers and to retailers. 
 
 In any scheme of organization the distinction be- 
 tween the several units in the system is one of functions 
 and not necessarily of individuals. This fundamental 
 principle will be emphasized in the consideration of each 
 of the three suggestive methods of organization that are 
 presented in this chapter, but it is weU to state it at the 
 beginmng so that it can be borne in mind throughout 
 the discussion. The statement that different selling 
 methods requir , different methods of sales department 
 
 46 
 
SALES DEPARTMENT ORGANIZATION 
 
 47 
 
 organization means simply that the character of the 
 activiti'^s of the different members of the organization 
 and frequently the relation of the members to one an- 
 other depend largely on the market that is being sought 
 and the methods that are being used to reach it. 
 
 The sales department of a retailer, a jobber, and a 
 manufacturer differ in characteristics of organization. 
 It is not possible in the consideration of the organization 
 l)roblems of these three classes to present any schemes of 
 organization that can be regarded as typical. There 
 are no typical retail or wholesale selling organizations, 
 because the functions of the selling force of a mail-or- 
 der dealer^ are different from the functions of the sell- 
 ing force of a retail or jobbing establishment that does 
 little or no mail-order business. In like manner, 
 methods of sales department organization for a manu- 
 facturer are as varied as the selling methods that he may 
 adopt. Any plan of sales department organization that 
 is presented, therefore, can be typical only of a single 
 class of retailers or of jobbers or of manufacturers. In 
 considering the organization problems of each type of 
 distributer, we shall outline a system that is suggestive 
 of methods that are generally employed in certain com- 
 mon classes of the type under consideration, and we shall 
 then indicate briefly some modifications of the suggest- 
 ive system that are necessary to adapt it to other classes 
 of distributers in the same group. 
 
 43. Retail sales department organization. — There are 
 three methods of selling goods at retail — by the retail 
 store, by mail, and by means of salesmen to call upon 
 consumers. The first two of these methods can be con- 
 veniently combined, while the last is customarily em- 
 ployed alone. For most commodities, one or both of 
 the first two methods are the normal ones. Salesmen 
 
I 
 
 SELLING AND BUYING 
 
 to call upon consumers are employed only in exceptional 
 cases; and this method of marketing is not general 
 enough to be considered typical of retail distribution. 
 Accordingly, in a general consideration of. retail sales 
 department organization it will be sufficient to have in 
 mind an establishment that employs only the first two 
 methods of reaching consumers. 
 
 A department store is the most highly developed 
 form of retail selling. It possesses certain character- 
 istics that differentiate it from the "single line" estab- 
 lishment, but the fundamental features of its organiza- 
 tion are typical of those of the majority of retail stores. 
 Diagram I represents the relation between the different 
 members of the selling organization and the principal 
 hnes of authority and of contact in many department 
 stores. 
 
 This is not a complete chart for the entire organiza- 
 tion of a department score or other large retail estab- 
 lishment. In most stores of this class there are three 
 chief divisions. The first of these has charge of the 
 stock of goods, its purchase and sale. The merchandise 
 manager is normally the head of this division. The 
 second division is concerned with the physical features 
 of the store itself, instead of with the goods that are 
 bought and sold. The store superintendent is usually 
 in charge of this division. He is responsible for the 
 physical appearance of the store building, for the ar- 
 rangement of aisles, counters, and showcases, and for 
 the conveniences that are offered to patrons, such as 
 rest rooms, parcel checking facilities, and restaurants. 
 He IS in charge of the heating plant and the janitors, 
 and he ordinarily directs the activities of the stable em- 
 ployes, the wagon men, and the delivery clerks He is 
 only indirectly concerned with selling, through his cus- 
 
49 
 
 I1I-4 
 
SELLING AND BUYING 
 
 ? 
 
 I 
 
 "ft 
 ifi 
 
 tomary supervision of the floor-walkers or aisle-man- 
 agers and his function of hiring and of enforcing disci- 
 pline among the force of salespeople. The last great 
 division embraces the cashiers, accountants, and other 
 employes engaged in non-selling activities, who are not 
 subordinate to the store superintendent. 
 
 A complete chart of department store organization 
 would show the lines of authority and contact among all 
 the members of these three divisions. We are con- 
 cerned, however, only with the strictly selling activities 
 of the store. For that reason our organization chart 
 shows in detail only the first of the divisions and enough 
 of the second to indicate its connection with the selling 
 force. 
 
 44. Merchandise manager. — Sales department or- 
 ganization is best illustrated by the consideration of a 
 highly developed establishment in which no individual 
 serves in more than one capacity. At the head of the 
 business is the owner or general manager who has super- 
 vision over the entire organization. The inmiediate di- 
 rection of the different classes of activities are delegated 
 by him to officials in charge of the various divisions that 
 were mentioned in the preceding paragraph. The 
 official in charge of the stock of goods that are offered 
 for sale is commonly known as the merchandise man- 
 ager. He is the real sales manager of the store. The 
 entire selling force of the establishment are either di- 
 rectly or indirectly subordinate to him, and he is respon- 
 sible for carrying out the selling policies of the manage- 
 ment. 
 
 He is not concerned, however, solely with the sale of 
 goods. The chief characteristic of the sales department 
 of a retail store, as distinguished from that of a manu- 
 facturer, for example, is that the officials in charge of 
 
SALES DEPARTMENT ORGANIZATION 61 
 
 the selling in a retail store are also in charge of the 
 buying. The merchandise manager, therefore, is not 
 only the sales manager but he is also the buyer of the 
 stock. It seems to be an accepted principle of mer- 
 chandising that when goods are bought to be sold again, 
 the same individual must be made responsible for both 
 the buying and the selling. In a factory these two ac- 
 tivities are usually distinct, because the purchase is 
 usually of raw materials and the sale is of the finished 
 product. The man who knows the most about the thing 
 to be sold, therefore, is not necessarily the one with the 
 most intimate knowledge of the raw materials that en- 
 ter into its manufacture, and for this reason a manu- 
 facturer's sales department is ordinarily entirely dis- 
 tinct from his buying department. 
 
 In merchandising, however — in the purchase of goods 
 and their subsequent sale without alteration in form — 
 by far the most important factor in profitable selling 
 is intelligent and economical buying. There are, of 
 course, other factors that enter into the making of 
 profits in a merchandising establishment, but not nearly 
 to the extent that the productive processes, for example, 
 determine the profit on a manufactured article. In a 
 retail or wholesale store, therefore, there is an exceed- 
 ingly close connection between the buying and the sell- 
 ing of the stock. Profitable buying depends not only 
 on a knowledge of the goods themselves, but probably to 
 a far greater degree on a knowledge of present demand, 
 and on the ability to forecast the demand of the future. 
 This knowledge and ability are best acquired by actual 
 selling experience, and for that reason the members of 
 the store organization who are entrusted with the pur- 
 chase of its stock are almost invariably recruited from 
 the selling force. Because of their selling experience 
 
r>2 
 
 SELLING AND BUYING 
 
 i:'^ 
 
 they are well qualified to direct the operations of the 
 sales-people; and, because of the close connection be- 
 tween store buying and selling, it is entirely feasible to 
 place department heads in charge of both of these ac- 
 tivities. 
 
 45. Buyers. — In a small establishment the merchan- 
 dise manager may purchase all of the stock, and imme- 
 diately supervise all of the seUing. In a larger store, 
 however, he can not give his personal attention to the 
 purchase and sale of the entire stock. In such cases it 
 is customary to divide the store into sections or depart- 
 ments, basing the division upon the kinds of goods that 
 are carried. For instance, in a large department store 
 there might be the following departments or goods sec- 
 tions: Clothing, dress goods, food supplies, furniture, 
 hardware, shoes, notions, books, etc. In charge of each 
 of these departments is an official who is usually known 
 as a buyer. The buyers are the lieutenants of the mer- 
 chandise manager and are directly responsible to him. 
 Because the merchandise manager directs both the buy- 
 ing and selling, the buyers also combine these two ac- 
 tivities. They purchase the stock for their respective 
 departments and they may also be considered as as- 
 sistant sales managers of the store. 
 
 Each buyer keeps in close touch with all the details 
 of the work of his department. He purchases goods, 
 he fixes prices, directs the display of stock, and super- 
 vises the work of the people who actually make the sales 
 to consumers. He spends as much time as he can be- 
 hind the counters of his section making actual sales, 
 listening to the remarks of shoppers, learning what the 
 public want, and ti v'ng to foresee future demand. If 
 he does not get his information at first hand, he trains 
 
SALES DEPARTMENT ORGANIZATION 
 
 as 
 
 his selling force to secure it for him, and to transmit all 
 essential data by means of a system of reports. 
 
 If the business is of sufficient size, the various depart- 
 ments or goods sections may be divided into sub-sections, 
 each in charge of an assistant buyer. For instance, if 
 a large store has a department of food supplies, this 
 may be divided into three subsections, dealing respect- 
 ively in groceries, meats, and bakery goods. The re- 
 lation of the assistant buyers in a department to their 
 chief buyer is practically the same as that of the chief 
 buyers to the merchandise manager. The department 
 head confines his work to supervision and the deter- 
 mination of policies, and the detail of supervising much 
 of the buying and selling is left to the assistant buyers. 
 
 46. Sales-people. — The sales-people are the last unit 
 in the strictly selling organization. They are the only 
 members of the sales department of the store who do 
 not buy as well as sell, although even in their case there 
 is not always a distinct separation of these two func- 
 tions, because the superiors of the sales-people usually 
 encourage them to observe conditions and make sug- 
 gestions that may be of benefit to the buyers in pur- 
 chasing stock. One or more of the sales-people in any 
 department are usually being constantly trained as un- 
 derstudies for the buyer, so that m event of his absence 
 or promotion there may be some one fitted to carry on 
 his work. 
 
 In a complex organization, such as that which has 
 been described, the sales-people are directly responsible 
 to the assistant buyers. In a smaller organization the 
 buyers themselves direct the selling force; and, if there 
 arc no department managers or buyers, the merchandise 
 manager has immediate authority over the selling force. 
 
n-k 
 
 SKLLING AND BUYING 
 
 1. 
 ; I- 
 
 That is to say, the sales-people are primarily members 
 of the strictly selling organization, and their selling 
 functions are necessarily directed by the officials of the 
 sales department. In most large stores, however, the 
 buyers or merchandise manager do not have complete 
 auvhority over the sales-people. For instance, the sales 
 department does not ordinarily have charge of the 
 hiring of sales-people. When a buyer or assistant 
 buyer wants additional assistance in his department, he 
 notifies the store superintendent of his needs, and that 
 official is charged with supplying the ad<litional sales- 
 people, either by hiring them or by transferring them 
 from some other department where they may not be 
 needed. The store superintendent is also usually re- 
 sponsible for the enforcement of discipline among the 
 sales-people, and it is his duty to see that their reports, 
 sales tickets, delivery slips, and the like, are made out 
 in proper form. In supervising those activities of the 
 sales-people for which he is responsible, he is assisted 
 by the floor-walkers or aisle managers. 
 
 The system whereby the authority over the sales-peo- 
 ple is divided between the merchandise manager and 
 the store superintendent and their respective assistants, 
 is possibly not in accord with one of the principles of 
 organization that is often considered as fundamental. 
 This principle teaches that the best results are secured 
 by giving to each official definite and exclusive authority 
 over the group of employes immediately below him. 
 Recent tendencies in industrial organization, however, 
 indicate that this principle is possibly not so universally 
 applicable as has been supposed. The military "staff 
 and line" system which has been applied successfully to 
 large industrial undertakings, and which is sponsored by 
 
SALES DEPARTMENT ORGANIZATION M 
 
 the modem efficiency experts, recognizes the advantages 
 of assigning definite supervisory functions to each of 
 two or more superiors who have common authority over 
 a certain group of employes. To this extent modem 
 organization ideas are in line with the custom of de- 
 paument stores; but whether the department organiza- 
 tion that embodies a division of authority over the sales-* 
 people is or is not scientific, it seems to work well in the 
 majority of cases. 
 
 47. Variations in departmertal organization. — The 
 relation that has been described between the divisions 
 presided over respectively by the merchandise manager 
 and the store superinterr^ent is characteristic of a great 
 many stores, but it is ^y no means universal. The 
 floor-walkers or aisle managers, for instance, are some- 
 times considered an integral part of the selling organi- 
 zation, and they are made directly responsible to the 
 buyers or to the merchandise manager instead of to 
 the store superintendent. This arrangement helps to 
 concentrate authority, and where it is in effect the store 
 superintendent is usuaUy relieved of all supervision over 
 the sales-people. The customary method of organiza- 
 tion, however, is that shown in the chart. The floor- 
 walkers have little or nothing to do with the purchase 
 or sale of goods. They are usually in no way responsible 
 for the sales in the departments to which they are as- 
 signed. Their duties are to enforce discipline, to see 
 that customers are served and to look out for their com- 
 fort in all possible ways, and to be responsible for the 
 physical aspect of the part of the store over which they 
 have jurisdiction. If the store superintendent has 
 general supervision over these matters (and they are 
 certainly within his province rather than within that of 
 
SG 
 
 SELLING AND BUYING 
 
 I i 
 
 the selling department), it is logical for the floor- 
 walkers to be subordinate to him instead of to the 
 merchandise manager. 
 
 In some large retail stores there is an official with 
 the title of sales manager, whose duties are distinct 
 from, or subordinate to. those of the merchandise man- 
 ager. The functions of such an official vary so greatly, 
 however, in different establishments, that he can not 
 be said to occupy a definite position in retail sales de- 
 partment organization. He usually has no responsi- 
 bility whatever for the purchase of stock. In some 
 stores he is interested only in the development of the 
 efficiency of the sales force. He may have general 
 supervision over the sales-people. or he may be merely 
 the instructor in the school of salesmanship that many 
 establishments maintain for their employes. In other 
 stores the sales manager confines his activities to the 
 management of the big selling movements of the store, 
 such as planning the special sales and seeing that they 
 are properly merchandised, displayed, and advertised. 
 In these latter cases he simply relieves the merchandise 
 manager of a portion of his responsibility and is prac- 
 tically co-ordinate in authority with him. In the other 
 cases, however, he is subordinate to the merchandise 
 manager. 
 
 The time may come when a definite division between 
 the buying and selling functions wiU be characteristic 
 of retail store organization, but this division is not 
 general at the present time. The merchandise man- 
 ager IS really the sales-manager just as he is also the 
 chief buyer, and his immediate subordinates in a large 
 organization can just as logicaUy be called assistant 
 sales managers as buyers. The usual retail store or- 
 ganization, however, is based chiefly on the buying side 
 
SALES DEPARTMENT ORGANIZATION 57 
 
 of tlie dual functions of its officials, and their titles are 
 usually derived from their purchasing instead of from 
 tlieir selling activities. 
 
 48. Advertinng department.— In the chart of retail 
 store organization the advertising department is shown 
 as being distinct from the merchandise department. 
 The relation between the advertising and sales depart- 
 ments in any organization is a matter in which there 
 is no uniformity of opinion or practice. The earlier 
 practice was for the advertising manager to be subor^ 
 (liiiate to the sales manager. Perhaps the ordinary 
 custom now is for these two officials to be co-ordinate 
 in authority. Advertising men generally maintain that 
 the logical procedure is to combine the two departments 
 under a single head. Possibly one reason why this has 
 not been done to any extent in retail store organiza- 
 tion is that every sale has two phases — ^getting the cus- 
 tomer into the store, and caring for hun when he ia 
 once there. The advertising manager is charged with 
 the responsibility of getting customers into the store. 
 Formerly his authority stopped there, but now-a-days 
 he is also responsible for the numerous display devices 
 that tempt the customer to buy as he wanders through 
 the store. 
 
 It is difficult to say just where the authority of the 
 advertising manager should cease and that of the sales 
 or merchandise manager should begin. Each is en- 
 gaged in one phase of selling, and whatever their 
 nominal relation may be, they must work in the full- 
 est harmony with each other. The mail-order depart- 
 ment is one phase of the store's activity in which their 
 authority conflicts. Because selling by mail is one 
 method of coming into direct contact with the consumer 
 and of disposing of merchandise, the diart shows the 
 
58 
 
 SELLING AND BUYING 
 
 mail-order manager as being subordinate to the mer- 
 chandise manager. It is evident, however, that many 
 of the methods of seeurmg mail-orders must be under 
 the supervision of the advertising manager. Mail- 
 order selling depends largely on advertising for its 
 success. The preparation of the catalogues and follow- 
 up material is certainly an advertising proposition. If 
 the advertising manager is not a salesman, his advertise- 
 ments will be ineffective, and if the merchandise mana- 
 ger and his assistants have no knowledge of the prob- 
 lems of advertising, neither department can work to the 
 greatest advantage. More and more the vital connec- 
 tion between advertising and selling is becoming recog- 
 nized, and it is probable that in the future there will 
 be no distinct division between the two departments. 
 
 For the sake of convenience in the discussion of a 
 retail selling organization, we have been considering a 
 store in which a separate mdividual embodies each of 
 the functions that have been mentioned. This condi- 
 tion, however, can not exist in a small store where a 
 single person may perform all of the functions that 
 are divided among the staff of a larger organization. 
 The small proprietor may be his own merchandise mana- 
 ger, buyer, and salesman. He may handle all mail- 
 orders himself and also be his own advertising manager. 
 Whether one man performs all of these various func- 
 tions, however, or whether the organization is as com- 
 plex as that of a great department store, the dif- 
 ferentiation between the kinds of activities of the store 
 is always the same; and it is always possible with the 
 growth of the business to develop the organization along 
 lines parallel to these functions. 
 
 49. Lack of uniformity in wholesale selling organi- 
 zationg.— There is probably less uniformity in the sales 
 
§ 
 
60 
 
 SELLING AND BUYING 
 
 department organization njetlu)(ls of wholesale houses 
 than in tlie case of any other class of distributers. 
 There is, however, a tendency in the jobbing trade to- 
 ward the development of an organization similar in its 
 essential features to that of a large retail department 
 store. An outline of a possible sales department or- 
 ganization along these lines for a wholesale business is 
 shown by Diagram II. It must not be understood that 
 the suggested system is typical; for there is no typical 
 wholesale selling organization. It does, however, em- 
 l)ody some of the best features of the most progressive 
 jobbiiig houses, and it suggests the lines along which 
 wholesale selling organization methods generally may 
 develop in the future. 
 
 50. Manager of departmentg.— In a wholesale, as in 
 a retail, business the functions of buying and selling 
 are very closely related. Goods are purchased to be 
 sold again without change in form, and gross profits 
 are largely dependent on wise buying. There does not 
 seem to be any necessary division between the buying 
 and selling functions, at least as far as the duties of 
 executive officers are concerned. The buyer must be 
 most intimately in touch with the market, and the seller 
 must have an exact knowledge of the conditions un- 
 der whidi goods are purchased. Therefore in a job- 
 bing house, as in a retail store, it is customary for one 
 individual to combine the functions of buying and of 
 sui>ervising sales. In a typical case the small jobber 
 l)oth buys and sells his entire stock. If he has a 
 partner, the partner attends to the purchase of a part 
 of the stock, but they both usually act as salesmen for 
 tie entire line, or else they jointly supervise the work 
 of one or more general salesmen. In the executive 
 
SALES DEPARTMENT ORGA^IIZATION 61 
 
 offices, however, there is ordinarily no separation of the 
 functions of buying and selling. 
 
 As the business develops there may be so many dif- 
 ferent lines handled and the total business may be so 
 large that it becomes necessary to divide the organi- 
 zation into departments. Each of the department 
 heads has a definite part of the stock to purchase, and 
 he is, in addition, responsible for its sale. Where there 
 is departmentation of any sort, however, it is necessary 
 for some one to be superior to all the department heads 
 and* to correlate their activities. This is usually the 
 owner or general manager of the business, but in the 
 largest organizations he is frequently given the title 
 of manager of departments. He is the sales manager 
 and the chief buyer, and his relation to the heads of 
 departments is similar to that of a retail merchandise 
 manager to the buyers who operate under his super- 
 vision. 
 
 51. Department managers. — Each of the department 
 managers is in general charge of one or more of the 
 lines that are offered for sale. For instance, some of 
 the departments in a wholesale grocery may be as fol- 
 lows: canned goods; tea, coffee, and spices; fresh fruit 
 and produce; soap and laundry supplies; confectionery; 
 and cigars and tobacco. Each department manager 
 buys the stock for his department, fixes its price;, and 
 sees that the salesmen give it the attention to which 
 its importance may entitle it. 
 
 52. Specialty salesmen. — In a highly developed whole- 
 sale business, some of the departments may employ so- 
 called specialty salesmen to handle their respective lines 
 exclusively. This is usually the case when the success- 
 ful sale of an article demands a detailed familiarity 
 
6S 
 
 SELLING AND BUYING 
 
 with it which can only be acquired by a salesman who 
 gives his entire time to it, or when a jobber specializes 
 in a certain line and wishes to push it by means of 
 specialty salesmen as well as the general salesmen. For 
 example, many wholesale grocers specialize in cigars 
 and tobacco, and they frequently employ salesmen to 
 handle these lines exclusively. When specialty sales- 
 men are employed, they usually work directly under 
 the supervision of the department manager who is in 
 charge of the line that they sell, and they are only in- 
 directly responsible to the manager of departments. 
 
 53. General salesmen. — With the exception of the 
 comparatively few instances in which specialty sales- 
 men are employed, the entire line of a wholesale house 
 is usually handled by general salesmen. Even if there 
 are specialty salesmen for some departments, the 
 special lines are sold not only by the specialty sales- 
 men but are handled by the general salesmen as well. 
 In some houses the general salesmen are directly con- 
 trolled by the various department managers. It is 
 obvious, however, that this system may be productive 
 of conflicting directions to the salesmen, and of a 
 failure to follow the general selling policy that may 
 be for the best interest of the business as a whole. 
 Each department manager is naturally anxious that his 
 department shall lead the others, and if he is permitted 
 to direct the activities of the general salesmen, he is 
 likely to forget that the other departments have an 
 e(iual claim upon their services, and he may be tempted 
 to issue instructions in opp<jsition to, instead of in har- 
 mony with, the instructions of the other department 
 heads. Accordingly it is advisable to make the general 
 salesmen directly responsible only to the manager of 
 departments. 
 
SALES DEPARTMENT ORGANIZATION 63 
 
 Before communicating with the salesmen on any im- 
 portant point, a department manager should refer the 
 matter to the manager of departments, and the responsi- 
 bility for all directions to the salesman should rest 
 upon him. He is the general sales manager. It is his 
 duty to direct and control the natural competition be- 
 tween the departments so that the best interests of the 
 business as a whole will be advanced; and if any de- 
 partment head issues instructions to the general sales- 
 men, it should be understood that the instructions come 
 from and are approved by the manager of departments. 
 The best results will be secured if all instructions bear 
 his signature. The heads of departments come into 
 constant contact with the general salesmen, but the 
 salesmen are not logically directly subordinate to them. 
 There are usually three classes of general salesmen 
 —floor or store salesmen, city salesmen, and traveUng 
 salesmen. The store salesmen wait upon customers who 
 come to the store to select their stock. In many lines 
 there are fixed seasons of the year when out-of-town 
 dealers come to the central markets in large numbers to 
 make their purchases. There must always be adequate 
 provision for taking care of these customers. Fre- 
 (luently store sales are made by the department heads, 
 but in large organizations floor salesmen are frequently 
 maintained for this purpose. City salesmen call upon 
 tlealers whose places of business are in the city where 
 the wholesale house is situated. Traveling salesmen 
 call upon out-of-towii customers. All of Ihese classes 
 of salesmen occupy the same position in the scheme 
 ot organization. Their general functions are the same, 
 and they differ only with respect to the identity of the 
 dealers with whom they come into contact. 
 If a wholesale house does a large mail-order busi- 
 
64 
 
 SELLING AND BUYING 
 
 ness, it may have a mail-order manager, who is nor- 
 mally responsible to the manager of departments. 
 Such an official, however, is not so essential in a whole- 
 sale as in a retail store. A large proportion of the 
 wholesale salesmen's orders are usually sent in to the 
 house by mail, and most of these orders call for items 
 to be supplied by several of the departments. Accord- 
 ingly» even in a small organization there is usually found 
 a responsible order department, to which all orders are 
 delivered as soon as they have been approved by the 
 credit man. Each onier is then usually split up so that 
 each department head is kept in touch with the demands 
 upon his stock. It is the duty of the order department 
 to see that the entire order is filled promptly and in 
 accordance with the customer's wishes. Because prac- 
 tically every wholesale organization must maintain this 
 department to care for the large proportion of the sales- 
 men's orders that are received by mail, there is or- 
 dinarily no necessity for a separate department to care 
 for the orders that may be received directly from cus- 
 tomers. 
 
 54. Jobber's advertising department. — An advertis- 
 ing manager as a separate official is seldom found in 
 jobbing houses. Most jobbers confine their advertis- 
 ing activities to the preparation and distribution of a 
 general catalogue and to the publication of circulars 
 or other announcements of special offerings. The 
 supervision of these activities is usually delegated to one 
 of the department managers. There are other kinds 
 of advertising than those that have been mentioned, 
 however, that offer great opportunities to the wholesale 
 dealer. Many jobbers advertise in trade publications, 
 and an increasing number are realizing the possibilities 
 of house organs for distribution among their employes 
 
SALES DEPARTMENT ORGANIZATION 
 
 65 
 
 and customers. If advertising is attempted on an ex- 
 tensive scale, it is necessary to put it in charge of an 
 advertising manager, and this official is usually sub- 
 ordinate directly to the owner or general manager, not 
 because the general purposes of his activities are distinct 
 from the aims of the manager of departments, but 
 ))ecause it is not yet generally customary for selling and 
 advertising to be directed in detail by a single official. 
 
 55. Special applications of the suggestive wholesale 
 selling organization, — The chart of a jobber's selling 
 organization does not show all of the lines of contact 
 between the selling force and the other departments of 
 the business. The credit man is an exceedingly im- 
 portant official in a wholesale house, and the sales de- 
 partment must work in the closest harmony with him, 
 just as it must co-operate with the officials in charge 
 f)f accounting, shipping, and other non-selling activities. 
 The primary purpose of the chart is to show definite 
 sul)ordination of authority, and only those lines of con- 
 tact are presented that are necessary to indicate the 
 relations between members of the selling organization. 
 
 As has been suggested previously, any chart of or- 
 ganization shows the relation of functions and not of 
 individuals. A department manager, for instance, in 
 a wholesale house may not confine himself to the duties 
 of that one office. He may also be a salesman actively 
 engaged in calling upon the retail trade, he may be the 
 advertising manager as well, or he may have assigned 
 to him some of the duties of one or more of the other 
 office departments. The owner or general manager of 
 the store may be, and frequently is, the active mana- 
 ger of departments. The extent to which one indi- 
 vidual confines himself to the duties connected with a 
 single unit in the chain of authority depends solely on 
 
 II 1-5 
 
66 
 
 SELLING AND BUYING 
 
 the size of the establishment. What has been said 
 about the general application of the scheme of retail 
 sales organization applies in the case of the jobber as 
 well. The plan that has been outlined is seldom found 
 in its entirety in any one wholesale house. It repre- 
 sents, however, the general tendency in sales depart- 
 ment organization in the jobbing trade. It embodies 
 the characteristic features of every largely successful 
 business — specialized activities, departmentation, and 
 direct responsibility and delegation of authority. 
 
CHAPTER VI 
 
 MANUFACTURERS' SALES DEPARTMENT 
 ORGANIZATION 
 
 56. Dependence of manufacturers' selling organiza- 
 tion upon selling methods. — In the sections dealing with 
 manufacturers' selling methods it was shown that there 
 are three possible classes of customers for a manufac- 
 turer's products — ^jobbers, retailers, and consumers. 
 A manufacturer can reach any of the classes of cus- 
 tomers that he may select, by salesmen, by mail, by 
 retail stores of his own, by independent agents who may 
 buy his products to sell them again, or by branch-houses 
 that he may establish throughout his territory to handle 
 the business in their vicinities. His sales department 
 organization depends primarily on the market and the 
 selling methods that he may select. Because of the 
 number of these selling methods and the many possible 
 combinations of one or more of them, it is evident that 
 there can be no typical method of sales department 
 organization for a manufacturer. In order to indicate 
 the possibilities of sales department organization in any 
 particular manufacturing establislunent it is necessary 
 to have in mind a bu«ness tb^ readies all possible 
 classes of customers and uti&es all possible selling 
 methods. A general outliae of the sdling organizaticxi 
 of such aa industry is ^lown in the diart on page 68 
 (Diagram III). The insaginary manufacturer whose 
 sales department is there represented sells his products 
 (lirectlif io ajiy one who wishes to purcfaaae \keaL 
 
 67 
 
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 J 
 
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 00 
 
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 9 
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 9 
 09 
 
 68 
 
MANUFACl'URER'S SFXLING ORGANIZATION 69 
 
 Therefore, his organization must reach jobbers, re- 
 tailers, and consumers. The contact with the market 
 is effected by the use of branch-houses, salesmen, inde- 
 pendent agents, retail stores owned by the manufac- 
 turer, and a system for handling mail-orders. Prob- 
 ably no manufacturer's sales department is as exten- 
 sive as the imaginary one under consideration, but a 
 no less extensive system would be useful in suggesting 
 plans of a selling organization to fit all the possible 
 marketing methods that are open to the manufacturer.. 
 57. Two differences between manufacturer's and 
 wholesaler's or retailer's selling organizations.— A manu- 
 facturer's selling organization differs radically from the 
 sales department of a wholesale or retail store in two 
 important particulars: 
 
 In the first place, a manufacturer's selling officials 
 have nothing to do with buying. In a small factory, 
 of course, the sales manager may also be the purchasing 
 agent, but this is simply because the establishment is 
 small and it is not possible to assign a different individual 
 to each activity. The problems of factory buying are 
 entirely distinct from the problems of selling; and the 
 best results are obtained when factory buying and sell- 
 ing are recognized as specialized activities and are super- 
 vised by separate specialists. 
 
 The second important difference between wholesale 
 or retail and factory sales organization is found in the 
 j)rineiples that underlie departmentation. In a whole- 
 sale or retail store we have seen that the head of the 
 department (whether he is called a buyer or a de- 
 partment manager) is in charge of the sale of a cer- 
 tain kind of goods. In a department store, for ex- 
 ample, one buyer is in charge of groceries, another is 
 ill charge of dress goods, another is in charge of fumi- 
 
MldiOCOTY RESOIUTION TEST CHART 
 
 (ANSI and ISO TEST CHART No. 2) 
 
 .0 tr 
 
 116 
 lAO 
 
 2.5 
 
 2.2 
 2.0 
 
 1.8 
 
 ^ /1PPLIED IM^GE Inc 
 
 ^^ 165 J East Main Street 
 
 r,S Rochester. New York 1*6"^ USA 
 
 ^5 (716) 482 - 0300 - Phoi . 
 
 ^B (716) 288 - 5989 - '^ar 
 
70 
 
 SELLING AND BUYING 
 
 ture, and still others are in charge of each of the other 
 kinds of goods that are sold. In a factory organiza- 
 tion, however, the divisions in the sales department are 
 not ordinarily based on the different kinds of goods that 
 are sold but on the different ways in which they are 
 sold. Thus, in the organization shown in the chart, no 
 account is taken of the different products that may be 
 made by the factory. The basis of departmentation 
 is solely the different methods used by the manufacturer 
 to distribute his goods. It is not true, however, that 
 this principle of departmentation is universally applied 
 in manufacturing establishments. If the total business 
 is large, and if a considerable number of different kinds 
 of articles are produced, a separate sales manager is 
 sometimes in charge of the sale of each class of com- 
 modities, and under each sales manager is a complete 
 organization designed to reach the market that has been 
 selected, in accordance with the selling methods that 
 have been deemed advisable. 
 
 A certain manufacturing establishment, for example, 
 does a large business in a number of more or less closely 
 aUied lines. It manufactures many kinds of soaps for 
 family use, soap-chip for laundries, and lard com- 
 pound ; it deals in cotton-seed oil and in glycerine and 
 other by-products of its main productive processes. 
 For each class of products there is a sales organization 
 that is maintained separately from all the others. This 
 condition, however, is not typical of the manufacturing 
 field. In most factories there is a single selling organi- 
 zation, presided over by a single sales manager who is 
 responsible for the distribution of all of the products. 
 
 58. Sales manager. — In a manufacturer's organiza- 
 tion the official who is in charge of selling is almost 
 always called the sales manager. He is responsible 
 
MANUFACTURER'S SELLING ORGANIZATION 71 
 
 only to the owner or to the general manager. In a 
 small business he may be an active salesman as well 
 as a manager of salesri en, and he may personally exer- 
 cise detailed supervision over many of the activities that 
 would be under the inmiediate supervision of sub- 
 ordinates in a larger organization. In the case under 
 consideration he is purely an executive official. The 
 number of selling methods of which he has general con- 
 trol is so large that he has found it necessary to dele- 
 gate immediate direction of the different activities to 
 five officials who are called, respectively, superintendent 
 of salesmen, superintendent of branch-houses, superin- 
 tendent of agencies, superintendent of retail stores, and 
 mail-order manager. 
 
 59. Superintendents of different Mnds of selling 
 activities. — ^Whether sales are made to jobbers, retail- 
 ers, or consumers, or to any combination of these 
 classes of customers, the method of distribution by 
 salesmen is exceedingly conmaon in the manufacturing 
 field. Some official must be directly responsible for the 
 activities of the salesmen. If a great number of sell- 
 ing methods are employed, and if the sales manager, 
 consequently, can not give personal attention to all the 
 details of any one method of distribution, it is customary 
 to place the immediate supervision of salesmen in the 
 hands of a subordinate of the sales manager who may 
 be called the superintendent of salesmen. Such an 
 official, however, is seldom necessary. The salesmen 
 are usually so vital a part of the selling organiza- 
 tion, and the success of their activities is so largely 
 responsible for the success of the enterprise, that or- 
 dinarily the sales manager retains direct supervision 
 over them even when it is necessary to delegate direct 
 control of other selling agencies to subordinates. 
 
72 
 
 SELLING AND BUYING 
 
 60. Salesmen.— The chart does not differentiate be- 
 tween specialty salesmen and general salesmen. 
 Specialty salesmen are usually employed by a manu- 
 facturer under the same conditions that determine the 
 employment of specialty salesmen by a jobber. In 
 many factory sales organizations, even though a single 
 sales manager may be in charge of the sale of all lines 
 of goods that are produced, separate salesmen are as- 
 signed to the sale of each line. In other cases there 
 IS a combination of specialty and general salesmen, and 
 m still others general salesmen alone are depended on 
 to market all the goods. In all of these cases, however, 
 the place of the salesmen in the scheme of organiza- 
 tion is the same, and for that reason there is no dif- 
 ferentiation between the classes in the organization 
 chart. 
 
 61. Branch-houses.— The organization of each 
 branch-house may be as complex as that of the main 
 office itself. In other words, each branch-house may 
 have salesmen operating directly under its manager, it 
 may have supervision over other branch-houses, it may 
 seU to agents, operate retail stores, and have a mail- 
 order department. It is not customary, however, for a 
 branch-house to be engaged in all of these activities. 
 The typical branch-house functions are supervising 
 local salesmen and selling to local agents; and these 
 activities alone are indicated on the chart. 
 
 62. Agents— An agent is technically an independent 
 representative. He is usuaUy not on the manufac- 
 turer's pay roll and the manufacturer has only the most 
 general supervision over his activities. He is not in 
 reality an integral part of the manufacturer's selling or- 
 ganization. Accordingly in any business that dis- 
 tributes goods through agents it is not necessary to 
 
MANUFACTURER'S SELLING ORGANIZATION 73 
 
 trace the sales department organization further than 
 the agent. From the standpoint of the manufacturer 
 an article is finally disposed of when it is purchased by 
 the agent. For this reason the chart attempts no ex- 
 planation of methods of agency organization. The 
 agent's plan of selling organization may be that of a 
 manufacturer, jobber, or retailer, depending on the 
 market he is trying to reach and the seUing methods 
 he has adopted. 
 
 63. Manufacturer's retail »<ore».— Distribution of 
 goods through retail stores owned by the manufacturer 
 is not gene-il. It is frequent enough, however, to be 
 considered as one of the possible methods of market- 
 ing that is open to a manufacturer. If the manu- 
 facturer operates but one retail store, the superintendent 
 of retail stores and the retail store manager are the 
 same individual. If there are many stores, and if it 
 is not possible for the sales manager to give his at- 
 tention to the details of this method of distribution, it 
 is necessary to have a superintendent in charge of all 
 of the retail stores. The organization of each retail 
 store is practically the same as that of the retail store 
 organization that we have already considered. To be 
 sure, the merchandise manager does not purchase his 
 stock in the open market, but he has to make requisition 
 for it from the factory in accordance with his needs, 
 and in all essential particulars he has the same duties 
 as the selling head of a detached retail establishment. 
 
 64. Mail-order department — The mail-order depart- 
 ment is co-ordinate with the other selling departments. 
 It is one of the five outlets for the product of the 
 factory, and, therefore, is under the general control of 
 the sales manager. 
 
 65. Relation of sales and advertising departments. — In 
 
T4 SELLING AND BUYING 
 
 the consideration of retail and wholesale selling organi 
 zations we have indicated the close connection betweei 
 the advertising and sales departments. What has beer 
 said with regard to the relation between these depart- 
 ments in a retail or wholesale store applies to a manu- 
 facturer's organization as well. Commercial advertis- 
 ing is just as truly one form of selling as is direci 
 personal salesmanship. Whether the immediate pur- 
 pose of advertising is to create interest in the product, 
 to produce inquiries, or to bring in actual orders directly 
 from readers of the advertisements, the ultimate pur- 
 pose of all commercial advertising is solely to increase 
 the sale of the goods that are advertised. Logically, 
 therefore, there is no necessary distinction between the 
 sales and advertising department. This is the conten- 
 tion of many advertising men, who maintain that ulti- 
 mately the advertising manager and the sales manager 
 in every industry will be the same individual. This 
 condition, however, has not been realized as yet. Never- 
 theless the intimate relation between advertising and 
 seUing is generally recognized, although organization 
 methods differ in their attempt to express that relation. 
 Frequently the advertising manager is subordinate to 
 the sales manager. The disadvantage of this arrange- 
 ment is that advertising is such a specialized field of 
 endeavor that those who have not made a careful study 
 of it are not competent to pass judgment upon its 
 methods, and a general sales manager whose practical 
 experience has usually been entirely in the line of per- 
 sonal salesmanship is scarcely in a position to exercise 
 intelligent supervision over the details of advertising. 
 
 Advertising is most assuredly selling, and all the prob- 
 lems of distribution enter vitally into the problems of 
 advertising. In addition to these, however, advertising 
 
MANUFACTURER'S SELLING ORGANIZATION 75 
 
 has its own peculiar problems, which can be solved suc- 
 cessfully only by a man who has had professional train- 
 ing and experience in the great field of practical 
 jjublicity. When the business world produces a suffi- 
 cient number of executives of broad experience in all 
 phases of distribution, it will undoubtedly become cus- 
 tomary to consolidate the direction of advertising and of 
 other forms of selling in the hands of a single official. 
 Under present ccMiditions, however, in a suggestive plan 
 of sales department organization it seems wise to make 
 the sales manager and the advertising manager co- 
 ordinate in authority and responsible only to the owner 
 or general manager of the business. 
 
 66. Credit and traffic departments. — It is sometimes 
 contended that the credit and traffic departments are 
 essential parts of a manufacturer's selling organization. 
 The nature of the functions of these departments, how- 
 ever, does not justify this contention. Neither of them 
 is engaged primarily in the sale of goods, the one pur- 
 pose of the sales department. The credit man helps 
 to guard the manufacturer's profits by passing upon 
 the advisability of accepting sales that have already 
 been made. It is true that he should be a salesman, 
 because he has many opportunities to inject selling talk 
 into his letters to customers; and he should always con- 
 duct his activities with a view to advancing the sale 
 of goods so far as he can do so consistently with his 
 specific duties to his employer. His main purpose, 
 however, is not to make sales but to pass upon those 
 already made, and for that reason he has no logical 
 place in a strictly selling organization. 
 
 In like manner the traffic manager can do much to 
 assist the seUing force. By his knowledge of rates and 
 routes he can make it possible at times for the prod- 
 
76 
 
 SELLING AND BUYING 
 
 ucts of his employer to be sold at lower delivered 
 prices than the goods of competitors, and in his rela- 
 tions with customers he can do much to increase the 
 prestige of the house. His chief duties, however, do 
 not begin until the orders have been actually received. 
 It is his function to see that shipments are delivered in 
 the shortest possible time and at the lowest possible rate. 
 Accordingly the traffic manager is logically no more 
 subordinate to the sales manager than is the chief ac- 
 countant or the heads of any of the other non-selling 
 departments of the business. 
 
 67. Method of adapting the manufacturer's selling 
 organization chart— The manufacturer's sales organi- 
 zation that has been described is an ideal one. It is 
 based on the supposition that every possible means of 
 distribution is employed in marketing the product. 
 This condition seldom exists. Few manufacturers sell 
 to jobbers, retailers, and consumers alike; and most 
 of them use only a few of the possible methods of reach- 
 ing the market that they have selected. The organiza- 
 tion chart can be readily modified to suit any particu- 
 lar business. For instance, if the manufacturer does 
 not sell to consumers or retailers, as is the case with 
 most manufacturers of grocery specialties, the only 
 necessary change in the organization is the elimination 
 of the retail stores, the salesmen who sell to consumers 
 and retailers, and the machinery of the mail-order de- 
 partment designed to reach these classes of customers. 
 The relation between the remaining distributing factors 
 is unchanged. If a producer sells only to retailers 
 who act as his agents, the entire retail store and 
 mail-order sections of the chart may be eliminated, as 
 well as the salesmen who sell to jobbers and consumers. 
 In this manner the chart is capable of innumerable 
 
MANUFACTURER'S SELLING ORGANIZATION 77 
 
 I variations in its details. Whatever may be the extent 
 
 I of the alteration, however, there is no change in the 
 
 creneral principles of the organization. The effective 
 
 sales organization Is always based on the idea of definite 
 
 departmentation and graded delegation of authority. 
 
CHAPTER VII 
 
 METHODS OF SECURING CO-OPERATION BETWEEN 
 SELLING AND OTHER DEPARTMENTS 
 
 68. Necesrity of inter-departmental co-operation.— 
 We have already indicated the necessarily close rela- 
 tion that must exist between the sales department and 
 all the other departments of a business. The sale of 
 goods at a profit is the ultimate purpose of every or- 
 ganization, whether its primary purpose is the produc- 
 tioij^ of such goods, or whether it is concerned simply 
 with the distribution of articles that are produced by 
 others. Accordingly the efficiency of the sales depart- 
 ment IS a matter of great importance to every busi- 
 ness owner or manager. This efficiency can not reach 
 Its highest d velopment unless every department co- 
 operates with the selling orgam'zation in order to bring 
 about the most economical and successful administra- 
 tion of the sellmg activities. The intimate relation be- 
 tween the advertising and sales departments has been 
 frequently referred to. Although the connection is not 
 always so obvious, there is a similar relation between 
 the sales department and the departments in charge of 
 production, transportation, credit, accounting, office 
 routme, and all other phases of the activities of any 
 business establishment. 
 
 The development of co-operation between the sell- 
 ing and other departments can not be left to chance 
 Lnless an organization is composed of exceptional in- 
 dividuals, It seems to be natural for many of the em- 
 
 78 
 
METHODS OF CO-OPERATION 
 
 T9 
 
 ployes to work at cross purposes. Each department 
 naturally is concerned chiefly with its own interests; 
 and inter-departmental jealousy and lack of co-opera- 
 tion are unfortunately characteristic of many estab- 
 lisiiments, even when their organization is otherwise 
 highly developed and they have attained a large meas- 
 ure of success. 
 
 Three things are influential in bringing about the 
 necessary co-operation among the members of any de- 
 partment and among the different departments in a 
 business. They are as follows: 
 
 Tact 
 
 Profit-sharing 
 
 System 
 
 69. Use of tact in securing co-operation. — The prob- 
 lem is largely one of human nature, and wherever this, 
 factor is met, the solution certainly can not be found 
 by a resort to merely mechanical methods. The func- 
 tion of system in business is to secure the greatest re- 
 sults with the least expenditure of time and energy. 
 But no system, however well planned it may be or 
 however carefully installed, can be effective in accom- 
 plishing its purposes unless those who are affected by it 
 are in sympathy with it and are willing to co-operate 
 with all of their fellow employes who are concerned 
 with its operation. The human factor must always be 
 considered; and no mechanical means will ever be de- 
 vised that will take the place of tact in the equipment 
 of the successful business man. 
 
 Whatever other methods may be employed to secure 
 departmental co-operation, they must always be made 
 effective by the exercise of tact, A sales manager must 
 
HO 
 
 SELLING AND BUYING 
 
 ii 
 
 i^ 
 
 consider each of his suhordinates as an individual prob- 
 lem. He must study him, learn his strength and weak- 
 ness, discover his most approachable side — in short, he 
 must deal with him as a man and not as a machine. In 
 the same way, the executives of the sales department 
 must deal with the other members of the office and 
 factorj' organization. They must be courteous, patient, 
 open-minded, and with a regard for the opinions of 
 others. They must remember that while they may gain 
 their point by mere force of their authority, or by calling 
 into play the authority of the general manager or owner 
 of the business, every act of this sort will alienate the 
 support of their subordinates or associates, unless the 
 authority is exercised tactfully and with a regard for 
 the feelings of others. Tactless attempts to compel 
 co-operation, instead of solving the problem, only make 
 its ultimate solution more difficult. 
 
 It is obviously impossible to give practical directions 
 for the development of tactful relations within and 
 among departments. It is not a matter to be consid- 
 ered in the abstract, like organization methods or office 
 systems. It is something that pertains solely to the 
 individual. The only general directions concerning it 
 that are worth anything are those that urge the general 
 manager to eliminate from his organization any individ- 
 ual who does not exercise tact in his dealings with his 
 associates. A tactless salesman is an impossibility, and 
 a tactless sales manager does any business more harm 
 than good. If tact is displayed in the direction of sales- 
 men, it will also usually be found in the relation of the 
 selling officials to the other department heads in the 
 business. If it is nol found in these relations, the fault 
 can not be cured by any revised system or plan of re- 
 organization. The only cure is the elimination of the 
 
METHODS OF CO-OPERATION 
 
 81 
 
 individual who is incapable of working in harmony with 
 the other members of the force. 
 
 70. Profit-sharing to induce co-operation. — In any 
 lurjfe business, if there is lack of co-operation between 
 the departments, it is often due to the fact that the em- 
 ployes think more of the interests of their respective de- 
 partments than of the business as a whole. Having no 
 direct interest in the profits arising from the successful 
 conduct of the enterprise, each employ^ is likely to 
 think that what he conceives to be the advancement of 
 the interests of his department is the sole end toward 
 which he should strive, no matter how adversely such so- 
 called advancement may affect other departments. He 
 frequently fails to realize that any real departmental 
 success is dependent on the success of the entire busi- 
 ness. If controversy or friction arises with other de- 
 partments, he may be more concerned with proving his 
 own department in the right than with the ultimate ef- 
 fect of the controversy upon the owner's profits. 
 
 Where this condition exists, one method of removing 
 the difficulty is to give the employes a share in the 
 profits. Profit-sharing, with this purpose in view, is 
 l)ecoming increasingly popular in all branches of indus- 
 try. It is used most frequently in manufacturing es- 
 tablishments and in retail stores, but wholesale houses 
 also are beginning to realize its possibilities and to inau- 
 gurate profit-sharing in some form among their em- 
 ployes. Profit-sharing is a generic term used here to 
 refer to all methods by which employes are given a 
 financial interest in the business, in addition to their 
 regular remuneration. It may be in the form of a 
 division among the employes of a certain predeter- 
 mined portion of the profits; it may be in the form of 
 conditional salaries dependent on the profits made, 
 
 1II-6 
 
8!2 
 
 SELLING AND BUYING 
 
 ) 
 
 ownership of stock by employes, cash bonuses for ex- 
 ceptional results, or other modifications of the general 
 principle. 
 
 In many cases profit-sharing undoubtedly increases 
 co-operation among the various departments. Theo- 
 retically the different officials and minor employes will 
 willingly subordinate their individual desire and in- 
 clinations and work harmoniously for the common good 
 if that course will be to their immediate financial advan- 
 tage. Practically the beneficial results are not always 
 as great as might be expected, because human nature 
 is such that it is hard for any individual to distinguish 
 the greater good from his own immediate interests, and, 
 even when this is possible, a small share in increased 
 profits to be distributed twelve months hence is likely to 
 be of less importance than the satisfaction derived from 
 making a personal point in a controversy. Despite the 
 practical qualifications of the theoretical benefits of 
 profit-sharing, however, the plan works well. Particu- 
 larly in the case of higher officials whose share in the 
 profits is large, it has been found in many cases to in- 
 crease materially the willingness of department heads to 
 eo-operate for the advancement of the common good. 
 
 71. Committee system as an aid to co-operation. — 
 The third method of promoting co-operation between 
 the selling and other departments is the use of some sys- 
 tem whereby the managers of departments are forced to 
 confer about the matters that concern them in common. 
 By being given an opportunity to express their own 
 views and to leam at first hand the opinions of others 
 who are equally interested in the matters under dis- 
 « ussion, and by being given a large measure of responsi- 
 bility for the decisions on important questions, they are 
 likely to lose their narrow departmental points of view 
 
METHODS OF CO-OPERATION 
 
 83 
 
 and to think more of the interests of the business as a 
 whole. 
 
 The committee system is one of the best methods that 
 lias been devised for securing the beneficial results of 
 departmental co-operation. It is not a new thing; it 
 has been advocated and practiced successfully for sev- 
 eral years by ma'iy managers of industrial plants. It 
 lias been proved immensely effective in securing the co- 
 operation of factory foremen; and it is just as 
 effective when it is used to secure the co-opera- 
 tion of the higher employe. An important reason 
 for the lack of co-operation is the frequent failure of one 
 department manager to get the point of view of an- 
 other — to know his problems, and to look at the business 
 from the standpoi^it of his position. If the two depart- 
 ment heads can be brought together to consider frankly 
 the various aspects of any question on which they may 
 hold different oi>inions, they are very likely to alter 
 their original attitudes and to reach a conclusion that 
 is satisfactory to both. In many organizations, of 
 course, there are voluntary conferences of this sort, and 
 the several department managers are glad to listen to 
 the opinions of others and to profit by the general dis- 
 cussion. When there is no systematic provision for con- 
 ferences, however, the managers are too often unwilling 
 to go into them voluntarily, and jealousy and lack of 
 intercourse are too often the rule instead of co-opera- 
 tion and mutual helpfulness. 
 
 The committee system can be used by manufacturers, 
 wholesalers, and retailers. The principles under- 
 lying its successful operation are the same in all cases, 
 and it is not necessary, therefore, to consider its applica- 
 tion in detail to each of these three classes of business. 
 ^Manufacturers' organizations, however, have probably 
 
84 
 
 SELLING AND BUYING 
 
 applied it most effectively, and for that reason we shall 
 present its principal features in connection with such an 
 organization. The manufacturing industry that we 
 shall consider for the purpose of illustration has a highly 
 developed sales department. The territory in which its 
 products are sold is divided into three divisions with a 
 division sales manager in charge of each. The division 
 sales managers all make their headquarters at the main 
 office of the company. They are in reality assistant 
 sales managers, co-ordinate in authority, and directly 
 subordinate to the general sales manager of the organi- 
 zation. In this company the advertising department is 
 of great importance, and the advertising manager is not 
 responsible to the sales manager, but is equal in au- 
 thority with him. Diagram IV on page 85 illustrates 
 the application of the committee system to the office 
 organization of the company. 
 
 72. Executive committee. — In general, this system in- 
 volves the grouping of department heads into a series 
 of committees, in each of which the majority vote, on 
 matters brought before the committee, prevails against 
 the opinion of any dissenting member. The highest au- 
 thority is vested in the executive committee of the cor- 
 poration, which is composed of the corporate officers. 
 As is frequently the case, each of these officers has a 
 definite function in the active affairs of the company. 
 The president is the active executive head of the busi- 
 ness, with general supervision over all departments. 
 The vice-president is the general manager, with imme- 
 diate control over the productive end of the company's 
 activities. The treasurer is the superior officer of the 
 cashier, auditor, office -manager, credit man, and statisti- 
 cian. The secretary is the general sales manager, and 
 the assistant secretary is the advertising manager. 'It 
 
86 
 
80 
 
 SELLING AND BUYING 
 
 is evident, therefore, that the three principal depart- 
 ments of the corporation — production, marketing, and 
 the office organization — are represented on the execu- 
 tive committee. This conmiittee meets daily. Every 
 action of any of the other committees is subject to its 
 approval or veto. If a matter comes to the executive 
 conmiittee after favorable action by the advertising com- 
 mittee, for example, it is naturally defended in the ex- 
 ecutive committee by the advertising manager; and if it 
 comes from the factory committee, it usually is pre- 
 sented by the general manager. In like manner, the 
 sales manager ordinarily represents the sales committee 
 in matters that go to the executive committee, and the 
 conclusions of the office committee are presented by the 
 treasurer. 
 
 The executive committee may do one of three things 
 with any matter that has been approved by a subordi- 
 nate committee: it may approve the recommendation 
 and order it to be put into effect immediately; it may 
 disapprove it and order it back to the subordinate com- 
 mittee for further consideration; or it may finally veto 
 the recommendation. Of course, the executive com- 
 mittee also originates many measures. It is the govern- 
 ing body of the corporation, and it is responsible only 
 to the directors and ultimately to the stockholders. 
 
 Often the executive committee of a corporation has 
 only perfunctory duties. This is usually the case when 
 many of the officers are not active in the direction of the 
 company's affairs. When the officers do hold responsi- 
 ble positions in the organization, however, the executive 
 committee as an active governing body offers extraordi- 
 nary opportunities for the development of co-operation 
 among the officers. Even when one or two officers hold 
 most of the stock and are unwilling to permit important 
 
METHODS OF CO-OPERATION 
 
 87 
 
 matters to be decided finally by a majority vote of the 
 executive committee, it is entirely feasible to require the 
 committee to pass upon all matters affecting the busi- 
 ness as a whole. The president may reserve the power 
 to veto the committee action, but the free interchange of 
 ideas in the committee meetings will be productive of 
 co-operative effort and a common sympathy with the 
 view points of the various departments, which can be 
 secured in no other way. 
 
 73. Factory committee. — In the organization that 
 we are considering, the factory committee is composed 
 of the general manager, the factory superintendent, and 
 the general sales manager. The organization of this 
 committee, like that of all the other conmiittees, may 
 vary in individual cases, but it is of the greatest impor- 
 tance that its membership should always include a rep- 
 resentative of the sales department. All matters af- 
 fecting out-put should be considered from the selling 
 standpoint as well as from that of the factory engineer. 
 The presence of the sales manager on the committee 
 gives the factory officials an opportunity of securing 
 the seUing point of view, and is largely instrumental in 
 eliminating the unfortunate lack of sympathy between 
 the production and sales departments that is altogether 
 too common in manufacturing industries. 
 
 In the case of most factories there are very few weeks 
 during the year in which the orders and the out-put are 
 exactly equal. In dull times the warehouses fill up 
 with the product, and the factory thinks the sales depart- 
 ment is not doing its utmost to take care of the produc- 
 tion. When business is exceptionally good, the sales 
 department is often unreasonable in its demands upon 
 the factoiy for increased out-put far beyond the normal 
 or possible rate. A factory committee, on which there 
 
88 
 
 SELLING AND BUYING 
 
 i 
 I 
 
 IS a representative of the sales department, obviates this 
 rmituul misunderstanding and enables each of the two 
 chief branches of the business to realize that the other is 
 domg its best at all times. 
 
 74. Saks committee,— The sales committee is com- 
 posed of the general sales manager, the three division 
 sales managers, and the advertising manager. In this 
 particular organization no departments are represented 
 on the sales committee except those that have to do 
 directly with distribution. The same result that would 
 be secured by representation of other departments on 
 the sales committee is realized by the presence of repre- 
 sentatives of the sales department on aU the other im- 
 portant committees. 
 
 The working of the principle of majority rule is well 
 illustrated in the case of the sales committee. Theoreti- 
 cally the three division sales managers are subordinate 
 to the general sales manager. Nevertheless all four of 
 these officials meet in the committee room on an abso- 
 lutely equal footing. Suppose, for example, that the 
 western division sales manager wants a special price on 
 some product for a certain group of towns in his division. 
 The eastern and central division managers agree with 
 him that this price is advisable. They can not, how- 
 ever, convince the general sales manager that they are 
 right. When the matter is put to vote, it may have the 
 approval of all the members of the committee except 
 the general sales manager. Despite his disapproval, it 
 goes to the executive committee for final action, bearing 
 the formal approval of the sales committee. 
 
 In the case that we are considering, the sales com- 
 mittee meets daily, and every selling subject, unless it is 
 of a merely routine character, is brought up before all 
 the members for discussion. The minutes of their meet- 
 
METHODS OF CO-OPERATION 
 
 89 
 
 ings are read by the executive committee, and the recom- 
 mendations of the sales committee are either approved 
 or vetoed or sent back to the committee for further con- 
 sideration. If the sales committee recommends ^ cam- 
 l)aign that involves advertising, the character and ad- 
 visability of the advertising must be passed upon by the 
 advertising committee before the matter goes before the 
 executive conunittee. 
 
 75. Advertising committee. — ^The advertismg com- 
 mittee is composed of the advertising manager, the 
 treasurer, and the general sales manager. This com- 
 mittee initiates advertising ideas, and acts in general as 
 an advisory council for the advertising manager, pass- 
 ing upon his work, and aiding him in every way possi- 
 ble. Its important recommendations must be passed 
 upon by the sales committee before they go to the ex- 
 ecutive committee. In matters of advertising details, 
 however, it takes action without reference to the sales 
 committee, and subject only to the approval of the exec- 
 utive conunittee. 
 
 76. Office committee. — The office committee is made 
 up of the department heads who have supervision over 
 the routine of the office — entering of orders, accounting, 
 credit matters, correspondence, billing, etc. In these 
 activities the unfortunate results of the lack of system 
 and co-operation are most frequently evident, and it is 
 particularly important, therefore, that the office com- 
 mittee be carefully organized and that its members co- 
 operate with each other in all matters that affect them 
 in common. The sales department is represented on 
 this committee by one of the division sales managers, be- 
 cause of the interest of the sales department in seeing 
 that the orders, inquiries, and complaints of its customers 
 are given the careful attention that they deserve. This 
 
90 
 
 SELLING AND BUYING 
 
 H 
 
 representation is also helpful because of the necessity 
 of harmonizing the routine work of the sales departmen 
 with the office system of the rest of the organization. 
 
 77. Variations in system. — In addition to the com 
 mittees that have been described, many corporation 
 have one inclusive body that may be called the committe< 
 of principal employes. It is composed of all the de- 
 partment heads in the business. Its meetings may U 
 irregular, but it is a most effective means of getting to 
 gether the chief members of the organization and instill- 
 ing into them the idea that individual success can b< 
 achieved only by co-operative effort toward the success 
 of the business as a whole. 
 
 This system of committee organization is suggestive 
 rather than typical. The personnel and duties of the 
 various committees differ greatly in the different organ- 
 izations in which the committee system is used to promote 
 co-operation. In every organization the sales depart- 
 ment may not be given the commanding position that it 
 occupies in the case that has been described. Its im- 
 portance, however, justifies this position. There is 
 scarcely any activity of a business that does not have 
 some effect upon the sale of goods, and for that reason 
 a representative of the sales department should hold 
 membership in each of the important committees. 
 
 78. Practical results of committee system. — One ob- 
 jection that is sometimes urged against the committee 
 method of s'icuring departmental co-operation is that its 
 operation is more likely to result in profitless discus- 
 sions than in faciUtating the transaction of business. 
 It is true that when men are given the opportunity to 
 air their -news before others, there are always certain 
 individuals who take delight in talking rather than in 
 acting, and who endeavor to secure personal prestige in 
 
METHODS OF CO-OPERATION 
 
 Dl 
 
 wordy debates. It is the duty of the chairman of each 
 committee, however, to see that the discussions are perti- 
 nent and that they are directed along the most profitable 
 lines. When the conmiittee meetings are properly con- 
 trolled, the advantages of the system far outweigh its 
 possible disadvantages. The committee system is not 
 always necessary or advisable in a small organization 
 in which the department heads naturally come into suf- 
 ficient daily contact with each other without enforced 
 attendance at committee meetings. But when the 
 organization is of a character that precludes the possi- 
 bility of natural daily contact, the committee system has 
 been proved to be of immense value in the devetopment 
 of departmental co-operation. 
 
CHAPTER VIII 
 
 THE SALES MANAGER 
 
 79. Purpose of selling campaign.— The selling cam- 
 paign is simply the practical utilization of the selling 
 methods that have been adopted and the selling organi- 
 zation that has been developed. The problem of the 
 campaign, therefore, is the problem of how to make the 
 most effective use of marketing methods and sales de- 
 partment organization. One factor in the solution of this 
 problem has already been considered — the development 
 of methods of insuring inter-departmental co-operation 
 so that the efforts of the selling force will not be nullified 
 by the conflicting purposes of the other departments. 
 The other and the more important factor in the solution 
 of the problem is the development of the sales depart- 
 ment itself to the highest possible degree of efficiency. 
 
 In this development the fundamental principles are 
 always the same, whether the problem is considered with 
 particular reference to the activities of a retailer, a job- 
 ber, or a manufacturer. Of these three classes the re- 
 tailer has the least difficult problem, because of his com- 
 pact organization and his usually localized trade. The 
 chief problems that he has to solve in the development 
 of the efficiency of his selling organization are largely 
 included in the problems of the jobber and the manu- 
 facturer, and, in addition, the jobber and the manu- 
 facturer have peculiar problems of their own that the 
 retailer ordinarily does not have to meet. In like man- 
 ner, the problems of the jobber are included in those of 
 
 92 
 
THE SALES MANAGER 
 
 96 
 
 the manufacturer, and, in addition, the manufacturer 
 with a wide distribution of his products must solve cer- 
 tain problems that are not usually encountered by the 
 utlier classes of distributers. 
 
 Because of this inclusive nature of the problems of the 
 manufacturer in developing the efficiency of his selling 
 organization, our consideration of the selling campaign 
 will have particular reference to the situation of a manu- 
 facturer whose products have national distribution and 
 whose methods are typical of the activities of modern 
 large-scale manufacturing industries. It should be 
 i)()rne in mind, however, throughout the discussion, that 
 many of the manufacturer's methods are applicable as 
 well to the solution of the problems of retailers and 
 jobbers, and that the fundamental principles of selling 
 efficiency are universal throughout the entire merchan- 
 dising field. 
 
 80. Two chief factors in selling campaign. — ^We 
 have seen that the many variations in sales department 
 organization make it impossible to consider any par- 
 ticular organization in all its details as typical of any 
 class of distributers. There is one feature of selling 
 organization, however, that is so general that it can 
 fairly be considered as typical. This feature is the su- 
 penision of a number of salesmen by some one whose 
 duties are those of a sales manager. The supervisor of 
 salesmen may be the proprietor, the general manager, 
 the merchandise manager, the superintendent of sales- 
 men, or he may be an assistant to any of these officials. 
 His title and general functions are inmiaterial. If his 
 duties include the supervision of salesmen, however, he 
 is properly a sales manager in the sense in which that 
 term is usually understood, and he is to be so consid- 
 ered in any discussion of selling campaigns. This sug- 
 
<.)k 
 
 SELLING ANlJ BUYING 
 
 gested elementary selling organizatiiNi does not apply to 
 the case of the manufacturer or dealer who reaches his 
 market exclusively through the mail-order method of 
 distribution. The strictly mail-order houses, however, 
 are relatively few in number, and in their case the effi- 
 ciency of the selling organization is synonymous with 
 the efficiency of the advertising department. Accord- 
 ingly their problems are not within the scope of our 
 present discussion. 
 
 Because the common form of selling organization is 
 that in which a sales manager directs the work of several 
 salesmen, we shall consider the problem of developing 
 sales department efficiency first from the standpoint of 
 the sales manager, and then from the standpoint of the 
 salesmen themselves. 
 
 81. Qualifications of a sales manager. — There are four 
 general qualifications of a successful sales manager — he 
 must have all the qualifications of a successful salesman, 
 he should have had actual experience in selling, he must 
 possess executive ability of a high order, and he must 
 have complete knowledge of the business and be able to 
 use that knowledge successfully in promoting the effi- 
 ciency of the selling organization. 
 
 There is an established principle, which is only empha- 
 sized by the few exceptions to it, that no one can suc- 
 cessfully direct others in any activity in which he him- 
 self does not excel. Certainly the most successful sales 
 managers are drawn from the ranks of successful sales- 
 men, and it is perfectly proper that this should be so, 
 for two reasons. In the first place no executive can 
 fully appreciate the problems of personal salesmanship 
 or be able to give assistance in their solution unless he 
 has faced the same situations that the salesmen have to 
 face in their daily work. In the second place, even if it 
 
THK SAl.l'.S MANACIKU 
 
 95 
 
 were i>oMible for a sales manager to secure a thorough 
 knowledge of salesmanship without any actual expe- 
 Hence in^he field, he would have difficulty m msp.rmg 
 confidence in his ability among the members of the sell- 
 ing force if they did not know that his instructions were 
 baL upon wide experience and an intimate knowledge 
 of the details of their activities. The qualifications of a 
 successful sales manager that are ^^^f ^^^J^" 
 nualities of any successful salesman will be ~n« fered 
 „ a subsequent chapter. For the present we shall con- 
 sider only those qualifications that d.fferentjate hmi 
 from the salesmen who have not managerial ability. 
 These are, in general, executive ability and a detailed 
 knowledge of the business. It is by developing these 
 qualities to the utmost that he can be of the greatest serv- 
 iee in increasing the efficiency of the selling organiza- 
 
 *'°To the extent that the sales manager has a part in the 
 determination of policies and the development of plans 
 for the general advancement of the business, he must 
 have the qualities that are essential in any executive of- 
 ficer He must be broad-minded, unaginative, tar- 
 sighied. shrewd, logical, and determined. We are not 
 so much concerned with this phase of his activities how- 
 ever, as with his control over the members of the selling 
 force. In his capacity of director of salesmen he must 
 endeavor to reach the maximum efficiency m each of the 
 three following classes of his general duties: 
 
 1. Selection of salesmen 
 
 2. Training of salesmen 
 
 8. Supervision of salesmen 
 
 82. Sekction of saUsmen.-Atter the selection of 
 selling methods and the determination upon a plan of 
 
96 
 
 SELLING AND BUYING 
 
 sales department organization, the first executive duty 
 of a sales manager is the selection of his selling force. 
 Success in this depends on a knowledge of human na- 
 ture. JSIany sales managers are unable to analyze their 
 reasons for the acceptance or rejection of a candidate for 
 a position on their force; they apparently decide for or 
 against a man by whim, but if they are fortunate in 
 their selections, they unconsciously apply their knowl- 
 edge of what a salesman must and must not be. Be- 
 cause a knowledge of human nature is the most impor- 
 tant factor in determining the fitness of an applicant for 
 a position as salesman, it is impossible to lay down rules 
 for the guidance of the sales manager in this difficult 
 field of his activities. There are, however, a number of 
 more or less mechanical means of finding out certain im- 
 portant things about an applicant, and these the sales 
 manager can use to determine the advisability of grant- 
 ing a personal interview or to assist him in "sizing up" 
 the candidate who may have made his application in 
 person. 
 
 83. System as an aid in selection. — ^Every business 
 house that has a large selling organization is constantly 
 receiving applications from people who want to enter 
 its employ as salesmen. The number of these applica- 
 tions necessitates the adoption of some system to insure 
 the promising candidates' being given a chance to dem- 
 onstrate tlieir ability and to weed out those whose per- 
 sonalities or records do not entitle them to further con- 
 sideration. INIost large houses have a printed foi-m of 
 application which every applicant for a selling position is 
 required to fill out, usually before an interview is 
 granted. The application form may require the ap- 
 plicant to give such items of information as the fol- 
 lowing: 
 
THE SALES MANAGER 
 
 97 
 
 Name. 
 
 Address. 
 
 Age. 
 
 Married or single? 
 
 Name, address, and business of present employer. 
 
 Capacity in which applicant is employed. 
 
 Present salary or yearly commissions. 
 
 Reason for wishing to leave present employment. 
 
 Is applicant willing to have present employer communicated 
 
 with? 
 Territory in which applicant has had selling experience. 
 Has he sold goods to consumers, retailers, or jobbers? 
 Is any particular territory desired? 
 Will any other territory be considered? 
 When can applicant begin work? 
 Does he use intoxicating liquor? 
 
 In addition to information of the above character, the 
 candidate is usually required to give a full history of his 
 past business connections. He may be asked to give 
 the following data about each position he has held : exact 
 dates covering the period of employroent ; name, ad- 
 dress, and business of employer, and capacity in which 
 the applicant served ; name and present address, if it can 
 be given, of his immediate superior officer; reason for 
 leaving the position. The applicant is also asked to 
 give the names and addresses of several responsible in- 
 dividuals who are in a position to give information re- 
 garding his character and general fitness for the position 
 for which he is applying. When an application form 
 has been filled out, it comes to the attention of the sales 
 manager or his assistant. If the experience of the ap- 
 l)licant makes further consideration advisable, and if 
 his answers to the questions are satisfactory, letters are 
 then sent to his personal references and to as many of 
 
 III— 7 
 
98 
 
 SELLING AND BUYING 
 
 his former employers as it may seem necessary to com- 
 municate with. Printed forms are sometimes r.sed for 
 this purpose, with definite questions and spaces for 
 answers. When this is done, the questions may be of 
 the following nature : 
 
 How long have you known the applicant? 
 
 Are you related to him in any way? 
 
 Has he worked under your supervision, and, if so, in what 
 capacity? 
 
 Were his duties satisfactorily performed? 
 
 Is he honest — — energetic has he initiative does 
 
 he obey orders? 
 
 Have you ever heard of his using intoxicating liquors to 
 excess ? 
 
 Do you consider him fully qualified for a position as sales- 
 man with this house? 
 
 Please give any further information concerning the applicant 
 that may assist us to determine his fitness for our work. 
 
 When replies are received from all the references, 
 they are attached to the original application form, and 
 the entire file once more comes to the attention of the 
 sales manager, who must determine whether the appli- 
 cant is to receive fuither consideration. If there is any- 
 thing unsatisfactory about the applicant's character or 
 record, he is usually advised that the house has no posi- 
 tion that they could offer for his consideration. If his 
 papers are satisfactory, one of two things may happen. 
 There may be no vacant position at the time, and in that 
 event he is so informed, but he is also told that his appli- 
 cation has been favorably considered, that it will be 
 placed on file, and that if a suitable opening develops, it 
 will be brought to his attention at the proper time. In 
 the event that a position is vacant when the application 
 
THE SALES MANAGER 
 
 99 
 
 is received, the candidate whose papers have made a 
 favorable impression is ahnost invariably requested to 
 call for a personal interview. 
 
 The written statements of the candidate regarding his 
 own qualifications, and the statements < l those with 
 whom he has had business and personal relations, are 
 important and helpful in assisting the sales manager to 
 reach a decision regarding his fitness, but they are ordi- 
 narily not to be relied upon exclusively in determining 
 his availability for an important position. Sale^sman- 
 ship must always be largely a matter of personality, and 
 j)ersonality is something that most sales managers insist 
 upon judging for themselves. 
 
 84. Personal interview. — In the personal interview 
 the sales manager can not rely on rules or mechanical 
 means for judging the candidate's fitness. The strength 
 and weakness of the applicant must be brought out by 
 skillful questioning, and the main reliance of the sales 
 manager must be upon his ability to judge human na- 
 ture — an ability which is so large a part of the equip- 
 ment of every successful executive. As far as possible 
 he must ascertain whether th». candidate possesses the 
 (jualifications essential to successful salesmanship. These 
 are to be considered in a subsequent chapter. Some of 
 them can not be discovered in an interview and are dis- 
 ])layed only in the actual work of the salesman, while 
 the presence or absence of others can be discerned by the 
 experienced sales manager in his conversation with the 
 Jipplicant. What may be termed the external charac- 
 teristics that may enter into a manager's judgment of a 
 candidate for a selling position are noted in the follow- 
 ing sections. 
 
 85. Appearance. — There are two factors in appear- 
 ance — clothes and physical characteristics. It is said 
 
100 
 
 SELLING AND BUYING 
 
 that salesmen as a class are better dressed than any other 
 group of business men. They have to be; their busi- 
 ness demands it. They are constantly trying to in- 
 fluence others. When a sale must be effected in a short 
 time or not at all, the influence of the salesman depends 
 partly on the first impression that the buyer receives of 
 him, and clothes are an exceedingly important factor in 
 first impressions. Then, too, the buyer unconsciously 
 judges the principal by his representative. Good 
 clothes indicate prosperity, and the employer certainly 
 wants his representatives to create the impression that 
 the business is prosperous. For these and other reasons, 
 a shabby salesman is an anomaly. If a salesman ap- 
 preciates the relation between good clothes and success 
 in his calling, it will be apparent to the sales manager 
 when he interviews the applicant ; and if a man does not 
 present a neat and attractive appearance at a time so im- 
 portant as when applying for a position, he certainly 
 will not do so when he is out "on the road." The sec- 
 ond factor in appearance is physical characteristics. 
 Ill-health, intemperance, over-indulgence in any form, 
 and the other physical characteristics that are fatal to 
 success in salesmanship, leave their imprint upon the 
 features and general appearance of a man. The sales 
 manager should know the sure signs of such character- 
 istics, and he should use the personal interview to deter- 
 mine whether or not they are present in the applicant. 
 
 86. Conversational ahility. — A salesman must be able 
 to express his ideas tersely and convincingly. If an 
 applicant for a selling position is not able to sell bis own 
 services by his "selling talk," he ought not to be trusted 
 to sell merchandise. 
 
 87. Force. — General information and intelligence. — 
 A successful salesman must be forceful, and able to im- 
 
THE SALES MANAGER 
 
 101 
 
 press the customer by his magnetism. This is a quahty 
 that can be readily ascertained in a personal mterview. 
 The sales manager should direct the conversation into a 
 variety of channels to the end that he may ascertain the 
 applicant's breadth of view. The salesman who knows 
 Ills line and nothing more is not a high-grade man. The 
 most successful salesman is the one who is capable of ap- 
 proaching a customer from his "blind side"— that is, 
 gaining a customer's confidence by showing an intelli- 
 gent interest in that which particularly interests him. 
 
CHAPTER IX 
 
 METHODS OF TRAINING SALESMEN 
 
 88. Training of salesmen. — After the salesmen have 
 been selected, they must be trained in the methods that 
 the sales manager wishes them to use. The training of 
 salesmen is the second important branch of a sales 
 manager's duties in which he must perfect himself in 
 order to raise the efficiency of the sales department to 
 the highest possible point. This training varies widely 
 in different cases. The man who has had successful 
 selling experience does not need the elementary training 
 in the principles of salesmanship that the novice re- 
 quires. Likewise if the article to be sold is simple in 
 construction and use, the necessary familiarity with its 
 iselling points and their proper presentation can be ac- 
 quired more easily and quickly than would be possible 
 if the article was more complicated and difficult of pres- 
 entation. For instance, the average salesman with 
 selling experience would require less training to enable 
 him to sell laundry soap than to sell such a complicated 
 piece of mechanism as an adding-machine. 
 
 Then too there are wide variations in the degree to 
 which sales managers realize the possibilities of training 
 for their selling force. There are still some sales mana- 
 gers who think that the only equipment a new salesman 
 needs is "a sample case, a route list, and the parting in- 
 junction to keep down his expense account," as some 
 one has aptly expressed it. It is needless to say that 
 this method is not the one that makes for the greatest 
 
 102 
 
METHODS OF TRAINING SALESMEN 103 
 
 efficiency in the selling organization. The modern 
 method is to train the machinery salesman, for example, 
 as carefully as the man who makes the machines. Com- 
 petition has become so severe in all lines, advertising has 
 so generally educated the public with respect to proc- 
 esses, prices, and quality, that goods can no longer be 
 sold simply on the personality of the salesman. Special 
 training for his work is now generally recognized as be- 
 ing necessary. 
 
 In order to present all the possible methods of train- 
 ing salesmen, we shall consider a program that is de- 
 signed to give to a man who has not had any selling 
 experience, but who has the necessary natural qualifica- 
 tions, the training that is needed to enable him, with 
 reasonable hope of success, to undertake the sale of an 
 article that requires extensive study and thorough knowl- 
 edge on the part of the salesman. It is the duty of the 
 sales manager to provide this training, either in person 
 or by the aid of assistants, and upon the success of his 
 efforts the efficiency of the selling organization will 
 largely depend. The complete training that is required 
 in the case to which reference has been made, may be 
 divided into three parts: 
 
 1. Training in principles of salesmanship. 
 
 2. Training in construction and uses of the article to 
 
 be sold. 
 
 3. Training in special selling methods that are pecul- 
 iarly applicable to the article. 
 
 89. Training in principles of salesmanship. — Sales- 
 manship is as old as the human need for acquiring some- 
 thing possessed by another. We do not know at what 
 period in the progress of the race each individual or fam- 
 ily ceased to be wholy independent of others, but it is 
 certain that barter or exchange is one of the oldest of 
 
104 
 
 SELLING AND BUYING 
 
 human activities. There is, therefore, something that 
 might be called a trading instinct innate in almost every 
 one. Until a comparatively few years ago it was con- 
 tended that if this so-called selling instinct was suffi- 
 ciently strong in a man, he could become a good sales- 
 man witli no other training than that obtained in the 
 school of experience ; and that no one else could hope for 
 success in selling. The opponents of the modern idea 
 that there is a science of salesmanship maintained that 
 "a salesman is born and not made." They pointed out 
 that the world's goods had been sold for many centuries 
 without any attempt at scientific selling education, and 
 held that this was sufficient proof of the futility of in- 
 troducing any innovations in a world-old vocation. 
 
 But even though a man may be born with a certain 
 tendency, it does not follow that he can not develop his 
 natural bent by proper schooling. This is the position 
 of the advocates of scientific selling. They admit that 
 success in salesmanship depends partly on the posses- 
 sion of certain natural endowments, but they insist 
 rightly that it also depends, and to a far greater extent, 
 on the degree to which these endowments are developed. 
 This development may come through experience alone, 
 or it may come throuc^h training i^receding the expe- 
 rience. Formerly experience was the only school of 
 salesmanship. Its advocates tried to prove its efficiency 
 by pointing to the success of its pupils. It has never 
 been proved, however, that any salesman, no matter how 
 successful, could not have been more successful if he had 
 had the advantage of special training in his profession. 
 
 The old method of leaving every salesman to find 
 himself without assistance from others was tolerable in 
 a day when competition was not as fierce as it is now. 
 It is intolerable under present conditions, because it is 
 
METHODS OF TRAINING SALESMEN 105 
 
 distinctly wasteful. An inexperienced, untrained sales- 
 man is bound to make mistakes that are costly for his 
 employer. If some of these mistakes* can be avoided 
 by giving him training in the principles of salesman- 
 ship before he is permitted to face actual customers, it is 
 certainly to the financial advantage of his employer to 
 •rjve him this training. 
 
 The possibility of training in the art of selling is 
 dependent on the fact that there is a science of salesman- 
 ship. Science is merely organized knowledge. There- 
 fore the science of salesmanship is the logical arrange- 
 ment of the things that are known about selling. In 
 training his salesmen in the principles of salesmanship 
 the sales manager must draw from his own experience 
 and from the experience of others the facts and princi- 
 ples that are generally recognized as fundamental in 
 selling, and he must present this material in logical, 
 organized form. The number of things that are known 
 about the psychology and practice of selling are con- 
 stantly increasing. The literature of salesmanship is 
 growing rapidly. The possibility of giving practical, 
 definite instruction in selling has been proved. The 
 progressive sales manager takes advantage of all the 
 methods of instruction that modern investigation and 
 interest in the subject of salesmanship have developed 
 for him, and he rightfully considers that no part of his 
 duties is of more value in increasing the efficiency of his 
 organization than his share in the education of the sales- 
 men in the principles that are fundamental in their 
 
 work. 
 
 90. Training in construction and uses of goods to be 
 sold, — The second branch of the trp-ning that the mod- 
 ern sales manager provides for his salesmen is in the 
 construction and uses of the article or articles that are 
 
106 
 
 SELLING AND BUYING 
 
 to be sold. Manufacturers of cash registers do not send 
 out new salesmen until they are i)erfectly familiar with 
 every important detail in the construction of the machine, 
 until they are skilled in its operation, and until they 
 know all the uses to which it may be put. Manufac- 
 turers of automobiles insist that their salesmen shall have 
 an absolute knowledge of the car they are to sell before 
 they are permitted to approach possible purchasers. 
 Goods are sold now-a-days not so much because the 
 salesman has an attractive personality as because the 
 salesman is able to prove that it would be to the buyer's 
 advantage to purchase them, and it is obvious that the 
 salesman can be successful only by knowing every de- 
 tail about the goods that could have any possible bearing 
 on their utility to the purchaser. 
 
 A selling talk is simply a skillful arrangement of seU- 
 ing points, and selling points are simply the things 
 about the goods that the salesman thinks are of interest 
 to the "prospect." Knowledge of his line is one of the 
 fundamental qualifications of the successful salesman. 
 Unless he is given opportunity to acquire this knowl- 
 edge before he faces actual customers, his efforts are 
 certain to be less successful than complete knowledge 
 from the start would have made them. 
 
 91. Three methods of training salesmen. — There are 
 three methods by which a sales manager can provide 
 training for his salesmen in the goods they are to sell. 
 The method that he selects depends on the nature of the 
 goods and the extent to which he is willing to invest 
 capital in the salesman's education before the salesman 
 is actually set to work. The three methods are as fol- 
 lows : 
 
 1. A conference or series of conferences between the 
 sales manager and the salesman, in which the construe- 
 
METHODS OF TRAINING SALESMEN 
 
 107 
 
 tion and selling points of the article to be sold are care- 
 fully considered in all their aspects. This verbal in- 
 struction may or may not be supplemented by printed 
 descriptions of the article and its selling points. 
 
 2. A visit to the factory so that the salesman can 
 actually see the article in process of production, and 
 learn at first hand the quality of the constituent ele- 
 ments and of the final product. 
 
 3. A period of actual employment in the factory for 
 the new salesman, so that he may become familiar with 
 every part and process. 
 
 92. Employment in the factory best method. — Of 
 these three methods the last is obviously the most thor- 
 ough and far-reaching in its results. It has such 
 marked advantages that it is being employed by a con- 
 stantly increasing number of progressive manufactur- 
 ers, and it is certain to play a larger part in the train- 
 ing of salesmen in the future than it has in the past. 
 The thorough familiarity with the article that can be ac- 
 quired by actual participation in its construction has 
 two results: 
 
 First, it enables the salesman to talk intelligently 
 and to be sure of his ground even when he is at- 
 tempting to sell to a buyer who himself has an exact 
 technical knowledge of the article he wants to purchase. 
 
 Second, it gives a salesman confidence in his knowl- 
 edge and in the article he is to sell. It gives him an- en- 
 thusiasm for his line that can not be dispelled by any 
 number of complaints from customers or temporary 
 faults that may develop. 
 
 The man who has gone to the selling force from the 
 shop is in tlie strongest possible position to advance the 
 interests of his employer. If his training in construc- 
 tion and in selling are equal, he can talk mechanical 
 
108 
 
 SELLING AND BUYING 
 
 points intelligently to the buyer who is interested in and 
 who knows that phase of the subject; and he can talk 
 usefulness, durability, and inoney-saving qualities to 
 the man who is not interested in mechanics. He can 
 make repairs when repairs are necessar>'. In short, he 
 is in a i)osition to prove to purchasers in countless ways 
 that he knows what he is talking about, and there is 
 nothing that is so calculated to inspire confidence on the 
 l)art of possible purchasers as the demonstrated and de- 
 tii «■''•/» knowledge of the salesman about the article he 
 IS trj'ing to sell. 
 
 In the sale of many goods it is impossible and un- 
 necessary for the sales manager to provide a course of 
 instruction in the factory for his salesman; but in any 
 line and in any branch of merchandising a thorough 
 knowledge of the goods that are to be sold is the one 
 quality that is most helpful in securing for a salesman 
 the confidence of his employer and of his customers. 
 
 98. Training in selling methods. — The third branch 
 of training that the sales manager should provide for 
 his selling force is in special methods of selling that are 
 peculiarly applicable to the article that is to be sold. 
 The principles of salesmanship are the same under all 
 conditions, but their application varies with the com- 
 modities that are sold. The life insurance solicitor does 
 not use the same methods as the salesman in a retail 
 store, and the methods of the wholesale grocer's sales- 
 man are not the same as those of the man who sells loco- 
 motives to a great railway. The successful salejs man- 
 ager of every business house ought to know the best 
 methods of selling the goods that he has to distribute, 
 and he ought to train his salesman in those methods. 
 
 It is true that the man who possesses the qualifica- 
 tions of successful salesmanship will in time if left to 
 
METHODS OF TKAINING SALKSMKN 109 
 
 himself, find out the methods that are most helpful in 
 disijosing of the goods he is called uiwn to sell. But 
 organized efforts at giving him this knowledge before 
 he faces actual customers are economical of his time and 
 energy and are distinctly advantageous from the stan<l 
 point of his employer. 
 
 94. Standard selling talks.— In a typical case this 
 training is provided, first, by requiring the new sales- 
 man to learn a standard selling talk. The theory of the 
 standard selling talk is that for any given condition 
 there is one best way of approaching the customer and 
 of presenting the selling points so that they will have 
 the maximum effectiveness. It is not intended that this 
 standard selling talk shall be used indiscriminately in all 
 sitL ♦ions. A salesman is not a machine, and he can 
 not sell goods by simply repeating, parrot-like, a sell- 
 ing talk that some one has prepared for him. It is of 
 great advantage to him, however, to be grounded in 
 methods of selling that have been proved successful, 
 and that he can adapt to the particular problems that 
 he ha. c meel. A sales manager of experience knows 
 the best method of approaching the possible purchaser, 
 he knows the "pulling power" of the various selling 
 points and the most effective order in which they can 
 be presented, he knows the objections that have to be 
 met, and he knows the best means of meeting them. 
 It is to be expected that he would be in a better position 
 to embody these various points in a strong selling ap- 
 peal than the new salesman who has not had the sales 
 manager's experience. One of the great advantages of 
 the standard selling talk is that it phrases the selling 
 points in au effective manner. 
 
 Every salesman will in time develop for himself the 
 method of impressing seUing points upon customers 
 
no 
 
 SELLING AND BUYING 
 
 that seems best adapted to his personahty and to the 
 particular individuals to whom he tries to make sales. 
 When he is new at the work, however, he has not had 
 the experience to guide him in suitable expression of 
 the points he wants to make, and he can advantage- 
 ously use the words of others who, by careful study 
 and experience, have evolved effective statements of 
 the more important ti' » that the salesman ought to 
 say. 
 
 Another advantage of requiring a salesman to mem- 
 orize a standard selling talk is that he is thereby pro- 
 vided with a fu'id of effective phrases that he can draw 
 upon when for ?■■.■- reason he is unable to give spon- 
 taneous expression to his own ideas. In every sales- 
 man's experience there are hours and sometimes days 
 when "his personality does not seem to be working up 
 to normal" — when he finds himself incapable of ex- 
 pressing ideas quickly and well, and when his mind is 
 not so active as at other times. This may be due to 
 temporary ill-health, to mental moods, or to any of a 
 number of other causes. At such times, under former 
 conditions, the salesman ceased work and waited for a 
 return of the inspiration that he thought essential to suc- 
 cess in his activities. If he has stored away in his mem- 
 ory a stock of phrases and arguments, worked out for 
 him in logical, effective form, they will unconsciously 
 come to his aid, and will enable him to make sales even 
 though his work may not be as expressive of his indi- 
 viduality as is customary and desirable. This is not an 
 argument for mechanical salesmanship. It is simply 
 one method of insuring the highest efficiency of the sell- 
 ing force by giving the salesman a sure foundation for 
 the development of individual methods, and by provid- 
 ing him with a thorough knowledge of general princi- 
 
METHODS OF TRAINING SALESMEN 111 
 
 pies and methods of proved effectiveness that he can 
 adapt to his individual needs. 
 
 95. Adaptation of standard selling talks.— Aiier a 
 salesman has mastered the standard selling talk, he is 
 usually given an opportunity to learn how to adapt it 
 to a great variety of customers under conditions where 
 liis mistakes will not be so disastrous to himself and to 
 his employers as they would be if he were left to secure 
 his training in selling by actual contact with real pur- 
 chasers. 
 
 An extreme method of training in adapting the sell- 
 ing talk to individual classes of customers is illustrated 
 by the school for salesmen that is maintained by one of 
 the largest specialty manufacturers in the country. 
 The product of this manufacturer is a mechanical con- 
 trivance for use in all kinds of retail stores. The 
 "school-room" is divided into sections, each one of which 
 is fitted up with the fixtures and stock that are typical 
 of one of the important classes of retail establishments. 
 In charge of each miniature store there is a man who en- 
 acts the role of proprietor or of buyer and who has had 
 actual buying experience in the line that he represents. 
 The embryo salesman is required to enter each of these 
 little stores in turn and to make mock sales to the buy- 
 ers, in each case adapting the standard selling talk to 
 the peculiar conditions in the store and to the person- 
 ality of the man with whom he is dealing. There is the 
 closest possible approach to actual conditions in the field, 
 and the effectiveness of the system of instruction is 
 proved by the success of the salesmen who graduate 
 from this "school." 
 
 96. Meeting problems peculiar to a business. — Some 
 modifir i of this method of giving training in actual 
 selling ^ :n use by a great many modern merchandis- 
 
112 
 
 SELLING AND BUYING 
 
 ing establishments of all kinds. The great retail stores, 
 like the manufacturers, all over the country are recog- 
 nizing the value of teaching their new sales-people how 
 to meet the problems that are peculiar to their individual 
 businesses. Jobbers as a class have been the last to see 
 the advantages of the new methods, but many of them 
 also are now giving their attention to methods of train- 
 ing their salesmen for greater efficiency. If a jobber 
 carries an extensive line of articles, his problem of train- 
 ing salesmen is a difficult one, because of the practical 
 difficulties in the way of giving the salesmen an exact 
 knowledge of all the goods they are to sell. The solu- 
 tion of this difficulty seems to be found chiefly in a 
 multiplication of the number of specialty salesmen, each 
 one of whom handles only a limited line with which he 
 can become thoroughly familiar. The small, general 
 jobber, it is true, can not afford to adopt this method, 
 but the wholesaler that covers a wide territory and em- 
 ploys many salesmen can well afford to consider care- 
 fully the advantages of specializing the work of the 
 salesmen so that each one may have an intimate ac- 
 quaintance with all the essential features of every article 
 that he handles. 
 
 Training in selling should not cease with the grad- 
 uation of the salesman from the "school of salesman- 
 ship." The most successful sales manager is the one 
 that loses no opportunity to give the salesmen definite, 
 practical instruction in principles and methods. One 
 of the greatest selling organizations in the country fre- 
 quently revises its standard selling talks and requires 
 all its salesmen, under pain of dismissal, to memorize 
 everj' revised statement of selling points and arguments. 
 Every communication between the sales manager and 
 his men should be designed to assist the salesmen in their 
 
METHODS OF TRAINING SALESMEN 113 
 
 activities. Every convention or gathering of salesmen 
 should give them new aids in their work. Its program 
 should include talks by authorities on important prin- 
 ciples of selling, and demonstration sales 1 v picked 
 salesmen for the purpose of bringing out new ideas p,nd 
 methods. 
 
 III-8 
 
CHAPTER X 
 
 SUPERVISION OF SALESMEN 
 
 97. Sales manager's duties, — The third great field 
 of activities in which the sales manager must endeavor 
 to reach maximum efficiency if he is to do all in his 
 power to increase the efficiency of the selling organiza- 
 tion, is the supervision of salesmen. Many of the prob- 
 lems of supervision are closely allied with the problem 
 of training salesmen. With the exception of some 
 more or less mechanical details of selling supervision 
 that will be considered later, the sales manager's chief 
 duties of a supervising nature are to assist the salesman 
 in individual sales and to encourage him in his general 
 activities. 
 
 98. Supervision over particular sales. — Some of the 
 ways in which assistance can be given in particular sales 
 are as follows : 
 
 1. Personal visit of the sales manager to the scene 
 of the sale and the joint efforts of manager and sales- 
 man upon the customer. 
 
 2. Letters of instruction to the salesman. 
 
 3. Personal letters to the customer. 
 
 4. Advertising matter sent to the customer. 
 
 5. Assignment of other salesmen to help in the sale. 
 
 99. Supervision over general activities. — Encourage- 
 ment to the salesman in his general activities may 
 be given by the sales manager in a variety of ways. 
 Some of them are as follows: 
 
 114 
 
SUPKRVISION OF SALESMEN 
 
 115 
 
 1. Personal interviews either at home office or in 
 
 field. 
 
 2. Letters of advice, encouragement, and construc- 
 tive criticism 
 
 3. Competitive schemes to encourage the salesmen to 
 unusual efforts for certain periods. 
 
 4. Publication of a house-organ. 
 
 5. Sales department conventions. 
 
 100. Personal interviews. — Many salesmen operate 
 directly from the main office of the company where the 
 sales manager makes his headquarters, and in such cases 
 personal interviews between manager and salesmen are 
 frequently arranged. Each salesman makes his report 
 personally to the sales manager at the end of every trip, 
 and he has plenty of opportunity to secure all the as- 
 sistance he needs in solving the problems of selling in 
 his territory. In many large organizations, however, 
 some of the salesmen's territories are located at a dis- 
 tance from the main office, and the salesman has no oc- 
 casion to come in to headquarters unless the sales man- 
 ager sends for him. It is advisable for distant salesmen 
 to be called in for conferences with the sales manager at 
 intervals so that they may receive the advice and en- 
 couragement that is essential to highest success in their 
 work, and that the manager may learn directly from 
 them the conditions that exist in their territories with 
 respect to the sale of the goods of the house. 
 
 It is just as important for the manager to make fre- 
 quent trips to salesmen's territories as it is for the sales- 
 men to visit the home office. Salesmen's reports are 
 exceedingly valuable in giving the manager a knowl- 
 edge of conditions in the field, but they can never en- 
 tirely take the place of actual first-hand obsen'ation by 
 those who are responsible for the company's policies. 
 
116 
 
 SFXLING AND BUYING 
 
 Retail establishments and city selling organizations have 
 a great advantage in this respect, because constant per- 
 sonal contact is possible between the sales people and 
 those who direct their activities. 
 
 101. Keeping in touch tcith salesmen by letter. — 
 When a sales manager is separated from his sales- 
 men, he should make it a point to keep in close touch 
 with them by letter. Their reports form the basis for 
 his letters of advice and encouragement. If criticism 
 is necessary, it should be given in a manner calculated to 
 increase rather than to decrease the salesman's efficiency. 
 Salesmen are often exceedingly sensitive; their work is 
 exacting and makes great lemands upon their store of 
 nervous energy. If they have been doing their best, but 
 have not been producing normal results, they expect 
 and need encouragement rather than criticism. There 
 is nothing that can so effectively destroy the efficiency 
 of a conscientious salesman for a day or a week as a 
 sharp, fault-finding letter from his manager. If he has 
 been derelict in his duties, it is necessary for the sake of 
 discipline that he be reprimanded, but the reprimand 
 should be carefully phrased. There is possibly no phase 
 of a sales manager's duties in which he is called upon to 
 exercise more tact and real executive ability than in his 
 letters to his men. His one purpose is to increase sales, 
 and in every letter he should have in mind its ultimate ef- 
 fect upon the productiveness of the salesman. 
 
 102. Competitive schemes to promote selling e/^- 
 ciency. — Many houses use competitive schemes of vari- 
 ous sorts, with or without prizes, to stimulate the sales- 
 men to unusual efforts. If a special sale is in progress 
 on any article, some retail dealers offer a cash prize to 
 the sales-person making the most sales of that article 
 during the special sale. Jobbers and manufacturers 
 
SUPERVISION OF SALESMEN 
 
 117 
 
 frequently encourage special efforts by offering cash or 
 other prizes for the largest total sales or for the largest 
 sales of any particular commodity during a given period. 
 One of the most generally used methods of keeping 
 salesmen at the point of highest working efficiency is 
 known as the quota system. The principle at the basis 
 of the quota system is that a salesman will work harder 
 to produce a definite result that he knows is expected of 
 him that he would if he had no specific go-1 in view. 
 The quota system is applied in a variety of ways, but a 
 typical one is as follows: At the end of each month's 
 business the sales manager determines upon a certain 
 volume of sales that is fair to expect from each salesman 
 during the succeeding month. This is known as the 
 sales quota. The quota for each salesman is determined 
 separately, and the manager's decision is based upon a 
 careful consideration of past results in the salesman's 
 territory, present local conditions that might affect 
 sales, and selling and advertising plans of the company 
 that might have a bearing on the sales to be expected 
 during the quota period. 
 
 It is evident that even though it is determined after a 
 most careful consideration of all pertinent conditions, a 
 quota must finally be largely arbitrary in character. 
 This fact does not lessen the efficacy of the system, 
 provided the salesmen know that the same general 
 principles are applied in determining the quotas for all 
 territories. The more or less arbitrary nature of the 
 quota works no injustice to any one salesman if the 
 methods of determining it are the same in all cases. 
 Each salesman is informed of the quota that has been set 
 for him for the ensuing month, and he is urged to do all 
 in his power to reach tho mark and to pass it. The re- 
 sult of his activities for the month are usually shown by 
 
118 
 
 SELLING AND BUYING 
 
 a percentage. If liis quota for gross sales is $2,000, and 
 if he sells $1,.jOO worth of goods, his percentage for the 
 niontii is 75. If he sells $2,.500 worth of goods, his per- 
 centage is 125. The (juota may be expressed in dollars, 
 in individual articles, in cases of goods, or in any other 
 way that suits the i)articular business under considera- 
 tion. 
 
 In the case of a general jobber or manufacturer whose 
 salesmen handle a large line of goods, it is difficult to 
 determine a quota satisfactorily expressing the relative 
 importance of all the lines in the total sales. This is 
 done, however, in some cases by setting a separate quota 
 for each of the different classes of goods handled. It 
 is then necessary to determine the relative importance, 
 from the standpoint of the house, of the sales in the dif- 
 ferent classes. 
 
 It may be the policy to push one line and to sell only 
 enough of another to supply the demand. The relative 
 importance of the different classes of articles is repre- 
 sented by numbers. The class of least importance may 
 be represented by the numl)er 1. The sale of another 
 class may be considered to be twice as important as that 
 of the first; therefore the importance of this second 
 class is represented by the number 2 ; and so on. Sup- 
 pose, for example, that a salesman has a quota of 1,000 
 for sales of goods in class A. If he sells 900, his per- 
 centage in that class is 90. If the relative importance 
 of that class is represented by the number 3 (which is 
 called the "weight" number), this percentage of 90 is 
 multiplied by 3, and the product, 270, is added to other 
 l)roducts similarly obtained in all the other classes. 
 
 The following chart shows the method of determining 
 a salesman's final monthly percentage when he handles 
 four different classes of goods whose sale is considered 
 
SUPERVISION OF SALESMEN 119 
 
 by the house to be of varying degrees of importance, and 
 when separate quotas are set for each class* 
 
 Class Qttot* 
 
 A 1.000 
 
 B ♦OO 
 
 c aoo 
 
 D ■.■.' 300 
 
 Sales 
 90 
 
 SOO 
 33& 
 
 Class Weight 
 
 percent number 
 
 90 S 
 
 110 1 
 
 100 S 
 
 74 _« 
 
 9 
 
 Final monthly rating 
 
 Product obtained 
 by multiplying 
 class percent by 
 weight number 
 
 870 
 
 110 
 
 aoo 
 
 MO 
 
 830 
 
 92.2% 
 
 The final montUy rating is found by "ff 8 »» J** 
 weight numbers and then by adding all the pH»lurts 
 i„ L last colunm. The sum of the P«"lucts .s then 
 divided by the sum of the weight numbers, and the result 
 is the final monthly rating. . . 
 
 The quota system is of ehief value when it .s eompet- 
 tive It is not necessary to let any salesman know the 
 ^tt^ and total sales of the others, but >t .s f requertly 
 
 dvisable to pubUsh aU the final m-tWy « X.^ 
 each salesman can see how the results of lus efforts com 
 pare with the results of others. The effectiveness of 
 Zl aTompetitive system is surprising. Salesmen work 
 :*d»3k a fewVints above their bellows t^n they 
 do when the only incentive is larger fon.m.s«ons on^in^ 
 creased sales. The love of a g«ne is mnate m hmcan 
 nature, and any system that makes a game out of buM 
 ness, that gives the salesmen an opportunity ^ compete 
 wllh their feUows for precedence on the ranking hrt, 
 «ms to bring results that are entirely disproportionate 
 rr smaU lount of time and labor that are rcqmr^ 
 to maintain even a complicated rating system_ If cash 
 or other prizes are offered for precedence on the list, the 
 incentive to head it is, of course, greatly increased. 
 108. Ho«e.or(,a«..-Many sales departments pub- 
 
 r 
 
 'V ■ 
 
 r 
 
1X0 
 
 SELLING AND BUYING 
 
 lish house-organs to keep the sales officials in touch with 
 the salesmen, and to cultivate in the selling force an 
 esprit de corps that is valuahle in promoting united ef- 
 fort toward a conmion end. A house-organ of this kind 
 usually contains items on salesmanship, "ginger talks" 
 by the sales manager, and general news of the house. 
 It is, in addition, an effective medium for the publica- 
 tion of the relative rank of the salesmen as determined 
 by their monthly ratings. The development of this 
 method of keeping the salesmen in close touch with the 
 house is one of the marked features of modern merchan- 
 dising. Some house-organs are published daily, others 
 ■weekly, and others at longer intervals. 
 
 104. Selling conferences. — Sales department conven- 
 tions are widely used by selling organizations whose 
 members work in widely separated territories and do 
 not come into frequent contact with one another or with 
 their sales manager. The salesmen are called together 
 for conferences at certain intervals, either at the factory, 
 the home office, or at some centrally located point. 
 These conferences may have one or more of the follow- 
 ing purposes: 
 
 1. To promote a feeling of unity among the men. 
 The salesman working in a definite territory, where he 
 seldom comes into contact with other representatives of 
 the house, is likely to forget that he is part of an organi- 
 zation all of whose members are working toward the 
 same end. A periodical meeting with his fellow sales- 
 men tends to increase his eflSciency and to develop in him 
 a spirit of co-operation with all those who are selHng the 
 same line of goods. 
 
 2. To arouse enthusiasm. The man who is working 
 in an isolated territory, and who seldom comes into touch 
 directly with his superiors, has a tendency to get into a 
 
SUPERVISION OF SALESMEN 
 
 ISl 
 
 iMit and to make his work mechanical. A conference 
 with others working along the same line gives him new 
 points of view, and the talks by the officials of the com- 
 pany whom he meets at the convention arouse his en- 
 thusiasm and a determination to redouble his eflPorts 
 when he returns to his territory. 
 
 3. To encourage the interchange of ideas among the 
 men. No one salesman in any business has a knowl- 
 edge of all the selling schemes that he might use to ad- 
 Mintage. Each one can learn from the others plans that 
 liave worked, as well as plans that have failed, and this 
 information can assist him in his own work. 
 
 4. To continue the specific training of the salesmen 
 in their general duties, and to instruct them in new sell- 
 ing methods and in plans of marketing new articles that 
 may be placed upon the market. Sales demonstrations 
 and technical talks by selling authorities have an im- 
 portant place in sales department conventions. In ad- 
 dition, such conferences are /aluable means of impart- 
 ing to the salesmen first-hand instruction in new 
 products and new selling methods. 
 
 105. Other duties of sales manager.— We have found 
 that the chief duties of a sales manager with respect to 
 the supervision of the salesmen are to give them assist- 
 ance in individual sales and to encourage and help them 
 in their general activities. These, of course, by no 
 means comprise all his duties of a supervising nature. 
 Among the multitude of things that engage his atten- 
 tion, three others stand out prominently. He must de- 
 termine upon suitable methods of compensating his sell- 
 ing force, he must assign territories, and he must adopt 
 satisfactory methods of keeping in touch with his sales- 
 men. 
 106. Compensation of salesmen.— There are three 
 
 ■- 
 
ISf 
 
 SELLING AND BUYING 
 
 principal methods of compensating salesmen without 
 taking into consideration the question of allowances for 
 traveling and other expenses. They are: commission, 
 salary, and a combination of conunission and salary. 
 There are many high-grade salesmen who refuse to work 
 on any other than a commission basis. They are so 
 confident of their ability to produce results that they 
 insist on having their compensation measured di- 
 rectly by the amount of their sales. There is no question 
 that there is a greater incentive for an efficient man to 
 work harder for a commission than for a salary. The 
 commission method of payment, however, has one dis- 
 advantage. The salesman feels that he is more his own 
 master than when he is working for a salary. He has a 
 keen interest in increasing his own inmiediate earnings, 
 and he is not always willing to follow a policy that means 
 the sacrifice of large total sales for the moment even 
 though the purpose of the policy may be ultimately to 
 increase the business in his territory. 
 
 In some sections of the country wholesale grocers' 
 salesmen are paid entirely by commission on the profits 
 resulting from their sales. Naturally they are inter- 
 ested only in the sale of goods that carry a long profit. 
 It is sometimes to the advantage of the jobbers to push 
 the goods of manufacturers whose products may not 
 carry the maximum profit but who recognize the job- 
 bers as their exclusive distributers and who expect the 
 support of the jobbers in return. In such cases the 
 wholesale dealers have no means of forcing the sales- 
 men to push the goods they want pushed, except moral 
 persuasion and the fear of discharge. Neither of these 
 means is particularly effective in the case of the compe- 
 tent salesman who has proved his ability to make profits 
 for his employer and for himself. 
 
SUPERVISION OF SALESMEN 
 
 Uii 
 
 The salary nietlMxl of compensating salesmen is 
 usually employed when the salesmen are reiiuired to 
 give paft of their time to other than strictly selling 
 duties — when, for instance, they are called upon to act 
 lis "missionaries," to cultivate friendly relations with 
 the trade, to investigate and report on local conditions, 
 to enlist the support of all the factors in a contemplated 
 selling campaign, and to do any of the other numerous 
 duties that frequently fall to a salesman's lot, which 
 are not immediately effective in increasing the total 
 volume of any individual's sales. Of course the broad- 
 minded salesman, even when he is working on com- 
 mission, is willing to give a certain amount of his time 
 to such duties, but when they form a large part of his 
 activities, the best results are usually secured by placing 
 the salesman on a salary basis. In cases of this sort 
 many houses guarantee a sufficient salary with propor- 
 tionate increases in accordance with the increased total 
 sales in the territory. New salesmen are ahnost always 
 ^riven a minimum salary, which they are able to supple- 
 ment by conmiissions on sales in excess of an agreed 
 upon amount. 
 
 107. Salesman's expenses. — The question of sales- 
 men's expenses is closely connected with the question of 
 compensation. If a house pays the traveling expenses 
 of its salesmen, it is necessary to have the expenses re- 
 ported at frequent periods and in detail. They must be 
 carefully watched by the sales manager, because travel- 
 ing expenses often form a considerable part of the total 
 selling costs, and the profits on large total sales are 
 liable to be dissipated by excessive costs of selling. It 
 is obvious that the item of expenses is one that is diffi- 
 cult to audit. Unfortunately some salesmen permit 
 their moral sense to become a bit blunted when they re- 
 
124 
 
 SELLING AND BUYING 
 
 port their expenses to the house; Ihey are not always too 
 careful to report the exact amounts that they have ex- 
 pended in the interests of their employer. The problem 
 of obviating the possibility of padded expense accounts 
 is a difficult one for the sales manager to solve. 
 
 Hotel bills, railroad fares, and sundries, are the three 
 general classes of expenses incurred by a traveling sales- 
 man. Some houses fix a definite amount which a sales- 
 man is permitted to spend each day for room and meals. 
 When this is done, the salesman will seldom report less 
 than the maximum amount, but the system is often pref- 
 erable to having no maximum at all. Since railroad 
 rates have been made uniform, the item of transporta- 
 tion expenses is easily checked by requiring the salesman 
 to show the number of miles covered in each railroad 
 journey together with the cash fare or mileage collected, 
 and by checking up this data with an office file of rail- 
 road guides and tariff sheets. The item of sundries is 
 the most difficult of all to audit. In many cases 
 charges are permitted under this heading only for cer- 
 tain specified purposes. If a salesman is allowed to 
 "buy business" to any extent at all, his tendency tdward 
 extravagance in this direction may be checked by re- 
 (piiring him to itemize even the smallest expense that is 
 incurred. But the idea that a customer has to be enter- 
 tained in order to get his business is happily going out 
 of fashion, and with its complete disappefance will van- 
 ish one of the greatest opportunities for a salesman 
 to betray the confidence of the employer who entrusts 
 him with an expense account. 
 
 108. Assignment of sales territories. — The assign- 
 ment of territory is a question whose solution can not be 
 governed by general principles. It depends on the na- 
 ture of tlie goods to be marketed, the demand for them, 
 
SUPERVISION OF SALESMEN 
 
 125 
 
 the population and area of the possible market, the ex- 
 tent and character of transportation facilities, the 
 amount of competition, and the number of salesmen 
 who can be employed. The first point to be decided is 
 the number of times it is advisable to have each possible 
 customer called upon during a given period. The ter- 
 ritory is then divided so that this ideal can be most nearly 
 approached under the existing conditions. 
 
 One large house that operates in a thickly settled por- 
 tion of the country where transportation facilities are 
 approximately uniform in extent and character, has 
 adopted a certain amount of population as the unit for 
 each salesman's territory. Territory boundaries follow 
 county or state lines wherever that is possible without in- 
 terfering seriously with the population unit. If a 
 house were operating in the national field, it would be 
 impossible to use the population unit exclusively, be- 
 cause a salesman who could easily and frequently can- 
 vass all the dealers in a district with 250,000 population 
 in the East, for example, could not so easily cover a dis- 
 trict with equal population in one of the sparsely pop- 
 ulated western states. 
 
 109. Keeping in touch 'with salesmen. — ^We have 
 already indicated some methods by which the sales 
 manager keeps in touch with his selling force. His 
 function of helping them in individual sales and in their 
 general activities requires him to see them frequently in 
 person, to correspond with them, and to instruct and 
 help them with the aid of house organs and other pub- 
 lications. We are to learn that he is also to keep in 
 touch with them through their reports. 
 
 In addition, various mechanical devices are used to 
 enable the sales manager to know exactly where the 
 salesmen are working and their methods of covering 
 
126 
 
 SELLING AND BUYING 
 
 their territories. Each salesman is usually required to 
 send in a route list at the beginning of every week, to in- 
 dicate his exact location on each day of the coming 
 week. His movements are followed by means of this 
 route list and his daily reports. Frequently a map and 
 tack system is introduced to represent his movements 
 graphically. His territory is charted on a map, and 
 pins connected by a string are inserted in the towns that 
 he has covered or is to cover, in their proper order. 
 
 110. Knowledge of the business as factor in promoting 
 sales department efficiency. — The last important quali- 
 fication of a successful sales manager is a thorough 
 knowledge of the business in which he is engaged, and 
 the ability to use that knowledge effectively in promot- 
 ing the efficiency of the entire selling organization. By 
 knowledge of the business is meant not merely an inti- 
 mate knowledge of the personnel and policies of the 
 house the sales manager represents or of the article or 
 articles that his force of salesmen are to sell. All this is 
 essential, of course, but it is also necessary for a sales 
 manager to know every phase of the general line of 
 business in which he is engaged. He must know his 
 own line, and he must also know the lines of all of his 
 important competitors. He must know what adver- 
 tising they are doing, where they are making inroads 
 upon his own business, what new methods they are using 
 in the sale of their goods, new products that they may 
 be offering, their regular prices and discounts, and, so 
 far as possible, the special inducements they offer to in- 
 dividual customers. In short, the ideal sales manager 
 is so familiar with the competitive field in which his sales- 
 men operate that he is in a position to use the forces at 
 his command to the best advantage possible. 
 
 The information that is necessary for him to have 
 
SUPERVISION OF SALESMEN 
 
 127 
 
 al)out all phases of the business in which he is engaged 
 may come to him through his own experience and ob- 
 servation and by reports from the office and from the 
 field. The reports may be divided into three classes: 
 credit, statistical, and general 
 
 
CHAPTER XI 
 
 REPORTS AND DUTIES OF SALESMEN 
 
 111. Credit reporta. — In some cases the credit re- 
 ports are initiated by the sales department. They are 
 made by the salesmen on special forms prepared there- 
 for, as part of their regular routine. When this is not 
 the case, the credit reports come to the sales manager 
 from the accounting and credit departments. They 
 may show when a customer's bill is overdue, when his 
 financial condition has been strengthened or weakened 
 for any cause, or when there has been any change in his 
 business relations which would interest the sales depart- 
 ment. Selling and credits are vitally connected. A 
 successful salesman never forgets that a sale is not made 
 until it has been accepted by the credit department, and 
 that time spent in getting a big order from a dealer 
 with small credit is time wasted. Accordingly it is the 
 sales manager's duty to transmit to the salesmen in the 
 field all items of credit information that may be of in- 
 terest to the salesmen in their relations with their cus- 
 tomers. 
 
 112. Purpose of salesmen's reports. — The statistical 
 and general reports that help the sales manager in se- 
 curing a complete knowledge of the business may reach 
 him directly from the salesmen in the field, or they may 
 be prepared for his information from records in the 
 office. The reports that come directly from the sales- 
 men usually have the following purposes : 
 
 128 
 
REPORTS AND DUTIES OF SALESMEN 129 
 
 1. To enable the sales manager to judge the efficiency 
 of the salesmen. 
 
 2. To enable him to know conditions with respect to 
 individual customers as well as in entire territories, and 
 thereby to anticipate and check a threatened or actual 
 falling off in sales. 
 
 3. To keep him in close touch with all news of interest 
 
 in the business. 
 
 4. To provide material for periodical statistical re- 
 ports, which, in turn, are designed to give the sales man- 
 ager the desired sales data in organized, convenient 
 form. 
 
 In order to accomplish these four purposes, the data 
 contained in the salesmen's reports is usually divided 
 into two general classes: first, that nhich has reference 
 to individual customers or possible customers; second, 
 that which treats of general trade conditions. 
 
 113. A typical salesman's report. — In the typical 
 case of a salesman selling a grocer's specialty he is re- 
 quired to call upon every retail grocery dealer in every 
 town he visits. The blanks on his daily report form 
 call for the following information about each dealer 
 whom he interviews: 
 
 1. Name and address. 
 
 2. Which of the different sizes and brands of the goods 
 handled by salesman are carried in dealer's stock, with ap- 
 proximate amount of each one on hand. 
 
 3. The important competing lines that are carried by dealer. 
 
 4. Complete statement of the items contained in the order if 
 ii sale is made. 
 
 5. If no sale is made, the probable reasons therefor. 
 
 6. The brands of goods in the general class handled by the 
 
 salesman, which dealer reports as his first and second "best 
 
 sellers." 
 Ill— 9 
 
190 
 
 SELLING AND BUYING 
 
 7. Advertising matter left with dealer. 
 
 8. Advertising matter to be sent to dealer. 
 
 9. Dissatisfaction of dealer, if any, with the goods or with 
 his treatment by the house, and suggestions by salesmen of 
 methods for removing the dissatisfaction. 
 
 Information of this nature in the salesman's daily re- 
 port enables the manager to picture with a fair degree 
 of accuracy the conditions under which the salesman 
 worked, and, to a certain extent, to judge the efficiency 
 of the salesman in dealing with competitive conditions. 
 This information also gives the sales manager a running 
 record of the status of dealers' stocks and of any increase 
 or decrease in competition, and it provides some of the 
 material for periodical statistical reports that are com- 
 piled at the office. 
 
 114. Salesmen must observe closely- -To keep the 
 sales manager sufficiently in touch with general trade 
 conditions, the salesman has to develop his powers of 
 observation and analysis to a high degree. Some sales- 
 men's daily report forms contain definite space for the 
 various classes of data desired. In other cases the sales 
 manager prefers to receive this information in a general 
 letter from the salesman. In both instances the sales- 
 man is usually asked to report all items of interest along 
 the following lines : 
 
 1. New and important competition. 
 
 2. New advertising being done by competitors. 
 
 3. Changes in competitors' products and prices. 
 
 4. Apparent changes in demand. 
 
 5. Local business conditions that are likely to affect 
 demand. 
 
 6. General attitude of customers toward the product 
 of the house. 
 
REPORTS AND DUTIES OF SALESMEN 131 
 
 Information of this character, periodically received 
 from the salesmen, and regularly passing under the in- 
 spection of the sales manager, should give the latter a 
 comprehensive survey of the field in which the salesmen 
 are working. It should show him, in the case of each 
 customer, when there is a necessity for additional sell- 
 ing effort to protect business against the inroads of 
 competitors, and when there seems to be an unusual op- 
 jjortunity to get new business in a town. In a general 
 way the inspection of the salesmen's reports shows the 
 sales manager whether sales are increasing or are falling 
 off. The most important result of a careful, intelligent 
 study of the salesmen's reports, however, is that it gives 
 the manager an intimate knowledge of conditions which 
 may be influential in causing a decrease in business, and 
 this knowledge, to a certain extent, enables him to fore- 
 see a possible falling off in sales and to neutralize the un- 
 favorable conditions by increased activity of the sales 
 department. 
 
 115. ^ typical statistical system. — In the typical case 
 that we have been considering the salesman's reports on 
 his various visits to a town are summarized on a town 
 record card. Each card contains spaces for records 
 covering canvasses of the town during several years. 
 The cards provide a compact exhibit of the condition of 
 the company's business in every town which their sales- 
 men have visited. For each canvass of the town the 
 following data is summarized: 
 
 1. Date of canvass. 
 
 2. Number of dealers called upon. 
 
 3. Number of dealers carrying in stock each of the 
 brands sold by the house, as well as brands of principal 
 competitors. 
 
198 
 
 SELLING AND BUYING 
 
 4. Number of dealers reporting each of the various 
 brands as "best seller" or "second best seller." 
 
 5. Number of separate sales made during the canvass 
 and the totals of the different items included m the or- 
 ders. 
 
 6. Advertising activities of competitors. 
 
 On the back of each town record card is entered a 
 brief statement of all local advertising and selling cam- 
 paigns conducted by the house that is keeping the rec- 
 ord, in the town under consideration. Space is also 
 provided for a monthly, quarterly, and yearly record of 
 all shipments, by brands, of the company s goods to cus- 
 tomers in that town. 
 
 In addition to the record of shipments on the town 
 record cards, daily, monthly, quarterly, semi-yearly, and 
 yearly summaries of shipments are prepared, show- 
 ing sales by brands, by towns, by salesmen's ter- 
 ritories, by states, by selling divisions, and for the en- 
 tire country. Each of these statements is comparative; 
 that is, it shows sales for the current year as compared 
 with those for one or more years preceding. 
 
 The foregoing description of a statistical system is 
 merely suggestive of the many ways in which the re- 
 ports of the salesmen and the sales records may be 
 utilized in the compilation of statements that assist the 
 sales manager in knowing where trade is weak and 
 where it is strong — in other words, in acquiring a com- 
 plete knowledge of the business. With this definite 
 knowledge he can apply the necessary stimulus to the 
 business in the way of advertising and selling eflforts 
 with the greatest economy of time and expense. In 
 small organizations the compilation of statistical data 
 is one of the duties of the accounting department. In 
 large organizations the statistics are often recorded and 
 
REPORTS AND DUTIES OF SALESMEN 133 
 
 compiled by a separate department with a skilled statis- 
 tician at its head. The maintenance of an efficient 
 statistical department is expensive, and it would have 
 no place in a business organization unless its efforts 
 were productive of larger sales and increased profits. 
 That the compilation and intelligent use of statistical 
 (lata has this result is evidenced by the increasing un- 
 portance of the statistical department in large corpora- 
 tions. 
 
 116. Salesman's part in promoting sales department 
 efficiency.— T\m% far in the consideration of the selling 
 campaign we have considered the problem of develop- 
 ing sales department efficiency primarily from the 
 standpoint of the sales manager. The salesman, how- 
 ever, is as important in this movement as his manager, 
 and in many of the methods that have been discussed 
 the salesman's part is at least equal to that of the sales 
 manager. In order to indicate the salesman's share in 
 the development of sales department efficiency it is only 
 necessary to state and to consider briefly the three as- 
 pects of his duties in each of which he should endeavor to 
 perfect himself. He is ordinarily expected to do three 
 things : 
 
 1. Sell goods. 
 
 2. Maintain the reputation of the house and to do all 
 in his power to increase its prestige. 
 
 3. Observe and report items of information that are 
 of interest to the sales manager. 
 
 The actual sale of goods depends on the salesman's 
 practice of the principles of salesmanship. This is such 
 an important factor in his efficiency that it is reserved 
 for separate consideration in a subsequent chapter. 
 
 The salesman is the representative of the house that 
 employs him. Many customers never see any member 
 
\tU 
 
 SELLING AND BUYING 
 
 i 
 It 
 
 of the house organization except the salesman who so- 
 licits their orders. It is natural, therefore, that the cus- 
 tomer should receive his impression of the house from 
 the salesman. Every successful business house has cer- 
 tain policies — methods of doing business, attitude to- 
 ward its customers, business ideals — which are part of 
 the personality of the organization and which it should 
 cherish as carefully as an individual cherishes his repu- 
 tation. The salesman should represent these policies. 
 As an individual he should do nothing inconsistent with 
 the policies of the house he represents. He should al- 
 ways remember that he is the house so far as th ' cus- 
 tomer is concerned, and that it is in his power to do seri- 
 ous injury to his employer by an ill-considered word or 
 action. 
 
 The third way in which the salesman can contribute 
 to the highest efficiency of the sales department is by ob- 
 ser\'ing and reporting the trade conditions that are of 
 interest and assistance to his manager. The general 
 character of the reports that he is frequently required 
 to make has already been indicated. Salesmen are 
 sometimes unwilling to take the time and trouble to 
 make accurate and complete reports; they look upon the 
 requirement of detailed reports as an unnecessarily 
 burdensome addition to their already difficult duties. 
 This is a short-sighted and mistaken attitude. The 
 salesman is a trade missionary; he must often wait a 
 long time to see the results of his efforts. His ultimate 
 aim is orders, but he must frequently get orders indi- 
 rectly, and he should be willing to give all the assistance 
 in his power to any movement that is calculated to in- 
 crease the productiveness of his territorj-. 
 
 His accurate reports of important business conditions 
 in his territorj^ enable the selling officials to direct the 
 
REPORTS AND DUTIES OP SALESMEN 185 
 
 advertising and selling forces at their command in such 
 a way that he will ultimately he able to book orders that 
 might be unobtainable by his own unassisted efforts. 
 Successful selling is more than mere personal contact 
 between salesman and consumer. It is a linking up of 
 a large number of forces, many of which are at least 
 of equal importance with the salesman hims.lf. Co- 
 operation between all these forces is essential to the high- 
 est success in every form of distribution, and the sales- 
 man who refuses to recognize this fact, willfully limits 
 his own efficiency and that of the selling organization of 
 which he is a part. 
 
CHAPTER XII 
 
 PRINCIPLES OF SALESMANSHIP 
 
 117. Definition of salesmanship. — There are so many 
 phases of salesmanship, and so many ways in which it 
 can l)e applied, that a satisfactory definition of the term 
 is difficult of formulation. In a broad sense it is fre- 
 quently used to indicate any method by which one in- 
 dividual attempts to influence another to take a desired 
 action or to adopt a certain mental attitude. However, 
 we are concerned only with commercial salesmanship. 
 The essential feature of commercial salesmanship is an 
 exchange of values; and the practice of commercial sales- 
 manship is the attempt on the part of one person to 
 induce another to accept ownership of a commodity for 
 which something of value is to be given in exchange. 
 This is a sufficiently satisfactory explanation of what 
 salesmanship means, though it may not be a scientifically 
 accurate definition. The chief purpose of all business 
 is to make profits, and profits can not be made unless 
 there is an exchange of values of some sort. In every 
 industry or business or profession the sale of goods or 
 ser\'ices is the final aim, and because of this universal 
 practice of the art of salesmanship, its principles are 
 of importance to every worker in the business field. 
 
 118. Who is a salesman? — The man that practices 
 the principles of salesmanship is « salesman. In or- 
 der to come within this classification he does not need 
 to face prospective customers in person. He is a sales- 
 man if he has any part in the sale of goods. The owner 
 
 136 
 
PRINCIPLES OF SALESMANSHIP 
 
 187 
 
 of a manufacturing plant is a salesman if he shares in 
 the formulation of selling policies. The president of a 
 railroad company is a salesman if he exercises super- 
 vision over the sale of its services. The general sales 
 manager of any organization is certainly a salesman if 
 he directs the activities of thrse who finally face the 
 customers; and so are his f istants and subordinates 
 ail the way down the line lo the men that actually turn 
 in the orders. 
 
 The efficient advertiser who uses advertisements to 
 aid him in influencing people to buy his goods must 
 practice the principles of salesmanship, and the man 
 that can sell goods by mail without any direct personal 
 contact with his customers is probably the highest type 
 of the successful salesman. The manufacturer, the 
 jobber, and the retail merchant are all salesmen irre- 
 spective of whether they actually sell goods themselves 
 or simply direct the selling organizations that do dis- 
 pose of their merchandise. The retail clerk may be 
 just as good a salesman as the traveling representative 
 of the jobber. Any one who sells goods or who in any 
 way* directs their sale is a salesman, and the word is 
 also rightly applied to the promoter — ^the man who sells 
 ideas, who organizes industries, and is successful in giv- 
 ing a market value to his mere hopes and expectations. 
 
 Everyone who engages in the activities of salesman- 
 ship in any way must, in a measure, practice the same 
 principles and possess the same qualifications. In or- 
 der to discuss these general principles and qualifica- 
 tions, however, it is necessary to have in mind an in- 
 dividual that may be termed the typical salesman. He 
 is the man that meets his customers face to face, and 
 upon whom the final responsibility depends for success 
 or failure in the great majority of business enterprises. 
 
138 
 
 SELLING AND BUYING 
 
 His personal problems include those of all the other 
 factors in selling, and his qualifications are the measure 
 of those that all the others must possess. 
 
 Every seUing method, every sales department organi- 
 zation nmst ultimately dejjend for actual results upon 
 the man for whose guidance the selling methods have 
 been adopted and the sales organization has been de- 
 veloped. 
 
 119. Steps in a sale. — Because personal, face-to-face 
 solicitation of a customer is the most common form of 
 salesmanship, and because it best illustrates all of the 
 principles of the science, we shall discuss the problems 
 of salesmanship with particular reference to a sale in 
 which salesman and customer come into direct personal 
 contact. The modifications that are necessary to adapt 
 the general principles to other methods of selling will be 
 clearly evident in most cases without any special refer- 
 ence being made to them. In every sale it is generally 
 conceded that there are four distinct steps: attracting 
 the customer's attention, arousing his interest, creating 
 in him a desire to buy, and inducing him finally to take 
 the action that is necessary to close the sale. It is not 
 our purpose to consider in detail the methods of ac- 
 complishing these four steps, but rather to emphasize 
 the importance of suitable training in the methods 
 necessary to accomplish them by showing the connection 
 between the steps in every sale. 
 
 120. Attracting attention.— li is not by chance that 
 a possible customer gives his attention to the salesman 
 who wishes to sell him something. The business man 
 whose patronage is worth the most has no time to waste. 
 He is frequently called upon to listen to many different 
 salesmen's propositions every day, and he is often un- 
 able or unwilling to grant every demand upon his time. 
 
PRINCIPLES OF SALESMANSHIP 
 
 139 
 
 In !""" < stablishments buyers make it a rule to receive 
 sai--:.Acn at a certain hour and to give every salesman a 
 hearing. In the majority of cases, however, the sales- 
 man does not have such easy access to the attention of 
 the customer, and the buyer's attention can not be se- 
 cured unless the salesman first directs his careful efforts 
 toward that immediate end. 
 
 The method in each instance may differ; but, whether 
 the fact is recognized by the salesman or the buyer, 
 there is always some definite reason why the "prospect" 
 gives the salesman his attention. It is not enough, how- 
 ever, that the salesman should secure the buyer's at- 
 tention to himself. For the purpose of the sale, the 
 only attention that is worth while is the attention that 
 makes the buyer willing to talk business or to listen to 
 the salesman's business proposition. The personality 
 of the salesman rather than the attractivene-^'? of his 
 offer is frequently the force that first inouoes the 
 customer to listen to him, but if this is the means used 
 to secure attention, it is absolutely necessary to transfer 
 the buyer's attention from the salesman to the article 
 that is to be sold before any sale can result. It is for 
 this reason that the quiet, undemonstrative salesman is 
 usually more efficient than the one with a loud voice, 
 strong language, and exaggerated gestures. It is easy 
 for the buyer to transfer his attention from the per- 
 sonality of the salesman to the proposition that is 
 offered if the man that approaches him is quiet in man- 
 ner, but it is difficult in the case of the demonstrative 
 salesman because his personality is such that it can never 
 l)e subordinated to any other factor in the sale. 
 
 There are countless methods of securing attention; 
 every salesman has his own methods and every sale pre- 
 sents its own problems. The ability to read character 
 
140 
 
 SELLING AND BUYING 
 
 and the possession of initiative are the two qualities that 
 are of most assistance to the salesman in determining 
 the proper method for any particular sale. The man- 
 ner of g'-eeting the customer has much to do with the 
 matter of attracting attention. Frequently it is ad- 
 visable to introduce the conversation by talking about 
 some subject not directly connected with the business 
 in hand. It has already been suggested that approach- 
 ing the customer on his "blind side" — getting his con- 
 fidence by showing the salesman's interest in him and 
 in the things that interest him before the subject of 
 business is introduced — is valuable in securing the 
 buyer's attention. The use of humorous stories and 
 references to news items of the day have this purpose. 
 It should always be remembered, however, that 
 attention secured by such irrelevant means must be 
 completely transferred from the alien topic of conversa- 
 tion to the particular business proposition that the sales- 
 man wants to present before there is any possibility of 
 making a sale. Therefore, wherever possible, it is to 
 the salesman's advantage to use some method of intro- 
 duction that will definitely and immediately attract the 
 customer's attentiwi to the article the salesman wants to 
 sell. A new city salesman was employed by a specialty 
 house that sold patented mouse-traps to retail dealers. 
 The new man knew only the stereotyped forms of in- 
 troduction, and he approached every buyer with the 
 same formula: "Good morning, Mr. Smith. I am 
 Mr. Brown, representing the Great Northern Specialty 
 Company. I have an article," but in the majority of 
 cases he got no further, because he had wholly failed to 
 secure the busy merchant's attention. He reported his 
 difficulty to the sales manager, who resolved to go out 
 with him and see wherein the trouble lay. 
 
PRINCIPLES OF SALESMANSHIP 
 
 141 
 
 The sales manager witnessed one of the salesman's 
 ineffectual attempts to secure a hearing, and he de- 
 termined to make the next approach himself, while the 
 salesman simply observed his methods. In the next 
 store the sales manager approached the buyer, and with- 
 out a word of introduction simply placed the mouse- 
 trap in his hands. It was an ingenious contrivance, 
 and that fact, together with the unusual method of pre- 
 senting the proposition, immediately secured the cus- 
 tomer's attention. A brief statement of prices and prof- 
 its was all that was necessary to close the sale. At- 
 tention was directly and forcibly attracted to the article 
 to be sold rather than to the personality of the sales- 
 man; and in many cases this is the best method to pur- 
 sue. 
 
 121. Arousing interest— Interest is simply sus- 
 tained attention. If a customer can be induced to give 
 more than momentary attention to a salesman's prop- 
 osition, he has had his interest aroused in it. The se- 
 cret of holding attention and, therefore, of arousing in- 
 terest, is to present a proposition continually in a new 
 light. No one can give attention to a single thought 
 or idea for more than a very brief period of time. 
 
 The first idea must be immediately developed if the 
 attention is to be held. The characteristic feature of 
 this second step in a sale is the salesman's detailed de- 
 scription of his proposition. Each point that is 
 brought out focuses the customer's attention, and his 
 interest is thereby aroused in the proposition as a whole. 
 The description of the article to be sold, of its construc- 
 tion, uses, and advantages, should be definite and de- 
 tailed. The use of general terms is sometimes sufficient 
 to secure attention, but if interest is to be aroused, the 
 salesman must abandon generalities and use ovly specific 
 
U2 
 
 SELLING AND BU\ ING 
 
 language. The use of questions is permissible, but they 
 sliould be such as to aid rather than to interrupt the 
 logical development of the salesman's proposition. If 
 the customer can be made to answer "Yes" or "No," 
 his interest will be increased, because his attention is 
 thereby directed specifically to particular points, and 
 his final assent to the salesman's conclusion follows as 
 a natural result of his assent to the several parts of the 
 selling talk. 
 
 If the article that is being sold is such that a dem- 
 onstration of its construction and uses is possible, the 
 salesman has a great advantage if he is given an op- 
 portunity to show it to the customer and to make the 
 actual article supplement and illustrate his spoken de- 
 scription of its merits. Nothing is so calculated to 
 arouse interest as an actual demonstration. It empha- 
 sizes points as no mere statement of them can do, and 
 the constant succession of things of interest that the 
 customer can see for himself makes it easier to retain 
 his interest than when the salesman has to depend on his 
 own powers of description for the constant presenta- 
 tion of new points. No description is effective unless 
 it appeals to the customer's self-interest. He must be 
 shown how the purchase of the article will increase his 
 happiness, comfort, or profit, or the happiness, comfort, 
 or profit of those whose welfare is of gi-eat importance 
 to him. 
 
 It is essential for the salesman to get the customer's 
 point of view; he must present the features of the prop- 
 osition that will appeal to the customer— not necessarily 
 those that appeal to the salesman. There are ahnost as 
 many ways of arousing interest as there are of attract- 
 ing attention, and the proper method to use in each case 
 depends on the peculiar characteristics of the salesman, 
 
PRINCirLES OF SALESMANSHIP 
 
 143 
 
 
 the article to be sold, and the customer. In all cases, 
 however, an adequate description of the article must 
 have some place in the interest-arousing process, and 
 the most successful salesmen are those who can describe 
 their propositions concisely, graphically, and forcibly. 
 122. Creating desire. — It is obvious that attention to 
 a salesman's selling talk, and interest in what he is talk- 
 ing about can not in themselves induce a customer to 
 make the purchase. He mu'^t be made to desire the 
 goods; otherwise both of th( ^jreceding steps will have 
 l)een taken in vain." This fact is so evident that no 
 elaboration of it is necessary. The dictionary says that 
 desire is the "wish to obtain" a thing, and the word has 
 this meaning in salesmanship. The "wish to obtain," 
 however, is not to be confused with the determination 
 to obtain. The latter is the last step in selling; there 
 must be desire before there can be determination. 
 
 In some cases, of course, the customer naturally de- 
 sires the article that is presented for his consideration, 
 without any effort on the part of the salesman to create 
 the desire. The desire must be present in some form, 
 however, before the sale can proceed any further. 
 If it is necessary for the salesman to create it, what 
 methods is he to employ? As in the case of attracting 
 attention and arousing interest, the methods of creating 
 desire are as various as the characteristics of the articles 
 that are sold, the personalities of the men who sell them, 
 and the peculiarities of the prospective customers. A 
 few general principles, however, are suggestive of 
 methods of procedure. Just as sustained attention de- 
 \ elops into interest, so interest if properly nurtured can 
 be developed into desire, and the methods of arousing 
 interest are largely the methods of creating desire. 
 Continued presentation of the merits of the ^rtiQle to 
 
Ui 
 
 SELLING AND BUYING 
 
 be sold is necessary. The customer must be convinced 
 that its purchase would conduce to his pleasure, profit, 
 or gratification, or that it would be desirable from the 
 standpoint of his employer. Argument may be used, 
 but so sparingly as not to antagonize the buyer or to 
 make him think that his wishes and his interests are 
 not the chief factor in the salesman's desire to make 
 the sale. The best method of argument is i: display of 
 the article and the logical presentation of its strong 
 selling points in such a manner as to appeal to the pe- 
 culiar needs of the buyer. 
 
 Suggestion has a most important part in the creation 
 of desire. It has been said that we like to believe that 
 we are reasonable beings, but that we act more often be- 
 cause the action has been suggested to us than because 
 we have determined to do it through a process of reason- 
 ing. The salesman should utilize this valuable principle. 
 His reasoning and logical presentation of selling points 
 are effective, but reasoning should be supplemented 
 by tactful suggestions that will make the customer think 
 that he has from the first desired the article, without 
 having been greatly influenced by the selling methods 
 of the salesman. No one likes to admit that his opin- 
 ions have been changed by the statements of another, 
 and the efficient salesman, instead of relying too much 
 on logical reasoning, suggests the things that make the 
 customer alter his unfavorable ideas, and that ultimately 
 create in him a desire to purchase. 
 
 123. Inducing resolution and inciting to action. — At- 
 tention, interest, and desire are simply states of mind. 
 Resolution to buy involves decision and action. There 
 are many salesmen who are able to carry the customer 
 through the first three steps, but who seem to be un- 
 able to close the sale. In some organizations there are 
 
PRINCIPLES OF SALESMANSHIP 
 
 145 
 
 men who are called "closers," and who are definitely 
 assigned to the task of bringing about action in the 
 case of "prospects" whom other salesmen have worked 
 up to the point of interest or desire, but whom they 
 are unable to bring to the point of actually placing 
 the order. The ability to "close" is the most valuable 
 item in the salesman's equipment. Unaided he can not 
 make sales unless he can inspire action as well as in- 
 duce the proper mental attitude toward his proposition. 
 A man may desire an article greatly and yet not be 
 willing or able to purchase it. A poor man may want 
 an expensive automobile very greatly, and yet not have 
 the resources to buy it. In most sales, however, the 
 salesman does not approach buyerit who he thinks are 
 unable to take advantage of his proposition, and be- 
 cause of that fact it is often true that desire, if it is 
 strong enough, can be developed into resolve to purchase 
 and definite action toward that end. 
 
 In taking this final step in the sale — in inspiring action 
 — ^the salesman must meet the objections of the customer. 
 If the salesman has accomplished the preceding steps, 
 he has presented his entire case, and he has now simply 
 to play the part of the debater who has presented all his 
 own points and who merely emphasizes them in his re- 
 buttal of the points that are presented by his opponent. 
 The customer urges the greater necessity of making 
 other purchases, or the inexpediency of investment. He 
 acknowledges the value of the article but prefers to de- 
 lay buying it, or he interposes any one of the countless 
 other objections that every salesman is familiar with 
 and has to face. The salesman meets them courteously 
 and positively by suggestion, by exciting the customer's 
 imagination, by emphasizing his previous points and 
 phrasing them so as to suit the conditions mentioned 
 
 III— 10 
 
146 
 
 SELLING AND BUYING 
 
 by the buyer. He lets the customer do most of the 
 talking, but he watches for every opportunity to in- 
 terpose a conclusive point that will meet the buyer's 
 objection to immediate action. The salesman is often 
 forced to employ direct argumentation in this last step 
 in the sale, and it is entirely permissible for him to 
 do so when the tactics of the buyer demand it; but the 
 salesman should never lose sight of the necessity of 
 retaining the customer's good-will and of so phrasing 
 his arguments that the match of wits will not degener- 
 ate into mere controversy and dispute. 
 
 There is a "psychological moment" when further talk 
 is useless and when the buyer is ready for the definite 
 suggestion to put his name "on the dotted line." Some 
 salesmen fail to recognize this moment. They talk a 
 buyer into a sale and then they talk him out of it again. 
 To recognize the moment for action when it arrives is 
 often the most difficult feature in the sale. Common 
 sense, experience, a thorough knowledge of human 
 nature, and careful attention to everything a buyer says 
 and does are the things that give a salesman the ability 
 to stop talking when he has said enough, and to present 
 the order blank for the buyer's signature. 
 
 To bring about resolution and action is the final pur- 
 pose of every sale; without it all the other steps are 
 worthless. But if attention has been properly at- 
 tracted, interest aroused, and desire created, and if the 
 salesman has used intelligence in selecting his prospect, 
 desire can be so strengthened and objections so met 
 that the customer Mrill take the desired action and the 
 actual sale will result. 
 
 124. Importance of steps in a saL,. — Mr. A. F. 
 Sheldon was probably the first to point out the presence 
 of these four steps in every sale. They are now recog- 
 
PRINCIPLES OF SALESMANSHIP 
 
 147 
 
 iiized by most of the investigators of the science of sales- 
 manship. It is not, however, to be inferred from the 
 emphasis that is placed upon the steps in a sale, that 
 tliey are to be consciously borne in mind by every sales- 
 man whenever he faces a customer. The world's sales- 
 men made successful sales for many centuries before 
 the steps were heard of, and the experienced salesman 
 of to-day seldom has definitely in mind the necessity of 
 surmounting the various steps in their logical order 
 whenever he attempts to make a sale. This does not 
 alter the fact that, whether the salesman is aware o^ 
 it or not, if the sale is to be successful, the buyer must 
 be made to give his attention, he must take an interest 
 in the proposition, he must experience desire to acquire 
 the goods that are offered to him, and he must make a 
 definite resolution to buy. Sales can be made without 
 any thought being given to these steps, but if a sales- 
 man studies them and learns some of the methods that 
 are calculated to enable him to surmount each one, he 
 will gradually find himself applying the methods un- 
 consciously whenever he is in a situation where they 
 might be helpful. 
 
 The value of the steps in the study of salesmanship 
 is comparable to the value of the fundamental princi- 
 ples in the study of any science. A man who analyzes 
 his activities and who knows why he applies certain 
 methods is bound to apply them with greater eflPective- 
 iiess and discrimination than the man who has other- 
 wise the same equipment but whose operations are 
 directed only by intuition or by a system of unrelated 
 bits of knowledge based upon the unorganized results 
 of his own experience or the experience of others. 
 
CHAPTER XIII 
 
 QUALITIES ^F THE SALESMAN 
 
 125. Factors in a sale. — We have discussed sales- 
 manship from the point of view of the steps that must 
 be surmounted in every successful sale. The subject 
 may also be considered from the point of view of the 
 ^factors that are present in all sales. These factors are 
 the salesman, the article to be sold, and the customer. 
 If a salesman is to make the greatest success in his pro- 
 fession, he must be trained not only in the four steps 
 and in the methods of surmounting them, but he must 
 also develop the proper relationship to each of the fac- 
 tors in a sale. The two points of view are so closely 
 related that it is impossible to separate them in his train- 
 ing, for the development of the proper relationship to 
 the factors is simply for the purpose of enabling him to 
 carry a sale through the four essential steps. 
 
 126. Personality of salesman. — The first factor is the 
 salesman. The development of the right relationship 
 of the salesman to himself means simply the develop- 
 ment of the proper personality — of the personal quali- 
 ties that must be possessed by the successful salesman. 
 If he possesses these qualities, he will unconsciously as- 
 sume the right attitude toward the article to be sold and 
 toward the customer. To consider the factors in a sale, 
 therefore, we have chiefly to consider the characteristics 
 of a successful salesman and the possibility of develop- 
 ing the necessary qualities. We shall consider in de- 
 tail some of the more important of these qualities. If 
 
 148 
 
QUALITIES OF THE SALESMAN 
 
 149 
 
 tliey were all purely natural attributes and were in- 
 capable of development by the man who did not possess 
 them— if it were true that a salesman is bom and not 
 made— a consideration of the characteristics of a suc- 
 cessful salesman would be worthless to the man who 
 aspires to success in selling. 
 
 As has been previously pointed out, however, the old 
 idea about the mystical nature of success in salesman- 
 ship has been exploded. Success in this profession as in 
 all others rests on certain principles. It ha§ been 
 proved to be possible for a man to obtain training in 
 these principles, and, if he has inclination for the work 
 and a fair equipment of brains and will power, to ac- 
 quire the qualities that will bring him at least a f"ir de- 
 gree of success. 
 
 In the following presentation of some of the charac- 
 teristics of an efficient salesman, the word salesman is 
 used in the broadest possible sense. It refers to any- 
 one, man or woman, who has any part in the distribution 
 of merchandise. To make the discussion concrete, how- 
 ever, we shall have in mind the individual who may be 
 termed the typical salesman— the man who actually 
 faces customers, who usually travels from town to town, 
 and upon whom the success of most selling organiza- 
 tions finally depends. He may represent a manufac- 
 turer or a jobber, or he may sell general lines or special- 
 ties by calling upon consumers. He may belong to 
 the largest class of all— the great army of sales-people 
 who distribute through retail stores more than ninety 
 per cent of the staple goods that are consumed in this 
 country. In all of these cases the essential qualities of 
 the successful salesman are the same. 
 
 127. Inclination for work. — No one should consider 
 entering the profession of salesmanship unless he feels 
 
150 
 
 SELLING AND BUYING 
 
 impelled to do so by a love of the work. Too often 
 in the past, salesmanship has been the last resort of 
 the unsuccessful man and the chance choice of the man 
 with no definite purixwe in life. It has been under> 
 taken because it seemed to offer easy work which re- 
 quired no training. Another false incentive to enter 
 the profession is tlie glamour with which the inex- 
 perienced are likely to invest the life of the traveling 
 salesman. The clerk in a retail store meets the job- 
 bers' and manufacturers' representatives that come to 
 sell to his employer, and the variety of their life ap- 
 peals to him in contrast to the monotony of his own 
 work. Or the minor clerk in a jobbing or manufactur- 
 ing establishment learns of the salaries that are paid to 
 the firm's traveling representatives, he observes the 
 freedom of their movements when they visit the home 
 office, and he is impelled partly by envy and partly 
 by discontent with his own work to aspire to their posi- 
 tions. 
 
 Such incentives as these do not often bring success 
 in selling. No one should undertake the profession of 
 salesmanship who does not feel that the work of sell- 
 ing is the one work that he wants to do. There are 
 disappointments in salesmanship, there are many dis- 
 comforts and hard, grinding labor. To bear up under 
 the rebuffs, temporary failures, physical trials, and 
 mental strain, the salesman must have the sure foun- 
 dation of love of his work — intense pleasure in the con- 
 stant conflict of minds and in the part that the sales- 
 man plays in the great game of business. 
 
 128. Mental ability. — The degree of success that is 
 attained in selling, as in anything else, depends largely 
 on the salesman's equipment of brains and will power. 
 For lack of a better term to indicate this essential 
 
QUAUTIE8 OF THE SALESMAN 
 
 151 
 
 equipment, we shaU refer to it m mental abibty. The 
 possession of quick wit is one of the necessary natural 
 endowments of tlie salesman. Will power can be 
 developed, but the man who is naturally duU can not 
 ordinarUy quicken his mental processes. He can not 
 hope for success in salesmanship any more than he can 
 hope for success in any other profession. There al- 
 waVs has been and there always will be an aristocracy 
 of brains, and the successful salesman certainly belongs 
 in that classification. . , , , * 
 
 Inclination for the work and a considerable amount 
 of mental abiUty are the necessary natural endowments 
 that must be possessed by the man who wishes to be- 
 come a successful salesman. They are fundamental; 
 they form the basis for training in the other quahties 
 that the salesman must possess. With inclination and 
 mental ability as a foundation it is submitted that there 
 is none of the qualities that are to be discussed here- 
 after that can not be acquired and developed to a 
 irreater or less extent by the individual who u de- 
 termined to make himself efficient in the work of sell- 
 
 '"^129. General education.— The high-grade salesman 
 is an educated man. His interests are broad, and he 
 is able to talk intelligently to many men on many sub- 
 jects. The salesman who knows his own line and noth- 
 ing more is narrow, and his efficiency is limited by the 
 boundaries of his knowledge. He can not serve either 
 himself or his employer to the best advantage, because 
 the introduction into the selling interview of a topic not 
 immediately concerned veith the article he is handbng 
 indicates to the buyer the mental limitetions of the sales- 
 man and makes it impossible for the latter to maintain 
 an attitude of equality with those with whom he deals. 
 
159 
 
 SELLING AND BUYING 
 
 There is scarcely any branch of human knowledge for 
 winch a salesman may not at some time have definite 
 use m his business activities. The more complete a 
 salesman's education has been, the greater are his op- 
 iwrtunities to win the confidence and respect of his 
 customers and to increase the prestige and sales of his 
 employer and of himself. 
 
 A salesman must be able to express his ideas clearly 
 concisely, and forcibly. He must possess conversa- 
 tional ability and the conmion sense to talk to the best 
 purpose. This is by no means the same as saying that 
 a salesman must be a fluent talker. The best sales- 
 men are not those who talk the most, but those who talk 
 less and make every word count. Nearly every sales 
 manager can point to men on his staff who are by no 
 means fluent talkers, but who possess the immensely 
 valuable ability of knowing exactly the right thing to 
 say at the right time, and of saying it in such a way 
 that they make the customer think that the idea is his 
 rather than the salesman's. The man who knows how 
 to make the customer do most of the talking is in a 
 decidedly advantageous position. 
 
 The power of expression-and of repression as well 
 -like all the other worth-while attributes of a salesman, 
 comes chiefly from long study and training. There 
 may be natural orators in the selling field, but they are 
 at a disadvantage with the man who has made a care- 
 ful study of the things he should say in any given cir- 
 cumstance, and of the exact manner in which he should 
 say them m order to gain the desired end. 
 
 130. //^«///,.-IIeaUh is one of the foundation stones 
 of success 11 any activity. Illness, physical weakness, 
 frequently enforced absence from work, and the lack 
 of Vital energy that always accompanies ill-health, are 
 
QUALITIES OF THE SALESMAN 
 
 153 
 
 fatal barriers to a salesman's success. Health is largely 
 a matter of habit. The man who takes care of him- 
 self has gone a long way toward establishing a sound 
 constitution, while the man who is ca-*^ jss of his body 
 and who uses up his energy in dissipa ^ must pay the 
 l)rice in failure. 
 
 The business world has pretty genera% abandoned 
 the idea that there is no connection between what a mfui 
 is at eleven o'clock at night and what he is at eleven 
 o'clock in the morning. The old-time "hit or miss" 
 method of selling concerned itself little with these 
 things. If a salesman turned in a fair volume of sales, 
 his personal faults and excesses were condoned. That 
 is not the attitude of the sales-manager of to-day. He 
 is not satisfied with a portion of a salesman's efficiency. 
 He demands maximum results, and the salesman who 
 remains in his employ must take every precaution to 
 conserve every ounce of energy he may possess. No 
 man can be intemperate in anything and expect to 
 develop himself to the utmost. The keen, fighting, 
 successful . salesman of to-day is clear-eyed and clear- 
 brained. He achieves the results he sets out to accom- 
 plish because he is absolute master of himself, and 
 mastery of self gives him mastery of others. 
 
 181. Importance of appearance. — The importance of 
 the salesman's dress and general appearance has been 
 already considered in our discussion of the external 
 characteristics that the sales-manager takes into con- 
 sideration when he interviews an applicant for a selling 
 ])osition. Salesmen are well-dressed because their 
 business demands it. Customers like to deal with pros- 
 l)erous houses. The salesman represents the house, 
 and, as the outward symbol of prosperity is good ap- 
 parel, it is essential for the salesman to dress as well as 
 
154 
 
 SELLING AND BUYING 
 
 his income will permit. But aside from the necessity 
 of presenting a good appearance for the benefit of his 
 old customers, he must have due regard for the first 
 impression he makes upon strangers. The well-dressed 
 man will often secure the attention of a "prospect" 
 where the man of careless appearance would utterly fail 
 to secure a hearing. Good clothes give a salesman an 
 advantage because they create a sentiment in his favor, 
 and for that reason they are of great importance in 
 the first step in every sale — securing the customer's at- 
 tention. 
 
 182. Honesty.— Tht man who is unable or unwilling 
 to be absolutely honest has no place in salesmanship. 
 It is true that there is no permanent place in any busi- 
 ness for a dishonest man, but lack of honesty is es- 
 pecially fatal in selling. A salesman is peculiarly liable 
 to temptations. He is so much his own master in the 
 details of his work that there are many opportunities 
 for dishonesty in his relations with his employer. If he 
 has an expense account, he must be constantly on his 
 guard to resist the temptation to "pad" the account. 
 If he makes reports that involve any labor in their 
 compilation, he must be certain that his information is 
 accurate and that his method of reporting is exact. He 
 must only seek credit for sales to which he is rightfully 
 entitled. He must remember that his time belongs to 
 his employer, and that the theft of an hour is as dis- 
 honest and as costly for his employer as the actual theft 
 of money. 
 
 If he understimates the importance of these things 
 and allows the line between right and wrong to be- 
 come blurred, he will soon find himself in such a maze of 
 dishonest habits that his efficiency will be at an end. 
 
QUALITIES OF THE BAILSMAN 
 
 l.W 
 
 The standard of business ethics is being saised. Ac- 
 tions that were condoned not so many years ago are no 
 longer tolerated. Just as the employer's responsibility 
 to the employe is being increased, so has the con- 
 scientious employe changed his attitude toward his em- 
 ployer. 
 
 The salesman, more perhaps than any other employe, 
 is the actual representative of the man who employs 
 him. If he is dishonest, his customer has reason to be- 
 lieve that dishonesty is the policy of his house. If he 
 misrepresents his goods, his employer must bear the re- 
 sponsibility. Such methods are not tolerated by the 
 ri^t sort of employers — and the other sort can not 
 buy the services of self-respecting men. Honesty with 
 himself, with his employer, and with his customers is 
 absolutely essential to a salesman's success. 
 
 188. Sincerity. — It is said that the whole fabric of 
 modern business is based upon confidence. This is cer- 
 tainly true of salesmanship. Few sales are ever made 
 unless the purchaser has cotifidence in the goods and in 
 the man who makes the sale. Nothing can so effectively 
 secure the customer's confidence as sincerity on the part 
 of the salesman. A salesman is severely handicapped 
 if he does not believe in his work, if he is not thoroughly 
 convinced of the quality of the article he is selling, and 
 if he does not feel absolutely sure that the sale will be 
 to the mutual advantage of the purchaser and of him- 
 self. If he is not in this state of mind, he must simu- 
 late sincerity where none exists; and the keen, experi- 
 enced buyer is quick to detect dishonesty either in the 
 article itself or in the attitude of the salesman. In- 
 sincerity breeds distrust, and distrust, once aroused, is 
 exceedingly difficult to displace. If a salesman can not 
 
156 
 
 SELLING AND BUYING 
 
 "talk" his Jine wiUi absolute sincerity, he had better 
 change employers, because he is carrying a handicap 
 that will seriously interfere with his success. 
 
 184. Fidelity.— Fidelity in salesmanship simply 
 means bemg honest with one's employer. Loyalty is 
 one of the most marked characteristics of the successful 
 salesman. He realizes the full responsibility that at- 
 taches to his position, and he is true to his trust. He 
 remembers always that he is the personal representative 
 of his employer, and he strives to conduct himself so 
 as to brmg no dishonor upon the house. 
 
 135. Co//r/my.— Courtesy is one of the first qualities 
 that a salesman must develop. His constant attitude 
 IS that of a supplicant for the time and attention of 
 another. At first, the customer almost inevitably adopts 
 the attitude that he is doing the salesman a favor in 
 hstenmg to him. Since this is the attitude of the man 
 he IS seeking to interest, the salesman must adapt him- 
 self to the circumstances, and win a hearing by the 
 courtesy of his bearing. He will meet rudeness and 
 discourtesy, but at all times he must retain control over 
 himself. A single discourteous word or action may 
 imperil his success in a sale. 
 
 The outward sign of courtesy is good manners. 
 Ihey can be acquired without price, and vet nothing 
 m the salesman's equipment pays larger dividends. 
 Good manners enable a salesman to appear at his ease 
 even in the most trying situations. The average sales- 
 man goes over the same territory many times. If he 
 does not make a sale to a man on one trip, he expects 
 to do so on the next, and the impression he leaves with 
 those who have failed to buy from him is of great im- 
 portance in determining the character of his future re- 
 ception by them. 
 
QUALITIES OF THE SALESMAN 
 
 157 
 
 Politeness and good manners are the outward expres- 
 sion of courtesy, but it is possible for a man to school 
 liimself to be polite without possessing real courtesy. 
 Courtesy is something more than mere manners. It 
 is one of the moral qualities that are essential for the 
 liighest success of the salesman. He should develop a 
 habit of consideration for the people he meets that will 
 make it impossible for him to harbor a discourteous 
 thought toward them, and will render the acts of 
 courtesy unconscious and actually indicative of his 
 mental attitude. 
 
 186. Industry. — Men have been knowii to take up 
 the profession of salesmanship because they were look- 
 ing for light work. They were disappointed. They 
 either reconciled themselves to strenuous labor very 
 shortly, or they ceased to be salesmen. The successful 
 salesman works hard, all the time. He does not know 
 wiiat "working hours" mean. Day or night, whenever 
 tiiere is an opportunity to make a sale, he is ready to 
 give himself wholly to the task of selling. He works 
 all the time because he likes to. He is engaged in sales- 
 manship because of his love of the work — not because 
 he is paid a certain wage for so many hours of labor 
 every day. He would rather make a sale than do any- 
 thing else, and he never thinks it a hardship to sacrifice 
 }>ersonal ease and comfort for the sake of matching his 
 wits against those of a possible purchaser. 
 
 Every case is a new problem to be solved, and the 
 salesman takes the keenest delight in its solution. 
 There have been salesmen — those of the old-fashioned 
 variety — ^who were inclined to let working hours be de- 
 termined by their physical condition and mental moods. 
 A few days of good results were followed by several 
 days of inactivity. No salesman can work intermit- 
 
l.w 
 
 SELLING AND BUYING 
 
 tently now-a-days and be a success. The modem game 
 of selling is played at too rapid a pace to permit any 
 of the players to rest on their past achievements. They 
 must be always up and doing-and the real salesman 
 needs but li ttle incentive to give himself without reserve 
 to the absorbing work of his profession. 
 
 137. Open-mindedness.—ln every occupation there 
 are some men who think they know all there is to be 
 known about their work. They resent suggestions from 
 others; new plans, new ideas have no interest for them 
 and they are satisfied to continue in the same rut that 
 they have followed all their lives. Such men are seldom 
 found m important positions. They are never found 
 at the head of a sales force. 
 
 The successful salesman is essentially open-minded. 
 If he is to acquire qualities that he does not naturally 
 possess, he must ordinarily learn what they are from 
 the statements of others, and he must be willing to 
 accept the frank suggestions of those whose advice he 
 seeks regarding the defective portions of his personality. 
 He is constantly watching for new methods of increas- 
 ing his efficiency. He realizes that he is engaged in 
 one of the most difficult of the professions, and he knows 
 that there are things he can always learn about his busi- 
 ness. He reads business literature, and he makes use 
 ot the information he gains from that source. If he 
 has a particularly hard selling problem to solve, he is 
 glad to receive the aid of his manager or a fellow sales- 
 man. He welcomes letters of constructive criticism, 
 and he reads sales bulletins and attends salesmen's con- 
 ventions with the determination to get from them every- 
 thing that can in any way assist him in developing his 
 efficiency. 
 
 Open-mindedness is a valuable asset. It is the 
 
QUALITIES OP THE SALESMAN 
 
 159 
 
 quality that keeps a man out of a rut; and it has been 
 truly said that "the only difference between a rut and 
 a grave is in the width and depth." 
 
 188. Persistence. — Persistence is the quality that pre* 
 vents a salesman from becoming discouraged. It is 
 based upon industry, courage, and patience. It en- 
 ables a salesman to follow up a "prospect" month after 
 month and year after year, if necessary, until the sale 
 is finally made. The salesman must work for the 
 future as well as for the present. The difficult, long- 
 pending order is usually more valuable than the im- 
 mediate, easily secured one. The salesman must often 
 plan his campaign for weeks and months in advance. 
 Every detail must be carefully worked out, and then he 
 must persistently follow his program until the last 
 barrier is removed and the sale is effected. 
 
 There is no quick and easy road to success in sell- 
 ing. The man who has the necessary training and who 
 plods persistently along is the man who gets the orders. 
 Mere brilliancy in salesmanship is notoriously unreliable. 
 The persistent salesman who is always at work and who 
 never gives up is the one whose order book contains 
 the most entries. 
 
 189. Tact. — A salesman without tact is an impossi- 
 bility. He would antagonize a customer more fre- 
 quently than he would secure his order. No amount of 
 inclination and training could bring a salesman success 
 if the development of this important quality had been 
 neglected. Tact is the attribute that enables a man to 
 deal with others without friction. It enables him to 
 adapt himself to circumstances and to do the right thing 
 in the right place. The lack of tact is largely a matter 
 of thoughtlessness and selfishness. 
 
 To develop the quality of tact, it is necessary for a 
 
160 
 
 SELLING AND BUYING 
 
 salesman to plan his selling talk with infinite care, to 
 think of the customer instead of himself, and to use 
 good judgment and common sense to guide him in all 
 his words and actions. The tactful salesman always 
 looks beyond the immediate action, and sees what its 
 results will be. He does not force himself upon a 
 dealer's attention, if the latter is obviously too busy to 
 talk to him. He avoids such topics of conversation 
 with his customers as politics and religion, which are 
 likely to lead to profitless argument. He humors his 
 customers' prejudices— when they are not antagonistic 
 to his goods— and conforms his manner and speech to 
 the known peculiarities of the man with whom he is 
 dealing. He discovers his customers' likes and dislikes, 
 records them systematically, and bases his selling talks 
 upon this information. He knows when to talk, and he 
 knows when he has said enough and it is time to leave 
 the customer or to close the sale. He talks about his 
 own goods— not his competitors', and he carefully avoids 
 suggesting in any way that the "prospect" has not used 
 good judgment in purchasing from another house. He 
 is a business diplomat. He guards his tongue and ac- 
 tions with the utmost care, and he gains a desired end 
 in a manner calculated to create the least friction and 
 to pave the way for future cordial relations. 
 
 140. Initiative.— There are three classes of em- 
 ployes: the first need to be told to do a thing but once; 
 the second have to be told three or four times, and then 
 there is no certainty that they will carry out instructions; 
 the third do the things that need to be done, without be- 
 ing told. They possess initiative. The ability to carry 
 out instructions is valuable, but the ability to anticipate 
 instructions and to do things on one's own initiative is 
 immensely more valuable. 
 
QUALITIES OF THE SALESMAN 
 
 161 
 
 There are many salesmen who are continually asking 
 the home office for help and advice in particular sales. 
 If they are men who can carry out instructions, their 
 manager is glad to give them the necessary assistance; 
 but such men are not the ones the management sends 
 on important missions or puts in charge of the best ter- 
 ritories. The typical, high-grade salesman is self-re- 
 liant and confident of his ability to handle any situa- 
 tion that may arise. He is not egotistical or unwilling 
 to accept aid when aid is necessary, but he is so trained 
 in the principles of his profession that he can usually 
 apply them immediately under any circumstances with- 
 out delaying action while he seeks advice, when delay 
 means a possible loss of the sale. The salesman with 
 initiative scents possible business as a newspaper re- 
 porter scents news. He takes advantage of unusual 
 conditions to secure unusual results, and he never loses 
 an opportunity to act with decision and judgment 
 when the interests of his employer are at stake. In 
 short, his work for his employer is as self-reliant and 
 constructive as it would be if he were working for him- 
 self. 
 
 141. Knowledge of the husinesa. — In a profession in 
 which there are so many qualities whose possession 
 measures the worker's success, it is impossible to pick 
 out one or more whose importance over-shadows that 
 of any of the others. It is certainly true, however, that 
 a man may possess all the qualitks that have been men- 
 tioned, and yet not be a salesman if he has no knowl- 
 edge of the busiiwss in which ht is engaged. The 
 phrase "knowledge of the business" is i»ed to include 
 knowledge of three diflferent subjects: 
 
 1. Knowledge of the goods the sakaman is to 
 handle. 
 
16S 
 
 SELLING AND BUYING 
 
 2. Knowledge of the policies, methods, aiid personnel 
 of the business house that employs him. 
 
 8. Knowledge of the business methods and of the 
 strength and weakness of competitors in the field in 
 which he is to operate. 
 
 In a previous chapter we have cmisidered modern 
 methods of training salesmen, in which practical ex- 
 jjerience in the construction of the things to be sold 
 plays an important part. No man can sell goods in- 
 telligently unless he is thoroughly familiar with them. 
 He frequently meets buyers who are fully conversant 
 with all the details of the line he is handling. If he 
 finds that his customer knows more about his goods than 
 he knows himself, he is in a decidedly embarrassing posi- 
 tion, from which he can extricate himself with credit 
 only by the exercise of exceptional tact. Absolute 
 knowledge of the goods to be sold is essential, and this 
 knowledge can be acquired only by specialization and 
 careful training. 
 
 The most promising material for machinery salesmen 
 is now to be found among the graduates of technical 
 schools, and school-book salesmen are largely recruited 
 from the ranks of teachers who have had actual ex- 
 perience in using the kind of books they are to sell. 
 In these as in all other lines the best results are secured 
 by the men who have the most extensive and exact 
 knowledge of the things they sell. 
 
 The salesman rei)resents his employer. Therefore, 
 he can not work to the best advantage unless he is fully 
 in touch with the house that employs liim. Too often 
 a new salesman is handicapped by being sent out "on 
 the road" before he has had opportunity to acquire 
 familiarity with the men and methods at the home office. 
 The wider the salesman's acquaintance among the mem- 
 
QUALITIES OP THE SALESMAN 
 
 16S 
 
 bers of the office force, the greater will be the prob- 
 ability of co-operation from all members of the organi- 
 zation. The salesman frequently works for weeks at 
 a time without coming into personal contact with his 
 manager or other members of the office organization. 
 At such times his efficiency is increased if he knows that 
 he is something more than a mere name to the people 
 at the home office, and that his personal acquaintance 
 with the various department heads will insure his or- 
 ders' being given as careful and prompt attention as 
 those of any other salesman. 
 
 But besides knowing the members of the organization 
 of which he is a part, the salesman should know the 
 methods and policies of the house that employs him. 
 For example: the routine of orders is, of course, ex- 
 plained to him, and if he has reports to make out, he is 
 )jiven instruction in the method of their preparation. 
 If his instruction in methods, however, goes no further 
 than that, one opportunity of increasing his efficiency 
 is being overlooked. Delays in filling orders are bound 
 to occur at times; the salesman should understand the 
 causes of these delays so that he can explain the matter 
 satisfactorily to his complaining customers. Many 
 salesmen look upon reports as unnecessary and unwel- 
 come burdens; if they have a complete knowledge of the 
 statistical system of which their reports form an im- 
 iwrtant part, they will make them with greater willing- 
 ness and accuracy than would otherwise be the case. 
 
 It is the duty of a salesman to keep his eyes and ears 
 constantly open for anything that may have even a re- 
 mote bearing on the sale of the goods he is handling. 
 An intimate knowledge of the competitive field is a 
 mark of the high-grade salesman. It is frequently and 
 correctly said that a salesman should talk to a customer 
 
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164 
 
 SELLING AND BUYING 
 
 about his own line, and not his competitor's. It does 
 not follow, however, that a knowledge of his competitor's 
 line is unnecessary. On the contrary, the salesman who 
 has an intimate knowledge of the quality and prices of 
 the goods that are in competition with his own is the one 
 who can make the most effective use of the selling points 
 possessed by the articles he is handling. 
 
 142. Confidence. — A salesman without confidence in 
 himself, in his goods, and in his employer can not be 
 successful. Confidence is not a quality that can be 
 cultivated separately like honesty, knowledge of the 
 business, industry, etc. It is the natural result of the de- 
 velopment of all the other essential qualities. A man 
 who makes g, conscientious study of his own physical, 
 moral, and mental characteristics, with the firm determi- 
 nation to correct his faults and to develop his efficiency, 
 and who is at all successful in carrying out that deter- 
 mination, thereby acquires justifiable confidence in him- 
 self, v.^hich enables him to take up any proposition with 
 reasonable assurance of his ability to carry it through 
 to success. 
 
 Likewise, an intimate knowledge of the line he is sell- 
 ing serves to put him at his ease in whatever situation 
 he may find himself. If he has studied his line and 
 has found it good, he has acquired a confidence in the 
 things he is to sell that no amount of criticism by a buyer 
 can destroy. On the other hand, if he has studied his 
 line carefully and has found it unworthy of confidence, 
 he had better never attempt to sell it, because he will be 
 constantly forced to counterfeit a confidence that he does 
 not possess. 
 
 Confidence in the house that employs him, in its finan- 
 cial condition, in its ability to keep its promises, in the 
 character and ideals of the men at its head, and in its 
 
QUALITIES OF THE SALESMAN 
 
 165 
 
 desire to deal honorably with everybody, is an immensely 
 valuable asset for the salesman. It increases his re- 
 spect and liking for his employer, it promotes satisfac- 
 "on and contentment, it gives him assurance of solid 
 .lacking, and it adds dignity to his work. 
 
 It has been stated that confidence is the basis of all 
 business. The constant effort of the salesman is to 
 create in the mind of the customer confidence in the 
 salesman, in the goods he is offering, and in the house 
 that makes them. If the man who is trj'ing to inspire 
 this confidence does not possess it himself, he can not 
 hope to be successful in inspiring it in another. 
 
 143. Enthusiasm. — A great authority on salesman- 
 sliip has said : A man might have honesty, health, abil- 
 ity, initiative, kno^vledge of the business, tact, sincerity, 
 industry, and the other qualities of salesmanship, and 
 without enthusiasm he would only be a statue. Enthu- 
 siasm is the white heat that fuses these qualities into one 
 effective mass. 
 
 The man who is enthusiastic has an intelligent, vital 
 interest in what he is doing. He works for the love of 
 the work, and would rather sell goods than do anything 
 else. He talks as if he meant what he said, because he 
 does mean it. He is fired with an intense desire to im- 
 part his enthusiasm to others. Enthusiasm makes a 
 man "talk shop" whenever there is the slightest chance 
 of influencing a sale; it enables him to forget disappoint- 
 ments and failures and to start afresh with renewed de- 
 termination to succeed. 
 
 Emerson says that no great thing was ever accom- 
 plished without enthusiasm. This is certainly true in 
 selling, as in everything else. Enthusiasm is the force 
 that grips the attention of the customer, that impresses 
 him with the salesman's sincerity, that makes him forget 
 
166 
 
 SELLING AND BUYING 
 
 his objections, and that rushes the sale past all obstacles 
 to a successful consummation. It is a quality that can 
 be acquired, and it must be acquired before success can 
 come m the fullest measure to anyone in any line of 
 endeavor. 
 
 Thousands of salesmen begin each working day with 
 the determined purpose of working up their enthusiasm 
 to a pomt that will carry them over all the difficult places 
 m the day's interviews. Their method is to "seU them- 
 selves" every day before they try to present their propo- 
 sitions to anyone else. They go over every selling ad- 
 vantage of their goods, they present their arguments to 
 themselves just as they would to the most obstmate 
 buyer, and they prove to themselves absolutely that their 
 propositions are the best ones on the market, that their 
 houses are the best in the business, and that no one is so 
 capable of selling their lines as they are themselves. 
 This method of stimulating enthusiasm brings results. 
 It refreshes the salesman's memory with the essential 
 points m his selling talk, it vitalizes him for the day's 
 work. It rekindles confidence in himself, in his line, and 
 in his employer, and it gives him the magnetic energy 
 to impart his confidence to others. 
 
 Enthusiasm is the quality more than all others that 
 makes a salesman oblivious of difficulties, that vitalizes 
 his selling efforts, makes him forceful and optimistic 
 turns apparent defeat into victory, creates a bond of 
 sympathy between buyer and salesman, changes apathy 
 into mterest, and makes personal salesmanship the vital 
 factor that it is m the distribution of the world's goods. 
 U^. Opportunities in salesmanship.-In this charac- 
 ter sketch of a successful salesman we have mentioned 
 only the more miportant of the qualities that are essen- 
 tial to success m salesmanship. Their number and 
 
QUALITIES OF THE SALESMAN 
 
 167 
 
 variety are indicative of the growing importance and 
 complexity of this absorbing profession. Modem indus- 
 try offers opportunities that were not dreamed of a gen- 
 eration ago, and in no field of business are there greater 
 opportunities than in the field of salesmanship. It calls 
 for the highest type of ability and training, its demands 
 are severe, but its rewards are commensurate with its 
 requirements. 
 
CHAPTER XIV 
 
 THE BUYER AND HIS WORK 
 
 145. Buying the universal business activity.— Buy ina 
 IS probably the most common of all business activities 
 In any marketing or manufacturing business a portion 
 ot the profits are very directly attributable to the care 
 with wh,ch the stock of the store or the raw materials 
 for the factory are purchased. It is true that the buying 
 end of the business is not of primary importance in such 
 industries as farming, lumbering, mining, and banking, 
 which are either extractive or contributive, and are not 
 concerned with the sale of goods that have been pre- 
 viously purchased or with the working up of raw mate- 
 rial into a manufactured product. Even in these indus- 
 tries, however, the efficient conduct of the business re- 
 quires the purchase of certain supplies. The farmer 
 and lumberman must purchase their tools with care the 
 miner must exercise skill and economy in buying his 
 valuable machinery, and the banker must guard his 
 profits by seeing that the utmost discretion is employed 
 in the purchase and use of office supplies. 
 
 There is no business or profession that does not in- 
 volve the purchase of supplies of some sort. Buying is 
 a umversal business activity. Despite its importance 
 in every orgamzation, however, the subject of buying 
 has received little attention from those who contribute 
 to the rapidly growing literature of business. The pur- 
 chasing ag-ent has had no text-books and few reference 
 works; his own experience and observation have been 
 
 168 
 
THE BUYER AND HIS WORK 
 
 169 
 
 almost the only factors in his training, and he has had 
 little opportunity to profit by the experience of others 
 whose methods and systems might help him in his own 
 activities. 
 
 It is partly due to this fact that the buyer frequently 
 is a "one house" man ; that is, his success in one organi- 
 zation has not always been accepted as proof of his 
 ability to secure equal results in a similar capacity with 
 another employer. It must be borne in mind, of course, 
 that the amount of detailed knowledge required of the 
 buyer is so great that, even under the most favorable 
 circumstances, it would not be easy for him to go from 
 one line of business to another and to adapt himself 
 (juickly to the new conditions. But even with due 
 weight given to that consideration, it is not to be ques- 
 tioned that general training in the principles of his work 
 may be of assistance to the buyer just as it is to the 
 salesman or the manufacturer or the accountant or the 
 correspondent. 
 
 146. Scope of buyer's duties. — The modem tendency 
 is continually to broaden the scope of the buyer's duties. 
 At one extreme is the member of the small office organi- 
 zation to whom is delegated the task of purchasing the 
 office supplies. At the other extreme is the buyer for 
 the large factory who purchases raw materials, super- 
 vises their storage and distribution, and is largely re- 
 sponsible for the satisfactory working of the cost ac- 
 counting system so far as it pertains to the processes of 
 production. The duties of the buyer are so closely re- 
 lated to those of other employes that the tendency is 
 more and more to give him a direct interest in all the 
 work that is miniediately allied to purchasing. 
 
 In a retail or wholesale business we have found that 
 it is not customary to attempt any separation of the 
 
170 
 
 SELLING AND BUYING 
 
 functions of buying and supervision of selling; and in 
 the complex factory organization the close relation be- 
 tween the actual buying, the storing, and, to some ex- 
 tent, the preliminary working on the raw materials that 
 go mto the finished product, has made it frequently ad- 
 visable for the purchasing agent to be placed in charw 
 of all of these activities. 
 
 147. Buyer's problems.— The chief problem of the 
 buyer is to obtain low prices and quick delivery on smaU 
 quantities. If he could always purchase in large quan- 
 titles, his duties would be greatly simplified, and the pur- 
 chasing would become largely a matter of system and 
 routine. The possibility of a large order immediately 
 attracts those who have the desired supplies. One sales- 
 man bids against another to bring down the price, and, if 
 the bidders are of equal responsibility, the placing of the 
 order simply means selecting the lowest bid. Ordina- 
 riiy, however, the buyer is not in this enviable position. 
 He must frequently go into the market with a smaU 
 order which in itself is not attractive to the suppliers, 
 and by his knowledge and skill obtain the best price 
 that IS possible under the circumstances. 
 
 148. Two opposing considerations.— In his desire to 
 do his work in the most efficient manner, the buyer is 
 constantly limited in his activity by the conflicting re- 
 quirements of two opposing considerations. The first 
 of these is the necessity of purchasing in the largest pos- 
 sible quantities in order to secure the lowest possible 
 price. If, for example, one thousand units of a certain 
 article can be used by a factory within a reasonable time, 
 and, if the price for that quantity is lower proportion- 
 ately than for one hundred units of the same article, it is 
 to the buyer's advantage to purchase the larger amount. 
 Is it equally advisable, however, for him to secure a still 
 
THE BUYER AND HIS WORK 
 
 171 
 
 lower proportionate price by purchasing in quantities 
 of, say, ten thousand units? The requirements of eco- 
 nomical buying force him to take advantage of the 
 quantity price whenever possible, but the question of 
 what is economical buying must receive careful consid- 
 eration in each individual case. 
 
 The temptation to buy heavily is not occasioned only 
 by the low price generally allowed on large orders. An 
 unusual condition of the market frequently tempts the 
 buyer to purchase a large stock of needed supplies under 
 peculiarly advantageous circumstances. The restaurant 
 keeper may have an exceptional opportunity to buy 
 fresh fruit at a very low price. He knows that he will 
 bave to pay more to-morrow or next week, and if the 
 food could be used before it deteriorates in quality, he 
 would save money by purchasing at to-day's price. The 
 clothing dealer may be offered a lot of garments at a 
 special price which will mean a large profit on the trans- 
 action. If he could accurately judge the future de- 
 mand, he might buy heavily because of the unusual in- 
 ducement. The automobile manufacturer may have a 
 chance to make a long time contract with a certain manu- 
 facturer of gasolene engines on especially favorable 
 terms. If he could be sure that improvements and econ- 
 omies would not be effected in gasolene engines in the 
 near future, it would be to his advantage to enter into 
 the contract. 
 
 In all these cases the price is tempting; and, if that 
 were the only consideration, the buyer would be saving 
 money by taking advantage of the quantity figure. 
 There is, however, a second consideration that enters 
 into every buying problem. This second considera- 
 tion is the necessity of limiting the size of the purchases, 
 which may be caused ( 1 ) by financial considerations, or 
 
178 
 
 SELLING AND BUYLNG 
 
 (2) by the possibility of depreciation. Let us examine 
 these two considerutions. 
 
 149. Vimmcinl co„mhratio,nf.—ln a small establish- 
 ment the resources of which are meager and the credit 
 Jmnted, the financial consideration is the one of first im- 
 portance; and this consideration loses little of its impor- 
 tance even in the larger and richer organizations. The 
 abdity to turn over capital rapidly is of vital impor- 
 tance m successful merchandising, and it is never advisa- 
 ble therefore, to tie up capital in supplies beyond the 
 extent required by economical buying. The manufac- 
 turer must likewise beware of an unnecessary or exces- 
 sive investment of capital in the purchase of raw 
 materials. 
 
 In order to guide the buyer in his determination of 
 the proper quantities to purchase, maximum quantities 
 are usually determined upon, which the stock of supplies 
 Tu°u ""^^^^^^^ «f ^ny particular kind must not exceed. 
 Although these quantities are fixed only after careful 
 consideration of the peculiar requirements of the or- 
 ganization and the nature of the supplies, it is pkin that 
 at times the arbitrary limits may seriously embarrass the 
 buyer in his work. They are, however, valuable, be- 
 cause without them the buyer would be tempted, under 
 the provocation of exceptional prices, to tie up more 
 capital ,n one line than the financial condition of the 
 house would j ustif y. 
 
 150. PossihiUty'of depreciation.~Although the chief 
 reason for limiting the buyer's purchases is the financial 
 one, he must also constantly bear in mind the peculiar 
 nature of the goods he buys and the possibility that they 
 may deteriorate in quality and depreciate in value If 
 goods bought to-day would in all cases have the same 
 value at all times in the future, the purchasing agent 
 
THE BUYER AND HIS WORK 
 
 173 
 
 inioht be justified in yielding to the temptations of price 
 and in making purchases lieyond the maximimi limit. 
 IJiit this is not the case; depreciation is a factor that 
 :iiust enter into all his calculations. 
 
 1.>1. Illustrationa. — The force of this consideration 
 muy be illustrated by a few examples. It would be 
 Mry wasteful for a restaurant keeper to purchase more 
 (if perishable commodities than the probable demand 
 would justify. For instance, he must ordinarily buy 
 Iresh meat and vegetables only to meet the demand 
 from day to day, while in the case of canned goods 
 lie can buy in a low market and safely store the goods 
 until they are needed. The buyer for a clothing store 
 can not purchase for more than a single season, because 
 styles in garments are constantly changing, and cloth- 
 ing left on hand at the end of the season must be sold 
 with a sacrifice of normal profits. In an industry such 
 as the manufacture of automobiles, in which processes 
 are constantly being changed and improvements ef- 
 fected, it would not be advisable for a buyer to stock too 
 heavily with the various kinds of parts, because of the 
 ehance of their being superseded by some better devices 
 in the near future. In all these instances depreciation 
 is a factor that the buyer must consider carefully in de- 
 termining the quantities that it is safe for him to pur- 
 cliase. 
 
 152. The task of the buyer. — \ 'd have seen that 
 although the buyer is always anxious to get the low 
 (juantity price, he is constantly face to face with the ne- 
 cessity of limiting the size of his purchases, both on ac- 
 count of the resources and financial policy of his em- 
 ployer, and because of the nature of the articles to be 
 purchased. This dual aspect of the buyer's task makes 
 his problem a difficult one. He must view every prop- 
 
171 
 
 SELLING AND BUYING 
 
 os.t.on from two points of view, and the success of his 
 work ,s judged by the degree to which he reconciles the 
 two conflicting interests that enter into every decision. 
 
 159. Speculative buying.-There are times, of course, 
 when the maximum stock figure is exceeded, and when 
 the advantages of the quantity price outweigh the dis- 
 
 ^upphes If there is any possibility of depreciation in 
 tilin P^r^i^^^i* however (and there are compara- 
 t.vely few kinds of goods that do not depreciate in 
 value), the buyer who exceeds the maximum stock limit 
 IS purchasing on a speculative basis. Much buying is 
 of this character, and the successful buyer has to take 
 many chances; but even in speculative buying, its basis 
 must be the thoughtful opinion of the buyer fonsequent 
 upon a careful balancing of the two conflicting consid- 
 erations that are ever present in his work. 
 
 154. Qualifications of buyer.— Because of the com- 
 plex nature of the problem that continuaUy confronts 
 him, the buyer must possess unusual qualifications for 
 h^s work. The most important of these qualifications 
 may be grouped under the general term, "knowledge." 
 ^J;'' r^ be subdivided into (1) knowledge of the 
 house by which he is employed, (2) knowled^ of de- 
 mand, (8) knowledge of goods, including quSty and 
 present and prospective prices, and (4) knowledge of 
 the sources of supply. * 
 
 155 Knowledge of the house by which buyer is em- 
 M~^o buyer can intelligently carry on his work 
 unless he is completely in touch with the policy of his 
 house He must know (l) its financial ^souLes, so 
 that he may determine whether he is in a position to de- 
 mand and receive the most advantageous credit terms; 
 (2j in a general way at least he must know the usual 
 
 ^^^_ 
 
THE HUVEK AND HIS WORK 
 
 Hf) 
 
 and unusual demands upon the available funds of the 
 house, so that he may be able to determine the possibility 
 of any heavy buying that may seem desirable; (8) he 
 must know the attitude of the owner or the directors 
 toward the question of expansion or curtailment of pro- 
 duction, so that if there are any plans in contemplation 
 affecting the kind and quantity of the output, he may 
 k' able to govern his purchasing accordingly. 
 
 136. Knowledge of manufacturing, processes. — In 
 addition to the policies and resources of the house he 
 represents, the buyer must know thoroughly the manu- 
 facturing processes through which the raw material 
 jJEsses. The buyer deals with many salesmen. Each 
 one probably handles but a single article or line and in 
 that one field he is an expert. The salesman knows ab- 
 solutely the exact place and advantages of his article or 
 line in the manufacturing process of the house to which 
 he is trying to sell. He is, therefore, at an advantage 
 over the buyer unless the latter also has a complete 
 knowledge of how the product of his house is manufac- 
 tured. 
 
 The buyer must know the uses for the various things 
 that he buys. A certain article may be made in several 
 grades or qualities, only one of which will answer for 
 the particular purpose for whict it is used. Unless this 
 information is in the buyer's possession, he is likely to 
 he misled into the purchase of a grade or quality that 
 can not be used by the factory. So important is this 
 knowledge of processes that often the buyer is given his 
 position because of thorough training in all depart- 
 ments of the factory. If it is important for the sales- 
 men who are to sell the finished product to know the 
 product absolutely through actual experience in its 
 manufacture, it is at least of equal importance that this 
 
170 
 
 SELLING AND BUYING 
 
 same knowledge be possessed by the man whose skill and 
 knowledge are responsible for the factors that enter 
 primarily into the cost of the finished article. 
 
 1.37. Familiaritii xvith departmental divisions of house. 
 — The efficient buyer is familiar with the departmental 
 divisions of his house, and with the exact nature of the 
 duties of each division. He buys not only raw material 
 for manufacture but the various tools of the business 
 and the general office supplies as well. In many organi- 
 zations it is his duty to pass upon the requisitions of de- 
 partment heads or their subordinates for supplies of 
 various sorts. To do this intelligently he must have a 
 complete grasp of the needs of the departments and of 
 the material that is best suited to accomplish their pur- 
 poses. This particular function of the purchasing 
 agent is one that requires other qualifications bes' : ?s 
 knowledge, but the first necessity in this work, as in all 
 other branches of the buyer's activity, is knowledge of 
 the wants of the business and of the materials that w\\\ 
 satisfy them in the most effective and economical man- 
 ner. 
 
 158. Acquaintance with important employes. — 
 Closely associated with knowledge of the departmental 
 divisions and their work, is knowledge of the men who 
 make up the organization. Through his function of 
 buying supplies for all parts of the business— office 
 as well as factory — the purchasing agent is brought 
 into contact with practically all of the important em- 
 ployes. 
 
 If he has the power of vetoing their requisitions, a 
 knowledge of their individual characteristics is essential 
 to guide him in this important duty. If a careful, con- 
 servative department head sends in an unusual requisi- 
 tion for new and expensive supplies, the buyer will 
 
THE BUYER AND HIS WORK 
 
 177 
 
 more readily fill the requisition than he would if it came 
 from a man who was continually ordering unnecessary 
 articles and attempting to install expensive systems 
 without any preliminary test of their efficiency. In re- 
 jecting a requisition it must be done in a manner calcu- 
 lated to produce the least friction and unpleasantness, 
 and in the performance of this delicate task a knowl- 
 edge of the men with whom he is dealing is a valuable 
 asset for the purchasing agent. 
 
 We have shown that the most important qualification 
 of the buyer is knowledge and that the class of knowl- 
 edge he must first acquire is knowledge of the house 
 by which he is employed. We have subdivided knowl- 
 edge of the liouse into the following headings, and have 
 shown how each is of importance to the buyer in his 
 work: 
 
 1. Knowledge of the house in general, including its 
 financial resources and trade policies. 
 
 2. Knowledge of manufacturing processes. 
 
 3. Knowledge of departmental divisions and their 
 works. 
 
 4. Knowledge of the characteristics of the individual 
 members of the organization. 
 
 159. Knowledge of demand. — The second class of 
 knowledge that the successful buyer must possess is 
 knowledge of demand. In acquiring this knowledge 
 the man who purchases raw material for a factory has a 
 relatively simple problem as compared with that of the 
 buyer in a retail or wholesale store. The quantity of 
 the various kinds of raw material that will be required to 
 keep the factory running to capacity is usually capable 
 of exact determination. The stock-keeper has a card 
 for each item that enters into the productive process. 
 On this card is shown the minimum amount of that 
 
 111—19 
 
178 
 
 SELLING AND BUYING 
 
 particular commodity tliat should be on hand at all 
 times, as well as the maximum quantity that the stock 
 must not exceed. 
 
 Under normal conditions it is a relatively simple mat- 
 ter to keep the supply of each item somewhere between 
 the maximum and minimum figures. Although this 
 system takes into account the possibility of orders that 
 will require the maximum output of the factory, it does 
 not provide a mechanical method of determining demand 
 when it is affected by such abnormal ccxiditions as the 
 following: labor troubles that make it necessary to close 
 the plant ; commercial crises that result in an unexpected 
 decrease in orders; mechanical improvements that render 
 obsolete part of the stock of raw materials or equipment; 
 changes in popular taste or requirements that affect the 
 demand for the finished product. 
 
 No system, however carefully developed, can enable 
 the buyer to foresee the future or to guard against all 
 possible contingencies. Nevertheless the buyer is con- 
 stantly under the necessity of attempting to foresee the 
 future demand for the things he purchases or for the 
 finished product into which his purchases enter as raw 
 materials. He is successful in this attempt largely in 
 proportion to his experience and to his detailed knowl- 
 edge of every condition that may have any influence 
 upon demand. He frequently fails, but, in view of the 
 fallibility of human judgment, it is surprising how often 
 the successful buyer is able to foretell accurately the 
 conditions that will obtain in his business. 
 
 160. Buyer for wholesale or retail store. — ^We have 
 seen that the factory buyer has certain systematic aids 
 in his purchase of raw materials, although he is by no 
 means entirely relieved of the necessity of judging fu- 
 ture demand. The buyer for a wholesale or retail store, 
 
THE BUYER AND HIS WORK 
 
 179 
 
 oil the other hand, has a more difficult problem to solve. 
 A merchant's stock usually consists of staples and novel- 
 ties. To the extent that an article is a staple, and is, 
 tiierefore, in comparatively steady demand, its purchase 
 can be systematized in a manner similar to that in which 
 the factory buyer systematizes his purchase of stock 
 parts for the finished product. 
 
 But no such method can be applied to the purchase of 
 novelties. How, for instance, is the wholesale procer 
 to judge of the probable demand for a new brand of 
 breakfast food? Obviously in the merchandising field, 
 buying inevitably involves a considerable factor of 
 speculation. Nevertheless the buyer's opinion of fu- 
 ture demand must always be based upon something 
 tangible, and the surest foundation for successful judg- 
 ing of the future is wide experience in the past and the 
 broadest possible knowledge of the innumerable condi- 
 tions that influence demands. 
 
 161. Knowledge of goods to he purchased. — The pur- 
 chasing agent must know his house, he must know de- 
 mand, and, in addition, he must know the goods with 
 which he has to deal. • He must be able to judge of their 
 quality, and he must have a thorough grasp of the sub- 
 ject of prices, both present and prospective. Price 
 and quality are so closely related that it is unnecessary 
 to treat them separately in this consideration of the 
 buyer's qualifications. 
 
 The buyer must know values; in other words, when he 
 makes a purchase, he must know whether he is getting 
 the most that is possible for the amount expended. To 
 do this he must have an intimate knowledge of raw 
 materials, of production processes, and of production 
 costs. Suppose, for example, that a buyer is purchas- 
 ing iron castings in a competitive market. Their value 
 
1«() 
 
 SELLING AND BUYING 
 
 is largely dependent on the cost of the raw material, the 
 nature of the foundry processes, and the cost of these 
 processes. To purchase intelligently the buyer must 
 have knowledge of all these factors. If he is purchasing 
 a complicated piece of machinery, the problem is more 
 difficult than in the simple case of the purchase of iron 
 castings. Too often the careless buyer judges of the 
 merits of articles only by comparing one with another 
 instead of with the ideal product which should be the 
 standard of comparison. The latter is the method that 
 most successful buyers use. 
 
 If a buyer is required to purchase at different times, 
 a large variety of articles, it is obvious that it is a phy- 
 sical impossibility for him to familiarize himself with 
 all the articles he is required to buy. At least, he can 
 not do so until he has had long experience in his duties. 
 In such a case it is necessary for him to analyze the 
 situation and to select the articles that enter most fre- 
 quently into his purchases and that, because of their 
 nature, present the greatest difficulties to the purchas- 
 ing agent who is unfamiliar with them. This list should 
 receive his first study. When he has secured a work- 
 ing knowledge of the essential details of the articles on 
 the list, he should gradually add to them, until he has 
 obtained a fair familiarity with all the goods that he 
 may be called upon to handle. 
 
 This suggested method of acquiring familiarity with 
 raw materials and productive processes is probably of 
 too general a nature to be of much practical value to the 
 ambitious buyer. The fact that it is general, and that 
 nothing more definite is possible within the limits of a 
 general discussion of the subject of buying, is indica- 
 tive of the difficulty of the buyer's problem. The success- 
 ful buyer is a store-house of detailed information. 
 
THE BUYER AND HIS WORK 
 
 181 
 
 Systems of various kinds help him in accumulating, 
 filing, and using data; but behind the system must al- 
 ways be the ability to analyze goods and processes and 
 determine the things about them that ought to be known, 
 to investigate the essential points, and to store the ac- 
 (juired information in such a way that it can be employed 
 immediately whenever necessity arises for its use. 
 
 We have said that the purchasing agent is chiefly 
 guided in his determination of values by a knowledge 
 of raw mater '. and of productive processes. There 
 are, however, ol ler items to be taken into consideration, 
 such as profits, selling and administrative expenses, and 
 the like. It is far more difficult to acquire knowledge 
 of these factors than it is to acquire knowledge of mate- 
 rials and processes. 
 
 Selling costs, for instance, vary greatly in diflFerent 
 houses handling the same line, and no buyer can expect 
 to do more than approximate the cost of this item. The 
 same thing is true to some extent, of course, of produc- 
 tion costs. In modern factories, however, there are by 
 no means the variations in these costs that there are in 
 the costs of selling. 
 
 The increasing application of the principles of scien- 
 tific management is doing much to eliminate the uncer- 
 tainties of production costs; and, while there probably 
 will never be uniformity in the cost of producing identi- 
 cal goods in any two factories, it is becoming more and 
 more possible for the buyer who has made a complete 
 study of the cost of producing a certain article in one 
 factory, to make a fairly satisfactory estimate of the 
 cost of producing a like article in any factory where 
 similar productive methods are employed. 
 
 162. Judging future prices. — In judging future 
 prices the buyer must depend on the same things that 
 
18a 
 
 SELLING AND BUYING 
 
 guide him in judging future demand; namely, past ex- 
 perience and wide knowledge. The buyer who foresees 
 an era of low or of high prices and who adjusts his pur- 
 chases accordingly, is in a position to save his employer 
 a great deal of money. 
 
 The average man who attempts to determine which 
 way the market is going bases his guess on insufficient 
 information or on no information at all. The small 
 speculator who attempts this feat usually loses only his 
 own money. The buyer who follows the same tactics 
 stands a chance of ruining his employer. 
 
 Any buying on the basis of future prices is specula- 
 tive and dangerous. If it is attempted, the buyer's 
 judgment must be based on the most complete informa- 
 tion that it is possible to acquire. For example, the 
 buyer for a large cotton mill is keenly interested in the 
 possible fluctuations in the price of raw cotton. No 
 item of news bearing on the cotton supply escapes his 
 attention. He is equally interested in the appearance 
 of the boll weevil in Texas, in a threatened mutiny in 
 India, and in the failure of the cotton crop in Egypt. 
 
 In like manner, the tea buyer for a wholesale grocer 
 interprets in terms of future prices such news items as 
 an agreement of the Powers affecting the "open door" 
 in China, the Japanese annexation of Formosa, and the 
 imposition of a new duty on tea by Congress. These 
 examples suggest the range of information that the 
 buyer must ^)or.sess if his judgments of price movements 
 are to be anything more than mere guesses. 
 
 163. Knowledge of sources of supply. — The last 
 class of knowledge that the buyer must possess is knowl- 
 edge of the sources of the supplies that he is to pur- 
 chase. It is possible to acquire this information ac- 
 curately, and to systematize it in such manner that the 
 
THE BUYER AND HIS WORK 
 
 188 
 
 data is always readily accessible. In general, the 
 buyer must know the following items about the busi- 
 ness houses from which it is possible to purchase the 
 goods he desires: location and facilities for delivery; 
 ability to keep promise., financial responsibility; pro- 
 duction methods; selling methods. 
 
 164. Importance of location of various houses. — Ob- 
 viously, the location of the various houses that can sup- 
 ply the buyer's wants is an important factor in deter- 
 mining which one is to secure the order. If the same 
 quality of coal were mined in Colorado and in Illinois, 
 the man in Colorado who wanted that grade of coal 
 would be foolish to order it from Illinois. Location 
 also has an important bearing on the ability to ship 
 safely and quickly. A small order for furniture for a 
 Milwaukee dealer would go more quickly and with a 
 greater chance for safety from Grand Rapids than from 
 some point in North Carolina. Facilities for delivery 
 have a close connection with location. In placing an 
 order with a local dealer the buyer is influenced by the 
 consideration of whether he must send his own truck 
 for the supplies, or whether the dealer will deliver them. 
 An order for grain to be delivered by rail would prob- 
 ably not be placed with a dealer who did not have proper 
 elevator facilities for unloading it into cars. 
 
 165. Ability of salesman's house to keep his promises. 
 — To obtain an order, an irresponsible salesman may 
 make any promises respecting such items as quality 
 of goods and time of delivery. The buyer must know 
 whether the salesman's house is capable of keeping these 
 promises. A certain buyer wanted a supply of iron 
 bolts for an urgent purpose. He had been dealing 
 with Messrs. A. & B., and he knew that they could de- 
 liver the goods in the necessary time. Messrs. X. & Y., 
 
184 
 
 SELLING AND BUYING 
 
 liowever, made a bid for the business at an exceptionally 
 low price. They promised prompt delivery, and the 
 buyer a^freed to give them the order. When the agreed- 
 upon delivery period had expired, only a small pro- 
 portion of the total order had been fUled. The low 
 price that was offered had tempted the buyer to run the 
 risk of the new firm's not being able to keep their promise 
 of delivery. This method of buying does not pay; the 
 successful buyer must have some good reason for be- 
 lieving that the house that gets the order can fill it in all 
 of its details. 
 
 166. Credit rating of seller.—Closely related to the 
 ability to keep promises is the financial responsibility 
 of the houses with which the buyer deals. Many a large 
 contract has gone to a small concern which did not have 
 the resources to complete it. The results in such cases 
 are always annoying, and frequently productive of fi- 
 nancial loss to the purchasing house. The buyer can 
 not afford to deal with houses that are not as fully able 
 to fill the order as his house is able to pay for the goods. 
 In other words, in the placing of a large order the credit 
 rating of the seller is as important as that of the buyer. 
 167. Important to know costs.— The importance to 
 the buyer of possessing a knowledge of productive proc- 
 esses has already been considered in connection with 
 the discussion of the relation between value and the cost 
 of productive processes. It is of importance to the 
 buyer in another way. Suppose, for example, that he 
 wants to purchase machine tools, and that he is visited by 
 a salesman representing a manufacturer who, the buyer 
 knows, has in operation a satisfactory system of cost ac- 
 counting. It is possible for that manufacturer, then 
 to know the cost of his product with a reasonable degree 
 of accuracy. To this cost he presumably adds a fair 
 
 V 
 
THE BUYER AND HIS WORK 
 
 185 
 
 profit, and the result is a price that the buyer has little 
 tliaiice (»f "beating down"; because few manuiacturers 
 will accept an order at or below cost when they really 
 know what the cost is. They will not do so unless they 
 are willing to sell below cost to secure an order that may 
 result in profitable future business. 
 
 If the buyer knows of the operation of the manufac- 
 turer's cost system, he can usually save his own and the 
 salesman's time by accepting the first quotation as final. 
 On the other hand, a buyer may be interviewed by a 
 salesman who represents a house in which cost account- 
 ing is unknown or inefficiently operated. Neither the 
 manufacturer nor the salesman knows the real cost of 
 what he is selling. He usually has a variable scale of 
 prices, and if the buyer knows of the absence of suitable 
 cost methods, and if he is shrewd enough, he may be 
 able to force down the price to a point actually below 
 the cost of production. 
 
 There is nothing ethically wrong in a buyer's securing 
 any price that it is possible for him to obtain, if he 
 avoids misrepresentation and uses only honest methods; 
 because no independent supplier can be forced to make 
 any price that he does not wish to make. If a manufac- 
 tui-er's business methods are such that he does not know 
 his cost of doing business, and if he consequently per- 
 mits his salesmen to make unprofitable prices to get an 
 order, the buyer is perfectly justified in taking advan- 
 tage of such a condition. 
 
 168. Selling methods of houses dealt with. — The last 
 important item for the buyer to know about the houses 
 with which he deals is their selling methods. Many 
 manufacturers, even when they have an exact knowl- 
 edge of the cost of producing and marketing their prod- 
 uct, consciously make their list prices considerably in 
 
186 
 
 SELLING AND BUYING 
 
 excess of the figure they will be satisfied to receive. 
 This is done sometimes to conceal the real selling prices 
 from competitors; at other times, to make buyers think 
 that they are being specially favored when they are 
 granted large discounts from the list prices; and in still 
 other cases, because competitive conditions in the busi- 
 ness are such that the manufacturer expects buyers to 
 question every quoted price. 
 
 There are some buyers whose principal qualification is 
 the ability to "beat down" the price, and in anticipation 
 of these tactics some manufacturers and dealers always 
 make their first quotation considerably in excess of the 
 real market value of the thing to be sold. When such 
 houses, however, deal with a buyer who never practices 
 the "offer" method of buying, but accepts or rejects a 
 proposition on the basis of the first price quoted, they 
 have to modify their usual procedure and make their 
 first quotation a fair one. It is as important, therefore, 
 for the salesman to be familiar with the methods of the 
 buyer as it is for the buyer to know the selling methods 
 of the houses that solicit his patronage. 
 
 169. Variable price scales,— Many reputable con- 
 cerns still have a variable scale of prices, and there are 
 highly successful purchasing agents who continue to 
 look with suspicion upon every quoted price. But as 
 fixed prices are doing more than any other one thing to 
 dignify the profession of salesmanship, so buyers are 
 generally coming to believe that they can best serve their 
 exployers and save valuable time by dealing with houses 
 that quote but one price and that refuse to deviate 
 from that figure. 
 
 170. Tact in buying.— We have shown that the first 
 qualification of the successful buyer is knowledge; we 
 have analyzed this knowledge that he must possess, and 
 
THE BUYER AND HIS WORK 
 
 187 
 
 have considered each of its main sub-divisions. The 
 second important qualification is tact. Tact is the 
 qtiulity that enables its possessor to get along with others 
 without friction. First of all, tact is essential to the 
 buyer in his relation with his fellow employes, and then 
 in relation to the salesmen who call upon him. We 
 have shown that one duty ordinarily assigned to the 
 purchasing agent is the acceptance or rejection of req- 
 uisitions for supplies frran the heads of departments. 
 In exercising this function it is necessary for the buyer 
 to know intimately the needs and work of the different 
 departments; but it is far more important for him to 
 possess and to exercise tact, so that his veto of a requisi- 
 tion may not cause ill-feeling, and be destructive of the 
 co-operation that should exist between all departments. 
 
 171. Friendly relations with salesmen. — A tactful 
 buyer secures the good will of the salesmen who call upon 
 him, while one without this quality is likely to antago- 
 nize them. No man is fitted for a purchasing posi^'* n 
 unless he is able to gain and hold the regard of ii j 
 with whom he comes into contact. It is true that tiie 
 salesman is the one who is most often seeking the favor 
 of the buyer, but it is just as true that the salesman is in 
 a position on many occasions to do substantial favors 
 for the buyer whose treatment of him has gained his re- 
 gard. It is conmion practice for a salesman who has 
 some real bargain to offer to place the proposition only 
 before those buyers whom he counts as his personal 
 friends. 
 
 A friendly salesman can also frequently do a great 
 deal in the way of facilitating deliveries, obtaining favor- 
 able credit terms, and giving the purchaser trade news 
 that is of direct value to him in his work. It is distinctly 
 worth while for the buyer to cultivate the good will and 
 
188 
 
 SKLLING AND BUYING 
 
 fr.eiHl.slii|) of tlie men with whom he deals, and the most 
 potent factor in this endeavor is the iK)8session of the 
 quahty of tact. 
 
 172. Other qualities important for buyer to poaseu.— 
 Knowled^ and taet are not the oidy qualities that the 
 buyer should possess, but they are so exceedingly impor- 
 tant that they have demanded separate and detailed con- 
 sideration. Common-sense, intelligence, ability to read 
 human nature, decision, industry, loyalty— these and 
 many more are essential to success in his work. The 
 man that has proved the possession of all the necessary 
 qualities of the successful salesman frequently makes the 
 best buyer. He is engaged in a big work; narrowness 
 in any particular will disqualify him for success, and he 
 must strive for the development of all the qualities that 
 efficiency in any line of modern business demands. 
 
 173. Who should do the buying?— in the small retail 
 store the proprietor does all the buying; and in some of 
 the largest industrial corporations the careful purchase 
 of immense quantities of valuable raw material is so im- 
 portant that the president of the corporation reserves 
 this duty for himself. These examples are typical of 
 one method of modem buying. 
 
 The vital importance of this function is so generally 
 recognized that in many establishments the owner is un- 
 willing to delegate the purchasing to any of his subordi- 
 nates. He is willing enough to allow others to seU for 
 him, because he can fix the prices, and even the most in- 
 efficient salesman can not immediately bankrupt him or 
 permanently alienate all his trade. An inefficient buyer, 
 however, is in a position to do irreparable injury to his 
 employer; it is possible for a single unwise purchase to 
 wipe out a season's profits. It is only natural, there- 
 fore, that the proprietor should retain immediate super- 
 
THE BUYER AND HIS WORK 
 
 189 
 
 vision over the buying until the growth of the business 
 makes it imiK>ssible for him to retain control of all the 
 (lettiils of the work, and until he has found a man who 
 is capable of relieving him of this imiwrtant responsibil- 
 ity. In well-developed retail and wholesale establish- 
 ments we have found that the heads of the various goods 
 sections or departments are entrusted with the buying as 
 well as with supervision over the selling in their respec- 
 tive departments. 
 
 Each buyer knows more about the goods he handles 
 than the owner or general manager could possibly know. 
 Ill addition to his knowledge of the goods themselves, 
 the buyer is or should be an expert on the subject of de- 
 mand, and, if he is honest and loyal and thoroughly 
 trained in his work, his employer's interests are safe in 
 his hands. 
 
 174. Factory purchadng agents. — In the same man- 
 ner that the development of a retail or wholesale busi- 
 ness requires the dealer to abandon the detail of buying, 
 the growth of a factory organization renders it impossi- 
 ble for the individual manufacturer to give his personal 
 attention to the purchasing. 
 
 When it is necessary to delegate this duty, one of two 
 methods may be adopted. First, a member of the firm 
 or an officer of the corporation may be delegated to give 
 his time to this work. If there are three members of a 
 firm or three active officers of a corporation engaged in 
 manufacturing, a convenient division of authority is to 
 assign to them, respectively, supervision over produc- 
 tion, selling, and buying. In many large organizations 
 the general manager, although he may not attend to the 
 actual detail of the buying, acts in an advisory capacity 
 to the purchasing agent, and keeps a careful watch on 
 present and prospective prices. 
 
190 
 
 SELLING AND BUYING 
 
 The second method of factory buying is to assign the 
 work to an employed purchasing agent. This procedure 
 IS common. Its chief disadvantage is that it places the 
 direction of an activity that has a vital bearing upon 
 profits, m the hands of one who has only a limited fi- 
 nancial interest in the business. Its great advantage is 
 that It places buying in the hands of a trained buyer who 
 can specialize in this activity and who can attain a degree 
 of proficiency that can be achieved in any line only 
 through specialized training and experience. 
 .. In view of the great opportunity for disloyalty and 
 graft in their calling, the purchasing agents of the 
 country present a striking example of the general loyalty 
 of employes to their employers and of the basic honesty 
 which IS responsible for the confidence on which our busi- 
 ness system is built. 
 
 V 
 
CHAPTER XV 
 
 SYSTEM IN BUYING 
 
 175. General systems and specific conditions. — "No 
 universally applicable system was ever formulated for 
 any branch of business activity, nor can it be, because 
 every industry and every organization has its individual 
 peculiarities which must be taken into consideration in 
 developing a system to fit the business. In the consid- 
 eration of any business activity aU that is possible is to 
 present the general outlines of a typical system. Even 
 this is difficult in the case of purchasing, because the 
 duties of buyers as a class are not clearly defined, and in 
 some organizations the authority of the purchasing agent 
 may be much more extensive than in others. Generally 
 speaking, buyers may be divided into two classes : 
 
 1. Those who confine themselves strictly to placing 
 and tracing orders, and have no supervision over the 
 store-room. 
 
 2. Those who, in addition to placing and tracing or- 
 ders, are in charge of the material after it arrives and 
 are responsible for its distribution in the factory or of- 
 fice. 
 
 It is evident that some of the activities of the second 
 class of buyers are not concerned strictly with purchas- 
 ing, but are only incident thereto. In other words, the 
 determination of what goods are to be purchased and 
 their storage and distribution after receipt are not neces- 
 sarily purchasing functions. They have been frequently 
 added to the duties of the purchasing agent simply be- 
 
 191 
 
192 
 
 SELLING AND BUYING 
 
 cause they are more directly connected with his activities 
 than with those of any other member of the average 
 organization. Because they are incidental, however, and 
 not fundamental duties of the buyer's position, we shall 
 not consider them in any detail in this discussion of pur- 
 chasing methods. It is our purpose to consider chiefly 
 the systems that guide the buyer in his relations with 
 his sources of supply — systems that help him in his essen- 
 tial duties of placing and tracing orders. 
 
 176. Requirements of an adequate purchasing system. 
 — Any adequate purchasing system must make provision 
 for the following: 
 
 1. A method of classifying and filing important data. 
 
 a. The articles that have to be bought. 
 
 b. Where thev can be bought. 
 
 c. Prices at which they are offered. 
 
 d. Where, when, for what, and in what quan- 
 
 tities they have been bought in the past. 
 
 2. A method of ordering and of tracing orders. 
 8. A method of checking deliveries and invoices. 
 
 177. Subject index. — The first essential in the 
 buyer's system is an accessible record of every article 
 that he may be called upon to purchase. This is usually 
 kept in a subject index on cards similar to Form No. 1. 
 
 The cards are arranged in a drawer or desk cabinet 
 and are filed alphabetically with suitable index cards to 
 enable the buyer to find quickly any desired subject. 
 If the purchasing agent is required to buy different sizes 
 or grades of the same article, there is a distinct card for 
 each size or grade that may be needed. Each kind of 
 article and each grade or size has a peimanent stock 
 number, which appears on all records in connection with 
 the name or other reference to the goods. The purpose 
 of each subject index card is to show the names of the 
 
SYSTEM IX BUYING 
 Subject Index 
 
 193 
 
 
 
 
 Stock No... 
 
 
 
 
 Name and Grade of Article 
 
 
 Suppliers 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 ^ 
 
 Form No. 1 
 
 Firm Index 
 
 Name Tel. No... 
 
 
 .\ddress. „. 
 
 
 Natui:e of Business. 
 
 
 
 Date 
 
 Catalog, List, or Circular 
 
 File No. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Ill— i:i 
 
 Form \o. 2 
 
19+ 
 
 Si:i-LING AND BUYING 
 
 various houses that cau supply the particular article 
 whose name and stock numher appear on tlie card. If 
 all the names of suppliers can not be placed on one card, 
 as many cards are used as may be needed. 
 
 178. Firm indccc. — To supplement the subject index it 
 is necessary to maintain a file that fs usually known as a 
 firm index. Form No. 2 shows a typical arrangement 
 of the cards for the firm index. The cards are filed in 
 the same manner as those that comprise the subject 
 index; and the two sets of cards are kept either in ad- 
 jacent drawers or in twin desk cabinets. One is merely 
 a cross reference for the other. 
 
 The firm index file contains important information 
 concerning every house that might possibly supply the 
 buyer with any of the material +hat he purchases. Its 
 value is in proportion to its completeness. There is a 
 separate card not only for each supplier from whuii. 
 purchases have been made or whose catalogues are on 
 file, but also for every other firm of whom the buyer may 
 learn, and who deals in the material that the buyer is re- 
 quired to purchase. The word firm in the name of the 
 index is not intended to restrict the use of the file to the 
 recordhig of information concerning supply houses that 
 have a partnership form of organization. Used in a 
 non-legal sense, the word is simply a customary and con- 
 venient generic term for all business houses, irrespective 
 of whether they are conducted as individual enterprises, 
 as partnerships, or as corporations. Each card in the 
 firm index contains the following information: 
 
 1. Name and address of the supplier, with telephone 
 number. 
 
 2. Nature of the supplier's business — whether dealer 
 or manufacturer — with some indication of the general 
 character of the supplies handled. 
 
SYSTEM IX BUYING 
 
 19."^ 
 
 3. Date when catalogues, price lists, etc., are received. 
 
 i. Nature of the data filed — whether catalogue, gen- 
 eral circular, price hst, direct quotation, etc. 
 
 .). File number showing where the selling literature 
 nf the supplier is to be found. 
 
 When the subject index and firm index are first in- 
 tro(hiced as the basis of the buyer's systematic record of 
 jjiirchase data, a complete list is made of all the material 
 for which it is possible to foresee any need. The items 
 ill this list are copied onto the subject index cards. It 
 is then necessary for the buyer to obtain a list of sup- 
 pliers. This is compiled from his personal knowledge, 
 horn information secured from others, and from adver- 
 tisements. When he learns of a house dealing in any 
 article on his subject index, he enters the name of the 
 house on the card referring to that article. At the same 
 time he makes out a card for the firm index, giving all 
 the information he may possess concerning the supplier. 
 If he has their catalogue on file, he makes a record of that 
 fact on the firm index card, and he also makes proper no- 
 tation in the "File Number" column, to enable him to 
 tiiul the catalogue readily. If the information from 
 the supplier is in the form of a special price list, circular, 
 or direct quotation, instead of a catalogue, that fact is 
 imted and the necessary file reference recorded. As 
 will 1)6 explained later, however, if tue information is in 
 till' form of a direct .quotation, no reference to the cata- 
 loffiie file is necessary. 
 
 179. Necessiti/ of cross-references for buying data. — 
 There are several reasons for having two sets of index 
 cards instead of combining all the information in one file. 
 Aniong them are the following: 
 
 1. Each catalogue must be filed with due regard for 
 its accessibility. If only one index were kept and the 
 
196 
 
 SELLING AND BUYING 
 
 I 
 
 t 
 
 cards were filed according to articles or subjects, when 
 a catalogue was received it would be necessarj' to record 
 its receipt and file number on eveiy card in the file that 
 referred to any article listed in the catalogue. Ob- 
 viously, this would be out of the question. 
 
 2. If, on the other hand, the single set of index cards 
 were filed according to the names of the supply houses, 
 the buyer would not be able to turn to any particular 
 card and find thereon the names of several dealers who 
 might supply him with the article he desired to purchase. 
 
 If two index files are used, the buyer who wants to 
 purchase an article can look up the proper card in the 
 subject index. There he will see the names of dealers 
 handling that article. He can then look up those dealers 
 in his firm index, and be referred immediately to the 
 price information that has been received from them. 
 
 180. Catalogue file. — The filing of catalogues and 
 other price data is an important feature of the buyer's 
 work. A good file is made by dividing a series of shelves 
 into pigeon-holes by the use of vertical partitions. 
 Each of these pigeon-holes should be large enough to 
 contain several catalogues. When a catalogue is re- 
 ceived, it is usually bound with a heavy cover, on the 
 back of which is placed a number coinciding with the 
 number of the pigeon-hole in which it is to be filed. The 
 necessary notation is then made on the proper card in the 
 firm index, and the catalogue is filed away. This same 
 procedure is employed in the case of price lists and other 
 circulars. It is customary to have all the catalogues 
 from the same house bear the same number. For in- 
 stance, Messrs. Smith & Jones' number might be 168. 
 Their first catalogue would be numbered 163A, the sec- 
 ond 163B, the third 163C, and so on. All of the cata- 
 logues would be found in file compartment Number 168. 
 
SYSTEM IN BUYING 
 
 197 
 
 181. The quotation file. — It has been suggested that 
 artaiii price information, not contained in catalogues or 
 price-lists, requires a special method of filing. For this 
 purpose a quotation file is maintained. It consists of a 
 series of cards on one side of which may appear the ar- 
 rangement of columns and headings shown in Form No. 
 3. A separate card is provided for each article on which 
 
 Quotation File Card 
 
 Stock No. 
 
 Name and Grade of AHicIe 
 
 Supplier 
 
 Date 
 
 Price 
 
 Terms 
 
 Remarks 
 
 
 
 
 
 
 
 
 
 
 
 ... 
 
 ' 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Form No. 3 
 
 a special quotation has been received. The cards are 
 tiled alphabetically according to the names of the articles 
 to which they refer, and no cross-reference file is neces- 
 sary other than the firm index. 
 
 Price data in the quotation file are received from those 
 suppliers who publish no general catalogue or price-list, 
 or from those who wish to modify their published prices 
 oil individual articles for any reason whatever. Special 
 quotations are usually made either by letter or by some 
 representative of the supplier in person. When a quo- 
 
198 
 
 SELLING AND BUYING 
 
 I i '■ 
 
 tatiun is received, the iiuiiie of the supplier is recorded on 
 a curd in the <iu<)tatioii file, together with the date of tiie 
 (piotation, the price, the credit terms, and other data that 
 may be deemed advisable. If the quotation is received 
 bv letter, the communication is filed under the name of 
 the supplier from which it came, and it can be referred 
 to easily, if further details are desired, by referring to 
 the date of the letter on the card in the quotation file. 
 
 182. The order record. — The information contained 
 in the subject index, the firm index, and the quotation 
 file, is not all the purchase data that the buyer should 
 have in the form of permanent, accessible records. He 
 should also have easy access to the record of previous 
 purchases. This information is readily recorded on the 
 back of the cards in the quotation file. It would prob- 
 ably be more correct to say that quotations are recorded 
 on the back of the cards in the order record file, because 
 every article purchased should have a card in the order 
 record file, while special quotations are usually received 
 on only a small proportion of the articles that are pur- 
 chased. The quotation file, however, is logically the 
 third in the buyer's system, and for that reason it has 
 seemed advisable to discuss it before the order record. 
 The only reason why it is suggested that the record of 
 (juotations and of orders be kept on the same cards is 
 that in both cases the cards are filed alphabetically by 
 articles handled, and it is a saving of space and material 
 to utilize both sides of the cards rather than to duplicate 
 the entire set. A convenient method of providing for 
 the necessary data on the order record cards is shown in 
 Form No. 4. 
 
 If these cards are properly written up, they present 
 the following data regarding all articles that have been 
 purchased : 
 
SYSTEM IN BUYING 
 
 1»0 
 
 1. Name of the articles, with size and grade if more 
 tiian one kind have been bought. 
 
 2. Dates of previous orders. 
 
 a. Record numbers of previous orders. 
 4. Names of suppliers. 
 'i. Quantities purchased. 
 0. Prices charged. 
 
 7. Dates when the goods were received. 
 
 8. General remarks; for example, condition of goode 
 when received. 
 
 Order Record 
 
 
 
 
 
 Stock No 
 
 
 
 Name and Grade of Article | 
 
 ):ito 
 
 No. 
 
 Supplier 
 
 (Quan- 
 tity 
 
 rrice 
 
 Date 
 Ke<*d 
 
 Remarks 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 . _l 
 
 Furm .Vu. 4 
 (Reverse Side of Form No. 3) 
 
 Of course, with simply the order number the buyer 
 should be able to obtain all this information by looking 
 i!p the original order in his files. It is o. great advant- 
 age to him, however, to have all the foregoing data im« 
 mediately before him where he can turn to it readily and 
 utilize it in determininjj where to place his orders. Such 
 a record, also, is of value in enabling the buyer to fol- 
 
wo 
 
 SKLLING AM) BUYING 
 
 low Die luovc'imiit ol' prices for any particular coinniod- 
 ity, and Inmi past changes to «Ira\v some convlusions as 
 to future fluctuations. 
 
 It has been stated that the first essential of any buy- 
 ing system is to [)rovide for classified purchase informa- 
 tion. The four card forais that have been described 
 ordinarily give this data in sufficient detail. With such 
 a system in oi>eration the buyer knows what goods he 
 requires, where they can be bought, the prices at which 
 they are offered, and where, when, for what, and in what 
 (piantities they have been purchased in the past. 
 
 183. Placing orders. — The second requisite of a pur- 
 chasing system is a method of placing and tracing or- 
 ders. It should be remembered that in the elementary 
 system that we are considering the buyer does not have 
 to determine when and what to order. This is decided 
 by the general manager or the stock-keeper, by whom a 
 purchasing requisition is sent to the purchasing agent. 
 Upon receipt of the requisition the buyer uses the va- 
 rious classes of data that have been described, and decides 
 with whom he will place the order. He then fills out a 
 regular order blank, which usually provides for the 
 following data: 
 
 1. Name and address of house from which the goods 
 are ordered. 
 
 2. Exact quantity and kind of goods desired. 
 
 3. Price at which the buyer understands the shipment 
 is to be billed. (This item is not frequently found in 
 orders. ) 
 
 4. When goods are desired. 
 
 5. Shipping instructions. 
 
 6. A serial number with a request that the number be 
 placed upon the shipper's invoice. 
 
 7. Conditions under which the order is placed ; as, for 
 
SYSTEM IN nrVINT. 
 
 mn 
 
 instance, compliance with the instructions alnnit placing 
 Older number upon invoice, making delivery when re- 
 quested, ailowinjf certain credit terms, etc. The order is 
 ordinarily made in triplicate by the use of carbon paper, 
 each impression being on paper of a different color. 
 The original order goes to the house that is to supply the 
 jroods, the first carbon copy is sent to the receiving clerk 
 or stock-keeper, and the last carbon coi)y is retained by 
 the buyer. The purpose of sending one copy to the re- 
 triving clerk will he explained later. For the present 
 we are interested only in the copy that is kept in the office 
 ol' the purchasing agent. This is used to trace the order 
 and to check the invoice when the goods are received. 
 I'or this purpose the back of the buyer's copy of the 
 order has spaces j>rovided for four classes of informa- 
 tion: 
 
 1. Correspondence sent. 
 
 2. Correspondence received. 
 a. Goods received. 
 
 4. Invoices received and checked. 
 
 184. Tracing orders.— An actual example will illus- 
 trate how the buyer keeps track of orders that he has 
 |)laced. Suppose, for example, that an order is for- 
 warded to a supplier on the fifth of the month, and that 
 an acknowledgment may be expected by the eighth. 
 The buyer places his copy of the order in a folder which 
 l)tai*s the number 8 in his "tickler" file. If an acknowl- 
 fd^ient is received on or before the eighth, the order is 
 taken out of the No. 8 file compartment, and the fact 
 that acknowledgment was received, with the date, is 
 noted on the back of the order under the heading "cor- 
 rispondence received." If acknowledgment is not re- 
 ceived by the eighth, the order automatically comes to 
 the buyer's attention on that date; he writes requesting 
 
non 
 
 SKM.INd AM) DrVING 
 
 immediate acknowlcd^im'iit, and plucrs the order ahead 
 in the file folder representing the date on wliieli he eaii 
 reasonably exi)ect to reeeive a reply. At the same time, 
 on the back of the order under the headin;;^ "eorresiKJnd- 
 ence sent," he makes notation of the fact that he has had 
 to write for acknowledgment, with the date of his letter. 
 
 When the acknowledgment is received, it is necessary 
 to place the order ahead in the "tickler" file so that de- 
 livery can l)e traced if the goods do not arrive within a 
 reasonable time. The supplier may have prontised de- 
 livery on a certain date, or it may be necessary for the 
 buyer to estimate the probable delivery date. Under 
 either condition the order is placed in the folder bearing 
 the same number as the day of the month when deliver}' 
 is to l>e expected. If the goods are not on hand on that 
 day, the order is taken out of the file, and exactly the 
 same method of tracing is pursued as was the case when 
 the acknowledgment did not arrive promptly. When the 
 goods are received, notation is made on the back of 
 the order under the heading "goods received." If par- 
 tial deliveries are made at intervals, as is frequently done 
 in the case of large orders, each separate delivery is noted 
 on the back of the order, with the exact amount delivered 
 in each instance; and the order is not considered filled 
 until the total amount ordered has been received. 
 
 185. Checking deliveries. — Before we follow the buy- 
 er's copy of the order to the time when it can be removed 
 from the "tickler" file, we must consider the system by 
 which the buyer knows when the goods have been re- 
 ceived. We have said that one copy of the oider goes 
 to the receiving clerk. This is to inform him that the 
 goods are expected, so he can make room for them in 
 the store-room. When the goods arrive, he checks the 
 quantities with the order and makes notations of any 
 
SYSTKM IN BUYING 
 
 !^0.') 
 
 .k IVfts. TIjc copy of the order is then returned to the 
 liuytr. This inetho<l is simple, but it has certain <lis- 
 advantages. If tlie receiving clerk has l)efore him an 
 oilier showing the exact (piantity of the goods to be re- 
 ciived, he is likely to be careless in actually counting the 
 number of pieces in the delivery, and to take it for 
 orunted that the number ordeied were received. To 
 avoid this difficulty it is sometimes customary to use a 
 short piece of carbon paper in making the first carbon 
 copy of the order, so that the quantities of the various 
 articles ordered do not appear on the receiving clerk's 
 copy of the order. He then has to count the shipment 
 and to place the exact figures on the order sheet before 
 he returns it to the buyer. 
 
 186. Checking partial deliveries.— The method of 
 guarding against carelessness in checking orders that 
 has been described in the preceding paragraph is feasi- 
 ble only when all the goods ordered are delivered at one 
 time. When partial deliveries are free:, jnt, a system 
 similar to the following is advisable: If a copy of the 
 order is sent at all to the receiving clerk, it is simply to 
 give him advance information of the arrival of the mer- 
 chandise, and it is not used in checking deliveries. At 
 the close of each day the receiving clerk fills out a blank 
 form that gives the following information about every 
 delivery that has been made during the day: 
 
 1. Name and atldrchs of sliipper. 
 
 2. Description of goods. 
 
 3. Quantity of goods. 
 
 4. Apparent condition of goods on arrival. 
 
 5. Method of delivery, name of railroad, etc. 
 
 With this sheet before him, the buyer can go over 
 his unfilled orders and make the necessary notations . f 
 

 -'** SKLFJXG AND BUVING 
 
 (Iclivcrics on the hacks of his copies of tlie orders. By 
 this system partial dehveries are cheeked and reported 
 to the huyer as rea(h'ly as complete dehveries. 
 
 The final result of any system of checkin^r and report- 
 in^r is to inform the huyer of the status of his orders. 
 AVhen an order has been only partially filled, it is re- 
 tained in the "tickler" file, and so placed as to come up 
 automat-ically for attention on the date Avhen another 
 shipment can be expected. As heretofore explained, 
 every letter written by the buyer or received by him 
 from the supplier with reference to any order, together 
 with a record of all deliveries, is noted on the back of 
 the order. If at any time he desires more detailed in- 
 formation than is contained in the brief record on the 
 order itself, the notations enable him to refer to his cor- 
 respondence file for such letters as he may wish to see. 
 
 187. Checking the invoice.— When the oi-der is finally 
 filled, an invoice accompanies the shipment or is sent by 
 mail to the consignee. The invoice ordinarily goes im- 
 mediately to the buyer. He frequently has a rubber 
 stamp with which he may provide for information of the 
 following nature to be given on the face of the invoice: 
 
 Goods received 
 
 Price O.K 
 
 Extension O.K 
 
 Distribution 
 
 Account No jb 
 
 Account \o >fe 
 
 Account Xo jfe 
 
 Total $ 
 
 The buyer knows whether or not the goods have been 
 received, but in order to have a double check '-i this item, 
 
m^ 
 
 SYSTEM IN BUYING 
 
 aos 
 
 he sends the invoice to the receiving clerk, who has kept 
 a record of all receipts. The receiving clerk places his 
 name or initials, with the date, after the phrase "goods 
 received." The invoice is then returned to the huyer. 
 Fiither he or one of his clerks compares the prices 
 charged with the quotations or catalogue figures, and 
 \erities the extensions. The name or initial of the per- 
 son who makes the comparison and checks the multipli- 
 cation is inserted in the proper place, with the date of the 
 operation. After tiie purchasing agent has made his 
 own record of the receipt of the goods and of the check- 
 ing of the invoice, his duties in regard to the order are 
 completed. His copy of the order may be removed 
 from the "tickler" file, and filed permanently according 
 to the order number. The invoice is sent to the stock 
 clerk or to some one else who knows the uses to which the 
 gr)ods that have been received are to be put, and these 
 uses are indicated by noting on the invoice the accounts 
 to v/hich the purchase is to be charged. The invoice is 
 now ready to go to the accounting department for entry 
 upon the books of account, and for payment. 
 
 The details of a purchasing system may differ greatly 
 in individual cases, but most of the features that have 
 been described are found in the majority of houses. 
 I'erhaps the greatest variations are found in the method 
 of handling the invoice after its receipt. It is not at all 
 necessary for the successful operation of the system that 
 the employes who check the invoice and who indicate the 
 distribution of the charge among the various accounts 
 be the ones we have mentioned. In fact, in an organiza- 
 tion that has a system of cost accounting in operation, 
 the method of determining the distribution of the charge 
 is much more complicated than the simple system we 
 have described. This is purely an accounting matter. 
 
206 
 
 SELLING AND BUYIN(J 
 
 however, and the variations in the methods of handhng 
 it have no bearing on the purchasing system. 
 
 188. The perpetual inventory. — We have considered 
 only a method of purchasing goods after their need is 
 known. Few buyers, however, have so simple a task. 
 The purchasing agent is frequently in charge of the 
 supplies, and he must have a system that will enable him 
 to know when purchases are necessary. This informa- 
 tion is customarily obtained from a form known as a 
 perpetual inventory. A suggestive arrangement of this 
 record is shown in Form No. 5. A card or loose-leaf 
 record sheet is provided for each kind and size of article 
 used. The data on this record gives the buyer the fol- 
 lowing information: 
 
 1. Minimum and maximum quantities of the article 
 that should be on hand, together with an average that 
 may be considered as normal. 
 
 2. On what dates and in what quantities supplies of 
 the article have been ordered. 
 
 3. Amounts received on any date, as well as quanti- 
 ties taken from the store-room for use in the factorj', 
 office, or store. 
 
 4. From the above data, a daily balance of stock on 
 hand is obtained. This figure, in comparison with the 
 minimum, normal, and maximum figures at the top of 
 the form, tells the buyer whether or not new purchases 
 are necessary. 
 
 5. For the purposes of cost accounting, the prices of 
 goods ordered and received are frequently shown on the 
 perpetual inventory. This information, however, is not 
 necessary for the purposes of the buyer, because the same 
 data is given on his order record. For that reason no 
 provision is made for it in the suggestive arrangement 
 of columns in Form No. 5. 
 
SYSTOI IV BUYING 
 
 201 
 
 \£ a 
 ? c ^ 
 
 t: 
 
 
 X 
 
 o 
 
 c 
 
 > 
 c 
 
 3 
 
 a 
 
 u 
 0. 
 
 it 
 
 ;0 
 
 ' a 
 i 
 
 ■< 
 
 o 
 
 e 
 
 3 
 
 '3 
 
 s 
 
 3S 
 
 0j 
 
 o 
 
 K 
 
 a 
 
 as 
 
 s 
 
 3 
 
 O 
 
 I 
 
 
 s 
 
 ■< 
 
208 
 
 SELLING AM) BUYING 
 
 189. Modification of the typical purchasing system.— 
 It sliouki be remembered that the systems and forms 
 that have been described are of the most simple charac- 
 ter. There may be, and often are, many other forms 
 for use in making? requisitions upon the purcl i^ agent 
 and in the disbursement of supphes from the .store-room. 
 Ordinarily, however, they are not immediately con- 
 cerned with the strictly buying activities, and for that 
 reason it is not necessary to give them consideration in a 
 general discussion of the duties and methods of the pur- 
 chasing department. The essential purchase data is 
 l^rovided by the forms that have been described. There 
 may be variations in details, and there may even be ad- 
 ditions to the number of forms that comprise the system. 
 The peculiar requirements of individual businesses, of 
 course, always determine the number and kind of forms 
 to be used. It should be borne in mind, however, that 
 the usefulness of any form is not the only thing to be 
 considered in determining whether it is to be emploj-ed. 
 Every form re(j[uires a certain amount of clerical labor 
 to record the data for which it makes provision, and 
 sometimes the value of the information is not worth the 
 amount of time and energy necessary to record it. The 
 value of any form, therefore, must be determined by 
 balancing its usefulness against the difficulty of its prep- 
 aration. If the former factor is outweighed by the 
 latter, the form should not be used. 
 
 190. System in retail buying. — The purchasing sys- 
 tem that has been described applies particularly to a 
 manufacturing industry. Its essential features, how- 
 ever, are equally applicable to a retail store, but with this 
 very important modification in nu"nd — it is usually im- 
 practicable to keep an accurate stock record of every 
 article that is handled. In a grocery store, for instance, 
 
SYSTEM IN Bi; VINCI 
 
 :oy 
 
 it is out of tlie question to maintain a perpetual inventory 
 that \\i\\ show eveiy cake of soap or pound of su^ar or 
 can ()'' corn that is sold. The smallest units that the 
 l)ii\ tr needs to consider in the case of articles of this 
 iliaracter are hoxes of soap, harrels of sugar, and cases 
 of carmed corn. In otlier words, whenever an original 
 package is broken, it appears on the buyer's records as 
 having gone out of stock. 
 
 The small retail store that purchases a large part of 
 its stock from a single jobber would scarcely require all 
 the forms that have been considered. It would cer- 
 tainly not need to maintain a firm index, and possibly 
 the (juotation file would not be of value. The subject 
 index, the order record, and the perpetual inventory, 
 however, could be used to advantage even in a very small 
 establishment. Retail stores are frequently almost en- 
 tiiely lacking in system in their buying methods. Many 
 dealers order only when a salesman calls upon them. 
 Then they hastily look over tlieir stock, or allow the 
 salesman to do it for them, and make up an order ac- 
 cording to the result of this brief obsei'vation. It is a 
 common experience for a retailer to be "out" of an ar- 
 tiele for which there is a steadj'^ demand. Almost in- 
 variably the cause of this annoying situation is lack of 
 system in buying. 
 
 There are some dealers who — paradoxical as it may 
 seem — permit a traveling salesman who has gained their 
 confidence to order for tiiem what he thinks they need, 
 (111(1 there are even a few who allow a jobber a hundred 
 miles away to send on such an assortment and such 
 (|uantities of goods as he may deem proper. The dealer 
 who pursues any of these methods is not in line for the 
 f?reatest success. It is entirely right for him to accept 
 
 the advice of those who may be more experienced in 
 
 III— u 
 
210 
 
 SELLING AND BUYING 
 
 stocking up a store than he is, but he is a poor merchant 
 unless he learns to do his own buying. If he does not do 
 so, it is because he does not know his own stock, and the 
 reason for his ignorance is usually lack of system in his 
 business. 
 
 There is no retailer who can not use a carefully devel- 
 oped buying system to advantage, and in the largest and 
 most successful stores the purchasing methods are as 
 carefully worked out as they are in the most highly de- 
 veloped manufacturing organization. 
 
 191. The jobber's purchasing system. — The jobber 
 is in a more favorable situation than the retailer with 
 respect to his ability to keep accurate stock records, be- 
 cause he does not ordinarily deal in broken packages. 
 There are some jobbers, however, who are as lax in their 
 buying methods as are many small retailers, but their 
 limited success is evidence of the fact that carelessness in 
 buying is as fatal to volume of business and to profits, as 
 carelessness in any other of the important business activi- 
 ties. The wholesale dealer purchases from a large num- 
 ber of manufacturers and he usually handles a very great 
 variety of articles ; if he is to be able to fill the orders of 
 his customers at all times, he must use systematic meth- 
 ods in order to keep his stock complete. The subject in- 
 dex, the firm index, the quotation file, the order record, 
 and the perpetual inventory provide detailed purchasing 
 information that is as important to the jobber as it is to 
 the factory buyer. The buying in a wholesale house is 
 usually done by departments, and there must, therefore, 
 be a distinct purchasing system for each department. 
 This is also the case in retail stores in which there is de- 
 partmental division of the buying. As a result of this 
 characteristic feature of the buying in wholesale and re- 
 tail establishments, certain changes in the typical factory 
 
SYSTEM IN BUYING 
 
 Sll 
 
 liii\ ing system are necessary, chiefly with respect to the 
 airan^ement of some of the forms and the routine of 
 
 iirdcrs. 
 
 W'liatever may be the changes in detail, due to the 
 ;v(|iiirements of the individual business, the general na- 
 ture of the buying data to be recorded remains approxi- 
 mately the same in all instances; and there are few in- 
 dustries in which the demand for a suitable method of 
 systematizing the purchasing can not be met by some 
 application of tho fundamental principles that are at 
 tlie basis of the system described in this chapter. 
 
PART II: CREDIT AND THE 
 CREDIT MAN 
 
 CIIAPTKH I 
 NATURE OF CREDIT 
 
 1. Relation of conjidcticc to business. — Confidence 
 is the basis of all business relations, which simply means 
 that in order for business to be carried on men must 
 trust one another. In that sta^e of society when men 
 only exchanged goods when there was opportunity for 
 personal inspection, and where the actual goods passed 
 from one person to another, a certain amoimt of confi- 
 dence must have existed between the traders. But this 
 was the confidence of a condition of truce rather than a 
 trust in the commercial honesty of either of the barter- 
 ers. jNIen were primarily fighters in those days, and the 
 exchange of goods by barter was simply an improve- 
 ment upon the still earlier method of the transfer of 
 goods through concpiest. 
 
 When men began to surrender their ])()ssessions by 
 means of barter rather than by articles of capitulation, 
 there was evidence of a growth of confidence between 
 them which at least showed that each felt secure of his 
 personal safety during the trade. The development of 
 society from the earlier condition of perpetual hostility 
 between individuals, through the various stages of hos- 
 tile distrust betM-een families, clans, tribes, nations and 
 races, to the time when the world holds that "each miin's 
 word is as good as his bond," has been and will be of 
 slow growth. This development, to l.e sure, is not 
 
 2ia 
 
NATl RK OF ('RKI)IT 
 
 21.'} 
 
 (iimplctc as yet, but it can be measured by tbe extension 
 (if man's confidence and laitb in man. And, although 
 nations still build battleships to protect their commercial 
 iiitirests, nevertheless it has become universally ac- 
 kiiowledjjfed that confidence is the basis upon which our 
 wliole business structure rests. 
 
 •_'. Contracts support confidence. — During this long 
 evolutionary period, society encouraged the growth of 
 llu- spirit of confidence by various means, and as men 
 often describe a thing in terms of the means by which 
 the object was accomplished, it is well to note by what 
 iiiiaiis society has encouraged and protected men's con- 
 tidtnce in each other. The law of contract has been one 
 (if the chief means in accomplishing this end. Hence 
 wc find the lawyer describing the growth of civilization 
 as a development from a condition of status to a condi- 
 tion of contract. That is, under the earlier condition, 
 society decreed that every man had a right to carry on 
 his method of making a living with the assurance that his 
 economic relations with other men would be protected so 
 long as his actions conformed to the customary usages. 
 So men paid customary rents, received customary wages 
 and charged customary prices; in fact, business relations 
 (if all kinds were limited and restricted by the customs 
 which had been established by earlier generations of busi- 
 ness men. So long as changes were slow and few, men 
 (lid not feel the restrictions imposed by the necessity to 
 conform to usages established by previous generations, 
 l)iit as commercial and business relations were extended, 
 society found that greater individual freedom and ini- 
 tiiitive were necessary. It was no longer possible to find 
 s;ii'c guidance in the customs of bygone ages for the 
 newer and larger business relations. It became neces- 
 siiiy to permit each individual to enter into a bargain 
 
f>U 
 
 C HKDir AM) Tin: ( UKDIT MAN 
 
 upon sucli terms as he felt we"" most advantttgeous to 
 himself. He eoiild no longer he hound hy customs 
 more applieahle to a past generation than to his own 
 environment. Men tlierefore formed contracts with one 
 another, pledging themselves to the performance of 
 some act in the future. As this element of future time 
 entered into men's husiness relations more and more, it 
 hecame increasingly necessary to jjrotect the confidence 
 upon which these husiness relations rested. Therefore 
 we find to-day that the basic law of the business world is 
 the one which severely punishes any act impairing the 
 obligation of a contract. So closely allied are the two 
 ideas of contract and confidence that they are sometimes 
 united into one concept, called credit. When so united 
 credit is defined as "a right of action," which may be 
 called the legal concept of credit. 
 
 3. Monei/ a sign of economic progress. — Various 
 measures are used in determining the progress of so- 
 ciety, but perhaps there is none more illuminating or 
 suggestive than that which gauges civilization by the 
 readiness and facility with which exchange of possession 
 or ownership takes place. Under a system of exchange 
 where ownership was surrendered by one person to an- 
 other through barter, the number of transfers was neces- 
 sarily limited by many causes too evident to mention. 
 As soon, however, as men could trust to a common 
 medium of exchange which in time was called money, 
 they were no longer so closely tied to time and place in 
 order to effect a transfer of their property. But the 
 change from "barter" to a "money" economy means 
 more than a substitution of one system for another. It 
 signifies the development of society from the low plane 
 of ignorance and suspicion to a higher plane of intelli- 
 i,ence, wider information and Increased confidence. So 
 
NATURE OF t KEDIT 
 
 aio 
 
 tl,.„oughly did the advantages of the "money" economy 
 impress itself upon the people of that period, that lor 
 centuries they believed that money was identical with 
 u.alth itself. With such universal confidence m the 
 inetuls which were used as the media of exchange, it is 
 easily seen that few people would deem it necessary 
 t„ resort to barter in order to eifect an exchange of 
 g,K)ds. But the point to be noted is, that no such step 
 Worn barter to money could have been effected without 
 an increase in the confidence and trust which men were 
 generally acquiring in one another. The fact that with 
 the growing complexity and increase of business there 
 were one or two commodities which were universally 
 recognized as having general purchasing power made it 
 easy to take another step upward in the economy of 
 trade. This was done by again extending the scope of 
 ()l)erations dependent upon confidence. 
 
 4. Bargains ichich involved future delivery.— The 
 direction of the next extension lay in bargaining for 
 fnture delivery of goods or services. Under the older 
 nionev economy, men exchanged goods for money and 
 vice versa, and the chief risks incurred were those inci- 
 dent to the loss through theft or accident; for under a 
 barter or a money economy the exchanges of goods or 
 money were performed by both parties, who delivered 
 their commodities at the same moment. With the intro- 
 (hiction of this new element of future time into trans- 
 actions, new risks were also introduced and these had to 
 ])e provided for. This was done by simply substituting 
 a promise to pay money in the future to the party who 
 delivered his goods in the present. Upon this simple 
 provision was founded our modern system of doing busi- 
 ness. Thus it is that some nations passed from a money 
 to a credit economy and confidence and trust became 
 
'i\(i 
 
 ( Hi:i)iT AND riii: ( ukdi'I' man 
 
 not (.Illy litlpful factors. Imt the viry Imsis of the struc- 
 ture of industry. To <|uote one authority: 
 
 yUmvy vcmimiy nuw lilnriy, cmlif gave opportunity. By 
 credit the ennip»titive .system Ims cleveloped so as to l)e able to 
 replace tlio primitive group system, and even surpassed its ue- 
 complisl.ments. Without credit, individuals oouhl not extend 
 their operations so as to sup.rsedc the collective system which 
 subsisted as some form of natural or involuntary 'cooperation 
 until the ilsc of credit in Kurope. 
 
 Under an organization of crc(ht economy undertak- 
 ings are carried on hy men who may acquire title to 
 capital, not by delivering an eciuivalelit at the time of 
 acquisition, but by a method which divided the two parts 
 of a transaction, the receipt and liie delivery, by a eon- 
 siderable period of time. This is the distinguishing 
 feature of the new system of exchange. This is the 
 I)eculiar mark of the newer credit economy. Under this 
 sinq)le arrangement by which the borrower promises to 
 pay a certain sum of money at some future date in 
 return for goods delivered to him in the present, the 
 field of industrial activity has been widened and extended 
 in harmony with the forces of production which were 
 demanding new outlets for its surplus. We said "har- 
 mony," but not perfect harmony. 
 
 5. The relation of money to credit.— The close and 
 vital connection between the new system of exchange 
 and the older money economy is not generally recog- 
 nized. It will be noticed that not only is one-half of 
 the transaction to be performed at some future date, but 
 the contract calls for a deliNcry of money. Any system 
 of exchange, therefore, that does not provide for the 
 close and ready cooperation between the money needs 
 of a country and the credit needs of the same, will often 
 
NATUHK or ( IlKDIT 
 
 yi: 
 
 tiiul its wlmle industrial system thrown into disorder by 
 this nialadjustnient. The l)est known illustration of 
 the way credit coiiperates and aids money is seen in the 
 hanking business/ 
 
 r.. Banking and credit. — Because of the central po- 
 sition which the banks of a nation hold in the credit 
 s\ stem as dealers in credit, the result of anv disturbance 
 affecting the public confidence is first observed in the 
 hanks* attempt to protect their cash reser\'es. This 
 often necessitates the calling in of certain lines of credit, 
 which means that some class or classes of business men 
 must find the money to meet the banks' demands. Thev 
 ill turn are also compelled to call in some of their credit, 
 and thus it is that the demand for money is scattered far 
 and wide, while at the same time no one is offering 
 (irdit. So panics begin and spread until every business 
 tinii which has used credit in its operations is aff'ected. 
 Many are ruined because they can not meet the demand 
 upon them to pay money, and others are injured by 
 licing compelled under the immediate pressure to turn 
 valuable goods into money at a great loss, while all en- 
 terprises are hurt indirectly by the general industrial 
 depression. 
 
 The practical point to be observed here is that the 
 ivhition which the cash reserves of the banks hold to 
 their outstanding credits is a fairly good guide to the 
 husiness man in judging whether or not it is advisable 
 to extend or contract his commercial credit operations. 
 
 7. Relation of credit to panics and depressions. — 
 A study of the great panics and depressions which have 
 occurred at various periods during the last one hundred 
 years discloses in each case a constantly growing dis- 
 proportion between the reserves and the liabilities of the 
 
 1 See volume on Money axu Baxkixo. 
 
218 
 
 CREDIT AND THE CREDIT MAN 
 
 banks just before the business world has been plunged 
 into a financial crisis. In every case the immediate cause 
 of the panic was the inability of the two essential factors 
 in the credit system to cooperate effectively at the crit- 
 ical moment. This defect lies partly in the faults of 
 banking and currency systems, but more fundamental 
 still is the fact that though our industrial system is 
 founded on confidence, there are still many men in every 
 community who are not yet fitted to participate, without 
 restriction, in a system which depends for its existence 
 upon the general belief that men are honest and will 
 pay the debts which they contract. Trade exchanges 
 should be more strictly guarded by holding men within 
 their "credit limits." There is a general reluctance on 
 the part of business men to put checks upon the freedom 
 of trade, but in the present state of conunercial develop- 
 ment it is necessarj'^ that men be held fast to some credit- 
 giving standard, which is high enough to enable only 
 those who can reach it to get the benefits derived from 
 the use of credit. Under our present credit system 
 men are prone to take advantage of any looseness in 
 the granting of credit and as a consequence there are 
 frequently recurring periods of "over-trading." These 
 inevitably end in a general failure to liquidate, and this, 
 combined with an inelastic system of banking and cur- 
 rency, means bank failure, business failure and indus- 
 trial depression. jMr. Henry D. MacLeod describes this 
 state of affairs as follows: 
 
 All commercial crises, therefore, originate in the over-creation 
 of credit and this is innate in the modem system of credit. 
 Suppose that at any time the commercial world started with a 
 perfectly clean slate. When such multitudes of persons are 
 trading on credit, it must inevitably happen that a consider- 
 able number will speculate unsuccessfully, and create an excess 
 
NATURE OF C REDIT 
 
 JJ19 
 
 of credit, which cannot be redeemed hy fair means. All excess 
 of credit may be considered as so much virus or poison in the 
 l)ody commercial. However, by various tricks and devices 
 known to traders, they can keep themselves afloat many years 
 after they are utterly insolvent, and thus the poison continu- 
 ally accumulates. Then perhaps a fever of speculation takes 
 place, giving rise to the creation of vast masses of speculative 
 paper, and then, the poison having accumulated to a sufficient 
 "xtciit, bursts forth in a tumor or abscess, called a commercial 
 
 crisis. 
 
 8. Different degrees of business confidence repre- 
 acnted hy different credit instruments. — Confidence is 
 such an essential element in all departments of social 
 activity that it becomes necessary to specify which par- 
 ticular confidential relation is referred .to. We speak 
 of a man's "belief" when we have reference to the con- 
 viction upon which his religious trust is founded. If we 
 mention a man's "credit" then we have reference to that 
 trust or confidence which pertains to his business rela- 
 tions. 
 
 As business transactions grew more involved and 
 embraced longer times and greater distances, it be- 
 came necessary to qualify the idea of "credit" so that 
 there might be a more correct judgment regarding the 
 degree of confidence, or the opposite — the amount of 
 risk — involved in these varying business relations. 
 
 The first difference that suggests itself is the differ- 
 ence due to the distances which separate men and other 
 obstacles that prevent men from forming accurate 
 knowledge of each other. This puts restrictions upon 
 men's confidence. Few men have national reputations, 
 Tione are universnlly trusted, and the great majority are 
 not known and trusted outside the circle of a few per- 
 sonal friends. This limits the acceptability of credit in- 
 
iliii) 
 
 CREDIT AND THE CREDIT .MAX 
 
 struineiits issued by individuals, institutions, and even 
 governments. It is necessary in a discussion oi credit 
 to put some limits to the locality within which we wish 
 to consider it. The nation is taken, therefore, when the 
 extent of the acceptability of credit instruments is con- 
 sidered. Thus we can speak of credit of limited and 
 credit of unlimited acceptability. The first of these is 
 represented by the promissory note, and the bank check, 
 while examples of the second are seen in the greenback 
 and the banknote. The last two are popularly called 
 money and are so i-eadily ajid generally accepted that 
 people often forget that they represent only the gov- 
 ernment's promise to pay money upon demand.' 
 
 A further consideration of the relation of credit to 
 money would l^iad into a discussion of the subject of 
 prices. Although this is a very important one to the 
 business man, it cannot be developed here. A few 
 words, however, may be suggestive. IMen who give 
 credit extending over long periods of time are interested 
 in the return of an equivalent value when the debt falls 
 due. The face value of the credit instrument is ex- 
 pressed in terms of money, say $1,000, but if at the date 
 of maturity the value of money has changed, that is, 
 if the $1,000 will not buy the same amount of goods at 
 the latter date that it could at the date at which the 
 note was given, then the creditor may be in a position 
 
 ' Scientific vse.— Money is that thing which everybody in a community 
 desires in some degree and is willing to take in payment for goods parted 
 with or for services rendered. This is money in the scientific sense. It 
 is sometimes distinguished as standard or redemption money. In the 
 I'nited States, according to this definition, gold coin alone is money. 
 
 Popular use.— Money is jjopularly used as a synonym of cash or " ready 
 money," being applied indiscriminately to all forms of currency, such as 
 gold coin, bank notes, greenbacks, silver dollars, etc. This Is the most 
 inniiuo.i use of the word. In this sense money is made to include not only 
 so-citllcd "standard money," but also all kinds of cretlit money.— Joseph 
 Krenili Johnsoh, " .Money and Currency," page C. 
 
NATURE OF CREDIT 
 
 231 
 
 to lose money by the transaction. Thus it is important 
 that the giver of long-time credits should have some 
 means of judging the tendency for money to increase 
 or decrease in value. The use of credit as a medium 
 of exchange tends to lessen the need for money and 
 lience to lessen its value. The level of prices is higher 
 than it would be if credit were not used. As before 
 explained, a credit instrument is a promise to pay money 
 and serves as a medium of exchange. Since the prom- 
 ises to pay money are cancelled through the agency of 
 banks, without the use of money, it is evident that \he 
 demand or need for money must tend to decrease when 
 the use of credit is increasing. In a country whose 
 business is giving rise to a certain volume of exchange 
 the demand for money itself varies in proportion to the 
 use of credit. It is large if credit is little employed, 
 and small if credit is much employed.^ 
 
 9. Time as a factor in credit. — Another distinction 
 that it has become necessary to make within the field of 
 cred't is the one due to the different lengths of time for 
 which credit is granted. The close relation between the 
 development of commerce and the credit system has 
 been noted already. The severe commercial competition 
 forced men into a close study of the better organization 
 of the productive and the distributive systems in order 
 to economize. This better organization enabled men not 
 o!\ly to increase their capital, but enabled them to turn 
 over their capital oftener. Man is compelled to-day to 
 work on smaller margins of profit and he must, there- 
 lore, turn over his capital oftener. Consequently, the 
 credit system was modified to suit the commercial condi- 
 tions, an^J as a result there has been a curtailment of time 
 in the granting of credits. The long-time credits, when 
 
 » Joseph French Johnson, " Monej and Currency," page 24. 
 
222 
 
 CREDIT AND THE CREDIT MAN 
 
 six and twelve months were regularly given to traders 
 in the far AVest and South, would not be considered war- 
 rantable to-day. Those were days of long distances, 
 and of little communication, except when the buyers vis- 
 ited the market in person. When these conditions 
 changed it was no longer necessary to grant such long 
 terms of credit. Therefore it became customary to 
 speak of short-time and long-time credits. Examples 
 of the first kind include a period of time running from 
 a demand at sight to a thirty-day promissory note. The 
 second class includes those long-time instruments M'hich 
 may run sixty days or longer. 
 
 10. Various classes of credit— StiW another classi- 
 fication of credits may be made. The basis for this 
 classification rests on the particular economic activity 
 in which credit is used. In the field of produc- 
 tion into which capital is led by the means of credit we 
 have what is known as capital or investment credit. In 
 the field of exchange, where business men devote them- 
 selves solely to the business of buying and selling credits, 
 we have the kind of credit with' which people are most 
 familiar. Credit in this relation is spoken of as banking 
 credit. Another very active sphere where credit is used 
 is in connection with the distribution of the products of 
 manufacture. The form of credit which permits the 
 change of goods from one merchant to another is com- 
 monly called mercantile or commercial credit. Although 
 these divisions constitute the most thoroughly systema- 
 tized spheres of credit operations, nevertheless there is 
 still another point of view from which credit should be 
 observed. This is within the field of consumption. 
 Credit which permits the individual to obtain goods for 
 his personal enjoyment is designated as "personal 
 
NATURE OF CREDIT 
 
 ilUS 
 
 credit." The problems which arise under this latter sys- 
 tem belong especially to the retail trade. 
 
 The advantages of credit in these various branches of 
 economic activity of production, exchange, distribution 
 and consumption are well set forth by Professor Conrad 
 of Halle University: 
 
 ( 1 ) Credit furnishes a more perfect and convenient means of 
 p.ivment in large sums and between distant places than the 
 precious metals, saving time and labor. This is effected by 
 means of notes, checks and bills of exchange. (2) Credit takes 
 the place of corresponding amounts of gold and silver. This 
 is ii saving, as it enables us to employ the precious metals for 
 other useful purposes. (S) Capital is employed more produc- 
 tively. He who possesses capital, but is for any reason unable 
 to make use of it, transfers it to another for a compensation 
 to the btnefit of both, as well as that of the public economy. 
 It is given, cateris paribus, to him who is ready to pay the 
 liif^hcst price for its use; that is, in general, to him who can em- 
 ))h)y it most productively. (4) The laborers, artisans, and 
 traders, although unprovided with means of their own, may by 
 tlic use of credit obtain capital to assist them in their labors, 
 and that without sacrificing their independence. This point 
 is to be particularly borne in mind as of special weight in 
 judging the credit of unions. Credits is thus of importance in 
 avoiding that separation of capital and labor which excites so 
 much bad feeling and which forebodes danger to modem civili- 
 zation. (5) Credit gathers together the small sums, which, by 
 moans of joint-stock companies and otherwise, are economic- 
 ally employed. Capital is concentrated, but its returns are 
 disseminated among the people, politically a weighty point. 
 (()) The possibility of employing every sum, however minute, 
 iirpfcs people on to saving. (7) Credit binds together the 
 interests of those having dealings with one another. Under 
 a highly developed system of credit economy, it is the interest 
 
J.'24 
 
 CREDIT AND THE CREDIT MAN 
 
 of each to show himself wortliy of trust ; this can be of advan- 
 tage in the moral education of a people. (8) It enables men 
 to save for their old age, and make provision for their families 
 in case of their death. Were there no such thing as credit, the 
 best one could do would be to heap up, and then consume after- 
 ward, the capital gathered together. 
 
 To this excellent summary Professor Ely in his article 
 on "German Cooperative Credit Unions" adds the fol- 
 lowing division : 
 
 (9) Capital, when obtained under favorable circumstances, 
 yields a larger return than the interest. Were it otherwise] 
 borrowing, except in case of special need and distress, would 
 cease. The prudent and skillful laborer who can command 
 credit is thus enabled to obtain, besides his wages, a surplus from 
 the use of the capital. Credit, well used, is therefore economic- 
 ally as productive as a favorable climate or a high education of 
 a people. 
 
CHAPTER II 
 
 DIVISIONS OF CREDIT 
 
 11. Varieties of business credit. — It has been men- 
 tioned in the preceding pages that barter, money and 
 credit simply represented three transactions, differing 
 only in the degree of confidence that was manifested in 
 the transaction. The last stage, or credit economy, 
 shows a higher degree of confidence, since the very es- 
 sence of our commercial system is found in the element 
 of future time involved in our transactions. The longer 
 the period of time that is interposed between the sur- 
 render of one's property and the payment for the same, 
 the greater is the confidence displayed. There remains, 
 however, a close connection between the present credit 
 economy and the use of money ; for every credit instru- 
 ment given in exchange for goods must be liquidated 
 by means of money. This imposes upon the commercial 
 world the necessity of watching a double set of condi- 
 tions: (1) The character of the collateral; and (2) the 
 condition of the money market. That is, the credits 
 must be based on goods or collateral that are marketable 
 and whose future value in terms of money will be equiv- 
 alent to the value of the credit extension at the time 
 when it was given. Banking credit, mercantile credit, 
 or personal credit are simply transactions which differ 
 from each other because they hold different situations 
 in the field of business relations. A bank, a large com- 
 mercial house and a small retail store may be presented 
 simultaneously with requests for credit, each applicant 
 
 III-15 ««5 
 
aae 
 
 CREDIT AND THE CREDIT MAN 
 
 offering the same kind of security, but as there would 
 be different relations established in each case, there 
 would be different names used. Thus while there are 
 certain things which are common to the whole field of 
 credit operations, there are certain lines of credit which 
 become the particular study of each of the divisions rep- 
 resented above. 
 
 12. Personal credit. — In order of origin, personal 
 credit holds first place. Borrowing arose for the pur- 
 pose of satisfying some consumptive desire. But when 
 the purpose of business changed from making a living 
 to making a profit, banking and conmiercial credits were 
 developed. Nevertheless, personal credit still persists, 
 and although the oldest form, it is not the one which 
 presents the most systematic organization. This is eas- 
 ily explained when we examine the elements of which it 
 is composed. In general, it resembles commercial credit; 
 the difference lies chiefly in the fact that commercial 
 credit has other features, in which personal credit is 
 lacking. 
 
 13. Why a personal credit system is not well organ- 
 ized.— On account of the difficulty of classifying per- 
 sonal credit-takers, there seem to be no well-established 
 rules that are followed by those who extend credit to 
 their customers. Each extension of credit is to an indi- 
 vidual member of society. His relation to others in his 
 capacity as an individual consumer is in no way regu- 
 lated by public ratings of his riches, earning power, 
 or character. Any agency that would attempt to gather 
 such information from among the various classes of 
 laborers, professional people and others would find the 
 costs far too high to make it pay. Another difiSculty 
 which confronts the dealer, and which makes the estab- 
 lishment of any uniform policy ahnost impossible, is the 
 
DIVISIONS OF CREDIT 
 
 227 
 
 great difference in the economic status of those who wish 
 to "buy goods on trust." First, there are individuals 
 who can demand credit on their merits; secondly, there 
 are others who by virtue of their very misery and poverty 
 have a claim for credit. The reason for lack of system 
 in this branch of credit is not, however, solely due to 
 the variety of social and economic disparities among 
 consumers. There is much to be charged against the 
 (lisi)enser of credit. JNIr. James G. Cannon, vice-pres- 
 ident of the Fourth National Bank of New York, in a 
 paper entitled, Individual Credits^ is of the opinion that 
 one of the great evils connected with this kind of credit 
 is "too great liberality." Neither genuine liberal- 
 ity nor philanthropy inspires the extension of such 
 credit; it is rather the result of ignorance or inertia on 
 the part of those whose duty it is to investigate the 
 credit-standing of the applicant. 
 
 14. Reasons for not making proper inquiries. — The 
 neglect of making proper inquiries may be due to the 
 following factors. First, there is often an inordinate 
 desire on the part of dealers to gain wealth. This leads 
 them to extend credits without distinction. In order to 
 out-rival their competitors, they throw discretion to the 
 winds, and invite custom by offering liberal credit. The 
 maxim of "a small business with good collections and 
 fair profits" is forgotten, and the dealer is led by his 
 ciii)idity upon the unsafe ground of a big credit busi- 
 ness, which is not only less profitable financially, but is 
 detrimental to his health and peace of mind, insofar as 
 it means a constant struggle to support the thin margin 
 that stands between him and commercial failure. 
 
 Second, many dealers lack the "business sense." They 
 are wanting in those instincts which discriminate clearly 
 between a proposition based on a trading relation and 
 
asH 
 
 CRi:UIT AM) THE CREDIT MAN 
 
 one which is based on personal friendship. Such men 
 are deterred from making inijuiries of their patrons 
 regarding their immediate or prospective ability to pay 
 for fear of giving offense, although questions of this 
 sort are perfectly legitimate from a business point of 
 view; but the dealer allows himself to be controlled by 
 feelings which are more suited to a "good fellow" 
 socially, than to a successful business man. 
 
 Third, there exists a si)ecies of cre<lit-seekers who prey 
 upon the fears of the dealer, knowing that by pre- 
 senting a bold front, by telling a plausible story, or by 
 convincing manners, they will be given credit. Having 
 once won a foothc il, they further increase their debts by 
 appealing to another fear common among dealers — that 
 of losing a patron, or playing him into the hands of com- 
 petitors. What storekeeper, having convinced hhnself 
 that he was wrong in not refusing credit, has not been 
 again driven to the same policy by the appearance of 
 some clever woman, who full of righteous indignation, 
 "the family honor having been impugned," offers expla- 
 nations which make the dealer feel that the evidence 
 of unpaid bills is as naught besid the mighty possibility 
 standing before him. He will probably chide himself 
 and offer humble apologies for letting an unfavorable 
 balance arouse any doubts of her paying ability. 
 
 Fourth, besides these personal causes, there is another 
 factor which, although it is perhaps outside of the con- 
 trol of the individual, may not be beyond the control 
 of a united trade. Many dealers would make investi- 
 gations in harmony with good business judgment if 
 there were such facilities. We do not here include the 
 "mammoth stores" whose managements can avail them- 
 selves of the various sources of credit information. The 
 majority of dealers do not have access to these facilities, 
 
DIVISIONS OF CREDIT ««9 
 
 however. The expenses connected with membership in 
 a mercantile agency, or cooperative bureau, put such 
 means beyond their reach. Then, too, the small mer- 
 chant has not the necessary time to give his attention 
 to the investigation of the credit standing of his cus- 
 tomers, while to hire a man for this particular purpose 
 is also far beyond his means. Yet, it is the opinion of 
 eminent author* ties, that it would be to the advantage 
 of every merchant to give considerable time to the study 
 of his credits.* 
 
 That the time is not far distant when the retail trade 
 will have much better facilities for obtaining credit in- 
 formation is evident from such movements as the "In- 
 dianapolis Plan." During the year 1910 four cities had 
 adopted this plan of cooperative retail credit reporting. 
 
 The plan as outlined by W. E. Bolch before the an- 
 nual meeting of credit men shows the following signifi- 
 cant features: 
 
 A private telephone exchange was installed. This 
 enables the credit departments of each firm to get abso- 
 hite privacy. The records of customers are kept in a 
 central office. When cards come to the office they are 
 carefully compiled. A special code of numbers known 
 only to the central office is used to designate the members 
 
 1 One of the large department stores sends the following form letter to 
 pei. >ns whom an applicant for credit give as references: 
 
 Dear Sir:— 
 
 Will you kindly give us in confidence such information as you may possess 
 concerning the financial responsibility. Income and habit of pay, etc^ of the 
 person whose name is noted on the reverse side of this inquiry. 
 
 Thanking you in advance, we are 
 
 Yours very truly, 
 
 The following appears on the reverse side of the letter: 
 
 Xame • 
 
 Residence 
 
 Business 
 
 Address 
 
 REPLYt 
 
ftSO 
 
 CREDIT AND THE CREDIT MAN 
 
 of the association. Under these numbers the informa- 
 tion concerning customers was filed. Thus when the file 
 was completed the bureau had a record in concise form 
 of the manner every account in every store had been 
 taken care of. In order to keep the file "alive" a record 
 book was introduced. In this is entered every account 
 as soon as it is opened. This keeps the record complete 
 to the very day. Special attention is given by members 
 to reporting changes of address of customers. This 
 makes the record valuable as a reliable directory. 
 
 Daily the Commercial Record is checked to this 
 record; every suit and judgment, every lien and lease, 
 chattel mortgage — in fact — everything tending to lessen 
 a customer's credit responsibility is entered on his par- 
 ticular card. If danger is scented all members inter- 
 ested as having sold or still selling the customer are 
 called on their special telephone and notified of the facts 
 against his record. Likewise is each case reported if a 
 customer's account shows that it is becoming danger- 
 ously slow. Two or more reports on one person sent 
 to the Bureau is the signal for a general notification to 
 all members of the Association. 
 
 Information of a more general nature, such as a 
 record of the persons to whom credit had been denied 
 either because of previous adverse ratings or because of 
 no credit experience is sent out in bulletin form twice a 
 week to the members. 
 
 The three elements which the Association lays stress 
 upon when a customer's credit standing is being inves- 
 tigated are paying ability, stability of character and 
 moral responsibility. "As practically 75 per cent of the 
 retail credit risks," says Mr. Bolch, "are salaried persons, 
 we ascertain as nearly as possible the income or salary 
 of an applicant, his stability as shown by the length of 
 
DIVISIONS OF CREDIT 
 
 881 
 
 time he has been with his present employer, his domestic 
 rt'siKJnsibility and his paying habits in the immediate 
 IcK-ality of his home. The tax records show his legal 
 responsibiUty, if any. and these all go to show as far as 
 jM)ssible, the probable results, should credit be extended. 
 When an applicant is engaged in business, a complete 
 eport of his ledger experience in the local wholesale 
 trade is secured through close affiliation with a similar 
 bureau maintained in the wholesale jobbing trade." 
 
 Besides keeping in touch with other trade bureaus the 
 retail association maintains close affiliations with the city 
 banks. All the banks are members of the bureau. This 
 relation helps both the retailers and the banks, since 
 "kiters" * either of checks or commercial credit are known 
 to the Bureau and reported to the whole association. 
 Three fundamental ideas underlie the working of this 
 
 system. 
 
 (1) Opinions are never confused with facta. The 
 bureau acts only as a clearing house for ledger figures 
 which tell their own story. 
 
 (2) The source of information is never made known. 
 The stores are known by a cipher. Without divulging 
 the source of the information the bureau can report upon 
 a customer's indebtedness to another store. The inquir- 
 ing store gets only the total sum owing and the amount 
 past due. The chief value of this mformation rests 
 upon its being up to date. It represents present in- 
 debtedness of a credit customer. 
 
 (8) Cooperation between the members is stimulated 
 by a feeling of ownership. The bureau belongs to the 
 members and not to a voting agency owned and con- 
 
 1 A check "klter" is a person given to overdrawing his account habituaUy. 
 "Kiting accounts" refers to the practice of establishing a line of credit 
 in several stores by a person In excess of his ability to pay. 
 
232 
 
 CREDIT AND THE CREDIT MAN 
 
 trolled by people from the outside. The association 
 absolutely owns a live record of ove^ 60,000 persons, 
 comprising over 600,000 actual ;]> . transactions. 
 
 In summing up his valuable report the author says: 
 
 While the direct tangible good wrought by the working out 
 of this plan has been far greater than we had dared to hope, 
 the intangible salutary effect it has had has been worth far more 
 than can be esti: ited in dollars and cents. It has been the 
 means of clearing out forever parasites who have literally lived 
 on the local retail merchants in maintaining their valued (?) 
 position in society and at the same time, has given a correct 
 and firmer credit standing to those to whom credit is due. 
 
 15. Relation of personal credit to other credits.-^ 
 The extension of personal credits has a two-fold effect. 
 It affects the commercial system as a whole, and it is 
 also connected with the subject of prices. If the retail 
 dealer cannot collect his debts, it means that the whole- 
 saler or jobber or his banker must wait for their 
 payments. Then, too, there are the producers or man- 
 ufacturers or their bankers, who must suffer the restric- 
 tions which are put upon business activity by fraud or 
 failure to meet engagements on time. For this lack of 
 system and the strictness in regard to credit extension, 
 the consumer pays the penalty in the increase of prices 
 due to added risks which the commercial world must 
 undergo as a result. How great these risks are, may 
 be inferred from the statement made before the meeting 
 of the Credit Men's Association in 1900. After giving 
 the estimated average losses for the years 1890-1899, 
 as being more than $178,800,000, Mr. D. B. Murphy 
 says: 
 
 Appalling though these figures be, they do not include the 
 untold millions that are absolutely lost each year, by merchants 
 
DIVISIONS OF CREDIT 
 
 233 
 
 engaged in retail trade, in every line of industry, in every town 
 and cross-roads, from ocean to ocean, from the lakes to the 
 Gulf, comprising every retail enterprise, from the gigantic 
 department stores in our great cities to the humble rural deal- 
 ers. These figures do not include the very considerable loss sus- 
 tained by those engaged in the learned professions — notably 
 by the physicians of the country — nor do they include the 
 enormous losses of a personal and confidential nature. 
 
 16. Efect of "too ready credit" upon the consumer, 
 —There is another penalty which the consumer must 
 pay although not so directly, through the use of too 
 "ready credit," which is nevertheless more harmful be- 
 cause of the insidious nature of the cause. Among 
 those who seek credit are a large class of laborers and 
 others who do not give due consideration to the demands 
 of the future, but who are controlled entirely by their 
 present desires. We i^ee whole communities in numer- 
 ous sections of i country, who lack definite plans for 
 provision for ola age or for periods of idleness or sick- 
 ness. The "installment plan" is an example of a method 
 by which credit may be made attractive to this class of 
 people. In a recent report upon the conditions in "The 
 Cotton Mills of South Carolina," the author says in 
 illustration of this point: 
 
 It is an exception to go Into a home and not find photographs 
 or highly-colored lithographs. In a great many communities I 
 was told that the bane of the operatives as a class was the habit 
 of buying things on the installment plan — ^from an organ to 
 a last year's almanac — and when I asked him why anyone 
 would buy a "last year's almanac,*' he replied that it would be 
 bought on credit for the jokes that were in it. As a matter of 
 fact, the first thing that the operatives have to contend with 
 after they get into the mill village is the agent who wants to 
 
834 
 
 CREDIT AND THE CREDIT MAN 
 
 sell furniture, pictures, a sewing machine, books, and a Bible, 
 and now a phonograph on the installment plan. 
 
 Any means by which credit might be curtailed among 
 such classes would tend to raise them morally and eco- 
 nomically in the scale of social betterment. A method 
 often followed by individual dealers is to restrict credit 
 allowances to one week and refuse more until settlement 
 is made. This is often most effective among those who 
 "run" book accounts with the grocer and butcher. 
 "Run" is a good word to use in this connection, for the 
 account book is generally traveling back and forth be- 
 tween the home and the store incessantly. As a conse- 
 quence, the weekly salary is outrun before the week's 
 necessities have been provided for. 
 
 Perhaps no human weakness is more universally 
 played upon than the readiness of the individual to bar- 
 gain away his future independence through the instru- 
 ment of credit. It is the instinct of every trader to 
 insure his profit wherever he can. By getting men to 
 buy on credit, he not only encourages them to purchase 
 more extravagantly than on a strictly cash basis, but he 
 holds a claim upon their future earning power, and to 
 this extent controls their independence. The "truck 
 system" is the best example of the abuse of this class 
 of credit. The relationship of employer to employe 
 often puts the latter in the power of the former through 
 the "enjoyment of credit" at the "company stores." 
 
 17. Other abuses of credit— There is, however, a 
 more general abuse of personal credit in the appeals 
 to the public made by mercantile houses. "Your credit 
 is good at the New England" is a type of a very com- 
 mon mode of advertising which is meant to trap people 
 into assuming heavy obligations, which, in view of their 
 
DIVISIONS OF CREDIT 
 
 235 
 
 means, they have no right to make. The risk to capital 
 and profits when long credits are given is protected by 
 chattel mortgage and high prices for the goods. But 
 these disadvantages look small to the purchaser when 
 "the day of judgment" lies so far in the future. 
 
 Another favorite device practiced even by large and 
 representative firms, is only a variation of this method. 
 Personal letters are sent to prospective customers whose 
 patronage is solicited. The advantages of a running 
 account are offered to them. The evil of this method 
 lies not so much in the solicitation as in the kind of infor- 
 mation which forms the basis for offering the opening of 
 credit accounts. Lists of names are gathered from a 
 sort of society's "Who's Who." The makers of these 
 directories are not concerned with the financial respon- 
 sibility of the people whose names they procure. Fash- 
 onable residence quarters are- the chief consideration. 
 iVhere luxury exists there should be at least a suspicion 
 of extravagance, and extravagance means that the credit 
 margin is likely to be narrow. The merchant should be 
 more interested in the surplus which the customer can 
 devote lo the purchase of goods, than to the size of the 
 bills for the rent of house and automobiles. 
 
 18. Mercanlile credit. — The division of credit into 
 personal, mercantile, banking, and capital credits is done 
 on the basis of convenience rather than for the purpose 
 of forming a basis for scientific analysis. While per- 
 sonal credit has to do with the transactions connected 
 with the buying of the individual consumer, it is desir- 
 able to form another classification in order to include 
 those larger transactions which involve a greater degree 
 of responsibility. As a consequence, we should expect 
 to find a more fully organized system for dealing with 
 credit, and a sounder basis upon which it is granted. 
 
236 
 
 CREDIT AND THE CREDIT MAN 
 
 Mercantile credit is confined to those trade inter- 
 clmnges embraced in the distribution of goods. So nu- 
 merous and varied are these credit operations in this 
 field of trade interchange, that it has become necessary 
 to provide special institutions and agencies to aid in 
 giving celerity and security to these credit operations. 
 So there are banks and brokerage concerns that help in 
 the transfers, and insurance agencies which aid in afford- 
 ing security to credit transactions. 
 
 The system of mercantile credits as it exists to-day 
 is the result of a steady growth. The rapid extensioi 
 of commerce put limitations to the old credit facilities. 
 The whole system of distribution underwent a transfor- 
 mation. As the country developed toward the west and 
 south, it became necessary to meet the newer condition 
 of widely separated markets. The essential character- 
 istics of the credit situation were the ever-growing risks 
 and the involved adjustments necessary to bring present 
 and prospective resources to meet present and prospect- 
 ive needs among conmiunities whether local, national, 
 or, if we go beyond the nation, international markets. 
 
 The distribution of our products, regarded as a com- 
 mercial system, involves so many risks to capital and 
 labor that this service has become a distinctively specu- 
 lative business. These speculative risks have reacted 
 upon the industrial system in such a way as to develop 
 a new system under which credit may be extended. The 
 credit system is, therefore, complementary to the com- 
 mercial system. The new communities in the west and 
 south needed capital to help them in developing their 
 natural resources. It was credit that helped them over 
 the experimental stage of their endeavors. It is not 
 to be wondered at that the spirit of speculation often 
 became rampant. Yet as communities became more 
 
DIVISIONS OF CREDIT 
 
 237 
 
 accustomed to settled conditions, they began to appre- 
 ciate the necessity for greater commercial conservatism 
 and the importance of handling more carefully the 
 finely balanced mechanism of the credit system. 
 
 19. Factors that have changed the credit system.— 
 The factors that have been uppermost in the modifica- 
 tions of credit systems are the railroads, the telegraph, 
 and other means of communication. These have helped 
 to cut down the risks due to bad roads, inadequate in- 
 formation as to investment and commercial conditions, 
 and the necessity of keeping capital tied up for long 
 periods of time. Under the old conditions, capital was 
 tied up because it was necessary for the merchant to 
 carry such large amounts of stock due to the difficulty 
 of calculating the probable sales of a season. As an il- 
 lustration of this as it exists in international trade, we 
 need only cite the case of the Indian trade. In the days 
 when a voyage around the Cape of Good Hope took a 
 part of a year, and the tune of arrival varied by months, 
 India merchants had to keep large stocks on hand to 
 meet the varying demand. At present, however, when 
 ships make the trip by way of Suez Canal in a month, 
 goods are ordered as they are needed, and the immense 
 warehouses of India are practically useless for the pur- 
 pose for which they were designed. It was necessary, 
 too, for the merchant to make periodically long trips to 
 the market in order to purchase his supplies. The better 
 means of communication have reversed the situation be- 
 cause it is more economical for the selling concern to 
 send a salesman to many localities than for the country 
 merchants to travel in person to the trade centers. Sell- 
 ing by sample has superseded selling by inspection. It 
 is the wholesaler who must now assume the risks of over- 
 stocking rather than the local merchant. 
 
238 
 
 CREDIT AND THE CREDIT MAN 
 
 The character of the credit systems was modified in 
 several important respects. The liberal "time limit" 
 under the old commercial conditions compelled the mer- 
 chant who accorded credit to require the promissory note 
 at the time of sale so that he himself might not be lackinff 
 m capital funds while his goods were being disposed of 
 under a long term credit contract. Quick and easy 
 communication has occasioned the substitution of short 
 time payments for the former "long time" commercial 
 paper. Then besides the services of the railway, the 
 mail, the telegraph, and telephone, is the fact that bank- 
 ing accommodations have been extended to nearly every 
 village and hamlet in the nation. These combined fae- 
 tors have had the secondary effect of changing the 
 method and extent of note settlements. The long time 
 credits running from four to six months had to be paid 
 for by the merchant in higher prices and higher rates 
 of interest, but as the banks were ready to advance him 
 hberal accommodations, he soon saw the advantage of 
 borrowing money from the bank and paying for his 
 goods at the most favorable discount rates. In the 
 place, therefore, of the long time paper, two new fea- 
 tures ^gan to be used, "dating" and "book accounts." 
 20. The custom of dating.— The custom of dating 
 seenis to have grown out of a plan to grant extra credit 
 by the wholesaler and jobber in order to induce the mer- 
 chant to make purchases before the season opened. 
 Competition, too, encouraged the practice of making 
 time allowances in order to cover the period during which 
 goo<k were in transit and while they were being prepared 
 for display. By this method, the purchaser persuades 
 the seUer of the goods to date the biU a certain length of 
 tune ahead of the actual shipment, say, thirty or sixty 
 days. Then if the purchaser is accustomed to another 
 
DIVISIONS OP CREDIT 
 
 2S9 
 
 definite length of time in which to pay, the time does 
 not begin until the expiration of the thirty or sixty days. 
 For instance, a cotton textile merchant has a bill of goods 
 sold July I, 1908, and charged for on the same date 
 with a dating of sixty days ; terms 2 per cent, ten days ; 
 and net thirty days. This will not be due until October 
 1, which means that the debtor can pay the bill at any 
 time within three months from July 1, because the 
 dating gives him until September 1, and the term of 
 thirty days extends the time limit to October 1. Not 
 until October 1 can the creditor demand payment. The 
 merchant might take advantage of his credit at his bank 
 and borrow money with which to liquidate the note at 
 the end of ten days. He would then be gaining the ad- 
 vantage of the 2 per cent discount as well as the interest 
 upon the note for sixty days. 
 
 Although the custom of dating bills seems to be firmly 
 established, yet the wholesale world is beginning to favor 
 its discontinuance. This is seen in one direction by the 
 steady growth of cash wholesalers by whom the credit 
 market is being undersold. If the latter practice should 
 prove the more economical, it is only a question of time 
 when the retailers must withdraw their support of the 
 dating system. Some claim that it is already outgrown 
 and is on the whole detrimental to the trade since it en- 
 courages men to use snap judgments in anticipating 
 market conditions. As a consequence, dealers over- 
 stock, and large and frequent losses ensue. 
 
 21. The book account. — More recent than the cus- 
 tom of "dating" is the substitution of the book account 
 for the familiar promissory note and the domestic bill of 
 exchange. For many years these formed the greater 
 part of the business paper handled by the banks. By 
 the extension and better organization of the banking sys- 
 
240 
 
 CREDIT AND THE CREDIT MAN 
 
 tem, the dealers in the country were enabled to save the 
 extra costs connected with the long time paper. Mer- 
 chants could now buy credit of their local banker and 
 pay "cash" to the distant jobber or wholesaler.^ 
 
 The long time credit instruments having disappeared 
 generally, the chief record of the transaction was that 
 left upon the books of the creditor. The bills of ex- 
 change had served not only as evidences of debts, but 
 had also entered largely into commerce as mediums of 
 exchange. They were among the best kinds of business 
 paper. A merchant who had sold his goods and held a 
 note against them could easily pass it to another business 
 man for more goods, or he could readily discount it at 
 a bank for the actual cash. The disappearance of the 
 bill of exchange, however, did not do away with the 
 necessity on the part of the wholesaler or jobber of often 
 seeking to raise money on outstanding accounts. Not 
 having the notes to discount, the only avenue open was 
 to borrow directly upon the book accounts. This, of 
 course, could be done only when the owner of the book 
 accounts was well known to the banker, for while the 
 promissory note gave double evidence of the transaction 
 — that of the maker and that of the endorser— the book 
 account had to stand on the word of the owner alone. 
 
 The experiment, however, having been made and 
 found to be reasonably safe and profitable to both par- 
 ties, a regular system has grown up which deals with 
 this particular kind of credit. At first it was handled 
 solely by the banks along with their loan departments, 
 but the business increased to such an extent that some 
 
 1 A cash sale is a sale which is to l»e immediately delivered and paid for 
 at the same time (stock exchange rule), tiut among merchants payment 
 is to be miKi^c within a certain number of days, usually ten.— Montgomeiy 
 Rollins, " Money and Investment." 
 
DIVISIONS OF CREDIT 
 
 241 
 
 hanks organized a separate department for dealing in 
 l)ook accounts. 
 
 Most banks found, however, that work of this kind 
 was very highly specialized and therefore too ex- 
 j)ensive — taking into consideration the conservatism 
 necessary in banking — for them to handle. Accord- 
 ingly there grew up outside the bank certain brokerage 
 institutions which made it their specialty to handle busi- 
 ness paper. They became very expert in judging of 
 business credits and as they gained rapidly in capital 
 strength themselves, these brokerage concerns became 
 valuable adjuncts to the banking system. Often where 
 a bank is prohibited from assuming the risk of discount- 
 ing the book account directly, it is able to loan money 
 on the broker's security and experience, as well as on 
 the knowledge that a ready market exists in which they 
 can quickly realize on these securities if necessary. 
 
 22. Two methods of assigning accounts. — The terms 
 under which this business is done vary. The accounts 
 of a merchant may be assigned to a bank or a conunis- 
 sion house in one of two ways. The assignee may al- 
 low the assignor of the acounts to withdraw a certain 
 percentage of the value of the book credit, amounting 
 to from 70 to 00 per cent. In addition he may ask a 
 bonus and a heavy rate of interest.^ 
 
 The terms which govern another class of assignments 
 are not so onerous, the difference depending in a great 
 measure upon the degree of confidence which the banker 
 has in the assignor of the accounts. A common prac- 
 tice permits the assignor to act virtually in the capacity 
 of an agent of the assignee. The banker accepts the ac- 
 
 1 In the state of New York the usury laws compel such agreements to 
 ('c carried on tub ro$a. The methods by which some commission houses 
 *nd banks evade the law are very questionable. 
 
 Ill— 16 
 
842 
 
 CREDIT AND THE CREDIT MAN 
 
 counts and then allows the original owner to collect them 
 and to use the money. As soon as the account is col- 
 lected new credits of equal value are turned over to the 
 banker. By this means is maintained the margin be- 
 tween the total book value of the accounts and the agreed 
 percentage allowed upon them by the banker. This 
 method is considered favorable to the assignor becausv 
 he may in this way keep the fact of assignment from 
 his customers. It is generally thought that a man's 
 business prospects are not sound if he is willing to as- 
 sume the heavy charges connected with this method of 
 raising funds. But conditions may compel the banker 
 to exercise his rights under the assignment, in whidi 
 case the customer's accounts that have been conveyed to 
 him would be collected by the bank. 
 
 In case the bank or commission concern is willing to 
 take all the risk connected with a given line of accounts, 
 the terms are proportionately exacting. Here the book 
 credits are bought outright but only at a heavy discount 
 including a "bonus" and a high interest charge. To be 
 convinced that the handling of this kind of credit paper 
 is profitable one needs only to observe the increasing 
 numbers of commission firms which are discounting and 
 loaning upon these book credits. Many of these con- 
 cerns have the capital strength of large banks and their 
 work partakes much of the nature of banking. 
 
CHAPTER III 
 
 DIVISIONS OF CREDIT {Continued), 
 
 28. Capital or investment credit. — When goods have 
 l>een turned out of the factories, mills and workshops, 
 completely finished and ready for use they may be di- 
 vided into two general classes — ^those which are to be 
 consumed directly, their usefulness ending with one act 
 of consumption, and those goods which are to be used 
 in the production of more merchandise. The former 
 are desired because they satisfy some personal want. 
 Food and clothing are the commonest examples of these. 
 The economist calls them "consumption goods." In the 
 ])receding pages we have taken this use or function as 
 the basis for classifying the credit transactions connected 
 with the exchange of these goods in their transference 
 from the dealer to the consumer, and we have designated 
 this transaction as "personal" or "consumptive" credit. 
 The latter class is desired because these goods are ex- 
 pected to help in the production of more goods. People 
 value them according to the profit they are expected to 
 return. They are therefore called "capital goods." 
 
 Income from capital goods may arise from the use of 
 them by the owner; for example, the blacksmith may 
 own his own forge, anvil, and other tools and may per- 
 form all the work with his own hands. He assumes the 
 personal risk in the business and he expects to receive 
 his return in the shape of profits. On the other hand, 
 the owner of the capital goods may take no active part 
 in the business. His interest in the enterprise is limited 
 
 24S 
 
344 
 
 CREDIT AND THE CREDIT MAN 
 
 to the income in the form of dividends and interest pay> 
 ments. His share of the gain does not depend on the 
 fortunes of the handler. Railroad stock, municipal and 
 government bonds may be cited as good illustrations of 
 this class of investments. Men who invest in these 
 forms of capital goods are generally controlled by the 
 desire to have a regular and assured income. Certainty 
 and regularity, therefore, must be the guiding elements 
 in considering the exchanges which take place in trans- 
 ferring the claims of ownership comprehended in this 
 field of capital investment. So we have another basis 
 for classifying the credit transactions of persons who 
 deal in this grade of capital ■ investments. The title 
 given to this branch of credit is in accordance with the 
 character of the investments which it aids in carrying 
 out and is therefore called "capital" or "investment" 
 credit. The credit instruments which arise as a result 
 of these are designated investment securities, and the es- 
 sential nature of the credit is suggested by the term 
 "long-time investments." 
 
 24. Elements of safety in capital credit. — A full 
 discussion of the nature, forms and methods of invest- 
 ment would take us into the broad field of fimncial 
 operations, but it is pertinent here to mention the ele- 
 ments of safety to be studied in capital credit: 
 
 ( 1 ) If the business is safe and profitable, the security 
 is safe. 
 
 (2) The permanency and activity of the market is 
 essential in determining the character of the demand. 
 
 (3) Stability and progress in business conditions in- 
 dicate the general trend which all investments are taking. 
 
 (4) Solidarity and fixedness of policy in a business 
 lend the same attributes to its securities. 
 
 (5) A steady and reasonable rate of interest over a 
 
DIVISIONS OF CREDIT 
 
 245 
 
 series of years insures the fact that a business is on an 
 "investment basis." 
 
 (6) The character of the competition discloses the 
 value of its monopoly position as a holder of franchises. 
 ffood will, patents and so on. 
 
 (7) It is desirable that the character of the manage- 
 ment be known in order to arrive at a knowledge of 
 policy, trustworthiness and so forth. 
 
 23. Principal forms of capital credit— The usual 
 forms of capital credit are the following: 
 
 1. Government bonds. 
 
 2. State bonds. 
 
 8. Municipal bonds. 
 
 4. Real estate bonds and mortgages covering real 
 
 estate. 
 
 5. Railroad bonds and stock. 
 
 6. Municipal street car line bonds and stock. 
 
 7. Telegraph securities. 
 
 8. Telephone securities. 
 
 9. Gas and electric lighting. 
 
 10. Waterworks bonds. 
 
 11. Bank and trust company shares. 
 
 12. "Industrials." 
 
 The rapid growth of the last form of investment— 
 "industrials"— calls for at least a passing remark. 
 Within a comparatively short period this form of cap- 
 ital credit has assumed a leading place. The magni- 
 tude of the industrial capitalization may be appreciated 
 from a recent tabulation showing that the amount of 
 "industrial securities" was equal to 48 per cent of the 
 capital listed on the New York Stock Exchange. This 
 comparison showed that the industrials amounted to 
 $4,002,000,000 as against the railroads of $5,800,- 
 000,000. 
 
246 
 
 CREDIT AND THE CREDIT MAN 
 
 26. Principal sources of capital funds. — The sources 
 from which funds are drawn to be employed in capital 
 investments show the desire of the investor to have se- 
 curity for his capital. The commonest source is the 
 funds of the retired business man. Another well-known 
 avenue by which surplus funds reach the investment 
 field of credit securities is found in the savinf", bank de- 
 posits, the accumulated profits of commercial banks, and 
 the funds of life and fire insurance companies. There 
 are also certain charitable or educational institutions 
 which buy up well-known bonds as safe investments. 
 Of the same nature are the funds of estates in the hands 
 of executors. In the case of trustees the risks and 
 profits of business are exchanged for the safer but 
 smaller income from some form of capital credits.* 
 
 27. Banking credit and its relation to commercial 
 credit. — The close relation of banking credit to conmier- 
 cial credit is indicated by the frequent association of the 
 two before the subject of banking credit could be treated 
 specifically. Not all banks are connected with conmier- 
 cial credits. Those which do deal in them are called 
 commercial banks. Their organization is based on the 
 principle of accepting deposits subject to check so as to 
 facilitate an exchange of commodities, and in this way 
 to be of benefit to merchants and business men in gen- 
 eral. It is commercial credit that originates and gives 
 life to the vast amount of credit instruments which form 
 the bulk of the banking business. That the bank's re- 
 lations to the community can be defined in terms of 
 credit is illustrated by the fact that when a bank receives 
 a deposit, the community expresses its degree of confi- 
 dence in the bank, and when the community takes a loan 
 from the bank, the latter shows its faith in the com- 
 
 > See " Credit and its Uses," by WllUam A. Prendergast, page 43. 
 
DIVISIONS OF CREDIT 
 
 X47 
 
 munity. This mutual expression of confidence extends 
 the activity of the bank in one direction, while it sets 
 limits to it in another. The confidence of the depositor 
 rests largely in ' ••• belief that the "bank is safe," by 
 which is meant t the creditor can obtain his money 
 upon demand. j long as this faith in the bank's abil- 
 ity to pay on demiOid is unquestioned, which is gener- 
 ally true in normal business times, the depositors will not 
 all call for their money at the same time. Knowing this 
 and through long experience having found out what 
 proportion of the dep»sits must be kept for meeting the 
 immediate demands, the banker is able to use part of the 
 deposits for granting credit to business men who have 
 no money to deposit but who have property in the form 
 of notes, bills of exchange, warehouse receipts and so 
 on, which they are willing to deposit with the banks or 
 sell to them at a discount in return for the right of using 
 the bank's credit. In this way the banking credit is ex- 
 changed for commercial credit and in two ways is credit 
 extended. First, the bank by its position as an accumu- 
 lator of deposits is enabled to create four times the 
 amount of credit transactions that could have been 
 created in the hands of individual depositors. Second, 
 by the "swapping of well-known credit for less known 
 credit," as the discount of conmiercial paper is so aptly 
 defined, a credit instrument of greater acceptability has 
 been added to the conmiunity by means of which ex- 
 changes are the more readily increased. 
 
 28. Limitation of bank credit. — On the other hand, 
 the scope of a bank's credit operations is limited and by 
 means of the very force which gives it its great credit 
 strength. Every deposit is also a liability which the 
 bank must meet at once if demanded. The limit of a 
 banker's power to discount commercial paper is set by 
 
848 
 
 CREDIT AND THE CREDIT MAN 
 
 the probable call for money by his depositors for with- 
 drawal from the bank. The amount kept on hand to 
 meet such demands is called the cash reserve. "This re- 
 serve is the hank, in the original meaning of the term— 
 the heap, or pile, from which daily payments are made 
 and upon which all the credit operations rest." * 
 
 29. The credit latitude of a bank and a mercantile 
 home. — In order, therefore, to meet any sudden demand 
 upon the reserve, it is necessary that the bank's in- 
 vestment in outside credits be of such a nature as to be 
 realized upon with certainty and despatch. It must be 
 satisfied, therefore, with a comparatively low rate of 
 income from its investments. 
 
 Guided by the leading idea of maintaining its own 
 credit in the discharge of the obligations to its depositors, 
 the field of credit operations open to a bank is dependent 
 upon the degree of convertibility among credit instru- 
 ments. A certain kind of credit security, therefore, may 
 be excluded altogether. Under our national banking 
 law, commercial banks cannot lend money on the se- 
 curity of real estate. On the other hand, the securities 
 which a bank accepts may be so readily marketable that 
 it is not necessary to connect them with its credit depart- 
 ment at all. These "call loans" are handled in a loan 
 department where the momentarily fluctuating market 
 conditions govern the collateral value rather than the 
 person or persons making the note. 
 
 J The cash reserve may consist of any kind of currency which is com- 
 monly accepted, but preferal)ly of legal-tender money, not the notes of other 
 banlcs. Its amount must be proportionate to tiiat of the deposits. Tlie 
 right proportion can l>e learned only by experience and only approximately. 
 It varies in different countries, and at different places in the same country; 
 and the local banker, as the person most tlioroughly conversant with local 
 conditions, has, as one of his most important duties, the ascertainment and 
 preservation of that reserve which most nearly meets the needs of hit 
 conununity.— Horace White, " Money and Banking." 
 
DIVISIONS OF CREDIT 
 
 249 
 
 It is desirable that a bank should have a portion of its inter- 
 est-bearing assets so invested that it can be quickly turned into 
 cash to meet a sudden emergency. This is especially needful 
 in the case of a bank which holds large sums deposited by other 
 hanks, since a financial disturbance occurring in a distant quar- 
 ter may bring sudden demands for cash from the depositing 
 banks. Stock exchange securities are held by banks, partly 
 because they can be sold at short notice to meet such emer- 
 gencies, partly because opportunities occur to bankers for ac- 
 quiring them at low prices, and sometimes because they have 
 been compelled to take the securities for debts, which would 
 otherwise have been lost.^ 
 
 Still another class of credit instruments are excluded 
 from the credit department on account of their nature. 
 Such are checks and other cash items as drafts on private 
 banks not members of the clearing house, and small ad- 
 vances payable on demand. 
 
 30. "Business paper" and "loans and discounts" — 
 Therefore, by a process of elimination we arrive at the 
 particular branch of credit known as banking credit. 
 The change of name which certain credits undergo be- 
 cause of the different point of view involved, often 
 causes confusion and leads to complete loss of connec- 
 tion between the conmiercial and the banking world, 
 lu the conunercial world many credit instruments, run- 
 ning from two to four months, are executed by men en- 
 ^raged in active business. In this relation they are 
 spoken of collectively as "business paper" and consist 
 of promissory notes, drafts and bills of exchange. 
 From the point of view of the bank these promissory 
 notes and so forth become "loans and discounts." Then, 
 too, the bank finds it convenient and necessary to mdke 
 other classifications of this "paper." Two of these are 
 
 > Horace White, **M(»>ey and bank rg," p. 91. 
 
250 
 
 CREDIT AND THE CREDIT MAN 
 
 fundamentally very important to the credit man from 
 the point of view of security. Promissory notes are di- 
 vided into single-name paper and double-name paper. 
 A promissory note which is executed by one person and 
 offered for discount without other security is called 
 single-name paper. A similar note drawn by X to the 
 order of Z, endorsed by the latter and presented for dis- 
 count, gives the note a double security, both men being 
 liable. This is called double-name paper. A second 
 criterion of security is sought in the method of its origin. 
 Either single-name or double-name paper may have its 
 origin in a sale of goods on time and be presented to the 
 bank for discount, but if it does not owe its existence to 
 an actual business transaction it is not considered as 
 somA security to lend upon. This kind of a note is 
 called accommodation paper. In the case of a ficti- 
 tious or intended transaction, the security is consid- 
 ered to be simply "personal." The following estima- 
 tion of Mr. Henry Thornton illustrates the difference 
 between real and fictitious paper: 
 
 Real notes (it is sometimes said) represent actual property. 
 There are actual goods in existence which are the counterpart 
 to every real note. Notes which are not drawn in consequence 
 of a sale of goods are a species of false wealth by which a na- 
 tion is deceived. These supply only an imaginary capital, the 
 others indicate one that is real. 
 
 In answer to this statement it may be observed, first, that 
 the notes given in consequence of a real sale of goods cannot 
 be considered as on that account certainly representing any 
 actual property. Suppose that A sells £100 worth of goods 
 to B at six months' credit, and takes a bill at six months for 
 it ; and that B, within a month after, sells the same goods, at a 
 like credit to C, taking a like bill; and again, that C, after 
 another month, sells them to D, taking a like bill, and so on. 
 
DIVISIONS OF CREDIT 
 
 251 
 
 There may then at the end of six month* be six bilU, of £100 
 each, existing at the same time; and every one of these may 
 possibly have been discounted. Of all these bills, then only one 
 represents any actual property. 
 
 In order to justify the supposition that a real bill (as it i» 
 called) represents actual property, there ought *<> be some 
 power in the billholder to prevent the property which the bill 
 represents from being turned to other purposes than that of 
 paying the bill in question. No such power exists ; neither the 
 man who holds the real bill nor the man who discounts it has 
 any property in the specific goods for which it was given; he 
 as much trusts to the general ability to pay of the giver of 
 the bill, as the holder of any fictitious bill does. The fictitious 
 bill may, in many cases, be a bill given by a person having a 
 large and known capital, a part of which the fictitious bill may 
 be said in that case to represent. The supposition that real 
 bills represent property, and that fictitious bills do not, seems, 
 therefore, to be one by which more than justice is done to one 
 of these species of bills, and something less than justice to the 
 other. 
 
 Mr. Horace White seems to agree with Win when he 
 says in his "Money and Banking" : "Both are loans on 
 personal security, since in neither case has the hanker a 
 lien on any particular goods." 
 
CHAPTER IV 
 
 FUNCTIONS OF A CREDIT DEPARTMENT 
 
 81. The forming of credit estimations. — Some 
 knowledge of the nature of credit opens the way to a 
 clear understanding of a credit department. From the 
 point of view of trade interchanges, two elements 
 need to be emphasized regarding the nature of credit 
 
 (1) Every credit transaction involves the future and 
 
 (2) it involves a contract. Hence, credit making is an 
 estimate of the ability and intention of business men 
 to carry out their business contracts, and of their ability 
 to judge future commercial conditions. The functions 
 of a credit department, then, may be said to be the form- 
 ing of credit estimations. If every customer paid cash 
 on the receipt of his goods, there would be little need of 
 a credit man; but since customers buy on credit, it is 
 necessarj' that the man who sells on credit shall study 
 the conditions on which the customer's future profits de- 
 pend. Every seller of credit thus becomes a risk taker 
 in the enterprises of every credit taker and to this extent 
 is a partner in the business. 
 
 The basis upon which the credit man forms his opin- 
 ion is the information which is collected. It therefore 
 becomes necessary to know what information is most es- 
 sential to the particular business under consideratioh. 
 Many factors must be taken into account before a de- 
 cision can be made. Consequently no general state- 
 ment that will fit all lines of business activity can be ap- 
 pealed to. Before seeking information, the credit man 
 
 ^Z6% 
 
FUNCTIONS OP CREDIT DEPARTMENT «58 
 
 should consider the location of his own business house, 
 the kind of wares it handles, the general character of ite 
 trade, and the form of credit it usually extends. 
 Having once mastered the relations growing out of the 
 activities which these factors produce in meeting the 
 commercial world at various points, much information 
 that is irrelevant to his work may be eliminated. In 
 general, after all due allowances have been made, two 
 factors may be said to form the basis of the essential in- 
 formation needed to judge of the advisability of ex- 
 tending credit. These are character and tangible as- 
 sets. By the latter is meant "property which can be 
 taken under an execution and whether personally ac- 
 quired or inherited, qualified by income and net wealth." 
 32. Credit exteimon in the wholesale trade.— We 
 have already pointed out important distinctions that 
 arise in applying credit to the various fields of indus- 
 trial and commercial activities. It will now be neces- 
 sary to point out certain differences which arise within 
 the more restricted field of commercial activity. The 
 most fully developed branch of this field from the point 
 of view of commercial credit is that which embraces the 
 relations of the wholesalers or jobbers to their customers. 
 A very important matter in connection with wholesale 
 credit is the volume of a customer's sales and the amount 
 of his expenses. The amount of sales throws light upon 
 the frequency of the turnover of his capital, which in 
 turn indicates the ability of the merchant as well as the 
 condition of the market. 
 
 One of the largest wholesale houses in Chicago fol- 
 lows a plan which allows a customer with a business 
 capital of $10,000 a certain hne of credit to start with. 
 If he proves himself prompt in meeting his obligations 
 and confines his purchases largely to this one company. 
 
iirti 
 
 CREDIT AND THE CREDIT MAN 
 
 the amount of his credit is often increased, but the prin- 
 cipal basis for increasing a line of credit lies in the 
 amount of business done. If the customer does a busi- 
 ness of three times his capital he is entitled to more 
 credit than one who is turning over his capital only once 
 or twice annually. In this particular line of trade, 
 statistics show that a merchant must turn his stock at 
 least twice a year or he is not making a profit. 
 
 But after all, if the credit man keeps his eye solely 
 upon the business-getting qualities of a customer, he has 
 observed only one side of his ability. Much depends 
 upon the cutting of expenses, for this shows the man's 
 ability as a manager. The relation between the expenses 
 of a house and the amount of sales forms one of the best 
 foundations for granting it credit 
 
 88, Granting credit by a manufacturing concern. — 
 Another branch of business which comes within the 
 scope of trade interchange is the manufacturing con- 
 cern whose product must be put upon the market, but 
 which is generally done through the jobber. Yet there 
 is a growing tendency on the part of the manufacturer 
 to deal directly with the retailer and even with the large 
 consumer. The basis upon which credit opinions are 
 formed here is much the same as that in the wholesale 
 trade; but the point of view of the manufacturer is 
 different from that of the jobber. The latter works 
 locally; the former has a broader horizon. The mami- 
 facturer is often in a better position to chocne his cus- 
 tomers from among the retail trade and can leave the 
 poorer risks to be dealt with through the middleman. 
 But on the other hand, the manufacturer must take other 
 risks not imposed upon the jobber. This gives different 
 directions to the general policies of the two firms. To 
 demonstrate this, let us suppose, that a manufacturer hw 
 
FUNCTIONS OF CREDIT DEPARTMENT «55 
 
 decided to put a new line of goods on the market. To 
 do this he advertises broadly. He has no limitation as 
 to the extent of that market, but when it comes to the 
 filling of the incoming orders he must meet his custom- 
 ers in the spirit in which he created the demand for his 
 product. Failure to supply any large commercial cen- 
 ter, or failure to assume a liberal attitude in granting 
 credit might not only lose him trade, but might injure 
 his reputation as well. He must often place his goods 
 with little hope of getting other returns than a good ad- 
 vertisement. The credit department of a jobbing house 
 has few worries of this nature, for its policy is usually 
 directed toward selling staple goods with an assured 
 market. Yet the manufacturing concern must ever 
 keep in mind that it is also a producer as well as a dis- 
 tributer. CJoods left on hand at the end of the season 
 mean a loss. Promptness, therefore, on the part of the 
 credit department is a vital factor. Too great caution 
 in forming a credit judgment may result in overstock- 
 ing, or the delay may leave "a loophole through which a 
 competitor creeps into a customer's favor." 
 
 34. The giving of credit by a retail house. — ^DiflFer- 
 ing from both the wholesale and the manufacturing con- 
 cern in its relation to the demand for credit, there is the 
 retail house. The retailer seldom looks up the past 
 history of a cusUnner. He bases his opinion on the 
 character of the man and certain specific facts pertain- 
 ing to his income, his bank account, his place of resi- 
 dence and if poMflilc, the state of his past or present 
 standing with otter dealers with wh<Hn he has run ac- 
 counts. The method of applying for credit in the re- 
 tail trade differs in some respects from tiiat of other 
 lines of bMness. As the applicant comes in person, 
 and often in the person <rf a woman, judgments must 
 
me 
 
 CREDIT AND THE CREDIT MAN 
 
 be made quickly and often without a private interview re- 
 garding the credit strength of the applicant. The nec- 
 essary facts for the formation of a judgment mart 
 often come indirectly from a general conversation. In- 
 ferences rather than settled opinions must be formed un- 
 til the applicant's statement can be verified from 
 outside sources. In case the applicant is a business man, 
 the services of mercantile agencies can be used. Even 
 in case he is not a merchant, it is possible that the agency 
 can give information regarding a man's reliability. But 
 at best, the retail man must form his opinion of the hon- 
 esty and resources of his customer from a more incom- 
 plete set of facts than those upon which the wholesaler 
 relies. Still some compensation exists in the retail 
 trade. There is a much broader field here for the ex- 
 ercise of the credit man's ingenuity in seeking a safe 
 basis on which to open an account. More risks can be 
 safely taken as the time limit is more completely under 
 his control as well as the extension of credit. For ex- 
 ample, every account can have a limit put upon the 
 amount of credit extended by monthly periods. Some 
 firms change the limit of the amount several times dur- 
 ing the month, in accordance with the condition of the 
 account and the character of the purchases. These 
 statements, however, only show that "eternal vigilance" 
 is the price of success in the credit department of a re- 
 tail store. 
 
 85. InstaUment house credits. — ^As manufacturing 
 credit is only a phase of wholesale credit, so do we have 
 different phases of retail credit. The installment 
 method of the retail trade is differentiated from ordi- 
 nary trade through the methods of its sales. The in- 
 stallment plan provides for (1) a part payment in "cash 
 down" and (2) a mortgage of some kind for the re- 
 
FUNCTIONS OP CREDIT DEPARTMENT f.17 
 
 mainder of the invoice. When the method of selling 
 on insUUments was first instituted, the customer looked 
 upon the installment house as granting him a favor, but 
 competition in this method of trading has removed any 
 advantage which this fact may have given to this branch 
 of the retail trade. An advantage of the plan, however, 
 is the fact that the credit man knows better what class 
 of customers he has to count upon. Men of limited in- 
 come are the people with whom the installment house 
 largely deals. They seldom have any real basis for 
 credit. On the other hand, there is the disadvantage 
 in the risks the house takes in befaig compeUed to 
 ^ant credit on the basis of the credit man's intuitions. 
 He must gain his information on the spot and decide 
 then and there. In an indirect manner, he must find 
 out from his customer the reason for his buying on this 
 plan and the position or trade or bank account from 
 which the resources must come to pay the installments. 
 A quick analysis of this information in order to circum- 
 vent the fraudulent buyer or to guard against the honest 
 man who may be overreaching las resources, is very es- 
 sential. 
 
 Having decided upon the diaracter of the information 
 which any particular business needs in forming a suit- 
 able basis for granting credit, each firm must settle 
 upon the best means for gathering the desired informa- 
 tion. 
 
 Ill— 17 
 
MIdtOCOPY RESOIUTION TEST CHART 
 
 (ANSI and ISO TEST CHART No. 2) 
 
 1^ 
 
 ! 
 
 1^ 
 
 \Si 
 
 1 
 
 2.2 
 
 ]3A 
 
 i 
 
 IS 
 
 4.0 
 
 1 
 
 2.0 
 
 
 1 
 
 il 
 
 ^ /1PPLIED IfVHGE 
 
 1 ' ^ast Main Street 
 
 ■' fter, .New York U609 USA 
 
 V " ' ' 82 - 0300 - Phone 
 
 (716) 288- 5989 - Foi 
 
CHAPTER V 
 
 SOURCES OF CREDIT INFORMATION 
 
 I; 'T 
 
 hi; 
 
 36. Three essentials in credit giving. — As education 
 has its three R's, so the business of credit giving has its 
 three C's — "character," "capacity," and "capital," and 
 the greatest of these is character. If the credit man has 
 decided that the character of the appUcant is sound, the 
 investigation of the other two features will be materi- 
 ally lightened, for the qualities that make for character 
 must of necessity be reflected in all statements which are 
 presented as evidence of ability and sufficient capital 
 strength. 
 
 87. Methods of investigation. — In searching for in- 
 formation, the credit man has two ways of approach. 
 These may be termed the direct and the indirect methods. 
 By the direct method the credit man may interview the 
 applicant personally and decide to what line of credit 
 he is entitled. He may even ask for a direct statement 
 from the applicant himself. In some ways this is an 
 ideal method. It presupposes that the credit man is of 
 a type similar to the entrepreneur himself. He must 
 be able to judge of a risk; and the cumulative risks con- 
 nected with a credit department are only secondary to 
 the risks incident to the original business venture. If 
 the credit man can be on the spot where the customer is 
 to venture upon the credit of his firm, he can judge of 
 the commercial conditions at first hand; he comes into 
 personal contact with the customer on his "native heath." 
 In this way — to use the language of the stage — ^he gets 
 
 a58 
 
SOURCES OF CREDIT INFORMATION 
 
 259 
 
 the setting along with the principal character. Then if 
 he is permitted, too, to inspect the internal sources of his 
 information, such as the books of accounts, there ought 
 to be little e reuse on the part of the investigator for ac- 
 cepting a i/ad risk." 
 
 If the credit man selects the other direct means of get- 
 ting information, the applicant is requested to present a 
 statement. Although the statement is not generally 
 taiien at its face value, it is often the starting point in 
 establishing a basis for judging credit, and.if this knowl- 
 edge is regarded in the light of its true importance as a 
 means to an end, this information coming as it does di- 
 rectly from those asking for a line of credit, is a valu- 
 able aid. 
 
 38. Testing the reliability of a statement. — In con- 
 sidering the reliability of a statement two important 
 factors must be kept in mind: (1) "Chronic and in- 
 tentional misrepresentation," and (2) ineffective 
 methods and loose systems in business, which make a re- 
 liable statement impossible. These two factors are so 
 common that the conmiercial public looks with skepti- 
 cism upon statements in general. Many good firms re- 
 fuse to submit them because of the feeling that the 
 credit man regards them as mis-statements rather than 
 statements. This method of acquiring information is 
 used with greater frequency and success in the bank- 
 ing world than in commercial circles. The nature of 
 banking necessitates frequent statements and accord- 
 ingly more attention is given to method. 
 
 The following forms are among those in common use. 
 The first two forms are sent by a bank to the customer 
 for a statement of his affairs. The next three forms are 
 used bv commercial houses. 
 
260 SOURCES OF CREDIT INFORMATION 
 
 Fonn I. 
 
 Property .i.tement ..nt by • Ut,\ i« b^Med out by an Individual or partn.r.hi, 
 
 MESSRS. KNAUTH. NACHOD, * SI'itY'"''^'*'' " ^^"'^*»' ^^ 
 For the parpose of procuring and eitabliahinK credit from time to tin. -uu .v 
 above fianlcers. for claim, and demand. %gain.t the und°?.ilrnei thr't*" j"" 
 
 that in case of failure or insolvency on the part of the nnder«i«ied nr i!1J 
 event of it appearing at any time that any*^ of the following repwaentatl™! 
 
 f.ih™'fS'';„H/ "" /"\°^'''* occurrence of auch change a,* afoteUid or „ 
 failure to notify of such change aa above agreed, all or anv of th« »i.i»^ -I 
 demand, against the undersigned held by .aid Banker. SLlI at th. ^«°' 
 thereof, immediately become due and payable """"e"' «"«» «» the option 
 Further, that the exerci.e of or omission to exercise such option on the nart of th. 
 ^^To iSer'cZ tr^a'^e'-"" ""' '"'" " •"'"'* «"'' <"-"' °' «b4ul« 
 
 ASSETS. 
 
 Cash on hand 
 
 Cash in Bank 
 
 Bills Receivable, good, due from 
 Customer. 
 
 Bills Receivable, due from Part- 
 ners 
 
 Accounts Receivable, good, due 
 from Customer. 
 
 Account. Receivable, due from 
 Partner. 
 
 Merchandise (at actual pre.ent 
 
 ea.h value) 
 
 Real E.tate belonging to Firm. 
 Machinery and Fixtures 
 
 o S 
 -§ 
 
 B a, 
 
 «i 
 
 I. " 
 
 o 
 
 Total. 
 
 LIABILITIES. 
 
 Bills Payable for Merchandise. 
 Bills Payable to Own Banks.. 
 Bills Payable for Papers Sold. 
 
 Open Account. 
 
 Deposits of Money with us . . . 
 Mortgages or Liens on Real 
 
 Estate 
 
 All Other Wotes '. 
 
 -1 
 
 « ■ 
 « o 
 a a 
 ■o a 
 So 
 
 .S- 
 
 5| 
 
 Total Liabilities. 
 NET WORTH. . . 
 
 Total. 
 
 Contingent Liability. 
 
 J Accommodation Endorsement 
 
 I Endorsed Bills Receivable OutsUnding. 
 
 Name, in full 
 Partner. 
 
 of all General J 
 
 Names in full of Special PartO 
 ner. with amnunt. contrib- I 
 
 nted by each, and until f 
 
 when, J 
 
 Date of organization and expiration of Partnership..*...'"* 
 State la.t date of takinj; trial balance and if same pnired 
 Memorandum 
 
 Please sign here. 
 By .... 
 
 V-23 
 
 D«te signed i^..., 
 
CREDIT AND THE CREDIT MAN 
 
 261 
 
 form II- 
 
 Property •tatement tent by bank to be ftlled out by • corporation. 
 MESSRS KNAUTH, NACHOD & KUHNE, BANKERS, 15 WILLIAM ST., 
 
 NEW YORK CITY 
 
 ^" '^,%rme?i rca'"aW:».'^a;a'^^'t' Iru^JS^ll^.Wt*"! 
 Biened fSffi^he folowin, a. being a true and correct atat.ment of Wa or 
 ^"^^ .tatement of M. - t..|^r^ -^^^^^^^^^^^ cSiVocc„ri-UaV«a; 
 
 right to exerciae the same. 
 
 Casli in Bank 
 
 Cash on hand 
 
 Bills Receivable, Good. 
 
 Accounts Receivable, Good 
 
 Bills or Accounts Receivable, due 
 
 from oificera 
 
 Merchandise, finished (How Val 
 
 ued) 
 
 Merchandise, unfinished (How 
 
 Valued) 
 
 Raw Material (How Valued) . . 
 
 Real Estate 
 
 Machinery and Fixtures 
 
 11 
 
 iC 
 
 'I 
 
 Total. 
 
 Bills Payable for Merchandise. . . 
 
 Bills Payable to Own Banks 
 
 Bills Payable for Papers Sold. . . 
 
 Open Accounts 
 
 Bonded Debt (When due ) 
 
 Interest on Bonded Debt 
 
 Mortgages or Liens on Real Es- 
 tate 
 
 Chattel Mortgages 
 
 Deposits of Money with us 
 
 All Other Notes 
 
 -1 
 
 • o 
 
 1 
 
 n [ 
 
 ToUl Liabilities 
 
 Oapltkl 
 
 Snrplns, including undivided 
 
 profits ' 
 
 Total. 
 
 Contingent Liability. 
 
 J Accommodation Endorsement 
 
 [.Endorsed Bills Receivable Outstanding. 
 
 Specify any of above assets or liabilities pledged as, or secured by, collateral. 
 and state collateral. 
 
262 
 
 SOURCES OF CREDIT INFORMATION 
 
 CAPITAL. 
 
 AuthoriMd Snbieribsd , Paid in 
 
 Held by Company •■ Treaiury Stock 
 
 How paid in: Cash | Other property 9 
 
 Description of otiier property and liow ralued 
 
 What portion of real estate, if any, has been acquired through bad debts 
 
 In whose name is title to real estate held 
 
 Incorporated in what State and under what General Law or Special Act 
 
 Date of charter Commercial business 
 
 Are Stockholders liable beyond amount of stock subscribed 
 
 If so, to what extent 
 
 Amount of annual business Annus! expenses Annual dividends 
 
 Whea wai last dividend declared Rate 
 
 Insurance carried on merchandise . . ; Real Estate 
 
 Is Mortgage above state a first lien on all the assets 
 
 Regular times of taking inventory 
 
 Give basis of statement, whether actual inventory, by whom j 
 
 taken and, date, or if estimate, by whom made and date 1 
 
 What maeunt, if any, of acc'ts and bills rec. not charged off, is past due, extendtd 
 
 or renewed 
 
 Amount charged oft for bad debts last year 
 
 Amount recovered during same period 
 
 Amount charged ott account of plant preceding year 
 
 State last date of taking trial balance and if same proved 
 
 Regular times of balancing booka 
 
 Number of bank accounts, and where kept 
 
 OFFICERS. 
 
 NAME IN FULL 
 
 President 
 
 Vice-President 
 
 Secretary 
 
 Treasurer 
 
 ADDRESS 
 
 DIRECTORS. 
 
 NAME IN FULL 
 
 ADDRESS 
 
 Hease Sign Company's Name here 
 
 By 
 
 Date signed 180 ... . 
 
CREDIT AND THE CREDIT MAN 
 
 S63 
 
 PROPERTY STATEMENT BLANK 
 
 EECOMMENDED AND INDOBSED BY THE 
 NATIONAL ASSOCIATION OF CKEDIT MEN 
 TEE RECIPROCAL VALVE OF A BIONED ^^^^^^^f j ,. 
 Good credit In the market, of *« -fg '"J^JT'o? e"l«gS «piSt 
 
 is most desirable is. *at credit ^ in «^5^*^™P°„d maintain it A 
 assets, and in harmonr with <:onf|«o°! !l"fte6f« wowrw. plus hit ersdit. 
 merckanf, capital i, ths ~'»,1 **' "f J "tniUd. and^ii". l" • "t^" 
 ''" •^r»al.«tf Se'^wS a£ « A^ • ^^cct 'right to com- 
 5rin%oCliro'f^?*torS.c^^^^ reposed in him. 
 
 •^ Credit is given a merchant J«"'f* °V*" j~°ot a reSra on one's 
 
 to. better kK«Wge of htabu^P~J^y- ,1,^ „„^ 
 
 subiriTa statement of his financial condition. 
 
 NOTE- Th. .bOT. ..timat. of th. ;•'«?* •eXSS°ol*ScoV.*.'' o'f'The WlS 
 eeiver is the MDbodlinent of the thonghti «* 'JSJ of Ae Netional A.eoci.tlon ol 
 c?edU men ofThe United SUte. who jre^'-Sto ttirview. in order th.t ther. 
 S.V^e'^t'he r.",Ut\ea'ra'*«uar'U whol.Mler. 
 Standard Form A. 
 
264 
 
 SOURCES OF CREDIT INFORMATION 
 
 To BIOH, MAMN * CO., V«w Tort 
 
 For the purpose of obtaining credit for goods to be sold me or us by you. 
 or for any extension granted me or us on my or our account with you/the 
 following is given you us a true statement of my or our assets and ilabili- 
 ties and gtrneral financial condition. I or we agree to and will notify you 
 immediately in writing of any materially unfavorable change In my or 
 our financial condition, and in the absence of such notice, or of a new and 
 full written statement, this may be considered as a continuing statement 
 and substantially correct. 
 
 Firm name Date. 
 
 .190... 
 
 '"wn county 
 
 State 
 
 •• 
 
 ... 
 
 •• 
 
 •• 
 
 • • 
 
 ACTIVE BUSINESS ASSETS. 
 
 Dollars 
 
 Cts. 
 
 Value of merchandise on hand at cost.. . 
 
 
 
 
 
 
 
 
 
 Notes and accounts, cash value 
 
 
 
 
 
 Cash in hand 
 
 
 
 
 
 
 
 
 
 Cash In bank 
 
 
 
 
 
 
 
 
 
 Fixtures, machinery, horses and wairons 
 
 
 
 
 
 
 
 
 
 Total Active Business Assets 
 
 ^ 
 
 
 
 
 
 
 
 
 BUSINESS LIABILITIES. 
 
 Dollars 
 
 Cts.| 
 
 Owe for mdse., open acct. of 
 
 which $ is past due 
 
 Owe on notes for mdse 
 
 Owe bank 
 
 
 
 
 
 
 
 
 
 Owe others for bor'd money . . . 
 Owe taxes and rent 
 
 
 
 
 
 
 
 
 
 Mtges. on fixtures, machinery, 
 horses and wagons 
 
 
 
 
 
 
 
 
 
 Total Business Liabilities 
 
 II .11 
 
 
 
 Net Worth in Business 
 
 1 1 1 1 1 1 1 
 
 OUTSIDE ASSETS. 
 
 Total real estate, assessed valuation, $ 
 
 Total encumbrances $ 
 
 
 
 
 
 
 
 
 
 
 Equity 
 
 Personal property 
 
 Other assets 
 
 
 
 
 
 
 
 
 
 Grand Total net worth in and out of Business 
 
 ~ 
 
 MM 
 
 1 
 
 Please state location and description of each parcel of real estate, and 
 cash valuation of, and encumbrances on each, and in whose name each 
 parcel is held 
 
 Form A. 
 
CREDIT AND THE CREDIT MAN 
 
 205 
 
 Wliat portion of real estate described is homestead. 
 Have you any other debts than herein mentioned?.. 
 
 Full given nnd surname of each 
 partner 
 
 Age? 
 
 Married? 
 
 Possible liability of 
 each member of Arm as 
 indorser, bondsman, etc. 
 
 What Iclnd of business do you conduct? 
 
 Insurance on stock On fixtures, machinery, horses and wagonn 
 
 On real estate 
 
 Amount of sales last year Amount of expenses last yea. 
 
 What proportion ot your sales is on credit? 
 
 Date of last inventory Have you any judgments, 
 
 judpnent notes, chattel mortgages, or other liens against you, lecorded or 
 unrecorded? If so, describe 
 
 If you have pledged or transferred outstanding accounts or property re- 
 maining under your control, state amount thereof and amount received, or 
 
 to be received, on account of such pledge or transfer 
 
 Wliat books of account do you keep? 
 
 Buy principally from following firms: 
 
 Name 
 
 Address 
 
 What line of 
 business? 
 
 The above statement, both printed and written, has been carefully read 
 by the undersigned, and is a fuU and correct statement of my or our 
 
 financial condition as of 190 
 
 Firm signature ' 
 
 By whom signed a member of the firm. 
 
 All questions must be answered. Insert ciphers in absence of any amount. 
 When the words "Yes," "No" or « None '♦^ will correcUy answer the ques- 
 tions, write them in their proper places. ^^^ 
 
«G6 
 
 FonnlV. 
 
 S0URCK8 OF CREDIT INFORMATION 
 PROPERTY STATEMENT BLANK 
 
 "Lan* mmU tn not klways n trf i r y to the crMtlon of eradit: what la moal iImIhIiIi h. «>-« 
 ercdit be In relative proportloo to the actual a«et«. The elver of credit la a roDtrtbutor ol easHal 
 and beeamaa, la a aertain Minae. a partner of the debtor and. aaauch, baa a pirfeot rlibt to aoaSit* 
 Kformatlon of tba debtore condition at aU timea." ^^ "" 
 
 To RICH, MANN ft CO., New Yorki Date |»| 
 
 For tbe purpoae of obtalnln* credit for goods to be lold me or us by you, or for any aatanalon irausd 
 me or us on my or our account with you. tbe fullowlni Is given you as a true statement of my or our 
 assets and liabilities and general Itnanclal condition. I or we agree to and will notify you Immedlaldy 
 la writing of any materially unfavorable change In my or our Hnanelol condition, and In tba absracs 
 of such notio-. or nf a new and full written statement, this may be considered as a continuing state- 
 ment and sub-itantlally currevt. 
 
 BUSINESS ASSETS 
 
 
 3 
 
 J 
 
 BUSINESS LIABILITIES 
 
 i 
 
 1 ..]! 
 
 i 
 
 Oasli ralaa of Iferehandiia on 
 hand 
 
 Owe for Mereliandtsa, not duo . . . 
 Owa for Merchandise, past due . . 
 
 Owa Notea for llarehandisa 
 
 Owa Banka 
 
 
 Stora Famitura and Fixtures .... 
 
 
 
 
 Cftah in bftnk ... 
 
 
 
 Owa RelatiTsa and Frienda 
 
 Owe Taxes 
 
 
 
 Aceonatt food and collrctiblc. . . 
 Notea cooa and collectible 
 
 
 
 
 Ow» Rent 
 
 
 
 Stora. W,^^^ p,„,.. 
 
 
 
 Total Busineaa Liabilitiea. . 
 
 Net Wortlj ia Business 
 
 Total 
 
 
 
 Oth^r p^rional property 
 
 
 
 
 
 
 
 
 
 ■" 
 
 Tot&l fiuiineAfl Aiiets 
 
 
 
 If anr of above liabilities are aecurad. 
 
 
 
 
 statu particulars iu proper placa below. 
 
 OUTSIDE ASSETS 
 
 Total Real Estate owned 
 
 Lett exempt portions 
 
 Total Real Estate not exempt. 
 Knevmbranee oa Real Estate not 
 
 exempt 
 
 Ket Equit/ In Real Estate not 
 
 exempt 
 
 Other Property not exempt .... 
 
 Total Ontiide Property 
 
 Debtt not rawnerated kbove. . 
 
 Ket Ontside Astttt 
 
 Ket Worth in Busineii 
 
 Total Net Worth in and out of 
 
 Bntinesa 
 
 Fun Given and Sur- 
 name of £ach Partner 
 
 LUbUtrM 
 Endoraevov 
 
 Nature of Business 
 
 Insurance on Merchandise. . . 
 Insurance on Real Estate . . . 
 Insurance on Furniture and 
 
 Fixturea 
 
 Insurance on Other Property. 
 Pay Rent on Store, per month. 
 Commenced Bttsineta. .Lease Expires. 
 
 Bank with 
 
 Date of last Inventory 
 
 Ever burned out 
 
 Keep following Books of Account. 
 
 ::l 
 
 Included In Liabilities In Above Statement: Merchandise con- 
 
 slsuot 
 
 Mortgage on Merchandise t Suits pending Dry Goods t.. 
 
 Mortgage on Furniture and Fixtures t Judgments t. . Notions {.. 
 
 Mortwwe on Horses and Wagons f Judgment Notes t.. Clothing (. . 
 
 Mortgage on Other Personal Boots and 
 
 Property t Mechanics' Liens f. . Sboea I.. 
 
 What .proportion of Bali-s Is Amount of Balea Bate and 
 
 on Credit S Last year S.. Cape I.. 
 
 REMARKa — Olve details and explanations of queatlons not fully answered 
 
 above Oroceriee I.. 
 
 Crockery i.. 
 
 It you have pledged or transferred outstanding accounts or property remaining 
 
 underyourcontrol, state amount thereof and amount received, or to be received, Hardware .. 
 
 on account of such pledge or transfer 
 
 Total 
 
 The sboTc intsment, both printed and written, hu brcn carefoIlT md by die nndecilg n t d . ewJ I* 
 
 a fall and correct ■utcmcnl of my or oar finsndal condidon ae of ■*> 
 
 _ Firm sigiutture ..-. 
 
 Town State By a member of the Arm. 
 
 On the reverse side of this sheet Is given a complete list of houses I or we deal with, and amount 
 owing each one: also a description of ail real estate owned. 
 Stanoud Form U. 
 
 IBent by a commercial bouan to be fllled out by an individual or partnership Orm. 
 
FonnV. 
 
 CREDIT AND THE CREDIT MAN 
 PROPERTY STATEMENT BLANK* 
 
 - ^ „^ .-a..^ b. tfc. W.*M»I A 111 
 
 «67 
 
 To RICH. MANN » CO.. N.W YaAi 
 
 purpoM a 
 I foiiowtal 
 
 For tba 
 to you tbj 
 
 iMuivMiey. or ta 
 
 ol obUUUM endit 
 ■uWBMBt ol our 
 
 I M tU llinw 
 
 ,' J . ,-, moda DurehHwI. wo horowlth nibBtt 
 
 li?2iJ15l^lSu>lU!^ W toSiJUwiy noUIy you ol 
 
 !.. th.7oiC«tai itMaBMBt ol our r«oure« mm imuim— . — 
 
 SLmU cSkMi la our aoMMM ooadlUpo. „„„,-,t-^ _, am. that lo eaao of our laUur* or 
 
 5r'.i:!XTy?:?^'i:jjr'»'^^ 
 
 ■ whleh you tovo fttimi 
 
 HS •7fcsxsss!r»Sir»'J?o'iyo«'^ 
 
 fXt eopdltlBM M » p»rt o l tt» unM ol »i» - ■—====== 
 
 AOTIVI BUSIHE88 ABSlTfl. °*"U* g ^ 1 Aeeoinmod»tloB 
 
 AOTIVI BUSIHE88 A881T8 
 C»ih ▼•!«• of mwehwdlM on l»»nd 
 H msnufMturiafc »w OMMrlkl, 
 
 1. . .AnUkad, f . . . .«»ftBltk«4, 
 
 t .....••• 
 
 N'otM and aawuati, oaw vara*. 
 
 Ctih In hand 
 
 Cash in bank • • • ■ • • • • - 
 
 Bills or aeeounti r«c«l»ablt, au* 
 
 (rom ofleort 
 
 Ptttnta and pattomi 
 
 Fixtures and machinery. ■•■• • 
 
 Total real •■tata, cash Talue, f . . . 
 Total enenmbrancea on real astaie 
 
 I 
 
 EqtutT 
 
 Total Aett^a Bnalneia Aaaeta. 
 
 BUSINESS 
 LIABILITIES. 
 
 Owe for marehan 
 diie, open aeet., 
 of which «.. 
 ii past dna. 
 
 Owe for notea for 
 merchandise 
 
 Owe banks. . . 
 
 Owe for bills for 
 paper sold. . . . 
 
 Owe others for 
 borrowed nion.^ 
 
 Dollars 
 
 ey. 
 
 and 
 
 Owe taxes 
 
 rent 
 
 Uortgages on fu- 
 tures and ma. 
 rhinery... 
 
 Cts. 
 
 ... 
 
 Total Bnsiness Uabilitios. 
 
 Net worth in Bnsinesa. 
 
 OFFICERS 
 
 Name in Fnlt 
 
 President 
 
 Vice-Prest 
 
 Secretary 
 
 Treasursr 
 
 Address 
 
 ]>ntI0TOB& 
 
 >•••••••«•*••* 
 
 •••••*•*•.»»•. 
 
 .52 
 •a 
 
 Accommodation 
 Indorsements . . 
 Indorsed Bills 
 Reeeirable and 
 Otttatanding . . . 
 
 Jnthorised Oapiul 
 
 Subscribed . . .Paid in . . . 
 
 How paid In: Caah, •.. 
 
 Other property. ....••• 
 
 Incorporated in what 
 
 8tat« and tsndsr what 
 
 Oensral Laws or Bp«- 
 
 clal Aetl 
 
 Nature of' business I. . . . 
 
 Date of charter I. .... ■ 
 
 Bttlta pending, and of 
 
 what natnret 
 
 Aro any merehandiee 
 creditors secured in 
 any way I 
 
 Amount of annual bnsi- 
 ness 
 
 Annual expenses 
 
 Annual diridends . . ■ • 
 When was laat dlTl- 
 dend declared t 
 
 Bate Insnranea 
 
 carrisd on merchandise 
 
 On flxturas and 
 
 machinery 
 
 On real estate 
 
 Bsgnlar timt of taking 
 inrentory 
 
 Koop bank account with 
 
 Keep tho following 
 ' ^ka of account.... 
 
 If you hare pledged or 
 tranaferred outstanding 
 aeconnta or property re- 
 maining nnder your con- 
 trol, atote amount there- 
 of and amount receiTed. 
 or to bo reeeired, on ac- 
 oennt of anch pledgo or 
 transf sr 
 
 MOCABXIi 
 
 ,«■••»••«*•••«•••••■ 
 
S68 
 
 CRKDIT AND THE CREDIT MAN 
 
 No extended commentary upon the contents of these 
 forms is necessary ut this time. The items contained 
 here a:e discussed in the various volumes of this series 
 of texts. The purj^se of presenting these forms is to 
 show what particular facts the credit departments of a 
 hank and a mercantile house are interested in; and in 
 what sjM'cial form or arrangement business men have 
 found it most convenient to have them presented. For 
 these reasons two distinct types of forms are given cor- 
 responding to the two forms of business, the individual 
 or partnership and the corporation. The number and 
 character of the questions asked by the corporation 
 statements show how much more important and intri- 
 cate is the organization of capital in the corporate form 
 than is the case with the individual or partnership form. 
 
 The types which are given as examples for commer- 
 cial houses were selected from a series of six forms which 
 are recommended by the "National Association of 
 Credit Men." The items printed upon the forms are al- 
 most identical, but the styles are different (in shape and 
 arrangement) the better to fit in certain filing cabinets 
 and also to meet conditions in different classes of credits. 
 Special attention is called to the paragraphs setting forth 
 the reciprocal value of a signed statement. They show 
 in part how the association of credit men is endeavoring 
 to educate the commercial world up to the standard de- 
 • manded by a credit economy. 
 
 In estimating the worth of a firm applying for credit 
 one writer suggests the following formula: 
 
 The credit man should apply liberally the principle of depre- 
 ciation. Appreciating the generosity with which a merchant 
 will estimate the value of his own resources, the credit man 
 should deduct 10 per cent from accounts and notes receivable 
 as a reserve against bad debts ; about the same percentage for 
 
SOURCES OF CREDIT INFORMATION 
 
 260 
 
 ,„«.hinery; at lca.t 10 per cent on account of shopworn .tock, 
 „,„! 50 per cent from anything scheduled which appear, to be 
 of iiideterminable value. If, after this operation, the surplus 
 „f assets over liabilities appears to have been transformed mto 
 H deficit, the credit man should require security, or make such 
 further investigation into the general reputation of the firm, 
 or corporation, involved, as would enable him to accept the 
 risk with a fair assurance of ultimate realization. 
 
 It is new understood that certain classes of assets on a balance 
 sheet arc more or less fictitious, that applications are not often 
 „mde for credit based on a showing of that kind. In some 
 classes of business a "construction" account is perfectly legiti- 
 mate and represents actual value, but the value placed on a 
 .nine, or on real estate, etc., should always be compared with 
 the amount of working capital. It would be generally safe to 
 „mke it a rule to assume that where assets of this kind are a 
 very important feature of a balance sheet, while the cash on 
 Land amounts to $«.60, or thereabouts, there is a good deal of 
 "discount on stock" lurking around somewhere, and not much 
 real value. 
 
 39 An example of statement analyns.— In analyz- 
 ing the statement the credit man forms his judgment 
 bv comparing the items with the whole busmess situ- 
 ation of the applicant. For example, the answer to the 
 question "How much store rent do you pay?" forms the 
 basis of several opinions. In selectmg this item for con- 
 sideration, the relation of rent to capital, the volume of 
 business transacted, and the profits are of first impor- 
 tance. It is generally agreed that the amount of rent 
 a man can pay does not depend upon capital or the 
 amount of sales, but thp.t the rent and the profits do have 
 a close relation. A druggist, for instance, could pay 
 out a larger percentage of his sales for rental than a 
 dealer in some staple commodity because drugs yield a 
 larger profit than the latter. 
 
270 
 
 CREDIT AND THE CREDIT MAN 
 
 Some men prefer to compare the rent with the ex- 
 penses of the busmess rather than with the income. If 
 this point of view is taken, it is well to bear in mind that 
 it is only an indirect way of arriving at the same result 
 as by the other method. Rent in no way depends upon 
 the expenses of a business. Two men engaged in the 
 same business may pay the same amount of rent, and yet 
 the expenses of one may be twice as high as those of the 
 other. If the profits of the two are not considered, the 
 only conclusion to be arrived at would be that one en- 
 joyed advantages which the other did not; and instead 
 of its being desirable that the one who has the greater 
 expenses pay less rent, perhaps it would be more de- 
 sirable that he change his location and pay a higher rent, 
 if by so doing he could increase his business prospects. 
 Because there is a close connection between the expenses 
 of a business and the profits, some merchants have found 
 it possible to make a rule for their particular line 
 which says that the rent shall bear a certain ratio to the 
 gross expense. One man may think that 4 per cent of 
 the gross expenses is a conservative estimate for rent, 
 while another may say that 1 per cent is sufficient in his 
 particular business. 
 
 These differences of opinion only serve to show that 
 these "rules" were arrived at by a process similar to all 
 "rule of thumb" methods. By practical experience each 
 man ascertains the amount of space necessary for suc- 
 cessfully operating his business under the conditions 
 prevalent in his line, and one of these "conditions" is 
 the usual rental for a given amount of space. Having 
 ascertained these facts, he arbitrarily fixes upon a ratio 
 of rent to gross expense. 
 
 40. The reporter and the iraveling representative. — 
 Because of the expense and the fact that the credit men 
 
SOURCES OF CREDIT INFORMATION 271 
 
 connected with large establishments are too busy hi the 
 home office, the method of direct investigation by the 
 credit man himself can seldom be carried out m practice. 
 Therefore, mdirect ways are devised. The represent- 
 ative method most nearly takes the place of the personal 
 interview of the credit man. There are two kmds of 
 representatives used in this method-the reporter rep- 
 resentative and the traveling representative. The dit- 
 ference between the two classes of investigators is 
 simply one of responsibility. The reporters are gen- 
 erally young men, credit apprentices, perhaps, whose 
 duty it is to visit the various persons to whom the de- 
 partment has been referred as well as the houses from 
 whom useful information may be obtained concerning 
 ^he particular firm under investigation. This interview 
 method is confined to the environs of the house con- 
 ducting the inquiry. Much depends upon the keenness 
 of the investigator, for, Uke the newspaper reporter, he 
 must depend often for the truth of the facts upon the 
 attitude of the man he is questioning. He must frame 
 his questions so that evasion is difficult. The man to 
 whom the questions are put must either answer directly 
 or reveal by his manner the true information which he 
 wishes to conceal. The experience of firms in the larger 
 cities proves that this system gives the best returns ot 
 anv, although the expense involved is heavy. 
 
 The method of employing traveling credit represent- 
 atives is an outgrowth of the necessity for large firms to 
 have direct information concerning classes of accounts 
 which, because of their number and magnitude, become 
 heavy as well as doubtful risks. This method is an ex- 
 pensive one, but the extent and complexity of modem 
 wholesale business is calling for it more and more. The 
 traveling credit man is the complement of the travel- 
 
27« 
 
 CREDIT AND THE CREDIT MAN 
 
 ing salesman. The responsibilities call for a man of ex- 
 perience — one who can critically analyze a customer's 
 books and stock and, if necessary, can make use of the 
 information collected from banks, local attorneys and 
 agencies. Such a man becomes the best substitute for 
 the credit manager himself, for he brings to the investi- 
 gation a knowledge of both sides of the situation. 
 Knowing the business thoroughly and being experi- 
 enced in the ways of the credit department, he is ac- 
 quainted with both the creditor's point of view and that 
 of the customer in the particular case under consider- 
 ation. 
 
 41. The salesman as a gatherer of information. — 
 Perhaps the oldest way of getting information by per- 
 sonal representatives was through the salesman's re- 
 ports. At first thought it would seem a good idea to 
 unite the two offices of credit man and salesman with a 
 single "expense account." iBut between these two 
 offices there is ever a thick partition. The self-interest 
 of the seller of goods rises like a wall of adamant, and 
 as a consequence the demands of the credit department 
 seldom penetrate its thickness. 
 
 Someone has said that of the four chief factors which 
 enter a salesman's considerations, he himself comes first, 
 the credit man fourth, and in between these two are the 
 customer and the salesman's own firm. While it may 
 not be safe to rely entirely on the salesman's judgment, 
 the credit man can, however, secure a certain kind of in- 
 formation from this source which will prove valuable 
 supplements to the reports received from other sources. 
 The character of the information demanded of the sales- 
 man should be of a kind that he can easily supply from 
 his own observations and experience. If the informa- 
 tion does not require the salesman to iagk questions that 
 
SOURCES OF CREDIT INFORMATION 273 
 
 may hinder a sale or embarrass the customer, much that 
 is of value in making a study of credits can be obtamed. 
 The following form has been used: 
 
 Firm name Address . 
 
 Date • Salesman 
 
 Business good? 
 
 Store neat? 
 
 In General 
 Growing? 
 In Partictdar 
 Well located? 
 
 Well displayed? 
 
 Stock kept in 
 
 good order? 
 Clerks well trained or incompetent? 
 Proprietor a good business man? 
 Drink? Gamble? Other firms bought from? 
 
 Competition? 
 
 Any advertising 
 
 signs? 
 
 Well stocked or 
 
 low? 
 
 Kept busy? 
 
 Social standing? 
 
 Each salesman is provided with these cards, and when- 
 ever he takes an order from a new customer one of the 
 cards is fiUed out and enclosed with the order. If con- 
 ditions seem to warrant it. the credit man may ask for 
 a revised report on the same form, thus keepmg the file 
 up to date. A modification of the salesman's report is 
 seen in connection with large packing houses or firms 
 which conduct their selling departments through branch 
 houses. The local managers are expected to obtam the 
 information which is usually embodied in the salesman s 
 report. It is often possible to substitute the local man- 
 ager's report for that of the local banker's or attorney's 
 
 report. . « 
 
 42. Agency method.— ^o extensive is the use ol 
 
 credit that it was found more economical to establish a 
 
 new kind of business whose duty it is to devote its whole 
 
 III— 18 
 
274 
 
 CREDIT AND THE CREDIT MAN 
 
 time to the study of commercial credits. Its purpose 
 was to impose upon each firm the necessity of gathering 
 all the information needed to do business on credit. 
 This is another illustration of the growth of a new em- 
 ployment because of the economy in the division of 
 labor. The best known methods of gaining information 
 by an agent are those of the large mercantile agencies. 
 For several years this method was the chief source of 
 credit information, but at present the field of credit is 
 being broken up and special agencies are organizing to 
 furnish information along certain lines of business. 
 Then, too, commercial concerns are making use of the 
 principle of cooperation in this branch of their business. 
 The old method of turnmg a "dead beat" loose upon the 
 commercial community is a survival of the old self -pro- 
 tection idea which at one tune made every man furnish 
 his own bodyguard. If he protected his own person 
 from the criminal, he felt no necessity of warning his 
 neighbor against the marauder nor any responsibility 
 for his neighbor's safety. 
 
 Besides these agencies, the wholesale house has at its 
 disposal two other agents. These are the local bank- 
 ers or attorneys, whose services are secured by firms to 
 keep them in touch with local conditions. Both will be 
 treated of further on. 
 
 Mr. T. J. Zimmerman, in his book "Credits and Col- 
 lections," says of the commercial agency: 
 
 The point at which the commercial agency enters into credit 
 operations is between the receipt of the order and the shipment 
 of the goods. Credit rests upon the seller's confidence in the 
 buyer's ability to pay ; confidence results from favorable knowl- 
 edge of a man's character, ability, and circumstances. In order 
 to decide whether his house wishes to extend credit to an appli 
 cant, to determine the amount of credit which this credit is to 
 
SOURCES OF CREDIT INFORMATION 275 
 
 l,c granted, the credit man must have certain general and specific 
 information. Such information the commercial agency has 
 nuide it its function to furnish. 
 
 43. The commercial agency.— The commercial agency- 
 originated as a result of the panic of 1887. New 
 York, the commercial* and financial center of the 
 United States, suffered greatly from the wild-cat spec- 
 ulations of the West, and it was felt necessary to devise 
 some means whereby the ' redit responsibility of the mer- 
 chants might be assured. In response to the needs of 
 the times came the first mercantile agency, which was es- 
 tablished in New York in 1841. Its business was 
 limited at first. Its reports were meager and its facili- 
 ties for obtaining reliable information were incomplete. 
 But in 1860, when Mr. Dun's name became associated. 
 with it, the mercantile agency had gained a recognized 
 and assured position in the business world. Meantime, 
 however, a rival institution had appeared. This was 
 the firm of J. M. Bradstreet and Company, which had 
 its beginning in 1849. Although many agencies with 
 similar purposes have been organized, these two are the 
 only ones that have survived. They both have so wide- 
 spread a reputation that they keep competition out of 
 this field by the sheer force of a name— a form of 
 monopoly not always recognized. They have covered 
 the country with branch offices and have extended their 
 connections to all parts of the busmess world. They 
 purpose to trace the experience of a person engaged in 
 business, to discover the real character and general rep- 
 utation which a man holds not only in business but in 
 society, and to investigate the extent of his operations 
 and the strength of his business position. 
 44. Haw information is collected. — This informa- 
 
276 
 
 CREDIT AND THE CREDIT MAN 
 
 tion is collected by means of a system whose organiza< 
 tion reaches every business man in the United States and 
 Canada. Several independent district oifices located 
 in the large cities of the country form the central points 
 for the accumulation of business news. In the large 
 cities the work of collecting information is specialized. 
 There are separate reporters for different kinds of trade. 
 In the wholesale trade, for example, there are various 
 individual lines of business and a man is assigned to 
 look after each special line. But outside of the large 
 centers the business territory is divided into districts 
 and the reporter assigned to the particular district gath- 
 ers information along all lines of trade. In order that 
 the information may be gathered quickly and yet be 
 reliable, these reporters are kept in their positions year 
 after year. They become thoroughly acquainted with 
 the detailed business facts and trade conditions in their 
 line of trade or within their districts. They can judge 
 of the importance of any new developments or rumors 
 aifecting the commercial standing of the firm or firms 
 within their jurisdiction. 
 
 Besides, each independent office has sub-offices in the 
 smaller cities, the number depending upon the size of the 
 territory and the amount of business carried on. Some 
 district offices have as many as eight sub-offices, others 
 only two. The work of these is much like that of the 
 larger cities. In a city of 40,000 people, for example, 
 the sub-office sends reporters to the smaller towns and the 
 territory round about. These men make regular trips 
 and keep their managers in touch with the conditions 
 along their routes. 
 
 But in addition to the news that can be gathered by 
 reporters at intervals, there are often many develop- 
 ments and changes that need to be reported to the 
 
SOURCES OF CREDIT INFORMATION «77 
 
 agency immediately. To look after this kind of inf or- 
 mation the agencies employ local attorneys who reside 
 in the various towns. These men report news of im- 
 portance which needs the immc .-te attention of the 
 district office. Although they do not give their whote 
 time to this work, these representatives are helpfiJ in 
 supplementing the work of the regular reporters. One 
 feature of the reports is their regulanty. The city 
 reporters make daily reports and the county repre- 
 sentatives send in theirs at longer intervals of time. 
 
 45. Content of the agency reports.— The mtoraia- 
 tion appearing in these reports may he divided into t^ee 
 classes. First, there are the strictly news items. Sec- 
 ond, there are the "impressions," that is, judgments of 
 tendencies. Is a business going backwards? The re- 
 porter may have heard rumors of growing carelessness 
 on the part of the merchant, whose stock is running down 
 and whose manager is inattentive to the needs of the 
 business; or it may be that a firm has increased its cap- 
 ital and is branching out in new Unes. Third, there arc 
 the special reports growing out of a request on the part 
 of a subscriber for special information concemmg a 
 customer, or from a desire on the part of the agency to 
 gain information concerning a new firm. The agency 
 prepares these reports not merely for the convemence 
 of the subscriber, for they wish to publish the ratings of 
 the new house in the next quarterly book. Whenever a 
 district office wants a special report on some merchant 
 outside its territory, it notifies the sub-offi^, and from 
 here a reporter is sent out to gather the facts wanted 
 for the report. Copies of these are made \fjt is an 
 important one and sent to the several district offices. 
 This is done so that time may be saved should the new 
 firm seek to get credit outside the agency's district. 
 
878 
 
 CREDIT AND THE CREDIT MAN 
 
 In order that all reports may be made to the district 
 office in the shortest time and with the greatest secrecy, 
 the agency has a special telegraph code which is used 
 in all reports made by wire. 
 
 46. Methods by which the information is distributed. 
 —How does the agency distribute this information 
 which it has gathered? The names of merchants and 
 manufacturers with business, capital, and credit ratings 
 throughout the United States and Canada are issued to 
 subscribers. By the payment of an extra fee, each cus- 
 tomer of the agency is given two books of reference. 
 These are merely the quarterly reports put into perma- 
 nent form with corrections. In order to make use of 
 the information received daily from reporters, the 
 agency publishes daily sheets informing their subscribers 
 of all failures, new incorporations, changes of owner- 
 ship and so on. And, finally, the agency furnishes the 
 special reports concerning the character of certain firms, 
 which inf or^nation is generally more difficult to procure. 
 They include a record of the man's business and per- 
 sonal character, past and present; his wealth inside and 
 outside of his business; his debts, his social connections, 
 and his reputation. Then follows an analysis of the 
 business itself— the capital, debts, outstanding accounts, 
 amount of business done, its connections and creditors. 
 In a concluding statement, the agency oflTers its judg- 
 ment concerning the worth, credit limits, and. best 
 method of handling the situation. 
 
 Another feature of the works of these companies is 
 the review of trade conditions and market information. 
 This is published weekly and is accepted by the com- 
 mercial world as the most authoritative opinion upon 
 trade, financial and industrial conditions. Business 
 
SOURCES OF CREDIT INFORMATION «79 
 men find this of invaluable aid in measuring the credit 
 
 conditions. . ,«, j. * *i.« 
 
 47. Cost of the agency tervtce.—The cost of the 
 most popular service to merchants and banking houses 
 is $100 per annum, but $60 more must be paid for the 
 two extra books which are published six months apart. 
 If the merchant or banker wishes the special reports 
 he must make the request on a blank prepared by the 
 agency. He has the privilege of receiving one hunted 
 special reports under his agency membership. Addi- 
 tional reports of this nature are charged for extra. 
 
 48. Sources of the information.— Tht sources of 
 the agency's information are much the same as th(we 
 of the individual firm when it seeks to detemme the 
 standing of another concern applying for credit Ihe 
 agency sends its reporter directly to the firm under in- 
 vestigation. Questions are asked along the hnes out- 
 lined above in the treatment of the special report. Ihe 
 
 reporters generally insUt that the statements of the firai 
 shall be signed by a legally responsible member of the 
 firm This makes the statement a better financial basis 
 for credit extension because a false statement makes 
 the party Hable for obtaining goods under false pre- 
 tenses. It is now that the reporter's abilities are caUed 
 forth. He must form rapid judgments from what he 
 hears and observes so as to sustain or condemn the state- 
 ments given. Putting these facts and unpressions to- 
 gether with such indirect information as can be acquired 
 from other people, he now files the report with the 
 agency. In the meantime, the district office has had 
 other sources under investigation. A force of clerks is 
 constantly at work examining the various government 
 and court reports of incorporations and bankruptaes. 
 
««0 CREDIT AND THE CREDIT MAN 
 
 Then, too, the agencj- uses the valuable Information 
 gathered for its own weekly publications from the trade 
 and hnancial sections of newspapers, government re- 
 ports and so on. 
 
 49. Kinds of reports.— The reports may be divided 
 into three classes: High, medium and unfavorable. 
 These estimations are based upon two fundamental ele- 
 ments: capital rating and credit rating. The ratings 
 are indicated by short abbreviations. The agencies gen- 
 erally use about seventeen or eighteeen signs for finan- 
 cial responsibility and about eight for credit standing 
 not counting the "blanks." A firm may be rated as being 
 worth $8,000 to $5,000 and be given a second grade of 
 credit. Perhaps a sign "21" is placed beside the finan- 
 cial rating. This means that the capital rating is as- 
 signed on a signed statement. Another sign may show 
 that the firm refuses to make a statement. The credit 
 rating "second grade" is explained by little figures 
 which mean perhaps that the person concerned "pays 
 when ready, no regard for terms," or "takes off dis- 
 count m violation of terms." or that there is a "chattel 
 mortgage on record." 
 
 The mailing of these ratings is the most difficult part 
 of the agent's work. A few short abbreviations express 
 the labor of days, and on these few signs perhaps rests 
 the fate of some firm's business reputation. The re- 
 porter cannot form his judgment on the capital strength 
 of a firm from a single statement of the concern, nor 
 even upon the basis of the known cash investments or 
 the amount of nominal or paid-up stock, but he must 
 make an appraisal of the commercial or par value of the 
 firm's assets. Not only is the individual estimate of the 
 value of the business on the basis of investment con- 
 cerned, but the relation of its assets to the market where 
 
SOURCES OF CREDIT INFORMATION «81 
 
 those assets are valued as well. This accounts for varia- 
 tions that appear from time to time in the agency's quar- 
 terly book. The invested capital of a firm or corpora- 
 tion may remain the same for many years and yet the 
 capital rating may change often. This is only a prac- 
 tical illustration of that fundamental idea in economic 
 theory that the value of a commodity or a business is 
 not determined by the cost of production or the amount 
 invested, but rather by the demand for goods, or if it 
 be a business, by the market value of ite assets. The 
 credit rating naturally tends to change in the same 
 direction as the capital rating, but this tendency may 
 be and generally is checked by many other factors which 
 influence the judgment of the reporter. Confidence in 
 a man's ability to pay may be neutralized or added to by 
 evidence which shows a man's willingness to pay. Char- 
 acter and social or commercial standing, as disclosed by 
 a history of the firm for a number of years, determine 
 the reporter's opinion as to the credit value of that firm's 
 integrity and worth in terms of cash. 
 
 50. Criticism of agency methods and services. — 
 The many criticisms coming from credit men show the 
 increasing necessity of business concerns to watch their 
 margins of profit more closely. All risk is a result of 
 lack of knowledge. If our knowledge of future events 
 were complete there would be no risk. Before the days 
 of railroads, telegraphs, telephones, and daily newspa- 
 pers risks were greater in all departments of human 
 activity than they are to-day. The business world has 
 struggled to cut down "time and distance" to a minimum 
 in order that risk may be eliminated. The mercantile 
 agency itself was called into being because of this de- 
 mand. For many years its information was superior 
 to the haphazard methods of individual firms, and even 
 
sm 
 
 CREDIT AND THE CREDIT MAN 
 
 such indefinite statements as the following illustratim 
 offered by Mr. E. F. Morgan in his article entitled 
 "Some Defects of the Commercial Agency Report Sys- 
 tem," were better in those days before the "rush order 
 regime" began than no "guess" at all. 
 
 Jones, Wm. H. Jonesville, Jones Co., Ga. 
 
 This party recently came here from Smithton, at which place 
 he is said to have been in the dry goods business. It is not 
 thought that he accumulated very much while in business at 
 Smithton, though it is said that he owns a house and lot there, 
 which is not known to be encumbered. He could not be seen at 
 his place of business when correspondent called, so no statement 
 could be obtained from him. He has a stock of goods esti- 
 mated to be worth $S,000, but it is not known how much he it 
 owing on same. Without a showing from Jones it would be 
 difficult to estimate financial responsibility. 
 
 The credit man does not have the large profit margin 
 to work on to-day, and he nuist eliminate all risk due 
 to indefinite and inaccurate knowledge of the com- 
 mercial situation. "Above all things give us accuracy" 
 is the demand of the credit man. But accuracy under 
 the present system of doing business, which measures 
 efficiency in terms of speed, is the most difficult thing 
 to attain. Especially is this true in the case of the 
 agency which has been compared "to a huge machine, 
 made up of numerous intricate parts, all human, there- 
 fore liable to occasional error." 
 
 In judging the agency one must first of all consider 
 the purpose of its reports. Is it to furnish information 
 so complete and judgments so final that the credit de- 
 partment needs no further proof before determining 
 a customer's line of credit? Or is the work of the 
 agency simply a supplement to other information pro- 
 
SOURCES OF CREDIT INFORMATION «83 
 
 cured by the credit man before arriving at conclusions? 
 If the former is its purpose, so say the agencies, it would 
 Ik.' more economical for credit departments to be trans- 
 ferred to the agency's offices. There would be no neces- 
 sity for two departments to perform a single function. 
 If the latter purpose be considered the more correct one, 
 the question arises: How well is the agency supplymg 
 information which may be considered within its p<»si- 
 bilities to supply ? Are there any sources left untouched 
 bv them which would advance the credit system to a 
 higher plane of increased confidence? We cannot do 
 more than to name the various complaints which credit 
 men make against the mercantile agencies. These are 
 as follows: 
 
 1. The service is slow. . i, ^ 
 
 2. The reports of the agencies need to be checked 
 by outside information. 
 
 ' 8. The reports lack in detailed statements. 
 
 4. The books do not use enough significations in the 
 ratilig of capital and credit. A pay rating designation 
 is demanded. 
 
 5. The agencies have refused to institute a thorough 
 system for the interchange of trade and ledger infor- 
 mation. ^L 1. iU 
 
 It is perhaps in the last of these statements that the 
 credit men have the best basis for a complaint. The 
 agencies are undoubtedly well situated, both as regards 
 equipment and reputation, to undertake this work suc- 
 cessfully. So far they have refused, probably for bus- 
 iness reasons. In the meantime, the necessity for whole- 
 sale manufacturing concerns to protect themselves 
 against "poor risks" is compelling them to obtain this 
 most necessary information independently of outside 
 assistance. Their system demands of them that they 
 
S84 
 
 CREDIT AND THE CREDIT MAN 
 
 increase their confidence in each other and protect them- 
 selves by cooperating in furnishing such important in- 
 formation as a ledger account. 
 
 51. Credit cooperative methods — special agencies. — 
 The failure of the general agencies to meet a wide- 
 spread demand for some modification of the method em- 
 ployed and the character of the information furnished 
 has led to attempts on the part of various lines of busi- 
 ness to provide their own system for furnishing this 
 information among themselves from their "ledger ex- 
 periences." The purpose of this "interchange system," 
 as it is set forth by Mr. W. H. Wheeler, vice-president 
 of the Credit Clearing House, is to provide "an impartial 
 medium between debtor and creditor and between cred- 
 itors themselves, and to establish a system whereby those 
 who are interested in any account may freely and unre- 
 servedly interchange the facts contained in their ledgers, 
 without the necessity of direct reference each to the 
 other, without divulging this information under their 
 own name, and at all times receiving in exchange for 
 items contributed by them the combined experiences of 
 all the others interested in the acoount." 
 
 The blank report on page 285 is for interchange of in- 
 formation between firms. This blank, with an exact 
 duplicate, which is filled in by the firm seeking new in- 
 formation, is sent to another firm. Thus some informa- 
 tion is offered in return for information requested. 
 
 The basis of this new method rests upon the principle 
 of cooperation and reciprocity. In not living up to the 
 spirit of reciprocity some firms are bringing discredit 
 upon the interchange system. For example, one firm 
 will solicit information from another without giving an 
 equivalent with the inquiry. Another instance where 
 the spirit of cooperation is violated is seen when a firm 
 
SOURCES OF CREDIT INFORMATION 
 
 Form AT 11-08— lOOM. 
 
 OUR EXPERIENCE. 
 
 KEEP THIS FOR YOUR FILES. 
 
 285 
 
 Mess. 
 
 :} 
 
 New Britain, Conn. 
 We have order, 
 
 from. 
 
 .P. O. 
 
 Kindly favor us with your experience and opinion. 
 This blank is adopted 
 ">^:iirrA:£tio'n *ol Yours truly, GOOD FORM & COMPANY. 
 Credit Men, of which we 
 are members. 
 
 BOOTS AXO SHOES. 
 
 How Long Sold? 
 
 Terras: 
 
 Highest Recent Credit, $ 
 
 Owes, $ Past Due, $. 
 
 I'ays 
 
 Other Information: 
 
 Form A7 11-08— lOOM. 
 
 RETURN THIS TO US. 
 
 Mess. 
 
 :} 
 
 New Britain, Conn . . . 
 We have order, $. 
 
 from. 
 
 .P. O. 
 
 Kindly favor us with your experience and opinion. 
 
 This blank is adopted 
 
 x'tionarA^rStio?. ^5? Yours truly, GOOD FORM & COMPANY. 
 Credit Men, of which we boots and shoes. 
 
 arc members. 
 
 How Long Sold ? 
 
 Terms : 
 
 Highest Recent Credit, $ 
 
 Owes, $ • .Past Due, 
 
 Pays 
 
 Other Information; 
 
286 
 
 CREDIT AND THE CREDIT MAN 
 
 attempts to pass its credits solely on the ledger experi- 
 ence of fellow merchants^ and without subscribing to a 
 mercantile agency. This practice tends to increase the 
 number of inquiries unduly. Such a firm will get a 
 twenty-five dollar order from a concern rated at a mil- 
 lion or more. Instead of looking up the rating of the 
 firm they seek to establish the firm's credit strength by 
 means of a trade investigation. 
 
 In order to facilitate and at the same time reduce 
 abuses the following rules were proposed at the 1911 
 Convention of Credit Men. 
 
 1. The association blank shall always be used in mak- 
 ing inquiries. 
 
 2. Each inquiry shall show she amount of the order; 
 and when it is a first order, shall so state. 
 
 3. If the inquiry is on a customer, and is forwarded to 
 one with whom credit interchange is rarely carried on, 
 the inquirer shall accompany his communication with a 
 statement of his own experience, and thus encourage the 
 reciprocal exchange of views. 
 
 4. Inquiries shall not be made except on orders 
 actually in hand, or on an open account ; if investigation 
 is being made with a view to selling an account, a letter 
 should be written stating that fact. 
 
 5. All inquiries to be treated confidentially, and under 
 no circumstances shall the subject of the inquiry be in- 
 formed that he has been inquired about. This is funda- 
 mental. 
 
 6. All inquiries shall be answered if possible on the 
 day of their receipt ; and shall not be simply turned over 
 to a bookkeeper or clerk, but shall pass through the 
 hands of the credit man, in order that special informa- 
 tion he may have, not appearing on the books, may be 
 furnished. 
 
SOURCES OF CREDIT INFORMATION 287 
 
 A number of wholesale houses 'in some line of trade 
 • miffht acree to furnish to each other upon application 
 Mie credit standing of any customer as presented by 
 iheir ledger accounts. This method has been tried, 
 but the amount of work and the expense connected 
 with it is likely to h.nit its wide use.^ Vf Iwde' 
 "interchange by direct correspondence. A further de- 
 velopment of this same idea is seen in the organization 
 of "credit bureaus by trades." 
 
 One of the most advanced plans for reciprocal ex- 
 change is that of the manufacturing hatters who sell 
 the iobbing trade. Their entire product is put on the 
 
 market through about a dozen ^^^''^^l.^^^^' 
 These commisf- m men cooperate m handhng the trade. 
 An "actuary" is hired by them to whom all orders and 
 payments are submitted. 
 
 in Columbus, Ohio, the grocery men to the number 
 of over five hundred have a reciprocal credit plan, it 
 ^vorks about as follows: Each grocer gives the names 
 of all customers, together with all credit information 
 thev may possess to the secretary of the grocers asso- 
 ciation. This credit data pertains to the amount of the 
 man's worldly goods, to the amount of credit allowed 
 him, to a careful estimate of his moral strength his busi- 
 ness ability, his habits and his attitude toward paying 
 his debts. The range of information is large and of ten 
 embraces the amount of fire insurance carried by the 
 customer, the social aspirations of the wife and the abil- 
 ity of the family to live within their income. 
 The secretary arranges all this data into forms for 
 
 >The complaint is now quite general that «»« ""'"^Vil^.JtSln'i 
 increasing so rapidly that the credit men must be careful ab««t "1^8 
 unnccessarj- requests or the whole scheme must faU. Some ^irms 'e^f^ 
 that the number of inquiries has become so large that an extra clerk is 
 liircd to give his whole time to handling them. 
 
S88 
 
 CREDIT AND THE CREDIT MAN 
 
 'i 
 
 ready reference. Upon application from members, the 
 secretary answers all questions concerning the credit *| 
 standing of a customer. For instance, a charge cus- 
 tomer having moved from one section of the city to 
 another wishes to open a new account. The new grocer 
 immediately gets in touch with the secretary and asks 
 him how Mr. Blank met his last obligations. If it is 
 found that he is in arrears, credit will be refused until 
 his old debts are paid. 
 
 The bureau also collect data pertaining to selling con- 
 ditions in the various districts, and this with a weekly 
 list of customers who are becoming slow in their pay- 
 ments, keeps the members of the association well in- 
 formed as to the possible failures and the "dead beats" 
 of the community. 
 
 In order to make as few mistakes as possible in judg- 
 ing the customer's credit reliability, the association has 
 appointed a committee whose duty it is to inquire into 
 the condition of accounts of those delinquents who have 
 been prompt in meeting obligations heretofore and have 
 always stood high in the opinion of the credit men. 
 Perhaps it is found that the man is worthy but is the 
 victim of outside influences such as a strike or the preva- 
 lence of a contagious disease which prevents him from 
 disposing of his goods. The committee is in a position 
 to lend a helping hand here, and by so doing not only 
 saves the man from failure but saves a customer to the 
 trade. Occasionally the committee upon investigation 
 reports unfavorably. The debtor is striving to "cover 
 up" with the intention of defrauding his creditors. An 
 early investigation of this kind enables the members 
 of the association to withhold further shipment, to col- 
 lect their accounts and close their relations with the 
 debtor before disaster overtakes him. 
 
SOURCES OF CREDIT INFORMATION 
 
 2S«) 
 
 The extent of the influence which such an association 
 nn wield is indicated by the number of names of cus- 
 t,„ners listed in the bureau. The Columbus association 
 is said to have complete reports on oa er three hundred 
 tlK.usand people doing business in their vicinity on whom 
 can be given "complete ledger information instanter." 
 
 By the establishment of a central clearing house all 
 the 'information and requests can be centered at one 
 n„iiit. Information can thus be tabulated and distrib- 
 uted with a minimum of labor and expense. This seems 
 to be the direction which the newest development of 
 collections and distribution of credit information is tak- 
 ing at present. As each trade has its own specific 
 nerds, such as terms of sale, time of shipment and so 
 0- it maintains its own bureau in harmony with its own 
 inincdiate interests. The limitations of this method 
 may be seen by the fact that each trade is dependent 
 upon a number of other trades in securing a reasonably 
 complete record of orders and indebtedness of a dealer. 
 Recognition of the fact that information must be 
 gathered from sources outside the particular trade has 
 l)r()ught about a still further extension of the inter- 
 change system. An example of this development is seen 
 in the Northwestern Jobbers' Credit Bureau, organized 
 in 1905. This is supported by the four credit associa- 
 tions of Minneapolis, St. Paul, Fargo and Duluth, and 
 at present has 160 members made up of jobbers residing 
 in these cities. It employs an inside office force of 
 twenty-one people and an outside force of thirty. 
 
 Its purpose is to serve the members with credit in- 
 formation about the trade and to act as a standing body 
 of experts continually on watch to guard the members 
 an;ainst losses due to fraud and failures. 
 Every day each member receives a complete list of 
 
 ill— 19 
 
sno 
 
 CREDIT A\D THE CREDIT MAN 
 
 .'' t 
 
 firms about wlioin inquiries arc being made. Each 
 member is expected to respond by giving the informa- 
 tion which liis ledger contains. The next day the mem- 
 bers receive a statement showing the import of the evi- 
 <!cnce collected. The statement shows the condition of 
 il:c debtor's indebtedness since the last statement was 
 issued and the number of times and by whom he has been 
 denied credit. No names are used. The information 
 is issued in key form. However, a credit man familiar 
 M ith the account and the conditions surrounding it can 
 easily locate the larger accounts. 
 
 One unique activity of the Jobbers' Bureau is in con< 
 nection with trusteeship and bankruptcies. Under its 
 administration the trusteeships have paid on an average 
 of 65 per cent, while bankruptcies have averaged about 
 40 per cent. 
 
 Another feature of the bureau is the provision by 
 which an expert will be sent out to investigate a cus- 
 tomer's business affairs for a member. This service 
 costs the member requesting it $10 a day and expenses. 
 If the report is favorable to the firm investigated no 
 publicity is given to it, but if the report shows that con- 
 ditions are not satisfactory a representative of this 
 bureau takes charge immediately. In case of bank- 
 ruptcy no preference is given the members but all cred- 
 itors are treated alike. An average of about six months 
 is required to liquidate a business. The manager of the 
 bureau has a list of about 400 prospective buyers to 
 whom he applies when trying to dispose of bankrupt 
 stock, private sales being favored as they are more suc- 
 cessful than public sales. 
 
 The magnitude of the business M-hich goes through 
 the bureau's hands in this connection is seen in the figures 
 which represent the average values distributed for each 
 
SOURCES OF CREDIT INFORMATION 291 
 
 month, during the years 1910 and 1911. These aver- 
 aged $34,000 per month for 1910 and $49,000 per month 
 
 for 1911.* 
 
 The goal of many credit men is to supplement 
 the trade bureaus with a "central clearing house." 
 Other credit men think that the extra expense and 
 the many difficulties in the way of providing a uni- 
 form handling of the information make this method 
 impossible in practice. They would offer as a substi- 
 tution an independent corporation to take charge of the 
 collecting and distributing of the inter-trade informa- 
 tion which pertained solely to the ledger experiences of 
 the various firms. Being independent of all trade con- 
 nection it could not be accused of favoring any partic- 
 ular trade. 
 
 .>'2. Advantages of interchange system.— The fol- 
 lowing advantages are claimed for an interchange sys- 
 tem: (1) It offers a means of studying a customer in 
 the light of two ledger accounts — his own and his com- 
 petitor's. 
 
 (2) Much valuable information not directly sought 
 comes to a firm, often anticipating the need. 
 
 (3) It helps to put a check upon a dealer's tendency 
 to overtrade. Some buyers make a practice of paying 
 their bills promptly to the firms from which they wish 
 
 a reference." With a good record of this kind they 
 purchase heavily of other firms. Under the interchange 
 system, this increased indebtedness can be detected and 
 the person's line of credit Umited accordingly. The sys- 
 tem offers the same protection against fraudulent over- 
 buying — that is, buying a large stock preparatory to a 
 bankruptcy. 
 (i) The collection department is helped by a knowl- 
 
 1 Bulletin, Xational Association of Credit Men, July, 1911. 
 
292 
 
 cri:dit and the credit man 
 
 p!> 
 
 edge of the trader's entire obligations. JMerchants are 
 often overtaken by calamities not within their control, 
 but if allowed time they may be able to right themselves. 
 Some one creditor by forcing his claims might at this 
 time ruin all chances for his recovery. If all the cred- 
 itors work together thej'- may not only save a hundred 
 cents on the dollar, but a good customer for the future. 
 
 ( 5 ) A strong moral influence is exerted over the mind 
 of the trader. He knows that his shortcomings as a 
 business man will be published over the whole field from 
 whence he expects to get credit. It gives a strong sup- 
 port to the maxim that honesty is the best policy. As 
 a further aid, the customer's statements can be verified 
 by comparing his own estimation of his liabilities with 
 the bureau's estimate as compiled from the ledgers of 
 the interested creditors. 
 
 53. Banks as sources of information. — Among the 
 indirect methods of getting credit information are the 
 local banks and local attorneys. These sources are open 
 to all the diiFerent mediums for collecting information. 
 The various firms consult them directly, and the general 
 agencies find them valuable aids in supplementing the 
 work of their reporters. These banks and these- attor- 
 neys are not of equal usefulness to the credit man. The 
 position of the two and their relations to the commercial 
 community are very diff'erent. Often the local banker 
 and the distant jobber may have interests very much 
 alike in the business of the merchant. The merchant 
 mav be a borrower at the bank and may wish credit 
 from a distant wholesale house. This possible and gen- 
 erally probable connection between the bank and the 
 merchants of a town leads the wholesaler to look upon 
 bank references as of little value. They divide the 
 bank's attitude into three classes depending upon cir- 
 
SOURCKS OF CREDIT INFORMATION 
 
 99fi 
 
 „„,,,ances. If the bunk holds the notes of a local 
 .ncrclumt and he feels that a contraction of the mer- 
 ,h,„t's credit might endanger his business, the banker 
 is not likely to express an opinion unfavorable to the 
 merchant. In case the merchant is a good customer 
 of tiie bank, the latter would naturally recommend him 
 for accommodation, while another bank in the same 
 town would report the man as unworthy of any consid- 
 eration when it came to giving him credit. This bank 
 would probably not be handling the business of the mer- 
 chant in question. 
 
 Perhaps it would be well to mention at this point that 
 at present the weakest part of the credit system shows 
 itself here. There is practically no credit interchange 
 between the bankers themselves, while the recognition 
 of the good that would come from an interchange of 
 credit information between banker and merchant is also 
 still among the "things hoped for." 
 
 54. Attorney-at-law.—The attorney-at-law, on the 
 other hand, is in a position to render valuable services 
 to the credit man. He is in a position both by training 
 and profession to become acquainted with and to weigh 
 the facts of business in his locality. Then, too, his rela- 
 tions to the community enable him to use this informa- 
 tion without violating any trade confidences or without 
 prejudice to his own business interests. Especially well 
 (nullified is he to report upon the results of litigations 
 aiul other legal matters which are important in deter- 
 mining the credit standing of a merchant. 
 
 In cities which are large enough to afford an extended 
 
 amount of business, law firms have found this class of 
 
 ...ncrcial business so profitable that they have installed 
 
 pecial department to handle the gathering of credit 
 
 coium 
 
 a s 
 
 information. The files of such firms are becoming rich 
 
iU 
 
 CREDIT A.<D THE CREDIT MAN 
 
 with accumulations of credit data. Some years ago 
 credit men kept card indexed lists of attorneys for pur- 
 poses of credit reporting, but this method has been su- 
 perseded recently by "law lists" published by responsible 
 houses. The lists are revised frequently, and lawyers 
 whose names appear are under contract to act as agents 
 for supplying credit information to firms which apply 
 for it. 
 
SOURCES OF CREDIT INFORMATION 295 
 
 THE NATIONAL ASSOCIATION OF 
 CREDIT MEN. 
 
 41 PARK ROW, NEW YORK. 
 
 On. 
 
 " Your 'name appears on our list as having represented us, or as being 
 r,;,.l.v to look after our Interests, should occasion arise requiring >our 
 
 "Tn'rloseil, therefore, please find one dollar, for which kindly send us 
 .o„li.lentially as complete a ^^P-^ as possible on Ihu^Bl^nk^o^^^^^^^^ 
 
 ;;,iious questions" Vpecifled. ' Dei.ayed " RKPorrt ak or »o U„ T.ir"r.roK 
 „,: I'HOMPT, Please. Do xot disclose ou» Name as iKauiiiKO. Hie our 
 nam.- Hs l>eing interested In above business, and advise us at once of any 
 .hn;ic affecting bis or their financial standing. Yours truly. 
 
 Name 
 
 liiiitity .... 
 
 lull names 
 all Partners, 
 
 "'{ 
 
 Town 
 
 ■■■■■'■'■'.'. State 
 
 Xationalltv? Age?. . . .Married?. 
 
 . . . .Nationality? Age?. . . .Married?. 
 
 ; . ; Nationality? Age?. . . .Married?. 
 
 Form 19. — Attornet's Report Blank. 
 
 How long in present business? 
 
 ;v::^S?.?^?"!'!'wi::;fr:^V.\\\v;.-.\\;.v.;.;.H;nvj^ 
 
 Ever been sued? 
 
 i:;eV"aJked'«i;A;ion?:.'.'.'.'.'.'.'.'.' :}\^^z' ""'^ •;?'•'""* °' °'"^"' 
 
 indebtedness? If so. of what kind and amount? 
 
 Reputation good, fair, or bad for abilitj ? .^^- • • • • • 
 
 iim-eity? ^. Promptness ?....... Is he doing a good busi- 
 
 ness' Location relative to business center?... ... • 
 
 ....Is stock in good condition? 
 
 Vo.;; ' Vsllmate" of ' amouni" of stock Of ^vWd-s he buy goods if 
 
 tarried? • ^ ' 
 
 U it insured? 9 ' 
 
 Value of Real Estate above exemp- 
 tions and incumbrances? | ] " ' 
 
 Value of other assets? • • • •* 
 
 ^..ur estimate total net worth above 
 ill delits, exemptions and incum- 
 lirances? " 
 
 Reuarkb. 
 Vnv answers which cannot be made in above spaces kindly Indicate by some 
 mark and amplify here. 
 
 Attorney's Name. 
 
 Do not Write below Ilcaw I.ine. 
 Form 19A. Reverse Side of Form 1ft 
 
( iiAPTKii vr 
 
 CRKDIT I'ROTKCTIOX 
 
 55. E/Torts to secure protection. -\n a certain 'sense 
 the general and si)ccial agencies, as well as the various 
 ineans of gathering infonnation. are only different wavs 
 ot securing protection. These methods are cvolvd 
 Irom the n.side relations of the creditor and his cus- 
 tomers, and as such form a distinct i).)rtion of the credit 
 system. In order to supplement the agencies already 
 existing and to imjiart strength to the who.c structure 
 "t the credit system, certain other means have been 
 devised which act as props from the outside * 
 
 On account of the nature of the credit one is not 
 surprised to find the principle of insurance applied in 
 this field. The credit indemnity companies supplement 
 the commercial agencies in two respects: (i They 
 provide against uncalculahle losses by applving'the the- 
 ory of averages to the fiHd of credit extensions; (2) 
 they aid the dispenser of credit by adding to the infor- 
 mation of the customer that information which comes 
 from a close investigation of the creditor's business also. 
 Kvery form of business is subjected to the losses inci- 
 <lent to the uncertainty of the future. To remove tlii« 
 e ement of' uncertainty from man's calculations, the in- 
 stitution of insurance Mas devised. So we have marine 
 insurance, fire insurance, life insurance, burglary insur- 
 ance, accident insurance, ol<l age insurance, laundry in- 
 surance, and so on. As soon as any branch of business 
 
CREDIT IMtOTECTlON 
 
 SO"; 
 
 „r liuinan activity involvinK" risks Ik-coiucs extended 
 iiioii^h so that large luiinlKTs eaii be used in a combina- 
 tion of these risks, a new form of insurance arises to 
 uNircome the economic disadvantages of the particular 
 iiiuirtainty i>eculiar to this branch of activity. 
 
 The principle which underlies all forms of insurance 
 is the same. The difference lies in the character of the 
 (lata which enters into the averages. If we have accu- 
 rate statistics of fires for a term of years and take the 
 iminber of tires with a given number of houses during 
 that period, we get an average. Nothing is more uncer- 
 tain than the specific loss which will occur in any par- 
 titular group; but, on the other hand, nothing is more 
 ct itain than the average loss on all risks. 
 
 .')0. Credit innu ranee. —In the same way, if during 
 the periotl of several years, the number of losses due to 
 ixtension of credit is known, it is possible to classify the 
 losses and arrive at a rormal or average loss H.it a 
 oioiip of commercial houses or any particular house 
 which has a large number of credit customers may sus- 
 tain in a year's time. Accordingly we have companies 
 which will insure a manufacturer or wholesaler against 
 losses arising from selling goods on credit, i'he usual 
 iiu'thod is an investigation by the company of the whole- 
 saler's books to determine what the average loss for the 
 past five years amounts to. This loss must be borne by 
 the firm itself. The company considers this loss as 
 within the realms of certainty, and insurance has to do 
 with uncertainty. Therefore it is only the losses in 
 excess of this "initial" loss that can be insured. The 
 wjiolesaler will be retjuired to sell to retailers of a certain 
 commercial rating and the premiums charged will de- 
 pend in large measure upon the grade of rating allowed, 
 i'herefore the amount of credit that can be allowed to 
 
298 
 
 CREDIT AND THE ("REDIT MAS 
 
 any one purchaser is depeiulent iij)on the size of the 
 ])()hey and the rating- of the dehtor. 
 
 In illustration of the method, let us assume that a 
 wholesale firm has gross sales of $100,000, and the 
 normal loss figured over a period of five years is $1,000 
 or 1 per cent. The amount of insurance allowed the 
 firm might be represented by a bond for $2,500, on which 
 f' re could be an annual premium of $125 or 5 per cent, 
 i J' . ise of a loss of $1,000 or under during the year, the 
 wholesale firm would get nothing from the insurance 
 company, yet all losses over the initial $1,000 up to 
 $2,500 would be recoverable within certain restrictions. 
 These restrictions are regulated by the credit standing 
 and the capital of the debtors of the firm as determined 
 by the ratings of the commercial agencies. Losses sus- 
 tained from the failure of "rated" customers — those 
 having a capital rating followed by a first or second 
 credit rating — are covered by the full amount ( 100 per 
 cent) of their debts or perhaps up to an agreed per- 
 centage of their capital; while losses on the "ofF-rated" 
 — those with poor or no ratings — are never covered for 
 more than a part of the loss sustained through them. 
 
 57. Business houses classified by credit underwriters. 
 —Just as the underwriter determines the class to which 
 each new applicant for fire insurance belongs, so the 
 credit underwriting company investigates the condition 
 of the commercial house to be insured. It must first 
 determine the line of business that the applicant for 
 credit insurance follows. There would, of course, he 
 a difference in the character of the risks connected with 
 a wholesale liquor house and those pertaining to a whole- 
 sale hardware firm. The class of customers with whom 
 the applicant deals is the next consideration, and then the 
 business policy of the applicant himself. For . is- 
 
CREDIT PROTECTION 
 
 299 
 
 I'f 
 
 j„nicrs' standing the credit insurance companies rely ni 
 a larsre measure upon the various agencies which make 
 it their business to collect information. As mentioned 
 lid'ore, the mercantile agencies have amassed a vast 
 amount of valuable commercial data and statistics of 
 I'ailures. By these means the "commercial mortality" 
 can be classified according to different trades, localities 
 and commercial considerations. Then, too, the mercan- 
 tile agencies supply valuable data, all bearing on credit 
 )nditions regarding any specific business concern. 
 Although much can be learned concerning the insur- 
 •ince risk of a wholesale firm by investigating the cus- 
 tomers of the house, still the chief basis for determining 
 the normal loss, the per cent and fixed limit of indemni- 
 fication, and the premium per year, is in the inside inves- 
 tioation of the wholesale house itself. It must disclose 
 horn its books the class of customers, the volume of busi- 
 ness, the size of the accounts, the terms on which goods 
 are sold, the run of its collections and the general credit 
 
 58. Arguments in favor of credit insurance. —All 
 I'orms of insurance must have some economic justifica- 
 tion or they will not survive. The economist and the 
 i)iisiness man have the same tests, but they are expressed 
 I'rom two different points of view. The economist uses 
 the test of utility. He argues that uncertainty results 
 in a lower degree of productivity, or in a smaller surplus 
 of utility, than would be the case were uncertainty les- 
 sened or removed. By minimizing this uncertainty it 
 I'ollows that insurance is productive of wealth. The 
 \)usiness man reaches the same goal by a like test, only 
 ^ji a very practical way. He asks: "Does it pay?" By 
 tliis he means, when applied to credit insurance, does 
 'i add income to his business and is the cost of adopting 
 
300 
 
 CREDIT A\n THE CREDIT MAX 
 
 it — the premium — necessary? -(Vre tlie losses on the 
 average large enough to make insurance necessary' 
 
 The indemnity companies claim that credit insurance 
 does pay according to either test. It gives the husiness 
 man control over his costs. He knows at once what 
 costs are due to had dehts and he can enter his insurance 
 ])remium uj)on his books without waiting for the fend 
 of the year. By adding this to his other fixed expenses 
 he can ascertain the exact production and costs. Then, 
 too, being secured from any excessive loss, he can com- 
 pute his profits with certainty. Xo longer does he need 
 to worry over his book credits. He has exchanged an 
 uncertain expense for a certain expense, and his mind 
 is free to watch the productive part of his business with 
 greater keenness. As he now has some one with whom 
 to divide responsibilities and losses he can increase the 
 •sales of his house to the maximum and at the same time 
 keep the losses at a minimum. Although the terms of 
 the bond offer him protection, yet it is only within cer- 
 tain restrictions, and it is for this reason that the credit 
 man is forced to watch his customers' accounts in order 
 to avail himself of better insurance rates, which depend 
 upon a reduction of the average losses. 
 
 Much is claimed for credit insurance as a stimulator 
 of trade and a preventive of panics. By giv ing business 
 men confidence in their granting of credits the more 
 active they become, for with increased confidence come 
 increased opportunities for opening up larger and newer 
 fields of business enterprise. At the same time, how- 
 ever, confidence in doing this is keeping men away from 
 the source of all panics — loss of confidence. Each man 
 feels that his outstanding accounts are secured to him 
 by insurance. 
 59. Weak points in credit insurance. — Many busi- 
 
 Wmt 
 
CREDIT PROTECTION 
 
 301 
 
 ncss men are not yet satisfied that the claims of the sup- 
 porters of credit insurance have l)een reahzed. lor m- 
 stance, thcv question whether the normal loss of a large 
 ii,m for a long term of ears, if it has averaged a certain 
 percentage of its gross sales, does not include the very 
 iisks that the firm wishes to insure. If it does, then any 
 premium paid for "losses" ahove this amount is simp y 
 in added expense without any return. It is extremely 
 probahle, thev say, even though in some one year the 
 Uses do not exceed this normal amount, that the average 
 „f the next five or ten years will be no higher. 
 
 The effect of insurance on the credit department is 
 one to be condemned rather than commended, as it 
 cither usurps the credit man's place entirely, or by divid- 
 ing the responsibility weakens his judgment as a dis- 
 penser of credit. 
 
 In regard to panics it is difficult to imagine an msur- 
 ance company strong enough to stem the tide of distrust 
 drawn on by a general feeling that the commercial world 
 is overtrading, and a knowledge that losses due to bad 
 debts approximate two billion dollars every ten years. 
 
 60. National bankruptcy Zaw;*.— Laws of bank- 
 ruptcy are based upon the fundamental relation between 
 creditor and debtor as determined by the law of contrart. 
 The theory upon which legal redress is sought by the 
 creditor is based upon the presumption that the debtor 
 has violated his contract. 
 
 Early laws pertaining to insolvency were framed 
 upon the presumption that the bankrupt was guilty o^ 
 fraudulent intention. These were creditors' laws. The 
 development of our industrial system and the greater 
 uttention paid to a study of the true relations between 
 creditor and debtor has brought about a great change 
 Ml the object of bankruptcy laws and the scope of their 
 
30^ 
 
 CREDIT AND THE ( KEDIT MAN 
 
 flf 
 
 n 
 
 application. The tendency of modern legislation in this 
 respect is toward the recognition of the fact that the 
 creditor is a risk-taker in a business along with t' 
 debtor. Modern laws therefore do not concern thei. 
 selves primarily with fraudulent practices, but with the 
 equitable distribution of the assets of an estate among all 
 risk-takers— the creditors principally— but the debtor, 
 too, is included. 
 
 The changed attitude of the present day merchant as 
 contrasted with former times when men were easily im- 
 I)risoned for debt is seen in the report of the Committee 
 on Bankruptcy presented at the 1911 meeting of the 
 National Association of 3Ianufacturers. It says: 
 "The business world is inclined to believe that the aver- 
 age man is honest and that the greater proportion of 
 those men who suffer failure in business are entitled to 
 release from their obligations through the due process 
 of law, and especially if the courts and the creditors are 
 convinced that no fraud exists." 
 
 Only brief reference can be made here to this phase 
 of the subject, although every credit man should know 
 the provisions of this law, not only that he may the 
 better know his legal rights and limitations, but that he 
 may support the principles which are embodied in the 
 law. The protection of the law against legislative at- 
 tack is distinctly the obligation of the credit man. What 
 the national bankruptcy law means to the credit men of 
 the country may be seen by contrasting the condition 
 before and after the legislation of July 1898, when the 
 present bankmptcy law was passed. On several occa- 
 sions before 1898, Congress enacted bankruptcy legis- 
 lation, the chief acts being those of 1800, 1841 and 1867. 
 All of these were short-lived and were brought about 
 because of wide-spread commercial disaster just previous 
 
CRKDIT rROTFX'TlON 
 
 ;jo;j 
 
 to those dates. Relief was sought by legislation afFect- 
 \\]<r the relati. '^ship of creditors and debtors. The ab- 
 sence of national bankruptcy laws put the administrator 
 of debts under the control of the individual states. 
 Therefore each state had its own system of bankruptcy 
 and no two were alike. The only restriction put upon 
 the state legislation was the federal constitutional provi- 
 sion prohibiting any law which impaired the obligation of 
 contracts. The creditor who lived outside the jurisdic- 
 tion of any state had two great disadvantages. One was 
 that each state gave preference to the local creditors and 
 the other was that many exemptions were allowed the 
 hankrupt. The latter was not removed by the National 
 Bankruptcy Act of 1898 nor its amendments of 1910, 
 for the debtor whose estate is administered in bankruptcy 
 is permitted to avail himself of such exemptions as are 
 allowed in the state where he has had "his domicile for 
 six months or the greater portion thereof immediately 
 preceding the filing of the petition." 
 
 61. Advantages of the present law.— The following 
 list of advantages which are claimed for the present 
 Bankruptcy Act may show more fully by the contrast 
 what the disadvantages were: 
 
 1 . The prevention of preferences, 
 
 2. The excellent influence of the law in enforcing concert 
 of action and mutual terms of settlement without recourse to 
 1i'u;h1 proceedings. 
 
 3. The expeditious adjudication of bankrupts, as distin- 
 guished from the tedious and expensive processes common to 
 >tatc courts. 
 
 i. The election of the trustee by the creditors. 
 
 5. The examination of the bankrupt by creditors. 
 
 6. The adjustment of bankruptcies through compositions 
 n 1th the knowledge and under the direction of the court. 
 
fJOl 
 
 CREDIT AND THE CREDIT MAN 
 
 7. Tlic prompt administratiun of estates and an avoidance 
 of the usual delays in litigation. 
 
 8. The use of contempt proceedings to effect the recovery 
 of property. 
 
 . 0. The institution of auxiliary proceedings to reach prop- 
 erty lying in (iiffercnt states. 
 
 10. The sale of real estate clear of liens. 
 
 11. The settlement of the affairs of corporations in bank- 
 ruptcy in the interests of creditors and stockholders. 
 
 12. The reduction in expenses incident to failed accounts, 
 notably in the case of attorney's fees. 
 
 13. The acquirement of increased dividends from insolvent 
 estates. 
 
 14. The punishment of fraudulent bankrupts. 
 
 1.5. The administration of insolvent estates wholly in charge 
 of creditors interested. 
 
 62. Cleaning of recent amendments. — Practically 
 every trade organization in the country, wholesale, re- 
 tail, board of trade, chamber of commerce, travellers' 
 association and the like, was represented in the fight of 
 June, 1910, to amend the Bankruptcy Law. One fac- 
 tion wished to repeal the law, the other wished to amend 
 it. The amendments that were finally passed were sug- 
 gested by defects in the law growing out of experience 
 in the practice under it and the decisions of the courts 
 bearing upon the administrative features that could not 
 have been anticipated when the law was first made. 
 
 The amendments passed were as follows : 
 
 ( 1 ) Regulation of receivers' fees. 
 
 (2) Ancillary jurisdiction. 
 
 (3) Broadening of the law as it affects bankrupt cor- 
 porations. 
 
 (4) Opportunity for composition before adjudica- 
 tion. 
 
CREDIT rUUTKCTION 
 
 30-j 
 
 (.5) Authority given a trustee with the consent of 
 creditors to oppose a bankrupt's discharge. 
 
 ( (5 ) Making the obtaining of property on credit upon 
 ii false statement in writing given to a third person, a 
 bar to discharge. 
 
 (7) Widening of the definition of preference. 
 
 (8) Compulsory notice to creditors before a bank- 
 niptcy proceeding can be dismissed, or bankrupt dis- 
 charged. 
 
 (0) Giving to the trustee the rights of a levying 
 creditor as against unrecorded chattel mortgages and 
 otlicr instruments of transfer. 
 
 The amendments bear strongest upon the subject of 
 compensation of receivers and trustees. Previous to 
 this time, men m ho were custodians in a way, received 
 what was subject only to conditions surrounding the case 
 and the disposition of the court. The first amendment 
 therefore provides for an exact regulation of the fees 
 of trustees and receivers. 
 
 Another amendment of importance allows corpora- 
 tions to become voluntary bankrupts. This was previ- 
 ously prohibited. The change also allows creditors to 
 ])roceed against corporations and put through involun- 
 tary bankruptcy. This will, among other things, avoid 
 long receiverships. 
 
 The amendment standing third in importance pro- 
 vides an opportunity for composition either before or 
 immediately after the adjudication of bankruptcy by 
 the court. This composition is only possible after the 
 court itself, as well as the creditors, is fully satisfied 
 that good faith has been exercised by all parties con- 
 cerned, and that statements that have been made by the 
 del /tor to the court are honest and complete. 
 Another amendment also makes it possible for the 
 
 111—20 
 
306 
 
 CREDIT AND THE CREDIT MAN 
 
 trustee in bankruptcy to oppose the final discharge of 
 the bankrupt, if he is able to show proof that a false 
 statement has been made, or that fraud has been prac- 
 ticed in any way. Before this amendment was passed 
 it was generally conceded that the trustee often was in 
 possession of evidence pertaining to the bankrupt which 
 was not obtainable by the creditors. 
 
 The amendment in reference to "preference in bank- 
 ruptcy " is also worthy of special mention. This refers 
 more particularly to chattel mortgages, trust deeds, etc., 
 which have been in existence but have not been filed. 
 This amendment defines at what period of time this 
 preference shall become operative, and then gives the 
 creditor an opportunity to exercise the common law as 
 well as the law of bankruptcy in dealing with the prefer- 
 ences. 
 
 68. Future of the Bankruptcy Law. — The future de- 
 velopment of legislation pertaining to bankruptcy will 
 be along lines of bringing the present law into harmony 
 with administrative conditions. Many large trade or- 
 ganizations such as the National Association of Manu- 
 facturers and the National Association of Credit Men 
 have adopted resolutions which show the opinions of 
 those most interested and which direct the way for fu- 
 ture legislation. In these resolutions it is declared that 
 the working of the bankruptcy law as amended by Con- 
 gress in 1910 is highly satisfactory and that they (the 
 organization) pledge themselves to strive to keep the 
 law in force and to assist in further amending the law 
 as may be required and as it becomes necessary under 
 changed commercial conditions. 
 
 The opposition to the law is chiefly due to the bad 
 administration in carrying out its provisions rather than 
 to any objection to the provisions themselves. Realizing 
 
CREDIT PROTECTION 
 
 mr, 
 
 the justice of this objection, the credit men's associations 
 of tiie country are giving special attention to the proper 
 a.lininistration of the bankruptcy law in their own lo- 
 calities. For example, the associations of New York 
 State are trying to cooperate with trade organizations 
 wit, reference to forming a list of bona fide credit men 
 wlio would be willing to act as receivers or trustees in 
 l)ankruptcv when chosen by the judges of the court m 
 their respective districts. Furthermore, the national as- 
 ,ciation is striving by every means in its power to gain 
 
 SOI 
 
 the cooperation of trade organizations throughout the 
 country in watching the administration of the law as it 
 now stinds. The national office has established a special 
 hureau, the Bankruptcy Law Department, which is pre- 
 pared to answer all questions pertaining to the act. 
 Through this bureau, members can investigate any mat- 
 ters of seeming irregularity, and learn authoritatively 
 tlieir rights under the law. 
 
 The greater uniformity in dealing with debtors 
 l)rought about by the National Bankruptcy Act was a 
 decided aid to the credit men of the nation. It removed 
 in part, at least, many of the differences and burdens 
 wiiich the separate state legislations had imposed upon 
 the credit departments. This lessening of the legal dif- 
 ficulties has given the credit men more opportunity to 
 apply their energies to the solving of those economic 
 problems which are inherent in the very nature of trade 
 and which are so directly connected with the credit de- 
 l)artnient of every business house. 
 
 (U. Credit men's associations.— The first thing we 
 must recognize in the beginning of a new movement is 
 the disadvantage in carrying on any form of activity 
 \\ ithout adequate organization and cooperation. While 
 (•()()l)eration has been more or less evident in the various 
 
;JOH 
 
 CUKDIT AM) TIIK ( RKDIT MAN 
 
 
 divisions of econoniic activity, such as is seen in coojxjra- 
 tive production and distributive societies, and in the cor- 
 porate management of large financial undertakings, yet 
 in the field of exchange there has been very little progress 
 in this direction. It is due perhaps to the fact that 
 effective cooperation could not be introduced here until 
 business men were willing to trust their competitors with 
 trade knowledge, the secrecy of which had been consid- 
 ered the one absolutely essential requisite of every busi- 
 ness. To trust a competitor with information which 
 disclosed the standing of a customer might mean that 
 you were surrendering to an enemy a knowledge of that 
 customer's strong and weak points which had taken one 
 years to acquire. But experience showed that the great 
 selling houses had much in common. The creditors were 
 natural allies. The opponents of the National Bank- 
 ruptcy Law were the debtor communities and not the 
 creditors, and it is now being more and more clearly 
 seen that the safety of all creditors mav be more firmlv 
 secured if each creditor will add his experience to that 
 of the others, and in this way create a cumulative fund 
 of credit information — a fund that may be drawn upon 
 by all and used as a preventive against bad debts. The 
 Bankrupty Law helps in the more equitable distribution 
 after the failure, while cociperation among credit men 
 helps to prevent the failures. 
 
 65. National association. — The organization which 
 stands sponsor for this newest form of cooperation is 
 the National Association of Credit Men. This asso- 
 ciation was organized in 1896 at Toledo, Ohio. It was 
 an outgrowth of the discussions at the World's JMer- 
 cantile Congress in June, 1893, which was held under 
 the auspices of the Chicago Exposition. 
 
 There had been various associations prior to this, such 
 
CREDIT PROTKCTION 
 
 :109 
 
 ,,s credit cm^panies or bureaus for the exchange of inf or 
 lution, but tlie scoiK. «f operations wan lunited. Sti 
 
 sc formed the basis for the national organization and 
 ,. to-dav brunches of the national organization, and 
 
 .,V of 'them yet carry on the functions of a cred 
 
 ... lug house, while the national organization of credit 
 tlines itself to the broader field of formulatuig 
 ,,a directing the principles of credit m g^^^!' J^^^ 
 objects of this association are summed up «« i«"°^^; 
 
 1 The organization of individual credit men and ot 
 ass(,ciations of credit men into one central body. 
 
 o They purpose to render a more uniform and hrm 
 Lai for granting credit in every branch of commercial 
 
 'ir They seek to reform the laws which are unfavor- 
 
 •il)le to honest debtors and creditors. 
 4 They demand new laws beneficial to commerce. 
 
 >' They seek to improve the methods of gathering and 
 aissemi..dting data in relation to credits. 
 
 0. They wish to amend business customs to the beneht 
 of all commercial interests. 
 
 7. They wish to provide "a fund for the protection of 
 numbers against injustice and fraud." . ^, ^^ 
 
 These objects have been worked for with zeal. There 
 Ik.s been considerable success in the spreadmg of intor- 
 nuition and the creation of a more friendly feeling be- 
 tween the various commercial interests. Through the 
 efforts of the association the attacks against the ^ ational 
 Bankruptcy Law were thwarted, while the efforts to- 
 ward constructive legislation have been rewarded by 
 many advanced national and state laws. 
 
 Tiie growth of the Association has been phenomenal. 
 Its membership in 1911 was over 14,400. and some 
 
 .1' the local branches had oVer 1,000 members. Ihe 
 
510 
 
 CUKDIT AM) Tin: CUKDIT MAN 
 
 annual meetings arc marked by the numl)er of disais- 
 sions and papers pertaining to the education of business 
 men in this department of commercial activity. As an 
 educational center for credit men the Association per- 
 forms its most useful function. The business literature 
 is made up of valuable articles, pamphlets and addresses 
 published by a department established for this purpose. 
 These publications embrace many subjects outside of 
 credits. We find among them the following: Account- 
 ing and bookkeeping, banks, bank credits, bankruptcy 
 law, business abuses, business principles and customs, 
 trade conditions, terms, datings and discounts, elements 
 of credit, and fire insurance and its relation to credit. 
 
 The credit departments of all branches of commerce 
 are trj'ing to strengthen themselves in other directions 
 by organization. The heavy risks attached to the exten- 
 sion of credit under a broad and extensive commerce 
 have called into existence the institution of credit insur- 
 ance. Although the benefits of this protection are not 
 generally acknowledged by credit men, many of those 
 against it base their objection upon the practical and 
 incomplete workings of the institution rather than upon 
 the principle of credit insurance. 
 
 lii securing national bankruptcy legislation great 
 advancement in the establishment of uniformity in the 
 legal relations of both creditors and debtors has been 
 made. In some respects this has proved to be the great- 
 est gain which the commercial world has received from 
 any quarter. It marks a distinct advancement in com- 
 mercial development. :Much credit, however, for this 
 must go to the third factor as represented by the Na- 
 tional Credit Men's Association. By persistent efforts 
 the credit men have organized into a body whose influ- 
 ence is national in character and which serves as a rallv- 
 
t UEDIT PROTECTION 
 
 811 
 
 i„. point for all movements which make for conunercml 
 siruritv and stability of credit. 
 
 (j(5. 'imiwrtancc of credit men's Msodatiom. -Kvery 
 .Knartment in a system or organization pertaunng o 
 iH.siness has two important relationships. One has to 
 ,10 with the outside or allied interests and the other with 
 the various departments of the organization itself. 1 he 
 ,,Hlit department is no exception. It is indirectly con- 
 nected with the whole field of exchange from the outside. 
 a.ul it is closely associated with the selling departments. 
 the collection, and accounting departments of its own 
 hi.siness. It has already been shown how closely the 
 credit departments of every line of business are being 
 drawn together. The greatest achievement along the 
 Hues of cheapening the costs of production has been 
 accomplished in the great industrial divisions of the 
 ,„aking and the transporting of goods. The principles 
 of combination and cooperation have given the modern 
 hulustrial system a great advantage over all preceding 
 systems. It now remains for the business world to apply 
 these same principles to the field of exchange, and it 
 appears that the points of nearest approach at present 
 between the various business units lie in the credit de- 
 partments of each individual concern. The losses due 
 t.) "bad debts," and the great expense necessary to pro- 
 N ide credit protection even in ordinary transactions puts 
 upon the business concerns of the nation a burden and 
 an expense similar to that borne by transportation when 
 the mail coach was the chief means of sending goods 
 across the frontiers. The credit men's associations are 
 ,h)ing much both by precept and example to draw the 
 commercial interests together in the field of exchange. 
 Thev are "weaving a mesh of tough fibre, confidence, 
 which permeates the entire crystallized structure of our 
 
iilil 
 
 CREDir AND THE CREDIT MAN 
 
 commercial body, giving strength and cohesion to with- 
 stand a stiain." 
 
 07. liehiHon of the credit man to the firm. — The 
 man who organizes a business, raises the capital and 
 takes the initial risks in any venture, is generally called 
 the entrepreneur, or undertaker of the enterprise. One 
 of his chief concerns in deciding upon the undertaking 
 is the nature and extent of the demand for his product. 
 Having once decided upon this in a general way and 
 haA ing established the business, it then devolves upon 
 the various officers of the concern to carry out the details 
 of the operations. The market still remains a determin- 
 ing element in operating the firm as it was the determin- 
 ing factor in establishing the business. If the enterprise 
 succeeds, this will be due in great part to the depart- 
 ments which deal with the people who demand the 
 goods. In this respect the sales department is very im- 
 portant. The salesman has been called the firm's "other 
 image" — the selling force of a house being its sole out- 
 side representation. In the same way a good collection 
 department is a source of strength in determining the 
 success of a business. But the latter must meet the 
 puWic in the guise of an adjuster rather than as a pro- 
 moter, and as a consequence the success of a collection 
 department often depends upon the amount of salvage 
 that can be rescued rather than the "profit on account" 
 to be accorded him. The salesman gets the trade, the 
 collector must get :he money. The department which 
 stands between these two is the credit department. Its 
 manager must supply the judgment necessary to keep 
 the sales at a maximum and the losses at a minimum. 
 This relation to the public is of very great importance. 
 In adopting a system for handling the data of a credit 
 department these fundamental considerations must be 
 
CREDIT PROTILCTION 
 
 313 
 
 tlie ^rniding lines. In applying the principles in j)rac- 
 ticeftlie character of the business, its size and the many 
 local conditions must determine the details. It may be 
 .aid in general, however, that the system should take 
 care of the routine of the department mechanically and 
 leave the credit manager free for the weightier affairs 
 of his position. The outlines of the system will con- 
 nect the bookkeeping, the selling, the order and collec- 
 tion department with the credit department. 
 
 The system must care for data of two kinds : ( 1 ) Out- 
 side information, such as agency reports and so on, and 
 (•_>) inside information as gathered from the correspond- 
 ence, the ledgers and the records of the collection de- 
 partments. The purpose of any system is to provide 
 in the shortest time possible the necessary information 
 and to ward against carelessness on the part of the 
 credit man himself by warning him automatically of 
 (iaiifrerous accounts or doubtful customers. How this 
 is done in the case of a wholesale house may be sug- 
 gestive, but it is not given for all kinds and conditions 
 of businesses. 
 
 08. An illustrative method— the mail, index cards, 
 ctc.—^lczt credit mep desire to begin their business day 
 by learning the contents of the morning's mail. The 
 method of opening and sorting the mail will depend 
 upon its size. In a large department store, for instance, 
 it may be necessary to bring only one class of mail before 
 the credit man— the letters or orders— of new or doubt- 
 ful customers. In other lines of business the credit man 
 deems it his duty to open and classify every letter him- 
 sel t . There seems to be a happy medium between these 
 two methods, which saves the credit man the burden of 
 routine and at the same time keeps him in touch with 
 the changes and movements of the business. From the 
 
nu 
 
 CREDIT AND THE CREDIT MAN 
 
 incoming mail he gets information regarding the stat. 
 of collections without consulting the ledgers every day; 
 he can see what customers are taking advantage of dis- 
 counts, and which ones are not accepting the drafts 
 drawn on them; he also sees what new orders are sent 
 in without considering the many reports from the sales 
 and other departments ; while in general, the latest news 
 affecting business conditions, complaints, etc., are gath- 
 ered from the incoming mail. 
 
 One system which has proved successful provides for 
 the opening of the mail by a clerk whose duty it is simply 
 to write upon the letter the index number assigned to 
 the writer. An index number is given to every customer 
 of the house upon receipt of a first order. The numbers 
 are consecutive and each state of the Union has a series 
 of its own. Thus John Brown of Minneapohs, Min- 
 nesota, will be indexed as Minnesota 125; Fred Smith 
 of St. Louis, Missouri, will be Missouri 420. The same 
 number is used throughout the whole filing system. 
 Correspondence, orders, sales, ledger accounts, mercan- 
 tile and other reports are all classified according to it, 
 and all the forms necessary, such as index and ledger 
 cards and report folders are made out before the new 
 name comes before the credit man. As soon as a number 
 is assigned to a customer, his name is entered into a book 
 and the index number is written opposite it. This serves 
 as a book of reference in case the number is forgotten. 
 
 If the credit department is at the head of the whole 
 office and can control the policy and methods of the 
 accounting force, the credit man can carry out his system 
 most effectively. When this is true the card ledger 
 system seems to be the choice of the credit department. 
 It does away with the friction which was common when 
 books were called for under the old bound book ledger 
 
CREDIT PROTECTION 
 
 ais 
 
 system. In a large business these books must be m 
 cmistant use in the accounting department. A card 
 can be taken out without interfermg with the work ot 
 the bookkeeping department, while at the same time the 
 account is in a form to be easily handled. On this ledger 
 card are the usual debit and credit entries with a column 
 where the balance is indicated. It shows the condition 
 of the customer's account at a glance. Other items show 
 tlie terms on which the goods were sold to him and his 
 rating. A thh-d division of the card will prominently 
 display in brief form the data abstracted from all the 
 various sources which may have been used regarding 
 the man's character, capacity and capital. The briet is 
 revised or added to as new information comes m. 
 
 Some firms use differently colored cards so that at 
 a .rlance some information of vital and constant impor- 
 tance may be conveyed to the credit man. For example, 
 the regular ledger cards are white, but two other colors 
 are used to indicate special data. A blue card contain- 
 ing the same data replaces the white card in the file 
 when for any reason credit has been refused a customer. 
 This card is never changed back to a white card again. 
 Either a white or blue card may, however, be substituted 
 by a red one. This is only done when a customer s 
 account is placed in the hands of an attorney for col- 
 lection. The color of the card is never changed again 
 even though a new account be opened with the former 
 delinquent. It stands as a perpetual warning to the 
 credit department that at one time a fatal weakness was 
 displayed by the firm. 
 
 That there may be as little delay as possible m filling 
 new orders, many are turned over to the sales depart- 
 ment upon the high rating given in the mercantile 
 agency books, and the more detailed information is 
 
31fi 
 
 CREDIT AND THE CREDIT MAN 
 
 looked up as soon as possible. Inasmuch as a large per- 
 centage of orders is taken by traveling salesmen several 
 months before shipment is necessary, the credit depart- 
 ment has ample time in which to make a thorough inves- 
 tigation before the date of shipment. To avoid the 
 expense of filling orders that may be held up by the 
 credit department, a memorandum of the estimated 
 amount of all orders for future shipment is sent to the 
 credit department just prior to the filling of such orders. 
 The close connection between the credit department 
 and the other departments is best shown in the filling 
 and shipping of an order and the collecting of payment. 
 After the order has been passed by the credit man it 
 goes to the invoice clerk, who makes four copies. Two 
 copies are sent to the billing clerk, who holds them until 
 the goods are ready for shipment. The third and fourth 
 copies are sent directly to the warehouse. One is re- 
 tained by the warehouse as a receipt and the other is 
 sent back to the accounting department to serve as a 
 source from which to post the ledger. When the goods 
 are shipped, the billing clerk disposes of the two copies 
 in his hands by sending one to the collection department 
 and the other to the customer as a bill. The one sent 
 to the collection department is divided into two parts 
 by a perforated line. The information on the two 
 parts is so arranged that one section can be filed away 
 according to its numerical order number for future 
 reference, while the other section, which contains infor- 
 mation suited particularly to the collection department, 
 is filed away in such manner that it will make its ap- 
 l)earance "automatically" ' on the date and day of the 
 
 1 According to Mr. Montgomery Rollins a " tickler " is " a iMok in which* 
 "11 debts due to a banking institution (or anyone) are entered, together 
 with dates of maturity, so that failure to present for payment at the proj)er 
 time may not occur. It is a reminder." 
 
CREDIT PROTECTION 
 
 317 
 
 ,l,tinff It is the "tickler" ' of the collection department. 
 JcoUection methods.-The policy of a collection 
 acpartment must be in harmony with the credit depar - 
 n,ent. This is often brought about by puttmg the credit 
 ,„an in charge of both. The methods pursued in mak- 
 ing collections must be as varied as those pertaming to 
 tl,: granting of credits. Retail customers differ from 
 customers of wholesale houses. The "business-like 
 uK'thods practiced in the collection departments of 
 wholesale houses would not be applicable, as a loile in 
 dealing with debtors in the retail trade. The latter 
 must be carried on with a due understanding and con 
 sideration of human nature. 
 
 But there is one policy which is universally applicable 
 t.) all collection departments. No matter whether it is 
 i„ the retail or wholesale trade, customers should be 
 trained to make, prompt payments. Especially does this 
 apply to the installment house where the collection de- 
 partment forms the backbone of the system. 
 
 There may be three or four steps in the collection ot 
 a debt. The usual procedure is first to send a statement 
 en the day on which the debt falls due. If this does 
 not meet with an acknowledgment, a letter is generally 
 written asking for payment. This is a critical point 
 in the procedure and all the tact in the possession of the 
 department is needed. The object of the letter is of 
 course to bring about a settlement without losing a cus- 
 
 . Suppose the order was shipped July 1. and Ihe terms are thirty days 
 
 „rt. This slip will be Hied in the "tickler" thirty days ahead. Aocord- 
 
 , V on the first of August the attention of the clerk >n charge w.l be 
 
 ..al.;d to this account. He then consults the ledger and -"ta-ns whether 
 
 ,... l,ill has been paid or not. If not. a «*«*-'!"VL'""h hII for a 
 ,..to .nd one is sent to the customer; the other .s filed ahead again for a 
 ,,.ri«l of ten days. The account is now definitely on its way through the 
 ( Uection department. 
 
318 
 
 CREDIT AND THE CREDIT MAN 
 
 tomer. The correspondence should at least encourage 
 customers to be frank and open with the house and let it 
 know where he stands regarding the account. Circum- 
 stances must govern the procedure from now on, but at 
 no time should a firm depart from a dignified attitude. 
 A common practice is to send the customer a draft ex- 
 pecting him to accept it. This was a very efficacious 
 method at one time, but the awe which the method in- 
 spired in the country merchant has somewhat disap- 
 peared. When the unhonored draft is returned, some 
 collectors use the telegram to good advantage. A sharply 
 worded message expressing surprise and demanding im- 
 mediate settlement is sent to the delinquent. The chief 
 virtue in all of these methods is that they impress the 
 customer with the fact that the creditor is actively vigi- 
 lant and desires to do things in a business-like way. 
 
 Before the final appeal to the law is taken many 
 houses make it a practice to send the credit man to the 
 debtor to seek by a personal interview the true condition 
 of affairs. Often such visits prove of the utmost value 
 not only to the house, but to the customer. The larger 
 experience of a broad-minded credit man is brought to 
 bear upon a situation that may have proved to be too 
 complex for the local tradesman and by kindly advice 
 and helpful suggestions a falling trade is put upon its 
 feet again. 
 
 If no satisfaction can be secured by pacific means, the 
 account is put into the hands of an attorney for collec- 
 tion. It is at this point that the red card supplants the 
 white card in the ledger file and stands as a "red flag of 
 M-arning" to the credit man whenever this account is 
 approached in the future. 
 
 70. Suspended accounts. — ^When accounts have as- 
 sumed such a character that their worth is questionable, 
 
CREDIT PROTECTION 
 
 fJin 
 
 thev are separated from the regular accounts and put ni 
 a ciass by themselves. They are known as "suspended 
 accounts." The name indicates their nature. They are 
 held in suspense awaiting developments that will war- 
 rant some definite disposal of them. 
 
 When an account is given to a lawyer for collection 
 the value of it is diminished as an asset. Conservative 
 hnsiiiess policy dictates that such an account should not 
 l,e reckoned at its face value. Before chargmg the 
 account to profit and loss it is segregated from the good 
 accounts in order that its character may not be misun- 
 derstood, and put into a suspense account where an 
 approximate value is put upon it until the outcome of 
 the attorney's action definitely decides its true value. 
 
 In large firms suspended accounts are given a sepa- 
 rate and special treatment by the credit department. 
 The card system is recommended by many as the best 
 method for tabulating data in an orderly and convenient 
 manner. In conjunction with this the correspondence is 
 cared for by a folder system. 
 
 Not only does it pay to give adequate attention and 
 care to debtors who have failed to meet their obligations 
 l)ccause much more is reaUzed from them, but the infor- 
 mation gained under the pressure of the collection de- 
 partment becomes a valuable guide in granting future 
 credit to any such firm as may again apply for it. If 
 the credit man does not sufficiently investigate his bad 
 (lcl)ts, he will always be in doubt as to the real cause 
 of the debtor's failure. Was it an honorable failure 
 from which the man emerged with an unstained char- 
 acter, or was it a failure due to lack of moral stamina? 
 The files of the suspended accounts should disclose the 
 
 answer. 
 71. Analysis of credit information.— The supreme 
 
320 
 
 CRKDIT AND THE CRKDIT MAN 
 
 test of a credit department's efficiency comes when it 
 must analyze the information that has been laid before 
 it. It is then that the credit man must bring into play 
 all of his natural ability and experience. The broader 
 his knoMledge of human nature and the more constant 
 his contact with the men in the trade, the easier it will 
 be for him to detect pitfalls into which untruthfulness, 
 carelessness or incapacity might lead him. But even 
 after he has decided the character and capacity of the 
 customer asking for credit, there is still the necessity 
 of clearly comprehending the financial statement which 
 he presents to the credit man. The latter's knowledge 
 of the trade and its tricks will be of special aid to him 
 in this connection. He can the more surely estimate 
 the merchant's paying power because he knows the qual- 
 ity and permanency of the demand and the rate of tmn- 
 over pertaining to this particular line of goods. The 
 relation of the assets to the liabilities assumes, therefore, 
 an imposing place in directing the decision of the credit 
 man. In order to analyze a statement critically with 
 this point in view or to examine a customer's books for 
 this purpose, the credit man could bring to his assist- 
 ance no greater aid than a thorough knowledge of ac- 
 counting. Each particular trade has its peculiarities, 
 and a credit man in sending out statements to be filled 
 in by prtjspective customers shows his suspicions by the 
 questions he asks. A knowledge of accounting enables 
 him to pick out the weak and hidden places in the report 
 when it is filled out and returned. It is a common thing 
 in business circles to speak of the exaggerations and mis- 
 representations presented in the balance sheet. Accord- 
 ing to Professor Bolles, the man unfamiliar with the 
 science of higher accounting should ask the following 
 questions when analyzing a statement: 
 
CREDIT PROTECTION 
 
 8S1 
 
 (a) I» the capital Buffident and ha« it b«en contributed in 
 cash; if not, what docs it represent? 
 
 (b) Who constitute the firm, and do the partners understand 
 
 the business? 
 
 (c) Has the stock been taken in at a fair figure and has due 
 allowance been made for depreciation? This is very necessary 
 to ascertain in large manufacturing concerns. 
 
 (d) What about accounts and bills receivable? Has due 
 allowance been made for doubtful credits and have bad debts been 
 written off or provided for? 
 
 (e) The liabilities of the firm should be carefully examined; 
 are they heavy ; are they continuously large ; to whom and what 
 for? 
 
 To this list, Mr. Thome, in his paper on "What the 
 Statement Means to a Credit Man," would add: 
 
 (f) Is the buying legitimate in amount? 
 
 (g) Do they carry other lines beside their principal business? 
 If so, where does the capital come from? 
 
 If the credit man can induce the customer to give him 
 such a detailed statement of his financial affairs, he has 
 something tangible to work upon. He asks what prop- 
 erty has the applicant which is unincumbered and in 
 good shape; what is the cost of his merchandise; how 
 much has he owing him in outstanding accounts; how 
 much cash has he on hand and in the bank? What is a 
 conservative estimate of his plant and machinery? The 
 sum of all of these items will give him his active busi- 
 ness assets. Then the credit man examines the other 
 side of the statement and searches it with the following 
 questions in mind: How much does he owe for mer- 
 chandise? What is the amount of borrowed money, 
 either from the bank or from mdividuals? What is the 
 c— m— 21 
 
tm CREDIT AND THE CREDIT MAN 
 
 amount and nature of other obligations? When these 
 items are added together the liabilities are exposed. 
 
 In order to determine the basis on which to lend to 
 this customer the credit man must deduct the sum of 
 the liabilities from the sum of the assets. The surplus 
 represents his active capital. It is very essential to make 
 a careful comparison of a firm's debts or liabilities with 
 its assets. 
 
 Mr. Marshall, president of the New York Credit 
 Men's Association, in his excellent paper on "The 
 Credit Man" gives the following illustration in whidi 
 are compared the statements of three business men 
 having the same capital in their businesses: 
 
 Assets. A B C 
 
 Machinery ^^1^,000 
 
 Merchandise $10,000 $20,000 10,000 
 
 A«»"n*s 5,000 15,000 10,000 
 
 ^^^ g>000 1,000 10,000 
 
 $20,000 $86,000 $40,000 
 
 ^^**»"^*^«« 16.000 20,000 
 
 ^mtal $20,000 $20,0.. $20,000 
 
 Apparently these three men are in the same financial 
 position. Each has $20,000 capital. It is only when 
 the nature of the assets is examined that the true posi- 
 tion of each is revealed. A, who has no liabilities, but 
 has $5,000 in the bank, is unquestionably much stronger 
 than either of the other two in so far as this one item is 
 concerned. When in comparing the accounts, it was 
 discovered that A's accounts could easily be collected 
 when due, but that B's and C's contained a large pro- 
 portion of bad debts, many of them having been carried 
 long beyond the period of "reasonable doubt." the 
 
CREDIT PROTECTION 
 
 3S3 
 
 credit man would again decide that A's statement is the 
 stronger one on which to give credit. 
 
 The same test might be applied to the item of mer- 
 ehaiulise. If A had on hand a commodity for which 
 there is a constant and large demand, that is, goods which 
 ini^'lit easily be turned into cash on short notice and at a 
 price very dose to the app^'aisal in the statement, there 
 would be no need to hesitate on the part of the credit 
 (le[)urtment in extending a liberal credit to this man. 
 On the other hand, if B's merchandise statement is a 
 valuation upon a novelty of doubtful demand or if it 
 includes a good deal of old stock, the $20,000 would 
 need to be much reduced before a reasonable credit basis 
 is reached. For it is quite evident that the cash on hand 
 would not go far ill liquidating the liabilities while the 
 nature of the accounts would not warrant their accept- 
 ance at the stated value. Therefore, to meet the liabil- 
 ities on short notice, at least part of the merchandise 
 must be disposed of. B. is in a better condition than C. 
 He is at least solvent. 
 
 With C, the relation of the liabilities to the assets and 
 the nature of these items discloses a very unsafe basis 
 for the giving of credit. He has $20,000 of liabilities 
 that must be naid. He cannot pay it out of real es- 
 tate unless he sells it. He would be compelled to dis- 
 mantle his plant and hence disrupt the whole business 
 should he attempt to realize on his machinery. If the 
 general experience is to be relied upon he could not col- 
 lect all of the outstanding accounts. But even if the 
 machinery, merchandise, real estate, and accounts were 
 disposed of at a forced sale, the amount they would 
 bring in would be far below the book value as repre- 
 sented in the statement. In reality, C is practically 
 bankrupt. 
 
324 
 
 CKKDIT AND THE CRKDIT MAN 
 
 Therefore it is seen that although these men may be 
 rated the same, it is the credit man's duty to ascertain the 
 nature of the capital. As a general proposition, says 
 ^■Ir. Marshall, a man whose liabilities exceed 50 per cent 
 of his assets is not in a healthy business condition. 
 
 72. Credit associations in Canada. — The enormous ex- 
 pansion of Canada's domestic trade in recent years has 
 quite naturally given rise to the formation of various 
 credit associations. The lessons learned in the United 
 States have been of the utmost value to Canada. The 
 scope and method of Canadian credit associations are 
 based upon the practice and precedents of those whidi 
 have worked to best adva:\tage across the border. The 
 most important organization in Canada is the Canadian 
 Credit Glen's Association, which was organized in Win- 
 nipeg in 1909. This association has now passed the ex- 
 perimental stage, and is firmly established with seven dif- 
 ferent offices in full operation extending from St. John, 
 N. B., to Vancouver, B. C. The Toronto branch was 
 organized in 1911, eighty-nine members being on the roll 
 at the time the office was opened. Since that time 
 twenty-eight of these members have been transferred to 
 eastern offices, which were opened later, leaving sixty- 
 one of the original members with the Toronto branch. 
 The membership of the Toronto branch has steadily 
 grown : and at the end of 1918 was expected to reach 
 two hundred and fifty. 
 
 This association is composed exclusively of monufac- 
 turers and jobbers, who have found that it is to their 
 mutual advantage to co-operate with each other to sup- 
 port deserving and thoroughly honest retailers. At the 
 same time they have found that very considerable ad- 
 vantages have Wn gained by eliminating weak and 
 fraudulent accounts. It was the practice, formerly, 
 
CREDH' PROTECTION 
 
 where a wholesaler found himself forced to carry a bad 
 airount to "unload" it at the first opportunity on some 
 cmmetitor. At the present time the wholesalers are 
 leiulinK one another mutual aid and support by freely 
 excluuiKing information concerning their accounts and 
 customers. Thus, through the medium of credit associa- 
 tions, ur. esirable accounts are being eliminated while 
 those wf honest and efficient customers are protected. 
 
 The Canadian credit associations are engaged in nu- 
 merous activities designed to improve the general condi- 
 tions of trade. For instance, they are educating the re- 
 tailer to carry more and better fire insurance. They are 
 teaehing retailers, too, to furnish more complete financial 
 statements to their supply houses; to prosecute cases 
 of fraudulent failure; to unite in carrying deserving 
 debtors, who through some misfortune have got into deep 
 water; and to secure the passing of better commercial 
 laws that will be so worded that the spirit and intent of 
 the legislation may not be evaded by fraudulent dealers. 
 The credit associations are not working in opposition 
 to anv class of trade. They are, for example, m abso- 
 lute harmony with such organizations as the Retail Mer- 
 dmnts' Association, the Canadian Manufacturers' Asso- 
 ciation, the Wholesale Grocers' Guild, and others. In 
 the case of the Canadian Credit Men's Association each 
 member, on joining the association, becomes the owuct of 
 one share of the capital stock of the organization. This 
 association is a limited liability company with a Domin- 
 ion charter. All members thus have an equal voice m 
 tiie operation of the association. Each member signs a 
 contract agreeing to exchange, through the medium of 
 the association's offices, his ledger information on any 
 account required. In return for furnishing his figures on 
 anv customer, he receives the figures of from ten to per- 
 
326 
 
 CREDIT AND THE CREDIT MAN 
 
 haps one hundred other members who may be "elling to 
 the same customer. In this way, a fairl, a ■ ..ate com- 
 mercial history of a retail dealer is secured. In many 
 cases such knowledge has prevented fraudulent accounts 
 from being started, and has thus safeguarded members 
 from considerable losses. 
 
 Assignments are handled by the association as effi- 
 ciently and economically as possible. A\'hen a debtor is 
 in deep water the supply houses get together with him, 
 and arrive at some arrangement that is fair and equitable 
 to all. Many honest retailers have been carried over 
 a period of depression, and kept on their feet, through 
 the activities of the association, where otherwise they 
 would have been obliged to assign, with a definite loss 
 to themselves and to the houses that had furnished them 
 credit. 
 
 By way of illustration two actual reports issued by 
 the association are given. The longer report refers to a 
 dealer who has no credit rating. He ordered $1,800 
 worth of goods in Montreal, and the wholesaler after 
 receiving this report filled his order. The smaller report 
 refers to a dealer who ordered $150 worth of goods in 
 Toronto, but the order was cancelled after this trade 
 report was received. Later, two other firms, not mem- 
 bers of the association, shipped him goods, one for $40 
 and the other for $100. Shortly after, the dealer as- 
 signed and none of the .^editors has received a dollar; 
 so that this one report saved $150 for one wholesale 
 firm, and might have saved $140 to the other two firms 
 had they been members of the association, as they now 
 are. 
 
 78. Banhruptcy procedure in Canada.— The over- 
 hauling of the bankruptcy laws in the several provinces 
 of Canada is becoming more and more urgently neces- 
 
TRADE CLEARING REPORT nttPHo-t. -*.« \ g« 
 
 ON 
 
 FAnmrfS,- 
 
 W Front St. West 
 
 i TORONTO, ONT. 
 
 FORMER 
 CLEARINGS 
 
 Na OF HOUU 
 REPORTINa 
 
 OVUDUE 
 
 Buxinem 
 
 Omng 
 
 B. &S. 
 
 H. ('. & F. 
 
 Harness 
 
 Teas 
 
 P.&G. 
 
 Gloves 
 
 Wall paper 
 
 Sundries 
 
 Overdue 
 
 407 
 
 407 
 
 
 
 
 
 
 
 
 
 
 
 
 
 19 
 
 
 
 9 
 
 9 
 
 
 
 
 
 40 
 
 40 
 
 475 
 
 456 
 
 Highest How l^ng banner of Paying 
 
 Credit 
 
 600 
 533 
 77 
 50 
 19 
 145 
 52 
 
 350 
 
 Sold 
 
 Years 
 
 Years 
 
 5 years 
 
 5 years 
 
 1910 
 
 1908 
 
 Once 
 
 Very slow, a/c closed 
 Placed for collection 
 Slow 
 Fair 
 
 Slow pay 
 Slow 
 
 (Very slow, collected 
 by attorney) 
 
 TRADE CLEARING REPORT 
 
 TELEPHONE* MAIN 
 
 15042 
 
 S043 
 
 ON 
 
 
 
 3U, 
 
 
 
 FORMER 
 aEARINGS 
 
 OAfE 
 
 NO. OF HOU«E 
 REPORTING 
 
 OWINQ 
 
 OVERDUE 
 
 
 
 
 
 
 ,W Front St. Wert 
 
 TOBO.VTO, ONT. 
 
 
 
 
 
 Busineu 
 
 B. &S. 
 Rubber 
 
 Shoes 
 Rubbers 
 B. &S. 
 B. &S. 
 B. & S. 
 B. &S. 
 Gloves 
 Sundries 
 B. & S. 
 B. &S. 
 
 B. &S. 
 n. &S. 
 
 Owing 
 
 38 
 31JM 
 
 80 
 
 "isi 
 
 390 
 150 
 
 112 
 
 340 
 
 4700 
 
 12 
 35 
 
 9110 
 
 Overdue 
 
 HigkeH 
 CredU 
 
 2300 
 
 2300 
 
 297 
 3122 
 
 600 
 200 
 131 
 390 
 150 
 468 
 44 
 112 
 580 
 7000 
 
 597 
 200 
 
 How Long 
 Sold 
 
 Manner of Paying 
 
 March 1911 Takes Discount 
 Nearly 2 yrs. Takes Discount and 
 
 accepts drafts 
 1910— drafU full time— Satisfactory 
 1st order Not delivered 
 Ist time 
 
 Just shipped Sept. 15 asks cash disc. 
 Just sold 
 
 Feb. 1906 Net terms— prompt 
 1905 Fair 
 
 7 years Discount 
 
 1 year Good 
 10 years Fair 
 
 (Reducing account itoadily Quite 
 
 ■atirfactory) 
 Years Good 
 
 2 years Discount 
 
 327 
 
328 
 
 CREDIT AND THE CREDIT MAN 
 
 sary; it is altogether likely that any party leader who 
 will bring forward a definite policy of improvement in 
 this regard will be assured the solid support of the busi- 
 ness community in his province without regard to party 
 affiliations. 
 
 Montreal is the principal center of Canadian business 
 and finance, and hence the need of reform is more keenly 
 felt in the Province of Quebec than elsewhere. The 
 procedure for the administration of bankrupts' estates 
 in Quebec is faulty in the extreme; but, even so, it is 
 hardly inferior to that in vogue in other provinces of the 
 Dominion. The present state of the bankruptcy laws 
 compels creditors to accept almost any kind of a volun- 
 tary settlement rather than allow the estate of the in- 
 solvent to pass into the hands of an administrator. Thus, 
 the visible volume of insolvency is greatly decreased, al- 
 though the real losses resulting from inability to pay 
 debts are not reduced, but are merely concealed by being 
 kept private. The insolvency totals are thus kept down, 
 while the private and unreported losses may continue to 
 rise without anybody perceiving them. The net advan- 
 tage is distinctly questionable. In cases where the great 
 bulk of the insolvent debtor's liabilities are to large cred- 
 itors it is becoming a rare thing for the estate to be 
 placed in bankruptcy; the large creditors stand to lose 
 less by taking over the business and settling with the 
 smaller creditors in full. 
 
 The powers of liquidators may not be very extensive 
 in the direction of expediting an efficient settlement of 
 the estate, but they are very large in the direction of 
 delaying and obstnicting that settlement. This holds 
 especially true of ^lontreal and its tributary territor}'. 
 In that city many liquidations have been drawn out to an 
 inordinate length, with enormous loss to the creditors 
 
CREDIT PROTECTION 
 
 329 
 
 through the tying up of the money to which they are 
 rightfuUy entitled. The temptation to the hquidator is 
 very great. Every day's delay is a source of direct 
 profit to him; and there is no machinery by which he can 
 be forced into expeditious action except in the case of 
 entire unanimity among the creditors. A single dissent- 
 ing creditor can stave off the final settlement as long as 
 the liquidator desires. No business man doubts for a 
 moment that dissenting creditors are not infrequently 
 acting in collusion with the liquidator. 
 
 The men who are selected for the responsible (and 
 profitable) task of liquidating a large insolvent estate 
 do not always enjoy the confidence of the business com- 
 munity. Some of them are admirable officials, and very 
 useful service has been rendered by the trust companies 
 in this regard. But trust companies are seldom em- 
 ployed except when there is a bond issue which has to 
 be safeguarded in the winding-up proceedings, and it is 
 undeniable that the results in cases where the creditors 
 themselves agree upon the liquidator are far better than 
 in cases where the court makes an appointment on its 
 
 own initiative. 
 
 The reason why, on the whole, there has been such 
 general apathy throughout Canada on the question is 
 that trade has been exceptionally good during recent 
 Thus the evils of a bad bankruptcy system have 
 
 years. 
 
 not pressed so heavily on the community as would other- 
 wise have been the case. But trade will not always and 
 perpetually remain good It is important that legislat- 
 ing bodies throughout Canada should be made to realize 
 the dangers of the present bankruptcy procedure, and the 
 urgent need of unproved and uniform bankruptcy laws 
 throughout the Dominion. 
 74. Some evils of Canadian bankruptcy laws.— The 
 
S30 
 
 CREDIT AND THE CREDIT MAN 
 
 chief, and almost the sole, cause of the unhealthy condi- 
 tion of insolvency procedure in Canada, is undoubtedly 
 the carelessness of creditors. It is quite possible; even 
 under existing laws and methods, for the creditors of an 
 insolvent estate to protect themselves against malprac- 
 tices of liquidators. But the process of self -protection 
 requires a considerable amount of time and care; and 
 the prevalent disposition of the Canadian merchant, pro- 
 fessional man or other creditor, when his debtor seeks 
 refuge in bankruptcy, is to write off the losses and at- 
 tempt to make them up elsewhere. 
 
 As a result of the practice of extending long-time 
 credits to plausible borrowers dividends out of bankrupt 
 estates are exceptionally low. An experienced liquidator 
 has estimated that 10 per cent is a usual figure for in- 
 solvent estates to pay, and 20 per cent is felt to be a 
 high figure. A man with a claim for $100 will go to a 
 lot of trouble to collect that claim in full from a delin- 
 quent but solvent debtor, but will give himself little 
 concern as to whether an insolvent estate pays him $20 
 or $15. By that carelessness, aided by certain laxities 
 in law and practice, there is provided a fertile field for 
 the operations of unscrupulous liquidators. 
 
 The law in the Province of Quebec, for example, as- 
 sumes that the creditors in a body, in the larger matters 
 —such as the choice of the liquidator, the policy in regard 
 to carrying on the business, etc.— will look out for their 
 own interests; and that in matters of detail the inspectors 
 whom they appoint to watch the operations of the liqui- 
 dator, and who are usually important creditors, will safe- 
 guard the interests of the whole body. In practice the 
 assumption is never home out; the liquidator is left with 
 an extremely free hand. Inspectors, as a rule, are lack- 
 ing in the sense of trusteeship; they become reconciled 
 
CREDIT PROTECTION 
 
 331 
 
 to their own losses, and see no reason why anybody else 
 should expect them to give up their time to the gra- 
 tuitous task of insuring that every possible doUar is real- 
 ized from the estate. They are supposed to keep a check 
 upon the liquidator; but if they faU to do so, there is no 
 check upon them— no publicity for their work, beyond 
 the right of other creditors or any citizen to inspect the 
 accounts at the liquidator's office. This is a right which is 
 rarely forced; and there is no prospect of criticism at a 
 meeting of the creditors because the creditors have prac- 
 tically no knowledge of the condition of the estate, at the 
 time of msolvency, on which to base criticism. It has 
 been proposed, and there seems much force in the sug- 
 gestion, that liquidators should be required to fUe in court 
 a detailed statement of all assets at book value at the 
 time of takinpr over the estate, a process which would 
 impose upon them some obligation of explaining the 
 disposition of such assets. • . j- 
 
 This state of affairs has given rise to a class of mdi- 
 viduals who take advantage of the business ignorance 
 of the general creditor. Their emissaries are in constant 
 communication with the minor officials of the courts and 
 are posted, in advance of publication^ concemuig appli- 
 cations for winding-up orders. In cases where there is 
 a preponderance of large trade accounts they do not con- 
 cern themselves; but where the creditors are the general 
 public they secure as many powers of attorney as possi- 
 ble, and turn up at the meeting with a volume of sup- 
 port which easily entitles them to selection for the post 
 of liquidator. The sole source of their strength is this 
 advance information and ability to round up powers of 
 attorney, which exclude any ordinary conscientious au- 
 ditor or accountant from securing the appointment. 
 The law requires the personal presence of the inspec- 
 
332 
 
 CREDIT AND THE CREDIT MAN 
 
 tors at various stages of the more important negotiations, 
 but it is notoriously ignored, and nobody, least of all the 
 inspectors, makes any trouble. The law requires that 
 the liquidator shall bank all sums belonging to the estate 
 as soon as the amount in his hands is one hundred dol- 
 lars; but this is equally neglected, while often the bank- 
 book is not even produced at meetings, although the min- 
 utes have to declare thai it has been so produced. 
 
 The task of bettering these conditions lies with the 
 creditor. It is his money which is being wasted. So long 
 as creditors are individually and collectively careless 
 about it they will, individually and collectively, suffer 
 loss. Unfortunately, by this carelessness, the creditor 
 injures foreign creditors, who have to rely to some extent 
 on Canadian creditors to protect the interests of the 
 whole estate. The credit associations which are spring- 
 ing up in Canada are doing a highly necessary work in 
 connection with the liquidation of estates; and should 
 receive the support of every Canadian business man. 
 
 75. Liquidation in England.— As has been said, the 
 failure of the liquidation laws of Quebec is typical of 
 those in the several provinces. The whole law of bank- 
 ruptcy in the Canadian provinces need* revision and uni- 
 fication. In bringing this about much can be learned 
 from England. The striking characteristics of the in- 
 solvency procedure of England is the official part taken 
 in the proceedings by the Board of Trade which gives to 
 the representatives of the whole commercial community 
 a share of the responsibility for the effective working of 
 the Bankruptcy Act and the safeguarding of the inter- 
 ests of honest debtors and creditors. In Canada, as al- 
 ready explained, the general practice is to treat bank- 
 ruptcy proceedings too much as if they were purely a 
 matter between the estate and the creditors alone, and 
 
CREDIT PROTECTION 
 
 SSS 
 
 any steps indorsed by a majority of the creditors or 
 Sr representatives should be accepted without further 
 
 %'he English system is superior to that in vogue in 
 Quebec and other Canadian provinces, in P«>vidmg a 
 permanent public official closely associated with the 
 Cd of Trade. He has the title of Official Receiver, 
 ami automatically becomes provisional liquidator or 
 trustee upon the issuance of a winding-up order or the 
 filing of a petition in bankruptcy. A particularly inter- 
 esting feature of his duties is that in his prehminary re- 
 port he shall declare "whether, in his opmion, further 
 inquiry is desirable as to any matter relating to the pro- 
 motion, formation or failure of the company, or the con- 
 duct of the business thereof." and may further report 
 "whether, in his opinion, any fraud has been committed 
 in the promotion or formation of the company, or by any 
 director or officer of the company, in relation to the a)m- 
 panv since the formation thereof." The public official 
 Lay be superseded by an order of the court, if the cred- 
 itors and shareholders apply for the appointment of a 
 special liquidator. The result is to afford the same free- 
 dom for the selection of any specially competent person 
 to be liquidator as exists in the Canadian provinces, with 
 the very valuable proviso that the whole business of the 
 insolvent must first pass under the eye of an expenen<^d 
 and impartial official responsible directly to the court and 
 
 the Board of Trade. 
 
 The Board of Trade again enters upon the scene when 
 it comes to auditing the accomits of the liquidator 
 (whether special or official receiver), a service which it 
 must perform twice a year. There is absolutely no pro- 
 vision for official audit of liquidators' accounts corre- 
 sponding to this, in most of the Canadian provmces- 
 
334 
 
 CREDIT AND THE CREDIT MAN 
 
 Ontario being a striking exception. The current as- 
 sumption in Canada is that if the inspectors appointed 
 by the creditors are satisfied with the accounts, nobody 
 else has a word to say. 
 
 An excellent feature of the English Act is the fur- 
 nishing—along with the first summary of the affairs 
 of a debtor— of a statement "showing thereon in red ink 
 the amount realized and explaining the cause of the non- 
 realization of such assets as may be unrealized." The 
 first purpose of the English Act seems to be the ob- 
 taining of a clear statement of the affairs of the msolvent 
 business, with a view not only to the satisfaction of cred- 
 itors, but also to the preservation of good business moral- 
 ity and the punishment of wrongdoing. The ideal is 
 not in evidence in Canadian bankruptcy practice. Cred- 
 itors in Canada have a very limited interest in the pun- 
 ishment of wrongdoing or in the preservation of a high 
 level of business morality. The business community cer- 
 tainly has much to learn from English precedent and 
 practice. 
 
PART III: TRAFFIC 
 
 CHAPTER I 
 
 CANADIAN TRANSPORTATION 
 
 1. Early waterways.— In the beginnings of industry 
 and commerce, waterways are all-important. In a new 
 country, such as Canada, one finds in the history of its 
 settlement that influence of waterways which on account 
 of the lapse of time is more masked in older lands. In 
 Nova Scotia, the extensive coast line and the numerous 
 rivers determined the settlement. In Nova Scotia, as 
 in England, it is difficult to find any point more than 
 forty miles from the sea. This made the sea an impor- 
 tant element both in the settlement and in the trade of 
 Nova Scotia. In New Brunswick, the coast lines of the 
 Bay of Fundy, the Bay Chaleur and the Gulf of St. 
 Lawrence, and the course of the river St. John co-oper- 
 ated in determining where settlement should be. As 
 late as the middle of the nineteenth century. New Bruns- 
 wick was divided into long lines of settlement along the 
 watercourses with tracts of wilderness between, which 
 were traversed at rare intervals by roads leading from 
 one line of settlement to another. It was natural that 
 lumbering and its ancillary industries should first attract 
 
 attention. 
 
 In the colonies of Upper and Lower Canada, the St. 
 Lawrence and the Great Lakes were from an early 
 (late an important factor in settlement. To-day the 
 
 335 
 
336 
 
 TRAFFIC 
 
 white-walled villages of Quebec which line the St. Law- 
 rence, in almost continuous formation, while in part 
 due to the French-Canadian system of subdivision of 
 property, are also a reminder of the time when the river 
 was the only highway. As Parkman said, "One could 
 have seen nearly every house in Canada by paddling a 
 canoe up the St. Lawrence and the Richelieu." 
 
 The activity of the fur trader and the zeal of the 
 missionary opened up the route to the Upper Lakes, 
 by way of the Ottawa River, Lake Nipissing and Geor- 
 gian Bay, which was itself an old warpath route of the 
 Iroquois. The direction of French settlement and 
 trade in. Canada was fashiotied by the location of the 
 Ottawa and of the St. Lawrence. 
 
 With the settlement of the United Empire Loyalists 
 in Upper Canada, the St. Lawrence and Lake Ontario 
 obtained an added importance. Gradually settlement 
 filled in the shadowy outlines betwe-'n Kingston and 
 Lake St. Clair. The trade importance of the lake and 
 river route was early recognized and plans for the con- 
 struction of canals around the impeded sections of the 
 St. Lawrence were developed. Merritt saw that the 
 construction of the Welland Canal would make the route 
 from Lake Ontario to Lake Huron one. The Lachine 
 Canal, the other St. Lawrence Canals, the Ottawa 
 Canals, the Rideau Canals all bear on the position 
 which was taken by Colonel By in 1820 when he 
 stated that the construction of an improved waterway 
 from the Upper Lakes by way of the St. Lawrence to 
 the sea would attract the growing trade of the western 
 territory of the United States to a Canadian route, 
 thereby assisting in building up the Canadian towns 
 along that route and increasing the shipping and ex- 
 port trade of Canada. 
 
CANADIAN TRANSPORTATION 
 
 887 
 
 2. Improved h$ghrvayg.—W\tt\c the waterways facili- 
 tated settlement and permitted limibering to be carried 
 on, the development of agriculture was dependent upon 
 improved roads. Roads were necessary if the country 
 was to have width instead of mere length. Roads were 
 necessary if there was to be any adequate organization 
 of government. One of the first acts of the first Parlia- 
 ment of Upper Canada was concerned with highways. 
 Soon the policy of constructing "Grand Trunk" roads 
 was undertaken. In Upper Cai.ada, Yonge Street 
 leading from Toronto to Lake Simcoe, the Dundas 
 Road and the Talbot Road were undertaken. A simi- 
 lar policy of constructing crrand Trunk roads was un- 
 dertaken in the maritime p»*ovinces. By 1885, New 
 Brunswick had roads radiating from St. John to Mira- 
 michi, St. Andrews and Fredericton. In Lower Canada 
 roads were constructed to connect with the United States 
 frontier. 
 
 The improved highways played their part in the de- 
 velopment of trade. With the opening up of Yonge 
 Street, the North West Fur Company diverted its car- 
 goes from the Ottawa to the St. Lawrence, Lake On- 
 tario, and this new highway. The importance of this 
 early stage in the transit trade across Canada is seen 
 in the fact that British goods which thus found their 
 way to Mackinaw were thence distributed as far south 
 as the Spanish settlements at the mouth of the Missis- 
 sippi. 
 
 While the construction of plank roads in the County 
 of York in Upper Canada increased the values of the 
 lands located along them by 50 per cent, the disadvan- 
 tages of the existing system of transportation were seen 
 in the prices of agricultural commodities. Near St. 
 Thomas, at one time, eighteen bushels of wheat were 
 
 C— m— 22 
 
SS8 
 
 TRAFFIC 
 
 exchanged for a barrel of salt, while one bushel of wheat 
 was given for a yard of cotton. The dependence of 
 Montreal on water communication and winter roads was 
 such that as late as 18A1 the cost of food and fuel 
 doubled while the ice was forming on the river. The 
 movement of freight was slow and expensive. From 
 the Townships of Innisfil and Vespra, it cost 7id per 
 bushel to convey wheat to Lake Ontario. From Lt- 
 prairie to St. Johns, a distance of fourteen miles, it 
 took a day to haul three barrels of ashes in a cart drawn 
 by two horses. Stage-coach movement had equal draw- 
 backs. Between Montreal and St. Hyacinthe, a dis- 
 tance of thirty miles, it took a stage-coach twelve to fif- 
 teen hours in the fall and spring. 
 
 8. The Canadian railway system. — In Canada, as in 
 the United States, it was soon felt that waterways, 
 whether natural or artificial, and highways were in- 
 adequate for the rapid development of settlement ai^ 
 trade. The activity of railway construction in the 
 United States was a stimulus to railway construction in 
 Canada; for Canada feared that the development it 
 had hoped to obtain through the improvement of the 
 lake and St. Lawrence route would be lost if railways 
 were not constructed in Canada as well. As early as 
 1828 railway construction was discussed in New Bruns- 
 wick. The Champlain and St. Lawrence, a short por- 
 tage line of sixteen miles in length, which was opened 
 in 1886, was concerned simply with facilitating the north 
 and south movement of traffic to and from Montreal. 
 But its greater significance consists in the fact that it 
 was the beginning of that great Canadian railway de- 
 velopment, which, important as it is from a trade stand- 
 point, is still more important from that of national de- 
 velopment. For to understand the significance of this 
 
CANADIAN TRANSPORTATION 
 
 839 
 
 railway development is to understand why and how 
 Canada has grown. 
 
 In the year 1912, Canada had in operation, aeoord- 
 mn to the government returns, 26,727 miles of railway. 
 To this must be added 1,622 miles of the Grand Trunk 
 Pacific, which were not included because they are not 
 "open for traffic," in the sense such opening is defined 
 in the Railway Act. That is to say, Canada had 28,849 
 miles of railway carrying traffic. To-day there are over 
 30,000 miles of railway in this class, a total exceeding 
 that of Great Britain and Ireland. In addition there 
 are about 8,000 miles under construction. 
 
 Down to Confederation there were constructed 2,278 
 miles of railway. In the year ending December, 1912, 
 practically the same mileage was constructed,— to be 
 exact, 2,282. The railway mileage has almost doubled 
 since 1896. 
 
 In the railway construction, as it stood in 1867, the 
 Grand Trunk and the Great Western were the most 
 important so far as Upper and Lower Canada were 
 concerned. The Grand Trunk, which had been under- 
 taken to afford a lire of conmiunication from Montreal 
 to the western boundary of Upper Canada, was also 
 concerned with the more ambitious project of connect- 
 int? the inland provinces with the maritime provinces. 
 The Great Western, running through the rich farm- 
 ing' country of Ontario between Lake Ontario and Lake 
 St. Clair, had come to be closely allied with various 
 American lines, more especially those of the Vanderbilt 
 group. So close were its traffic relations that one of its 
 shareholders, not in criticism but in recognition of a fact, 
 said that it was an "American line." Owing to its 
 geographical position it afforded a link in a direct line 
 of conmiunication between New York and the New 
 
340 
 
 TRAFFIC 
 
 £ngland States on the one hand, and the Central West- 
 ern States on the other. As a result of this it became 
 embroiled in American rate wars and its relations with 
 the Grand Trunk, which was also struggling to obtain 
 a share of the American traffic, were normally strained. 
 In Nova Scotia and New Brunswick, after a vary- 
 ing choice between government and private ownership 
 and construction, a number of small, somewhat isolated, 
 lines had been built. 
 
 4. Western and northwestern railroads. — The Cana- 
 dian Pacific and Canadian Northern, which have come 
 into existence since 1867, are a recognition of the change 
 wrought by Canada's acquisition of territory west of 
 the Great Lakes. They are also an effect of that 
 change. The Canadian Pacific, which was the condition 
 of British Columbia's entrance into Confederation, was 
 a magnificent leap in the dark, which has, however, been 
 justified by results. The Canadian Northern, which 
 began in a feeble way in 1896, when the nucleus of the 
 system, the Lake Manitoba Railway and Canal Com- 
 pany, was acquired by MacKenzie and Mann, is a fruit 
 of the later period when the great development of the 
 North West was just beginning. The Grand Trunk, 
 in the early days of the Canadian Pacific project, had 
 the opportunity to construct that line, but could see no 
 traffic in it. In 1903, through its controlled line, the 
 Grand Trunk Pacific, it also entered the North West. 
 
 5. Expansion of Canadian railway system. — While 
 the railway construction of the United States has of 
 recent years been approaching the saturation point, it 
 may be pointed out that the mileage constructed in 
 Canada in 1912 was equal to three-fourths of that con- 
 structed in the United States in the same year. While 
 railway expansion has been fairly general in Canada, 
 
CANADIAN TRANSPORTATION 
 
 341 
 
 71 iKjr cent of the railway mileage built in 1912 was west 
 of the Great Lakes. Putting the matter another way, it 
 may be said that for ever -^ny of the year there was, 
 west of the Great Lakes, average construction in 
 1909 of 2.6 mUes; in 1910, » . .11 ; in 1911, of 8.08, and 
 in 1912, of 4.8 miles. 
 
 Since 1867, there has been a steady movement towards 
 limiting the number of railways. Larger companies 
 liave eliminated the smaller ones by absorbing them. 
 This concentration of the control of mileage has been 
 in the main along the lines of east and west lines of 
 communication. 
 
 6. Influence of trunk Knes.—WhUe the Canadian 
 Pacific was undertaken to open up the North West, it 
 was clearly recognized in its charter that lines east of 
 Callender, near Lake Nipissing, were essential to it; 
 and it was given power to acquire and construct such 
 lines. This power, notwithstanding the vigorous op- 
 position of the Grand Trunk, it actively exercised. 
 The Grand Trunk claimed that the role of the Canadian 
 Pacific was to collect the traffic of the North West and 
 hand it over to eastern connecting lines. The Canadian 
 Pacific said this would leave it at the mercy of its con- 
 necting lines. 
 
 While the Canadian Pacific was thus concerning itself 
 with obtainmg an entrance into the southern peninsula 
 of Ontario and linking its lines west and east through 
 Ontario to further connect with lines easterly through 
 Quebec, the Grand Trunk endeavored to checkmate the 
 Canadian Pacific, and in this endeavor rapidly acquired 
 such lines as the Great Western, the Northern, the 
 Hamilton and North Western, and the Midland. This 
 period of hostility between the two railways, with ite 
 attendant expansion by consolidation, ended in 1890 
 
342 TRAFFIC 
 
 when the Canadian Pacific had obtained a western out- 
 let at Windsor and the railway map had been remade. 
 
 The struggle of the Grand Trunk had given it control 
 of north and south lines in Ontario, connecting with the 
 strategic points of entrance from the northern portions 
 of the province. It had at the same time consolidated 
 its system in that province. By undertaking the con- 
 struction of the Grand Tmnk Pacific it took up the 
 matter of east and west development. 
 
 The Canadian Northern has been built up by original 
 construction, lease and acquisition of control. An in- 
 tegral portion of its system is the portion of line con- 
 structed in Manitoba by the Northern Pacific, which is 
 leased to that province and by it sublet to the Canadian 
 Northern. Charters of various lines have been obtained 
 in Ontario. In Quebec, the Great Northern came into 
 its hands through control of bonds. The Quebec and 
 Lake St. John and the Halifax Southwestern, although 
 technically separate as being under provincial charters, 
 are a real part of the east and west line it is building up. 
 While there are some eighty-nine lines of steam rail- 
 ways in Canada, mere enumeration does not show their 
 significance. To the total as given in the government 
 returns may be added Ihe mileage on which the Grand 
 Trtmk Pacific had in 1912 "leave to carry traffic." An 
 analysis of the mileage figures shows how highly con- 
 centrated the control is: 
 
 Percentage of 
 Total MUeage 
 
 Canadian Pacific 41 
 
 Canadian Northern gj 
 
 Grand Trunk and Grand Trunk Pacific. . . 17 
 
 The government lines, comprising the Intercolonial, 
 Prince Edward Island, Temiskaming and Northern 
 
CANADIAN TRANSPORTATION 
 
 848 
 
 Ontario and New Brunswick Coal and Railway, com- 
 prise 7 per cent. The lines of the Great Northern and 
 of the Canada Southern represent jointly 8 per cent. 
 Tiie remaining mileage is concerned primarily with 
 short haul lines of local interest, the average per line 
 being only forty-six miles. 
 
 7. Railway geography.— The maritime provinces are 
 served by the Intercolonial and the Canadian Pacific, 
 as well as by a considerable number of smaller lines. In 
 Quebec, the Intercolonial, the Canadian Pacific, Cana- 
 dian Northern, and the Grand Trunk are the most im- 
 portant. In Ontario are found the Canadian Pacific, 
 Grand Trunk, Canadian Northern, Canada Southern 
 or Michigan Central, Wabash, Pere Marquette, and 
 Temiskaming and Northern Ontario. Manitoba's mile- 
 age is ahnost wholly made up of the Canadian Pacific, 
 the Canadian Northern and the Grand Trunk Pacific. 
 Tlie latter connects at Winnipeg with the National 
 Transcontinental which runs easterly through Ontario 
 and Quebec to Moncton, New Brunswick, and which 
 will be the eastern outlet of the Grand Trunk Pacific. 
 In addition, the lines of the Great Northern enter Mani- 
 toba. Alberta and Saskatchewan are served by the 
 Canadian Northern, Canadian Pacific and Grand Trunk 
 Pacific, as well as by the Great Northern in Alberta. 
 In British Columbia, in addition to the Canadian Pacific, 
 portions of the Grand Trunk Pacific are in operation. 
 The Great Northern also connects the State of Wash- 
 ington with Vancouver, and has mileage in and out of 
 ^^'ashington connecting with the mining country of 
 Southern British Columbia. There is also under con- 
 struction, under a provincial charter, the Canadian 
 Northern Pacific which will connect the Canadian 
 Northern system with the Coast in 11)14. 
 
S44 
 
 TRAFFIC 
 
 . Jl lit 
 
 t I 
 
 8. Freight resources.— Vrlnce Edward Island has as 
 its diief industries agriculture and fisheries. It ranks 
 high in average number of sheep per farm, although tlie 
 farms are normally small. It does well in root crops. 
 In New Brunswick, lumbering and fisheries are the 
 most important industries. Northern New Brunswick 
 is heavily wooded, and the River St. John and its tribu- 
 taries facilitate now as they did at an earlier day the 
 liandling of logs. Lumber is exported to Europe, 
 South America, the United States and the West Indies! 
 While the province has minerals, these are not as yet 
 commercially important. Its coal is consumed locally. 
 Nova Scotia in 1911 was credited with over one-third 
 of the value of the fishmg industry of Canada. It is 
 active in mineral production, especially in coal and iron. 
 The lumbering industry is not of much importance. 
 While the country has rich agricultural possibUities, 
 these have not been fully developed. 
 
 Of the agricultural staples, Quebec produces the 
 cereals and root crops. Oats and hay are the most 
 important items in its agricultural production. It sup- 
 plies two-thirds of the tobacco grown in Canada. Its 
 lumber and the industries dependent thereon, such as 
 pulp and paper mills, are very important. In 1910, 
 Quebec had one-half the pulp miUs in Canada. Ontario 
 produces in large quantities all kinds of agricultural 
 produce and live stock and has also a largely developed 
 milling industry. Fruit is produced in the Niagara 
 Peninsula and along Lake Erie. This is for the most 
 part consumed in Canadian cities and towns, thereby 
 creating short haul traffic. Dairying and cheese-mak- 
 mg are also important. In minerals, iron, nickel, cop- 
 per and silver are the most important. The lumbering 
 mdustry has been unportant in Ontario from an eariy 
 
CANADIAN TRANSPORTATION 
 
 S45 
 
 date, and now tends to be concentrated in large indus- 
 trial concerns. In point of manufactures, Ontario 
 stands first among the provinces of the Dominion. 
 
 In Manitoba and Saskatchewan, the all-important 
 industry is agriculture. While wheat has been the pre- 
 dominant factor in Manitoba, attention is now being 
 devoted in greater degree to mixed farming. In north- 
 ern Saskatchewan, a large saw-milling industry has 
 
 developed. 
 
 Alberta has more diversified resources than the prairie 
 provinces east of it. While Saskatchewan has coal. 
 Alberta has much larger supplies. In the section 
 around Lethbridge, in the Crow's Nest Pass section, 
 and in the territory which the Grand Trunk Pacific is 
 opening up near the Yellow Head Pass, large deposits 
 of bituminous coal are to be found. Ranching as it 
 was in the earlier days is passing with the breaking up 
 of the range. Farming is more diversified than in Sas- 
 katehewan. In southern Alberta, there is a heavy yield 
 per acre of winter wheat. Spring wheat, oats and live 
 st(K'k are important items of production further north 
 in the province. 
 
 British Columbia has attracted attention because of 
 its minerals. While its gold attracted most attention in 
 the earlier days, its large supplies of coal on Vancouver 
 Island and in the Crow's Nest I'ass section are still 
 more important. Lumbering is carried on on an exten- 
 sive scale. In 1911, the cut was over one billion feet. 
 In the fisheries, British Columbia divides the field with 
 Nova Scotia. Agriculture, although the valleys and 
 knch lands afford rich opportunities, has not been devel- 
 oped to its fullest extent; oats, potatoes and hay are the 
 most important products. Fruit is raised in such val- 
 leys as the Okanagan, the Kootenay and the Arrow 
 
S46 
 
 TRAFFIC 
 
 Lakes. There is an expanding trade in fruit with the 
 prairie provinces. 
 
 9. Distribution of railway mileage. — Analysis of the 
 figures of railway mileage as contained in the govern- 
 ment returns for the year ending June 80, 1912, shows 
 the following distribution: 
 
 Provincea 
 Prince Edward Island. 
 
 New Brunswick 
 
 Nova Scotia 
 
 Quebec 
 
 Ontario 
 
 Manitoba 
 
 Saskatchewan 
 
 Alberta. 
 
 British Columbia 
 
 Percentage qf Percentage qf 
 Population "" 
 
 13.01 
 
 27.8 
 85. OS 
 
 88.7 
 
 11.9 
 
 14.5 
 S£.09 
 
 41. OS 
 
 It might seem that in proportion to population the 
 section west of the Great Lakes is well supplied with 
 railways; but this would be a hasty conclusion. Of the 
 total area embraced in the different provinces, the prov- 
 inces west of the Great Lakes embrace 57 per cent. The 
 need and opportunity for additional railway construc- 
 tion, not only in this but also in other sections of Canada, 
 may be gathered from the following table: 
 
 Prorineet 
 
 Area in Railway 
 Population Sq. Milet Mileage 
 
 Mile* qf 
 
 Railway 
 per IjOOO 
 Sq.MUee 
 
 PojndaHM 
 
 perMa$4 
 
 RaUwag 
 
 Prince Edward I'd. . . 9S,7S8 
 
 New Brunswick 351.889 
 
 Nova Scotia 49«,SS8 
 
 Quebec 2,002,712 
 
 Ontario 2.523.208 
 
 Manitoba 455,614 
 
 Saakatchewan 492,342 
 
 Alberta 374.663 
 
 British Columbia 392.480 
 
 Yukon 8,512 
 
 2,184 
 
 27,985 
 
 21,427 
 
 351,783 
 
 260,862 
 
 73,731 
 
 251,700 
 
 255,285 
 
 355.855 
 
 207,076 
 
 1.545 
 1,357 
 3.883 
 8.546 
 3.520 
 3.754 
 1.897 
 1.855 
 102 
 
 12.31 
 5.5 
 6.S 
 1.1 
 3.2 
 4.7 
 1.4 
 0.7 
 0.5 
 0.05 
 
 8M.1 
 227.7 
 S0i.8 
 515.4 
 205.2 
 129.4 
 190.8 
 197.8 
 191.2 
 
 10. Potential railway traffic.— An interesting index 
 of the traffic possibilities of an agricultural country like 
 
CANADIAN TRANSPORTATION 847 
 
 Canada is to be found in the sum total of agricultural 
 production. For while this, on account of local con- 
 sumption, will of course be much in excess of what moves 
 by rail, it shows the maximum possible movement. It 
 is also of interest as showing where the greatest traffic 
 
 possibilities are. 
 
 Details as to agricultural production and as to bve 
 stock are given in a summary which follows. This sum- 
 mary is based in part on the returns of 1910 and m 
 part on those of 1912. 
 
 Production of Farm Products of AU Kinds, Except 
 
 Live Stock 
 
 Prodnees JjH^a^s. ^'T^' 
 
 NovaScotia ;.89J.«8* JJ 
 
 SjSrio 16.628,455 46 9 
 
 ^^:^....- r^];z ijr 
 
 Saskatchewan ^'Hl'Si a 5 
 
 BriS^Coiunibia; . . . . • • • . • . .__m47« 0.6 
 
 35,895.353 
 
 Total Live Stock 
 
 Prorincea ^^^^ Pmsentagt 
 
 NovaScotia SJJ'SS A 
 
 NewBnu^ck.....^^....;... ^^^ ^J 
 
 &•■■•••• «•» 1.1 
 
 Manitoba ?«« «m 8 OS 
 
 Saskatchewan J'lS'SS 115 
 
 Alberto ^'T'SJ 0« 
 
 British Columbia ^^'^^ "" 
 
 14,45«,117 
 
 11. Actwd traffic.— Ot course, the potential traffic 
 differs in such items as have been quoted from the actual 
 traffic. Tl^ traffic returns for 1912 show that the ton- 
 
348 TRAFFIC 
 
 nage of agricultural products transported was 50 per 
 cent of that shown in the preceding statement, while in 
 the case of animals and animal products it was about 21 
 per cent. 
 
 Between 1907 and 1912 the total freight traffic of 
 Canadian railways has increased by 58 per cent, from 
 56.4 to 89.4 millions of tons. In the same period agri- 
 cultural products carried increased 88 per cent, products 
 of mines 70 per cent, and manufactures 104 per cent 
 The following table shows the percentage importance' 
 of the leading articles carried: 
 
 Distribution of Freight Traffic by Percentages of Each 
 
 Year's Traffic 
 
 Prod.ucUolWu.ture IS'L iZ /r7, //?, //Vt S% 
 
 .. .. 5?"**! S««8 35 M M.81 S5 1 35 87 35 S 
 
 Mwaetu^^*-"-.-.-.:.:- SJS II.sl iJ2 l?i is 
 JlSSl::::::::::::::: t?. i?:i; JS ;is l^ It 
 
 Products of agriculture and products of the mines are 
 the most important in point of tonnage. In comparing 
 the increase of tonnage of 1912 over 1907, these two 
 dasses are responsible for 63 per cent of the increase. 
 The distribution of carriage between the three leading 
 railroad systems in respect of carriage of agricultural 
 products and mining products works out as follows for 
 1912: 
 
 «wlucts of Apiculture 38% 11% is% 
 
 Product, of Mines g^ ']| JJ| 
 
 The passengers carried in 1912 were 61.1 miUions, as 
 compared with 32.1 millions in 1907, an increase of 
 28 per cent. 
 
CANADIAN TRANSPORTATION 
 
 849 
 
 12. Traffic interrelations of Canada and the United 
 States. — Nature has bound up the transportation system 
 of Canada with that of the United States. The water- 
 way, extending into the heart of the Continent, is com- 
 mon to both countries. The southward dip of boundary 
 allows a portion of the Province of Ontario to project 
 far south, with the result that the most direct line be- 
 tween the northwestern states and New England is by 
 way of Sault Ste. Marie and across Canadian territory. 
 The direct lines of the Grand Trunk, Wabash, Pfere 
 Marquette, and Michigan Central between Detroit and 
 Buffalo traverse the southwestern peninsula of Ontario. 
 
 Then, again, the Canadian territory occupies a posi- 
 tion of advantage in regard to combination lake and 
 rail lines. Through freight between New England 
 points and the northwestern states may be economically 
 handled by railways running across Canada to Georgian 
 Bay ports, and thence by boat to American lake points. 
 
 In the portion of Canada lying east of Montreal, the 
 conditions are reversed. The northward trend of the 
 Imundary makes the Canadian railway system dependent 
 in some degree upon United States territory. The 
 northeastern porticm of Maine almost divides New 
 Brunswick from Quebec by an intervening neck of 
 Tnited States territory. The most direct line between 
 Montreal and maritime jMrovince ports is across Maine. 
 The Canadian Pacific has its shcMi line across Maine to 
 New Brunswick; it also has its connection via Newport, 
 Vermont, with the American lines. The Grand Trunk 
 routes export and import traffic in winter via its line to 
 and from Portland, Maine. West from the "Soo" \ht 
 Canadian Pacific has its controlled system, the "Soo" 
 line, which enters Canada at Portal, and connects with 
 the main line of the parent railway at Paaqua, 
 
350 
 
 TRAFFIC 
 
 Moose Jaw. The Canadian Pacific again enters United 
 States territory via Kingsgate. British Columbia, con- 
 nectmg with the lines of the Pacific northwestern 
 states. Thfc Hill lines wliich are being constructed in 
 British Columbia under the name of the Victoria, Van- 
 couver and Eastern, in tapping the mining section of 
 southern British Columbia, swing back and forth across 
 the mternational boundary. The Canadian railways 
 own or control more miles of railway in the United 
 States than are owned or controlled in Canada by Ameri- 
 can lines. West of Port Arthur. Canadian lines across 
 the international boundary at eight points, while the 
 American lines cross at fifteen. East of Port Arthur, 
 Canadian lines cross at twenty-three points, while Amer- 
 ican lines cross at one. 
 
 The result of this interrelation, both of natural and 
 of artificial means of transport, is that in respect not 
 only of through movements, but also of local transport, 
 the railway systems of the two countries are in many 
 respects one. The traffic of the railways in bond 
 through Canada and the United States has become of 
 large proportions. Importations for the eastern states 
 from the Orient come in by way of Vancouver and move 
 east on the Canadian Pacific lines. New England cot- 
 tons reach the Orient by the same route. Canada ob- 
 tains importe by way of American porta, and traffic 
 between different parts of Canada, as well as between 
 different parts of the United States, moves through 
 intervening American or Canadian territory as con- 
 venience demands. 
 
 18. Volume of transit movement.— What the volume 
 of this m transit movement is to-day it is impossible to 
 say. It has been estimated that taking the period 1868- 
 1894. the average annual value of the domestic transit 
 
CANADIAN TRANSPORTATION Ml 
 
 trade from point to point in Cunada was $7,500,000. 
 The United States Treasury Department issued at one 
 time a special circular covering the period 1894 to 1807. 
 This showed the statistics for the domestic transit trade 
 of the United States. The statistics for the Canadian 
 domestic transit trade have not been kept 
 
 Although this trade is of considerable advanUge to 
 the Canadian shipper, it is probably of much smaller 
 proportions than the American domestic trade. This 
 latter trade includes tonnage from practically all the 
 various lines of industry in the United States; and all 
 the states are interested in it. The leading points 
 through which the tonnage concerned in this traffic 
 moves are Port Huron and Detroit, Michigan, Suspen- 
 sion Bridge and Buffalo, New York. The special re- 
 turn of the Treasury Department above referred to gives 
 the following data concerning the domestic transit trade 
 between points in United States territory through 
 Canada: 
 
 Number Weight of ConterUa 
 Year ef Cart in Tone 
 
 1894 425,809 7,847.058 
 
 1895' 480,678 8,068,51* 
 
 1896 480,040 5,964,405 
 
 1897 448,875 5,851.350 
 
MICROCOPY RESOLUTION TEST CHART 
 
 (ANSI ond ISO TEST CHART No. 2) 
 
 I 
 
 2.8 
 
 t37 
 
 1 4.0 
 
 12.2 
 2.0 
 
 1.8 
 
 ^ y^PPLM-D IN/MGE Ir 
 
 1653 East Main Street 
 
 Rochester, New York U609 USA 
 
 (716) 482 - 0300 - Phone 
 
 (716) 288-S989 - Fok 
 
CHAPTER II 
 
 FREIGHT CLASS iriCATION 
 
 14. Classification fundamental. — A shipper of freight 
 must acquaint himself with the freight classification and 
 the class tariffs. In some cases he must consult com- 
 modity tariffs as well. Class tariffs and commodity 
 tariffs are considered in the next chapter. A classifica- 
 tion is in effect a ready reference list of the articles of 
 freight which a railway holds itself out to carry for the 
 public offering traffic. 
 
 Logically and historically, the striking of the rate 
 comes first; but in practice today the classification comes 
 first. Industry has become very complex and the arti- 
 cles offered for carriage are many and diversified. It 
 is obvious that to carry in a tariff by specific reference 
 the names and rates of the commodities which the rail- 
 ways hold themselves out to carry would make the tariffs 
 exceedingly voluminous. 
 
 Even in early traffic conditions it was recognized 
 that, although the articles and rates to be carried might 
 be included in a single sheet, there must be some system 
 of grouping and differentiation of charge. The first 
 tariff sheet in the United Stales was issued August 27, 
 1816, by the Lake Champlain Steamboat Company, and 
 set out the following articles and rates: 
 
 Pot and pearl ashes, per bbl ^1.00 
 
 Provisions per hundred 75 
 
 Flour per bbl 50 
 
 S52 
 
FREIGHT CLASSIFICATION 353 
 
 Firkins of butter or lard $0.25 
 
 Tierces of seed or salt 1.25 
 
 Tierces of rice .... 2.00 
 
 All other articles (except bullion or specie) , per ton 5.00 
 
 In the days of wagon transportation two classes were 
 reco^niized — light and heavy articles. The rates on the 
 former were assessed on the cubic foot; on the latter, on 
 the hundred pounds. As late as the middle of last cen- 
 tury, the railways of the United States arranged their 
 classifications to suit their varying conditions and needs. 
 Tlie grouping adopted was usually a simple one. A 
 few examples from the year 1847 will show this. The 
 Xashua and Lowell, which was fifteen miles in length, 
 had only one class, and freight was charged $1.00 per 
 ton for the distance. On the Boston and Worcester, a 
 somewhat more elaborate, although still simple, group- 
 ing was made : 
 
 Coal, iron, lumber and manure 4c. per ton mile 
 
 Heavy merchandise, e. g., sugar, salt, 
 
 butter 6c. " " " 
 
 (iroccries and dry goods 6c. to 8o. " " " 
 
 Light and bulky merchandise ... 6c. to 10c. " " " * 
 
 The Boston and Maine, then seventy-one miles in 
 length, had two classes, viz. : 
 
 Coal, iron, manure, lumber, salt, sugar, butter and gro- 
 ceries, $2.20 per ton for the whole distance. 
 
 Light and bulky merchandise and dry goods, $3.62 per 
 ton for the wliole distance. 
 
 The Concord also had two classes. 
 
 The ratings of the classification are either for less than 
 carloads (L.C.L.) , that is to say, for one hundred pounds 
 or for multiples of one hundred pounds charged as a 
 
 C-III-88 
 
354 
 
 TRAFFIC 
 
 multiple of the hundred pound rate, or for carloads 
 (C.L.). Where no distinction is made in rating in re- 
 spect of quantity between a carload and a smaller ship- 
 ment and the rate is the same per hundred pounds for 
 the smaller as for the larger shipment, it is called an any- 
 quantity rating. An any-quantity rating ena])les the 
 small shipper to compete on fairly equal terms with his 
 more powerful competitor. 
 
 It is contended by the railways that when carload 
 ratings are provided, they should represent a legitimate 
 commercial necessity and a genuine carload movement. 
 That is to say, the average bulk moving should be such 
 as to justify the C.L. rating. From the standpoint of 
 the railway, it is articles which are traffic producers, such 
 as fuel, raw materials, productive implements or ma- 
 chinery, building materials, foodstuffs other than luxu- 
 ries, which should have the first consideration in granting 
 C.L. ratings. 
 
 The railway position in regard to the conditions Avhich 
 justify granting C.L. ratings may be summarized as 
 follows : 
 
 It is to the interest of the railways, as well as to the 
 public, that rates be low enough, but not below a remu- 
 nerative point, to permit the general movement and dis- 
 tribution of commodities in general demand in large 
 quantities for construction, building, manufacturing 
 and other purposes. It is a sound rule for railways to 
 adapt their classification to the laws of trade; if the 
 article moves in sufficient volume and the demands of 
 commerce will be better served, it is reasonable to give 
 It a carload classification. A lower rate for carloads than 
 that applied to shipments of light traffic in less than car- 
 load lots should only be required upon circumstances and 
 conditions of service to the large shipper so dissimilar 
 
FREIGHT ("LASSIFK ATION 
 
 355 
 
 as to require, in the line of equal treatment, a less rate 
 than is made for the small shipper. When a claim is 
 made for lower rates for carload shipments than those 
 applied to shipments of light traffic in less than carloads, 
 it shoidd be shown that failure to apply such lower rates 
 results in unjust discrimination. 
 
 The objection of the railways to granting all com- 
 modities C.L. ratings is in great degree due to their 
 fear that if this were done there would, through the use 
 of the mixing privilege, which is referred to later, be a 
 building up of a carload composed of less than carload 
 quantitieo. Looked at from the standpoint of the cost 
 of the service, the carload movement is less burdensome 
 than the less than carload movement. 
 
 While in the early days, when hauls were short, very 
 simple grouping was possible, and while it was even 
 possible for a single sheet to set out both the commodities 
 and the rates, modern business conditions and the in- 
 creasing length of the haul have wrought great changes. 
 So complex has industry become and so many and 
 diversified are the articles offered for carriage, that the 
 tariff of Canada, with its 711 items, is short and simple 
 as compared with the Canadian Classification which, 
 with its 3,742 L.C.L. ratings and 2,347 C.L. ratings, 
 covering 7,011 items, enfolds a group of commodities 
 stretching from acorns to zinc washers. A similar com- 
 plexity is to be found in the United States, where the 
 Otticial Classification carries some 10,000 items. In the 
 Southern Classification there were, in 1908, 3,503 L.C.L. 
 and 773 C.L. ratings; in the Western Classification, 
 J.729 L.C.L. and 1,690 C.L. ratings; while the Official 
 Classification had 5,852 L.C.L. and 4,235 C.L. ratings. 
 
 I "^nder such conditions the attempt to include in each 
 taiiff all articles whether of actual or potential carriage 
 
■IJ&lil'il 
 
 356 TRAFFIC 
 
 would make the tariffs bulky and cumbersome. In the 
 item of printing alone, it would mean a burdensome 
 expense. It is, therefore, necessary to have some ready 
 reference work (which the Classification is) which sets 
 out what articles the railway is prepared to carry. This 
 makes the tariff simpler and therefore of more service to 
 the shipper. The early examples of classification which 
 have been referred to show that it was appreciated, 
 though in a crude way, that it was unfair to charge all 
 articles alike. The classification has also to see in its 
 gioupings that the groupings are relatively reasonable. 
 15. Hotv dmsificalions are built.— \Xh\\e in the early 
 days, when hauls were short and there was but little inter- 
 change of traffic, the confusion arising from diversities 
 of classification was not so serious in its effects, but 
 when, as in the United States, through consolidation of 
 existing lines and additional construction, the lines of 
 railway reached steadily into the interior, enabling longer 
 hauls to be made, and interchange of traffic between rail- 
 ^vays became necessary, it often happened that different 
 portions of the same railway were subject to different 
 classifications. The efl'ect of this may be seen in an ex- 
 treme form in the situation in which* the Wabash Rail- 
 way found itself in 1883. In that year it had in effect 
 the following classifications : 
 
 No. of Classes in 
 
 Middle and Western States 5° '"" 
 
 Southern Railway & Steamship ig 
 
 Mississippi Valley 5 
 
 Revised Western 9 
 
 Trunk Line, Eastbound 13 
 
 Trunk Line, Westbound 5 
 
 Texas g 
 
 Pacific Coast, Eastbound g 
 
 Pacific Coast, Westbound .Rates quoted for 
 
 each article 
 
FHKIGHT CLASSIFICATION 
 
 357 
 
 II ri(|niies no elaboration to conclude that the shipper, 
 iiiikss he had especial facilities for keeping track of the 
 situation, would be utterly at sea. 
 
 1(5. Classifications of the United States. — By 1887 
 thcie had come into existence three leading Classifica- 
 tions, the Official, the Southern, and the Western. The 
 Otiicial covers traffic in the territory north of the Ohio 
 anil Potomac Rivers, including New England, and east 
 of a line from Chicago to St. Louis and the mouth of the 
 Ohio River. This is the most dense traffic territory in 
 the United States. The Southern apphes east of the 
 Mississippi River and south of Official territory'. The 
 Western Classification applies west of Lake Michigan, 
 the Mississippi River, and Official Territory. Occasion- 
 ally there are overlappings of these classifications; for ex- 
 ample, in the case of a shipment to or from a point near 
 the boundary of the classification territory one classifica- 
 tion may govern through. Thus, St. Louis uses the 
 OlKeial Classification eastbound, the Western west- 
 l)ound, and the Southern southbound. 
 
 A\'hile there has been a movement for uniform classi- 
 iieation in the United States, the diversity of trade and 
 traffic conditions has so far prevented the success of this 
 movement. Consequently, there is no necessary uni- 
 formity as between the classifications, either in respect of 
 rating or description. Under Official Classification No. 
 .'{0 there are under the item "Clothing," eight descrip- 
 tions, the final one being "Clothing in bales or boxes, not 
 otherwise specified, first class, L.C.L." In Western 
 Classification No. 50 there are eleven descriptions, but 
 ^^!lile Clothing, boxed, N.O.S., is carried first class 
 L.C.L., in bales, N.O.S., it is not taken. The Official 
 Classification has six numbered classes and two "rules." 
 These are in effect additional classes. Rule No. 25 in- 
 
'hy. 
 
 358 TRAFFIC 
 
 eludes articles rated at 13 per cent less than second class, 
 and Rule No. 26 includes those rated at 20 per cent less 
 than third class. The Southern Classification has six 
 numbered and seven lettered classes. The Western con- 
 tains ten classes, five numbered and five lettered. 
 
 17. Canadian classification. — In the earlier days the 
 same chaotic conditions hi regard to classification existed 
 in Canada as in the United States. The various small 
 independently operated roads had each its individual 
 classification, there being no necessary common base. In 
 1874, the class rates applying from station to station on 
 the Grand Trunk were governed by the "Grand Trunk 
 Railway Classification of Freight." The merchandise 
 classes, which were four in number, scaled as follows: 
 
 1-st class 200% of 4th 
 
 2nd '• 167% " " 
 
 3rd " 133% " " 
 
 4th " 100% " " 
 
 In addition, there were four special columns governing 
 carload rates on flour per barrel, grain per one hundred 
 pounds, lumber per car, and live stock per car. Various 
 other items were scheduled as "same rates as flour," 
 "same rates as lumber," and so on. There were also 
 various ratings which were multiples of the four mer- 
 chandise class ratings. 
 
 The Canadian Classiflcation came into existence in 
 1884. It had at first nine classes; it has now ten. But 
 in effect it may be said to have sixteen, for the multiples 
 of the first class rating must also be noted. There are 
 the ratings 1|; D-1 (double first class) ; 2i-l (two and 
 one-half times first class); 3-1; 3J; 4-1. The Classi- 
 fination is built up on the fifth class, fourth being 25 per 
 cent, third 50 per cent, second 75 per cent, and first 100 
 per cent higher than fifth. In the first five classes the 
 
FREIGHT CLASSIFICATION 
 
 350 
 
 railway loads and unloads, except where the piece or 
 package weighs two thousand pounds or over; in tlie 
 sixth to tenth classes it does not. 
 
 There is a subdivision of Canadian Classification ter- 
 ritory, known as Canadian Freight Association terri- 
 tory; this includes Canadian points east of but not m- 
 chuling Port Arthur, and east of and including Sault 
 Ste -Slar'ie, Sarnia, and Windsor. Westbound from this 
 territory to points in Oregon, Washington, and North 
 Pacific Coast terminals in the United States, the move- 
 ment is subject to the Canadian Classification. 
 
 18. International traffic— The international trade 
 movements between Canada and the United States and 
 some movements in Canada are subject to the classifica- 
 tions of the United States. In a summary way the lead- 
 ing? examples are as follows : 
 Official Classification applies— 
 
 (a) From C. P. R. stations west of ]SIontreal to Mon- 
 treal for export. 
 
 (b) Canadian Freight Association territory to and 
 
 from Illinois, Iowa, Missouri. 
 
 (c) Canadian Freight Association t ritory to and 
 from Louisiana, Kentucky, Tennessee, Alabama, 
 
 Florida. 
 
 Southern Classification applies— 
 
 Canadian Freight Association territory to and from 
 Alabama, Florida, Georgia, Kentucky, Mississippi, 
 North Carolina, South Carolina, Tennessee, and Vir- 
 ginia. 
 Western Classification applies— 
 
 (a) Canadian Freight Association territory to and 
 from British Columbia. 
 
 (b) Same territory to and from Arkansas and Okla- 
 homa. 
 
'MiO 
 
 THAFFIC 
 
 (c) Same territory to and from Rocky Mountain 
 States and west to the Pacific. 
 
 (d) California, Nevada and Utali to 3Ianitoba. 
 The Railway Act recognizes international traffic as a 
 
 complicating factor, for it provides that subject to any 
 order or direction of the Canadian Railway Commissioi 
 any freight classification in use in the United States may 
 l)e used in the traffic to and from the United States. 
 ^ 19. Expansion of Camidinn classification. — The 
 Canadian Classification has steadily increased the num- 
 ber of items as business has exparided. At first, there 
 ^yere simple, broad groups. There has been a progres- 
 sive differentiation of ratings. This is shown in the com- 
 parative summary of ratings which follows: 
 
 Year 
 1884 
 1913 
 
 L.C.L. 
 1,284 
 3,74« 
 
 C.L 
 
 mi 
 
 2,347 
 
 Any Quantity 
 459 
 923 
 
 On account of the variety of articles covered by the 
 classificatiidi, it would be impossible without quoting the 
 complete classification to give a fully illustrative list. 
 For the purpose, however, of illustrating the way in 
 which the grouping is arranged, the following examples 
 may be quoted (see also specimen page opposite) : 
 
 Class 1. Dry goods, clothing. 
 
 2. Cotton piece goods. 
 
 3. Apples; fish, salted, dried or smoked. 
 
 4. Lumber, cement, building material. 
 
 5. Iron pipe, pig iron, horseshoe nails, green 
 
 coffee, paints, etc. 
 I' 6. 3Iachinery, agricultural implements, etc. 
 
 7. Railway equipment. 
 
 8. Flour, grain, and coarser grain products, 
 
 potatoes, and vegetables. 
 

 CUiiiflcttioa Ho. li R««dt:- 
 
 im 
 
 1 10 :'ii 
 
 
 Chemicait. Dnm and If adi 
 
 clttM — 
 
 Acid* (See Notri): 
 Arctic; 
 
 Id demiiuhiu, sU rov- 
 ereU with wicker 
 ORB . 
 
 In deraijohna covererti 
 with wicker and 
 packed with itruwi 
 rnb«»ket».O.n.B.J 
 
 In demijuhna, boxed 
 
 O.R.B 
 
 In barrel* 
 
 :' Id 3 Cigarettes ni.d CijBrs — 
 
 In cases securely strapped, 
 
 or with iron straps or 
 
 - clamps on the ends .... 
 
 In cases, not strapped as' 
 
 above l^l 
 
 D-1 
 
 I'i 
 
 1 
 3 
 
 1 
 
 ;t JH 27 Crates, Empty, prepaid— 
 
 i L.C.L • 
 
 I C.L., minimum 20.000 lbs. 
 
 4 .'I j() Detonators.— Subject tO; 
 I Rule 10. 
 
 Dnr Good* — j 
 
 5'.>2 5 Bacging and Bags, N.O.S.: 
 
 I i In bUe* 
 
 1 Cloth: ^ ^., 
 
 (i :'.' '.3 Brattice— Same as Oil 
 
 I Cloth. 
 I 
 
 i > 
 
 8 Equipment, Roadmaking — 
 
 I Consisting of carts, dump 
 cars, dump wagons, en- 
 gines and boilers, 
 graders, plows, road ma- 
 chines, road rollers, rock 
 crushers, scrapers, stone- 
 spreading wagon.i, tile 
 moulds and wheelbar- 
 rows, in mixed carloads 
 
 i 
 
 I P 
 
 Fibre— ' 
 
 7 Wood: 
 
 a Chemical 
 
 D-1 U> 
 
 ICbamicala. Druga aad Modi'-, 
 ' clnaa- 
 
 Acids (See Notes): 
 Acetic: 
 
 In demiiohn* all cov- 
 ered with wicker,' 
 
 ORB . 
 
 In demijohns, cork and 
 canvas covered,! 
 ORB .| 
 
 In demijohns covered 
 with wicker and 
 packed with straw in 
 baskets, OR.B..... 
 In demijohns, boxed, 
 
 ORB 
 
 In barrels 
 
 Cigarettes and Clgara— 
 In cases securely strapped 
 with wire or band iron; or 
 in cases fastened with 
 iron or steel key cUimpa, 
 and boards forming top. 
 bottom and sides stapled 
 together on the inside.i 
 and so stated by shipper 
 
 on bill of lading 
 
 In eases, not fastened as 
 
 above • 
 
 Crates, Empty, prepaid— 
 8.II., C.L. mimmum 20,000 
 Ibi 
 
 J3 
 I 
 
 S2fi 
 10 20 
 
 1120 
 
 12 20 
 
 Dry, in bales. C.L. mim- 
 mum 20.000 lbs . . 
 Fireworks. — Subject to Rule 
 10. 
 
 Firecrackers 
 
 N.0.8 
 
 1 
 D-1 
 
 D-1 
 
 D-1 
 
 IH 
 
 1 I 
 D-1 
 
 D-1 10 
 
 'Eliminate item 50, page 21^ 
 { See item 4. page 2 of this 
 Supplement. 
 
 Dry Oooda— », « - 
 
 Bags and Bagging, N.O.S.: 
 
 In bundles or bale* ... 
 Cloth: 
 Brattice: 
 
 13 feet long and over 
 Under 13 feet long: 
 In balea or rolls . . 
 
 Equipment, Roadmaking— 
 Consisting of carta, dump 
 cars, dump wagons, en- 
 gines and boilers, graders, 
 plows, road machines, 
 road rollers,rock crushers, 
 scrapers, stone-spreading 
 wagons, street-sprinUing 
 wagons, street sweepers, 
 tile moulds and wheel 
 barrows, in mixed car 
 loads 
 
 tEliminate items 7, 8 and 9 
 I page 26. (See itema 1&-30, 
 
 mcl., page M of Claaaifica- 
 I tion.) 
 
 ^Elinuuule items 33 and 34. 
 I page 26. (See itema 5-8 
 
 incl., page 2 of this Supple 
 
 ment.) 
 
 Specimen Page from Canadian "Freight Classification. 
 
 361 
 
3012 
 
 TRAFFIC 
 
 Class 9. Live stock. 
 
 10. Luinbcr und forest products, coal, rough 
 stoiie, sand, lime, hay, and straw. 
 
 As examples of the supplementary classes the following 
 may be quoted : 
 
 4 — 1. Aeroplanes, wicker baskets not nested. 
 3 J — 1. Canoes, three or more crated together. 
 
 8—1. Aquariums, boxed, baseball bats hi boxes. 
 2i— 1. Cutters, single or crated, over 84 inches high 
 and less than 72 inches long, actual weight. 
 D — 1. Binders, s.u., honev. 
 
 IJ. Strawberry baskets, nested; perfumery in 
 cases. 
 
 2Q. quantity differences.— The Canadian Classifica- 
 tion, in common with other classifications, recognizes a 
 difference in quantity as justifying a difference in rating. 
 In England it has been recognized that in striking a rate 
 a railway may recognize that the commodity moves in 
 large quantities. But in Canada, as in the United 
 States, the carload is taken as the highest unit of quan- 
 tity. The man who moves thirty carloads is not to re- 
 ceive a more favorable treatment than the man who 
 moves one carload. In turning at random the pages of 
 the Canadian Classification it will be found that cotton 
 piece goods are rated 2 I..C.L., 4 C.L., or, to take 
 another example, canned goods are 3 L.C.L., 5 C.L. 
 
 The L.C.L. rating is for one hundred pounds or up- 
 wards. In the case of "smalls," or shipments under one 
 hundred pounds, no matter what the class might other- 
 wise be, the charge is that for one hundred pounds first 
 class, with a minimum charge of 83 cents. The railways 
 take the position that on account of the bookkeeping and 
 handling costs incident to such small shipments a charge 
 
FREIGHT t LASSIFICATION 
 
 ses 
 
 OIllV 
 
 in 
 
 ,.,r one hundred inmnds at the elass rating to which it 
 IrloiiL's would not be adequate. , , ^. ■. 
 
 1„ order to obtain the advantage of a ear lot rating it 
 is not necessary that one should load up to the full carry- 
 • ,K capacity of tlie car. But it is necessary to furnish a 
 minimum weight. . 
 
 The position taken by the railways in regard to mim- 
 ,„,„„ weights is put succinctly in a statement made by 
 the Chairman of the Canadian Freight Association in a 
 ease before the board, i. e.. the Canadian Railway Com- 
 mission: 
 
 Ml articles arc provided with a lens-than-carload rating, but 
 V those which are generally and to some extent forwardcl 
 Straight carload quantities are given the carload rating. 
 In order to entitle a shipper to the lower carload 
 nainff when it h provided in the classification, the rules require 
 tl.at a full straight carload, subject to certain mmnnum weights 
 which are designed to produce adequate per car revenue, be 
 forwarded by one shipper from one station on one day to one 
 coiisiffnee and destination. ... 
 
 Where the character of the freight, size of the package, 
 HKthod of packing, weight of the goods, strength or fragihty, 
 vu. V so greatly, it is impossible to fix by rule a mmimum we.gnt 
 d.ich will in all cases exactly correspond with (and not m some 
 cases exceed) the actual quantity which can conveniently be 
 put into a car. It is impracticable by rule to confer the benefit 
 of the carload rate without the use of a minimum weight In 
 the case of heavy coarse freight, the shipping public find no 
 .htficulty in loading up to and even in excess of the mmimum 
 w.i-.ht There are no commercial transactions which interfere 
 with this being complied with. In the case of light bulky freight, 
 the weight carrying capacity of the car is disregarded, and the 
 loading capacity generally determines the minimum weight, but 
 ahvays subject to its . application resulting in a fair per car 
 revenue. This is essential in order to prevent the necessity 
 
•'^64 TRAFFIC 
 
 of liauling a ligiiHy loaded car and to obtain economy in the 
 use of equipment and yard facilities. A le.ss-than-carloac> con- 
 signment is charged for its actual weight at the higher less- 
 than-carloa ' rate, unless the total charge exceeds the charge 
 based upon tlie carload mininuun weight and carload rate, in 
 which event the lower charge governs. At no time does a charge 
 on a less-than-carload lot exceed the charge for a carload of 
 the same class. 
 
 The classification provides that, unless otherwise spe- 
 cifically provided for in the classification, the minimum 
 weight in box cars not over 36 feet 6 inches in length is 
 to be as follows, actual weight to be charged for when 
 in excess of the minimum — 
 
 1st, 2nd and 3rd class OQ.OOO lbs. per car 
 
 4th, 5th and 8th 24,000 " " " 
 
 7th, 8th and 10th 30,000 " *' " 
 
 Or specific items in the classification there may be 
 minimum weights differing from those just quoted. To 
 quote a few examples: lumbermen's boats and batteaux 
 have a tenth class rating, with a minimum of 20,000 lbs., 
 while boats X.O.S. (not otherwise specified) have a sixth 
 class rating, with a minimum of 20,000 lbs.; concrete 
 spreading carts with a fourth class rating have a mini- 
 mum of 14,000 lbs., and charcoal, with a seventh class 
 rating, has a minimum of 24,000 lbs. 
 
 21. Car measurements.— The box car not over 36 feet 
 6 inches, inside measurement, 8 feet 6 inches wide and 
 8 feet high, inside measurement, is taken as the stand- 
 ard box car; but as the car increases in length the Cana- 
 dian Classification increases the minimum. The same 
 thing is done both by the Oflficial and Western Classi- 
 fications. In the two former, the increase in the mini- 
 mum does not increase in regular gradation as the length 
 of the car increases, while in the Western Classification 
 
FREIGHT CLASSIFICATION 
 
 365 
 
 the rule is followed in the case of light and bulky goods 
 „f adding for each foot over 36 feet inside measurement 
 3 ntr cent to the minimum. 
 
 The (juestion of the increased minimum is not con- 
 cerned with increased length alone; there is also the 
 nuestion of increased height of the car. While the stand- 
 ard box car IS 8 feet high, inside measurement, or 13 
 feet r» inches from the rails, special cars, as, for example, 
 furniture and automobile cars, are higher. There is at 
 present before the board a proposition that m the case 
 „f lijrht and bulky goods, the cubical capacity of the car 
 should be looked to and a minimum fixed on it, and that 
 tor exerv one hundred cubic feet over twenty-five hun- 
 dred cubic fe-t of containing space there should be a 
 percentage addition. The Wisconsin Railway Commis- 
 sion, in dealing with the 3 per cent scale of the West- 
 ern Classification, has expressed the opinion "it would 
 soeni that the cubic capacity of the cars is a better basis 
 for ad lusting minima than length alone." 
 
 22. 'cost of C.L. and L.C.L. shipments.-While the 
 placing of a higher rating upon an L.C.L. shipment than 
 on a C.L. shipment is an established practice, there is a 
 ,,uestion as to whether there are factors so differentiating 
 these two traffic movements that the apparent discrimi- 
 nation is not "unjust." It may be said that the small 
 shipment is a retail transaction while the large is a whole- 
 sale one. But the distinction looked for must be more 
 fundamental. 
 
 C ar lot traffic is relatively much less costly to handle 
 tlian less than car lot traffic. In the former, the loading 
 per car is relatively heavy, thus materially reducing the 
 proportion of dead weight to the pay weight. Where it 
 is loaded and unloaded by the shippers, as compared 
 with the less than car lot traffic, it involves much less ex- 
 
366 
 
 TKAFFIC 
 
 pc?ise in the way of station, office, and other services. In 
 Avestern Canada, the Canadian Pacific estimates the 
 physical cost of handling L.C.L. traffic from shed door 
 until it is stowed in the car at from 35 cents to $1.00 per 
 ton. The further service in connection with the time 
 it takes to assemhle a car must be considered. At Win- 
 nipeg^ or Calgary, for example, cars are spotted ever}- 
 day for certain sections of the railway and for certain 
 places on the railway. The car stands at the shed all day, 
 then goes out in the morning on the way-freight train. 
 
 The ^Visconsin Commission has estimated that in the 
 State of AVisconsin the average car lot loading is 17 tons, 
 while in the case of less than car lot traffic the average 
 loading per car does not reach 6 tons. It then continues: 
 
 On one of the principal carriers in the Western Classification 
 territory the average terminal cost per cwt. amounts to about 
 2.3 cents, when the loading amounts to 17 tons per car and to 
 almost 5.8 cents when the loading amounts to 7 tons per car, 
 while the average cost of moving the freight between the stations 
 amounts to about 0.26 mills per cwt. when the car is loaded 
 with 17 tons and to about 0.44 mills per cwt. when it is loaded 
 with 7 tons of freight. On these bases, for a haul of two hun- 
 dred miles, there is a difference in favor of the carload traffic 
 that amounts to about 7 cents per cwt. 
 
 Summing up the matter, it expresses the opinion: 
 We feel quite justified in saying that the less than carload 
 traffic is relatively less profitable to the carriers than the car- 
 load traffic, and that the higher rates for the former are more 
 than offset by the greater cost of handling it. 
 
 The difference as between less than car lot and car lot 
 ratings is justified by differences in cost. 
 
 23. Uniformity in Canada,— The unsuccessful at- 
 tempts of the United States to obtain a uniform classi- 
 fication applicable throughout the entire section served 
 
FREIGHT CLASSIFICATION 
 
 367 
 
 bv the railways of that country', is indicative of the 
 ailvantage both to the shipper and to the railway of 
 uniformity of practice. While in Canada there is one 
 general classification, certain modifications must be 
 rtco^niized which in effect, in certain respects, create two 
 jTcncral classifications and one minor classification. 
 
 On the White Pass and Yukon route, connecting 
 Skaguay and White Horse, shipments are governed by 
 the Northern Classification. In this classification there 
 are three general ratings. A, B and C, A being the lowest 
 rating. In addition, there are the following multiples 
 of these classes, h h U, 2, 24, 3 and 4 times A. 
 
 As has been indicated, the Canadian Freight Classifi- 
 cation is built up on fifth class. But while in western 
 Canada, outside of the Yukon, the principle of having 
 ten classes is followed, the method of building is dif- 
 ferent. In western Canada, when the Canadian Pacific 
 began operation, the classification which was adopted 
 was the Joint Northern, which was at that time used in 
 the Dakotas and adjoining United States territory. In 
 this classification, first-class was double fourth. There 
 was no percentage relation as to the intervening classes. 
 Later, when further classes were added, no percentage 
 basis of relation of the classes was adopted ; and so, while 
 seemingly uniform, the classification in western Canada 
 is out of line with that in use in eastern Canada. 
 
 24. Mixing privilege. — In dealing with the question 
 of minimum weights it was for the moment referred to 
 as if straight carloads of a single commodity were alone 
 involved. But in addition to a minimum weight made 
 up of one article alone, there may be a minimum weight 
 arrived at by mixing. 
 
 In eastern Canada the arrangement as to mixing 
 mav be summarized as follows : 
 
368 
 
 TRAFFIC 
 
 (a) When a number of articles of the same class in car- 
 
 loads are tendered on one day by one consignor, 
 destined to one consignee, the* quantity being 
 sufficient for a carload, they take the rate per hun- 
 dred pounds of the class at the higliest minimum 
 of any of the articles so carried. 
 
 (b) AVhen the articles are of different classes, the rale 
 
 and minimum of the article in the highest class 
 applies. 
 
 (c) In a mixed carload of fifth and higher class freight 
 
 having a minimum of less than 20,000 lbs., a min- 
 imum of 20,000 lbs. at the highest class rate ap- 
 plies. 
 
 For obvious reasons, there are in dealing with certain 
 commodities, such as petroleum, lubricating oil, gasoline, 
 and live stock, limitations of the general mixing privi- 
 lege. 
 
 The mixing privilege is limited to articles which have 
 a distinctive car lot rating, which means that in the ma- 
 jority of cases less than car lot quantities may be com- 
 bined to obtain the advantage of car lot rates. 
 
 In western Canada, however, the mixing privilege 
 is limited by the adoption of the principle of trade lists. 
 The classification states that "articles under distinctive 
 headings will not be taken in mixed carloads at carload 
 rates." "Distinctive headings" as set out in the classifi- 
 cation are, for example, agricultural implements, hard- 
 ware, groceries, etc. The same provisions apply in the 
 west as do in the east, (a) where the articles are of the 
 same class, (b) where the articles are of different classes. 
 
 25. Effect on shippers and consumers.— The effect 
 of this is that there is a much wider mixing privilege 
 east of Port Arthur than west of it. In eastern Canada 
 the system redounds to the advantage of the consignee 
 
FREIGHT CLASSI FICATIOX 
 
 369 
 
 who cannot take a straight carload of a particular line 
 of ooods. In western Canada, the rule existing re- 
 dounds to the advantage of the man who can take a 
 straight carload of a particular line of goods. The rule 
 as to limitation to distinctive headings applies not only 
 to shipments between points in the west, but also to ship- 
 nictits between points east of Port Arthur and points 
 west thereof and vice versa. 
 
 The difference in situation as bet een the east and 
 the west in this respect may be indicated by a specific 
 example. A mixed carload of hoes, anvils, and culti- 
 vators is possible east of Port Arthur. In western 
 Canada, tools and hand farm im])lements are in the hard- 
 ware list at fiftli class, while the cultivators fall in the 
 agricultural machinery list Avith a sixth class rating. 
 Consequently, on such a shipment from an Ontario point 
 to a point west of Port Arthur, the sixth class rating 
 wdiild apply on a minimum of 20,000 pounds for the cul- 
 tivators and the L.C.L. rate would be charged on the 
 tools and hand implements. If, however, the tools and 
 hand implements formed the bulk of the shipment, they 
 would move on a fifth class rating with a minimum of 
 24.()()() pounds, and the other articles would move on an 
 L.C.L. rating. 
 
 The effect of this is that in respect of distributive 
 husiness there really are two classifications. 
 
 This situation has grown up as a result of a compro- 
 mise between divergent trade interests. In the classifi- 
 es t ion of 1893 the mixing privilege was limited by the 
 list |)rinciple. Various modifications were subsequently 
 luaih,'. By 1897, the general practice established was 
 the same as it is east of Port Arthur today. In 1902, 
 the list principle was adopted generally. In 1904, an 
 attempt was made to obtain the open rule for Canada 
 
 C-III— «4 
 
370 
 
 TRAFFIC 
 
 generally. Instead, there was worked out the compro- 
 mise which gives two systems, as has already been indi- 
 cated. 
 
 The compromise was, in the main, attributable to the 
 increasing importance of the jobbing centers of western 
 Canada. They felt that the open mixing system would 
 expand the distributing business of eastern Canada in 
 western Canada, and they took the position that this 
 distributive business was naturally tributary to the 
 western jobbing centers. 
 
 The complexities introduced by jobbing businesses 
 and their bearing upon classifications and the mixing 
 privileges thereunder are illustrated by recent develop- 
 ments. The Boards of Trade of Calgary, JNIoose Jaw, 
 AVeyburn, Lethbridge, Saskatoon, and Regina desire a 
 further modification of the rule as to mixing as it now 
 applies west of Port Arthur. They point out that job- 
 bing centers are now established at central points in the 
 Provinces of Manitoba, Saskatchewan, and Alberta, and 
 contend that reasonable protection should be given to 
 these centers to do the business naturally tributary to 
 such points. At present, shippers of small lots may 
 combine their shipments and secure carload rates on 
 what would otherwise be carried at broken lot rates. In 
 the case of groceries, mixtures are permitted on over 
 300 articles running from alun to washtubs. This, it 
 is claimed, is unfair to the western wholesale merchants. 
 It is admitted that there may have been some justifica- 
 tion at an earlier date for maintaining carload rates to 
 retailers. It is contended that now, however, there is 
 "no further necessity for violating the principle of giving 
 to the purchaser of a carload all the protection that tlie 
 Railway Classification and tariffs intended he should 
 have. At present it is possible for the shipper of one 
 
FREIGHT CLASSIFICATION 
 
 371 
 
 package to secure as low a rate as the shipper of any 
 nuinbcr of carloads." It is, therefore, contended that 
 tlie following rearrangements should be made: carload 
 rates should be confined to carload quantities of one com- 
 modity or of conmiodities of an analogous character; 
 that the minimum weight for each class of commodity 
 should reasonably approximate the carrying or cubical 
 capacity of a standard car with due regard for the mar- 
 keting conditions for the articles in question; that the 
 present basis of trade lists should be abolished and car- 
 load rates applied only on carload quantities of one com- 
 modity, or one or more commodities of an analogous 
 character. 
 
 As will be seen in dealing with the question of rates, 
 the matter of distributive business and the settlement of 
 distributive areas is a question of balancing. Each job- 
 bing center, while contending for the geographical ad- 
 vantage of its situation, is chary in defining the limits 
 of its si)here of influence. And thus while merchants of 
 the west are contending for a rearrangement of the 
 mixing rule which will give them the longest possible 
 haul in carloads, and a distributive business out on the 
 short hauls in less than car lots, points such as Van- 
 couver, Fort William, and Montreal are opposed to 
 tlie further modification which has been outlined. Mon- 
 treal, for example, desires that the open rule should 
 iipj)ly generally throughout Canada. 
 
 20. Factors affecting classification. — Classification, as 
 Conunissioner Clark, now Chairman of the Interstate 
 Commerce Commission in the United States, has aptly 
 said: 
 
 Is not an exact science nor may the rating of a particular 
 article be determined alone by the yardstick, the scales and the 
 dollar. The volume and desirability of the tniffic, the hazard 
 
372 
 
 TRAFFIC 
 
 of oirriu^c, iiiul the prolmbility of misrepresentation of the 
 article arc large factors of prime importance in classification. 
 At best it is l)ut a grouping. . . . 
 
 Consideration of the earlier examples of classification, 
 to which reference has been made, indicates that at least 
 three determining factors were considered — space, 
 weiglit, and value. It was considered that where an 
 article |^acked soliUIy into a comparatively small space 
 it was projier to make a lower charge than when the same 
 M eight took up a much larger space. And there was 
 also, in a somewhat crude way, an attempt to take into 
 consideration the basis of value or ability to pay. To- 
 day, while there are many refinements of classification, 
 these three factors are still of importance. 
 
 While the scope of the classification has become more 
 inclusive as business has expanded, and while the ratings 
 have at the same time become more differentiated, it is 
 impossible to have a cla'^s for each article. Consequently, 
 the class groupings, while intended to embrace analogous 
 articles, do not embrace articles necessarily identical in 
 point of value, cost of carriage, or other factors. 
 
 27. Value of the article— The value of the article is 
 recognized as an important factor. From the stand- 
 point of cost of service, it does not appear justifiable to 
 class gloves, whalebone, thread, and umbrellas in first 
 I..C.L., while common brick, concrete building blocks, 
 and coal are classed fourth L.C.I.. When the C.L. 
 ratings are considered it will be found that the first 
 group of commodities extracted from the dry goods list 
 have an any-quantity rating, while common brick, stone, 
 building blocks, and coal have a tenth class rating C.L. 
 
 If, however, an attempt w^ere made to arrange the 
 ratings on the basis of the cost of service, assuming that 
 this could be accurately established, the result would be 
 
FREIGHT CLASSIFICATION 
 
 373 
 
 tiiat tlie low grade commodities which are placed in tenth 
 class ^vould be able to stand only a short haul move- 
 mint. Under these circumstances, such conunodities 
 uouKl be locally monopolized with a resultant disadvan- 
 tafje to the consumer. As a result of this, value is recog- 
 nized as a factor and ability to pay places certain articles 
 ill the first class and others in the tenth. 
 
 In so arranging, cognizance is taken of the fact 
 whether the articles are in the rough, partly finished or 
 rinished state. ]Millstones in the rough are classed 
 L.C.L. third, C.L. fifth; when finished they are classed 
 second and fourth. And while dimension or building 
 tone in tlie rough, sawn or dressed, not car^'ed, is fourth 
 aiul tf-nth, it is first and fifth when carved or lettered, 
 (rated or boxed. Or, again, difference in quality is rec- 
 ouni/ed. Thus, while brick, common, fire, vitrified and 
 scoiia blocks are rated fourth and tenth, enameled and 
 '^I'Mtd brick is third and fifth. 
 
 In dealing with the classification of blaugas, the board 
 found that the ratings of second and fourth were reason- 
 able, this being based on a consideration of the article and 
 of its ability to pay as compared with the lower ability to 
 pay of the articles classed third and fifth, which were the 
 ratings asked for. So, also, where a carload rating was 
 asked for on cigars, which have an any-quantity rating 
 of tirst class, it was held that as cigars were luxuries the 
 aiiy-(iuantity rating was not unfair. A similar position 
 was taken in dealing with an application to reduce the 
 rating of cutglass from double first to first class. 
 
 In using value as a basis, there is considered not only 
 the ability to pay, but also the market value of the article. 
 That is to say, where an article has a high market price, 
 the higher rating has but a slight percentage effect upon 
 the market demand. But in the case of articles of wide 
 
374 
 
 THAFFIC 
 
 dc^imnd and conse(,i,ently lower market price the higher 
 rating would add such a per«.ntage to the market X 
 that the demand Mould be curtailed. Consequently « 
 a matter o self-interest, the ratings must, within ceL" 
 broad hm. s. recognize ability to pay as a factor. 
 
 28. Bu.k and rccight.~As the railways in trans- 
 portmg freight are selling car space, what can be packed 
 in a firiven space is important. There must be Lsid- 
 ered whether the articles are K.D. (knocked down)or 
 S.U. set up). Sheaf carriers. S.U.. are D-1. niile 
 K.D they are second class, these ratings being for 
 J^.t^.U; while lumber wagons are first class S.U. and 
 ^cond class K.D. Another consideration is whether th 
 
 attn Z^'T '" ^"^'^'' ''"^^"^"« '" *»^'« the consider- 
 ation whether they are crated in boxes or otherwise 
 packed. A vanety of ratings will be found based on th" 
 
 fhffnir- " ^'""uu^ '^^^"^ ^" '^' *^" «»d «n^«re list 
 the followmg will be found: 
 
 Tinware, N.O.S.: L.C.L. 
 
 Loose. O.R.D. . . ^ 
 
 Not nested, in crates, boxed or barrels . . *1 
 
 Nested, in crates, boxes or barrels. . . 2 
 
 Nested solid, in crnJ ns, boxes or barrels. .3 
 
 buS*t'/""''tr*'''"' ^""'"«^ ""^^^ «^^ heading "^^f 
 bulk and weight are whether the commodities are in 
 
 w;7.rf'«°'r ^h^P'"^"*^' «nd questions of minimum 
 
 Jftb v>l. ^""^ '^''"""^^ *^"^^ ^ '«*'"^ °^ «^«>"d and 
 no .HfT. ^?^?™"™ «f 20.000 pounds. It may be 
 noted that while the normal fifth class minimum is 24,000 
 
 anTbnV ^"^^ r "' °" "^^°""* °^ '^'^ being light 
 
 '0000^'"°'™'"^ have difficulty in loading up to the 
 -so.ooo minimum. 
 
 29. Risk attached to carriage.-A railway is an in- 
 surer, and so the risk attaching to the carriage of the 
 
 C.L 
 
 6 
 5 
 6 
 
 5 
 
FHEIGHT CLASSIFICATION 
 
 375 
 
 g.M)tls is considered. Scattered throughout the classifica- 
 tion will be found the following notations: 
 
 ORH = Owners riJi of breaUge. O.R.F. -Owner*. rUk «rf fire. 
 
 ()U( ^ " " chafing. O.R.L. - «»■•■ 
 
 OHl) = " " damage. O.R.Lkge.- " leakage. 
 
 OK l)it - " " deterioration. O.R.S. - " «fting. 
 
 O.R.W. -Owner'* risk at weather. 
 
 When these owner's risk notations appear in the classi- 
 fication, the railway is relieved from the risks necessarily 
 incidental to the transportation of the article so noted. 
 But it is not relieved from liability for any loss or dam- 
 ajje which may result from any negligence or omission 
 (.f the railway, its agents, or employees. If a shipper 
 (lots not wish to ship at "owner's risk," then the articles 
 proffered by him will be carried subject to the terms of 
 the Standard Bill of Lading, but subject to the addition 
 of t\venty-five per cent to the rates applying when the 
 {roods are carried at "owner's risk." 
 
 Particular examples of the classification considering 
 the risk attending transportation are plentiful. Green 
 vegetables O.R.Det., in baskets, bags or crates, are first 
 thiss L.C.L., while evaporated or desiccated vegetables 
 are third class L.C.L. in bags, boxes, or barrels. The 
 lating is aflFected by the question of whether the com- 
 modity is liquid or dry. Liquid shellac in tins, boxed, 
 is first and third, while dry shellac is second and fourth. 
 Ill the rating of acids, there has to be taken into consid- 
 eration not only the risk of handhng not only as to the 
 floods themselves, but also as to other property. Spe- 
 cial care must be taken in handling them. 
 
 ao. Facilities and equipment required. — While the 
 iiatine of the facilities required has an important bearing 
 oil the rate it also affects the conditions attaching to the 
 classification rating. Apples and potatoes must be pre- 
 l)aid in winter. 
 
il70 
 
 THAI Fit' 
 
 l.i urrniiKinK cl«.s.si Heat ion, the matter of tonnage 
 movement ks in.porlant. ^VI.ile low gracJe commodi S 
 2f have a Ion; rating in onler to move at alUhe ^^ 
 that a ecnnnuuhty moves in lar^e hulk faeilitates the 
 1"H' rat.nff arrangement. The c.uestion of c^mpetit^ 
 of markets .s «!.„ a faetor. So, also, is the com^ it" 
 effect exercised hy alternate water rontes 
 
 In dealing with classification, the question of anaW 
 p ays an important part. A change in the rating of fn 
 article will create a demand for a change in a Lple- 
 nientary commo<lity. ^Vhile alun.inum wire and cZr 
 wire are dKstmet commodities, they are hoth complenT 
 ta.y an< competing; and so Me find them both with a 
 -tmg of second and fourth. The lists of tl. cla^:!! 
 t.on have grown u], out of the varied needs of business 
 and to disregard these is to upset business. In the gro-' 
 
 but we also find glue and tobacco. In 1911. the Cana- 
 dian freight Association, acting for the Canadian rail- 
 
 bZo Tr ".^'^«"'«"^'<^"»-"t "<• tbe ratings on to- 
 bacco The most important j,art of this rearrangement 
 was the substitution of a fourth class carload rating for 
 the exiting fifth class rating. In evidence, it was sho;" 
 that 84 per cent of the output of plug tobacco of the Do- 
 mimon Tobacco Company and over 60 per cent of its 
 cut tobacco was disposed of to the grocery trade The 
 Ontario Wholesale Grocers' Gui/testiL thai from 
 HO i,er cent to 8.5 per cent of the tobacco sold was handled 
 by grocers and that the tobacco business was about 10 
 per cent of the total trade of the grocers. The result 
 of the proposed change would have been a dislocation of 
 business, since tobacco and groceries would no longer 
 have been able to mix on a fifth class rating. The board 
 '" ruling on the matter said: 'In view of the dislocation 
 
FKKIGHT CLASSI I'K'ATION 
 
 S77 
 
 uhicli tlic proiKised increased ratings would cause, it 
 Hoiihl \Hi necessary for tlw railways to make out a strong 
 artiriiiative case. This they have not done . . . and 
 tlitir application should be dismissed." 
 
 It is impossible, without going into tedious detail, to 
 iiiiimcrate all tlie factors going into the determination 
 „f elasslHaition ratings. As a fairly compendious sum- 
 mary there may be quoted the following extract from 
 the Animal Report of the Interstate Commerce Cora- 
 inisMoii for 1897: 
 
 (tliirc is considered) whether commodities are crude, rough cr 
 tiiii>litil : licjuid or dry , knocked down or set up ; loose or in bulk ; 
 iu"<ti(l or in boxes or othcrw ise packed ; of vegetables whether 
 jrriiii or dry, desiccated or Evaporated; the market value 
 aiul shippers' representations as to their character; the cost of 
 sirvlcc, length anil duration of haul ; the season and manner of 
 ^liipnunt : the space occupied and weight ; whether in carload 
 or less than carload lots ; the value of annual shipments to be 
 calciiliitid on; the sort of car required, whether flat, gondola, 
 box, tank, or special; whether ice or heat must lie furnished; 
 the speid of trains necessary for perishable or otherwise rush 
 j(()ods ; the risk of handling, either to the goods themselves or 
 othtr property; the weights, actual and estimated; the car- 
 riers' risk or owners' release from damage or loss. 
 
 :n. Classification in operation in Canada. — The Rail- 
 way Act provides that the railway shall keep on file at 
 its stations where freight is received and delivered a copy 
 of the freight classification, or classifications, in force 
 upon the railway, for inspection during business hours. 
 The board is given wide powers in dealing with the classi- 
 fication. These are set forth in Section 821 of the Rail- 
 way iVct, which provides : 
 
 The tariff of tolls for freight traffic shall be subject to and 
 governed by that classification which the Board may prescrit>e 
 
378 
 
 TRAFFIC 
 
 or authorize, and the Board shall endeavor to have such clasMfi- 
 cation uniform throughout Canada, as far as niny be, having 
 due regard to all proper interests. The Board may make any 
 special regulations, terms and conditions in connection with such 
 classification, and as to the carriage of any particular com- 
 modity or commodities mentioned therein, as to it may seem 
 expedient. The company may from time to time, with the ap- 
 proval of the Board, and shall, when so directed by the Board, 
 place any goods specified by the Board in any stated class, or 
 remove them from any one class to any other, higher or lower 
 class. Provided that no goods shall be removed from a lower 
 to u higher chuss until such notice as the Board determines has 
 been given in the Canada Gazette. 
 
 The classification is revised from time to time. It is 
 issued at irregular intervals. The issues down to date 
 have been as follows : 
 
 Xo. 1.- 
 Xo. 2.- 
 Xo. 3.- 
 Xo. 4.- 
 Xo. 5.- 
 Xo. 6.- 
 Xo. 7.- 
 Xo. 8.- 
 
 -Jan. 1, 1884. 
 -June 1, 1884. 
 -April 1, 1885. 
 -May 10, 1886. 
 -May 1, 1888. 
 -April 15, 1889. 
 -Feb. 10, 1890. 
 -Oct. 1, 1891. 
 
 Xo. IC— March 1, 1913 
 
 Xo. 9.— June 1, 1893. 
 Xo. 10. — Jan. 1, 1896. 
 Xo. 10a.— Sept. 1, 1897. 
 Xo. 11. — Jan. 1,1900. 
 Xo. 12.— May 1, 1903. 
 Xo. 13.— Sept. 1, 1907. 
 Xo. 14.— Jan. 1, 1909. 
 Xo. 15.— Xov. 15, 1910. 
 
 Between issues supplements are issued to take care of 
 changed ratings. 
 
 While the Board of Railway Commissioners for 
 Canada, po])ularly spoken of as the Railway Commis- 
 sion, has power to initiate changes in classification, it 
 normally does not act of its own initiative, but on com- 
 plaint. The initiation of the classification or of a sup- 
 plement thereto is in the hands of the Canadian Freight 
 
FREIGHT CLASSIFICATION 
 
 379 
 
 Association, acting for the railways, and more particu- 
 larly the Advisory Committee thereof. 
 
 As has heen seen, the increased ratings have to be pub- 
 lished in the Canada Gazette. The board by its order 
 of January 18, 1909, provided that in filing changes 
 of classification this material should be submitted in 
 proofsheets, giving a list of the articles not previously 
 provided for which it is proposed to add to the classifica- 
 tion and giving the ratings for these articles. Further, 
 it was directed that information should be given as to 
 the proposed advances, reductions, or other changes in 
 rules, ratings, or minimum iveights. In making applica- 
 tion as to changes, it is required that the reasons should 
 he set out. As an example of reasons given, the foUow- 
 \wr dealing with "Lath, iron or steel, in bundles, crates 
 or boxes," may be referred to: 
 
 This material has several uses, chief of which is for plastered 
 walls. In this it takes the place of expanded metal or wooden 
 lath. Coming in competition with expanded metal of about 
 the same value and transported under the same general condi- 
 tions, there should be no difference in the ratings, and 3d class 
 L.C'.L. seems reasonable and should, we think, be permitted. 
 
 The Canadian Freight Association is required to sub- 
 mit proof copies of proposed changes which may be for- 
 warded to interested parties for their consideration. For 
 example, in connection with the consideration of Supple- 
 ment Xo. 2 to Classification 16, proof copies were sent 
 in addition to the Canadian ^lanufacturers' Associa- 
 tion, to the Ontario Grocers' Guild, and to eighteen other 
 trade bodies, so that their representations as to the effects 
 of the proposed changes could be considered. 
 
 Instead of dealhig with the classification after it is 
 made, as does the Interstate Conunerce Commission, the 
 hoard may be said to participate in its making. After 
 
380 
 
 TRAFFIC 
 
 he representations are received from the various trade 
 boches a . usual to arrange a conference between h 
 railways and the representatives of the trade organi a 
 jons^ A this conference the Chief Traffic Officer of 
 the board ,s also present. The matters at issue ar 
 discussed an<l an attempt is made to arrive at Icone 
 sion The Chief Traffic Officer reports to the boa 
 which deals with the unsettled questions, if there a^e 
 any. \\ hen this has been done an order of the board is 
 ZatL ''""'"'^ t^^e coming into effect of the classi- 
 
 ficfttn^t' ^^«*«/?^«/io« and complaints.-Fahe classi- 
 fication of .re.ght, either by a railway or if. emplovees, 
 «i by a consignor or consignee, with a view either to give 
 
 Zlu !' '^"■''- ^' °^ ^"°^^ "* ^°^^'«- «^«» tbe rates 
 
 legally m force, ,s punishable for each offense bv a 
 
 penalty not exceeding $1,000 and not less than $100 
 
 i^rom time to time an individual may complain of ilie 
 
 elassification as fixed. For example, a manufacturer of 
 
 explosives desired paraffin wax to be given a ratine 
 
 imder chemicals He made application to the Advisorv 
 
 didToT " fi !'" ''T''" '''''^''' ^---*-"' -h-h 
 
 to tbeh , H ''""^^ '"^ '"^ ^^^"^^*- B.y application 
 to the board the matter was set down for hearing and a 
 
 gmntr "" ^"" *^'* *'' '"'"^^ ^^*^"^ «'-"^d ^ 
 Since classification is tied up with rate-making, and 
 since the changing of an article from one class to another 
 s equivalent to a change in the rate, it is essential that 
 anj organization regulating rates should have an effi- 
 cient control of er classification as well. 
 
CHAPTER III 
 
 FREIGHT RA'iES 
 
 IV.]. Importance of freight traffic.— In Ihe period be- 
 tween October 1, 1912, and September 30, 1913, there 
 were tiled with the Board of Railway Commissioners for 
 Canada, 81,076 tariffs. In the fiscal year ending 
 yUwch 31, 1913, the tariffs filed totaled 76,058. Of 
 ti)ese, 49,200 were freight tariffs. That is to say, 164 
 freight tariffs were filed e^ ery working day. These 
 tariffs are concerned not oniy with traffic lying wholly 
 vitliin Canada, but also wth the transit business in 
 vhieh both Canada and the United States participate. 
 The tariffs vary in size from a transcontinental tariff, 
 with its 187 pages, to a supplement of a single sheet. 
 
 In a new country such as Canada, where a sparse 
 I)()l)ulation is spread over a large territory, the receipts 
 from freight traffic largely outrank those from passenger 
 liusiness. If the ma.Is, express, baggage and parlor car 
 receipts, which total about 4 per cent of the gross earn- 
 iiios, are included in the passenger total, the following 
 tahular summary is available : 
 
 WW 
 Per Vent 
 
 Passenger service 30.44 
 
 Froighl 67. .'?4 
 
 Station and train privileges, etc. ..^{> 
 
 Telegraph, rent.s an J other .sources 1 63 
 
 1911 
 
 Per Cent 
 
 30 no 
 
 67.07 
 
 44 
 
 1.59 
 
 1912 
 
 Per Cent 
 
 29.65 
 
 68.35 
 
 .49 
 
 1.51 
 
 That is to say, in Canada, for every dollar earned from 
 ]j;issenger business $2.60 were earned from freight 
 l)iisiness. 
 
 During the period from 1902 to 1908, the Canadian 
 
 381 
 
■^** TRAFFIC 
 
 Pacific added u freight cars i>er ,1,,, , 
 
 every day, and , iLmot e everv \lr7«" ™' 
 
 the period between 1909 and T97T ! ,*^'' '" 
 
 Canada have added 0,2 llZtive!9»fir ""'""■" "' 
 
 and 30,3,0 freight ears t„ t^^r^^.^^rT"'^' 
 
 the years 1911 and 1012: ^^"'Pnient placed in 
 
 ^-""^-^ ■ :: tiS JS ?? 'J? I JS 
 
 Tlie freight cars ordered in lOio h,, fi, *. ' "" 
 ;vays were «,,„, t„ an addition f ' ":"**" I' 
 f.e,ght.car e„.„p„,ent then in nse on ail^an^ "r" ! 
 
 In Canada, in tl.e period of loio to 1912 ih. 
 
 earnings from freight increased hv 07 ^'"'' 
 
 tonnage and mileage service n^fom 7 T';'"*' '^''^ 
 
 of what the railways a, e doTnrir \^ " '"'^^"''^ 
 
 following table putsX nTttr ^a's^ ' ^"" *'^ 
 
 1 le matter m a summary manner: 
 
 Average haul, miles jsf^ .^f* -'Wfl /9/0 ^9^^ 
 
 Average tons per train. . . . ; S gn ll*! 21 1 20O m 
 
 Average camper train. ... 92 Jr ^ *V^ ^11 305 |i? 
 
 Average tons per car S.^? Jg 2 9'! J? 1.^ '« «« ^^ '^ 
 
 T-I • ''^ '3 10.91 17 87 
 
 In the period in n„.ct 1 ""^ '''^'*^^" ^^''^^^' 
 
 thirty tons canacitv if n . '"^ *''^ ^^'^^''^^^ ^«^ «* 
 
 "f lOls/ll pert'; *;"" '" ""*^^ *^«t «" the figures 
 average empir ' ''''^*^'^"^ "^P^^^ -«^ «" the 
 
 34 Mtcy,,y r«^r.9 o/ ;/w/V^;-*«/ interest Th. f i 
 mental part transportation plavs in allTf 7 T'^' 
 
 ^^reat importance of freight traffi ^'n *'"' '"^ ^'^^ 
 
 ^"^ traffic m a new country. Ins 
 
FREIGHT RATES 
 
 383 
 
 caused much discussion as to the proper basis of rates, 
 and especially of freight rates. While certain phases of 
 competition have effect in railway transportation, there 
 are also limitations of competition. In a sense, this is 
 becoming more and more true of all modern industry, 
 and the easy-going ideas as to the pervasive effects of 
 competition which developed at a time when industry 
 was not organized on a large scale and large investments 
 of capital were uimecessary, are now being shocked into 
 readjustment. 
 
 In the case of the railway, its service is as fundamental 
 in modern industrial life as electric light and water serv- 
 ices and street cars are in the routine of the city dweller. 
 Aisy interference with the efficiency of the transporta- 
 tion system is .». far-reaching consequence. The large 
 mass of the people are in one way or another affected by 
 the transport of commodities on the railway. Few, 
 nowadays, lead the hermit life. Not onlj'^ are we de- 
 pendent on the railway in the normal distributive process, 
 1)11 1 we are greatly dependent on it in our maladjusted 
 distributive organization which is characterized by wastes 
 of transportation. When we ship Eastern Townships 
 butter to Vancouver Island and New Zealand butter to 
 Ottawa, New Zealand poultry and mutton to the inte- 
 rior valleys of British Columbia, and eggs from Ontario 
 to llegina, it is but little wonder that the freight rate 
 elicits active discussion. 
 
 .'{.). Competition. — Not only is the rate a matter of 
 wide interest, the nature of the railway transportation 
 business is also important. In a letter which Leland 
 Stanford wrote to the San Francisco Chamber of Com- 
 merce in 1873, he said: "Whenever undue profits upon 
 an investment in railroads, or any other corporate prop- 
 erty accrue, other capital will always be found to enter 
 
384 
 
 TRAFFIC 
 
 nito the same business to share such profits, and by com 
 petition to re(h,ce them to a legitimate standard." On 
 he other Jiand, J. J. Hill, in his evicienee l,efore the 
 interstate Commerce Commission in 1902, said- "Com 
 petition d.)es not lower rates; on the contrary, it advances 
 them In the North A\'est, where for twenty years the 
 Northern Pacific and the Great Northern 'have been 
 at peace, where one road has agreed with the other on 
 rates and maintained the .-.greement. rates are lower than 
 111 any other part of the country." 
 
 Railways are not operating in a frictionless economic 
 ether, as Stanford naively suggested. They are forced 
 by their nature to come into some kind of Relationship 
 A dry goods merchant, dealing with his customers, is 
 not dependent upon the other merchants concerned in 
 local trade. He may do more than a local trade with- 
 out demanding any co-operation with other merchants 
 It is true that the pursuit of his trade demands a co-oper- 
 ation with the wholesale merchant. But within the 
 hmits of his retail business his relationship to other mer- 
 chants is not one of co-operation, but of competition. 
 
 30. Compared tcith mercantile and manufacturing 
 husiness^A merchant must, of course, be prepared, 
 withm limits, to supply the goods demanded by his cus- 
 tomers, and when they are demanded. A railway is 
 engaged in selling services, and readiness to serve is 
 therefore essential to its business. A merchant, while 
 he must be ready to serve, has the opportunity of aci- 
 nisting his stock to seasonal demands, and in ^o doin- 
 he has the opportunity to turn his capital over. A 
 manufacturer may conceivably accumulate a surplus 
 stock of goods to meet a later demand. It is patent 
 that a railway cannot create service in advance of de- 
 mand. It has to be prepared to provide service when 
 
FREIGHT RATES 
 
 S85 
 
 and how demanded. This readiness to serve is repre- 
 sented in locomotive and freight car units. 
 
 A striking example of this is afforded by the western 
 grain movement. The grain begins to move about two 
 and a half months before the close of navigation on the 
 (ireat Lakes, and every effort has to be made to get the 
 grain forward to Fort William and Port Arthur. Con- 
 sequently the railways have to be ready to meet a peak 
 load in a short period of time. On September 29, 1913, 
 the Canadian Pacific handled in and out of Winnipeg 
 5,014 cars of grain. On the same date thirty-eight 
 trains of grain were dispatched from Winnipeg in ten 
 hours, or an average of one train every sixteen minutes. 
 In order to meet this peak load, the railway has to carry 
 sufficient cars to meet not only the grain peak load, but 
 also carry on the ordinary business of the railway. 
 Were it possible to equalize the grain movement over 
 the year, it is obvious that a lesser number of cars would 
 be needed to move the total business. 
 
 37. Evils of parallel lines. — As has been indicated, 
 attempts have been made to trace an analogy, if not an 
 identity, between railway transportation and other busi- 
 ness. The analogy, however, is imperfect. On account 
 of the large expenditure of fixed capital necessary, the 
 construction of parallel railways is expensive. Nor- 
 mally it is better, both from the standpoint of the public 
 using the railway and from the standpoint of the public 
 investing in railways, not to have reduplication of closely 
 paralleling railways. If there is paralleling, the chances 
 are that there will not be sufficient local business for the 
 two lines. If the parallel lines connect two important 
 commercial centers, they may each obtain a sufficient 
 share of the trade. But as regards local traffic there 
 may be insufficient to give an adequate division. 
 
 C-ra— 85 
 
386 
 
 TRAFFIC 
 
 ■te: 
 
 Two parallel railway systems competing for an insuffl. 
 cent local traffic have all the greater refson to dnfa 
 some arrangement with reference to the division of the 
 traffic. In the realignment of the railway system of 
 e«,tern Ontario, which is being brought about by the 
 «.nstruct,o„ of the Canadian Northern lines and the 
 Canad an Pacific hne-the Campbellford. Lake Ontario 
 and V\ estern-there is m the towns along Lake OnUrio 
 parallelmg of the lines of the Grand Trunk and ^u2 
 ca .on of ,ts facilities. These new lines are being S 
 pnmardy because of the through business. As to the 
 oeal business, while there will be competition of service, 
 It s not to be expected that there wUl be competition in 
 rates, except m so far as the short-line mileage of one 
 ra, way w,l control the maximum charges of the other 
 railways between given points. 
 
 Even if we have two systems which do compete the 
 competition is different from orfinary competitio.: To 
 have competition operating in the same w^y as in ordi- 
 nay business there would have to be a very L^l 
 
 ing railw^s" ' "•""■"""« '"" '""^•'' °' *^ »■»•««■ 
 
 If, however, a railway which has a monopoly of the 
 
 ocal business charges exorbitant rates, the, fby obtain- 
 
 ng profits grcatci than normal, it is possible that poten- 
 
 cLt ioTr »' T T^ "■"■■^'^ *•■''• B"' <=«rtain qualifi- 
 
 ade„n»t.T i"'™ '" ■"'"''• The local business 
 
 ne« »t ,T "' T^- '™" ""h *e additional busi- 
 
 pr^fit rib T''' ''""^P' ^' '■"'«'«1"''te to give a 
 
 profit on the investment of two lines. Then airain if 
 
 derd"V'"V' """'• *^ ^p'*"' ™» m";*:!''™;:* 
 
 raffle. It cannot, of coiu-se, be moved if the profits are 
 madequate. If a railway is obtaining profits in excess 
 
FREIGHT RATES 
 
 887 
 
 of the normal rate, then, subject to what has been said, 
 free capital may in time be attracted. This takes time, 
 although it is not impossible. 
 
 38. The West Shore Case.— The Hudson River Rail- 
 road was known to be obtaining a large return on the 
 investment. The West Shore, which parallels the Hud- 
 son River Railroad on the west side of the river, was 
 the outcome of this. That paralleling does not of neces- 
 sity ensure efficient competition, and a permanent advan- 
 tapfe to the public is illustrated in this. The West Shore 
 was built primarily as a blackmailing system. For 
 some time it cut the Buffalo-New York rates in two. 
 The nominal stock of the railway represented nothing. 
 It was built on the bonds. The Vanderbilt system was 
 forced in self-protection to lease the road. It is true 
 that the public gained a competition in service; but the 
 puhlic, in order to obtain this, was paying at the time 
 on an unnecessary addition to fixed capital. 
 
 In Canada, especially in western Canada, parallel 
 lines are being extensively built. It is unfortunate that 
 this is being done, because there is such an extent of 
 territory still needing railways. As the money which 
 goes into these railways for the most part represents, 
 on the newer lines, at least, borrowed money, it simply 
 means that the construction of every additional unnec- 
 essary i)arallel mile lessens to that extent the ability 
 to raise capital to construct railways in undeveloped 
 country. 
 
 39. "Postage stamp" rates. — Arguing from the anal- 
 ogy of the postal service, some, as for example, Gait in 
 Engl ,nd and Cowles in the United States, have argued 
 that there should be a flat rate. Cowles, in his "A Gen- 
 eral Freight and Passenger Port," has put the position 
 thus: "Railway rates should be determined by the cost. 
 
388 
 
 TRAFFIC 
 
 and not by the value, of the service rendered. Any rate 
 that will pay the cost of the shortest haul of a person o 
 of a piece of property, within a railway system, will 
 pay the cost of the average haul, and. therefore the 
 cost of service rate." 
 
 It has been recognized by the Interstate Commerce 
 Commission, as well as by the board, that while dis- 
 tance is a factor, it is not the only factor. In the prac- 
 tice of rate-making there is at times a minimizing of 
 distance. At one time, in shipments from Official Classi- 
 fication territory to Pacific Coast points, the practice 
 grew up whereby New York and Chicago had the same 
 class rate to the same destination. This arose out of a 
 competition of markets as between the territory adjacent 
 to New York and the territory adjacent to Chicago. 
 The railways entering into the two cities desired to 
 protect the trade of their respective sections, and finally 
 a compromise was worked out whereby New York and 
 Chicago were "blanketed" on Pacific Coast business. 
 
 In shipments from Ontario and Quebec to points in 
 the Canadian North West, the territory between Men- 
 treal and such points as Samia and Windsor in the south- 
 western peninsula of Ontario, are "blanketed" on a 
 common rate. 
 
 Wellington, in his "Economic Theory of Railway 
 Location, which is noteworthy as the first real attempt 
 to correlate the engineering and the economics of loca- 
 tion, puts m its most extreme form the case for the mini- 
 mizmg of the importance of the distance factor: 
 
 The sale of transportation, like the sale of any other com- 
 modity, IS governed by the universal business law of selling what- 
 ever is salable as dearly as possible (or at least as dearly as is 
 prudent and wise) regardless of the cost of production. The 
 sclhng price of no marketable commodity, whether transporta- 
 
FREIGHT RATES 
 
 S89 
 
 tion or houses, or cotton cloth, is fixed by the cost of produc- 
 tion, I'xccpt that if it will not brin^ a profit on its cost it is no 
 longer produced ; and for railways any such attempt would be 
 ptirticiiliirly senseless, for the reason that the cost of any par- 
 ticular sale of transportation may be considered as varying 
 iinyu litre from zero upwards; depending to a far greater extent 
 tliHii ill any other commercial transaction simply upon the 
 luiiount tiiat can be sold. 
 
 The theory of Cowles rests on an exaggeration of the 
 niiiinportance of distance. While distance may not in a 
 |)articular case be the determining factor, it is a factor to 
 he considered. In assuming that the rate that will pay 
 the cost of service of the shortest haul will be the proper 
 rate for all, he is resting upon pure assumption. If 
 aj)j)lication were made of the theory, it would inevitably 
 hapiH^n that the long-distance traffic would be unduly 
 l)()mised at the expense of the short-haul traffic. 
 
 Further, if it is contended, as it is by Cowles, that 
 rates should be determined by cost of service and that 
 at the same time distance should be disregarded by apply- 
 ing' the postal principle, it follows that distance is not 
 a varying element in the cost of service, and that it must 
 cost no more to haul a car five thousand miles than to 
 haul it five. While the theory might possibly be enter- 
 tained as a matter of public policy, as a statement of a 
 cost of service basis, it is a patent absurdity. 
 
 40. Distance rates. — While the "postage stamp" the- 
 ory disregards distance, the equal mileage theory over- 
 eiiipliasizes it. In 1873 there was introduced into the 
 Parliament of Canada a bill to provide that "tolls should 
 he at all times charged equally to all persons and after 
 the same rate per mile for all distances in respect of 
 ])assengers and traffic." At the same time, the subject 
 was engaging the attention of the legislature of New 
 
890 
 
 THAFPIC 
 
 ^.I^f « ""*' " "'" *•■* competition of g«rf, 
 
 fn,n, further west, which went through on . lo^ 
 
 ha,., ,«rn.,le a, eom,.ared with the higher-rate b^u 
 1 ^ tT '?'• r""'' ''"'"«'" "•e^n.at.^r to^: 
 
 of 1878 cau,ed th,» j.rojeet to he rather aetively Z 
 cu,«d ,„ the period from 1878 to 1874. " 
 
 « .lie the thoroughgoing application of the di,lan« 
 prmcple ha, the advantage of ,upplying a ™^ M 
 here are difflcultie, attaching to it, fSle ap^fcS 
 .n f«.ght hu„ne,s. A distance rate woul.I l.afe h 'I 
 advantage that it would give the preference to cT 
 n,od,t,e, po«e„i„g large value in ,mall h^k, .nZ 
 would make a local market for bulky eommoA L pj 
 example, rough forest product,. cen.ent. hide, and ,ki^ 
 gra,n and gra n products, sugar beet,, brick , tone 1"' 
 l.n,e, etc., could not he carried c«n,iderable d rnc"*; 
 at present. The higher valued article, would moTun 
 
 rd'oTiThi^rr'"""-™'""'-''^'-^ 
 
 In England, the Select Committee on Railway Com 
 
 (a.) It would prevent railways from lowering rate, 
 leswn.ng advantages of competition. 
 larLer ouLTir''' """"'''" '"'* »"■'"« ^"^^ "'« »» 
 
 tai^ada between L.C.L. and C.L. In England train- 
 load quantities may also be considered.) 
 
 ic.) It would compel the same rate over exnensive 
 a, over less expensive lines of the company. ^ 
 
 41. Bate, based on capitalization.-Vaks, there i, in 
 
FREIGHT RATES 
 
 801 
 
 the first instance a regulation of the issue of the securi- 
 ties entering into the capitalization, there is no assurance 
 that the capiUlization as it stands is in its entirety legiti- 
 mate. Then, again, a railway which has been lavishly 
 assisted by the government, for example, the Canadian 
 Pacific, may be able to keep down its capitalization. 
 Another, like the Grand Trunk, may have been forced 
 at times in default of government assistance to issue its 
 st(Kk at heavy discounts. Under the capitalization plan, 
 is the Grand Trunk to be penalized for its misfortunes? 
 Then, again, if the road with the lighter capitalization 
 and rates fixed accordingly competes with the road with 
 the heavier capitalization and rates fixed accordingly, it 
 would happen that between common points the latter 
 road would have to meet the rates of the former. The 
 furtlier question arises, what is to be considered in strik- 
 injr the rate on capitalization— is it the par, or is it the 
 cash which actually was raised? 
 
 The following summary for 1912 will serve to indi- 
 cate the lack of harmony between the takings per passen- 
 ger or per ton and the capitalization: 
 
 Canadian Pacific (excluaive of leased lines) . 
 
 CuniKlian Northern (Western lines) 
 
 Grand Trunk 
 
 Ateragt 
 
 Capitalization 
 
 PerMiU 
 
 $ 47,354 
 
 41,743 
 
 l«0.dO» 
 
 Paitenger 
 MiU 
 
 Eami tgt 
 CmU 
 1.043 
 S.114 
 1.81S 
 
 Ton MiU 
 
 Earning* 
 Cent* 
 
 .774 
 .757 
 .687 
 
 42. Physical valuation as a rate ba«*.— Correlated 
 with t!ie question of capitalization as a rate basis is physi- 
 cal valuation, which is attracting so much attention in 
 the United States at present. Commissioner Clements, 
 of the Interstate Commerce Conunission, in speaking 
 before the House Committee, said : "I think it is sound 
 justice and law that as a basis for constitutional earn- 
 ings a fair return on the value of the property means. 
 
392 
 
 TRAFFIC 
 
 generally speaking, a fair return nr. fk^ • 
 
 ally n.ade. on«i.i,V and s'^Itly "'''"'""'"' 
 
 Just what the »eneraleffepf ,.f ..I., • i , 
 
 per,' GaMc said: ^'^ ^mm.an */,;^ 
 
 .iiuXz':::;: ti ;;''■•"« ", "" '"'""'■•°" ->- -p'e.e 
 
 oo„.,u„,cr, IC" " '° '"7"'' -"" >>«-«' 'o U.e Amerio. 
 
 «ro .oc,„, ovc.!;;:",:!!,*''™'' °" "'"*'' ^■"'™» -'"-^ 
 
 In the case of the valuation of the New York v» 
 ther,n, t 't appe„e<I that the assets excee.led 
 
 .i.at when the rate l^ZZt IZTS^^''^'"^ 
 return thereon determine.) tl, 1 . , "'*' ■'"P^"' 
 
 n.aximum tailings on.efaiWT?'' Tl."'"" "•' 
 That is to say, neither of Z. .. .7 ^^"^odit.es. 
 
 .-^.- -2^;i£r*;L1.;-''•"■ 
 -f all » ver dl evn ' °'/T ~"""°<l'ti^». must first 
 ..f pro«s ' ™' "'"' "'"^""- ^"'-^ "- item 
 
 In various railways, „„ attempt has been made to dis- 
 
FREIGHT RATES 
 
 SOS 
 
 tinguisli between expenses of passenger and freight busi- 
 ness. Certain items may be directly allocated; other 
 items whifh are not so capable of direct allocation are, 
 in the case of the Louisville and Nashville and the Bur- 
 liiiotoii railways, divided on the basis of the engine mile- 
 age for each class of traffic. While this affords a sys- 
 tem of distribution of cost which may be of comparative 
 value one year with another, it does not show how cost is 
 actually distributed, because it is based on an assumption. 
 
 The Interstate Commerce Commission abandoned in 
 1894 the attempt to arrjve in its accounting system at 
 cost of service. It has more recently, in the matter of 
 soft coal rates to the lakes, taken up the matter of cost 
 (listril)ution once more. It cannot, however, be said that 
 the commission has definitely accepted cost of ser^'ice 
 as the infallible criterion of reasonableness. 
 
 In railway service, there are certain general expenses 
 wliich must be borne if the railway is to be a railway at 
 all. These charges, in the rough, do not vary with the 
 amount of business done. Then, again, the railway does 
 hoth ])assenger and freight business ; the facilities of the 
 railway are used by both these types of traffic. The 
 (|uesti()n arises: how are the expenses of creation and 
 maintenance of these facilities to be divided as between 
 these forms of traffic? Then, again, freight may be mov- 
 ing in trainloads, as in the movement of such a staple 
 as wheat; or it may be handled in way-freight trains, 
 wliich are peddling package freight. The question 
 whether the movement is in carload or in less than car- 
 load quantities also, as has been indicated, aflfects the 
 cost of handling. But the freight rate which is struck 
 must l)e an inclusive average. The cost of the move- 
 »' ■ freight is affected by the question of whether it 
 is uu/h or local. The amount and direction of the 
 
S94 
 
 TRAFFIC 
 
 
 K also of miportance. I„ Canada in 1912, 22 per Z 
 of the to al freight-ear mileage «=present;i J^IZ 
 movement In the long run, the loarkd^ar JS 
 must pay for the empty movement as well ^ 
 
 44. What is coat of sertice?-Vf\Kn we speak of cml 
 of serviee ,t must be remembered that it covers a van^ 
 of meanmgs. It may be a primary cost represenhV,! 
 the actual cost of movement either ofthe artidemS 
 or of an additional unit of commodity when the traffic I 
 already movmg. For example, a certain amount" 
 package freight is moving westward from Fort Wifc 
 and there are empty cars which have to be taken wert- 
 ward. A railway may conceivably desire to attract tmf. 
 fie at low rates to redress the volume of empty mile.« , 
 smce as the cars are moving any way it has onlyl ' 
 question of the additional cost. Ever/commodity m^ 
 contribute m some degree to secondary cost. That is 
 to say, ,t must make such a contribution to all the ex- 
 
 enable the radway, one commodity with another, to be 
 
 Afflcult phase of the cost of service theory, for what the 
 commodity can contribute to this secondary, but none 
 the less necessary, cost, depends on its ability to contrib- 
 ^ntributT '"^ P^"-*'^"! -^ of what it ought to 
 
 An important question as affectmg any attempt to 
 determine cost of service is the ratio of constant to van- 
 
 total expenditures of the railways of Canada for 1912 
 may be made: 
 
 • "RaMroad Rates and Regulations." by W. Z. Ripley. 
 
FREIGHT RATES 
 
 395 
 
 AXi\LYSIS OF TOTAL EXPENDITURES CANADIAN RAILWAYS 
 
 1912 
 
 Per Cent of Per Cent of 
 
 Operating Expenses Total Expenses 
 
 Both Constant Variable Both Constant VariabU 
 Maintenance of way 
 
 and structures.... 20.9 14 6.9 18.8 12.5 6.3 
 Maintenance of equip- 
 ment 19.8 9.9 9.9 17.8 8.9 8.9 
 
 Traffic expenses S.5 ) ^^ ^g 3.1 » ^ q^ ^ q^ 
 
 TransporUtion 52.4 J *'" *' " 47 J 
 
 General expenses.. . . 3.4 3.4 .... 3 3 .... 
 
 100 55.2 44.7 
 Fixed charges 10.3 10.3 
 
 100 59.75 40.25 
 
 Summarizing these computations, we arrive at the re- 
 sult that approximately three-fifths of the total expendi- 
 tures of the Canadian railways and 55 per cent of 
 their operating expenses are independent of the changes 
 in the volume of traffic. Two-fifths of the total expenses 
 and 45 per cent of the operating expenses vary with 
 changes in the traffic. 
 
 The Wisconsin Railroad Commission, wliose work 
 in connection with the regulation of rates is extremely 
 valuable, has placed great reliance upon the cost of 
 service principle. Commissioner Erickson, of that com- 
 mission, in dealing with the question of rate regulation, 
 has said: "The cost of service both in law and in fact ap- 
 pears to be the fundamental basis for rates." And he 
 has also said: 
 
 In order to be able to determine the costs per unit in the 
 railway service under present conditions, it is necessary, first, 
 to separate the expenses between freight and passenger traffic, 
 and second, to separate the outlays for each of these branches 
 of the service between terminal and movement expenses. . . . 
 I pon close examination, it is usually found that when the ac- 
 counts are picked to pieces, reclassified and reconstructed along 
 proper lines, often 60 per cent of the expenses are found to be 
 
396 
 
 TRAFFIC 
 
 special in each case to the freigiit and passenger traffic, and 
 that the bahince consisting of the fixed or common items, bear 
 so close a relation to certain factors in the business that they 
 can be safely apportioned thereon. 
 
 The commissioner allocates fixed or indirect expenses 
 in freight traffic, for example, according to the locomo- 
 tive, the car, the locomotive-mile, the car-mile, the train, 
 the train-mile, the number of cars handled, the number 
 of tons handled, the tons carried one mile. 
 
 It would be interesting, if space permitted, to pur- 
 sue further the analysis of the methods used by the Wis- 
 consin Commission. Sufficient has been said to indicate 
 the thoroughness with which they have worked the mat- 
 ter out. 
 
 But while the Wisconsin Commission thus emphasizes 
 cost of service as fundamental, it recognizes value as a 
 factor as well. Commissioner Erickson, in a paper read 
 before the National Association of Railway Commission- 
 ers in November, 1910, said: 
 
 . .-. costs . . . (are) the first and most essential element 
 in rate-making. But . . . recognition of value in fixing rates 
 is usually regarded as in line with the best interests of all con- 
 sumers . . . cheap and bulky articles are, as a rule, not moved 
 at all except at comparatively low rates, and this for the reason 
 that their ability to pay is small. . . . While low-priced articles 
 should be charged comparatively low rates, the rates so levied 
 upon them, under normal conditions, should, as a rule, be high 
 enough to cover their share of the ordinary operating expenses, 
 including something in the way of net earnings. Such traffic 
 is of importance even on these terms. It increases the volume 
 of the traffic and thereby decreases the cost of the same per unit. 
 By contributing something to net earnings, it also decreases 
 the amount that will have to be borne by the rest of the traffic. 
 The deficiencies in the net earnings from low-grade traffic should 
 be made up by higher rates on the higher grade traffic. 
 
FREIGHT RATES 
 
 397 
 
 Used in this way, cost of service determines not the 
 actual reasonable rate to be charged but the minimum 
 necessary rate. 
 
 ' " What the traffic will hear. — The Cullom Commit- 
 t whose report was responsible for the constitution 
 of the Interstate Conmiission, said: "The capacity of 
 each commodity to contribute to the payment of the 
 fixed charges is measured by the extent to which the cost 
 of its transportation fixes its market value and deter- 
 mines the question of its movement. . . ." Commissioner 
 liaiie, who during his tenure of office as a member of the 
 Interstate Commerce Commission, was a most trenchant 
 critic of railway evils, has said: 
 
 . . . consideration must be given to what may be termed 
 public policy, the advantage to the community of having some 
 kinds of freight carried at a less rate than other kinds, and this 
 is tlie true meaning of the phrase, "What the traffic will bear." 
 It expresses the consideration that must be shown by the traffic 
 nifinager to the need of the people for certain commodities. He 
 accordingly imposes a higher rate upon what may be termed 
 luxuries as compared with that imposed upon those articles 
 for which there is more universal demand. . . .^ 
 
 Albert Fink, who was the first railway official in the 
 Ignited States to attempt to make a scientific study of 
 traffic, said: 
 
 The question that greatly controls tariffs is what is the 
 service worth not what does it cost; and this is a mere commer- 
 cial transaction uncontrollable by acts of legislation. The 
 relative value of an article at the place from and to which it is 
 sliipped determines the charges for transportation it can bear. 
 If a greater charge is made than the difference in these values, 
 tlic article cannot be moved. It may, therefore, be found neces- 
 sary to charge on some articles less than the full cost of trans- 
 portation, in order to enable them to be moved at all, and this 
 ^22 /. C. C, 623, 
 
398 
 
 TRAFFIC 
 
 necessitate^^ again to charge more on others which can bear 
 higher charges. 
 
 Is the principle which the foregoing quotations set 
 out limited to railway business alone? 
 
 46. Principle applied in department stores.— Some 
 years ago the writer had the interesting experience of 
 being shown through the various departments of Can- 
 ada's greatest department store. The guide stated that 
 it was the policy to have every commodity sold within 
 six months. It was stated that, of course, in most de- 
 partments the commodities were turned over many times 
 in the six months' period. In the picture department, 
 however, the sales were normally slower. But the rule 
 that all articles must be disposed of in six months ap- 
 plied here as well. If a picture would not sell at the 
 price originally marked, the price would be reduced, and 
 successive reductions, if necessary, would be made so that 
 the pictT-re would be disposed of in the six months' 
 period. Now the picture might be disposed of at a very 
 slight profit, or even at cost. The other commodities 
 handled in other departments might contribute in greater 
 degree to fixed charges and to profits. The rate of 
 profit would of necessity vary with the conditions of 
 demand. But in the last analysis all tlie commodities 
 must be disposed of at such prices as would meet not 
 only the charges special to them, but the overhead 
 charges as well, plus some contribution to profits. What 
 each commodity would pay to overhead charges and 
 profits would depend on the price at which the commod- 
 ity could be sold ; in other words, on the ability to pay. 
 
 47. Applied to a newspaper.— Some years ago a 
 Canadian, resident in California, subscribed for a Cana- 
 dian daily paper. He found that the price per annum 
 west of the IMississippi was much less than it was in Can- 
 
FREIGHT RATES 
 
 ada. The contents of the paper were the same in Canada 
 as ill California. In Canada, the subscriber obtained the 
 daily news from its columns. In California the subscriber 
 of necessity received the daily news from other sources. 
 He was, however, interested in keeping in touch with 
 various developments in Canada. Was the paper sold 
 ill Canada at a higher price in order that it might sell 
 for a lower price in California? Was the price for the 
 C'alifornian subscriber a reasonable price covering 
 cost and profit, with the corollary that the Cana- 
 dian price was excessive? As a matter of fact, the 
 service in Canada was different from that rendered in 
 California. The paper sold west of the Mississippi may 
 he regarded as a by-product. To the extent it con- 
 tributed something over and above actual cost to general 
 exj)enses it was aiding in holding down the price in 
 Canada. The price as charged in Canada was not ex- 
 orbitant. Presumably it was felt that to sell the paper 
 to the Canadian subscriber at the same price as west of 
 tlie Mississippi would not yield a fair average profit on 
 tlie investment. The only conclusion that can be ar- 
 rived at is that having in mind the different services 
 rendered in the two sections, the lower charge was all 
 the traffic would bear. 
 
 48. Practical meaning of the term. — There is no ques- 
 tion but that if the railway rate is so fixed so as to take up 
 the difference between the price at the place of original 
 shipment and the price at destination — the full measure 
 of the value of the service — this is extortion. But the 
 term "what the traffic will bear" is concerned with some- 
 thing within this outside limit. It is concerned not with 
 "all the traffic can bear," but what it can bear and at the 
 same time afford a mutual profit. 
 
 Keference is sometimes made to the fact that many 
 
400 
 
 TRAFFIC 
 
 articles of light weight and high values could stand ver- 
 much higher rates than at present, without seriously 
 affecting the consumer. To say, for example, that an 
 increase of 10 per cent in the rates on furniture might 
 add sixteen cents to the cost of a dining-room set; that 
 an ordinary suit of clothing might be increased from a 
 third to half a cent by a 10 per cent increase in freight 
 charges; and that by a similar increase the cost of shoes 
 might be increased one cent per pair, is really to beg the 
 question, because the question is not that the article in 
 question could stand a very much higher rate without 
 appreciably affecting the consumer, but, is the rate rea- 
 sonable? As has been aptly said, "Statements like these 
 . . . emphasize the economy of the transportation serv- 
 ice; but they also show with equal clearness that if the 
 carrier is not prevented by competition or by govern- 
 ment interference, he may exact such rates of producers 
 as would compel them to pay much greater sums to the 
 carrier than it is entitled to receive." 
 
 Charging what the traffic will bear has, with the rec- 
 ognition of its proper limitations, a justification. While 
 the transportation charge is not properly a tax since it 
 is a payment for a specific service, while in the case of 
 taxation it is difficult to earmark the particular benefit 
 received, it bears an analogy to the basis of taxation, 
 namely, ability to pay. Properly applied, charging what 
 the traffic will bear means so apportioning the charges 
 as to allow the freest possible movement of all commod- 
 ities. Certain charges, as has been seen, do not vary 
 with the traffic. No article should be handled at less than 
 the out-of-pocket charges for its movement. But what 
 shall it contribute to the general expenses? As the Wis- 
 consin Commission points cut, there must be considered 
 the value and nature of the article as well. If, then, 
 
FREIGHT RATES 
 
 401 
 
 ice, lime, or stone cannot contribute much over and 
 above out-of-pocket expenses to constant expenses, some 
 otiier commodity must bear more. 
 
 Some years ago, a railway official stated that rates 
 were based on competition, comparison, and compromise. 
 That is to say, rates are wholly empirical. While this 
 may be too b oad a generalization, the experience of Ger- 
 many is in point. There, on the government owned and 
 oi)erated railways, there was at first a "space" tariff 
 whereunder each commodity paid an equal rate per mile 
 based on the space occupied by it in the car, plus a fixed 
 terminal charge. Now there is in operation a tapering 
 rate. The rate per kilometer decreases as the distance 
 increases, and it is also modified in particular cases by 
 competition. The government has had to consider the 
 ability of conmiodities to pay. In the export rates of 
 the German railways to the seaports, the same recogni- 
 tion of competition is to be found both in respect of 
 water and of market competition. For example, to meet 
 the competition of British manufactured goods at the 
 seaports, similar German goods are carried by rail to 
 these ports at much lower rates than are charged on 
 local rail movement. 
 
 49. View of Canadian Manufacturers' Association. — 
 Industrial Canada, the organ of the Canadian Manu- 
 facturers' Association, in dealing wiiii the subject from 
 the shippers' standpoint, stated the situation as follows: 
 
 Criticism of the railways and their methods of rate-making 
 should be tempered by a consideration of some of the problems 
 they have to meet. In theory, no doubt, a carrier should charge 
 the same rate for the same service under all conditions. Prac- 
 tically such a thing is impossible. In order that the factories 
 of Ontario may operate, it is necessary that coal be carried 
 from Pennsylvania. It must be delivered for a few dollars a 
 
 c-m-«e 
 
402 
 
 TRAFFIC 
 
 
 ton; it costs so much at the mine mouth; the rest goes for 
 transportation. If more were charged the factory could not 
 buy it and the business developed by that factory would cease. 
 For that reason, railways are hauling coal at a price which in 
 itself would not pay the cost of operation. They do it in order 
 that business in their territory may be developed. The man 
 who establishes a smelting plant in Ontario must be able to 
 manufacture pig iron at a cost which will enable him to sell in 
 competition with his competitors in Pittsburg, Sydney, or any 
 other point. With fixed charges established and the cost of 
 ore and coal at the mine mouth uniform, he is able to pay for 
 transporting that ore and coal only so much. That is all the 
 traffic will bear. It rests then with the railway to say whether 
 for the sake of the business such a plant will bring into exist- 
 ence, or to keep rolling stock moving or to provide return 
 cargoes, this traflic is worth while at such a price. But the 
 principle, that of charging what the traffic will bear, is sound 
 and is indeed the only system which is at all practicable. The 
 idea that other industries have to pay extra to make up for 
 low rates on raw materials is absurd. The business has to be 
 taken at a low price or not at all. By taking it fixed charges 
 are distributed over a wider bulk of business and conditions are 
 to that extent improved for other users of the service. It prob- 
 ably costs a railway as much to handle a ton of coal as a ton 
 of silk. If the rates were averaged the buyer of a piece of silk 
 might benefit to the extent of a cent or two, while the house- 
 holder would find his coal bill go up some dollars a ton. The 
 suggestion would be no more popular than feasible. As the 
 present system is the only one which practical railway men have 
 so far been able to devise and as it has been approved by ship- 
 pers as right in principle, though frequently, it is true, some- 
 what unsatisfactory in its individual incidences, we may be al- 
 lowed to accept what we have rather than ... to fly to evils 
 that we know not of. 
 
 What, then, is the test of reasonableness? Distance, 
 bulk, conditions of loading, value, competition, cost of 
 
FREIGHT RATES 
 
 403 
 
 service — these and other factors all have weight. But 
 IK) one factor can be pointed to as exclusively applicable 
 ill every case. There is no yardstick of reasonableness. 
 While there are factors capable of more or less precise 
 determination which bear upon the question of reason- 
 ableness, the final answer of a regulative tribunal must 
 l)e that the reasonableness of a rate is a matter of judg- 
 ment. 
 
CHAPTER IV 
 
 FREIGHT RATES IN PRACTICE 
 
 50. Class tariffs and commodity tariffs. — By refer- 
 ence to the classification it may be ascertained in which 
 class the article (for example, cotton piece goods) the 
 shipper desires to send is to be found. By reference to 
 the appropriate tariff the rate for the article will be 
 found. 
 
 Tariffs may name rates either by classes or by com- 
 modities. When they name rates on specific com- 
 modities, these commodities are taken out of the ordinary 
 classification rating. In Canada and in the United 
 States, tariflFs quoting rates on commodities are known 
 as commodity tariffs. In England and Germany they 
 are known as Exceptional Rates. Commodity tariffs 
 are concerned with the lower grade goods. 
 
 In a commodity tariff the normal unit is the carload. 
 A commodity rate is in general a recognition of the 
 volume of movement. It may be given with the inten- 
 tion of developing an industry, or as a recognition of a 
 large tonnage from a staple industry — for example, the 
 movement of grain or live stock in Canada. When there 
 are different classifications in a country, as in the United 
 States, we find, for example, in the Southern Classifica- 
 tion, raw cotton, a staple commodity, given a conmiodity 
 rating, while under the Western and the Official Classi- 
 fications it has a class rating. Again, the volume of 
 movement of iron ore in the northern states leads to the 
 
 404 
 
FREIGHT RATES IN PRACTICE 
 
 40ff 
 
 istublishment of a commodity rate. A commodity rate 
 may be given as a result of water competition, as in the 
 ease of traffic destined to the Pacific Coast. 
 
 Ill Germany, the reasons given for granting such 
 rates will outline the extent of the practice. The rea- 
 sons summarized are: railway competition, competition 
 uj^aiiist waterways and highways, competition against 
 foreign transportation ways, competition to divert traffic 
 to a given harbor, competition of markets, rates granted 
 to develop industries which have unfavorable geographi- 
 cal situation, rates granted to ensure the continuity and 
 increase of transportation. For England, the granting 
 of such rates has been justified by the foregoing con- 
 siderations and, in addition, by volume and regularity 
 of traffic, loading per car or per train, earning power of 
 the traffic, liability or non-liability to damage, general 
 considerations of what the traffic will bear. 
 
 As indicative of the nature of the commodities on 
 which such rates are granted, the following list of the 
 ])riiicipal articles on which carload commodity rates are 
 published in Canada may be referred to: 
 
 Canned goods, lumber and terial (brick, stone, sand, lime, 
 
 hliiii^les and rough forest etc.), paper, wood-pulp, pe- 
 
 products generally, salt, coal troleum and its products, fer- 
 
 niul coke, ores, grain and tilizers, sugar and molasses, 
 
 starch and glucose, ice, sugar 
 beets, cooperage stock, po- 
 tatoes, turnips, onions, flax- 
 seed and meal. 
 
 grain products, cement, hides 
 and skins, packing-house 
 products, iron and steel ar- 
 ticles (coarse), building ma- 
 
 As an example of the method pursued in building up 
 a particular conmiodity tariff, reference may be made 
 to the C. P. R.'s special coke and coal tariff, C. R. C, 
 Xo. W1296, effective October 4, 1909. This tariff, 
 Mhich applies in western Canada, took coal out of the 
 
406 
 
 TRAFFIC 
 
 10th class, to which it belongs, and worked out the fol- 
 lowing basis, the rate tapering as the distance increases: 
 
 100 miles and less 66% of 10th class 
 
 """ 64% 
 
 200 
 
 
 300 
 
 
 400 
 
 
 500 
 
 
 600 
 
 
 700 
 
 
 800 
 
 
 1000 
 
 
 62% 
 
 
 
 61% 
 
 
 
 60% 
 
 
 
 59% 
 
 
 
 53% 
 
 
 
 51% 
 
 
 
 Class rates apply to movements either way. They 
 carry the notation that they are effective "between" sta- 
 tions. A commodity rate is specific and applies to a 
 movement in one direction, unless otherwise noted. For 
 example, the Canadian Pacific tariff on grain, flaxseed 
 and grain products from stations in Manitoba, Sas- 
 katchewan, and Alberta to Westport, Fort William, and 
 Port Arthur is limited to the movement in the one direc- 
 tion and to specific points. 
 
 Commodity rates are extensively used. In Canada, 
 at least 75 per cent of the railway tonnage is carried on 
 commodity rates. In the United States, probably a 
 larger percentage of the business is so transacted. On 
 the transcontinental business to the Pacific Coast, into 
 which water competition enters as an important com- 
 peting and regulative factor, all the rates may be 
 regarded as commodity rates. In England, the com- 
 modity rates cover about 75 per cent of the business; in 
 Germany, about 63 per cent. 
 
 51. Comparisons of freight fm/^c— Comparison be- 
 tween the freight rates of Canada and the United States 
 on the one hand and the freight rates of England and 
 Germany on the other hand are often made with a view 
 of showing how low are the rates of the New World. 
 
FREIGHT RATES IN PRACTICE 
 
 407 
 
 Before making comparisons one must be sure that there 
 is a common denominator. 
 
 While in Canada and in the United States the increase 
 in the nmnber of carload ratings and the increase in the 
 size of the cars has had its effect in the increase of the 
 average tonnage per car, commercial conditions differ 
 in England and in Germany. In Canada and in the 
 United States the 80-ton car may be taken as the normal 
 car. In England the 10-ton car and in Germany the 
 20-ton car are the normal cars. The Canadian Pacific 
 in moving grain to the head of the Lake^, in trainloads, 
 can average 88.75 tons per car. In England the average 
 consignment of grain is about 2 tons. In general mer- 
 chandise in England an average of the business from a 
 representative station of the Great Northern on one day 
 showed 4,427 packages, which had a total weight of 128 
 tons. The average weight per consignment was two 
 cwt., the average weight per package was 62 lbs. The 
 total number of cars to move this business was 72, while 
 the average load per car was 84 cwt. Under the most 
 favorable circumstances the average loading of merchan- 
 dise per car on the London and North Western does not 
 exceed three tons. 
 
 In Canada and the United States large cars with large 
 shipments are used. In England, small cars with small 
 shipments and greater despatch are used. Some years 
 ago an officer of the Caledonian Railway, in comparing 
 the rates of the quantities normally moving on his rail- 
 M-ay with those out of New York and Philadelphia, 
 found that on groceries, dry goods, and tea up to dis- 
 tances of forty or fifty miles, the rates on his railway were 
 lower. 
 
 In Canada and the United States, the ton-mile rate, 
 a work distance rate, built up by multiplying weight by 
 
408 
 
 TRAFFIC 
 
 distance, affords a statistical measure of earnings. Ton- 
 mile rates are kept in England by the North Eastern 
 Railway, and comparison may be made with the German 
 railways. But in England and in Germany the average 
 haul and average loading are, because of differences in 
 business conditions, very much less than in Canada and 
 in the United States. In England it would be too ex- 
 pensive, even if business were so conducted, on account 
 of the expense of terminals, to hold trains until maxi- 
 mum tonnage was accumulated. The ton-mile rates in 
 Canada are held down by the long hauls. Ton-mile 
 rates are of value as a measure of earnings and of the 
 work done for the earnings. But they are useful for 
 comparative purposes only when conditions are similar. 
 Since they are averages of all kinds of traffic, long haul 
 and short haul, carload and less than carload, high-grade 
 and low-grade tonnage, they are averages which do not 
 necessarily afford a conclusive criterion of the reason- 
 ableness of a rate. 
 
 52. Component factors of a m^e.— While in England 
 charges for station and other terminal services are recog- 
 nized as being distinct from the haulage charge, in 
 Canada and the United States the practice is to quote 
 an inclusive rate. 
 
 Logically, the freight rate is composed of two fac- 
 tors—the terminal charge and the haulage charge. 
 Whether the terminal service is carried on in a large 
 expensive terminal or at a small wayside station, the 
 service is distinct from that performed in the road haul. 
 In the Grand Trunk terminals at Ottawa it takes, allow- 
 ing space on the team track for a car and for the neces- 
 sary roadway for access, a space of 800 square feet per 
 car. This space at $5.00 per square foot represents an 
 mvestment of $4,000 for freight-car space per car. Then 
 
FREIGHT RATES IN PRACTICE 
 
 409 
 
 there are the freight-shed facilities and the switching 
 expenses. Switching movements in terminals have been 
 computed as representing per mile an expense of from 
 six to twelve times that incurred per mile on a road haul. 
 
 In the terminal cost there is included not only the cost 
 of the particular movement, but there is also the question 
 of its contribution to overhead expenses. Then, again, 
 there is the complicated question of the joint cost of the 
 terminal as between freight and passenger services. 
 Aside from large expenditures on passenger stations it is 
 to be remembered that the passengers move themselves 
 in and out of the terminal; the freight has to be moved. 
 
 On the road haul there are the expenses for the wages 
 of the train crew, the cost of fuel, oil, waste, wages of 
 engine crews. Here, again, there is not only the ques- 
 tion of the cost of the particular movement, which in the 
 case of a trainload movement moving continuously 
 through a division may be computed, there is the further 
 and more difficult question of what contribution the com- 
 modity moved should ma^e to overhead charges. 
 
 Both in the case of the terminal costs and of the road 
 haul costs the matter is complicated by the fact that dif- 
 fering quantities may be concerned, carload and less than 
 carload quantities, the costs of handling which differ. 
 
 The terminal costs at both ends of the haul are con- 
 stant whether the haul be for 10 or for 800 miles. But 
 in the cost of the road haul the services incidental to the 
 movement do not increase in the same ratio as the 
 mileage. Further, the necessary terminal cost is a 
 greater percentage of the joint cost on the short haul 
 of, say, 10 miles than on the longer haul of 800 miles. 
 As the distance increases the haulage charges tend to 
 vary inversely, while the terminal costs chargeable 
 against the movement also become of less importance 
 
410 
 
 TRAFFIC 
 
 per mile as the distance increases. That is to say, on a 
 basis of ton-mile earnings, the ton-mile rate tends to de- 
 crease as the distance increases. 
 
 In the trans-shipment of grain cargoes at Depot Har- 
 bor the Parry Sound Railway placed grain on cars at 
 an expense of 25 cents per ton. The board has recog- 
 nized that in dividing up a rate to arrive at the reason- 
 ableness of the component parts a terminal expense 
 of 20 cents per ton is not unreasonable. Byers, in his 
 "Economics of Railway Operation," has figured out 
 terminal costs on the basis of New York figures as fol- 
 lows, per ton: 
 
 Interest and depreciation 28 6 
 
 Station services and shipping 41 15 
 
 70.14 
 
 In 1906, the Canadian Pacific made a computation as 
 to switching costs in terminals at Winnipeg on line haul 
 business; that is, on carloads received from or shipped 
 to points outside of Winnipeg. The services performed 
 were classified as follows: 
 
 (a) The expense of assembling and sorting 
 through cars. This covered 185,501 cars handled 
 an average movement of 3,600 feet. The cost was 
 computed at $3.99 per car. 
 
 (b) The placing, sorting, and assembling of cars 
 for local sidings in C. P. R. terminals. This covered 
 134,202 cars, with an average movement of 7,200 
 feet. The cost was computed at $5.32 per car. 
 
 (c) The transfer of cars between the Canadian 
 Northern and Canadian Pacific at St. Boniface, 
 destined to or received for siding delivery in either 
 terminal. This covered 24,961 cars, with an aver- 
 age movement of 20,050 feet. The cost was com- 
 puted at $6.65 per car. 
 
FREIGHT RATES IN PRACTICE 411 
 
 The cost figures were based on interest and deprecia- 
 tion on the freight terminals; interest and depreciation 
 on the engines used exclusively in the switching service; 
 actual cost of fuel, oil, waste, and repairs on these en- 
 gines; actual cost of wages, superintendence, etc., in 
 connection with exclusively terminal work. 
 
 These figures, assuming that the cars were of 80-tons 
 capacity, gave averages per ton as follows: (a), 18.8 
 cents; (b) , 17.7 cents; (c) , 22.1 cents. If an average is 
 struck of all the cars switched it amounts to 16 cents. 
 
 The Wisconsin Commission has worked out the fol- 
 lowing computations of terminal cost per ton for the 
 different classes of the Western Classification : 
 
 Classes 18 8 4 5 A B 2_ _^ — 
 
 $1.68 $1.39 $1.18 84c. 67c. 76c. «8c. 60c. 4«c. 83c. 
 
 If we arbitrarily assume that one ton of each class is 
 moved this would give an average of 82.8 cents per ton 
 to cover terminal costs at both ends of the line. 
 
 Variations in terminal expenses will be found not only 
 in regard to the cost of terminal properties, but also in 
 connection with the nature of the loading. In a specific 
 case the Wisconsin Commission has computed that 
 when — 
 
 Car is loaded with 6 tons freight, terminal ejcpenses are per ton $1 .68 
 
 Car is loaded with 16 tons freight, terminal expenses are per ton 56 
 
 Car is loaded with 20 tons freight, terminal expenses arc per ton 48 
 
 53. Distance as a factor in rates. — Examples have 
 already been given showing how in rate-making distance 
 may be minimized. In addition to those already given, 
 reference may be made to the system of group rates. In 
 Illinois, in the movement of coal, points forty miles 
 apart have been grouped under the same rate. Under 
 the Canadian Pacific coal and coke tariff, abeady re- 
 ferred to, the Lethbridge group, including six shipping 
 
412 
 
 TRAFFIC 
 
 points, covers a distance of fifty miles. Examples either 
 of the originating or of the destination points being 
 grouped are quite common. Reference may be made to 
 the class and commodity tariffs westbound to points 
 west of Lake Superior, including the Pacific Coast, to 
 the rates on grain and grain products from Fort William 
 to eastern points, JMontreal and west thereof, and to the 
 rates on lumber and forest products from British Co- 
 lumbia Coast and interior mills to eastern Canada. 
 
 The regulative tribunals of England, Canada and of 
 the United States have recognized that reasonable group- 
 ing is permissible. Grouping arrangements usually 
 come into existence where there are a considerable num- 
 ber of points supplying a commodity of general demand 
 to a common market. Grouping at the destination 
 points may also occur when such a commodity is mar- 
 keted over a considerable area after a long haul. 
 
 But while, because of special conditions, distance may 
 be minimized, it is, in the absence of such disturbing 
 conditions, always to be reckoned with. 
 
 The most interesting example in America of the adop- 
 tion of the distance basis of rate-making is to be found 
 in the territory of the OflScial Classification. This terri- 
 tory is subdivided into Trunk Line Association terri- 
 tory, which may, in a general way, be described as the 
 section east of a line drawn through Buffalo, Pittsburg, 
 Parkersburg, West Virginia, and Norfolk, Virginia. 
 West of this is to be found Central Freight Association 
 territory occupying the remainder of the Official Classi- 
 fication territory. 
 
 In the early seventies the railways located in what is 
 now the territory of the Official Classification were en- 
 gaged in cutthroat competition. In addition, the water 
 competition of the lake carriers was also felt. As an 
 
FREIGHT RATES IN PRACTICE 
 
 413 
 
 outcome of this there was worked out a system whereby 
 the Chicago-New York rate was taken as a base rate. 
 
 The rate system so built up was concerned with the 
 movement from Central Freight Association territory, 
 in which are located some 8,000 stations. Taking the 
 l)ase rate as 100 per cent, the shorter distance points 
 liave rates worked out on a percentage of the base rate. 
 For example, on the movement from Detroit to New 
 York, Detroit has 78 per cent of the Chicago rate. 
 Toledo and Sandusky are 71 per cent points. The rate 
 adjustment works westward to the Mississippi River 
 crossings, where 125 per cent points are to be found. 
 
 While the percentage system was adopted in 1876 
 there have been various readjustments and regroupings 
 since that date. Water competition, market competition, 
 and the effect of the rail movements of north and south 
 lines working in this territory have aided in bringing 
 about the system as it stands today. The result is that 
 instead of percentage points there are percentage 
 groups. While the system was concerned in the first in- 
 stance with the movement eastbound, it now in general 
 applies westbound, 
 
 A similar system is made use of in the movement from 
 points in Central Freight Association territory, inter- 
 mediate to Chicago, to points in Trunk Line territory 
 intermediate to New York. 
 
 The basis on which the percentages are worked out is 
 as follows: 
 
 From an assumed rate of 26 cents from Chicago to New York 
 there was first deducted the sum of 6 cents to represent the 
 fixed terminal expenses at the points of origin and destination. 
 The remaining 19 cents represented the assumed charge for 
 the rail haul, exclusive of any service at either terminal. This 
 rate being divided by 920, that being the accepted short line 
 
414 
 
 TRAFFIC 
 
 r cent for a movement from Chicago to New York under 
 
 for estabhshmg an assumed basis from any particular junction 
 or competitive point on the basis of its mileage to NewYtl 
 
 ^rom It 7- T P" ""' '""^^•P''^^ ^y *^« ""'"ber of mile, 
 from the parhcular pomt to New York gave an assumed rate 
 for the ra, haul from that point exclusive of any terminal 
 service at e.ther end of the movement. To that assumed rat^ 
 the S.X cents was again added to cover the terminal expense, 
 at the pomts of ongm and destination. The result gave an 
 assumed rate from the particular point to New York including 
 the termmal charges, and the percentage which this assum^ 
 rate bore to the assumed rate of 25 cents from Chicago to New 
 York determmed the percentag, of the Chicago rate which 
 
 chandise. ''""* ""'' ^'^'^ °" "^"^ «'^^" «^-» °^ -- 
 
 To illustrate by a concrete example, the short line 
 
 Thr^« J'*""! I'^d'^^^P^lis to New York is 838 mHes. 
 Ihen 833 miles times .0206 cent equals 17.2 cents. To 
 this add 6 cents for fixed terminals, and a total of 28 2 
 cents, or 93 per cent of the Chicago assumed rate of 25 
 cents, ,s obtained. Therefore, Indianapolis is a 98 per 
 cent point. ^ 
 
 54 Competition of lines of different lengths.-Where 
 
 W ^1 ?' 7^''^^ °^ *"°**^^^ '^il^«y' the short 
 
 hne mUeage rate of necessity governs. Between Fort 
 
 i^ii rr r^^^"'^'? *^' ^"'^*^''»" ^^'^^ "Mileage 
 
 Tntn^'p i^T^l?°^^^™ ^^«' ^"d the Grand 
 Trunk Pacific 449. The C. P. R. mileage makes the 
 
 tb! r i^T' r^'"" .^°^*^^ ^* ^'^^^^ *nd Regina 
 the C. P. R. mileage is 302, while the Grand Trunk 
 
 Pacific IS 323 miles. Here, again, the C. P. R. rate is 
 
FREIGHT RATES IN PRACTICE 415 
 
 DiflFerences in mileage as between different routes 
 connecting two points are common. For example, be- 
 tween Chicago and Kansas City we have the following: 
 
 Miles 
 
 Atchison, Topeka & Santa Fe 458 
 
 Burlington BLoute 489 
 
 Chicago & Alton 488 
 
 Chicago Great Western 597 
 
 Chicago, Milwaukee & St. Paul 498 
 
 Rock Island Route 517 
 
 Wabash 51* 
 
 But the competition is not necessarily limited to that 
 existing between lines of slightly differing lengths. 
 Once a railway is built the capital is fixed, and so in 
 order to obtain a return on the investment it may par- 
 ticipate in traffic which is handled by an exceedingly 
 roundabout route. Between New York and New Or- 
 leans there are about one hundred all-rail routes which 
 may compete for business. The shortest route is 1,840 
 miles; the longest is 53 per cent greater. When such a 
 roundabout route competes for this business it must, of 
 necessity, reduce its rate on the principle of what the 
 traffic will bear. 
 
 Under such circumstances the anomaly may arise of 
 the rate being controlled by the longer line or route, for 
 the longer line, not being able to give the same despatch, 
 may have to give a more advantageous rate. Just before 
 the Civil War the Grand Trunk carried flour from 
 Chicago to Portland by rail and thence by water to 
 Boston by boat in competition with all-rail American 
 lines. From a situation like this may arise so-called 
 "differential" rates. 
 
 55. Differential rates. — A diflFerential rate arises 
 where two or more competing carriers agree that a pre- 
 scribed difference shall exist between their respective 
 
416 
 
 TRAFFIC 
 
 rates. This may be regarded as a concession to avert 
 a greater cut in rates. When the Canadian Pacific en- 
 tered the field of through business it engaged in the 
 carriage of business to San Francisco by means of its 
 rail route to its Pacific terminus and thence by boat to 
 destmation. It took the position that as it was a broken 
 rail and water route, and was in its then condition a weak 
 route, a differential should be allowed. It also empha- 
 sized the disadvantage it labored under because of its 
 roundabout route— 4,020 miles by rail and water as 
 against 8,270 all-rail. 
 
 In 1887, the American lines agreed that on business 
 to San Francisco the Canadian Pacific might quote 
 rates lower, by agreed differences in ( nts per class, than 
 the all-rail American lines. At the end of 1892 the 
 Canadian Pacific adopted the principle of charging rates 
 10 per cent less than those of the American lines. The 
 latter contended that this was not a differential, but a 
 "cut" rate, since they had not agreed to it. The matter 
 came to arbitration in 1898, when it was decided that the 
 Canadian Pacific was not entitled to a differential. 
 
 The Grand Trunk has a differential freight rate from 
 New York and New England points, all-rail, as age .t 
 the standard lines to Chicago. It also has differential 
 rates via the Ottawa Division and Depot Harbor the 
 rates being 10 cents below the first-class rate from New 
 York and 5 cents below the first-class rate from Boston. 
 American lines handling freight through Canada also 
 participate in such arrangements. There are in effect 
 over a route composed of the Boston and Maine, Rut- 
 land, New York Central, and Michigan Central or 
 Wabash railways the same differential rates as via the 
 Grand Trunk. 
 
 56. Water competition.— An early example of water 
 
FUKIGIIT HATKS IN I»HA( Til K 
 
 417 
 
 cDiiipetition in the passenger business is set out in an 
 ad irtisenjent published in 1788 by the Philadelphia 
 and Haitimore Eastern Shore stage line, which stated 
 that its couches wf'iiul carry a passenger from Philadel- 
 pliiii to the Susquehanna River for £1 6 sh., and from 
 tliat point to Haitimore, 37 miles further, free of charge. 
 That is to say, on the last 37 miles of the journey it had 
 to meet the competition of water ca riers. 
 
 In 1892, complaint was made before the English Rail- 
 way and Canal Commission that the rate on flour and 
 (jraiii from Bristol to Birmingham, a distance of 141 
 mill's, was 8 sh. Od., while from Birkenhead to Birming- 
 ham, a distance of 98 miles, it was 11 sh. 6d, The com- 
 mission found that the difference in rate was due to 
 etliciciit railway and water competition. 
 
 In the transiKjrtation system of the section of North 
 .\inerica which may be determined by a line drawn north 
 and south through Omaha the effect of the Great Lakes 
 and the St. Lawrence is very important. In general, 
 the average rate which carries a ton one mile on the rail- 
 way will carry it three miles on the lakes. If the various 
 ^nain routes to the seaboard are considered the im- 
 ])()itance of the alternative water route and its competi- 
 tive effect will be apparent. 
 
 I'rom Chicago grain may move eastward to the 
 
 seaboard by the follo>>ing routes: to Buffalo by rail, 
 
 thence via the Erie Canal and Hudson River, or by all 
 
 rail to New York; to Erie by lake, thence by rail to 
 
 Philadelphia or Baltimore; by lake to Canadian lake 
 
 l)()its, thence by rail to Montreal, St. John, Portland, 
 
 or Boston; by lake and canal to New York; all-rail to 
 
 Philadelphia, Boston, New York, Baltimore, and New- 
 
 ])ort News; by lake, canal, and the St. Lawrence. That 
 
 is to say, there are routes to eight ports on the North 
 c— i'n-«7 
 
418 
 
 THAFI'IC 
 
 Atlantic scalHianl. and the lake route has a controllinir 
 effect over all. ** 
 
 On the movement from Minneapolis tiie following 
 routes are available : all-rail to the sealward via Sault Ste. 
 Marie; by rail to Gladstone, Michigan, and thence by 
 lake and canal or other combination; by rail to Duluth 
 or Sui)erior and thence by lake and canal or other com- 
 bination. 
 
 Shipments of grain from the Canadian Northwest 
 may move: all-rail to the seaboard; by rail to Fort 
 William or Port Arthur and thence by lake to Canadian 
 lake ports and thence eastward by rail; or by lake to 
 Buffalo and thence eastward by rail or other combina- 
 tion; to Duluth by rail and thence eastward by lake and 
 rail; or by lake and canal combinallun; or by lake, canal, 
 and St. Lawrence. 
 
 As has been pointed out, in the movement to the 
 Pacific Coast water competition is important. To-day 
 the China ^lutual, or Blue Funnel Line, is bringing in 
 monthly to British Columbia via the Suez Canal from 
 three to five thousand tons of package freight. This is 
 distribute<l east into Alberta. If the combined ocean 
 and rail rate west to British Columbia is to get a share 
 of this business it must meet this competition. In the 
 movement of cotton piece goods from New England to 
 China over the Canadian Pacific and its connecting 
 steamships on the Pacific there has to be considered the 
 rate offering to China by way of the Suez Canal. Meat 
 shipments from Canada to London, England, may move 
 all-water to London or by water carriers to Liverpool 
 and by rail to London. The water rate holds down the 
 combination rate. Shirments of produce from Denmark 
 to Liverpool may move all-water, or may move by water 
 to the east coast and thence by rail to Liverpool. 
 
FRKIGIIT IIATKS IN PRACTICE 
 
 410 
 
 Here, again, the water rate holds down the combination 
 nite. 
 
 The Imard has recognized that rail carriers may have 
 to meet the com{)etition of water carriers. Its position 
 in regard to water competition is summarized in the 
 Complaint of the Blind River Board of Trade, decided 
 Murch 12, 1018. In this decision it in substance said 
 tliut, wiiile a ruir^ xy was characterized by a large invest- 
 ment of fixed capital, the expenditure of a sum of money 
 whieh would be suificient only to construct six or seven 
 iiiiles of fully equipped railway track will provide a 
 \vater carrier which can move freely* from place to place 
 mid from route to route over the free right of way of the 
 waters. The railway may, therefore, have to meet water 
 competition at given points. The extent to which it will 
 Mieet it is in its own discretion. 
 
 57. Changing centers of production. — In the United 
 States the westward movement of the agricultural cen- 
 ters has had an influence on rates. In the north it has 
 lessened the importance of Lakes Erie and Ontario as 
 controlling factors. About the time the Erie Canal be- 
 came an efficient carrier the Genesee Valley in western 
 \ew York was important in wheat production. Since 
 the seventies the center of wheat production in the 
 Fnited States has been moving north and westward until 
 now it is west of the Mississippi. 
 
 In western Canada, the wheat area is not reached until 
 a point some four hundred miles west of Lake Superior is 
 reached. This has increased the traffic importance of 
 the Upper I^akes. Coupled with this is the fact that on 
 account of this northward and westward movement east 
 and west lines of movement from (Georgian Bay are now 
 of increasing importance. 
 
 In the southern portions of the United States the 
 
^20 TRAFFIC 
 
 westward movement of the cotton crop, as well as the 
 development of the wheat areas of Kansas and of Okla 
 homa, have added to the efficiency of ocean compe' ••.. 
 by way of the Gulf of Mexico. 
 
 In the United States this westward movement of grain 
 has created a competitive area extending from the inter- 
 national boundary as far south as Kansas and ^Missouri 
 and west to the western boundaries of the Dakotas. Its 
 effects are especially noticeable in connection with the 
 primary grain markets. Grain from the Dakotas and 
 jNIinnesota is normally tributary to ]Minneapolis and 
 Duluth; it may mrtve to Chicago. The grain of I^Iis- 
 souri is normally tributary to St. Louis; it may move to 
 Chicago. 
 
 58. Competition of ports.— As has been seen in dis- 
 cussing water competition, Chicago has some eight pos- 
 sible outlets on the North Atlantic seaboard. With the 
 M estward development of American railways the short 
 line mileages to the seaboard have been readjusted. This 
 is illustrated in the following table: 
 
 Short rail distances from some of the interior grain markets 
 and packing-house centers to New York and to Xerv Orleans. 
 
 ., ^^, , . To Saving to 
 
 ^. . ^^'"'^ ^ork Xew Orleans New Orleans 
 
 t-nicaRo 912 gig 
 
 P"!"*^- • 1.390 1,337 53 
 
 Minneapohs 1.321 1,268 53 
 
 itP*"l- 1'321 1,268 53 
 
 Sioux City 1,422 1,258 164 
 
 i{™a 1,402 1,070 332 
 
 P"!Z»qVe 1.070 988 91 
 
 bt. Louis 1,058 695 ggg 
 
 Kansas City 1,335 878 457 
 
 If, beginning at Duluth, a line is traced running south 
 to Lake Michigan and following the western boundary 
 of that lake to its southern extremity, thence swinging 
 
FREIGHT RATES IN PRACTICE 
 
 421 
 
 southwesterly until the south Atlantic seaboard is 
 reached a little south of the northern boundary of 
 (Jcorgia, it will be found that all points west of this line 
 are nearer to the Gulf ports than they are to New York. 
 
 Of course, the mere question of distance is not the only 
 controlling factor. The question of the volume of traffic 
 moving, the matter of established trade routes, and the 
 amount of ocean tonnage offering at the port are im- 
 j)ortant factors. As between IMontreal and New York, 
 the volume of ocean tonnage offering is necessarily an 
 important factor. The contests between Boston, New 
 York, Philadelphia, and Baltimore centering around the 
 (|iiestion what differential or difference below the longer 
 route to New York rates should be allowed to Boston, 
 Philadelphia, and Baltimore all point to the importance 
 in connection Avith a transportation movement and rail- 
 way competition of established trade routes and amount 
 of ocean tonnage at the ports. 
 
 50. Market or trade competitio —As industries ex- 
 jnind they naturally develop competition in common 
 markets. In the adjustment of their rates the railways 
 are constantly faced with the question of this competi- 
 tion and of the extent to which they w^ill by readjustment 
 of rates extend the area in which industries may com- 
 ]>ete. It may happen that from this, wastes of trans- 
 l)ortiition will arise through overlapping of markets. 
 
 The sugar refining industry of Canada affords a 
 striking example of trade competition. Sugar refineries 
 located at Montreal and at Wallaceburg compete in 
 Toronto and in the Canadian Northwest. A sugar re- 
 iinery located in Vancouver meets the competition of the 
 eastern refineries in Manitoba. The Knight Sugar Re- 
 fining Conij)any, of Raymond, Alberta, is also engaged 
 in the manufacture and distribution of sugar in Alberta. 
 
422 
 
 TRAFFIC 
 
 What are the boundaries of the respective markets? 
 Where shall the rates meet? 
 
 Sugar moves west from Montreal on a fifth-class 
 rate ; it moves from Vancouver on a commodity rate 
 Under this arrangement the rates meet at Portage la 
 Prairie. Manitoba. When the board by its order in 
 the Regma Rates Case reduced rates westward from 
 Fort William, complaint was made bv the refining 
 company at Vancouver that this, by Wending the 
 Montreal territory westward, had curtailed the terri- 
 tory naturally tributary to Vancouver. 
 
 The Canadian Oil Company applied to the Cana- 
 dian Railway Commission to reduce its rates from 
 Petroha to the Northwest to meet the competition of 
 American oil refiners selling in the same field. It was 
 recognized that the competing companies had certain 
 situation advantages, water competition, and low cost 
 of raw material. On this state of facts it was held that 
 the rates, not being challenged as unreasonable, and 
 the trade disadvantages not having been created by the 
 Canadian railways, the direction asked for could not 
 be given. While it is the function of a rate-regulative 
 tribunal to deal with reasonableness of rates, it is not 
 concerned with so equalizing trade profits that all mav 
 compete on an even keel. 
 
 Again, in another case it was contended that cheese 
 and bacon are complementary commodities and that 
 the price of cheese in England is regulated by that of 
 bacon It vvas. therefore, urged that this should be 
 comidered in Canada in fixing the rate basis on export 
 traffic. It was held by the board that this was a phase 
 of market competition, and that the extent to which 
 the railways should consider it was, if the rates actually 
 charged were not unreasonable, in their discretion 
 
FREIGHT RATES IN PRACTICE 
 
 49S 
 
 Just how the claims of competing industries located 
 in different sections of the same line of railway are to be 
 adjusted is a mattci* of extreme delicacy and difficulty. 
 Tlie board has recognized in a case of such competition 
 arising from an industry located on another line, that 
 in the case of brick from Bradford, Pennsylvania, when 
 the Windsor rate on this article was higher than the 
 Detroit rate, the Detroit rate was held down by the 
 trade competition of the similar brick produced at 
 other points in Ohio which were nearer to Detroit. If 
 the brick moving the longer distance from Bradford 
 was to share in the Detroit business, it had to meet the 
 Ohio rate. 
 
 ^Market competition is not limited to domestic move- 
 ment alone. The rate grain can stand depends upon 
 tlie price at which grain stands in the world market. 
 In that market Russia, India, Australia, Argentina, 
 Canada, and the United States compete. The wheat 
 of Argentina, which is for the most part grown within 
 four hundred miles of tidewater, and the greater part 
 of whose carriage to Liverpool is, therefore, by water, 
 competes with the wheat of Canada and of the United 
 States which has a rail haul of two thousand miles to 
 the seaboard. Canadian bacon must compete in Eng- 
 land with Danish bacon. Canadian butter competes in 
 England with butter from Denmark and Siberia. 
 Copper from Butte, Montana, competes with the water- 
 borne copper from the Rio Tinte mines. 
 
 60. Improvements in roadbed and rolUng stock. — 
 The effect of improved track and rolling stock is con- 
 cerned with the net profit of operation rather than with 
 the rate actually charged. But it has an indirect effect 
 upon the rate in that it adds to what the railway can 
 do in its operation, and, therefore, gives it an advantage 
 
424 
 
 TRAFFIC 
 
 m point of such rate reductions as are brought about 
 l)y tlie factors already outlined. FurtJier, since its 
 improved operating condition enables a large volume of 
 ousniess to be handled more econoniicallv, it permits 
 the railways, by lowering rates, to stimulate that volume 
 of business which is essential to the full return from its 
 imj)rovements. 
 
 In the roadbed there have been great improvements 
 ll)e 56-pound rails of the early seventies have been 
 replaced with 80-, 90- and even 100-pound rails, there- 
 by enabling heavier rolling stock to be carried. In the 
 endeavor to carry heavy trainloads, thereby lessening 
 unnecessary engine mileage, railwavs are now building 
 on easy grades and curves. Heavy grades and sharp 
 curves lessen tractive efficiency. The Canadian Pacific 
 Which had a 4.4 grade on the Field Hill, has by tunnel 
 cmistruction cut this in two, thereby doubling engine 
 efl^cency. The (Jrand Trunk Pacific is being built on 
 a .4 grade. The extensive improvements the Canadian 
 i acific IS making in the Hocky :Mountains l.xik, by in- 
 creasing efficiency, to offset the haulage advantages of 
 the easy grades of the new lines. 
 
 Engines have increased in weight and tractive effi- 
 ^"'"o*'- *;°r,^^^'"l>le, a Grand Trunk engine built in 
 18/2 weighed with Its tender 62 tons, while an engine 
 built for the same raihNay in 1911 weighed 182^ tons. 
 \\ Jiile the average amount hauled per engine per an- 
 mim depends, of course, on the amount and nature of 
 the traffic offering in the particular year and on tiie M-av 
 the cars are loaded, comparisons of the average tonnage 
 hauled per engine are an index of increasing engine 
 efficiency. In 1908, on the Canadian Pacific the aver- 
 age tonnage moved i,er freight engine was 12,983 tons- 
 in 1912, it was 19,892. For the Grand Trunk the 
 
FREIGHT KATi:S IN PRACTICE 
 
 425 
 
 tioures in 1908 and 1912 were 18,787 and 24,331, re- 
 spectively. 
 
 Tlie impetus to increase in size of freight cars came 
 I'loin the construction in the United States and Canada 
 ill the early seventies of narrow-jrauge lines. In the 
 endeavor to introduce economies, increase in carrying 
 capacity was looked to. In 187«, the standard capacity 
 ol" the ordinary freight car was 15 tons. To-day 80 per 
 cent of the freight cars of the Grand Trunk have a 
 carrying capaci*v of 30 tons. The 15-ton car has prac- 
 tically disapp( ed. On this railway 6 per cent of the 
 cars are of 20-ton capacity, while 40- and 50-ton cars 
 account for 12 j)er cent. 
 
 The 30-ton car may he regarded as the standard 
 jreiieral-purpose car to-day. The larger cars are used 
 for heavy bulk commodities. Under the railway rules, a 
 car may he loaded 10 per cent above its marked capacity. 
 Ihit tlie extent to which cars on the average can be 
 loaded nearly to their carrying capacity depends on com- 
 mercial conditions and whether tonnage can be held until 
 a maximum load is obtained in the car. While the large 
 cars used by ten of the constituent companies of the 
 Tiiited States Steel Corporation averaged in 1912 36 
 tons per car, the average loading in Canada was less than 
 half of this. From the standpoint of the railway, there is 
 not only the advantage of the larger amount which can be 
 handled in the larger car, thus economizing in engine 
 and train mileage; there is also an increase in the pay 
 weight per car. The tare or weight of the empty car 
 does not increase in the same ratio as carrying capacity. 
 Thus, out of the total loaded weight of a car, the tare 
 of the 20-ton car is 41 per cent; of the 30-ton car, 35 
 per cent; of the 40-ton car, 32 per cent; and of the 50- 
 ton car, 80 per cent. 
 
CHAPTER V 
 
 PHASES OF RATES AND TARIFFS 
 
 61. Freight tariffs and the Railuay ^cf.— Every 
 tariff carries on its face the senal number of the rail- 
 way's issue; also the date of issue and the effective 
 date. For example, the Canadian Pacific tariff deal- 
 mg with stop-off on lumber, issued January 8, 1913 
 effective February 10, 1913, bears the notation 
 C . P. R. tariff Xo. E 2119, cancelling Xo. E 2409. In 
 addition, it has to bear a Canadian Railway Commission 
 serial number— in this case it is C. R. C. X^o. E 2313. A 
 tariff may be amended by a supplement. In the United 
 States the Interstate Commerce Commission rule is that 
 the number of supplements which may be outstanding 
 IS governed by the size of the tariff. Tariffs filed with 
 the Interstate Commerce Commission must bear an 
 I. C. C. number. Tariffs concerned with the transit 
 trade or with business from the United States to 
 Canada or vice versa bear the serial numbers of both 
 commissions. 
 
 Under the Railway Act, freight tariffs are classed 
 as standard, special, and competitive. 
 
 62. Standard tariff. —The standard freight tariff or 
 tarifl's specify the maximum mileage tolls to be charged 
 for each class of the freight classification for all dis- 
 tances covered by the railway. The distances are ex- 
 pressed m groups. The Railway Act permits relatively 
 greater distances to be included in these groups for the 
 
 426 
 
PHASES OF RATES AND TARIFFS 
 
 427 
 
 \ou}icv than for the shorter hauls. The standard freight 
 tiiritt' has to be filed with the board for its approval. 
 \N'hen it is approved it has to be published in two con- 
 secutive weekly issues of the Canada Gazette before it 
 i:iii l)ecome effective. 
 
 The standard freight tariffs of the Canadian Pacific 
 ;uc representative of other railways operating in the 
 same territory. The following groups of standard 
 tariff territory of the Canadian Pacific may be distin- 
 guished: (a) from Sudbury east to the Atlantic; (b) 
 from Sudbury to Port Arthur; (c) Manitoba and 
 Ontario, west of Port Arthur; (d) Saskatchewan and 
 Alberta, east of Canmore; (e) Alberta west of Can- 
 more and British Columbia; (f) steamboat service in 
 British Columbia inland waters; (g) the Kootenay 
 territory; (h) the Crow's Nest territory. 
 
 The tariffs may be summarily described : 
 
 A, Local mileage freight tariff No. 1 applying Sud- 
 bury and east thereof: 
 
 Rates are quoted by mileage grgups, which, up to 
 100 miles, advance by 5-mile steps. From 100 to 200 
 miles, the steps are by 10 miles, while from 200 to 1,000, 
 the limit of the tariff, the groups are 25 miles. The 
 late quoted covers the entire group. Up to 100 miles 
 the first-class rate is stepped two cents for each group. 
 In the case of the tenth class the rate is stepped by one 
 cent for each rate group, but here the rate-grouping 
 heeomes irregular. Up to 10 miles the rate is quoted on 
 a 5-mile group; beyond to 100, the rate is quoted either 
 on a 10-mile or a 15-mile group. Beyond 100 miles the 
 rate steps are irregular. 
 
 B. Sudbury to Port Arthur: 
 
 This tariff covers mileages up to 3,000 miles. Up to 
 100 miles the groups are stepped every 5 miles; from 
 
ns 
 
 TRAFFIC 
 
 to 1,600 miles there are 23-niile groups, while from 
 1.600 to 8.000 the groups are 50 miles. Up to 100 miles 
 w.th the exception of the 20-25-mile group, the first- 
 class rates are stepped two cents per group. In the 
 case of tenth class, the rates advance one cent by 5-mile 
 groups up to 25 miles. From 25 miles to 100 miles the 
 rate groups are irregular, varying from 10 to 15 miles 
 Beyond 100 miles the rate steps are irregular. 
 C. Manitoba and Ontario, tccst of Port Arthur- 
 This covers a mileage of 1,500 miles. The first 
 group covers 10 miles. From 10 miles to 100 the 
 mileage groups are 5 miles each. From 100 to 500 
 miles they advance by lO-mile steps. The balance ad- 
 vances on 25-mile steps. The rate advances follow the 
 same method as above indicated under B 
 
 AWerfa"'^''*'^''''''' """^ ^^^"'*''' ^^*' ^^ Canmore, 
 This tariff covers 1,500 miles. The mileage groups 
 are the same as in the previous tariff. The rates ad- 
 vance by groups irregularly. 
 
 Cdumbh'^''' ""''* ""^ <^'««mor^, Alherta, and British 
 This tariff covers 600 miles. Up to 100 miles group- 
 
 100 to 800 miles there are 10-mile steps. Beyond 300 
 miles the steps are m 25-mile groups. The *rates ad- 
 vance by groups irregularly. Here the mileage rates 
 are based on the local mileage tariff (Xo. 270), which 
 was issued m 1894. In building up the mileage, the 
 railway has considered that the higher cost of operation 
 m the mountains justifies assumed mileage being used. 
 From Vancouver to Yale, at the head of navigation on 
 the Fraser River, actual mileage is used. From Yale 
 
PHASES OF RATES AND TARIFFS 
 
 420 
 
 to Uevelstoke, each mile counts as li miles, while from 
 Ktvelstoke to Canmore each mile counts as 2 miles. 
 Oil the Crow's Nest mileage, dealt with below under 
 heading /, each mile was also made to count 2 miles. 
 
 F. Okanagan Lake steamer service: 
 
 This tariff covers 100 miles. The first group is 10 
 miles. Beyond this the groups advance by 5-mile steps. 
 Oil tirst-class up to 30 miles the first-class rate is 
 stci)i)ed 3 cents per group; beyond, the steps are 2 
 ctiits. The tenth-class rates are stepped one-half cent 
 ])vr group. 
 
 G. Slocan, Kootenay, and Trout Lakes steamer 
 Kcrvicc: 
 
 This tariff covers 130 miles. Up to 100 miles 
 the mileage groupings are the same as in the pre- 
 vious tariff. Beyond, the steps are in 10-mile groups. 
 On first-class traffic, the first-class rates are stepped 
 irregularly 3 cents. On tenth class the rate advances by 
 one-half -cent steps. 
 
 //. Nakttsp and Slocan, Kootenai/ and Arrowhead j 
 Columbia and Kootenay, and Columbia and Western 
 Railicays: 
 
 This tariff covers 200 miles. The groupings as to 
 the 100-mile and 200-mile divisions are the same as 
 under F. From 10 to 15 miles the first-class rate is 
 advanced by 6 cents; the remaining steps up to 90 
 miles are on a 4-cent advance. From 90 to 100 there 
 is a 2-cent advance on each step. Beyond 100 miles 
 the steps are irregular. The tenth-class rate proceeds 
 l)y one-cent steps for each group up to 50 miles; be- 
 yond 50 and up to 200, in general the mileage group 
 to which the rate applies is 10 miles. 
 
 /. Craio's Nest, B. C, and west to Kootenay Land- 
 ius, B. C, inclusive: 
 
ISO 
 
 THAFFIC 
 
 This tariff covers 730 miles. The grouping up to 
 100 miles is the same as under F. From 100 to 800 
 there are 10-mile groups, while in the balance of the 
 mileage there are 23-mile groups. On first class the 
 rates are, with one exception, stepped 4 cents for each 
 group. On tenth class up to 100 miles the rates on the 
 groups up 'o 60 miles are stepped 1 cent for each 5-mile 
 group; from 60 to 100, in general there are 10-mile 
 groups. Beyond 100 miles the rate groupings are 
 irregular. 
 
 The standard mileage tariffs above referred to apply 
 in the absence of special tariffs quoting lower rates. 
 They also apply on interchange business, the rule being 
 that m a movement from a higher tariff division to a 
 lower, or vice versa, the higher rate applies. 
 
 Reference to the figures given in connection with the 
 standard tariffs will show that the rate scales are dif- 
 ferent in difl'erent sections. For the purposes of com- 
 parison the table on the opposite page covering rates for 
 the first 100 miles may be consulted. 
 
 It must be remembered that these standard rates are 
 simply maximum rates and in no way indicate the 
 actual rates under which shipments move. They applv 
 oidy where there are no lower special tariffs. It is im'- 
 possible to make any general statement of how much 
 ower the special tariflFs are in any particular section 
 than are the standard tariffs for that section. It is safe 
 to say that from 90 per cent to 05 per cent of the traffic 
 moves on rates lower than standard. 
 
 63. Special and competitive tariffs.— Special and 
 competitive freight tariffs do not require the approval 
 ot the board before becoming operative. They come 
 into force upon filing with the board, in compliance 
 uith the regulations of the Railway Act. A special 
 
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 431 
 
432 
 
 TKAFFIC 
 
 tariff reducing existing rates, in addition to being filed 
 with the board, requires that for three days before the 
 cffectiA-e date of the tariff it sliall l)e on file in everv- 
 station or oflfice of the company where freight is re- 
 ceived, or to which freight is carried under the tariff 
 in question, and that there shall Ik i)ublic notice at such 
 place as to where tariff may be seen. In the case of 
 mcreases of rates there is a similar provision except 
 that thirty days' public notice is required. Competi- 
 tive tariffs are not under any obligation as to public 
 notice, this matter lieing left to the discretion of the 
 board to fix such regulations as it may deem necessary. 
 To meet temporary emergency conditions special 
 rate notices may, without publication. l)e issued quot- 
 ing reduced rates on specific shipments between points 
 on the railway which are not com[x.'titive. It is pro- 
 vided that the railway may issue these rate notices at 
 Its discretion, to helj) to create trade or develop the 
 business of the company, or if it be in the public interest, 
 and not other^vise contrary to the provisions of this 
 act. The special rate notice has to be filed with the 
 board, and is operative only for a specific shipment. 
 It must also specify the reason for issuance and the 
 rate which would otherwise have been effective. 
 
 In practice, the railways have been permitted* under 
 the provision, so to provide for the prompt shipment 
 of any freight which may unexpectedly offer and for 
 which no suitable tariffs have been prepared, there 
 being the condition that the filing and publication of the 
 tariffs shall be immediately proceeded with. Such 
 special notices may also cover the disposition of a ship- 
 ment which has been forwarded to a UTong destination, 
 or which may have been refused by the consignee. 
 Small sample shipments, e. g., of ore, may be carried 
 
PIIASKS OF UATKS AM) TAHIFFS 
 
 433 
 
 iinrier such notice for testing puri)oses, actual weight 
 at carload rate applying. 
 
 Formerly such a notice might cover the removal of 
 live stock by rail from exhausted grazing grounds to 
 new pastures on tlie ranches of the Northwest for sub- 
 sequent reshipment to the markets. With the change 
 in agricultural conditions the need for this has passed. 
 The railways are also jK'rmitted under such an arrange- 
 ment to carry fuel for their employees at reduced rates. 
 
 (J-t. Transcontinental raten. — When the Canadian 
 Pacific entered the field of through traffic at the Pacific 
 Coast it adopted in a general way the system as to 
 terminal points which it found in use on the American 
 railways to the south. These had been affected by 
 various rate adjustments in which the competition by 
 way of the Isthmus of Panama and Cape Horn had 
 played an important part. The movement by way of 
 Cape Horn is, so far as the movement from the eastern 
 to the western coast of North America is concerned, of 
 diminishing importance. Since 1900 a few chartered 
 sailing vessels have each year carried cargoes around the 
 Horn. The Panama Railway has been overshadowed 
 in public interest by the Panama Canal. But the rail- 
 way has been an important factor. Before it became 
 the property of the United States government, the 
 United States railways had been able to make it simply 
 a differential rate route. The route by way of the rail- 
 way across the Isthmus of Tehuantepec is of impor- 
 tance, and will be of increasing importance. 
 
 In the tariff covering rates from eastern Canada to 
 British Columbia rates are quoted to fifty-three "British 
 Columbia Coast terminals" and to twenty-three other 
 points which take rates made up by adding to the termi- 
 nal rate certain arbitraries or differences. The movement 
 
 C— III— 28 
 
434 TRAFFIC 
 
 is subject to the Canadian classification. The eastern 
 points of origin are grouped, as Toronto and Montreal; 
 Sherbrooke, Quebec, Cacouna, and St. John, N. B.; 
 iMulgrave; Sydney. P'or other points there are speci- 
 fied arbitraries which, when added to the rate from the 
 rate point, will give the total rate. 
 
 The rates charged from eastern Canada on trans- 
 continental freight are based ujion the rates charged 
 by American railways on transcontinental traffic origi- 
 nating at Chicago. To the class rates from Chicago 
 are added certain arbitraries to cover the haul east 
 thereof from points in eastern Canada. For example, 
 these arbitraries are in cents per 100 pounds by classes, 
 as follows, in the case of the movement from Montreal 
 or Toronto: 
 
 J^^^* 5 67 89 10 
 
 «> 18 15 13 10 8 7 7 7 7 
 
 While the traffic originating in the eastern states 
 is subject to kt-n water competition the water com- 
 petition in eastern Canada is much less active. The 
 class traffic originating at Chicago is also less influenced 
 by water competition. The similarity in respect of 
 lessened water competition is considered by the rail-, 
 ways as justifying Chicago being taken as a basing 
 point. The method adopted results in the following 
 class rates: 
 
 In CENTg PER Class per 100 Pounds 
 
 lut ind 3rd kth r,th fith Tth Hih {Hh KHk 
 
 Toronto or Montreal ~ 
 
 Shrrlr^ke.Qu.bcc.Ca. »«>«'«*«>««> »«« '« I« 118 ... 103 
 
 eouna, or St. John, 
 
 .,^/B 370 3«1 m <tt5 190 190 153 1«8 108 
 
 MulRrave 374 3M «68 ««8 m 19« 155 XU HO 
 
 ^y*'n«^y 378 3«8 «71 «30 194 104 157 187 ' IIS 
 
PHASES or RATES AND TARIFFS 
 
 435 
 
 The ninth-class rate is not given, as this class covers 
 live stock. 
 
 While class rates are thus quoted t'ley are in the main 
 iK'f>ligible, since commodity rates e quoted on over 
 .'i.ooo items, vhich cover in their . lusive sweep not 
 only flour, furniture, iron and steel and their manu- 
 faciiires, tobacco, vegetables, but also skirt boards, 
 ^ro-carts, playing cards, paper fasteners, wax tapers, 
 zithers. 
 
 In the transcontinental movement. United States rail- 
 ways are found participating. For example, in the 
 lines mentioned as operating via certain gateways are 
 the "Soo" line, the Great Northern, the Burlington, and 
 the Union Pacific. 
 
 During the season of lake navigation there is a dif- 
 ferential lake and rail route via Duluth, Fort William, 
 Tort Arthur; or Westfort. The rates, which include 
 marine insurance on the lakes, are less than the all-rail 
 lates to and from the same points by the following 
 differences: 
 
 <'lii<isi-.s 1 « S 4 
 
 (Vrit> per 100 pounds 10 8 7 6 
 
 5 6 7 8 10 
 
 6 S S S 5 S 
 
 In the movement eastbound from British Columbia to 
 eastern Canada, class rates are built on the same gen- 
 eral system as on the westbound movement. Here, 
 a^ain, the commodity movement is the important one. 
 Aside from Oriental traffic, not far from 80 per cent of 
 the transcontinental traffic eastbound is concerned with 
 1 limber, shingles, canned goods, canned salmon, and 
 pickled fish. Practically all the movement is on com- 
 modity tariffs. 
 
 05. Digfrihuthe rates. — In Ontario, in the early days, 
 the Grand Trunk competing with the Great Western 
 
436 
 
 THAFFIC 
 
 and its connecting boat lines put in competitive rates to 
 common (that is, competitive) points. In the handling 
 of merchandise the establishment of jobbing or dis- 
 tributing points naturally develops. The railways have 
 in their rates shown recognition of such points. While 
 it may be queried as to what extent a distinction in rate 
 between a place which has so established a distributing 
 business and one which has not is justifiable, the railways 
 have in granting such rates recognized that they have 
 not only the carload business in, but also the distributive 
 business out, normally in less than carloads. 
 
 Distributive tariffs are of such a nature that the rail- 
 ways are constantly faced with demands for readjust- 
 ments. A new jobbing center may develop. It nat- 
 urally desires, when distributive rates are in effect, that 
 it should have such rates. But distributive rates and the 
 recognition of distributive areas tributary to certain 
 centers are like a pair of scales. Anything that affects 
 one scale affects the level of the other; and so one change 
 may lead to a demand for another. 
 ^ The tariffs given to distributing points are known as 
 "town tariffs." The various points so treated may either 
 be distributing or manufacturing centers. In effect they 
 may be regarded as rate-basing points. The "town 
 tariffs" in Ontario and east to Montreal were readjusted 
 by the order of the board in the International Rate Case 
 ^v•hich was decided in 1907. 
 
 66. International Rate Case.— It had long been a 
 source of complaint that the rates eastward to Mon- 
 treal exceeded those westward fiom Montreal. Appli- 
 cation was made by the Toronto Board of Trade that 
 this discrepancy be remo>ed. It developed that in 
 order to deal properly with the matter is was neces- 
 sary to "lave a general rearrangement of the class rates 
 
PHASES OF RATES AND TARIFFS 
 
 437 
 
 hctweeii all points. Coupled with this complaint was a 
 I'lirther complaint as to international rates on the ground 
 that the rates from Detroit were lower than the rates 
 fiom Windsor, just east across the river. It was recog- 
 iii/c(l that if the rate from Windsor was reduced this 
 would necessitate the scaling down of rates to inter- 
 mediate points. So the question of the complaint ad- 
 A a need by the Toronto Board of Trade as to Montreal 
 rates westbound versus Toronto rates eastbound became 
 interrelated with the complaint of the Canadian Manu- 
 taeturers' Association as to international rates. 
 
 The traffic from the Detroit River was affected both 
 liy the Official and by the Canadian Classification. It 
 >\ as impossible to harmoni/ie these, as they are built up 
 ill a different manner. What was done was to take the 
 existing first-class rate from Detroit and to scale down 
 the rates from Canadian points eastward accordingly; 
 and it was then directed that the rates from Canadian 
 points on the Detroit and St. Clair River frontier to all 
 points east to the Atlantic and north to the Ottawa River 
 should in no case exceed the rates from Detroit and Port 
 Huron. 
 
 Direction was given that the "to^vn tariffs" then in 
 existence be reduced so as to place them all on the 
 same mileage scale. The scale directed to be adopted 
 eovered up to 560 miles. It may be summarized as 
 follows: 
 n) Up to 5 miles, 8 cents {)er 100 lbs. 1st class. 
 (4) 6 to 20 miles, "i cents increase for each five - mile step 
 CJ) 21 to 80 " 2 *' •* '* " ten 
 
 (4) 81 to 110 " 2 " " *' " fifteen 
 
 !.i) 111 to 200 •' 2 " " ** " twenty 
 
 Hi) 201 to 440 " 2 " thirty 
 
 (7) 441 to 560 •• 2 " forty 
 
 It was found necessary in making this rearrangement 
 to re-group the existing rate points. The mile«ge pro- 
 
438 
 
 TRAFFIC 
 
 \ided for in the scale covered as far as ^lontreal. Be- 
 yond Montreal to Quebec the through rates from the 
 territory between ^Vindsor and Toronto and from the 
 northern portion of the westerly peninsula of Ontario 
 were to be built up by the addition of arbitraries. 
 
 The readjustment thus brought about represents 
 roughly a reduction of 25 per cent from the standard 
 rates up to 500 miles. The effect of the reduction goes 
 further. It is not limited to the "town tariff" points 
 alone. From and to intermediate points the "town 
 tariff" applies until the standard tariff becomes lower. 
 
 67. Tozcn tariff's in the east.— Bast of Montreal in 
 the Province of Quebec and in the provinces of New 
 Brunswick and Nova Scotia "town tariffs" also exist. 
 These cannot be expressed in terms of any general per- 
 centage of the standard tariff. 
 
 In the westward movement from eastern Canada to 
 the Northwest there is not only the all-rail movement, 
 but also the lake and rail movement, which is on a lower 
 basis to meet the lake competition. Goods may be car- 
 ried all-rail or by lake and rail, or between certain points 
 by all-water. For example, the all-rail rate fifth class 
 from London to Sault Ste. :Marie is 35 cents. By lake 
 and rail it is 25 cents. In the movement by water by 
 independent water carriers Sault Ste. Mane and Fort 
 William are blanketed on bar iron and other iron 
 and steel commodities with a rate of 174 cents. The 
 railways have met this competition by quoting a lake 
 and rail commodity rate of 19^ cents to the same points. ' 
 
 While on the lake and rail movement through rates 
 are worked out by the railways and their connecting 
 water carriers, the independent boat lines— for example, 
 the Inland Lines, the Canadian Lake Line, and the 
 ^Merchants' :Mutual— do not make joint rates with the 
 
PIIASKS OF RATES AND TARIFFS 
 
 439 
 
 railways. They base on the same rates from Fort 
 WiUiam or Port Arthur as the lake and rail lines do on 
 traffic beyond. While, of course, from December to 
 the end of April the lake route is closed, it is contended 
 by tlie railways that its competitive effect is pervasive 
 tlnoughout the year. I'or goods can be and are shipped 
 forward during tlie navigation season to the head of the 
 lakes, where they are warehoused and shipped out from 
 time to time during the winter. 
 
 08. Some objections overcome. — When distributing 
 business develojjed in Winnipeg there arose complaint 
 of competition from eastern Canada. Take a point, 
 say, 100 miles west of Winnipeg, and the situation arose 
 that the through rate on a carload of groceries from 
 Hamilton to this point would be less than the rate from 
 Hamilton to Winnipeg and the local out. As an out- 
 come of much discussion and agitation, Winnipeg was 
 oiven the "traders' tariff" arrangement. Under this 
 tariff, merchandise, when shipped into Winnipeg from 
 an eastern point and warehoused, paid, when shipped 
 out, the balance of the through rate from Winnipeg. 
 That is to say, to a point 100 miles beyond it would get 
 the same rate treatment as if the shipment had moved 
 (hrect from, say, Hamilton to the point 100 miles be- 
 yond. There had, however, to be i)aid in connection with 
 the stop-over the cartage and handling charges. These 
 a\ eraged 8 cents per 100 pounds on the first four classes 
 and 6 cents on the fifth class. Under this arrangement 
 !>.) per cent of the freight westbound from Winnipeg 
 moved on this tariff. Subsequently, Brandon, Regina, 
 and Calgary were given the same arrangement. In 
 HK)7, this tariff arrangement was found by the board 
 to be discriminatory, since it was limited to certain 
 l)laces, consignors, and consignees. 
 
440 
 
 TKAFFIC 
 
 The ariau^renient which was next put in and which is 
 still in force is one whose hasis is affected by the read- 
 justments in rates brought al)out by the subsidy given 
 to the Canadian Pacific under the Crow's Nest agree- 
 ment and by the Canadian Northern, as a result of ar- 
 rangements with the Province of Manitoba. These 
 arrangements, which are somewhat complicated, are set 
 out in the Kegina Rate Case. Put in a summary way, 
 the effect is that in Manitoba the "town tariffs" are 30 
 I)er cent below the uniform mileage tariff of 1894, while 
 in Saskatchewan and Alberta they are 22i per cent, 
 and in British Columbia 15 per cent below. 
 
 The following list sets out practically all the "town 
 tariff" points in Canada: 
 
 Nova Scotia and \ew Brukswick. 
 
 Halifax, X. S. Woodstock, N. B. 
 
 St. John, N. B. Fredericton, N. B. 
 
 West St John, N. B. Campbellton, N. B. 
 
 St. Stephen, N. B. Echnundston, N. B. 
 
 Ql'EBEC. 
 
 Montreal and its groupe<l 
 
 terminals. 
 Lacliine, Que. 
 Dominion, Que. 
 St. Johns, Que. 
 Ibenille, Que. 
 
 St, Hyacinthe, Que. 
 St. Rosalie Jet., Que. 
 Sherbrooke, Que. 
 I.ennoxville, Que. 
 Quebec, Que. 
 
 OxTARIO. 
 
 Aurora. 
 
 Barrie. 
 
 Belleville. 
 
 Berlin. 
 
 Bowmanvillc 
 
 Brantford. 
 
 Bridgeburg. 
 
 Brockville. 
 
 Chatham. 
 
 Cobourg. 
 
PHASES OF RATES AND TARIFFS 
 
 441 
 
 
 OirtAMO.— Continued. ■ 
 
 CoIIingwood. 
 
 Peterboro. H 
 
 Cornwall. 
 
 Petrolia. H 
 
 Depot Harbour 
 
 Port Dalhousie. H 
 
 Dcseronto. 
 
 Port Hope. I 
 
 Doon. 
 
 Prescott. H 
 
 Dundas. 
 
 Preston. H 
 
 Elora. 
 
 St. Catharines. H 
 
 Fergus. 
 
 St. Marys. H 
 
 Gait. 
 
 St Thomas. Il 
 
 Gananoque. 
 
 Sarnia. HI 
 
 Guelph. 
 
 Stratford. M 
 
 Hamilton. 
 
 Sudbury. jM 
 
 Hespeler. 
 
 Sault Ste. Marie. ;H 
 
 IngersoU. 
 
 Thorold. || 
 
 Kingston. 
 
 Toronto. \ 
 
 Lindsay. 
 
 Trenton. j 
 
 London. 
 
 Walkerton. j 
 
 Meaford. 
 
 Waterloo. 
 
 Merritton. 
 
 Welland. 
 
 Midland. 
 
 Welland Junction. | 
 
 Napanee. 
 
 Whitby. 
 
 Newmarket. 
 
 Wiarton. 
 
 Niagara Falls. 
 
 Windsor. 
 
 North Bay. 
 
 Wingham. 
 
 OriUia. 
 
 Woodstock. 
 
 Oshawa. 
 
 Port Arthur. 
 
 Ottawa. 
 
 Fort William. 
 
 Owen Sound. 
 
 Westfort. 
 
 Parry Sound. 
 
 Kenora. 
 
 Paris. 
 
 Keewatin. 
 
 
 Manitoba. 
 
 Winnipeg. 
 
 Brandon. 
 
 St. Boniface. 
 
 Portage la Prairie. 
 
 i 
 
442 
 
 
 TRAFFIC 
 
 
 Saskatchewan. 
 
 Kegina. 
 
 
 Battlcford. 
 
 Moose Jaw. 
 
 
 North Battlcford. 
 
 Yorkton. 
 
 
 Prince Albert. 
 
 Saskiitoon. 
 
 Albebta. 
 
 
 Calgary. 
 
 
 Strathcona. 
 
 VVcyburn. 
 
 
 Edmonton. 
 
 Cttiiirose. 
 
 
 Medicine Hat. 
 
 Lethbridge. 
 
 
 
 
 Bbitksh Columbia. 
 
 Fcrnic. 
 
 
 Revelstoke. 
 
 Cranbrook. 
 
 
 Westminster. 
 
 Nelson. 
 
 
 Vnncou\'er. 
 
 Kosslaiul. 
 
 
 Victoria. 
 
 GO. Ea-port and import rates.— In England the 
 question of export and import rates has engaged much 
 attention. In 1908, the Railway and Canal Commis- 
 sion, in the Spillers & Bakers Case, recognized that a 
 low "shipment" rate was necessary to obtain traffic. It 
 was considered impossible to raise this rate, and the dis- 
 similarity of circumstances did not warrant a compari- 
 son of the higher domestic rate with the lower export 
 rate. A briquette manufacturing firm claimed it was 
 unduly discriminated against, since it paid the domestic 
 rate on its raw material, while the manufactured prod- 
 uct came into competition abroad with coal carried on 
 a low export rate. Here, again, the commission upheld 
 the principal of export rates, and further found that the 
 railway was under no obligation to regulate its charges 
 with reference to the ultimate competition complained of. 
 
 70. Lore import rate justified.— While in general 
 there has not been great objection to an export basis 
 lower than that of the domestic rate, England being an 
 
PHASES OF RATES AM) TARIFFS 
 
 443 
 
 exporting nation, there has been in England much ob- 
 jection to low import rates which it has been considered 
 l»eai- unfairly on the domestic trade which pays the 
 liijflier rate. In the United States the Interstate Com- 
 merce Commission, in dealing in the Alabama Midland 
 Case with a lower rate basis on the rail portion of the 
 ini|M)rt rate than was granted on the same portion on a 
 (loniestic movement, held that the circumstances were 
 not dissimilar, and that the difference in treatment was, 
 therefore, discriminatory. The Supreme Court, how- 
 ever, overruled this decision, holding in effect that the 
 import rate was a water-compelled rate throughout, and 
 that the commission had not given due consideration 
 to the competitive factors affecting the rate. 
 
 71. Problem in Canada. — On the export trade in 
 Canada's staples there comes into operation the com- 
 petition of markets. What Canada's grain can pay de- 
 pends upon the conditions in the world market, and the 
 rate must be adjusted with reference to these conditions. 
 Further, the rail portion of the export rate is concerned 
 only with a portion of the total haul, while in the case 
 of the local movement it has no movement beyond. It 
 has l)een ruled by various regulative Ixxlies that a divi- 
 sion of a through rate is not a neoessan,' measure of the 
 reasonableness of a loeal rate. Similar reasoning is 
 applied to export rates. 
 
 In the export movement, commodity mtes are quoted 
 on many staple articles. For example, there are export 
 commodity rates to St. John on cattle, riieep and hogs, 
 <>rain (all-rail), grain (lake and rail), apples, pears, 
 hird, cured meats. Frcwn Montreal there are export 
 commodity rates on the same articles and, ui addition, 
 on pine and larch lumber. 
 
 The board has recognized that there is, within reason. 
 
444 
 
 TK.\FFI(' 
 
 a justihcatioii for a lower Imsis on eximrt than on do. 
 i"c.st.c bus,ne.H. It <lirecte<l in 11)10 tin.. «.instatement 
 "l Montreal of export rates on hmik-r, lower than the 
 |loniest.c rates. Hy an order of 1011 it directed an ex 
 tension of the territory from whieh these reduced exjwt 
 rates on h.n.her shouhl apply. U'hile the export rates 
 v.a Montreal Imve varied, they have generally been held 
 down by he New York rates as a maximum. It wa, 
 recognized .n 1005 that the existing practice of com. 
 putmg export rates from Ontario points on the basis 
 of l^rcentages of the existing export rates from Chicago 
 to Xew ^ ork was not unreasonable, and a direction h^s 
 Kiven as to the groupings and percentages that should 
 apply m the case of all export traffic. 
 
 72. Import rate anomaUe».-WUh import traffic on 
 
 a low import rate basis does not elicit disapproval at a 
 
 ermmal point, say. Vancouver, anomalies in connection 
 
 M .th ,t are complained of at interior iwjints. That is to 
 
 'crllll T'"^'^""! "* ^'"^«''>' ^"^« *''«* «^^ rate from 
 C.rea Britain is lower than the rate from Montreal, he 
 
 considers that he is being discriminated against, iut 
 
 ma particular case the railway rejoined that the ocean 
 
 .ate on bar iron from Europe to Vancouver is 85 cents 
 
 per 100 pounds. The rail rate on this commodity from 
 
 ofT>ri? '^^'^- " '' ^^"*'^- ^'"^'"^ « combLtion 
 ot J?l.iO. At the same time the lake and rail rate (all- 
 
 IS J?L81. If, then, the railway met the rate combination 
 on Vancouver where water competition existed an 
 anomaly would be abated. 
 
 nofnri'V^T'"^ ""xV "^''* ''" '^' '^'^ «f «» interior 
 
 n basket crates, obtains a low ocean rate because since 
 
 .t packs solidly, it is really paying ballast. If th; "ai" 
 
rilASKS OF UATK8 AM) TARIFFS 
 
 445 
 
 H.iy makes a comi)elle(l rate to Vancouver on this com- 
 modity then the rate to Kaniloops will be the rate to 
 tlic Pacific terminal, plus the local rate back to Kam- 
 |.K)|)s. To Kamloops, there bcinj? no water competition 
 at that point, the rate would roughly be proportionate to 
 distance. But if the rate to the coast, plus the local 
 hack, is less than the straight rate to Kamloops, the com- 
 l»i nation on Vancouver will naturally act as a maximum 
 lioldifig down the Kamloops rate. With greater effi- 
 tieiity of water competition at Vancouver, the effect of 
 the compelled rate at the terminal will affect the rate 
 situation still further east of Vancouver. 
 
 On a shipment of tea from Montreal to Vancouver 
 complaint was made that, while in carloads the all-rail 
 rate was $1.40 and lake and rail $1.88, there was a 
 tiirough import rate of 98 cents from British ports to 
 \'aiicouver. 
 
 73. Attitude of rmlways. — The position taken by the 
 t'aiiadian Pacific, in explanation of this, was that the 
 rate all-water from London to Vancouver by the China- 
 Mutual— the Blue Funnel Line — was 73 cents, while 
 hy way of the Tehuantepec Railway it was 76 cents. 
 Therefore, in quoting an import rate of 98 cents the 
 railway contended that taking into full consideration 
 such advantages as it had over the all-water route in 
 point of despatch, it could not charge more than it did 
 and get any share of the import business. 
 
 A merchant in London, Ontario, may complain that 
 the rail rate he pays on goods from Montreal is higher 
 than the rail rate for the same distance when the goods 
 move on an import rate. He is of opinion that since the 
 jroods move over the same portion of railway in the 
 same quantities and under the same operating condi- 
 l ions, anv difference in treatment is discriminator^'. Tlie 
 
MrCROCOPY RESOLUTION TKT CHART 
 
 (ANSI and ISO TEST CHART No. 2) 
 
 1.0 
 
 I.I 
 
 1.25 
 
 Hi ^si 12.2 
 
 140 
 
 2.0 
 
 11^ 
 
 L8 
 1.6 
 
 ^ >I PPLIEG ..vMGE Inc 
 
 SS-^ 1653 East Main Streel 
 
 eg Rochester. New York 14609 USA 
 
 J^S (^'6) 482 - 0300 - Phone 
 
 ^S ("6) '98 - 5989 - Fox 
 
446 
 
 TRAFFIC 
 
 railways rejoin that the import rate is dependent upon 
 the conditions of traffic by .vay of the various North 
 American ports The rates through, say, New York, 
 are affected by the amount of tonnage offering in Eu- 
 rope for New York and the greater density of traffic 
 m the eastern states. New York, it is urg;d, is more 
 favorably situated from the standpoint of attracting 
 ocean tonnage than is 3Iontreal. The rate fixed by way 
 of ^ ew 1 ork will then, it is contended, fix the maximum 
 which the shipment by way of Montreal cannot exceed 
 On shipments to Ontario points, the access afforded bv 
 Lnited States lines spreads into Canada the effect of 
 the TJnited States import rate. 
 
 Through the import rate being thus fixed, the railways 
 will further contend that if on account of the less'er 
 amount of ocean tonnage moving to JMontreal the ocean 
 i^te to that point is higher than to New York, then 
 the Canadian railway participating in the import traffic 
 must either shrink its proportion of the inland rate or 
 forego the bushiess entirely. In other words, it is con- 
 tended that it IS not through any desire to discriminate 
 against the Canadian domestic movement that the lower 
 import rate basis is given, but because it will not stand 
 any higher rate. 
 
 74. Transit arrangements, stop-off, etc.-In the tariffs 
 are to be found arrangements .vhich permit the raw ma- 
 terial to be Morked up in whole or in part before the rail- 
 .lourney is completed. The board has recognized in the 
 case of sugar beets and of pulp wood, for example, that 
 the railway may take into consideration, in fixing the 
 rate basis inwards on crude material, that it carries out 
 the finished outcome of this raw material. It may 
 therefore, adjust its rates on the basis of a continuous 
 service instead of the basis of two distinct sen-ices 
 
PHASES OF RATES AND TARIFFS 
 
 447 
 
 The milling-in-transit privilege is probably the best 
 known of these manufacturing in transit arrangements. 
 With the expansion of the railway system of the United 
 States in the earl ' seventies, there came readjustments 
 in flour milling. For example, a new milling industry 
 bcifan to develop in Wisconsin and in Minnesota. Hith- 
 erto, the important flour mills had been located in the* east 
 and in the middle west. With changes in agricultural 
 conditions, the established mills had to look further west 
 for wheat. The new western mills were in a position to 
 obtain their grain locally, in the first instance, by wagon 
 haul. The railways competing for their business gave 
 low rates eastbound on the milled product. The rates 
 were further held down by the proximity of these mills 
 to the lakes. 
 
 At the same time the established mills further east 
 were apparently faced by a cost which, as compared with 
 the costs of the western mills, would be prohibitive. For 
 it appeared as if the eastern mills would have to stand 
 the rate of the relatively long haul on their wheat in and 
 the rate on the flour out. To meet this condition, the 
 railways developed the milling-in-transit arrangement 
 whereby the shipment of the wheat in and of the product 
 out were treated as a continuous movement on one rate 
 instead of two local movements on two local rates. 
 
 This transit arrangement, which is mutually advan- 
 tageous, since it enables the miller to draw upon wider 
 aieas for his supplies and insures the railway the out- 
 ward movement, is now widespread. It is taken advan- 
 tage of in western Canada. It is taken advantage of 
 extensively in eastern Canada. In the case of grain, 
 flaxseed, and grain products originating in the North- 
 west and destined to Fort William, Port Arthur and 
 Westfort grain shipped to millers on the direct line 
 
448 
 
 TRAFFIC 
 
 of transit will be charged the current local grain 
 rate in. 
 
 To take advantage of the transit arrangement, the 
 milled product has to be shipped out in six months. If 
 so shipped, it goes out on the balance of the through 
 grain mileage rate from tlie point of origin to final des- 
 tination, plus one cent per 100 pounds for terminal ser\'. 
 ices at the milling point. 
 
 A similar arrangement is made when the grain is 
 shipped to elevators for clearing or storage. In the ad- 
 justment of the rate there is refunded to the shipper the 
 difference between the local rate in and the through pro- 
 portional rate for the inbound haul. 
 
 It is not permissible to reship one kind of grain or its 
 product outwards against an inward billing for another 
 kmd of grain. That is to say, wheat or its product 
 may not be reshipped against inward billing for oats, or 
 vice versa. 
 
 Under grain products are included barley, cleanings, 
 breakfast foods or cereals (uncooked) , bran, buckwheat, 
 buckwheat flour, chopped feed, cornflour, commeal, flour 
 (made from grain only), grits, groats, linseed meal, 
 malt, middlmgs, millfeed, oathulls, oatmeal, oilcake, oil- 
 meal, peas (whole or split) , rolled oats, rolled wheat, rj'e 
 flour and meal, sw^eepings and screenings, shorts, wheat- 
 meal. JNIalting is covered by the transit arrangement on 
 the same general conditions subject to the further condi- 
 tion that the balance of the through rate will apply on 
 the product outward only to the amount of 80 per cent 
 of the weight of the barley covered by the inwards 
 billing. 
 
 A stop-over is allowed on rough lumlier for dressing, 
 re-sawing or sorting and reshipment. Here, while a 
 similar rate arraiigement is permitted, the stop-over is 
 
PHASES OF RATES AND TARIFFS 
 
 449 
 
 limited to thirty days. When re-sawing or dressing is 
 
 erformed, the outwards weight must not exceed the fol- 
 lowing percentages of the weights shipped into stop-oflF 
 point: 95 per cent when re-sawn on the rough; 90 per 
 cent when dressed only; 85 per cent when re-sawn and 
 dressed. 
 
 In the tariffs will be found various recognitions of the 
 principle of treating the consignment as a through move- 
 ment, although it is stopped in transit for one purpose 
 or another, there being some charge for such stop. The 
 more important examples may be mentioned. Apples 
 may be shipped to storage and inspection points for sub- 
 sequent reshipment. Beans may be held for cleaning and 
 reshipmciit. Coal and coke may be reshipped in the same 
 car if there is no breaking of bulk. Provision may be 
 made for completion of carloads of hogs, or for feeding 
 in transit. 
 
 75. Changing destination in transit. — ^While the con- 
 tract for carriage is in reality concerned with the move- 
 ment between the points set out in the bill of lading, the 
 railways arrange for changing destination. This is of 
 advantage because when the commodity goes forward it 
 may not be known what is the best market for it; or when 
 it is in transit, information as to a better market than 
 that to which it was originally consigned may be ob- 
 tained. On payment of $3.00 per car for each change of 
 destination in transit, the railway will on request attempt 
 to change the destination. In addition, the difference 
 between the rate as paid and the rate to ultimate destina- 
 tion has to be paid. 
 
 In the event of a car being hauled out of the direct line 
 
 from shipping point to ultimate destination, a charge of 
 
 one cent per ton per mile, with a minimum of twenty 
 
 miles, will be made for such extra haul. But in no case 
 
 c-m-29 
 
450 
 
 TRAFFIC 
 
 must the total charges exceed the local rate to and from 
 the point at which the change of destination is made, 
 plus the charge for change of destination. The extra 
 services and responsibilities this change in transit places 
 on the railway are: there must be a telegram to the 
 agent at the point where the change is to be made; 
 the agent at that point must be on the lookout for 
 the car, and this may require his going to the van of 
 each freight train that passes in order to examine the 
 conductor's record ; when the car is found it must be re- 
 billed and the waybill must be checked ; the amount of 
 charges must be verified and the Auditor of the Depart- 
 ment informed ; the car must be cut out of the train and 
 put to one side, thus necessitating switching, etc. ; the car 
 must be picked out and put on the new train ; the railway 
 company must assume the legal responsibility of decid- 
 ing whether the party who asked that the destination of 
 the car be changed owns the merchandise and has the 
 right to deal with it. 
 
 76. Concentration rates. — A concentration or assem- 
 bling arrangement is of advantage to shippers. A part 
 carload of horses, cattle, hogs or sheep charged at car- 
 load rate and weight from original point of shipment to 
 final destination may be stopped, on the direct run, in 
 transit, for completion of load for an additional charge 
 of $3.00 per car for each stop. In the case of poultry, the 
 charge is $5.00. In both of these cases, if there is an out- 
 of-line haul, there is, in addition to the stop-off charge 
 already mentioned, a charge of one cent per ton per 
 mile, with a minimum of $8.00. 
 
 Butter, cheese, and eggs when shipped to cold stor- 
 age points, in less than carload quantities (in the 
 case of cheese 500 pounds or over) for cold storage, 
 branding or inspection and reshipmenf, have a special 
 
PHASES OF RATES AND lARIFFS 451 
 
 rate basis in. Such commodities where exported are 
 given the advantage of the export rate from original 
 shipping point to the port of export, plus 2 cents per 
 100 pounds for stop-over. In the case of cheese, this 
 arrangement applies only if it is shipped into and out of 
 tlie cold storage point in carloads. 
 
 77. Special rate reductions.— At times, the railways 
 carry pedigreed stock at half rates. This is regarded by 
 the railways as a matter of concession, not of right. The 
 smaller roads when asked for such an arrangement, reply 
 that their traffic will not warrant the reduction. 
 
 Seed grain is carried at reduced rates. This conces- 
 sion is not, however, a continuous one. It is published 
 from season to season, as crop conditions seem to de- 
 mand it. 
 
 With a view to facilitating settlement, the railways in 
 the Xorthwest carry settlers' effects, in carloads, at one- 
 half the ordinary sixth-class tariff rate which would ap- 
 ply under the classification. The Canadian Pacific re- 
 stricts this concession to settlement on its own lines. The 
 Canadian Northern does not so limit the concession. 
 
 78. Cartage service. — Beginning about 1855, the Ca- 
 nadian railways performed cartage service. Down to 
 1892, there was no charge by the railways for the serv- 
 ice. In 1893, because of the increase of the cost of cart- 
 age, the railways added to their rates in the case of the 
 first four classes of the classification H cents per hun- 
 dred pounds, and to the fifth class 1 cent. In 1903, 
 the charges were equalized by making the additional 
 amount so collected li cents per hundred pounds for 
 the five classes. In 1908, * cent per hundred pounds 
 was added. This made the charge to the pubhc 2 cents 
 per hundred pounds, with a minimum of 15 cents on 
 smalls. 
 
452 
 
 TRAFFIC 
 
 At the same time, the railways were paying the cart- 
 age companies performing the service in Montreal, for 
 example, 2^ cents per one hundred pounds. In 1912, 
 application was made to the board to permit the charge 
 to the public as set out in the tariffs to be raised to 8 cents 
 per 100 pounds, with a minimum of 20 cents on smalls. 
 Evidence was submitted by the cartage companies as to 
 the great increases in their cost of operation. Permission 
 was given to the railways to collect 2i cents per hundred 
 pounds from the public, the smalls charge remaining un- 
 changed. 
 
 The cartage service has been performed in eastern 
 Canada by the Dominion Transport Company and the 
 Shedden Company, the railways having made contracts 
 with these companies. It was, of course, open to the 
 individual shipper to perform the cartage service to and 
 from the railway sheds. In practice, however, it was 
 found that in the bulk of the business, it was more expe- 
 ditious, as well as more economical, to have it performed 
 by the cartage companies. The cartage companies have 
 made and accepted deliveries of outbound and inbound 
 package freight at different shed doors, thus aiding the 
 railway in the matter of distribution of freight within 
 the sheds, and consequent increase of expedition in han- 
 dling. Bills of lading are signed by the teamsters of the 
 cartage companies. 
 
 The railways still contend that the increased cartage 
 charge which was allowed in 1912 does not sufficiently 
 reimburse them for the payments they have to make to 
 the cartage companies. Upon the reissuance of the class 
 tariffs to western points brought about bv the board's 
 decision in the Regina Rate Case, the rates in western 
 Canada were published exclusive of cartage, i. e., ship- 
 pers and consignees were obliged to furnish their own 
 
PHASES OF RATES AND TARIFFS 453 
 
 cartage. At the same time, an arrangement was made 
 l)y the railways whereby, in respect of the service per- 
 formed by designated cartage companies, they undertook 
 to bill for\vard for collection from the consignee the 
 cost of cartage on outbound business. The railways in 
 adopting the discriminatory practice of limiting this con- 
 cession to designated transfer companies at the various 
 points, stated that it would be impossible to let all the iso- 
 lated movements by private conveyance participate in 
 it, l)ecause of the additional bookkeeping expense it 
 would entail. The consignees objected to the railway 
 billing forward the cartage charge. They said if it is 
 an expense properly attachable to the sale of the goods 
 let it be covered by the invoice. While it was a con- 
 venience, it was not in terms of the Railway Act a rail- 
 way service. A consignee objecting to the payment of a 
 charge so advanced could not have been compelled in a 
 court of law to pay it. This arrangement with the rail- 
 ways was terminated at the end of 1913.* 
 
 Shippers and consignees in eastern Canada will have 
 to make their own arrangements as to cartage, the rail- 
 way no longer being an intermediary.'' 
 
 In the case of cartage in the United States, as, for 
 example, in Cleveland, the bulk of the work is done by 
 regular organized cartage companies, under contracts 
 with shippers and consignees who give carriers written 
 instructions or orders to deliver all freight consigned to 
 them to a specified cartage company. The cartage 
 charges are on a higher basis than has been in force in 
 Canada. 
 
 ' Since the above was written the railways have agreed to continue tfie prac- 
 tice of advancing cartage charges, it being understood that this confers no legal 
 ol'lieation. under the Railway Act, on the part of the consignees to pay the charges 
 so advanced. 
 
 2 Since the above was written the railways have agreed to continue the practice 
 of making cartage contracts with cartage companies provided all the expense <rf 
 tlif cartage is borne by the shippers or consignees. 
 
CHAPTER VI 
 
 PASSENGER RATES 
 
 79. Water and port competition in passenger traf- 
 fic.— Passenger rates are not affected by competition of 
 markets and only to a slight extent by competition of 
 ports. While the development of facilities for foreign 
 travel by way of a particular port may attract passen- 
 ger traffic by rail from one route to another, this de- 
 pends upon the preference of the passenger, not on mere 
 cheapness of route. While to the ton of freight the 
 cheapness of the rate is the thing, in the case of the 
 passenger there enter in conditions of personal com- 
 fort, scenic attractions of the route, and the like, which 
 may more than outweigh a lower rate afforded by a 
 shorter mileage to a particular port. 
 
 Water competition and its concomitants which, in cer- 
 tain phases, connect themselves with competition of 
 ports, are also much less important here. The competi- 
 tion of the Great Lakes attracts tourist traffic. But the 
 business man who has to meet some business engagement 
 seeks the more expeditious rail route. Low-grade bulky 
 freight is attracted by water because the rate is more 
 important than the time of transit. Within limits, the 
 time of transit is more important to the business man 
 than is the rate. 
 
 In freight business, ocean competition coimects itself 
 with port competition when a particular port may, by 
 attracting a larger volume of tramp tonnage, afford a 
 
 454 
 
PASSENGER RATES 
 
 455 
 
 cheap, slow, and perhaps roundabout route for freight. 
 Hut liere, again, on the ocean movement, time and direct- 
 ness of route are more important to the passenger. 
 
 80. Distance important /actor.— Distance affects pas- 
 senger rates much more directly than it does freight busi- 
 ness. Reference has been made to the extent to which 
 circuitous routes may enter into the transportation of 
 freight. But in the movement of passenger business be- 
 tween New York and New Orleans where the most 
 roundabout route is 58 per cent longer than the most 
 direct, normally passenger travel between these two 
 points will seek, if not the shortest, at least the shorter 
 routes. For if the longest route is taken, there will be 
 such an addition of the time to the journey that unless 
 the rate is very much reduced the additional expenses 
 of travel, meals, sleeper accommodation, etc., will more 
 than take up the rate advantage, if any. Again, in the 
 movement from the eastern states to San Francisco 
 by a broken raU and water route by way of Vancouver 
 as compared with a direct all-rail route, while the former 
 may, on account of the magnificent scenery of the Cana- 
 dian Rockies, attract the tourist, it is the latter which 
 attracts the business man. 
 
 81. Time eZement.— Throughout passenger travel, the 
 time element is much more important than the rate ele- 
 ment. But this must be modified by the fact that if the 
 time taken in transit is not too great, a slower and m 'e 
 circuitous route may within rather narrow limits compete 
 with a more direct route. 
 
 This is recognized in the transportation field between 
 Chicago and New York. The high-speed trains are 
 excess fare trains. Between Detroit and Buffalo, the 
 I^Iichigan Central has its high-speed excess fare train, 
 the "Detroiter." The Grand Trunk, because of its 
 
456 
 
 TRAFFIC 
 
 longer line between Chicago and New York, has a 
 differential rate of $10 first-class, as compared with the 
 $18 rate of the Michigan Central and other standard 
 lines. The excess fare trains are nin on the principle 
 of a premium for higher speeil. the premium being re- 
 paid if the time is not made. 
 
 It is within the bounds of reason to say that normally 
 the excess fare is not sufficiently high. The excess fare 
 tram, on account of the limited number of cars it can 
 haul and the superior luxurj' it affords its passengers, 
 IS more costly than the lower speed train. Possibly a 
 radway may feel that it can in a way regard this dif- 
 ference as being properly chargeable to the advertising 
 which such a service gives the railway. But the addi- 
 ^onal costs are not limited to the train movement alone. 
 The high speed means greater expenditures on track 
 and equipment than would be necessary with more mod- 
 erate speed. To the extent that it does not meet its 
 proper share of this expense the other, slower methods 
 of travel must pay more than their proper share. The 
 superior facility of the excess fare train should be com- 
 pensated for by an excess fare commensurate with the 
 increased cost, not merely by a nominal penalty. 
 
 82. Expensive statiom.— In the development of pas- 
 senger business, more expensive passenger stations are 
 called for in the larger cities. The expense of these may 
 be measured in millions of dollars. But when measured 
 m terms of passenger traffic, the terminal expense per 
 unit IS relatively small. The expense of the passenger 
 terminal may be considered as roughly proportional to 
 the business in and out of the point it serves. It is not 
 necessarily increased in expense by the matter of a 
 through movemcMt. In freight business, the constantly 
 expanding terminals, while in part attributable to local 
 
PASSENGER RATES 
 
 457 
 
 conditions, are also attributable to general increase in 
 tin: business of the country. 
 
 The congestion of freight facilities, which Montreal 
 at times faces, is not due simply to the business local to 
 Montreal; the export business is also an important fac- 
 tor. Passenger business, for example, at Winnipeg, 
 while affected by the movement of settlers through, is 
 roughly proportioned to the business local to Winnipeg. 
 In older sections which have been longer settled, this 
 holds in greater degree. But when the Canadian Pa- 
 cific acquired land at $1,000 per acre at Transcona for 
 terminal purposes, this was due to the general expan- 
 sion of the freight business of the Northwest. Since 
 1904, the Canadian Pacific has rebuilt and remodeled 
 everyone of its freight terminals from Fort William to 
 \'ancouver. The freight business requires a large 
 amount of service in terminals, all of which takes time, 
 space, and expense. The passenger loads and unloads 
 himself. In purchasing his ticket, he classifies himself 
 in point of service. 
 
 While the terminal expenses tend to become of in- 
 creasing importance in freight business, in passenger 
 business it is the costs of haulage, the line costs, which 
 are more important. 
 
 83. Other factors. — ^While the ton-mile rate, because 
 of conditions already referred to, tends to decrease as 
 the distance increases, the passenger costs are much 
 more constant. Consequently, the distance factor is 
 much more important in passenger business. Again, 
 disturbing conditions of competition such as are present 
 in freight business are much less in evidence here. 
 
 The passenger fare for a journey is a multiple of rate 
 and distance. That is to say, the principle of equal 
 mileage rates without a tapering of the rate as the dis- 
 
458 
 
 TRAFFIC 
 
 tance increases may be more readily applied here. The 
 actual rate applied may be modified by return trip rates, 
 commutation rates, excursion trip rates, etc. So it does 
 not happen that the rate charged is an exact multiple 
 of the s*"ndard rate. It is computed that in Canada 
 not more than 20 per cent of the passenger travel is 
 carried on one way first-class tickets based on the stand- 
 ard rate per mile. 
 
 On long haul business, modifications of the distance 
 basis and entrance of the grouping principle in a modi- 
 fied form may be found. From Montreal to Vancouver, 
 the first-class limited fare of the Canadian Pacific is 
 $72.50, while from Ottawa, a distance shorter by 115 
 miles, the rate is only $1 less. On round-trip tourist 
 tickets grouping or blanketing may be found to a 
 greater extent. Thus the nine months' round trip tour- 
 ist rate from Ottawa to Vancouver is $132.10. This 
 rate applies from Finch, Winchester, Prescott, and 
 Kingston. 
 
 In the freight business, the movement is a one-way 
 one. That is to say, the transportation is concerned only 
 with the movement of the conraiodity to the market. The 
 cars must be taken back either empty or filled with some 
 other commodity. But the passenger business is better 
 balanced. A man goes from his home town to a near-by 
 town on business; in a short time he retrrns. In the 
 absence of alternative routes, the passenger business 
 which goes returns. Of course this is subject to the ex- 
 ception which arises in the case of incoming settlers in 
 the Northwest. But this is only a momentary disturb- 
 ance of the balance. Once their ecoiiomic condition im- 
 proves, they also begin journeys away from home witli 
 their consequent return. While there cannot, in the na- 
 ture of things, be a perfect balance of mileage at a given 
 
PASSENGER RATES 
 
 459 
 
 time, there is proportionately less empty mileage due to 
 a lack of return business. 
 
 While freight business may to a considerable extent 
 be stimulated by reduced rates, this does not hold true 
 to the same extent in passenger business. The energetic 
 advertising of the passenger department does, indeed, 
 stimulate a demand for tourist, transcontinental, colo- 
 nization, round-the-world traveling. But the extent to 
 which this can be developed depends upon the income of 
 the individual. There are not only the incidental ex- 
 penses of train travel, but the hotel and other expenses 
 along the way are also large. The extent to which, then, 
 there is a response to such methods of stimulating travel 
 depends on the opinion of the mdividual as to some busi- 
 ness gain to be obtained, or upon his surplus income. 
 Concessions in rate are apt to have the most noticeable 
 effects in connection with commutation business on a 
 relatively short haul movement. The commutation rate 
 permits the business man to live some distance out of 
 the city. His family thus becomes dependent upon train 
 travel. The excursion rate stimulates holiday travel. 
 But, here again the matter of surplus income is a deter- 
 mining factor. 
 
 84. Passenger business in practice. — Comparison be- 
 tween freight and passenger business is natural because 
 they are the two main sources of railway income. While 
 they are not, because of inherent differences, exactly 
 comparable, they are of interest when considered jointly, 
 because they are complementary. A freight traffic man 
 may look askance at the advertising expenses of the 
 passenger department. The passenger man will re- 
 spond that while it may be difficult to point out the ex- 
 act return from such advertising, it not only creates 
 passenger traffic but also aids in attracting freight busi- 
 
460 
 
 TRAFFIC 
 
 ness. It may be too broad a generalization, althoujrh it 
 .s sometimes so stated, that the line a man travels ove 
 IS the Ime he wU route his freight over. Whether or 
 
 fl^lh! f t."" '" P™-^*'™ depends on the matter of 
 freight faeihties. But if a man is favorably impressed 
 by the passenger service he receives, it has some effect 
 on his shippmg mstructions. Mr. W. P. Hinton, Gen- 
 
 17!^T"J" ^/'"* "' *' ^"""^ Trunk Pacific, who 
 has had a diversified experience both in freight and pas" 
 senger business, put the matter, from the passenger 
 man s standpoint, very aptly when he said: * 
 
 .rf°„*' !'''«f™r^'^' of Ca„«l., transportation companie, 
 are permitted to give speeia. fares and concessions to land 
 settlers, agricultural exhibition managers, exhibition and c™ 
 mercial travellers. The ultimate results are reaped b/I 
 freight department, owing to the settlement of the land thi 
 improvement of crops, and the additional sale and distribit on 
 of merchandise and supplies, '"ounon 
 
 85. Pa»eenger and freight receipt, compared.-^t. 
 e«nce to certain phases of the fmght business whS. 
 
 hZ^'t^ '"" """'^ ^'"'" '"'^ ""''> ^"^ ""portent 
 freight busmess is m terms of railway receipts than pas- 
 
 sparsely settled sections a preponderance of freight busi- 
 ness IS always found. While in England every $1(W of 
 revenue s divided between passengfr and TJghtTusi 
 
 If : K / *^^ ^""*'* '^*»*«'' » somewhat similar 
 ratio IS to be found, although in the more densely Zm 
 eastern states the ratio is $44 to $56. Pro^LveT 
 crease in density of population may, other t^ZZ 
 equ^ be expected to affect pas Jger businesf ^ 
 \\ hile the receipts, and work done therefor, in freight ' 
 busmess may be expressed in ton-mile eamm^, thT^: 
 
PASSENGER RATES 
 
 461 
 
 senger mile, which is also a work distance unit, is used 
 to measure passenger earnings. While the ton mile is 
 made up of two exact quantities, passenger mileage is 
 made up of one inexact and one exact quantitative in- 
 dex. 
 
 In Canada, in the period 1910-1912, the number of 
 passengers carried increased by 14.6 per cent, while the 
 receipts increased by 23 per cent. 
 
 The earnings per unit in passenger and in freight 
 business in Canada for a period of years are of interest: 
 
 1907 1908 1909 1910 1911 1912 
 
 Average receipts per passen- 
 ger per mile 1 .911 
 
 Average receipts per ton per 
 mile 
 
 In this period, receipts per passenger per mile in- 
 creased 1.6 per cent, while freight receipts per ton mile 
 decreased 8.4 per cent. 
 
 86. Density of traffic.— In freight business, an index 
 of increasing business is freight density, that is, tons 
 hauled one mile per mile of line. In passenger business, 
 a similarly constructed index, viz., the number of pas- 
 sengers carried one mile per mile of line may be used. 
 For the period 1907 to 1912 the figures for Canada 
 are as follows: 
 
 Cents 
 
 Cents 
 
 Cents 
 
 Cents 
 
 Cents 
 
 Cents 
 
 1.911 
 
 1.9iM) 
 
 1.921 
 
 1.866 
 
 1.944 
 
 1.943 
 
 .815 
 
 .7iS 
 
 .787 
 
 .739 
 
 .777 
 
 .757 
 
 1907 
 
 1908 
 
 1909 
 
 1910 
 
 1911 
 
 1912 
 
 Passenger density.... 90,921 90,654 84,342 
 Freight density 518,486 564,378 545,991 
 
 99,742 
 635,321 
 
 102,597 
 631,829 
 
 108,888 
 731,776 
 
 In this period, the mileage on which the above av- 
 erages are struck increased by 18.6 per cent; the pas- 
 senger density increased by 19.7 per cent, while the 
 freight density increased by 87.8 per cent. While here 
 again the bases on which the percentages are computed 
 differ, the calculation shows in a general way that pas- 
 
462 
 
 TRAFFIC 
 
 87 p2 /"""^ is incrming twice as r.pid^*^' 
 
 «m.-In passenger business, one bad year by it, cur 
 a,iment of ,„come affects business in succeeding ye^ 
 
 908 thT'f 'tf'^' "' ™"™y "-« c„nstnfcS^ 
 1M8, the freight business of 1908 showed a sharp ii! 
 crease over 1007. It is true that it took untilmo t 
 get back to the normal situation. But in the <!L ot 
 passenger business, the curtaihnent was fe"t mosTX 
 
 pfn«1r?,Y *."""' disturbances than is freight 
 
 A striking difference exists between freiirhf «n,l « 
 Sanger business, both in respect of the lo^^td fte £ 
 
 m? 1908 1909 1910 19JJ 
 
 Average freight haul in miles. . 183 206 iivr 
 
 Average tons per train 2«o S^ ]»^ 
 
 Average passenger haul in mile.,. M ^? *I| 
 
 Averagepassengers in train.... S6 S J? 
 
 211 
 
 Sll 
 
 69 
 
 59 
 
 «00 
 
 305 
 
 70 
 
 60 
 
 218 
 
 325 
 
 71 
 
 62 
 
 ^J^r"'^^ ^™«''* •""•• •»» ''«^«'«ed by 17 per cent 
 
 per cent' %T'' ""r*^- """= <- -LX « 
 per cent. The percentage comparison is stiU more tn 
 
 toCit^'rs^nt^rfl^^^^^ "-" t 
 
 cars, the conditions are differe~pa£n"rb' ° "" 
 For 1912. the freight receipts were Z^l^:^Z 
 
 ^ri!;Te:tVort^^^l«^-^^^ 
 
 Putting the matter another ^rf^XlsfntTn 
 
PASSENGER RATES 
 
 463 
 
 engine earned $2.60 per mile, while in passenger busi- 
 ness it earned only $1.60 per mile. 
 
 88. Capacity of car*.— The economies of heavier 
 loading are not available in the passenger business. 
 Although the Great Northern was at one time credited 
 with attempting to introduce into its passenger business 
 the same principle it used in its freight business, viz., 
 maximum loading, it is not a principle which will work. 
 It is true that in India and Japan there are about five 
 times as many passengers on a tr-^' as in North Amer- 
 But such conditions cann( - be obtained here. 
 
 ica 
 
 Where time is unimportant and money all important, 
 maximum loading may be obtained. In India, the 
 cheaper class passengers will begin to assemble hours 
 before the train is scheduled to start. In other countries, 
 passenger trains must move not only at regular times, 
 but also with an eye to the general convenience of trav- 
 elers. A new train may be put on to develop business. 
 It takes not far from six months to prove its usefulness 
 and profit. With the frequent service which highly de- 
 veloped passenger business demands, the average load- 
 ing per train is low. The standard first-class cars of 
 the Canadian Pacific seat from 70 to 86; the more re- 
 cently constructed cars accommodating the latter num- 
 ber. The 62 passengers accommodated by the average 
 train could be handled in one car, with space to spare. 
 While the traveler has his mind concentrated on the dis- 
 comforts of overcrowding which he at times is subjected 
 to, on the average three-fourths of the seating capacity 
 in the train is unoccupied. 
 
 It is true, however, that the average is to some extent 
 held down by the travel in sleeping cars and in parlor 
 cars. The ordinary maximum carrying capacity of a 
 sleeping car is twenty-seven. While sleeping-car mQve- 
 
464 
 
 TRAFFIC 
 
 ment and parlor-car movement do indeed hold down the 
 average, the effect is not as great as might be anticipated 
 In 1909 only 2.91 per cent of the total number of pas- 
 sengers who traveled on the Canadian Northern were 
 carried in sleepers. For the same year, the figures for 
 the Grand Trunk were 3.25 per cent in sleeping cars 
 and 1.15 per cent in parlor cars. On the Canadian Pa- 
 cific, the figures for sleeping-car business were 5.9 per 
 cent, and for parlor-car business they were 1.2 per cent. 
 But to carry in Pullmans and parlor cars 7 per cent of 
 the total number of passengers meant that the mileage of 
 these cars was 20 per cent of the total passenger car 
 mileage. In part, this is due to such equipment being 
 used on the longer hauls; in part, it is due to the lesser 
 carrying capacity of each such car. 
 
 89. ''Dead'' weight.— The lesser average loading in 
 passenger car business means an increase in tare. In 
 passenger business, competition in service has led to 
 increasing weight of car. This is especially noticeable 
 m sleeping car traffic. West of Winnipeg, to and from 
 Vancouver, there is a solid Pullman movement as there 
 IS between Chicago and the Pacific Coast of the United 
 States. This has been characterized by the carriage of 
 additional weight, observation cars, bufl'et cars, etc. The 
 competition has been one in luxury and service, not in 
 rate. The "Overland Limited," which has an excess fare 
 of $10 on Its run between Chicago and San Francisco, 
 has in addition to observation cpr and club car the fol- 
 lowing additional services: barber and baths, valet, 
 stenographer, ladies' maid, telephone, electric ventila- 
 tion, telegraphic news service, stock and market reports. 
 It may be argued that a lesser composition in point of 
 luxury would have been a better business policy. 
 In Germany, calculating 13^ passengers as weighing 
 
PASSENGER RATES 
 
 465 
 
 a ton, it has been computed that 98.75 per cent of the 
 wei^'ht hauled is dead weight. Of course, passenger 
 fares are not calculated on weight; but the computation 
 is of some value as indicating where some of the cost of 
 passenger business is to be found. In Canada, a first- 
 class passenger car, with a maximum seating capacity 
 of 80, has a dead weight of 52i tons. A sleeping car 
 averages 60 tons. Such cars are supplied with both 
 upi)er and lower berths. Normally, the upper berths 
 are in use only about one-fifth of the time. In the sum- 
 mer months, all the accommodation in a sleeping car 
 may be taken up. At other seasons, there is often much 
 empty space. Calculations made by the Canadian Pacific 
 for certain winter months in 1910 showed in January of 
 that year between Montreal and Toronto, which is a 
 heavy passenger run, 88 per cent of the lowers and 29 
 per cent of the uppers occupied westbound; while east- 
 bound the percentages were 86 per cent and 27 per cent 
 respectively. For the month of March, between Toronto 
 and Winnipeg, the percentages of occupancy were re- 
 spectively 20 per cent and 14- per cent. In the same 
 month, between Montreal and Vancouver, the occu- 
 pancy westbound was 70 per cent and 34 per cent, while 
 eastbound it was 59 per cent and 14 per cent. 
 
 The average passenger haul is kept down by the 
 amount of suburban traffic, while in freight business the 
 average haul has tended to increase because of the long 
 haul of staple products. As interurban electric lines are 
 developed, they will take more of this short distance traf- 
 fic, with the result that the average haul will increase. 
 
 In general, the difference between freight and pas- 
 senger business is much the same as the difference be- 
 tween carload and less than carload business. It is pos- 
 sible to handle freight in a wholesale way. Passenger 
 
 c— III-SO 
 
466 
 
 TRAFFIC 
 
 business has, except in the case of excursion and similar 
 traffic, to be handled in a retail way. 
 
 90. Passenger rates and the Railway Act of Canada,— 
 Passenger tariffs are classified as standard and special. 
 Standard passenger tariffs may express the mileage they 
 cover in the same way as in standard freight tariffs. 
 Special tariffs specify the passenger tolls to be charged 
 when such tolls are lower than the standard. The re- 
 quirements as to the approval of standard passenger 
 tariffs are the same as in the case of standard freight 
 tariffs. The requirements in regard to the filing and 
 coming into force of special passenger tariffs are the 
 same as in the case of special freight tariffs, except that 
 the public notice is limited to three days. 
 
 The board is also given a wide discretion based on 
 "the exigencies of competition or otherwise" to deter- 
 mine, notwithstanding the provisions of the statute, the 
 time or manner within and according to which publi- 
 cation of any special tariff is to be made. 
 
 The railways may grant free or reduced rates to the 
 Dominion, any provincial or municipal government, 
 fairs and exhibitions in connection ^vith exhibition 
 thereat, to charitable societies and the necessary agencies 
 of such institutions in connection with the carriage of 
 destitute or homeless persons. 
 
 In defining the services just set out, the word "traf- 
 fic" is used in the Railway Act. This covers both pas- 
 senger and freight business. 
 
 Railways may issue mileage, excursion, or commuta- 
 tion -ates, and may carry at reduced rates immigrants 
 or settlers and their effects as well as any member of 
 any organized association of commercial travelers with 
 his baggage. They may carry at free or reduced rates 
 their own officers and employees, or their families, 
 
PASSENGER RATES 
 
 467 
 
 former employees of any railway, members of the pro- 
 vincial legislatures or of the press, members of the In- 
 terstate Commerce Commission of the United States, 
 tlieir officers and staff, with baggage and equipment. 
 The railways may also carry free or at reduced rates 
 such additional persons as the board may approve or 
 permit. Exchange of free transportation between the 
 principal officers of railways is permitted in respect of 
 the carriage of their officers and employees and their 
 families, or their goods and effects. 
 
 The statute also provides for the free transportation 
 as a matter of right of members of the Senate and House 
 of Commons, the members of the board and such offi- 
 cers and staff of the board as it may determine. 
 
 91. Standard rates in effect.— In 1907 the board 
 issued an order requiring the Canadian Pacific and the 
 Grand Trunk to reduce their standard rates east of the 
 Calgary and Edmonton Railway to 8 cents a mile. At 
 the same time the other railways were circularized to 
 see whether their condition would stand the reduction. 
 Subsequently, the Canadian Northern reduced its rates 
 to the 3-cent basis. The rates west of the Calgary and 
 Edmontor line remained at 4 cents. The justifiability 
 of this difference in rate is involved in the Western Rates 
 Case before the board. 
 
 Before the order was issued there were various stand- 
 ards on the diflPerent railways. On the Alberta Rail- 
 way and Irrigation Company the standard was 5 cents. 
 On the Algoma Central and on the Atlantic and Lake 
 Superior it was 4 cents. On the Grand Trunk (with 
 the exception of the line from St. Lambert Junction to 
 Rouses' Point, a distance of 44 miles, on which the rate 
 was 4 cents) the standard was 3i cents. On the Cana- 
 dian Pacific in Manitoba, the rate was 3 cents; while in 
 
468 
 
 TRAFFIC 
 
 Saskatchewan and Alberta it was 8i cents. A similar 
 condition existed on the Canadian Northern lines in the 
 West. On various sections of its lines east of the Great 
 Lakes, the Canadian Pacific had rates of 8, 8i, and 8i 
 cents. 
 
 The present situation is that the general standard rate 
 in British Columbia is 4 cents. The British Columbia 
 Eastern Railway has a rate of 6 cents. In British Co- 
 lumbia and the Yukon, the White Pass and Yukon 
 Route between the Alaskan boundary and White Horse 
 has, under exceptional circumstances, a rate of 18 cents 
 per mile. The Klondike Mines, a short railway in the 
 Yukon, has a rate of from 15 cents to 20 cents per mile. 
 East of the Calgary and Edmonton line, the following 
 exceptions from the 8-cent standard are to be found: 4 
 cents— Algoma Central and Algoma Eastern, Kent 
 Northern, Quebec Oriental, and Atlantic, Quebec and 
 Wes'-rn; 3i cents— the Pass division of the Canadian 
 Northern, Brockville, Westport & Northwestern, Tem- 
 iscouata, Halifax and Southwestern, New Brunswick 
 and Prince Edward Island, New Brunswick Coal and 
 Railway Co. ; 3^ cents— Dominion Atlantic. The mile- 
 age covered by these exceptions east of the Calgary 
 and Edmonton line is 1,057 miles. 
 
 92. Different kinds of passenger tickets.— The dif- 
 ferent kinds of tickets in use on the Canadian Pacific 
 may be taken as typical. 
 
 Mileage tickets in books of coupons covering 1,000 
 miles are issued east of Port Arthur. To be used on a 
 tr-in the coupons must first be exchanged for regular 
 transportation. Ticket will not be honored if lost. On 
 a first-class one-way ticket over more than one line, the 
 company acts as agent and assumes no responsibility 
 beyond its own lines. No stop-over is permitted, unless 
 
PASSENGER RATES 
 
 469 
 
 especially provided for. An emigrant ticket is good only 
 for five days from date of issue and for continuous pas- 
 sage. No stop-over is allowed. Conductors' tickets are 
 issued on train at a. charge of 10 cents over regular fare; 
 this 10 cents being redeemable. Arrangements are also 
 made to sell regular transportation on the train in the 
 case of passengers getting on at flag, or non-agency, sta- 
 tions. The second-class ticket has the same general lim- 
 itations as the first-class. Commutation tickets are 
 issued: in 10-trip tickets, good for continuous passage 
 only, with no stop-over; scholars' 46-trip tickets, good 
 only for continuous trip with no stop-over, not good 
 after date of expiration even if a portion is unused, and 
 if lost, a duplicate will not be issued; 56-trip tickets with 
 same conditions. In connection with commutation tick- 
 ets, marketing stamps are issued. These may be use4 
 by suburban holders of 55-trip tickets. They provide 
 for free transportation of 25 pounds of marketing in 
 baggage car on one day. Marketing is defined as being 
 perishable table food supplies. The tickets used between 
 Nelson and Kootenay Landing, on the boat, have in ad- 
 dition to the usual conditions on first-class tickets, the 
 condition that if the vessel's legal carrying capacity is 
 all taken when the ticket is presented, then the com- 
 pany's liability is limited to the redemption of the un- 
 used portion of the ticket. 
 
 In the case of excursion tickets over two or more lines, 
 such as the nine months' round trip to Pacific Coast 
 points, in connection with which a series of options as to 
 routes is permitted, provision is made for identification of 
 the passenger. There is also a provision that the return 
 portion of the ticket will not be good for passage unless 
 validated by the agent designated for this purpose. 
 
 Traveling on freight trains is permitted in cases of 
 
470 
 
 TRAFFIC 
 
 emergency and on special permission from the Super- 
 intendent of the Division, or any higher official. A re- 
 lease from liability in excess of $25 in case of accident 
 has to be given. First-class fare is charged. 
 
 On all of the tickets issued there is the general condi- 
 tion that they are not transferable. The contract is a 
 personal one as between the railway and the passenger. 
 The sale of an unused portion of a ticket is in Canada, 
 under R. S. C, 1886, Chap. 110, s. s. 7 and 8, a criminal 
 offence. Provision is made for refund of unused portion 
 of a ticket. 
 
 The tickets issued permit the carriage of 150 pounds 
 of baggage for each adult, and 75 pounds for each half- 
 fare ticket. The liability for loss of baggage is limited 
 in the ticket to $100. 
 
 98. Sleeping-car service. — The sleeping-car service, 
 which is now regarded as one of the necessary comforts 
 of long distance traveling, has been connected with 
 Canadian railway travel since Confederation. The first 
 Pullman car, the "President," was put in operation on 
 the Great Western Railway in 1867. It was a combina- 
 tion sleeper and kitchen with portable tables. When the 
 Pullman Company operates the service under contract, 
 as on the Grand Trunk, the arrangement is that if less 
 than a sum set out in the contract is earned per car per 
 annum, the railway pays mileage. When this guaranteed 
 sum is reached no mileage has to be paid. When a cer- 
 tain fixed sum is exceeded then the railway receives one- 
 half of the excess. In the case of the Canadian Pacific, 
 the Great Northern, the Canadian Northern, and the 
 Grand Trunk Pacific, the sleeping cars are operated by 
 the railways themselves. 
 
 The rate basis of sleeping-car tariffs now in force is, 
 east of Calgary, 6 mills per mile, with 20 per cent off on 
 
PASSENGER RATES 
 
 471 
 
 ui)per berths. West of Calgary the basis is 8 mills per 
 mile, with the same reduction for upper berths. The 
 parlor car rates are based on a charge of 5 mills per mile 
 east of Calgary, and I per cent per mile west thereof. 
 94. Cloiiified pasaenger ratM.— While the matter of 
 ability to pay is recognized in passenger rates, it is not 
 organized in the same way as in freight business. Pas- 
 se!«ger rates average to a greater condition, than do 
 freight rates, differing conditions of travel and of pas- 
 sengers. 
 
 The railway between Montreal and Lachine- which 
 was opened m 1847, had the English style of compart- 
 ment car*— the first, second, and third-class accommoda- 
 tion being supplied on the one car. The charter of the 
 (Jrand Trunk, under the influence of the movement 
 which culminated in England in the provision for "Par- 
 liamentary" trains, provided for a third-class service be- 
 tween Toronto and Montreal at the rate of one penny 
 per mile. The Privy Council has stated that this pro- 
 vision is still binding. 
 
 But while in Canada it was apparently assumed that 
 passenger traffic would be divided into three classes, such 
 a development has not taken place. 
 
 The Railway Act does not provide for second-class 
 fares. In eastern Canada second-class fares grew up 
 as a measure of segregation in connection with the car- 
 riage along the lakes and the St. Lawrence of the lum- 
 ber jacks, Indians, and others working as day laborers 
 in the lumber industry. These rates were also used in 
 connection with colonization. While they were put on 
 on the original Grand Trunk line and were later met 
 by the Canadian Pacific in competition, they are not in 
 general use in eastern Canada. 
 
 Second-class rates from eastern to western Canada 
 
472 
 
 TRAFFIC 
 
 Mere also put in to aid colonization and settlement Tf 
 . c„ed by the railways that the nerdl?the' J 
 ond-class rates for this purpose has passed, as there L 
 not any considerable movement of colonist f rom eas 
 
 Tted rtf" '''^'''' ''^^* ^' *^^ movemTm, t 
 United States who move on special fares, in many cases 
 ower than second-class. Second-class rates a^e"n fZl 
 
 xrctat 1 ^^^"*^ ^" ^^^*- toXit : 
 
 Ttes th^T. S " "" ^'^«"^Pl^ «f the relation of the 
 
 cZr^^^^^^^^^^ ^-- Ottawa to 
 
 .1 A I .J ' ^^«t-^^ass limited, $55.70, while the 
 ^eond-c ass . $41.70. In general, from p Jn sTn n^e 
 d ate to AVmmpeg and Vancouver, there are no secL 
 class rates east of Winnineff VmL \r second- 
 
 ninPD- th^ To r vP^P^^' ^ ^^m Vancouver to Win- 
 nipeg the Canadian lines made a hlnnV^f e^ j V 
 ratp of <ftj.n +« ^ i. a /"""^ » oianket second-class 
 rate of $40 to meet American competition. That is to 
 say, from any intermediate point to Winnin Jf? ! 
 w II annlv iinf;i ^u c ^ i^""!!. to ^^ innipeg this rate 
 till ^^ , ^ first-class rate is lower, the latter 
 
 Sof„asCa„adaa„dttu:i::,raraTerCTJ- 
 It may be said that in reality the P„ll^ -^^e conceined, 
 
 c... and the standard JXs :ar t 'e~<^lr 
 
 95. Passenger cimses in Europe ~ln vTrnrT'.v. 
 praeti« of hav,V three e.a.e. a„7eve^f„tXa t 
 
PASSENGER RATES 
 
 478 
 
 2 
 
 3 
 
 4 
 
 9.5 
 
 60.8 
 
 27.63 
 
 14.47 
 
 84.39 
 
 
 10.19 
 
 86.74 
 
 
 7.3 
 
 92.6 
 
 
 13.2 
 
 84.8 
 
 
 12.7 
 
 86.7 
 
 
 6.2 
 
 90.7 
 
 
 24.3 
 
 71.7 
 
 
 31.7 
 
 62.7 
 
 
 1.4 
 
 1.0 
 
 97.3 
 
 1 
 
 Germany 37 
 
 Switzerland 94 
 
 Belgium 3.00 
 
 Norway 1 
 
 Sweden 3 
 
 Denmark 6 
 
 United Kingdom 3.1 
 
 Italy 4.0 
 
 France 5.9 
 
 India 3 
 
 The average haul in Europe as set out in the follow- 
 ing summary is an index of travel conditions: 
 
 Germany 14 . 24 miles 
 
 Switzerland 13 .0 
 
 Belgium 15.4 " 
 
 Norway 16. 1 " 
 
 Sweden 16.6 " 
 
 Denmark 21 .8 " 
 
 United Kingdom 7.8 " 
 
 Italy 25.0 " 
 
 France 20.5 " 
 
 As a means of reduction of passenger rates, the "zone" 
 tariff system of Hungary, which was adopted in 1889, 
 was hailed when it was introduced as a revolutionary 
 change. As a matter of origin, it may be said that a 
 New Zealander, Samuel Vaile, claims that this idea was 
 first developed in his "stage" system of rate-making in 
 1882, and from it adopted in Hungary. The zone sys- 
 tem was worked out on the basis of 14 zones which 
 increased in size as the distance from Buda-Pesth 
 increased. Within each zone there was a flat rate. In 
 reality, instead of computing rates on a mileage basis, 
 the zone or fixed number of miles was taken as the unit. 
 The idea was to develop longer distance traveling. To 
 the extent that it was successful in this, the shorter hauls 
 were helping to pay for the longer hauls. The diffi- 
 culties which have arisen as to journeys between points 
 in two zones, such points being located near the bound- 
 
474 
 
 TRAFFIC 
 
 ary of the two zones, have been such that various modi- 
 flcafons have been introduced so that it now diffeX 
 httle from the ordinary distance basis. 
 
 The zme system is used in connection with street raU- 
 way raiBc m the United Kingdom as distbi^isM 
 from the flat rate system for the total distance Sh« 
 been used m Canada and in the United States 7 
 
 ^ImMA^l T^ *^'''^" ™ *' Manchester and 
 Sheffield d.str,ct. But the situation here was different 
 from that ,n Hungary, for here the adoption of X Ze 
 system was concerned with short distance traffic wS 
 had to meet electric railway competition. 
 
 the cl«ntf';4''""'""« "^■"^^ '«''» "Oopted on 
 the Continent of Europe are, in general, of three kinds- 
 he stnct distance tariff, for example, m ^rmany. wte« 
 the fare is so many pfennigs for each class for erch H^ 
 meter taveled; the tapering tariff, as in Itety undt 
 which the charge per kilometer decreases as the diston« 
 .ncrea.es: the zone system, a tapering tariff under S 
 the rates are the same to all stations within a partM„ 
 zone, radically decreasing to the stations in tte «S 
 
 Ty'vin^ thaZ"''' **" '"'"'"°" ""^ ^ »"-"-^^ 
 
 4.U* J .. 1 ^"0,1 ^c lur use oi an express train* 
 
 third, a ticket tax; fourth, a fee for registering any W 
 gage which IS not carried by hand 
 
 the case of passenger business, as in the case of freight 
 bus mess, it is practically impossible to make anv Jm 
 parisons of value between foreign conditions and Z-' 
 ditions on this continent. There is lack J. 
 denominator. Whe,. the aver^g haul ° shortT;: 
 apparent that a lower standard o^f comfort or «! 
 
PASSENGER RATES 
 
 475 
 
 ence is required in connection with the accommodation 
 supplied. When fourth-class traffic moves, as in Ger- 
 many, it is characterized by a degree of discomfort whose 
 only palliative is its economy. Whether traffic will move 
 in third or even in f arth-class accommodation in a par- 
 ticular country depends on ':he length of the journey, 
 the services and conveniences demanded, and above all 
 on the general standard of economic well-being. From 
 the standard of personal sacrifice, the payment by a na- 
 tive of India of .4 cents per mile on standard gauge 
 lines, or of .3 cents on the narrow gauge lines, means a 
 heavier deduction from his income than does the pay- 
 ment of 1.9 cen*s per mile by the average passenger in 
 Canada. 
 
CHAPTER VII 
 
 PRACTICAL PHASES OF RAILWAY BUSINESS 
 
 97. Common law obligation, of the rmfeaM —Th. 
 
 common w which applied to the earlier, 370™ 
 
 of carnage has been made applicable, except in ^ fa™ 
 
 t has been modified by statute, to the railway which 
 
 « to-day the most striking example of the coZ.;^ 
 
 Hutchinson, in his work on "CarnVrs " 1.0 ^ zs 1 
 —n carrier as follows: "1 commor;, Jrblttl: 
 s one who undertakes as a business, for hire cr retarf 
 to carry from one place to another the goods of 111 Ir 
 sons who may apply for such carriagcprovided ttJ 
 goods are of the kind which he profesl t~ and 
 unonTrr;^ ''""« '"■" "^^^ *° have them »rri^ 
 ICf^ 7"' *"■"' P''''"^ by the carrier and 
 «ho ,f he refuses such goods for thoL who are wilW 
 to comply w,th his terms becomes liable to an actio" by 
 the aggrieved party for such refusal " ^ 
 
 riJlriifble'a"'' ""'"'^ "l "^'- *■"" '"« ««™»on car- 
 rier was liable as an insurer for all goods which he und^r 
 
 ::rierarZmi"l^"^""v"'^ ^'"•" "^^^^^^n 
 earner at common law may be summarized as follows- 
 
 He was liable as an insurer of the goods, ex^pt' in 
 cases arising from except m 
 
 (a) The act of God. 
 
 (b) The King's enemies. 
 
 (e) Inherent vice or defect in the goods. 
 
 476 
 
PRACTICAL PHASES OF RAILWAY BUSINESS 477 
 
 All of these exceptions have been the subject of judi- 
 cial definition. Items a, b, d, and e are, however, subject 
 to the condition as defences that the negligence of the 
 carrier did not concur therein. Negligence is in law the 
 omitting to do something that a reasonable person would 
 do, or doing something that a reasonable person would 
 not do. While carriers are insurers as to freight, in the 
 case of passengers they are liable only for negligence. 
 
 At common law, as soon as goods were delivered to the 
 carrier, he had the risk of safe custody as well as the 
 duty of carrying as directed. His liability did not rest 
 on contract. However, it was in time established that 
 he might, in consideration of a reduced rate, limit the 
 common law liability by special contract, providing such 
 contract was not (a) contrary to an express provision of 
 la.v, (b) contrary to public policy, or (c) unjust or un- 
 reasonable. 
 
 When the contract of carriage of the carrier was ter- 
 minated and the goods remained in the possession of the 
 carrier as a warehouseman, he was no longer liable as 
 an insurer, his liability for loss or damage being depend- 
 ent on some negligence on his part being shown. 
 
 98. Bill of lading and its conditions. — As an incident 
 of the necessary contractual relations of the shipper and 
 the railway, there came into existence a bill of lading 
 setting out the conditions of carriage and the liability of 
 the railway thereunder. 
 
 The Railway Act of Canada provides that no contract, 
 condition, or by-law, regulation, declaration, or notice 
 limiting the liability of a railway in respect of the car- 
 riage of any traffic is to be valid unless approved by the 
 board, and the board is empowered to define the extent 
 to which such liability may be limited. While the rail- 
 way is a common carrier, whose liability has been further 
 
47S 
 
 TRAFFIC 
 
 defined by statute, it may refuse to take any naeka.^ 
 wK.oi, "^"/anuary 16, 1913, the regulations under 
 
 ^':Z'7^'z::t '- '^""^' "'-"'^- """^ <-'■ 
 
 In 1909 as a result of a series of conferences between 
 representatives of the shippers and of the ™il«^ys ^ 
 urn or„ bdl of lading applicable to Canadi „ "fmH^, 
 drafted and approved by the board. The provisions „f 
 
 99 LiMmy.-ln general, the railway is an insurer 
 
 B not bable m cases covered by the various conunon law 
 defenses. Nor ,s it liable for loss, damage or delay due 
 
 Aes caused by natural shrinkage or diserepaneiesTefe- 
 vator we-ghts when such elevators are not operatedt^ 
 the carrier unless the weights are evidenced by govern^ 
 ment cert.ficates; nor for any loss, damage, or deCdue 
 to the authority of law, or of quarantine detenC I 
 >s hable only for negligence where goods are stopped L 
 tans,t at the ,«,„est of the party entitled to rnake ih 
 request ; or where, in accordance with general custom^he 
 goods are carried in open cars. 
 Where goods are carried at "owner's risk," the shioner 
 
 assumes the risks incidental to tran.,portat „„; the rS 
 
 way, however, being liable for negligee 
 Except in ease of diversion from rail to a water route 
 
 goods carried by water over any portion of the jol^^' 
 
PRACTICAL PHASES OF RAILWAY BUSINESS 479 
 
 are subject to the provisions of the statute and of the 
 bill of lading; provided, however, that in respect of the 
 water route the carrier is not liable for any loss or dam- 
 age resulting from the perils of the lake, sea, or other 
 water, or from explosion or any other cause not due to 
 its negligence ; or from other accidents of navigation or 
 from prolongation of the voyage. 
 
 The company is not liable for loss or damage arising 
 from any dangerous article. 
 
 Under the former bill of lading, the company assumed 
 no liability off its own lines and acted only as the agent 
 of the owner off its own lines. Under the present bill, 
 in the case of a movement from one point to another in 
 Canada, or where goods are carried on a joint tariff, 
 the initial carrier is liable in respect of any loss or dam- 
 age occurring on the lines of the connecting carrier, and 
 from which such connecting carrier is not exempt under 
 the provisions of the bill of lading, the onus being on the 
 initial carrier. The latter is entitled to recover from the 
 connecting carrier. The person aggrieved, however, re- 
 tains any right of action he may have against the initial 
 or the connecting carrier. 
 
 The American rule, as set out in the earlier decisions, 
 was that for a carrier to be liable in respect of the portion 
 of a through movement which was off its own line, there 
 must be a positive agreement, either express or implied, 
 extending the liability. In the English rule, the posi- 
 tion was different. When the carrier accepted for a 
 through movement to a point off its own line on the 
 line of a connecting carrier, the first or contracting car- 
 rier became liable no matter by whom the goods might 
 be lost; it became exclusively responsible and it alone 
 could be sued by the aggrieved person. Any attempt to 
 hold the subsequent or connecting carrier liable for this 
 
480 
 
 TRAFFIC 
 
 loss, although it might have happened from its nedi- 
 gence or fault, would fail because of the want of privity 
 or contract between such carrier and the injured party 
 It was, of course, open to the carrier to safeguard itself 
 by special contract. 
 
 When the carrier limited by contract its obligation so 
 that It acted only as the agent of the shipper in respect 
 of the movement off its own line, it was naturally a diffi- 
 cult matter for the shipper to localize the cause of loss 
 and determme against whom action should be brought 
 
 100. Insurance.-Wh^n any person is reimbursed on 
 account of loss or damage, the carrier may have the 
 advantage of the insurance in effect upon such goods 
 subject to its reimbursing the person so assured for the 
 premmm paid. 
 
 101. Liability as a tcarehomeman.—The railway is 
 not liable, except as a warehouseman-in which capacity 
 It is answerable for want of reasonable care— for loss 
 damage, or delay caused by fire occurring forty-eight 
 hours, on general traffic, and seventy-two hours, on 
 bonded goods, after ^vritten notice of the arrival of the 
 goods at destination has been sent or given. Both these 
 time periods are exclusive of legal holidays. After these 
 periods have expired, the goods may be, on warehouse- 
 man s liability, kept in the car, station, or place of deliv- 
 ery, subject to reasonable storage charges; or the goods 
 may be removed to a public or licensed warehouse and 
 there held at the owner's cost and risk. For examole 
 under C. P. R. tariff' C. R. C. No. E 2680, efl'ective 
 Aovember 18, 1913, warehouse or shed freight (that is 
 goods and merchandise usually handled in the regular 
 freight sheds and auxiliary warehouses of the railway) 
 are subject to the following charges after the free time 
 has elapsed: 
 
PKACTK'AL PHASES OF RAILWAY BUSINESS 481 
 
 IS 
 
 For the first week, or part thereof — 
 
 L 1 1 1 '^ 6 7 8 10 CImw*. 
 
 3 3 3 3 3 1} 1} U li CenU per 100 pounds. 
 
 For the second week, or part thereof, and each suc- 
 ceeding week, or part thereof — 
 
 •«344678 10 ClaiWM. 
 
 6 
 
 6 
 
 6 3 S 3 3 Cents per 100 poundit. 
 
 Tliese charges are subject to a minimum storage charge 
 for any single consignment of 15 cents for the first week, 
 or part thereof; for the second week, or part thereof, 
 and each succeeding week, or part thereof, 30 cents. 
 Under the former bill, the responsibility of the railway 
 ceased when the goods were placed in the company's 
 sheds or warehouses at destination, and storage charges 
 ran from twenty-four hours after arrival. 
 
 102. Loss and damage. — Loss or damage is com- 
 puted on the basis of the value of the goods at the place 
 and time of shipment, plus freight and duty, if any, paid, 
 unless a lower value has been declared, in which case the 
 lower value governs, even if the loss or damage is due 
 to negligence. 
 
 Notice must be given, in writing, to the railway either 
 at the point of origin or at the point of delivery, within 
 four months after the delivery of the goods; in case of 
 failure to make delivery, notice must be given within 
 four months after a reasonable time for delivery has 
 elapsed. Under the old bill, claims for damages or loss 
 had to be presented at the nearest place of delivery \ ithin 
 tliirty-six hours after delivery of the goods. 
 
 103. Payment of charges.~The owner or consignee 
 may pay freight either before or after delivery. Under 
 the old bill, the charges had to be paid before delivery. 
 
 The Railway Act provides that on refusal to pay tolls 
 
 C-III-31 
 
482 
 
 TRAFFIC 
 
 they may be recovered in any court of competent juris- 
 diction. Instead of bringing action, the railway may 
 seize the goods and hold them at the risk of the owner 
 as security for the payment of the charges. If the tolls 
 are not paid within six weeks, the railway, after adver- 
 tisement, sells the goods, reimbursing itself out of the 
 proceeds. If the goods remain in the possession of the 
 railway unclaimed for six months, it may, after public 
 notice, sell the goods, reimbursing itself out of the pro- 
 ceeds. If the balance remains unclaimed after three 
 months, it is to be deposited with the Minister of Finance 
 for the public use. 
 
 104. Forma of the bill of lading.~The bill of lading 
 has three sets of documents: (a) the original bill of lad- 
 ing; (b) the shipping order; (c) the memorandum. A 
 and c are for the shipper; b is for the railway. The 
 railway practice is, when claims are made, to require the 
 surrender of the original bill of lading. This serves two 
 purposes; being the original, it requires no verification; 
 and being in the company's possession it cannot be 
 wrongfully utilized by any person who might otherwise 
 use it as a basis for repeating the claim. 
 
 There are two bills of lading— the straight bill and 
 the order bill. The papers concerned with the straight 
 bill are printed on white paper; the order bill is printed 
 on yellow paper, while the shipping order and memoran- 
 dum are printed on blue paper. The bill of lading has a 
 uniform size, viz.. Si inches by 11 inches. 
 
 When the "order" bill is used, it is for transactions 
 negotiated through the banks. For example, an Ontario 
 gram dealer may sell to a firm in Toronto. He draws 
 a draft either on sight or on demand on his consignee, 
 and attaches this draft to the biU of lading which carries 
 title to the goods. His bank will be instructed to hold 
 
rUACTlCAL PHASES OF RAILWAY BUSINESS 483 
 
 the document until the draft is paid. The net amount 
 of the draft goes at once to the credit of the dealer's 
 account. Then the bank owns the draft. It forwanls 
 the draft and bill of lading to Toronto. The Toronto 
 firm must pay the draft in order to get possession of 
 the bill of lading, which is its title to the grain. 
 
 The bulk grain bill is an "order" bill with the same 
 ^'ciieral terms as have been summarized above. 
 
 In 1904, a uniform bill of lading was adopted in the 
 1 'lilted States. The board has sanctioned the use of this 
 on shipments from any point in the United States into 
 Canada and in the transit trade through Canada. 
 
 Two special forms to be noted are the special contract 
 on silver and other valuable ores, in which the railway 
 limits its liability to $500.00 per net ton, and the house- 
 hold goods "release" in which a lower rate is given on a 
 released valuation of $5.00 for any one piece or package. 
 Both in English and in Canadian law it has been rec- 
 ognized that the carrier may, by contract, exempt itself 
 from liability for negligence; such exemption has, how- 
 ever, to be put in express, plain, and unambiguous terms. 
 Tiiere are a number of contracts dealing with liability in 
 respect of particular commodities or services. The live- 
 stock contract is at present being worked over by a special 
 committee of shippers and railway representatives. Men 
 in charge of property other than live stock are required to 
 sign a release from claims for injury, whether caused by 
 negligence or not. The potato contract of the Vermont 
 Central contains an exemption from negligence. The 
 same provision occurs in the general release forms of 
 the Michigan Central and the Niagara, St. Catharines, 
 and Toronto Railways. It is also to be found in the 
 contracts of the Michigan Central and the Toronto, 
 Hamilton, and Buffalo in the case of animals cairied 
 
484 
 
 TRAFFIC 
 
 in baggage cars. In the case of circus contracts, a niun- 
 ber of Canadian railways recite that they act neither as 
 common nor as special carriers, but simply as hirers of 
 equipment and train crews to the circus for the transport 
 of its outfit, and that the latter assumes all risks, in- 
 eluding negligence. 
 
 105. Due diligence.— Viiiess arranged under special 
 contract, the railway is not bound to transport goods by 
 a particular train or vessel, or in time for a particular 
 niarket. Its obligation is to use "due diligence." Due 
 diligence in law means everything reasonable, not every- 
 thing possible. The question of what is a reasonable 
 time for delivery is one of fact for the jury, and it has 
 been decided that no definite rules can be stated as to 
 what will and what will not constitute unreasona.. 'e delay, 
 as this must depend on the circumstances of each case. 
 
 106. Actual car movements.—The shipper is inter- 
 ested in obtaining a prompt supply of cars with prompt 
 movement in transit. The railway is interested in ob- 
 taining the greatest possible efficiency, since it is its cars 
 which are its money collectors. But while it w'lghf ap- 
 pear that there should be no difficulty in obtaining an 
 ideal combination of interests, nevertheless there are 
 difficulties in practice. Expedited movements, e. g., live 
 stock, time freights, and various other circumstances 
 and conditions interfere with the balance of mutual sat- 
 isfaction. 
 
 An ordinary freight car on the road may be reckoned, 
 while in motion, to move at 10 miles per hour. But in 
 1912, the average movement per freight car per day in 
 Canada was 21.4 miles. In 1908, the average had been 
 only 16.1 miles. Putting certain comparisons in a sum- 
 mary way, the following results for 1912 as compared 
 with 1908 are obtainable: 
 
PRACTICAL PHASES OF RAILWAY BUSINESS 483 
 
 AvoraRc haul of freight car per day increased by 84% 
 
 Fni^ht train mileage per freight engine per day increaaed by 81% 
 
 Tonnage increased by ^''^ 
 
 Freight train mileage increased by 49% 
 
 That is to say, the work to be done to haul a ton of 
 
 freight is increasing more rapidly than tonnage. 
 
 In Canada, in 1912, the average haul of a ton of 
 freight was 218 miles. With a freight car moving 21.4 
 miles per day, it thus took on the Average 10.1 days to 
 make this journey. Assuming that as soon as the car 
 ends this journey it can start on another, the maximum 
 number of trips it can make in a year would be thirty- 
 six. 
 
 At the same time there has been an increase in the 
 cubical contents space of the car, and a great increase in 
 maximum tractive efficiency. For example, a Grand 
 Trunk engine built in 1878 had a tonnage rating of 
 from 800 to 550 tons, while an engine built in 1912 for 
 the same system had a rating of from 1,500 to 2,.':00 
 tons. Time or manifest freight, that is to say, higher 
 grade goods moving in train loads where time is im- 
 portant and there is a movement on a relatively fixed 
 schedule, attains high speeds. The Wabash moves out 
 of Samia tunnel behind one engine 2,000 tons of such 
 freight, which goes forward at 25 miles per hour. It 
 is manifest that, in general, the transportation efficiency 
 is far within the maximum. 
 
 107. Demurrage. — Demurrage is a charge in addi- 
 tion to the rate, such charge being intended to compel 
 prompt loading or unloading of cars. The word is mari- 
 time in its origin; as early as the twelfth century it was 
 used to express the payment for detention of a vessel 
 beyond the normal time required for loading or unload- 
 ing a vessel. In railway practice, a demurrage charge 
 is not a car rental, but a penalty charge. In Canada, 
 
486 
 
 TRAFFIC 
 
 this IS known as a car service charge. In the United 
 Mates, car service" is used to describe inter-raihvav 
 handling of cars, and the word demurrage is used to 
 describe what the Canadian railways call a car service 
 charge. It does away with confusion to use the word 
 demurrage in this connection throughout the text 
 
 The first Car Service Bureau in the United States was 
 organized at Omaha in October, 1887. This was. how- 
 ev' roncerned only with a co-operative organization to 
 deal with common interests. The principle of such a 
 charge had been recognized as early as 1872. In Canada 
 the principle of such a charge was adopted by the Ca- 
 ) adian Pacific and the Grand Trunk in 1892; it subse- 
 quently extended to other railways. 
 
 In 1906, the Canadian Car Service rules (demur- 
 rage) as amended were approved by the board. Under 
 these, there are in general allowed f orty-eight hours free 
 time for loadmg or unloading a car. There are certain 
 modifications of this. In unloading coal, coke, and lime, 
 in bulk, and in the loading and unloading of boards 
 deals, and scantling, there are seventy-two hours free 
 time. Lumber and hay are allowed, for export, five davs 
 free time at ISIontreal and tide-water ports. In western 
 Canada, under the terms of the Canada Grain Act 
 twenty-four hours free time for loading are allowed.' 
 Where it ,s necessary to clear customs, twenty-f our hours 
 additional free time is allowed for this purpose. In ad- 
 dition, m the various cases the consignee is allowed 
 twenty-four hours after arrival to pay the tolls or charges 
 and give orders for special placing and delivery. For all 
 time in excess of the periods above defined, there is a 
 charge of $1.00 per day per car. 
 
 108. Causes of demvrrage.-nmcumes in unloading 
 cars may arise from conditions for which the consi^ 
 
PRACTICAL PHASES OF RAILWAY BUSINESS 487 
 
 is not responsible and over which he has no control. 
 Where local weather conditions render loading or un- 
 loading impracticable during business hours, the time al- 
 lowance is to be so extended as to allow the full free 
 time of suitable weather. There is also the "bunching 
 rule," whose scope is best indicated by quoting it. 
 
 Rult 7. When owing to conditions, for which the railway 
 company, or connecting companies, is or are responsible, or 
 to any neglect or default of its or their agents or employees 
 or to storms or floods, or to accidents on a railway, or accident 
 to the equipment of the railway company or companies, cars 
 are tendered to the consignee in numbers beyond his ascertained 
 reasonable ability to unload within the authorized free time, 
 such additional time shall be allowed as may be necessary with 
 the exercise of due and reasonable diligence on the part of the 
 consignee to unload the cars so in excess. 
 
 Each railway has its own car service officials and de- 
 partment. In addition, there is a car service bureau 
 which was organized in 1906, and which deals with com- 
 plaints as between railways and with complaints from 
 individuals as to the amount of demurrage assessed. 
 
 The results of the demurrage situation east of Port 
 Arthur for a given period are summarized in the follow- 
 ing tabular statement: 
 
 Demurrage Ecutem Lines, October, 1912, to June, 1913. 
 
 Per cent of 
 Car* Rdeased 
 in Free Tims 
 
 Average Detention in Days 
 Railway Consignee Tdal 
 
 Collection per 
 
 Car Detained 
 
 over Free Time 
 
 Oct.-Dec., 191«, 
 Jan-March. 1913, 
 April-June. 191», 
 
 93% 
 
 /o 
 94% 
 
 .52 
 .46 
 
 2.07 
 1.88 
 1.90 
 
 2.73 
 2.40 
 2.36 
 
 $ 4.63 
 
 10.70 
 
 4.13 
 
 The high average collection per car in the period Janu- 
 ary to March, 1913, is due to special conditions which 
 will be referred to later. 
 
 109. Demurrage and car shortage. — The importance 
 of the demurrage rules is especially bound up with the 
 
*^ TRAFFIC 
 
 question of car shortage, which is a phenomenon that 
 unfortunately presents itself in the fall of the year At 
 the present writing, the situation is better than it his 
 been for some years. In the Canadian west grain has 
 to be rushed to the lake front in as great a degree a 
 possible before the close of navigation. Consequertly 
 arge stocks of ears have to be accumulated. At Z 
 same t,me the fall is a busy shipping season in the fleW 
 of general merchandise. Again, in the trade betw«„ 
 Canada and the United States there are, for exampTe 
 large movements of hay. If this hay is consigned to a 
 readdy congested terminal, such as New York the 
 movement of a<lditio„al cars into the New York termi 
 nals may be stopped for a time. This is done bX" 
 ssuance of a notice known as an embargo. ThisV i„ 
 force untd the congestion is relieved. I„ the meln me 
 the hay cars remain under load either in the teZZiZ 
 
 oTthtrnthl'^" ""^ "^ '-' "^ '" ^"'^ -"y ^-™ 
 
 While it is tlie intention of the rules that a car shall 
 
 themUr^l T " ""'^''"'""- ■' ''^ P°»«We that 
 
 Tune oATi Tn '"^'"""'*' '" '^' P"'°d April to 
 "" ' fnl'owmg results are obtainable: 
 
 ill ." '"'■ Py'"(? charges and for placinir I .1., 
 
 (| A car may be held for loadins. . Itl 
 
 3 A car may be held for unloading. t ^P 
 
 if) g^lfCSefenrr-^ '""^ »-«-■ ■'■■■l»<> days 
 
 (6) m miles at 10 miles per hour: ..::::.:::.:: Zs" 
 
 Since the average car trip takes up 10., days.'«S:s 
 
 onlv ttv """^•l"*^'' f"--- If a ease is' taken where 
 only the free fme .s used then there are 5.192 days to 
 
I'RACTICAL PHASES OF RAILWAY BUSINESS 489 
 
 account for. It should be pointed out that as tlie ear 
 service details for the section west of the lakes are not 
 ])ul)lished there may be a factor of error in taking as 
 applicable in the west th( results worked out in the east. 
 
 110. A matter of controver.vf. — Around the question 
 of this detention much controversy wages. In an ex- 
 hibit submitted by the western branch of the Canadian 
 Freight Association to the board, in a case pending be- 
 fore it, details are given for the period July 1 to De- 
 cember 15, 1912, for western lines covering 9,289 cars 
 held in excess of five days over free time, on which there 
 were 106,034 days' detention. A detention of as high 
 as 152 days is noted in one case. The total number of 
 (lays' detention is equal to 10,600 additional freight car 
 trips which might have been performed in the period 
 covered. If ♦ihere is further taken into consideration 
 the five days over free time which is excluded from this 
 exhibit, the total number of days' detention would be 
 e<iuivalent to 15,200 additional car trips; this is equiva- 
 lent to an addition of 10 per cent to the car supply. On 
 the other hand, shippers furnish many examples of de- 
 lays in transit. Between Hawkesbury and Hull, a dis- 
 tance of 88 miles, 9 days were taken in transit, and be- 
 tween Hawkesbury and Toronto, a distance of 348 
 miles, 15 days. The average time of transit on 65 cars 
 between Alberta points and the heaa of the Lakes was 
 56 days. Complaints are also made by the shippers of 
 delays in placing cars, as well as of delays in moving 
 cars under load, examples of two, three and more days' 
 delay in lifting car after it is loaded being given. 
 
 Various suggestions are made by the railways as to 
 the method of meeting this difficulty. In a recent cir- 
 cular issued by the Car Service Department of the 
 Grand Trunk the following suggestions are made: 
 
490 
 
 TRAFFIC 
 
 heavier loading, prompt unloading, loading commodities 
 at other than rush periods, shippers supplying them- 
 selves with adequate warehousing facilities. This com- 
 pany has also circularized its employees instructing the. 
 to encourage the shippers to load and unload promptly 
 and to capacity. It pertinently admonishes its em- 
 ployees, "Remember, standing cars earn no money- 
 keep them moving." ^ 
 
 In the figures of western lines already referred to 
 analysis points to delays in terminals as an important 
 factor. The figures of the Canadian Pacific cover 338 
 stations The following points, Calgary, Edmonton. 
 Lethbridge. Moose Jaw, Medicine Hat, Port Arthur 
 Regina, Saskatoon, Swift Current, Vancouver, and 
 Wmnipeg, were responsible for 60 per cent of the car 
 detention and 50 per cent of the car-day detention. The 
 figures of the California demurrage bureau show that 
 ii&n Francisco, Oakland, and Los Angeles with 24 59 
 per cent of the cars handled had 36.25 per cent of the 
 cars held over time and yielded 34.23 per cent of the 
 demurrage charges. While the railways contend that 
 they have increased their terminal facilities in excess of 
 the unloading facilities of the consignees, the admoni- 
 tion of the Grand Trunk to its yardmasters and yard- 
 men IS pertinent: expedite movement "by realizing that 
 a yard ,s a place to get cars out of, not a place to get 
 cars mto. Delays in transit may, in the case of a single 
 track road be due to inadequate side track accommo- 
 dation. If the terminals of such a road are congested 
 the cars block up back on the line. 
 
 111. Higher demurrage charges.—UTging that the 
 present charge is not a sufficient deterrent, the railways 
 point to the fact that the value of the car to the railway 
 has increased. When the dollar rate was first struck in 
 
PRACTICAL PHASES OF RAILWAY BUSINESS 491 
 
 the United States in 1872 the normal car held fifteen 
 tons and had ?in average load of about six tons. Now 
 there are 30-ton cars with an average load of eighteen 
 tons. They point out that in Canada the average daily- 
 earnings of a freight car are $2.52, and that the demur- 
 rage charge should be commensurate. The shippers re- 
 join that, deducting operating expenses, a car nets about 
 $1.05 a day. 
 
 In November, 1912, application was made to the 
 hoard for a temporary increase in demurrage charges. 
 It was represented that a car shortage was impending, 
 and that an increased charge, by stimulating the load- 
 ing and unloading of cars, would increase the available 
 supply of cars. Reference was made to the fact that to 
 meet a similar situation the Temiskaming and Northern 
 Ontario had for a short time enforced a $3.00 rate. An 
 order was issued permitting between December 5, 
 
 1912, and April 1, 1913, an increase of the rate to 
 $2.00 for the first day over the free time and $8.00 for 
 each succeeding day thereafter. 
 
 The following statement presents a comparison of the 
 January-March period of 1912 with the same period for 
 
 1913, the former being under the $1.00 rate, the latter 
 under the increased rate: 
 
 
 Tdal No. 
 of Cars 
 
 Total Cars 
 Detained 
 
 Percent 
 
 of Cars 
 
 Released in 
 
 Free Time 
 
 Aver. 
 
 Detention 
 
 Days 
 
 CoWnper 
 
 Car 
 Detained 
 
 Period 
 
 Ry- 
 
 Consigns 
 
 Total 
 
 Jan.-Mch.,1912. 
 Jan.-Mch..l913. 
 
 351,193 
 401,481 
 
 18,157 
 17,345 
 
 95% 
 96% 
 
 .45 
 .62 
 
 1.89 
 1.88 
 
 2.34 
 2.40 
 
 $ 4.27 
 10.70 
 
 In California, as a result of the congestion of the San 
 Francisco and Oakland terminals after the earthquake, 
 high demurrage rates were adopted. These became 
 
492 
 
 TRAFFIC 
 
 fc-eneral, and so between July, 1909, and April, 1911 
 there was a rate of $6.00 per day on the intrastate traffic' 
 while on interstate traffic the rate was $1.00. In March' 
 1911, 98.12 per cent of the cars in state traffic were re- 
 leased in the free time, while on interstate traffic the per- 
 centage was 94.79 per cent. The excess over free time 
 on the state rate was 1 day, while on the interstate traffic 
 It was 2.15 days. In May, 1911, a $3.00 rate went into 
 force on the state traffic. The same rate was adopted 
 on interstate traffic in February, 1913. In August, 
 1913, the percentage released in free time on state traffic 
 was 98.12 per cent, while on interstate traffic it was 
 f per cent. A considerable part of the difference 
 ^s due to the fact that on the state movement the oriffi- 
 
 Further, m Califorma a great part of the movement is 
 concerned with one-line hauls on which the originating 
 .arrier has control throughout. On the interstate move 
 ment there are delays in connection with "order" ship- 
 ments, delivery of coal direct from track to the con- 
 sumer, contractors' supplies shipped in advance of actual 
 (iemand therefor. 
 
 The Pacific Car Demurrage Bureau in its brief be- 
 fore the Interstate Commerce Commission in 1912 
 
 SarFrlncis'^o"^^''' ""^ *^^ ^^^^ ^"^^^ Company of 
 
 190^' '^^ f ""^g-^ rate of $6 per car went into effect in 
 909, and later reduced to $3, reasonable terms of loading and 
 d scharg^ng bemg allowed, we have had a fairly abundant sup- 
 ply of cars, even m the most restricted season of the year when 
 the crops were moving, and to my mind the demurrage charge 
 of $6 per day, after reasonable time allowed for loading or dt 
 chnrgmg would be more advantageous to the shipper than a 
 lower rate, because of the fact that it would kee^equ pment 
 
PRACTICAL PHASES OF RAILWAY BUSINESS 493 
 
 from being used for storage purposes and keep it free for 
 ti-iuisportation purposes. 
 
 112. Average demurrage. — While the railways have 
 made suggestions, as indicated, for the improvement of 
 the demurrage situation, the shippers have from time 
 to time made recommendations that either average de- 
 murrage or reciprocal demurrage should be adopted. 
 
 Under the national demurrage iiiles of the United 
 States it is provided that when the shipper so elects and 
 gives proper assurance to the railway for prompt pay- 
 ment the demurrage charges may be settled on a monthly 
 balance of debits and credits worked out as follows: a 
 credit of one day at a rate of $1.00 per day is given for 
 each car released within the first twenty-four hours of 
 free time; a debit of one day is charged for each car 
 held for each day or portion thereof that the car is held 
 l)eyond free time. In no case is a credit of more than 
 one day allowed on any one car, nor may more than five 
 (lays' credit be aUowed in cancellation of debits accruing 
 on any one car. If there is an excess of credits, no pay- 
 ment is made therefor. The credits of one month do not 
 apply on a subsequent month. When a shipper elects 
 the average system he has not the advantage of the 
 allowances in respect of weather conditions pnd "bunch- 
 ing" which are available to those using the straight de- 
 murrage rules. 
 
 Those who argue for an average arrangement treat 
 the free time allowance per car as a matter of right 
 which each shipper is entitled to. A representative of 
 the Canadian branch of the International Harvester 
 Company testified that the company's yard tracks could 
 be worked more efficiently under the average system. 
 Instead of the extra switching necessary in order to get 
 
4M 
 
 TRAFFIC 
 
 out a car in the order of date and thus save demurraRe 
 the car could be used regardless of date of arrival 
 
 m a summary way the arguments advanced for aver- 
 age demurrage are: it means the more rapid placing 
 of cars for l™.d,„g or unloading, thus effecting a sav "g 
 on the cost of handling by the railways; cafs will Z 
 empfed faster and will be placed at the disposal oth^ 
 earner earher. and not only the receiver wL takes an 
 mterest ,n releasing his cars, but every shipper, wS t 
 benehted: .t will remove the friction'which frequlnt^ 
 anses betwen the carriers and the receivers in respe^rof 
 weather mterferen« and bunching in transit. The raH 
 ways contend that the maximum free time is intenXd 
 s.mply to g,ve a maximum reasonable time to cover n^ 
 ™ly th,«e who have g„«l unloading facilities. buTako 
 those who have poorer facilities, and that th; sh p~r 
 should use only so much time as is necessary. I„ del- 
 ing w.th the relation of detention to car sh^orto^s fte 
 Georgia Radroad Commission said in 1912: 
 
 cars, th« docs not necessarily mean that il ought to be con- 
 sumed ,„ every i„st.„oe and regardless of other con^^deraUon 
 or crcumslanees. Cars should be loaded and nnloadS .^ 
 pro„,p,ly as possible after being placed. It is notfalr to th 
 carr-ers or other shippers to hold them for 48 hours'Tu t ^ 
 cause one has that much free time bv law w)..„ ,1 .j 
 
 just as well be handled in 6 or ,2 hou^. '^ '=°"''' 
 
 of R^Iwrror"'"' ^^""^ '^ ^''*™''' Association 
 SO 19 3 Mr T T'V^* Washington on October 
 30, 1918 Mr. James O. Klapp, the manager of the 
 Wisconsm Demurrage Bureau, said: 
 
 A^ a concrete example of the working of this n.le, we call 
 .vour „„ent.on to the comparative results of two la;gr fi™! 
 
I'HACTK'AL PHASKS OF RAILWAY BUSINESS 495 
 
 ill the City of Milwaukee, who are now working under the aver- 
 iicrc ugrccment. 
 
 Average Delay 
 
 Number Days Per Car 
 
 of Cars Delayed Per Day 
 
 rndor straight demurrage 1 2962 2339 0.79 
 
 Mamh and April, 1910.. . | 
 
 I'nd r average agreement 1 3796 5525 1.46 
 
 March and April, 1912. . . j 
 
 Delay under the average agreement exceeds delay under the 
 straight demurrage rules 0.67 days per car per day — actual 
 loss in efficiency S,543 car days for the two months. 
 
 113. Reciprocal demurrage. — Under the Railway 
 Act the board is specifically given power to deal with 
 reciprocal demurrage. Under reciprocal demurrage 
 the railways are penalized in the same way as the ship- 
 j)ers. The penalty may be for delay in supplying a car 
 or for delay of the car in transit, or both. There are 
 before the board for determination two sets of applica- 
 tions dealing with this matter. One desires that the rail- 
 ways should be required, under penalty, to place cars 
 for loading within forty-eight hours after they are or- 
 dered; to lift the cars within twenty-four hours after 
 notification of loading; and to place cars for delivery 
 at destination within forty-eight hours after arrival. The 
 second application desires that, in addition to these con- 
 ditions, the railway should also be penalized if it does not 
 transport each loaded car a distance of 100 miles per 
 day, twenty-four hours additional being allowed to com- 
 plete transfer from one line to another where necessary. 
 
 The argument for reciprocal demurrage from the 
 standpoint of its analogy to the ordinary demurrage 
 charge has been very well put by Mr. J. E. Walsh, 
 Traffic Manager of the Canadian Manufacturers' Asso- 
 ciation: 
 
490 
 
 TRAFFIC 
 
 If .t .8 f«,r (and wc «ay that under ordinary .•ircumstancc. 
 It .8 fa.r) and m the public interest that a charge should be 
 made when freight car. are detained in loa.ling and unloading 
 in order that they may bo kept available for service, it is rea- 
 8onable to expect that the railways should be subject to a 
 s.m.lar penalty when they delay cars, entailing serious loss 
 to the public. 
 
 The shippers ask for reciprocal demurrage, not from 
 a desire to collect the penalty, hut to insure car supply 
 The advantages claimed for it are threefold: that it will 
 expedite sui)plying cars, movement in transit, and de- 
 livery after arrival. 
 
 The railways say in substance: it is not demurrage 
 and ,t IS not reciprocal. They say that delays may be 
 attributable to lack of care in ordering cars. For ex- 
 ample, at a grain shipping point 46 applicants may book 
 orders for cars to be placed on one day at a grain eleva- 
 
 iZa f ^ r^l "^"^**°^ '* '" « g"«d day's work to 
 
 oad four cars Therefore, penalties would accrue, when 
 If orders had been spread out no such penalties would 
 have accrued. It is contended that in times of specially 
 active car movement it would be unreasonable to require 
 under penalty, a supply of cars in forty-eight hours.' 
 T.,e delays are attributed, in great part, to the insuffi- 
 cient warehousmg facilities of shippers who find it 
 cheaper to hold goods in cars at a penalty of $1.00 per 
 day than to supply warehouses. 
 
 The board has found that a shortage of cars in one 
 ielf n^ 7 f^ T ^"' '"^ '^' ^^^^^ ""'"ber of cars 
 
 ofiT^^ ^ '." *5' *''"^'"'*^^- ^^»^^" *h- attention 
 of the local Board of Trade was drawn to this it took 
 steps to induce quick unloading. 
 
 fo7!?b "f^'^^^s urge that while allowance is proposed 
 for the time taken m transferring from one li^ to 
 
|'HA(TICAL PHASKS OF RAILWAY BUSINESS 497 
 
 another, equally great allowance,- if not greater, should 
 l»c made for i)assing through terminals where the hreak- 
 in^ up of trains and reclassifying of cars necessitates 
 (Itlays. It is claimed that there is no reciprocity as be- 
 tween a penalty charge on a car which the railway owns 
 and a penalty on a car which the shipper hires. It is 
 further contended that reciprocal demurrage would, by 
 collusive arrangements, open up the way for rebating, 
 since it would be possible to allow a favored shipper to 
 iiave cars while it was known that the terms on which 
 tliey were ordered under the reciprocal demurrage could 
 not be lived up to. In respect of mileage requirements 
 the railways quote the following average movements 
 during the grain shipping season at the end of 1911 : 
 
 Sejrf. Oct. Nov. Dec. 
 
 Great Northern 27.7 31 24.8 20.2 
 
 Northern Pacific 24.4 27.2 24.1 20.1 
 
 Grand Trunk Pacific 25.4 25.6 25.5 26.9 
 
 Canadian Pacific (Western Lines). 33.97 35.51 28.38 26.04 
 
 and they contend that the requirement of a defined 
 mileage per day, irrespective of climatic and other con- 
 ditions over which they have no control, would be unfair 
 and unworkable. 
 
 114. Raihvay interrelations and per diem charge. — 
 The large development of through business leads to cars 
 under load going to foreign lines. The American Rail- 
 way Association has a code of Car Service Rules and 
 per diem charges. The leading Canadian roads are 
 members of this association. The essential rules cover- 
 ing the homeward movement of foreign cars, i. e., cars 
 of another line, are that foreign cars must be promptly 
 returned to their owners loaded (via any route) so that 
 the home road will participate in the freight rate; or 
 loaded to the road from which originally received, if 
 
 C— III— 38 
 
406 
 
 THAFFIC 
 
 ' 
 
 siirh loading is in the direction of the home road, but not 
 otherwise; or loaded to an intermediate road in the 
 direction of the home road; or loaded in local service 
 in the direction of any junction point with the home 
 road. There is a per diem charge in the case of foreign 
 cars. This charge, which has varied from time to time, 
 is at present 45 cents per day. This charge is not 
 analogous to the demurrage charge, for in addition to 
 the per diem the home road participates in the rate when 
 the car has moved off its own lines under a through rate 
 or moves on to its own lines under a through rate. 
 
 The box car has been called a "legal tender" car since 
 it is a car of general and interchangeable service of any 
 line. It would seem justifiable, with a view to prevent- 
 ing car shortage, to equalize car equipment through a 
 car pool. At present, the road which is short of equip- 
 ment may, notwithstanding the rules, steal foreign 
 equipment that happens to be on its lines, it being 
 cheaper to pay per diem than own cars. As a further 
 development of this, by means of building a standard 
 box car, although such cars are not far apart in stand- 
 ards to-day, the building of cars in quantity would enable 
 them to be turned out at a lower price. The Car Service 
 Commission of the American Railway Association, in 
 a report published early in 1913, estimated that this 
 saving would be $65.00 per car— 6i per cent of the 
 present cost. In the words of that commission- 
 To be just to the railways themselves and to the public 
 generally, this pool should be regulated to the end that there 
 shall be secured to every road the use, when it needs them, of 
 its quota of "legal tender" equipment, whether its own or the 
 equivalent in foreign cars, or, in the alternative compensation 
 in money for the diflference. Such regulation can be made 
 effective only by the abandonment of the right to physical 
 
l'HA(TI( AL PIIASKS OF UAIIAVAV III SINKSS 499 
 
 ivhiiri f(» the owiur of itn own ciirH, niui l|u> NiiliHtitution of 
 lli« ri^lit to poMHt'sMion and uni- hy vnvU lint" of "logiil teiMlcr" 
 (lis ill kind equivalent to the tars hy it owned and co-*ribiitcd 
 lo the pool. The ohJerti<»ns to recognizinjf a box-ear pool 
 ill the past have rosteil largely qn the desire of roads which 
 line supplied their (|Uota of "legal tender" equipment and 
 liiivc maintained them on high standards, to be assured of the 
 use of cars measuring up to their standards. The answer is 
 th.it in practice existing car service rules have not secured 
 Hiis result so far as l)ox-cars arc concerned. 
 
 Tlie enforcement of the rule.s as to the prompt return 
 of* ears is in the hands of a commission of the American 
 Hallway Association, which has power, after investi- 
 ^nition, to assess, in addition to the per diem, a money 
 fine with a minimum of $2.00 for each violation of the 
 rules. 
 
 The Canadian railways have two general associa- 
 tions — the Canadian Freight Association and the Cana- 
 dian Passenger Association. These deal with matters 
 of general concern; for example, in the case of the 
 Passenger Association, excursion rates and baggage 
 rules; in the case of the Freight Association, classifica- 
 tion, general switching tariffs, and tariffs of general 
 scope. 
 
 115. Intermcitching. — Two or more lines may par- 
 ticipate in a relatively long haul. The occasion may also 
 arise where while two or more roads enter one city, the 
 point which the shipper, over the railway which has the 
 line haul, desires to reach is situated in the terminals of 
 another railway or in a section adjacent thereto and 
 served by it. The board has power to provide for a 
 physical connection between such railways so as to afford 
 interswitching facilities. To provide a tariff basis for 
 such services, which were recognized as distinct from the 
 
500 
 
 TRAFFIC 
 
 liH; 
 
 line haul, the hoard issued in 1908 an order, the pro- 
 visions of which J) resented analytically are as follows: 
 
 Traffic destined to consignees : 
 
 (a) Upon or ) tracks of contract- 
 
 (b) Reasonably adjacent to j ing carriers; or 
 
 (c) Customarily accepting contracting company's 
 
 delivery; or 
 
 (d) Not clearly indicating delivery required. 
 
 In such cases where there is a subsequent application 
 for interswitch delivery involving additional ser\'ice by 
 another carrier, the contracting carrier may collect an 
 interswitching toll of such other carrier not exceeding 
 20 cents per ton for a distance up to four miles, with a 
 minimum of $3.00 and a maximum of $8.00 per car. 
 
 Traffic destined to consignees : 
 
 (a) Upon or ] ^^^^'^^ °**^^'' *^»" 
 
 (b) Reasonably adjacent to f *^°'^. °^ *^^ ^°"- 
 
 J tractmg carrier; or 
 
 (c) Customarily requiring such other carrier's de- 
 
 livery. 
 In such cases the contracting carrier may, for such inter- 
 switch delivery, charge not exceeding 10 cents per ton 
 for a distance up to four miles, with a minimum of $1.50 
 per car and a maximum of $4.00 per car. Such other 
 carrier performing the service may charge not more 
 than 20 cents per ton up to the four-mile distance, with 
 a minimum of $3.00 per car and a maximum of $8.00 
 per car. The contracting carrier is not required to re- 
 duce its revenue below $8.00 per car. It will be noted 
 that, subject to the limitation contained in the preceding 
 sentence, the effect of this arrangement is to require the 
 contracting carrier to absorb one-half the interswitch 
 charge. 
 
PRACTICAL PHASES OF RAILWAY BUSINESS 501 
 
 It has been decided that this requires the railway to 
 which the car is interswitched to receive the car on its 
 private tracks or industrial sidings, but not to afford the 
 service of placing such car on its team tracks. 
 
 The matter of local switching, as distinguished from 
 interswitching, which may involve the service of two or 
 more carriers in a purely terminal movement, is before 
 tlie board for consideration. The railways object 
 strongly to such a movement, which, while of conven- 
 ience to the shipper, is an expensive one, since being 
 through the terminals it may place obstacles in the way 
 of the through movement. 
 
 116. The work of the claims department. — Claims 
 may arise from train collisions and derailments, break- 
 age, pilferage, leakage, soakage, weather conditions, 
 non-delivery or delayed delivery, overcharges due to 
 erroneous rate quotations, misclassification, errors in 
 way-billing, weighing. There are also claims arising 
 from accidents to passengers and claims for cattle killed 
 on the tracks. These are simply mentioned here. The 
 Canadian Pacific deals with about 55,000 claims a year, 
 the Grand Trunk with about 58,000. 
 
 There iz probably no department of the railway 
 service which has a greater opportunity to create fric- 
 tion, or a better opportunity through the exercise of tact 
 to prevent friction. Shippers constantly complain that 
 there are undue and unreasonable delays in connection 
 Avith the settlement of claims. The railways respond 
 that while they use every endeavor to settle claims, there 
 are of necessity delays in settlement. While many 
 claims are made in good faith, there are others that are 
 fraudulent; and so all must be tested. 
 
 In case of claims arising in connection with move- 
 ments local to the line, the matter should be promptly 
 

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504 
 
 TRAFFIC 
 
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 ^9.3% adjusted in less than 7 days 
 
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 8 4% « .. » » *1 .. 
 
 37.3% took over 3 months to adjust. 
 Mean average— 37 days. 
 
CHAPTER VIII 
 
 EXPRESS SERVICE 
 
 117. Express service and its scope. — Express service 
 is an expedited freight service carried on passenger 
 trains under the personal care of an express messenger. 
 In addition, there is in the case of towns and cities either 
 a delivery or a pick-up and delivery service. While it is 
 a freight service, the companies performing the service 
 do not own the means of transportation, as in the case of 
 ordinary freight carriers. They enter into contractual 
 relations with the railways for the purchase of space for 
 the carriage of goods. While the railway has a large 
 investment of capital in a fixed form in roadbed and cars, 
 the express company's investment is concerned for the 
 most part with office space, horses, wagons, or motor 
 vehicles for performing pick-up and delivery service. 
 
 The express service covers not only the carriage of 
 high-grade parcel freight, but also many articles of food 
 and drink. Not only are packages carried; provision 
 is also made for the movement of horses in carloads as 
 well as for a refrigerator car service in the case of fish 
 and fruit. Provision is made for the shipment of cur- 
 rency, bullion, gold and silver coin, precious stones, valu- 
 able papers and securities. A banking business is done 
 through the issuance of money orders. The returns from 
 C. O. D. shipments are also collected a^d returned to 
 the consignor. 
 
 The movement is not limited to one country alone, 
 foreign shipments also being handled. In addition, vari- 
 
 505 
 
sot 
 
 TRAFFIC 
 
 ous other services are rendered. The wide scope of these 
 >s set out ■„ the following extract from a special report 
 made by the Interstate Conunerce Commission in 1909- 
 Commclitie, of all kind, .re bought .„<! transported „„' 
 ordc„ and arc I,l<owi.e transported and sold on oriers. T 
 ere for and extend this branch of the business propcrlv. th 
 vanous co„pa„.os n,ai„,ain „,..er and co^ission dep' rtLl. 
 • . . Express business i, carried on through order and com- 
 ™.«.on departments in four different waysfviz.. (1) a paZ 
 
 him Zr '"^^'' "■= "'""""'y'' "S™' -d transported I. 
 h.m for express charges; (2) a patron may dehVer any com- 
 
 pany. to bo transported to a certain buyer and the agreed 
 ..le pr,ce collected and lra„»mi.te.l ,„ the shipper for eXs. 
 and money order charges; (3) a patron may Seliver anlTr 
 "."d.ty subject to express shipment, to an a^nt of aZpZ 
 who , „ d,rtake to sell it through other express ageTto 
 the best advantage on shippers' account and transit the 
 proceeds for express and money order charges; (4)7lr„: 
 may request an express agent to perform an^ .;aso„able com 
 Z"' ",'^. "' ™""""« •°"'" "''-ng papers for recordT 
 
 wilTenlTT,"""""' ''•^ ''"'""« """ *« «P«» agent 
 will enter and clear articles at custom houses transport 
 goods m bond, exchange foreign money, re^^m paXd 
 articles, pay gas bills, and "in short wil alTe^dTrnv 
 legmmate business transaction as the customer^ agent?' 
 
 ear y days of railway travel in the United States espe^ 
 
 «ie case of food supplies a spasmodic traffic of conven- 
 
 IfHend inT^tr^ " 'T" '" ""^ '"^ -""W ""^ *» 
 « friend in another a package, basket, or bmidle which 
 
EXPRESS SERVICE 
 
 507 
 
 some passenger would undertake to look after on the 
 way; or sometimes the conductor or baggageman would 
 undertake the service for a consideration. Under such 
 conditions, all the risks of loss through lack of care, as 
 well as all the risks incidental to transportation, had to 
 be borne by the shipper. 
 
 In 1839, the modem express service began in the ven- 
 ture of William Hemdon, who undertook to carry pack- 
 ages between New York and Boston at fixed rates. He 
 issued receipts for the packages and assumed the risks 
 in connection with their safe transmission. At first, he 
 constituted the whole service, traveling to and fro, carry- 
 ing the packages in a couple of valises. As his business 
 expanded, messengers were employed, who also traveled 
 in the passenger cars. It was not until the late forties 
 that an exclusive car for express service was put into 
 operation. 
 
 The express service, therefore, arose out of Hemdon's 
 appreciation of a public need at a time when the railways 
 considered that the only branches of business with which 
 they were concerned were freight and passenger. 
 
 In 1855, the American Railroad Journal strongly 
 urged that the express business should be done by the 
 railway without the use of any intermediary. There were 
 still, however, difficulties in the way of through lines of 
 traffic, although the consolidation of the various small 
 lines was already under way. The American Express 
 Company was founded in 1850 as a result of the con- 
 solidation of two private companies. In 1854, Hern- 
 don's Company and three others were consolidated into 
 the Adams Express Company. In the same year the 
 United States Express Company was organized. The 
 discovery of gold in California in 1849 led to the creation 
 of various pony express companies. The companies so 
 
508 
 
 
 TRAFFIC 
 
 thfw'n r' "°"«°^'^^*^d '^^ 18«6 under the name of 
 the We Is Fargo Company. In general, it may be said 
 that ,n the United States the handling of express busi- 
 ness by express companies was well established at the 
 outbreak of the Civil War. 
 
 U9 Exprcffs companies in Canada.-In the United 
 Mates the express companies grew up independently of 
 the railways. They have in later years come into very 
 close relationship with them. In various cases the hold- 
 mgs of stock m express companies by particular railway 
 groups give the interests controlling these practical con- 
 trol of the express companies as well. In Canada, from 
 the outset the expres companies have been the creations 
 ot the railway companies. 
 There are operating in Canada to-day various Amer- 
 
 Zrtr.r wTT''""^"*'"""*' ^^"'*^d States. Great 
 Northern, Wells Fargo, and American. The Canadian 
 
 iJ^fr^^'*'? ^""P'"'' Company was organized in 
 f 1 7^ol\"'''"'"/^ '*P'*^^ ^^ ^^^'^^0, subscribed capi- 
 tal of $275 200, of which 10 per cent was paid in. The 
 capital stock of the company was purchased in 1891 by 
 the Grand Trunk for $660,000 in cash. The stock of 
 the company is held in trust for the Grand Trunk Rail- 
 way by a body of trustees who are all directors of the 
 Grand Trunk 
 
 i«r^ ^°"^n'°n Express Company was incorporated in 
 1882 with a capital of $1,000,000. When the company 
 began business, 10 per cent of this had been paid up 
 The stock of the company is held in trust by its directors 
 for the Canadian Pacific. * "irecrors 
 
 The Canadian Northern Express Company was or- 
 gamzed m 1902 with a nominal capital of $1,000,000; 
 
EXPRESS SERVICE 
 
 509 
 
 $300,000 of this was issued; $5,000 was paid in cash; of 
 the balance, five shares went to qualify certain sharehold- 
 ers, while the i-emainder went to MacKenzie and Mann, 
 wlio thus through stock ownership control the company. 
 
 120. Arrangements laith railxtai/a. — The express com- 
 pany pays the railway over whose lines it operates an 
 agreed percentage of the gross earnings. For example, 
 the Canadian Express Company pays the Grand Trunk 
 50 per cent. The balance of the earnings, after the de- 
 (hiction of operating charges, go, on account of the 
 fiduciary relationship of the express company to the rail- 
 way, to the Grand Trunk. 
 
 The operation of an express company is not limited 
 to the lines of the railway which controls it. The smaller 
 railways have no separate express company service of 
 their own, and enter into relationships with one or other 
 of the express companies already referred to. For ex- 
 ample, the Canadian Express Company has contractual 
 relationships with the following: Quebec, Montreal, and 
 Southern; Temiscouata; Cumberland Railway and Coal 
 Company; St. Martin's; Central Railway of New 
 Brunswick; Windsor, Essex, and Lake Shore; the Inter- 
 colonial and other railways. The Dominion Express 
 Company also operates over the Intercolonial. 
 
 The Canadian Express Company operates over 
 twenty railways, while the Dominion operates over 
 thirty-two, and the Canadian Northern over seven. 
 
 In the contracts referred to, the Canadian Express 
 Company pays the railway percentages varying from 40 
 per cent to 50 per cent of the gross. 
 
 The express company operates not only ordinary ex- 
 press cars, but also refrigerator cars in the transport of 
 fish and fruit. At the larger points it maintains its 
 own salaried agents. At the smaller points, the railway 
 
510 
 
 'RAFFK' 
 
 station aflrent will act as a joint a^ent of the express 
 company and of the railway. He is paid by the ex 
 press eompany; in the ease of the Canadian^xpr^^s 
 Company, I,y a commission varying from 21 per rnt 
 
 tic Tn Z^::^rr''i^ T' ^^^ 
 h. ;« I ^' Dommion Express Company 
 
 The express business in Canada is primarily concerned 
 «-.tl. a movement in and ont „f the larger cenTerr it 
 the ease of tte Dominion, it is eslimatedlhatT* ^ een" 
 
 To^l!rdl^:"£ "^ ' "'^"^ "* '^"' 
 
 necessary amendments, be adopted to suit exp,^ s t~r 
 
 vent th«. The great difficulty is that, in cities, exp^^s 
 traffics collected in krge quantities and deliver^ 
 as trams are departing, when there is no time to handk 
 .t under a class fication similar to that of fre.^ht 
 
 The express classification in use has first to ^Main the 
 forma sanction of the board. The Railway AcTstates 
 hat all ,ts provisions "applicable to f«=ight1oUs and 
 freight tanffs, in so far as such provisions are app cable 
 • • • *''»" «PP>y to express tolls and tariffs " ^^^'^ 
 In express classification, commodities are classed not 
 m groups, ^ n freight traffic, but according toThe rate 
 the commodifes take. Express shipments are Z>Z 
 d.stmgu,shed as "freight- and "money." S 
 money • are mcluded not only shipment of actalf 
 money, but also of bullion, stocks, bonds^ va Jb°e pa~^ 
 and various articles of unusual value. "Freight" sWn' 
 ments are subclassed as "merchandise," "geneS 
 
EXPRESS SERVICE 
 
 511 
 
 special" or Scale N, and Scales K, M, and Section D. 
 There are also special scales and rules covering shipments 
 of "money." "Merchandise" rates are those applying on 
 commodities for which there are no special rates. The 
 "merchandise" ratings in the classification may also be 
 expressed as a multiple of the "merchandise" rating. 
 Articles rot shown in the classification and not analogous 
 to those rated higher or lower than "merchandise" take 
 tlie "merchandise" rate, which is always expressed at the 
 rate per one hundred pounds. 
 
 Scale K is a special tariff on ale, aerated waters, etc., 
 and is from 80 per cent to 40 per cent lower than "mer- 
 chandise." It applies at pound rates on actual weight. 
 Scale M is a special tariff on eggs in cases. Scale N 
 quotes special rates on perishable foodstuffs, such as pro- 
 visions and vegetables. Originally it was concerned sim- 
 ply with farm produce. Its scope has been widened, so 
 that in the forty-three articles covered by it there are 
 included, in addition to provisions and vegetables, cut- 
 tings, fertilizers, plants, poultry food, roots, scions, seeds 
 and seed grain, stock food, tallow, trees for setting, 
 stearine and tubers. Its rates are from 20 per cent to 
 30 per cent below "merchandise." Pound rates are 
 charged with a minimum of 35 cents, unless the graduate 
 under this sea] or under the IVIerchandise rate is lower. 
 
 Section D rates apply on packages, not exceeding five 
 pounds, of books, stationery, lithographs, periodicals, 
 etc., carried in competition with the post office. At 
 present, the express rates are lower than those of the 
 ])ost office on packages exceeding five pounds. Section 
 D rates are 1 cent for each two ounces or fraction 
 thereof, subject to a minimum. 
 
 122. Value, weight, and apace. — In the classification 
 ratings, value, weight, and space are considered. 
 
5U 
 
 TRAFFIC 
 
 The value of the article is consideml. since the nor- 
 n.al rate . based on a vah.e per package not exLing 
 ^50 If the sh.p,H.>r des.res the company to assume « 
 1 abihty in excess of this sum. he has to pay addXnd 
 charges, which are known as valuation charged The« 
 are imposed on the excess value for each $moo valu" 
 or fraction thereof, as follows: 
 
 When, merchandise rate is Jl.OO or le«. per 100 IK,.. 
 
 .. .. ^'00 to $3.00 " 100 •• . 
 .. :: 8.00 " 8.00 " 100 *• . 
 over $8.00 " loo 
 
 3c. 
 10c. 
 15c. 
 «0c 
 
 In he matter of weight, shipment, of extn«,rdi„.t" 
 
 Their T "."=,'""«' ""'y •"«ler special contra^ 
 1 he factor of wcght is considered in connection with the 
 
 weight. When the merchandise rate per one hundred 
 pounds ,3 less than *2.00, "graduated" charge, ^ 
 
 pounds When the merchandiiK rate i, $2.00 or over 
 graduated charges are assessed on shipment, under fifty 
 
 rl) %pC "*' ^ " "' one-hundred-^und 
 
 wefrtTshar^;''^'' ^l "" P""''"" *'«" "'nventiond 
 weight hall apply m the case of light and bulky g«,ds, 
 e. g., nulhnery shipments. *^^ 
 
 loS'^T'""""""' """'^ ^y *••« Dominion Expre^ in 
 
 S ZT^ °' '!;^»•"P'»™'» ■"-e on the meX" 
 aise rate, the balance being on lower rates. 
 
 In the amendment of the classification by the board in 
 
 eeilf the'S'^T'-l"'.''"?^"-^" '^ merehandise re- 
 ceipt, the liability ,s limited to $50.00 per shipment ex 
 
 eept where a higher value is decided aSd inseS the 
 
EXPRESS SERVICE 
 
 AIS 
 
 receipt. In the express investigation, the express re- 
 ceipts which hitherto gave the conipanies a very wide 
 exemption were redrafted. The company is not lialile — 
 
 (a) For differences in weight or quantity caused by 
 shrinkage, leakage, or evaporation. 
 
 (b) For loss or damage occurring after forty-eight 
 hours (exc' sive of legal holidays) after notice of the 
 arrival of tne shipment at destination, or at point of de- 
 livery, has been mailed to the address of the consignee, 
 unless such loss or damage is due to negligence of the 
 company. 
 
 (c) For loss or damage which can be met by the com- 
 mon law defenses. 
 
 (d) For loss or damage occurring in a custom ware- 
 house. 
 
 (e) For loss or damage or delay resulting from im- 
 proper or insufficient packing, securing, or addressing, 
 or from chafing when packed in bales. 
 
 (f ) For loss or damage to any fragile article, unless 
 there is negligence. 
 
 (g) For loss or damage from delays beyond its con- 
 trol. 
 
 (h) For loss or damage arising out of examination or 
 partial delivery to the consignee of C. O. D. shipments. 
 
 (i) For damage, loss, or partial shortage, unless writ- 
 ten notice is given at any office of the company within 
 thirty days from delivery. 
 
 (j) For loss or damage occurring to shipments ad- 
 dressed to stations where there is no agent of the com- 
 pany after such shipments have been left at such station. 
 
 (k) For non-delivery, loss, or destruction in Canada, 
 unless written notice is given within four months from 
 the time delivery should, in the ordinary course of transit, 
 have been made. 
 
 C— III— 33 
 
5U 
 
 TRAFFIC 
 
 The word "company" as used in this receipt includes 
 any connecting express company subject .. Z .^ilwa 
 Act. The agreement entered into by the signmg of the 
 receipt ,s bmdmg on the shipper and all peins in 
 privity with him, and inures to the benefit of anv per- 
 son or company to whom the shipment may be delivered 
 for the performance of an express service. 
 
 r^irr/t Ir^^^ '''^'''* *^^ conditions of which in 
 respect of hability are, subject to modifications due to the 
 difference in the nature of the commodities, substantially 
 the same as in the case of the merchandise receipt 
 
 In the C. O. D. receipt covering collections by the com- 
 pany, the common law defenses apply; in addition, the 
 company is exempt from liability for fire unless there is 
 negligence It is also free from liability for loss, dam- 
 age, or delay resulting from improper or insufficient 
 addressing or securing. 
 
 In the live stock contract, the company is exempt from 
 liability for delay, injury, or loss to the animals from any 
 cause whatsoever unless there is negligence. The attend- 
 ant accompanying the animals is required to sign a re- 
 lease from all liability, negligence included. 
 
 124. The standard mileage tanfs.-The standard 
 mileage tariff gives the merchandise rate. At the basis 
 of such a tanff IS the question of the division of territory 
 into mileage blocks. In eastern Canada, these nm up 
 to 100 miles in 25-mile groups; from 100 to 200 in 50- 
 mile groups; and from 200 in lOO-mile groups up to the 
 maximum. o r r 
 
 When the general investigation into express rates was 
 conducted, the board found that west of North Bav 
 
 l^Zfr'TTT'""' ^' *^ ''^'^^' ^"P« existed 
 as east thereof. Each standard tariff had its own par- 
 
 ticular mileage grouping, and the groups were irregular 
 
EXPRESS SERVICE 
 
 515 
 
 and overlapped. Direction was therefore given that 
 there should be a rearrangement with a view to approxi- 
 mating uniformity, so that, for example, any two or 
 more of the western groups should be equivalent to and 
 included in the corresponding eastern group, instead of 
 the relation being fractional, as then existing. 
 
 The eastern and Lake Superior standard scales then 
 met at North Bay. Direction was given that to harmo- 
 nize with freight conditions, the rates should instead 
 l)reak at Sudbury. 
 
 The meeting point of the prairie and the mountain 
 express standard mileage scales had hitherto been at 
 MacLeod and at Calgary. Direction was given that the 
 rates should break from one scale to another at the 
 points where the rates broke in the case of freight rates. 
 The direction given was in summary: 
 
 (1) That there shall be ' \r "standard" mileage-bas- 
 ing scales, viz.: 
 
 (a) On all lines east of and including Windsor 
 and Sudbury, excluding the lines of the Temiska- 
 ming and Northern Ontario Railway. 
 
 (b) On all lines west of and including Sudbury 
 to and including Sault St. Marie, Crow's Nest, 
 Canmore, and Thornton, Alberta; also north of and 
 including North Bay. 
 
 (c) On all lines west of and including the ter- 
 minal points set out in the preceding section to the 
 Pacific Coast and to Vancouver Island transfer 
 points. 
 
 (d) Vancouver Island. 
 
 (2) That the basis of (a) should not exceed $8.00; 
 of (b), $5.00; of (c), $6.00 per 100 pounds for the 900- 
 1,000 mile group. In Vancouver Island, the mileage 
 
516 
 
 TRAFFIC 
 
 groups were to be harmonized without increasing the 
 rateSs 
 
 The standard rates so fixed were further reduced in 
 Apnl, 1913, when it was directed that instead of the 
 $5.00 and $6.00 rates ah-eady referred to there should be 
 substituted rates of $4.00 and $4.75 respectively. 
 
 125. Differences in traffic conditions.— In sanctioning 
 differences m rate basis as between the sections covered 
 by the different tariffs, differences in traffic conditions 
 were recognized. In rearranging rates under its recent 
 decision on express rates in the United States, the Inter- 
 ^ate Commerce Commission has taken a similar position. 
 Ihe following words are from its judgment: 
 
 We have, therefore, felt that it was necessary for us to 
 recognize the variation in the density of traffic and of popula- 
 tion and in the expense of operating railroads in the different 
 sections of the country. With this in mind as a basis for the 
 formation of rates, the country has been divided into five grand 
 subdivisions. These subdivisions conform generally to those 
 recognized by the rail carriers and which this Commission ha. 
 m the consideration of freight rates been led to believe were 
 based upon actual differences in operating and traffic condi- 
 tions. 
 
 Following out the practice herein laid down, the Inter- 
 state Commerce Commission recognizes five zones dif- 
 fering m traffic and in population density, and has ad- 
 justed rates with this in mind. 
 
 126. Four standard tariffs.-The standard tariffs are 
 four in number Tariff A, applying east of Windsor 
 and Sudbury, has a merchandise rate of 40 cents per 
 100 pounds for distances of 25 miles and under; from 
 26-100 miles, the rates are stepped irregularly 10 or 15 
 cents for each 25-rnile group; from 101 to 200 miles, 
 the rate steps are 25 cents for each 50-mile group; and 
 
EXPRESS SERVICE 
 
 517 
 
 beyond this up to the limit of the tariff at 2,000 miles 
 the rates aie stepped 25 cents for each 100-mile group. 
 As the grouping is more complicated in tariffs B and C, 
 it may be expressed in a tabular summary: 
 
 TARIFF B WHICH COVERS 3,400 MILES: 
 
 25 miles, merchandise rate of 50c. 
 
 75 miles, 25 mile groups, rate steps either 10c. or 15c. 
 
 Up to 
 26 to 
 76 
 
 111 
 
 ill 
 
 331 
 
 401 
 
 110 
 210 
 330 
 400 
 700 
 
 25 
 50 
 60 
 70 
 75 
 100 
 
 25c. 
 25c. 
 25c. 
 25c. 
 25c. 
 25c. 
 
 701 and beyond 
 
 TARIFF C WHICH COVERS 4,000 MILES: 
 
 20 miles and under, merchandise rate of 50c. _ 
 
 21 to 75 miles, 15 mile groups, rate steps either 10c. or 16c. 
 76 " 150 " 25 " " " " 25c. 
 
 151 " 350 " 40 " " " " 25c. 
 
 351 *' 400 " 50 " " " " 25c. 
 
 401 and beyond 100 " " " " 25c. 
 
 Tariff D, which is concerned with Vancouver Island, 
 covers 135 miles. Up to 100 miles, there are 25-mile 
 groups, there being ten or fifteen cent increases up to 75 
 miles and a 25-cent step on the next group. Beyond 100 
 miles, there is one group with a rate step of 25 cents. 
 
 The following summary compares certain of these 
 rates: 
 
 ABC D 
 
 25 miles and under, 40c. 50c. 
 
 100 " 75c 
 
 1000 " $3.00 $4.00 
 
 20 miles and 
 under, 50c. 
 
 $4!75 
 
 25 miles and 
 
 under, 50c. 
 
 under, $1.00 
 
 The board found that in the traffic between the prairie 
 section and British Columbia the practice was to make 
 up a through rate by adding the two tariffs together. 
 In order to bring about uniformity and lessen the bur- 
 den of rates, direction was given that on inter-division 
 
518 
 
 TRAFFIC 
 
 Between poHl T,t !? sf T™ '" 'i"'" ''''•^'=""»- 
 thereof, throLh 1 " L I u""^ *""* P°'"'' »«* 
 local rale elt of S i "'" "P ''>' '"''"•'B to the 
 
 t..ereof:':S at' t":L3t',''T"« '""'^ ''-' 
 Sudbury loeal tariff n^, ^ ''"'" *'""' «» 
 
 standard tariff as annlied to thAu \ . the higher 
 the point of origin S„'.l:*™:tlL^^^^^ 
 
 out the spedfic. rates f„r'^ ''"'"'" "^•" Thi» sets 
 when adLTo the "a tes ealtTV"''..''' ^"'"""^ '''"'" 
 give the through rite „d',w°''' -' ^"''^"'^ "'" 
 standard tariff we"ofS„fl";'^'*P* "^'"^ «-' 
 n.iiea«e gives J:: t^tZ:!'''' '" *^ «-«" 
 
 may be made tTthe n„"""E.'' "'""'• "f««n<» 
 I-oial TarTff No 20 TI^ "'"r ^"P**^^ Company', 
 points in tl^7w„J„fo ''';'■'' ""/'■'P™™*^ ^^^" 
 «nd British CoZbk °',?,"f ^Y""! Pomts in Alberta 
 
 are given a rate number If f ' '''.""' '" "-^ '»"'' 
 find the rate per one lu.nJ ^ """?P'"' " " '^''^'^^ to 
 Quebec, to WnTsh MI T^'^ il™"* f™™ M«niwaki, 
 
 numberVorltitat't'^V :drS *"; T 
 
 atgr^:.::ftri:terf"-S 
 
 atn page, there is also a column of 
 
EXPRESS SERVICE 
 
 519 
 
 rate numbers arranged horizontally on the left hand of 
 eacli page. At the intersection of the column headed 145 
 with the horizontal line to the left of the page which has 
 at its extreme left 700, the rate of $6.25, which is the 
 rate sought, will be found. The tariff in question in its 
 271 pages quotes rates from 566 initial points to 551 
 destinations, or a total of 351,866 rates. 
 
 ^Vhere a shipment is to move off the lines of the 
 origina \g express company to a point on the line of 
 a connecting company for which no through rate is 
 quoted, the agent figures out the rate by means of a 
 transfer tariff. This tariff sets out rates to basing trans- 
 fer points. For example, a shipment might be sent from 
 Red Deer, Alberta, on the lines of the Dominion Ex- 
 press to North Battleford, on the lines of the Cana- 
 dian Northern Express. If there is no through rate 
 (jiiotation, then the rate shown in this tariff to Edmon- 
 ton, as a transfer point, plus the Canadian Northern 
 Express local beyond, will make up the through rate. 
 There is a chance for overcharge under such an arrange- 
 ment, for there may in a particular case be a number of 
 basing transfe.' points available with different rates. It 
 is true that the direction to the agent is to compute the 
 rate by the basing transfer point, which gives the lowest 
 through rate. But in the hurry of shipment, the lowest 
 combination may be overlooked. 
 
 128. Rates as affected by quantity. — In general, the 
 factors which affect express rates are more clearly analo- 
 gous to those affecting passenger rates than to those 
 affecting freight rates. From the standpoint of cost of 
 service, the difference between the capitalization in or- 
 dinary freight business and in express service is attrib- 
 utable to the fact that the former is a transportation 
 business, while the latter is more of an agency business. 
 
5W 
 
 TRAFFIC 
 
 The charge of the latter is. therefore, not necessarily 
 looked at from the standpoint of the return on capital 
 invested, but from the question of what is the rate of 
 I)rofit on the turnover. 
 
 While competitive conditions, such as water and mar- 
 ket competition, exercise an important effect on freight 
 rates, express rates are in a different condition. Wa- 
 ter competition certainly cannot be said to influence in 
 any way a service, the essential of which is speed; nor 
 IS the express service influenced in nearly the same de- 
 gree by the question of competitive points as is freight 
 In general, it is the factors which affect passenger 
 busmess which apply here. Express companies do rec- 
 ognize a difference of condition as between their "ex- 
 clusive" or non-competitive points and points at which 
 there is competition of another express company. They 
 recognize at competitive points the effect of short line 
 mileage as well as the control over a two-line movement 
 of a single line haul. The Canadian Express carries 
 from Toronto to Welland, a distance of eighty-five miles 
 at a rate of 75 cents per 100 pounds. The Dominion 
 Ji^xpress and the American Express, a two-line move- 
 ment, meet this rate of 75 cents. Fenwick. a point seven 
 miles short of Welland and through which the movement 
 on the two-line haul passes, has a rate of 90 cents The 
 lower rate to Welland has been held justifiable as a com. 
 petitive rate, while at the same time the higher rate of 
 the two-line haul to the intermediate point has been 
 recognized. It has been recognized that in express as 
 m freight there is a justification for a reasonably higher 
 rate on account of cost and division of earnings on a two- 
 line haul than on a one-line haul. But at Welland the 
 two-line movement had to meet the rate of the one-line 
 movement. 
 
EXPRESS SERVICE 
 
 521 
 
 129. Freight rate as a basis. — ^At times the expedited 
 sen'iee afforded in express business has been expressed 
 as a multiple of the first-class freight rate. Thus in some 
 of its earlier decisions on express rates, the Interstate 
 Commerce Commission held that an express rate of 
 three times the first-class freight rate was not unreason- 
 able. In the contract entered into between the Domin- 
 ion Express Company and the Canadian Pacific Rail- 
 way in 1907, it was provided that the express rate should 
 be 2i times the first-class freight rate. In practice, how- 
 ever, no such necessary relation exists. In the case of 
 the cream rates in Alberta, which were fixed by the 
 board, in various instances the express rate is less than 
 the first-class freight rate. In the case of the fruit rates 
 in British Columbia, which have been readjusted by the 
 Express Company, the rate from a point in the Okana- 
 gan Valley — for example, Peachland — to such prairie 
 points as Swift Current, Moose Jaw, Broadview, Re- 
 gina. Saskatoon, and Brandon, is less than the first- 
 class freight rate. 
 
 130. Special circulars. — Commodity rates are put in 
 force by special circulars quoting rates per one hundred 
 pounds. These may be limited to the one-way direction, 
 or may apply "between" points, in which case they apply 
 ill both directions. The rates quoted in special circulars 
 must not be exceeded to an intermediate point embraced 
 in the longer distance for which the rate is quoted. Scale 
 X rates apply where they are lower than the rates quoted 
 in special circulars. Commodity rates are issued on 
 fish — fresh, frozen, or cured — ^lobsters, oysters, fruit, 
 butter, eggs, dressed poultry, general specials (Scale 
 N), vegetables, sausage meat, meat — fresh or cured, 
 smelts, export shipments of bullion, returned empty 
 newspaper or periodical bags, bread, laundry, currency. 
 
599 
 
 TRAFFIC 
 
 and gold coin. Competition is recognized in putting in 
 a commodity tariff, as, for example, in a rate of 80 cents 
 per 100 pounds on horses, minimum 10,000 pounds, 
 from Clairmont to Toronto, to compete with a through 
 rate put in from a Canadian express point, Stoufville, to 
 New York. 
 
 Instead of a division into carlot and less than car- 
 lots as m freight, express business recognizes: 
 
 ( 1 ) Carlots, e. g., on horses and poultry. 
 
 (2) There is a rate quoted for 500-pound shipments 
 of merchandise from one consignor to one consignee 
 forwarded at one time and on one receipt. A shipment 
 of less than 500 pounds cannot have a higher charge than 
 a 500.pound shipment. The articles which will not be 
 carried under the 500 scale are: aeroplanes (K.D. 
 boxed) , animals (domestic or wild, either alive or dead) 
 self-propelling vehicles, live-stock, birds, poultry, piL 
 eons, nickel and copper coin, bullion, feathers, live fish 
 ice-cream, and in general any article taking a higher 
 classification than single merchandise rate. In general 
 the rate is about 20 per cent lower than merchandise' 
 rate. 
 
 (8) Then there is also recognized the 100-pound rate 
 on merchandise and, 
 
 (4) The packages under 100 pounds which are car- 
 ried on the graduate scale. 
 
 131. r^^ graduate *afe/e.— Approximately 90 per 
 cent of the packages handled by express companies 
 weigh one hundred pounds or less. The Interstate Com- 
 merce Commission in its investigation found that ap- 
 proximately one-half of the express business consists of 
 packages under 20 pounds in weight; and that the aver- 
 age shipment, including carloads of horses and of fruit 
 and vegetables, is 84 pounds. Taking the business of 
 
EXPRESS SERVICE 
 
 59S 
 
 the Dominion Express Company for September 18, 
 1912, when a computation was made, it appears that 
 applying the same average to the year's business 26 
 per cent of the revenue was obtained from parcels of 
 11 pounds and under. In the Express Investigation, it 
 was shown that for a given month in 1907 the average 
 weight of packages shipped in to Toronto was 19 
 l)ounds, while in the case of outward shipments it was 
 43 pounds. In eastern Canada, the average haul per 
 package — i. e., all shipments — is about 100 miles, while 
 in western Canada it is not far from 800 miles. 
 
 The rates for packages under 100 pounds are worked 
 out from a table of graduated charges which is set out 
 in the classification.* If, taking the example already 
 given of a shipment between Maniwaki, Quebec, and 
 Walsh, Alberta, it is desired to ship a 15-pound pack- 
 age between these points, the agent will look at the col- 
 umn in the graduate table headed $6.25, which is the 
 merchandise rate for a 100-pound shipment between 
 the points. Then he will run down that column 
 until at the left-hand side of the page he finds the 
 15-pound line, where this line intersects the $6.25 col- 
 umn the proper rate, viz., $1 .45 will be found. The grad- 
 uate table has the following modifications to be noted: 
 Under the $1.50 rate, shipments in excess of 50 pounds 
 pay 2 cents per pound with a maximum of $1.50; while 
 under the $1.75 rate they pay the same rate per pound 
 with a maximum of $1.75. As has been indicated, when 
 the merchandise rate is $2 or over the shipment in excess 
 of 50 pounds is charged pound rates. 
 
 132. Rates not uniform. — Scrutiny of the gradu- 
 ate table will show that the rates are not built up on a 
 scientific basis. The effect of the 100-pound rate is not 
 
 ' See spedmen on opposite page. 
 
S»4 
 
 TRAFFIC 
 
 earned down umformly through the colunm, of rate. 
 For example, under the $1 merchandi* rate. 60 po™^ 
 
 pan.es that the expenses in connection with coUectin« 
 and dehyenng and handling and clerical expinT^ 
 p:act.c. ly the «u„e on the small shipmentT^ t^ 
 large rfupment. Further, in the ca« of the i^"^ 
 
 Z™L^ •"■"' '"^" "^^ • '"«« ""ount of such 
 rfupments on one wagon trip, thus cutting down the 
 wagon mUeage necessary. * 
 
 There is considerable force in this contention At th. 
 »«ne tune, in view of what ha, been s.id« to .feL« 
 
 thTsLan """'!*' "■^P'^"-* ot the graduate tair^ 
 the smaUer-sized package is apparent 
 
 In the Express Investigation, it was found that only 
 some twenty-nme rate columns were oiven in thTlA 
 ate table and that where the rate ^^^^^l t^ofnta 
 was not given the next higher rate wasTbe uSt 
 arnvmg at the rate on the particular p^jkagT mere 
 there was a considerable gap between ™t^%i.- . 
 
 a very considerable ^IdedV.etZ,':^^^^^ 
 w« given that gr«luate, had to be added und«.Tth2 
 100-pound merchandise rates. There are now 72 r^ 
 columns in the table. "** 
 
 188 Single thr<mgh rate..-Ir, the matter of throueh 
 rates on packages, under the graduate table, mZg 
 o^er two Imes, the pr«:tice had been to graduate Tc! 
 on each of the local rates. By an order issu^n No^m 
 a ",;ni :. ^P"^" companies were directed to apply 
 a smgle graduate. The effect of this is as foltow 
 suppose a ten-pound shipment is moving on" thZl 
 movement, the locaU for which on the n^reL^dt "afe 
 
EXPRESS SERVICE 
 
 BU 
 
 are $1 and $1.50 respectively, graduating on each local 
 rate there would be a charge of 45 cents and 75 cents, 
 or $1.20. With the single graduate on the $2.50 rate, 
 tlie charge is 75 cents. When the graduate was made 
 on the sum of the locals, there really was included in the 
 ite charges a payment for four terminal services in- 
 stead of two as at present. 
 
 The effect of the reduction in western rates, already 
 referred to, whereby a reduction of 20 per cent in the 
 standard rates was directed, affected not only the mer- 
 chandise rates and the special scale for shipments of 500 
 pounds, it also affected the quantities of less than 100 
 pounds moving unde^ the merchandise rate and scales 
 KandM. 
 
CHAPTER IX 
 
 INLAND WATER TRANSPORTATION 
 
 184 Water transportation as a regulator of rates.- 
 In dealing with the factors affecting railway rates, vari- 
 ous examples have already been given of the influence 
 exercised by water on rail movements. In general, where 
 there is competition between these two methods of trans- 
 portation, the rail rate can exceed the water rate only 
 to the extent it gives superior facilities. Some of the 
 following factors of advantage are possessed over in- 
 and water transportation by rail transportation: in 
 thecase of ocean transportation, it possesses all of them; 
 goods earned by water have to bear marine insurance- 
 the rail carrier is an insurer; liability to salt water dam- 
 age; longer time in transit and consequent greater in- 
 terest on capitel invested; uncertainty in date of arrival. 
 
 whUTk 1 """l* ^ *^^"^ ^^' «^"^'«1 convenience 
 which the railway affords, which is estimated as worth a 
 
 premium of at least 5 per cent over water rates. This 
 has been put in the form of an example by Mr. W R 
 Wheeler^ Traffic Manager of the San FranciL Mer-' 
 chants Exchange: 
 
 ... let us take two plates of metal of equal gauge and 
 d.n,ens,on-^ne of copper, the other of iron. The value of the 
 copper at pomt of shipment is. say. 15 conts per pound, while 
 that of iron is « cents per pound. 
 
 526 
 
INLAND WATER TRANSPORTATION 5«7 
 
 Per hundred pound* 
 
 Sail freight on the copper AOc. Iron, AOc. 
 
 In.surance 45c. " 06c. 
 
 Interest 80c. " 04c. 
 
 Salt water damage 00c. " 06c. 
 
 $1.85 68c. 
 
 Add for rail convenience 5 per cent 06 OSc. 
 
 $1.31 71c. 
 
 By this it is plain that while the copper occupies no more 
 (<pacc than the iron, and is of such a nature that no salt water 
 damage is charged against it — the reverse being the case with 
 the iron — and although the rate by sea is the same on both, 
 the railroad is enabled to obtain a rate on the copper almost 
 SCO per cent higher than the sail rate, while on the iron it 
 obtains a rate less than 50 per cent higher than the sail 
 carrier. . . . 
 
 The efficiency of water competition on inland waters 
 is affected by the location of cities and towns. Where 
 these are adjacent to the water, the competitive effects 
 are more readily felt. But even in the case of points 
 some distance inland, for example, throughout the west- 
 ern peninsula of Ontario, the effect of the water route 
 is felt. As a particular example on the all-rail move- 
 ment of coal to London, there is the competitive effect 
 of the across-the-lake movement to Port Stanley and 
 thence to London. 
 
 185. Efficiency of waterways. — Inland waterways dif- 
 fer in point of efficiency. The lakes and navigable 
 waters are public highways accessible to all. Canals 
 require larger investments of capital, but are still com- 
 mon highways on which the individual may use his own 
 vessel. The accepted practice is to have canal construc- 
 tion carried on at public expense as a charge against 
 the taxing power of the country. When canals occur 
 
528 
 
 TRAFFIC 
 
 on a route, they aid in determining the maximum effi- 
 ciency of a route. The same thing is true in the case 
 of dredging, as in the St. Mary's River and through the 
 St. Clair flats. Just as the governing grade of a rail- 
 way, in a division, determines in practice the hauling 
 efficiency of an engine (no matter what may be its mavi- 
 mum tractive efficiency) through the division, thereby 
 affecting the costs of haulage, so it is the shallowest part 
 of a water route that governs the loading efficiency 
 of the route. 
 
 The policy adopted as to canals may be one of charg- 
 ing tolls with a view to earning a return on the invest- 
 ment, or they may be free of tolls, the charge being one 
 against the general revenues of the country as in the 
 case of highway construction. While individual boats 
 may use the water route, subject to the due observance 
 of the recognized rules of navigation, in the case of rail- 
 ways, the necessity of unified control leads to a spe- 
 cialized type of management. The vessel may ply from 
 port to port using different routes according to the ne- 
 cessities of trade. In the case of railways, the large in- 
 vestment of capital necessary limits the number of routes 
 available. 
 
 136. Canal terminals. — In the development of canals, 
 independent of great waterway systems, an exceedingly 
 important matter is the location of the terminals of these 
 canals in the various towns and cities they serve. One 
 disadvantage the English combined canal and waterways 
 systems have is that their terminals are so located in 
 large cities that it is cheaper to haul by rail direct to 
 destination, as well as more convenient, than to pay the 
 water charge and the wagon haul through the city to 
 destination. In the cities, businesses engaged in dis- 
 tribution grow up adjacent to the railway terminals, and 
 
INLAND WATER TRANSPORTATION 529 
 
 in many cases have railway sidings where delivery is 
 taken. If it costs 25 cents a ton to haul coal by wagon 
 from the canal terminr^ o the coal yard, this, if the canal 
 toll is 8 mills per ton ^ mile, is equivalent to the cost 
 of hauling the coal ei^ -three miles on the canal. 
 
 137. Effect of higlmay coats. — Highway costs are the 
 highest of transportation costs per mile. The United 
 States Department of Agriculture made a special in- 
 vestigation in 1907 of the highway costs of hauling ag- 
 ricultural products from farms to shipping points. Tak- 
 ing hemp, which had the lowest average haul — 5 miles — 
 the ton mile cost of haulage was 28 cents. To haul 
 grain by wagon into Edam, Saskatchewan, from a dis- 
 tance of 85 miles costs per 100 pounds 2i times what 
 it costs to haul it from that point to the head of the lakes, 
 a distance of 1,200 miles. 
 
 Of course, the costs will vary with the conditions of 
 the road, the nature of construction of the road, the type 
 of motor power used, whether animal or gasoline, etc. 
 But striking a rough general average, the cost of haul- 
 ing on earthem roads by animal power is about 25 cents 
 |)er ton mile. It is apparent that in wagon haulage on 
 highways there are not available the same opportunities 
 to take advantage of the economies of bulk movements 
 as are present in the case of railways and waterways. 
 
 188. Canadian lake and canal route.— From the head 
 of Lake Superior to Montreal the distance by the water 
 route is 1,228 miles. From Duluth and Chicago to the 
 same point the water distances are 1,857 and 1,286 miles, 
 respectively. Out of the distance between Port Arthur 
 and Montreal, the canals to be traversed represent 78i 
 miles, i. e., lockages are involved in 6 per cent of the 
 total route. 
 
 Through the "Soo" Canal, which has a lock 900 feet 
 
 C-III— S4 
 
530 
 
 TRAFFIC 
 
 in length, and which is 21 feet 5 inches in depth, the 
 largest vessels plying on the lakes can pass. The vessels 
 passing through it can move without breaking bulk to 
 the foot of Lake Erie. East through the Welland Canal 
 and the St. Lawrence canals to Montreal, the governing 
 locks are 270 feet in length and 14 feet in depth. 
 
 This determines the cargo load and type of vessel 
 using the lower portion of this route, and differentiates 
 the type of vessel in use on it from that used between 
 Lakes Superior and Erie. In general, on the lower 
 portion of the route, a vessel 255 feet in length, 42 ^eet 
 6 inches wide, drawing 18 feet and carrying 2,212 tons 
 of cargo may be regarded as typical of the ordinary ves- 
 sel accommodation afforded by this portion of the route. 
 
 189. From Georgian Bay to Montreal. — Considera- 
 tion of the short line movement between Georgian Bay 
 and Montreal has led to public interest in the Georgian 
 Bay Canal route which would, in the movement from 
 Fort William to Montreal, have a distance advantage 
 over the route of the Welland Canal of 862 miles. Sur- 
 veys of the route on the basis of a minimum depth of 
 22 feet have been made by the Dominion (Government, 
 and an investigation of its conmiercial possibilities will 
 shortly be made. The proposed depth would enable a 
 lake vessel to go through from the Upper Lakes to Mon- 
 treal. 
 
 In comparing this route with existing or projected 
 routes, the question of the elevation to be overcome is of 
 importance. Between Georgian Bay and Montreal, 
 there are 440 miles of navigation. Natural channels 
 are available for 80 per cent of this distance. To reach 
 the sununit level 689 feet of lockage will be necessary. 
 By the Welland Canal route only 584 feet of lockage 
 are necessary. The (Georgian Bay route may, as a factor 
 
INLAND WATER TRANSPORTATION 
 
 581 
 
 in the general traffic of the lakes, be compared with the 
 much discussed deepening of the Mississippi River 
 which is intended to afford a traffic outlet from Lake 
 Michigan to the Gulf of Mexico. This proposed deep 
 waterway would between its termmi have a distance of 
 1,G25 miles. 
 
 It is true thai the estimated cost of a deep waterway 
 by this route does not call for more than $40,000,000, or 
 less than half of the cost of the Georgian Bay route. 
 But there must also be considered the nature of the 
 stream, its tortuous course which is 60 per cent longer 
 than the direct distance, and the constant expenditure 
 on dredging which would be necessitated by the large 
 amounts of silt carried down by the river. 
 
 While the Georgian Bay is feasible from an engineer- 
 ing standpoint, the important question is its probable 
 traffic future. The saving in time, consequent in the 
 shorter distance, and the reduction in rate consequent 
 thereon may be expected to attract traffic. On the basis 
 of a movement of four miles per hour through the canal- 
 ized portion of the route vessels would move from 
 Georgian Bay to Montreal in seventy hours, giving an 
 advantage of from one and one-half to two days over 
 existing routes. This calculation is based, however, on 
 the conditions affecting the existing fourteen-foot wa- 
 terway by way of the Welland Canal. 
 
 The Welland Canal is being reconstructed to permit 
 the passage of the Upper Lakes vessels. If the St. Law- 
 rence route to ISIontreal were deepened to twenty-two 
 feet to Montreal, it is probable — subject to the traffic 
 conditions already mentioned — that the Georgian Bay 
 Canal would have no advantage in point of time. The 
 deepening of the I^ower Lake and river canals and the 
 increase in the size of the locks would lessen the amount 
 
5Si 
 
 TRAFFIC 
 
 of lockage. At the same time, the longer stretches of 
 lake and river navigation would permit higher average 
 speeds than would be possible on the northern route. 
 
 140. Ottarca system. — The canals of the Ottawa sys- 
 tem are of limited importance, having locks 200 feet 
 long and 9 feet in depth. On the Rideau Canal system, 
 the locks are 124 feet long and 5 feet deep; while on the 
 Richelieu system they are 200 feet in length and 7 feet 
 in depth. The Trent Canal, which is intended to connect 
 Georgian Bay and the eastern end of Lake Ontario, 
 affords a tortuous water route six times as long as the 
 direct land route. The governing depth is five feet. The 
 route is being constructed as a barge route. Among 
 other disadvantages as compared with the Welland 
 Canal route is the fact that it has five hundred feet more 
 of vertical lift. 
 
 141. No canal tolls. — From an early date the con- 
 struction of improved transportation ways in Canada, 
 both by water and by rail, has looked to participation in 
 the trade of the western states adjoining the Great 
 Lakes. Down to 1902 tolls were charged on the various 
 canals. Since 1903 tolls have not been charged. The 
 advantage of increased traffic, as reacting on the gen- 
 eral business of Canada, is expected to compensate for 
 this additional charge on the general revenue of the 
 country. 
 
 Throughout, the aids to navigation and the deepen- 
 ing of harbors are charged against the general revenues 
 of the country. 
 
 142. Great Lakes traffic. — A tremendous volume of 
 freight and vessel tonnage has developed on the Great 
 Lakes. Without comparing values, it may be said that 
 there annually pass through the two canals at Sault Ste. 
 Marie, in seven and a half months, three times the vessel 
 
INLAND WATER TRANSPORTATION 533 
 
 tonnage passing through the Suez Canal in a year. 
 W'lien to this there is added the vessel tonnage between 
 Lakes Huron and JSIichigan on the one hand and Erie 
 on the other, the result may be measured by the state- 
 ment that during the season of navigation a vessel passes 
 Detroit every six minutes. The number of vessels pass- 
 ing Detroit is ten times greater than the number passing 
 through the Suez Canal. The freight tonnage passing 
 Detroit is greater than the aggregate of all the cargoes 
 home by all the ships, British and foreign, entering the 
 j)orts of Great Britain in a year. 
 
 148. The Upper Lakes. — In tne traffic of Canada's 
 inland waters, that of the Upper Lakes is the most im- 
 jjortant. The movement through the Welland and the 
 St. Lawrence canals represent, respectively, 7 per cent 
 and 6 per cent of the total movement through the Cana- 
 dian canals; the movement through the Canadian "Soo" 
 Canal is 88 per cent of the total. Of the total capital 
 expenditure on canals since Confederation 84 per cent 
 has been on the "Soo," Welland, and St. Lawrence 
 canals. Between 1909 and 1912 the freight traffic pass- 
 ing through the Canadian "Soo" Canal increased by 
 42 per cent. In the same period the traffic passing 
 through all Canadian canals increased by 41 per cent. 
 Of the increase 62 per cent was attributable to the "Soo" 
 Canal. 
 
 A significant fact in the development of lake trans- 
 portation has been the increasing importance of the 
 Upper Lakes. The great increase in the traffic passing 
 tlirough the "Soo" canals is one index of this. With the 
 development of the United States, the westward move- 
 !uent of grain centers and the expansion of population 
 iiave lessened the transportation importance possessed by 
 the Lower Lakes in the early days of the Canadian canal 
 
584 
 
 TRAFFIC 
 
 system. In the United States, the center of wheat pro- 
 duction has moved west and north. In Canada, the more 
 recent development of the wheat areas of the North- 
 west has intensified the significance of this northward and 
 westward pull. The transportation significance of these 
 changes is that all the shortest lines of communication 
 from the Northwest to the seaboard lie across Canada. 
 144. Character of freight— In the general traffic of 
 the lakes, 90 per cent is represented by iron ore, coal, 
 grain, flour, and lumber. The significance of this is 
 shown in the following percentage comparison, which 
 brings out the much simpler nature of the traffic through 
 the Canadian "Soo" Canal than through the lower 
 canals : 
 
 Agricidtural Animal Manufac- 
 Productn Psoduetn tares 
 
 Produce of Produce «jf 
 Forest Mint* 
 
 Soo Canal 11.4 0.001 0.i4 
 
 Wetland i'unal 42.3 O.S gl.9 
 
 St. Lawrence Canals. 32.2 0.2 13^3 
 
 0.13 
 7.9 
 16.6 
 
 88.229 
 
 27.7 
 
 37,7 
 
 Of the American traffic carried through all Canadian 
 canals in 1912, 83 per cent was iron ore and 8 per cent 
 coal. The bulk of the movement through the "Soo" 
 canals is eastbound. The figures for August, 1918, 
 which are the least available, show 21 tons of freight 
 moving eastbound for every ton moving westbound. 
 
 With the expanding grain traffic of the Canadian 
 Northwest, there arise two important questions: what 
 proportion of it is lake borne and what routes does it 
 take? There are in Manitoba, Saskatchewan, and Al- 
 berta 2,265 country elevators and warehouses with a ca- 
 pacity of 70.4 millions of bushels. The Dominion gov- 
 ernment has adopted the policy of constructing elevators 
 at interior points. Including the new government ter- 
 minal elevator at Port Arthur, with a capacity of 8,250,- 
 
INLAND WATER TRANSPORTATION SS5 
 
 000 bushels, there is now at Fort William and Port 
 Arthur storage capacity for 41.1 millions of bushels. 
 
 145. Canadian grain. — ^As one of the great problems 
 of the Canadian Northwest has been concerned with rush- 
 ing the grain to the lakes before the close of navigation, 
 the problem of how and to what extent the movement 
 from the head of the lakes is water-borne is important. 
 
 Between 1909 and 1912 — Canadian was not differen- 
 tiated from American grain in the statistics before 1909 
 —the Canadian wheat moved via the Canadian "Soo" 
 Canal increased from forty-eight to eighty-three millions 
 of bushels, an increase of 74 per cent. The total quantity 
 of Canadian wheat moved by water through the two ca- 
 nals at the "Soo" increased from 65.6 millions of bushels 
 in 1911 to 109.8 millions in 1912, an increase of 51 per 
 cent. In addition, there passed through the two canals 
 2.8 millions of barrels of Canadian flour, which, allowing 
 4^ bushels of wheat to a barrel of flour, gave a total 
 water-borne wheat movement of 128.2 millions of bushels 
 of wheat. 
 
 The movement of Canadian wheat from the head of 
 the lakes and its destinations for a period of years is 
 expressed in the following percentage summary: 
 
 1909 1910 1911 1912 
 
 Fort WiUiam to Montreal 219 25.6 20.1 13.6 
 
 " Georgian Bay 
 
 ports 27.9 24.6 15.6 17.8 
 
 Fort William to other Canadian 
 
 ports 21.1 18.5 18.7 18.6 
 
 Fort WiUiam to Buffalo 26.7 80.8 48.8 40.2 
 
 Duluth to Canadian ports 1.8 .6 .7 17 
 
 " "U.S. ports 1.1 .6 1.1 5.2 
 
 " unclassified *-® 
 
 The distribution of the movement is indicative of the 
 importaiM^ of short-rail route methods of communication 
 
5se 
 
 TRAFFIC 
 
 >vith the seaboard, either across Ontario or via Buffalo. 
 Of the 16.6 millions of bushels of elevator capacity in 
 the public elevators of Ontario, 60 per cent are to be 
 found at the Georgian Bay ports. 
 
 146. Lake vessels.— In 1912, the average Canadian 
 steam vessel engaged in trade between Canada and the 
 ITnited States entering Port Arthur was 2,488 regis- 
 tered net tons, while the average American vessel was 
 2,595 tons. The unimportance of sail tonnage is shown 
 m the fact that no sailing vessels are recorded for Port 
 Arthur, while for Fort William there were thirteen 
 American sail-vessels and one Canadian. 
 
 The relatively simple nature of the traffic of the Upper 
 Lakes and the large bulk of the individual items thereof 
 have encouraged specialized vessel construction. Grain 
 and flour furnish a considerable amount of cargo for the 
 smaller vessels, such as the wooden steamers in the three 
 hundred and three hundred and fifty foot classes. Lum- 
 ber is handled to a large extent by wooden steam barges 
 which tow loaded barges. Schooners are also to some 
 extent still engaged in this traffic. It is in the traffic 
 in ore, grain, and coal that the large bulk freighters are 
 used. In this traffic, the tramp or "wild" boats are of 
 importance as a regulative factor. Tank boats are also 
 used in the carriage of oil— for example, by the Imperial 
 Oil Company— to the head of the lakes, where supplies 
 of oil are stored to be shipped on further west in the 
 winter season. 
 
 The package freight of the lake, which amounts to 
 about 6.6 millions of tons, includes general merchandise, 
 such as silks and woolen fabrics and manufactured goods, 
 canned goods, fine furniture, bar iron and steel, etc. 
 Here the traffic is carried mostly by line boats. The 
 rates of the line boats are usually lower than those of the 
 
INLAND WATER TRANSPORTATION 
 
 587 
 
 rail carriers by an agreed difference. While the North- 
 ern Navigation Company and the Dominion Transpor- 
 tation Company enter into through rate arrangements 
 with the railways, there are various through all-water 
 independent lines operating to the head of the lakes, e. g., 
 the Inland Lines operating from Montreal, Toronto, and 
 Hamilton to Sault Ste. Marie, Ont., and Fort William, 
 the Canadian Lake Line and the Merchants' Mutual. 
 
 147. Formation of Canada Transportation LineSf 
 Ltd. — In June, 1018, an amalgamation was formed to 
 control various freight and passenger services, whereby a 
 new company with a capital of $25,000,000, the Canada 
 Transportation Lines, Limited, took over the Richelieu 
 and Ontario Navigation Company, the Inland Lines, 
 Northern Navigation Company, St. Lawrence River 
 Steamboat Company, Quebec Steamship Company, 
 Canada Interlake Line, Ontario and Quebec Naviga- 
 tion Company, Merchants' Montreal Line, S. S. Had- 
 dington, Thousand Island Steamboat Company. 
 
 The Richelieu and Ontario Company already con- 
 trolled by purchase or by stock ownership the Inland 
 Lines, Northern Navigation Company, Niagara Navi- 
 gation Company, St. Lawrence River Steamboat Com- 
 pany, Thooaand Island Steamboat Company, and Mer- 
 chants' Montreal Line. The Quebec Steamship Com- 
 ])any operated a service between Quebec and the mari- 
 time provinces, as well m betweoi Quebec, New York, 
 and the West Indies. The Canada Interlake Line had 
 already ccHisolidated the interests operating under the 
 name of the Merchants' Mutual Luie. 
 
 148. Advent of large ve»»el». — In 1898, the construc- 
 tion of a vessel 475 feet long for the Bessemer Steam- 
 ship Company, an American lake boat company, was 
 hailed as marking an epoch in lake shipbuilding. To- 
 
5S8 
 
 TRAFFIC 
 
 day there are 600-foot freighters, and larger vessels are 
 not unknown. Such boats, while monstrosities from the 
 standpoint of naval architecture, have great carrying ca- 
 pacity. The "J. Pierpont Morgan," which is 605 feet 5 
 inches in length, can carry in a single voyage a cargo 
 equal to the combined cargo capacities of every vessel 
 afloat on Lake Superior in 1861. On the day this boat 
 was launched, its captain said that it could carry in one 
 voyage as much ore from Duluth to Cleveland as the 
 first steamer he commanded twenty-eight years before 
 could have carried in two years and a half. 
 
 While a boat of this type is built so that it can carry 
 nearly 21,000 tons of freight, the channels in the Detroit, 
 St. Clair, and St. Mary's rivers limit its effective car- 
 rying capacity to about fourteen thousand tons. In the 
 loading, management and unloading of such a vessel, 
 mechanical appliances are freely used. It is operated 
 economically at a speed of from 11 to 12 miks per hour, 
 with a coal consumption of 5 pounds for each 100-ton 
 miles, about one-fourth of the consumption required for 
 the performance of the same work by a railway. A six 
 hundred-foot ore boat can be loaded by the use of ore 
 docks in two hours and unloaded in from five to ten 
 hours. An ore boat returning light can make thirty 
 round trips in a season between Superior and Cleveland. 
 If it takes back coal, it can make twenty round trips. 
 The largest Canadian freighter, 551 feet in length, the 
 "James Camithers," was wrecked in the great storm of 
 November, 1918. 
 
 149. Loading and unloading.— The loading and un- 
 loading of grain can be carried on with great expedition. 
 At the new government elevator at Fort William, 100,- 
 000 bushels can be unloaded from the cars in an hour, 
 while a 600-foot car can be loaded in less than four hours. 
 
INLAND WATER TRANSPORTATION 5S9 
 
 In one day in 1912, fourteen boats took on at Fort 
 William and Port Arthur 8,000,000 bushels of grain. At 
 the end of September, 1918, one grain train came into 
 Winnipeg with 68 cars of wheat, or 76,500 bushels. From 
 Winnipeg to the head of the lakes, the trains average 
 about 41 cars. This means that one 600-foot boat can 
 take on nine such train loads. In the case of the 8,000,- 
 000 bushels loaded in one day, this was equivalent to 65 
 train loads. The grain vessels can handle out of Fort 
 William and Port Arthur in ten days as much grain as 
 the Canadian Pacific can handle east by raU while navi- 
 gation is closed. 
 
 When the grain arrives at Port McNicoU, for exam- 
 ple, the Canadian Pacific port on Georgian Bay, it is 
 found that the best average so far made in iinloading is 
 375,000 bushels in 18i hours. From this point, the Ca- 
 nadian Pacific was sending forward, early in November, 
 1918, 100 cars a day. That is to say, assuming the aver- 
 age of unloading to keep up during a twenty-four hour 
 period, it would take five days to move away from the 
 elevator what was unloaded in one. 
 
 150. Combined inland and ocean tra/jtc—li is at times 
 urged that the improvement of the St Lawrence canals, 
 if this follows the improvement now under way on the 
 Welland Canal, or the construction of the G^rgian Bay 
 Canal, will lead to ocean-going vessels carrying their 
 cargo in, without breaking bulk, to lake ports and receiv- 
 ing there export freights. Without going into earlier 
 experiences, reference may be made to the fortunes in 
 1901 of the vessels built for the Counselmen Sjmdicate 
 by the American Shipbuilding Company. Although 
 they journeyed under their own steam from Chicago to 
 Europe, the venture was so improfitable that it was given 
 up after one season. The fact that the vessels could not 
 
MICROCOPY RESOIUTION TEST CHART 
 
 (ANSI and ISO TEST CHAR'. ,.'3. 2) 
 
 ^ APPLIED IM^GE 
 
 1653 East Main Street 
 
 Rocliester. Ne» York 14609 us* 
 
 (716) 482 - 0300 - Phone 
 
 (716) 288-5989 - Fo, 
 
540 
 
 TRAFFIC 
 
 load to their full depth of twenty feet until Montreal 
 was reached was peculiar to the existing canal depth. 
 In addition, they could not compete in cargo capacity 
 with the larger vessels either of the lakes or of the ocean. 
 Their sailors were paid on the lake scale of wages, about 
 twice as high as the ocean scale. In addition, the ves- 
 sels were subjected to high insurance charges. The 
 ^ orth Atlantic requires especially stout construction. 
 1 he lake vessel is more lightly constructed. The stronger 
 hulls, etc., needed for the ocean voyage add about 20 
 per cent to the cost. The lake vessel, on account of the 
 smaller amount of coal needed to be carried, has greater 
 cargo space in proportion to size than the ocean-going 
 vessel. In general, the latter costs about twice as much 
 per ton of cargo capacity as the former. A combined 
 lake and ocean type of vessel would lack the economic 
 advantages attaching to the more specialized type. 
 
 151. Lake rflie«.— Figures collected by the Railways 
 and Canals Department show the average lake rate, in 
 1912, on Canadian traffic as .194 cents per ton per niile 
 while the United States traffic using the Canadian inland 
 waterways showed an average of .067 cents per ton per 
 mile. At the same time, the average ton mile rate for 
 Canadian railways was .757 cents per ton per mile. Put- 
 ting this in a readily comparable form, $1.00 carried 
 one ton 13? miles by rail, 515 miles in Canadian lake 
 traffic and 1,498 miles in United States lake traffic using 
 Canadian waterways. 
 
 A comparison between the rail gross ton mUe rate and 
 the water ton mile rate is not conclusive. In the ton 
 mile of the railway there is averaged up high grade and 
 low grade, long haul and short haul, carlot and less than 
 carlot business. In lake business, the movement is al- 
 most exclusively concerned with a few bulky commod- 
 
INLAND WATER TRANSPORTATION 541 
 
 ities. In comparison with the Canadian lake ton mile 
 rate of .194 cents may be taken the all-rail ton mile 
 rate from For'^^ William to Montreal for the same season, 
 viz., .402 ceiili, mider which rate a ton of grain would 
 be moved 247 miles for one dollar. 
 
 The disparity between the Canadian and the Ameri- 
 can lake ton mile rates indicates the difference in the 
 nature of the traffic, and has a bearing on the Buffalo 
 movement of Canadian grain. As has been pointed out, 
 93 per cent of the United States' traffic carried through 
 Canadian waterways is concerned with iron ore and coal. 
 Iron ore is carried down by the large freighters from 
 the Minnesota iron ranges; coal is carried back. Expe- 
 dition is desired so as to get the maximum number of 
 trips in a season; coal can be loaded and unloaded by 
 mechanical means. During 1912, the rate on ore from 
 the points of origin on Lake Superior to the ports of 
 destination on Lake Erie was 55 cents per ton, or .068 
 cents per ton mile; on the return movement there is a 
 large amount of empty cargo space and coal is carried 
 at exceedingly low rates — during 1912 at 80 cents per 
 ton, or .046 cents per ton mile. 
 
 In the matter of rates on water-borne grain, there are 
 variations from year to year, as well as from season to 
 season. Complaint was made, for example, that the rates 
 in 1918 were higher to Montreal than to BuflFalo. In 
 1912, the ton mile rates worked out as follows: 
 
 May November 
 
 Fort William to Buffalo 106 150 
 
 " Georgian Bay ports 012 .259 
 
 " other Canadian ports 099 .232 
 
 "Montreal 147 .19S 
 
 152. Comparison between lake and canal movements, 
 — The low averages of the United States' traflBc to Buf- 
 
542 
 
 TRAFFIC 
 
 falo are, m the ease of ore and coal, held down by a 
 highly speciahzed traffic and the necessity of obtaininff 
 cargo for backloading on the westward and northward 
 movement. The grain rates afford a more fairly com- 
 parable basis. In the movement to Buffalo there is larire 
 bulk m large freighters. These are able to obtain some 
 cargo on Lake Erie either of coal or a certain amount of 
 package freight. In the movement through the Welland 
 Canal and on to Montreal, the physical features of the 
 canal system limit the maximum through cargo to 80,000 
 bushels; so the economies of bulk handling are not so 
 largely present. The traffic may either go to Montreal 
 or be transhipped at Kingston. In either case, there is 
 the disadvantage that little westbound cargo offers on 
 Lake Ontario. 
 
 In the lake movement, short trips with minimum coal 
 consumption are the most profitable. Even in the case 
 of a vessel which is able to pass through the Welland 
 Canal, the locking through takes about nineteen hours. 
 The same expenditure of time would, after delivering 
 Its cargo at the foot of Lake Erie, take it back as far al 
 the Detroit River. As between the movement to Ca- 
 nadian points and the movement to Buffalo, it must also 
 be remembered that while in 1912, in the carriage of 
 gram between Canadian ports and United States ports 
 the average capacity of the Canadian boats was 102 000 
 bushels, in the same movement the average capacity of 
 United States' boats was 226,000 bushels. In 1912 the 
 insurance rate on the insurable value of the huU cover- 
 ing all risks from the head of the lakes to the foot of 
 Lake Erie, was 5| per cent. An additional 1 per cent 
 was charged on the movement east thereof to Ogdens- 
 burg, while an additional 1 per cent was charged on the 
 movement east of Ogdensburg to Montreal 
 
INLAND WATER TRANSPORTATION 543 
 
 In comparing rail with lake and river rates, it is urged 
 that in the latter case cognizance should be taken not 
 only of what the shipper pays, but also of what the gov- 
 ernment contributes, if an adequate conception of the 
 cost of movement is to be obtained. Taking into con- 
 sideration the interest at 8J per cent on what has been 
 expended on canals and adding thereto the annual out- 
 lay for upkeep, it will be found that this contribution 
 figures out .140 cents per ton per mile, which, when 
 added to the actual freight rate of .194 cents, gives a 
 rate of .884 cents per ton per mile as compared with an 
 all-rail rate on grain of .402 cents from Fort William 
 to Montreal. 
 
CHAPTER X 
 
 FOREIGN TRADE AND OCEAN TRANSPORTATION 
 
 153. Canada's foreign trade. — Ninety per cent of 
 Canada's foreign trade is with the British Empire and 
 the United States. The concentrated nature of the trade 
 is shown in the following percentage summary of the 
 trade with its most important trade connections: 
 
 Per Cent. 
 
 British Empire: 
 
 United Kingdom 30 9 
 
 ^ British possessions 45 
 
 United States 55 ! 8 
 
 Germany ' * " j ' y 
 
 France 1.5 
 
 94.4 
 The export trade of Canada is concerned with rela- 
 tively simple categories, as is indicated in the following 
 percentage summary covering the five months ending 
 August, 1913: 
 
 Per cent. 
 
 The mine jg 2 
 
 The fisheries go 
 
 The forest U g 
 
 Animals and their products 10 7 
 
 . Agriculture 4Q4 
 
 Manufactures jg " g 
 
 Coin and bullion g'g 
 
 Miscellaneous 'g 
 
 Putting the matter in a summary way, by articles, 
 74 per cent of the export trade is concerned with bread- 
 
 544 
 
FOREIGN TRADE AND TRANSPORTATION 545 
 
 stuffs, fish, lumber, fruit, animals living, furs and skins, 
 leather and manufactures of, metals and minerals and 
 manufactures of, provisions, seeds, coal and charcoal, 
 paper, drugs and chemicals, stone and manufactures of. 
 It thus appears that it is for the most part a trade in 
 bulky articles. 
 
 The manufactured products of Canada were in the 
 census year $1,164,695,032. Assimiing that in the inter- 
 censal period since elapsed there was the same ratio of 
 increase as in the previous decennial period, it will be 
 found that the export of manufactures for 1912 was only 
 2.5 per cent of the total manufactured product. 
 
 154. Imports from Great Britain. — Of the imports 
 from Great Britain, the following articles — in each case 
 there being an importation of $1,000,000 orover — cotton 
 and manufactures of, flax, hemp and jufe» metals and 
 minerals and manufactures of, wool and i^piufactures 
 of, spirits and wines, sugar and molasses, silk and manu- 
 factures of, diamonds, paper and manufactures of, fruits,- 
 glass and manufactures of, gunpowder, gutta percha, 
 hats and caps, leather and manufactures of, oilcloths, 
 books, drugs and dyes, earthenware, make up 72 per 
 cent. The three items, cotton and manufactures of, 
 metals and minerals and manufactures of, wool and man- 
 ufactures of, make up 47 per cent of the imports from 
 Great Britain. Animals living, grain and grain prod- 
 ucts, fish, fruits, furs and skins, leather and manufac- 
 tures of, metals and minerals and manufactures of, pro- 
 visions, seeds, lumber and manufactures of, total 99 per 
 cent of the exports to Great Britain. The items of ani- 
 mals living, grain and grain products, provisions, and 
 lumber alone total 84 per cent. 
 
 155. United States imports. — Of the imports from the 
 United States, 81 per cent are represented by animals 
 
 C— III— M 
 
546 
 
 TRAFFIC 
 
 living, books, breadstuffs, bricks and tiles, carriages and 
 motors, coal and coke, binder twine and cordage, cotton 
 and manufactures of, drugs, dyes and chemicals, elec- 
 trical apparatus, fruit and nuts, furs and manufactures 
 of, grease, gutta percha and manufactures of, hats and 
 caps, hides and skins, jewelry, leather and manufactures 
 of. The Items of breadstuffs— corn being the important 
 import— carriages and motors, coal and coke, cotton and 
 manufactures of-half of this is raw cotton-electrical 
 apparatus, fruit and nuts, gutta percha and manufac- 
 tures of, metals and minerals and manufactures of, rep- 
 resent 61 per cent. The principal items of Canada's 
 exports to the United States are animals living, bread- 
 stuffs, carriages and motors, drugs and chemicals, fish, 
 furs, skins and manufactures of, metals and minerals 
 and manufactures of, paper, seeds, lumber and manu- 
 factures d^ These represent 83 per cent. Of the ex- 
 ports of minerals, five-sixths are concerned with gold 
 silver, asbestos and nickel. Farm products, fish, miner- 
 als, and lumber account for 63 per cent of the export 
 trade. 
 
 156. From Francc.-ln the imports from France, 
 silk and Its manufactures, wool and its manufactures, and 
 spirits and wines are the most important single items, 
 accountmg for 36 per cent. Of the exports to France 
 the most important single items are fish and agricul- 
 tural implements, which represent 79 per cent of the ex- 
 ports. From Germany, the most important imports are 
 fancy goods, lace, feathers, etc., furs and manufac- 
 tures, metals and their manufactures. These represent 
 39 per cent. Of Canada's exports to Germany, 84 per 
 cent are represented by breadstuffs, fish, fruits, and agri- 
 cultural implements. 
 
 157. From Meanco.— The trade with Mexico, Central 
 
FOREIGN TRADE AND TRANSPORTATION 547 
 
 America, the West Indies, and South America is inter- 
 esting, not because of what it is but of what it may be- 
 a)ine. It amounts at present to about 8 per cent of 
 Canada's trade. The principal imports are hides and 
 skins, copper, sugar and molasses, tobacco and cigars, 
 manila grass and fibre, chicle gum crude. The principal 
 exports are lumber, fish, breadstuff s, coal and coke. The 
 British West Indies constitute the most important cus- 
 tomer — one-third of the trade is done with them. 
 
 158. Canadian tonnage. — Deducting the imports 
 from and exports to the United States to get a rough 
 approximation of the ocean-borne traffic, it will be found 
 that 37 per cent of Canada's imports and 65 per cent of 
 her exports enter into ocean traffic. 
 
 The registered net tonnage of ocean-going vessels is 
 less than that engaged in the trade of the inland waters 
 between Canada and the United States, the figures be- 
 ing 24.5 and 28.8 millions of tons respectively. 
 
 Both in the ocean tonnage and in the inland tonnage 
 steam predominates. The following tabular summary 
 presents essential features : 
 
 Ocean-going tonnage 24.5 millions of tons register 
 
 Per cent Per cent Per cent 
 of Total of Steam of Sail 
 
 Tonnage Tonnage Tonnage 
 
 British 54.21 ~, ~~ 
 
 Canadian 18.9/ ^^^ *^ 
 
 Foreign 26.9 84.8 15.2 
 
 Inland water tonnage between Canada and the United 
 
 States 28.3 millions of tons register 
 
 Per cent Per cent Per cent 
 of Total of Steam of Sail 
 
 Tonnage Tonnage Tonnage 
 
 Canada 47.4 95.2 4.8 
 
 United States 52.6 88.6 11.4 
 
548 
 
 TRAFFIC 
 
 In the ocean tonnage, the average size per vessel is 
 held down by the number of smaller vessels in the fisher- 
 ies, both sail and steam. 
 
 The figures of the coasting trade, which amount to 
 66.2 millions of registered tons, should also be consider, d 
 
 in this connection. 
 
 Per cent Per cent Per ctnt 
 
 of Total of Steam of Sail 
 
 Tonnage Tonnage Tonnage 
 
 86.6 
 90.6 
 
 18.4 
 .4 
 
 British and Canadian 95 . 6 
 
 Foreign 4-4 
 
 The tonnage of freight inward from the sea is 2.9 
 millions of weight tons, and .3 millions of measurement 
 tons. Outward, the figures are 4.3 millions and 1.4 
 millions, respectively. By ownership of vessels, the dis- 
 tribution of this freight tonnage is as follows: 
 
 INWARD 
 
 Weight Tons Measurement 
 per cent of Tons, per cent 
 
 British, 
 
 Canadian, 
 
 Foreign, 
 
 49.1 
 
 8.7 
 
 43.2 
 
 74.6 
 2.6 
 
 22.8 
 
 OUTWARD 
 
 Weight Tons Measurement 
 of per cent of Tons, per cent of 
 
 61.9 
 11.7 
 
 22.4 
 
 51.2 
 15.3 
 32.5 
 
 159. Ballast.— WhWe from the nature of the tonnage 
 movements a great preponderance of movements in bal- 
 last inward might be expected, they differ but little, 
 being 27 per cent inward and 24 per cent outward. The 
 distribution of the movement in ballast by countries in 
 percentages of the total vessel tonnage of each group is 
 
 as follows: 
 
 Inward Oviward 
 
 British JJ 
 
 Canadian ^ 
 
 Foreign 30 
 
 12 
 33 
 37 
 
FOREIGN TRADE AND TRANSPORTATION 549 
 
 Of the inward movement in ballast, 72 per cent is due 
 to lack of cargo from the United States to Canadian 
 ports. On the outward movement in ballast 64 per cent 
 is due to lack of cargo from Vancouver and Victoria, 
 while Prince Rupert and Sydney, Nova Scotia, have 7 
 per cent and 4 per cent of the movement out in ballast, 
 respectively. A further analysis is of interest with a 
 view to ascertaining what percentage of the movement 
 inbound from Europe is in ballast, as the cost of the light 
 movement has to be charged against the total movement 
 
 in and out. 
 
 The United Kingdom with 56 per cent of the mward 
 tonnage has 4 per cent of the movement in ballast. While 
 on the inward movement Newfoundland with 590,000 
 tons of shipping and the sea fisheries with 197,000 tons 
 have 26 per cent and 42 per cent of movement in ballast, 
 respectively, these are local movements which cannot be 
 considered'as materially bearing on the movement from 
 
 Europe. • 
 
 Taking the countries of Continental Europe, it wiU 
 be found that Austria, Belgium, Norway, Denmark, 
 France, Germany, Holland, Portugal, Russia, Spain, 
 and Sweden have 21 per cent of their vessel tonnage 
 moving in ballast. The tonnage of these countries is not 
 especially important in the inward movement. It is 
 only 18 per cent of the total foreign vessel tonnagv in- 
 ward. 
 
 It would, therefore, appear that as far as movement 
 inward in ballast is a factor in rates, the lack of ocean 
 carriage between United States and Canadian ports, 
 which is in turn due to the highly developed railway 
 carriage between the two countries, is the one important 
 factor in the whole inward movement in ballast. 
 160. Principal ports.— The principal ports are in or- 
 
MO TRAFFIC 
 
 der of imports and exports: Montreal, Vancouver, Si 
 John, N. B., Halifax, Quebec, and Victoria. Of the ex- 
 port trade, 80 per cent is handled through Montreal, 
 while it also handles 26 per cent of the imports. 
 
 These ports have 72 per cent of the steam tonnage 
 entering Canada from the ocean. In the trade of these 
 ports, sailing tonnage is of minor importance, both as 
 to numbers and size of vessels. In the trade of the 
 Atlantic ports the steam vessels are larger than in the 
 trade of the Pacific Coast. The position of the dif- 
 ferent ports in order of importance as to tonnage is as 
 follows: 
 
 AMrage Attragt 
 
 Sisam Saii Size of Siu of 
 
 Nawt$ qf Port Veud Tonnage Tonnagt Steam iSaUing 
 
 Tonnage per cent per cent Veted in Vtttd in 
 
 Tone Tone 
 
 Vancouver 3,759,109 99. 1 .0 891 1,S49 
 
 Victoria S.622,851 98.9 l.« 1,390 MS 
 
 Montreal 3,S8A,951 90.1 .9 4.040 88S 
 
 Halifax 3.111,535 97.1 S.9 2,443 \n 
 
 Quebec 2,323.845 99.9 .1 4,573 72 
 
 St. John. N.B....... 2.012,425 92.6 7.4 2,694 84 
 
 161. Montreal harbor. — ^The Harbor Commissioners 
 of Montreal, in their special report in 1908 on the de- 
 velopment of the port, presented the following sum- 
 mary of the situation at Montreal : 
 
 a. The present port development only partly takes 
 care of the existing trade. 
 
 b. The tonnage has doubled in five years and a vast 
 increase in trade is in sight. 
 
 c. Marine insurance rates have been cut in two in the 
 same period. 
 
 d. Nature has provided a thousand miles of magnifi- 
 cent navigation into the heart of the continent. 
 
 e. Interior ravigation through Canadian canals pro- 
 vides means of traffic distribution on a scale not equalled 
 by any other port in the world. 
 
FOREIGN TRADE AND TRANSPORTATION 551 
 
 f. Direct railway access is provided to the docks at 
 Montreal for every railway in the country on equal 
 terms. 
 
 g. A 80-foot ship channel now exists from Montreal 
 to the sea, with possibilities of enlarging it and main- 
 taining it at a lower comparative cost than any Eu- 
 ropean approach channel. 
 
 h. The aids to navigation throughout a thousand 
 miles of water channel are not excelled in Antwerp, 
 Bristol, Cardiff, Glasgow, Hamburg, Havre, Liver- 
 pool, London, Manchester, Marseilles, and Newcastle- 
 
 on-Tyne. 
 
 The report urged that the port development of Mon- 
 treal should be planned to be at least equal to that of 
 Hamburg or Liverpool. There should also be a free 
 port district after the model of Hamburg. In the free 
 port district of Hamburg goods can be stored, mixed, 
 improved, or re-manufactured, together with local raw 
 materials, within these limits and re-shipped to foreign 
 ports without paying any duty, or to domestic ports in 
 
 bond. 
 
 While Montreal occupies a commanding place in 
 Canada's foreign trade, the trade in wheat and flour 
 through it— it handles 80 per cent of the wheat ex- 
 IKjrted via Canadian ports— is not in satisfactory shape. 
 Of wheat and flour entering into Canada's export trade, 
 68 per cent are exported via Baltimore, Boston, New 
 York, Philadelphia, and Portland. 
 
 162. Opinion of Mr. Ross.— In commenting on the 
 fact that so large a part of the Canadian grain is moved 
 by American channels to American ports, Mr. W. G. 
 Ross, the chairman of the Montreal Harbor Commis- 
 sioners, said recently that, while in the period 1908 to 
 1912 the wheat shipments from the head of the lakes to 
 
552 
 
 TRAFFIC 
 
 lower Canadian ports increased about 40 per cent, the 
 shipments to United States ports increased 180 per 
 cent. He said, further, that while in 1908 Canadian 
 lake cai/iers carried one-seventh of the United States* 
 grain, in 1912 they carried less than 1 per cent. He 
 considers that until there is a greater balance of Cana- 
 dian traffic westbound the unsatisfactory condition is 
 likely to continue : 
 
 . . . until Canada has a westbound trade, capable of sup- 
 porting and warranting the building of vessels on a par with 
 U. S. boats, she cannot control the carrying trade from the 
 Canadian upper lake ports. With the development of the 
 package trade westbound on the lakes the Canadian vessel 
 owners built steamers to control it, and these carriers have 
 been a factor in making Montreal a large grain-shipping port 
 which can carry grain cheaper than the craft that only gets 
 a one-way cargo, and then only in the spasmodic movement of 
 grain sent East which reaches its full volume in spring and 
 fall seaso'is. Until Canada furnishes a deep water channel 
 to Montreal to tap her eastern coal fields, and supplies heavy 
 westbound freight which is so essential to the development of 
 the large carrying capacity lake steamers, equal in every re- 
 spect to the large U. S. craft and capable of coping with 
 them in rates, the U. S. will control the bulk of the grain 
 shipments. 
 
 163. Insurance and the St. Lawrence route. — The 
 harbor of Montreal is administered by a board of three 
 appointed by the Dominion Government. One of the 
 recommendations made by the Royal Commission on 
 Transportation, in 1905, was that IVxontreal should be a 
 free port, at which there should not be any port or dock 
 charges other than those for dry dock or elevator facili- 
 ties. This recommendation has not been carried out. 
 From time to time the Harbor Commission raises funds 
 
FOREIGN TRADE AND TRANSPORTATION 55S 
 
 for harbor works and improvements. The Dominion 
 Government guarantees interest on such portion of the 
 bonded indebtedness as it from time to time deter- 
 mines. In order to meet the interest on the bonded in- 
 debtedness and meet other expenditures, wharfage rates 
 are imposed. The commission finds it difficult to make 
 revenues meet expenditures. It is in the difficult posi- 
 tion that if it attempts through increased charges to 
 meet expenditures, it will, by placing an additional 
 burden on traffic, deflect it to other ports. 
 
 At New York the western produce has reached tide- 
 water, while at Montreal eighty-six miles must be tra- 
 versed before tidewater is reached at Three Rivers. Be- 
 tween Montreal and the ocean there intervene the waters 
 of the lower St. Lawrence and the Gulf of St. Lawrence, 
 wliich entail a journey of 986 miles. While the Mont- 
 real route to Liverpool has an advantage of 445 miles 
 over New York, there has to be considered the higher 
 insurance rates consequent upon the dangers of a land- 
 locked route, which minimize the advantage of the 
 shorter mileage. The crux of the situation is to be 
 found below Montreal. 
 
 It would be of interest, if space permitted, to go into 
 the history of the long and energetic attempt of the 
 Canadian government to improve the St. Lawrence 
 route. Beginning in 1841, the question of deepening 
 the channel was undertaken. It has since been carried 
 on, with the result that there is a thirty-foot channel. 
 
 The underwriters are disposed to charge up against 
 the St. Lawrence route not only the accidents in the 
 river, but also those which take place in the gulf. The 
 government has carried on an aggressive policy of in- 
 stalling lights and various other aids to navigation, 
 which have greatly increased the safety of the route. But 
 
554 
 
 TRAFFIC 
 
 insurance premiums are still against the route. The 
 following table presents the situation for a period of 
 years in a comparative manner in connection with move- 
 ments to points in the United Kingdom : 
 
 
 
 
 From Montreal 
 
 From New York 
 
 Year 
 
 Provisions 
 
 Grain 
 
 Provisions Grain 
 
 1906 — ^Average season 
 
 rate. 
 
 32|c. 
 
 32 Jc. 
 
 15c. 17ic. 
 
 1907 
 
 
 
 32|c. 
 
 32jc. 
 
 15c. 17ic. 
 
 1908 
 
 
 
 32ic. 
 
 32Ac. 
 
 15c. 17ic. 
 
 1909 
 
 
 
 35c. 
 
 35c. 
 
 15c. 17ic. 
 
 1910 
 
 
 
 31§c. 
 
 34ic. 
 
 12|c. 15c. 
 
 1911 
 
 
 
 25|c. 
 
 30c. 
 
 12}c. 15c. 
 
 1912 
 
 
 
 23c. 
 
 25ic. 
 
 12§c. 15c. 
 
 I 
 
 The rates quoted are in cents per $100 insured. 
 
 There is also a similar disadvantage in case of tramp 
 steamers with full cargoes of grain. From Montreal, 
 the average season rate in 1912 was 61 cents, while from 
 New York it was 50 cents. 
 
 While there is a disadvantage in point of insurance, 
 it is a matter of satisfaction that there has been a fairly 
 steady decrease in the insurance rates since 1900. Be- 
 tween 1900 and 1912 the insurance rate on grain has 
 been reduced 45 per cent. 
 
 164. Subsidies of steamships. — Aside from local and 
 Canadian coasting steamship services, which receive 
 subsidies to the amount of $305,000, the Dominion of 
 Canada grants subsidies to ocean-going vessels total- 
 ing 1.9 millions of dollars. The lines of trade which it 
 is sought to aid and develop may be gathered fronf the 
 following percentage summary of the distribution of 
 the aid according to the leading countries and routes 
 assisted : 
 
FOREIGN TRADE AND TRANSPORTATION 555 
 
 Ttr cent 
 
 Canada and Great Britain 87 .5 
 
 " South Africa, Australia and New Zealand.. i5.5 
 " Cuba, Mexico, West Indies and South 
 
 America l^-S 
 
 Canada and France 10-2 
 
 " China and Japan 6* 
 
 The general supervision of the subsidy contracts is 
 under the Minister of Trade and Commerce. The con- 
 tracts provide for the number of voyages per season; 
 the ports of call, and also additional ports of call to be 
 designated by the Minister; the minimum speed, etc. 
 General provisions of the contracts may be summarized. 
 Two-thirds of the officers and crew of each ship are to 
 be British subjects; the ships are to be seaworthy, and 
 have proper acconunodation for comfort and safety. 
 Provisions are made regarding the carriage of mails. 
 Freight and passenger rates are to be approved from 
 time to time by the Minister, who may also fix maxi- 
 mum rates. When freight and passengers are carried 
 to St. John or Halifax, these, unless otherwise specifi- 
 cally routed, are to be routed over the Intercolonial, 
 provided its rates are not in excess of those of other 
 railways from the same points. The Minister is to be 
 the final judge as to whether the terms of the contract 
 have been complied with, and may terminate it on 80 
 days' notice. 
 
 165. Factors affecting ocean traffic and rates. — There 
 are two main classes of ocean vessels — line boats and 
 tramps. The first class consists of vessels belonging to 
 a regular line — that is, a group of vessels plying over 
 the same route voyage after voyage and having more 
 or less regular times of sailing. Tramps have no reg- 
 ular routes, nor have they regular times of sailing, but 
 go from port to port seeking business. A tramp is gen- 
 
556 
 
 TRAFFIC 
 
 erally chartered or hired for one voyage at a time, al- 
 though some charters cover a series of voyages of even 
 one year or more. 
 
 Many examples might be given of the variety of 
 ports and routes. A ship left London with goods for 
 Colombo, Singapore, and certain Japanese ports. Go- 
 ing thence to Java, a cargo of sugar was loaded for 
 Xew York. From New York it took merchandise for 
 twenty-six ports on the west coast of South America. 
 Thence, with a cargo of nitrate of soda, the ship re- 
 turned to Baltimore. It then proceeded to New York 
 to take on a cargo of general merchandise for Australia 
 and New Zealand. At least two years would elapse 
 before it reached its home port. Another vessel sailed 
 from London with a general cargo for ten ports in 
 Japan. It then journeyed in ballast to Java, where it 
 took on a cargo of sugar for Philadelphia. Coal was 
 taken from Philadelphia to Havana; thence it sailed 
 in ballast to Galveston, taking on a cargo of cotton 
 for Liverpool. These journeys covered about eleven 
 months. 
 
 A Swedish tramp comes in light into Sydney, Cape 
 Breton. Thence it journeys around the Horn with a 
 cargo of steel rails to Prince Rupert for use in the con- 
 struction of the Grand Trunk Pacific. But little traffic 
 offering there, it will then go south to Vancouver or to 
 the Puget Sound ports looking for cargo. 
 
 166. Charter party. — The document containing the 
 agreement between the shipowners and the charterer is- 
 called a charter party. Usually under it the owner of 
 the ship hires the officers and crew, paying their wages 
 and providing their food, while the other expenses of 
 the ship are paid by either party, according to the terms 
 of the charter party. Various forms of charter parties 
 
FOREIGN TRADE AND TRANSPORTATION 557 
 
 exist in the trade of North America, according to the 
 commodity to be carried. There are, for example, 
 forms for cotton, grain, pitch pine, naval stores. West 
 Indian fruit. 
 
 The terms of the Anglo-American cotton charter 
 party, which was adopted by the Chamber of Shipping 
 of the United Kingdom in 1895, may be referred to 
 because of the importance of the British cotton manu- 
 factures. It sets out the i -.-.e, net tonnage and class 
 of the ship; the latter affects the rate of marine in- 
 surance. On account of cotton loading light, the vessel 
 has to have provision for water ballast. There is a 
 guarantee of the ship's carrying capacity. In order to 
 economize cargo space the vessel sails from Galveston 
 or New Orleans to Norfolk or Newport News, taking 
 on there the amount of coal necessary to take it to the 
 western coast of Europe. If the vessel is going to the 
 Baltic it must take in further supply of coal in the 
 United Kingdom. The object is to lessen the amount 
 of space taken up by coal on each portion of the 
 
 journey. 
 
 Provision is made for the time to begin loading; also 
 for "lay days," demurrage, and despatch money. Lay 
 days are the days allowed for loading. Demurrage, 
 which need not be defined here, is at the rate of 4d. per 
 net ton for each free day after the expiration of lay 
 days. Despatch money is a payment allowed the char- 
 terer for each day saved in loading within the lay day 
 
 period. 
 
 Provision is also made for the division of port charges 
 and other expenses. The ship is paid at a defined rate 
 per net register ton regardless of the amount of cargo 
 loadecl. If not loaded to full capacity, the charterer 
 has to pay, in addition to the freight on the cargo ac- 
 
558 
 
 TRAFFIC 
 
 tuaUy taken, a sum to cover the loss due on account of 
 the unused cargo space. 
 
 The charter party also sets forth the liability of each 
 party in the case of fires, accidents, or strikes, and gives 
 the ship permission to sail with or without pilots, and 
 to deviate from its course to aid vessels in distress. Pro- 
 vision is made for arbitration of disputes arising be- 
 tween the parties. The penalty for non-performance 
 of the agreement is limited to actual proven damages 
 not exceeding the amount of freight due under L 
 charter pa^ty. 
 
 167. Space and weight-Freight rates are fixed 
 either on the basis of the measurement ton of 40 cubic 
 feet or on the long ton of 2,240 pounds. A vessel may 
 be measured : ^ 
 
 (1) By its gross tonnage, which is its entire cubic 
 contents as measured in tons of 100 cubic feet- 
 
 (2) By its net tonnage, i. e., the gross tonnage less 
 all space used for purposes other than the acconrnioda- 
 tion of passengers and freight; 
 
 oJ^^ ^J u^ ^^*u ""f^^^ ^^P*^^*^' '' «•' *e weight of 
 cargo which may be loaded without sinking the vessel 
 
 !^hrT !.W*^'' ^"^ ^*^"*y- The load lines, as 
 es abhshed by the British Board of Trade, include one 
 set for fresh and one for salt water, and are marked on 
 the outside of the huU about midv.ay between the stem 
 and the stern. For each kind of water there is a summer 
 
 the ship s side than the former. 
 
 (4) By the displacement tonnage which is the weight 
 of ^a ship and its contents when immersed to some fixed 
 
 The gross tonnage is about 50 per cent greater than 
 the net tonnage; i.e., a vessel with a net tonnage of 
 
FOREIGN TRADE AND TRANSPORTATION 559 
 
 3,000 tons would have a gross tonnage of 4,500. The 
 carrying capacity in terms of weight tons is about 50 per 
 cent in excess of the gross tonnage; 'n **-^ case in point 
 it woiild be 7,250 tons. The net tonnage is figured on the 
 basis of 100 cubic feet to the ton; the measured ton 
 being 40 cubic feet, the measured tonnage capacity can 
 be obtained by multiplying the net tonnage by 2i, which 
 gives in this case 7,500 tons. 
 
 The "berth" traffic is a compromise between the work 
 of a tramp and of a line boat. Where a boat is put 
 "upon the berth" it makes a special voyage carrying 
 various lines of cargo, the rate being worked out not 
 as a price paid for the total carrying capacity of the 
 vessel, but on the basis either of the cubic or of the 
 measurement ton. 
 
 168. Ocean traffic distinguished from railway traf- 
 fic. — Ocean traffic as distinguished from railway traffic 
 is all through business. The average haul of the traffic 
 passing through the "Soo" Canals is 840 miles, 8i times 
 the average haul on Canadian railways. It is impossi- 
 ble to say what the average ocean haul is, but it is 
 manifestly very much greater than the lake haul re- 
 ferred to. In rail traffic, the relatively small vehicle, 
 the car, is the unit; in ocean or lake traffic it is the 
 vessel. 
 
 When in ocean traffic a vessel is chartered it is in 
 effect a wholesale movement in trainload lots as com- 
 pared with a retail transaction in car lots on the rail- 
 way. Terminals, while on the whole less expensive in 
 ocean business, are as important as in railway business. 
 The control of docks and wharves may give the owner 
 an opportunity to monopolize traffic. 
 
 169. Effect of harvests. — Ocean rates are affected 
 by harvests. Argentina is an importer of coal. If there 
 
560 
 
 TRAFFIC 
 
 is a large harvest, there must be a large volume of ton- 
 nage moving westward from Europe to carry the ex- 
 port grain. Consequently, there will be a large tonnage 
 competing for the carriage of coal, which, on this move- 
 ment, approximates the position of paying ballast. 
 Conversely, the. matter of return cargo is very impor- 
 tant. While on account of limited exports by way of 
 Vancouver and Victoria a large amount of tonnage 
 moves out of these ports in ballast, there is at the same 
 time the opportunity for the ships so moving to pick 
 up grain cargoes for Europe in the ports of the Pacific 
 Coast of the United States. 
 
 The increase which has taken place in the size of 
 freight-carrying ocean vessels may be indicated by say- 
 ing that a tramp may carry the total wheat crop pro- 
 duced on 15,000 acres, while the larger freighter can 
 carry twice as large a cargo. The larger the amount that 
 can be carried by a vessel the smaller need be the por- 
 tion of cost which each unit of the cargo has to bear. 
 The freighters can carry large cargoes at low speeds on 
 an exceedingly economical consumption of coal. In a 
 particular case a freighter with a dead-weight capacity 
 of 5,000 tons, traveling at the rate of nine knots per 
 hour, used only 20 tons of coal per day. 
 
 170. Conditions of carriage. — A broad distinction 
 between the liability in rail carriage and in water car- 
 riage is that, while in the former case the railway is the 
 insurer, in the latter the consignor or consignee must 
 carry his own insurance. The following is a summary 
 of the provisions of a typical Canadian export bill of 
 lading. The ocean carrier is not liable for loss or dam- 
 age arising from : 
 
 (1) Fire from any cause whatsoever, barratry of the 
 
FOREIGN TRADE AND TRANSPORTATION 561 
 
 crew, enemies, pirates or robbers, constraint of law, 
 riots, or strikes; 
 
 (2) Explosion, bursting of boilers, breakages of 
 sliafts, or any latent defect in hull, machinery, or ap- 
 purtenances; 
 
 ( 3 ) Unseaworthiness of the vessel provided owner has 
 exercised due diligence to make it seaworthy ; 
 
 (4) Heating, frost, decay, rust, sweat, change of 
 character, drainage, leaking, breakage, or by explosion 
 of any of the goods, whether shipped with or without 
 disclosure of the nature of the goods, or from nature 
 of the goods, or insufficiency of the packages; 
 
 (5) Risk of craft, hull, or transshipment, or loss or 
 damage caused by the prolongation of the voyage; 
 
 (6) Fault or negligence of the pilot, master or crew, 
 or from latent or other defects in the vessel; 
 
 (7) The value of each package receipted for is not to 
 exceed $100.00, unless so stated in the bill of lading; 
 unless so stated the rate of freight is to be adjusted on 
 the value stated. 
 
 Also: 
 
 (1) Delivery may begin on arrival; if consignee docs 
 not take goods from the steamer directly it arrives the 
 goods may be landed or put in store at the owner's risk 
 and expense ; 
 
 (2) Full freight is payable on damaged or unsound 
 goods; no freight is due on any increase in bulk or 
 weight caused by the absorption of water during the 
 voyage; 
 
 3) In case of claims for short delivery, the price 
 shall be the market price at the port of destination on 
 the day of the steamer's entry at the customs house less 
 all charges saved ; 
 
 (4) Parcels of different consignees collected or 
 
 C— in— 86 
 
562 
 
 TRAFFIC 
 
 made up in a single package addressed to one consignee 
 are to pay full freight on each parcel; 
 
 (5) If the goods cannot be forwarded by the first 
 steamer after their arrival at the port, they may be 
 forwarded by a later steamer of the steamship line or 
 by a ?teamer of another line if the carrier deems it 
 necessary; 
 
 (6) The carrier is not liable for gold, silver, bullion, 
 specie, documents, jewelrj', pictures, embroideries, per- 
 fumeries, works of art, silks, furs, glass, porcelain, 
 watches or clocks, in any respect, nor for goods of any 
 description whatsoever above the value of $5 per cubic 
 foot. ' 
 
 If the unseaworthiness of the vessel is not discovered 
 by the exercise of due diligence, then the owner of the 
 cargo has to contribute to general average with the 
 Shipowner. General average has been judicially de- 
 fined in England : "All loss which arises in consequence 
 of extraordinary sacrifices made, or expenses incurred, 
 for the preservation of the ship and cargo comes v/ithin 
 general average and must be borne proportionably by 
 all who are interested." 
 
 In February, 1898, there was enacted in the United 
 States the Harter Act, dealing with the liability of 
 water carriers. It was concerned primarily (1) with 
 the prohibiting of clauses which relieve shipowners from 
 liability for consequences of "negligence, fault, or 
 failure in proper loading, stowage, custody, care or 
 proper delivery" of cargo, or which diminish the obliga- 
 tion to make the vessel fit for the voyage; (2) such 
 clauses as exempt shipowners from liability for conse- 
 quences of "faults or errors in navigation or in the man- 
 agement" of the vessel as well as of certain other perils, 
 in cases where they have exercised "due diligence to 
 
FOREIGN TRADE AND TRANSI'ORTATION 563 
 
 make the saitl vessel in all respects seaworthy and prop- 
 erly manned, equipped, and supplied." But the ship- 
 owner may limit the implied warranty as to seaworthi- 
 ness by an express clause in the bill of lading. 
 
 171. Ocean rates as affecting Canada.— On May 
 >, 1918, Mr. Meighen, now the Solicitor-General, 
 brought to the attention of the House of Commons the 
 situation in regard to ocean rates as they affect Canada, 
 lie quoted a table of rates on dry goods from British 
 ports to Montreal, pointing out that between 1910 and 
 1912 these rates had on particular items increased from 
 20 per cent to 60 per cent; and he drew special attention 
 to the increase in rates on grain and flour, emphasizing 
 the spread between these commodities. 
 
 Later in the year the chairman of the board was ap- 
 pointed a commissioner to proceed to £ngland to go 
 into the matter with the British Government. Hfis re- 
 port to the Canadian Government in the matter has 
 not yet been made public. 
 
 The Canadian producer is vitally affected by the 
 spread between wheat and flour. Between 1907 and 
 1912 the spread as between wheat and flour averaged 
 1.52 cents to 8.85 cents per hundred pounds. In the 
 early part of 1918 it was increased to 7 cents. 
 
 If the per capita consumption of flour is taken at 5.8 
 bushels, which is the average in the United States, the 
 approximately 7,500,000 people in Canada will con- 
 sume 89,750,000 bushels. The exports of flour for 1912 
 were 8,378,836 barrels, or 17,759,471 bushels. This 
 accounts for 57,500,000 bushels of wheat, or 42i per 
 cent of the capacity of the existing mills per year. 
 
 The milling capacity of Canada at the end of 1912 
 was: 
 
564 TRAFFIC 
 
 No. of Daily CapatUy 
 
 Province Flour Mill* in Barrrit 
 
 Nova Scotia 31 005 
 
 New Brunswick 47 1,755 
 
 Prince Edward Island 80 735 
 
 Quebec SO 14.610 
 
 Ontario 362 61,183 
 
 Manitoba 53 10,135 
 
 Saskatchewan 41 7,480 
 
 Alberta 33 7,845 
 
 British Columbia 8 1,180 
 
 634 111,808 
 
 Up to the end of 1918 the daily average capacity in- 
 creased to about 125,000 barrels. 
 
 From the standpoint of the farmer it is urged that the 
 existing spread as between wheat and flour facilitates 
 the milling of the wheat in England. It is urged that 
 with greater milling in Canada there would be a de- 
 mand for wheat the year round at the mills instead of 
 the present congested rush to the head of the lakes, which 
 congestion breaks the price. Not only would such 
 greater milling be advantageous, as steadying the price ; 
 it would also have an advantage from the standpoint of 
 diversifying farming, since the offal would be available 
 for the feeding of live stock. 
 
 172. Lumber rates. — Complaint is also made of the 
 increase of rates on lumber from Canada to British 
 ports, the increase from 1908 to 1912 being placed at 
 approximately 40 per cent. On the import of crockery 
 and dry goods to Canadian Atlantic ports from British 
 ports the following detail is presented: 
 
 Winter Winter Summer 
 
 1907-08 1909-10 1910 1911-19 191i-lS 
 
 Crockery 10/ per tun w't 15/ 17/6 80/ ««/6 
 
 Dry goods 15/ measurement 17/6 ««/6 85/ «7/6 in boxes 
 
 173. Position of carriers. — A summary of the ocean 
 carriers' position as to the difference in rates between 
 
FOREIGN TRADE AND TRANSPORTATION A65 
 
 wheat and flour may now be given. The stevedoring 
 and handling on the dock in Canada per gross ton and 
 the wharfage payable by steamer per gross ton amount 
 to 9 cents on grain and 49 cents on flour. A ton weight 
 of wheat will stow in forty-seven feet, while flour takes 
 fifty-five feet; that is to say, on flour there is a loss of 
 one-sixth in space. Flour is more valuable, and claims 
 for damage thereon average 1 cent per one hundred 
 pounds, while no claims arise on wheat. Grain rates 
 fluctuate. Wheat has often been carried for stiffening 
 purposes at a low rate. 
 
 The low grain rates are found in March, April, Au- 
 gust, and the first half of September. The fluctuations 
 in March and April are due to the near approach of 
 the opening of lake navigation. In August and Sep- 
 tember they are due to the light movement. 
 
 Grain can be loaded at the rate of 12,000 bushels, 825 
 gross tons, per hour. It takes four times as long to 
 load and three times as long to unload flour Flour has 
 to receive special stowage, as contact with certain forms 
 of cargo — such as apples, cheese, provisions, etc. — will 
 probably result in claims for tainting. In support of 
 their contention that the existing rate adjustment places 
 no serious obstacle in the way of Canadian flour trade 
 with England reference is made to the following figures: 
 
 Imports of United Kmgdom from: 
 
 (1) Canada: 
 
 1908 1,529,122 cwt. of flour 
 
 1912 4,003,877 " " " 
 
 (2) United States: ., ,. „ 
 ^ 1908 9,958,000 " " " 
 
 1912 4,412,000 " " " 
 
 174. Rate "conferences"— The complaints regard- 
 ing ocean .rates take especial cognizance of the "con- 
 ferences"* or agreements existing as to rates. The 
 
566 
 
 TRAFFIC 
 
 North Atlantic conference covers the principal steam- 
 ship lines from British and northern continental ports 
 to North America. The conference arrangements, which 
 began about 1901, were at first concerned with steerage 
 rates, each company being allotted a portion of the traf- 
 fic. Now they cover both passenger and freight rates. 
 There are many complaints that the conference ar- 
 rangements have made the importance of tramp vessels 
 practically negligible as a regulative factor. 
 
 On the western movement to Canada from the United 
 Kingdom the Canadian lines in the North Atlantic 
 conference issue a tariff for the different seasons. The 
 tariff is so drafted as to cover practically all the im- 
 portant commodities moving. On the eastern move- 
 ment from Canada weekly lists of rates are issued. 
 Under such an arrangement it is practically impossible 
 for the shipper to make his arrangements any consid- 
 erable time in advance. 
 
 In general it is contended (1) that there is very litlle 
 high-priced package freight exported from Canada; 
 (2) that in exports many one-time revenue-producing 
 commodities have either disappeared or are shipped in 
 diminishing quantities, owing to increased home con- 
 sumption, as in the case of provisions, or in imports, 
 competition of domestic manufactures — such as cotton 
 goods and metals. 
 
 It is also contended that reduced quantities of gen- 
 eral cargo necessitate the burden being put on grain, 
 flour, and lumber, which are the only considerable 
 revenue-producing articles. 
 
 Reference has already been made to the amount of 
 tonnage moving in and out in ballast. Taking the 
 figures o^' the tonnage carrying freight inward and out- 
 ward, converting these into terms of freight carrying 
 
FOREIGN TRADE AND TRANSPORTATION 567 
 
 capacity, and ako expressing measurement tons in 
 terms of weight tons, in accordance with the calcula- 
 tions already given, the following results are available: 
 
 INWARD 
 
 OUTWARD 
 
 Freight 
 
 Capacity 
 
 in MiUion* 
 
 of Ton* 
 
 Meantrement 
 and Weight 
 
 Tons 
 
 Expressed in 
 
 Terms of 
 
 MiUion* of 
 
 Weight Tons 
 
 Percent 
 
 of 
 Capaetty 
 Occupied 
 
 Freight 
 
 Cavaeity 
 
 in Millions 
 
 of Tons 
 
 Measurement 
 and Weight 
 
 Tons 
 
 Expressed in 
 
 Terms of 
 
 Millions of 
 
 Weight Tons 
 
 Per cent 
 
 of 
 Capacity 
 Occupied 
 
 19.1 
 
 3.3 
 
 11 
 
 17.9 
 
 S.9 
 
 33 
 
 175. New ocean routes. — The importance of grain 
 in its export trade has caused Canada to concern itself 
 with new routes. The Canadian Northern and the 
 National Transcontinental will, in the grain shipping 
 season of 1914-15, be carrying grain east to connect 
 with the established rail routes of Ontario. This will 
 redress the evil Sir William Van Home picturesquely 
 described when he said that Canada had enlarged the 
 hopper without enlarging the spout. Every mile of 
 line built west of Fort WiUiam, with its attendant 
 opening up of the country has, so far as the product 
 of this new section had to be carried all rail to the sea- 
 board, attracted still further attention to the weak link 
 in Canada's transportation system — the single line 
 around Lake Superior. 
 
 176. Hudson Bay Railway.— The Hudson Bay 
 Railway has been undertaken with a view to affording 
 a short line for export via Hudson Bay. The line is 
 now in process of construction. What the traffic for- 
 tunes of this route will be is a matter of speculation. 
 No considered opinion can be expressed. The grain 
 moving will only to a very slight extent be moved out 
 bv this route in the season in which it is harvested, and 
 
568 
 
 TRAFFIC 
 
 will, therefore, have to be carried over to the next sea- 
 son with attendant elevator and -nterest charges. 
 
 It is improbable that the route will attract tramp 
 freighters. For a time, at least, the great prepon- 
 derance of traffic being eastbound, the eastbound move- 
 ment will have, in great part, to pay for the westbound 
 empty movement. It would appear as if a special type 
 of vessel construction would be necessary for the pas- 
 sage through the straits. Insurance rates are against 
 IVIontreal. In the case of a new route, like the Hudson 
 Bay, M^here the underwriters have not before handled 
 risks, they will undoubtedly discount every possible 
 risk. 
 
 There is also a project to make rhe Hudson Bay 
 Railway a link in a rail and water route within Canada 
 for moving grain to the east. The movement would be 
 by rail to the Bay terminal, thence by water to the Not- 
 taway River, on James Bay, where a connection can 
 be made with an extension of the Temiskaming and 
 Northern Ontario Railway. The North Railway has 
 also a charter to build from this point to Montreal. 
 
 177. Pacific route.— MVhWe the Hudson Bay route 
 attracts the attention of Manitoba and of Saskatchewan, 
 Alberta and British Columbia look to the Pacific. What 
 the grain future of the Peace River country may be it 
 is difficult to say; but it would appear that grain grown 
 there would be too far west to stand the rail haul to 
 the head of the Lakes. To go east to Europe, it wiD 
 have to go west to the Pacific. The low grade lines of 
 the Canadian Northern and the Grand Tnjnk Pacific 
 which will be completed in 1914, will afford outlets at 
 Vancouver and Prince Rupert. An elevator is to be 
 constructed at the latter point. Such a grain movement 
 will afford that balance of export, the lack of which is 
 
FOREIGN TRADE AND TRANSPORTATION 569 
 
 at present detrimental to British Columbia's ocean rates. 
 It is not yet clear whether the grain will be handled in 
 bulk, as on the Atlantic, or in sacks, as on the Pacific 
 Coast of the United States. 
 
 The export from British Columbia will, in part, be 
 concerned with the development of trade with Japan and 
 China. While there will, no doubt, be a movement east 
 by way of the Panama Canal, no considered opinion 
 can be expressed as to the amount of the movement. As 
 against the Panama route, there is the disadvantage 
 that on account of the grain passing through the warm 
 liumid climate of the Panama belt, there will be a dan- 
 ger of the grain "sweating." It is claimed that this can 
 be overcome by baggi ^', but this will add to the expense 
 of carriage. From Montreal to Liverpool is a distance 
 of 2,939 miles by way of Cape Race; by BeUe Isle it is 
 2,768 miles ; from Vancouver it is, via the Panama Canal, 
 8,676 miles, or a distance greater than the route by Cape 
 Race by 5,787 miles. During 1912 the ton-mile rate 
 from Montreal to Liverpool averaged on grain 0.112 
 cents or $3.81 per ton. If the same ton-mile rates were 
 applied to the extra distance from Vancouver, it would 
 given an additional charge of $6.42 per ton. To carry 
 at the same gross rate as the Montreal route, Vancouver 
 would need to have a ton-mile rate of 0.038 cents per ton 
 mile. This, of course, is on the basis of existing rates. 
 What change may be brought about by the increased 
 ocean tonnage attracted by the new route, it is impossible 
 lo say. 
 
 178. Panama Canal. — There is not only the question 
 of the effect on rates outward from British Columbia; 
 there is also the question of the rate readjustments be- 
 tween eastern Canada and the Pacific Coast. Profes- 
 sor Emory R. Johnson, who has been a member of the 
 
570 
 
 TRAFFIC 
 
 Panama Canal Commission, and who is the acknowl- 
 edged expert on the traffic and rates of the Panama 
 route, estimates that probably less than 20 per cent of 
 the trade of the Pacific Coast of the United States, 
 going east by rail, reaches points east of Buffalo. The 
 direct influence of the canal, so far as the United States 
 is concerned, will be on the coast to coast traffic. This 
 traffic is only about 20 per cent of the total traffic of 
 the United States, and it is already affected by water 
 competition. 
 
 It is probable; however, that the influence of the water 
 competition will be felt to a considerable distance west 
 of the Atlantic seaboard. Again, it is estimated that 
 fruits can be handled through the canal from Calif cnia 
 to New York in fifteen days. On a movement of or- 
 anges to Buffalo, there would be the rail haul to San 
 Pedro, steamer to New York, and thence by rail to 
 Buffalo. High-grade commodities may be attracted 
 to the water route by an actual shortening in the ship- 
 ping time; the average rail movement oi freight from 
 New York to San Francisco now requires thirty days. 
 
 Professor Johnson summarizes his position as to 
 probable changes in trade routes as follows: 
 
 1. The Atlantic section of the United States will obtain a 
 somewhat larger share of the trade of the Pacific Coast, and 
 will secure more benefit from the cheap water route than the 
 Middle West. 
 
 2. Inroads on the trade of the Middle West will not be seri^ 
 ous, because: 
 
 (a) The Middle West has now an established hold on 
 Pacific Coast trade. 
 
 (b) Aided by changed rail rates, they can probably 
 compete with the Atlantic Coast. The Middle West 
 will lose a part, not all, of its trade with Pacific sea- 
 
FOREIGN TRADE ASiS TRANSPORTATION 571 
 
 board cities, but may hold its Inter-Mountain trade. 
 
 (c) Rail lines east of the Alleghany Mountains may make 
 special rates from the back region to the Atlantic for 
 Western traffic. Rail lines to the Gulf will draw 
 traffic from Kansas City, Memphis, and St. Louis. 
 
 (d) Chicago and cities of this region may be assisted 
 in building up the Inter-Mountain trade by tlie rail- 
 roads. 
 
 3. The canal will assist the Pacific States in trading with 
 tlie Eastern and Southern parts of the United States. 
 
 It will appear, then, that one must speak with hesi- 
 tation as to the definite effects on Canadian rail rates 
 of the new route. In eastern Canada, the maximum 
 rates from interior points to the Pacific Coast will be 
 held down by the rates to the Atlantic seaboard, plus 
 the seabia d rates to the coast. This will bring about 
 various readjustments in the basis of rates. 
 
 Between Sudbury and Winnipeg there is in general 
 at present a break in productive and distributive terri- 
 tory, broken only by the two centers of Fort William 
 and Port Arthur. In the United States there is not the 
 same gap. 
 
 In British Columbia the rates to interior points are, 
 as has been indicated, built up on the "pull-back" sys- 
 tem. If the compelled rates to the coast are reduced 
 still lower by the competition of the new route, the com- 
 bination of the coast rate plus the local back will be effect- 
 ive as a maximum still further east, thereby controlling 
 the direct rates from eastern Canada to such points. 
 While it does not follow that the local rates will be au- 
 tomatically reduced, it is probable that the result will 
 l)e to increase the distributing territory of the Pacific 
 Coast cities. Possibly there may be a blanketing some 
 distance east from the coast. 
 
572 
 
 TRAFFIC 
 
 J 3 
 
 if 
 
 Such a readjustment will bring before the railways 
 the question of a readjustment of the relationships be- 
 tween the various distributing centers of the prairie 
 provinces. Again, the trade competition between dis- 
 tributing centers in eastern Canada and those in the 
 prairie provinces will bring before the railways the 
 question of further readjustments. How it will work 
 out it is impossible to foretell. 
 
 If ocean shipping and freight tonnage are attracted 
 in increased amount to British Columbia, this and the 
 development of grain areas nearer the coast may affect 
 grain rates as far east as a line drawn north and south 
 through Regina, at which point the competition of the 
 Hudson Bay route will be a factor. This would mean 
 that the Fort William rate and the coast rate would 
 meet about this point. There will probably be a certain 
 zone of indifference about this line from which grain 
 may move east or west according to variations in rates. 
 It must be recognized throughout that any opinions as 
 to probable readjustments will have to be checked by 
 experience. It is impossible, however, to bi*ing about 
 rate readjustments in general rates in one section with- 
 out vitally affecting rates in adjacent areas. 
 
 The Tehuantepec route has been overshadowed by the 
 discussion concerning the Panama Canal. The former 
 route, which has been in operation since 1907, has the 
 following distances: From New York to San Fran- 
 cisco via this route is 4,626 miles; the rail journey across 
 the Isthmus is 192 miles; from Montreal to Vancouver 
 the distance is 6,992 miles as against the all-rail route 
 of 2,897 miles; from Halifax to Vancouver via this route 
 is 6,001 miles. 
 
 This route is undoubtedly a factor to be considered 
 in the rate situation. To-day articles are laid down from 
 
FOREIGN TRADE AND TRANSPORTATION 573 
 
 Antwerp, via this route, in Vancouver in 45 days, 
 (loods from Michigan move to the Atlantic Coast and 
 thence, via this route, to the Pacific Coast of the United 
 States. It has the advantage of being one thousand 
 miles shorter than the Panama. It is probable that with 
 the opening of the latter route package freight move- 
 ment of the former to the Pacific Coast of North Amer- 
 ica will be much curtailed. 
 
 While it has the disadvantage of being a break bulk 
 movement, this does not entirely rule it out of the run- 
 ning as a grain route. The haulage of grain across 
 the Isthmus of Tehuantepec would aid in aerating it and 
 so assist in rendering possible a bulk movement. With 
 improved loading and unloading devices, hopper bottom 
 cars, etc., unloading direct mto the vessels at the Atlan- 
 tic terminal, costs could be reduced. The Panama Canal 
 will be a steamer route. Sailing vessels can make the 
 termini of the Tehuantepec route. With improved fa- 
 cilities there may, if a considerable bulk of grain moves 
 via the Pacific Coast, be an appreciable movement by the 
 Tehuantepec. 
 
 The advocates of the Panama route, however, see only 
 a local future for the Tehuantepec, primarily in connec- 
 tion with the coastwise movement up and down the 
 coast of Mexico and of Central America. The criti- 
 cism from this standpoint is summarized in the words 
 of Professor Johnson, M^ho says: 
 
 These differences in distance will not enable the Tehuantepec 
 route to compete with the Panama Canal. The average cost of 
 transferring freight from the hold of a ship on one side of the 
 Isthmus of Tehuantepec to the hold of a ship on the other side 
 could hardly be brought below $2.50 per ton. ... A toll at 
 Panama of $1.00 per vessel ton, net register, would amount to 
 about 50c. a ton on cargo ; and thus the cost of getting cargo 
 
574 
 
 TRAFFIC 
 
 from ocean to ocean would be at least $2 per ton greater. 
 The double handling of commodities, with the unavoidable 
 breakage and damage incident thereto, would further place the 
 Tehuantepec route at a disadvantage in competing for traffic 
 agamst the through service, without breaking bulk, by way of 
 the canal. Moreover, the time required to handle freight from 
 ^ew York to San Francisco would be but little less via Tehuan- 
 tepec than via the canal. As vessels require about two days 
 to discharge and two to load, the average detention of traffic, 
 due to transfer from ocean to ocean across the Isthmus of 
 Tehuantepec, will be about four days. A ship can pass 
 through the canal in less than half a day; and should another 
 half day be taken for coaling, the total detention will not 
 exceed one day. 
 
 h 
 
 ii¥' 
 
QUIZ QUESTIONS 
 
 ( The numbers refer to the numbered sections in the 
 
 text) 
 
 PART I. SELLING AND BUYING 
 
 
 CHAPTER I 
 
 1. Discuss the importance of selling methods in a 
 factory. Why is the problem becoming more difficult 
 of solution? What influence have modern competition 
 and advertising on the question of distribution? 
 
 2. Name the six factors in the former distribution 
 methods. Which have lost their distinctive functions? 
 
 8. Define consumer. What difficulties may arise in 
 deciding who is a consumer? 
 
 4. Define retailer. How is he different from the dis- 
 tributor? 
 
 5. What is a jobber? What was the early distinc- 
 tion between a jobber and a wholesaler? What is the 
 difference to-day? Is this distinction generally recog- 
 nized? 
 
 6. What does the term "manufacturer" include? Are 
 the following manufacturers: Farmer, miller, baker, 
 publisher, the one-man factory, the American Toba».^Q 
 Company? How may a manufacturer have no part in 
 the problem of distribution? 
 
 7. When may a business house be a wholesaler as 
 weU as a manufacturer? What is a semi-jobber?- 
 
 8. What are the two phases of the problem of selling? 
 
 575 
 
576 
 
 QUIZ QUESTIONS 
 
 With which one is the retailer most concerned? How 
 is his market determined? What are the three ways of 
 distributing goods at retail ? 
 
 9. Ex[)laiii why the early traveling merchants may 
 be considered as the originators of the merchandising 
 system ? 
 
 10. What is the characteristic feature of the peddler's 
 business? What is the advantage of the business and 
 why is it limited? 
 
 11. What are the advantages and disadvantages of 
 selling thiough a canvasser? When may this method be 
 successfully employed? Must it always be on a small 
 scale? 
 
 12. What is a specialty salesman? How is he dis- 
 tinguished from the canvasser? Give an example of a 
 specialty salesman. In what lines of business, for ex- 
 ample, are specialty salesmen necessary? 
 
 CHAPTER II 
 
 18. Describe the historic development of the retail 
 store. What is meant in the text by the "typical retail 
 store"? How is it limited? 
 
 14. State seven advantages of selling through a retail 
 store. Discuss these in detail. How may the retail 
 store often hold its trade? How may it be a factor in 
 the community? Why may it be more liberal in grant- 
 ing credit than the larger houses? 
 
 15. State four disadvantages of selling through a re- 
 tail store. Why is the growth of trade limited? Is it 
 affected by competition with the mail-order houses? 
 
 16. Why are generalizations impossible concerning 
 the relative advantages of the retail store and the mail- 
 
QUIZ QUESTIONS 
 
 577 
 
 order house in respect to cost of distribution? Where, 
 if at all, does the advantage of the latter lie? 
 
 17. Why do some manufacturers prefer to sell to 
 jobbers? What effect does buying capacity have on 
 the price? In what one way does a large mail-order 
 house have more advantage than a retail store? When 
 may the latter be quite as successful in getting prices f 
 
 18. Discuss the development of the mail-order sys- 
 tem. What two commercial developments have 
 fostered its growth? 
 
 19. State nine advantages of retail selling by the 
 mail-order method. Is the field limited? Why do lo- 
 cal business depressions not affect it? How may ex- 
 penses be decreased? Is credit given by mail-order 
 houses? 
 
 20. What part does advertising play in the mail- 
 order business? What sort of opposition as well as 
 competition must be met? Would the parcels post be 
 of advantage to mail-order houses? State four disad- 
 vantages of retail selling by mail-order method. 
 
 21. May the three methods of retail selling be com- 
 bined? If so, can it be done only by the larger houses? 
 What are the advantages of such combination? 
 
 CHAPTER III 
 
 22. Why is it usually inadvisable for the jobber to 
 try to sell both to dealers and to consumers in the same 
 locality? 
 
 23. State two methods of wholesale selling. Which 
 is the more common? 
 
 24. What advantages does the jobber get by sell- 
 
578 
 
 QUIZ QUESTIONS 
 
 ing through representatives? Discuss in detail. How 
 do the salesmen help in collections, in getting infonna* 
 tion, in gaining the confidence of the buyer and making 
 large sales? 
 
 25. What are the advantages of wholesale selling by 
 mail? Whftt risks of selling through salesmen are 
 avoided? 
 
 26. Why is the combination of the two methods par- 
 ticularly desirable? 
 
 
 CHAPTER IV 
 
 27. What particular selling problems had the manu- 
 facturer? What are the only problems of the retailer 
 and of the jobber? 
 
 28. Why is it important for the manufacturer to 
 choose the class to which he sells? Why is a definite 
 policy necessary for success? 
 
 29. What are the two chief factors in the determina- 
 tion of the market? 
 
 80. Give two examples of industries where it is bet- 
 ter for the manufacturer to deal directly with the re- 
 tailer. 
 
 81. Discuss the business policy of selling only through 
 jobbers. Why have some manufacturers ceased sell- 
 ing to middlemen? What class of manufacturers pre- 
 fer to sell to distributers and to consumers, and why? 
 Discuss these questions in relation to the grocery, the 
 iron and steel, and the publishing companies. 
 
 32. State and explain three advantages of selling 
 only through jobbers. 
 
 33. State and explain three disadvantages. 
 
 84. How may the market be better determined in a 
 
QUIZ QUESTIONS 
 
 579 
 
 direct sftle to the retailer? How is the manufacturer 
 knefited by direct relations with the retailer? Give 
 another advantage of such direct sales. 
 
 33. What opposition is met when a manufacturer 
 sells to the retailer? Give and explain two disadvan- 
 tages of such sales. 
 
 86. Wlien is it advantageous for the manufacturer to 
 sell directly to the consumer? Give at least two in- 
 stances. 
 
 87. What are the objections to a "direct to con- 
 sumer" business? 
 
 88. Discuss the methods by which a manufacturer 
 may reach his market when he sells to jobbers, to re- 
 tailers, to the consumer. 
 
 89. Why is there a tendency to eliminate the mid- 
 dleman? Show that this tendency is growing. Give 
 three reasons. Explain. 
 
 40. Is the jobber likely to disappear from the mer- 
 chandising system? What effect has he on the small 
 retail store? Discuss carefully. 
 
 41. Define agent, commission merchant and broker. 
 Where in the line of distribution do they come? Have 
 they any peculiar selling problems? State four rea- 
 sons for a manufacturer using the agent, etc., rather 
 than a selling organization of his own. 
 
 CHAPTER V 
 
 42. Discuss in detail the organization of the sales de- 
 partment. How are* its characteristics determined? Is 
 there any typical retail or wholesale selling organiza- 
 tion? Is the market to be reached of importance? 
 
 48. What are the three methods of selling goods at 
 
580 
 
 QUIZ QUESTIONS 
 
 retail? What two of them may be combined? De- 
 scribe the organization of the department store. 
 
 44. What are the duties of the merchandise manager? 
 What authority has he? Is he concerned with the sale 
 of goods? Are his duties different in a factory? How 
 are knowledge and ability best acquired? 
 
 45. Vho are the buyers in a small establishment, in 
 a depai cu mt store? Have they any relations with the 
 merchandise manager? What are their duties? 
 
 46. Are the sales people ever connected with the buy- 
 ing end of the business? To whom are they responsi- 
 ble? Who directs them? By whom is he assisted? 
 
 '.<7. Are the floor-walkers ever responsible to the 
 buyers? By whom are they commonly directed? 
 What are their duties? Who is the sales manager? 
 Discuss his duties in relation to those of the merchandise 
 manager. Will there ever be a definite division between 
 the buying and the selling functions in a retail store? 
 
 48. Discuss the relations between the advertising and 
 the sales departments. What is the ordinary custom? 
 Where does the authority of the advertising and of the 
 sales manager often conflict? What is the tendency 
 to-day? 
 
 49. Describe a selling organization for a wholesale 
 house. Is there any typical organization? 
 
 50. Where there is departmentation in a wholesale 
 house, what official has charge over all the department 
 heads? What is his authority, and what relations has 
 he to the buying and to the selling functions ? 
 
 51. What are the duties of a department head? 
 
 52. Why are specialty salesmen necessary? By 
 whom are they super\nsed? 
 
 53. Explain in detail the duties of the general sale' 
 men, by whom they are controlled, etc. Upon who. 
 
QUIZ QUESTIONS 
 
 581 
 
 should the final responsibility for all directions rest? 
 What are the usual three classes of salesmen? Explain 
 the duties of each. If there is a mail-order department, 
 to whom is the mail-order manager responsible? Is 
 such a man necessary in a wholesale house? 
 
 54. What are the advertising methods of a jobber? 
 Is an advertising manager usually employed ? 
 
 55. Of what importance to a wholesale house is the 
 credit man? Does the scheme of selling organization 
 confine itself to the relations of functions or of indi- 
 viduals? Explain your answer. Name four charac- 
 teristics of every largely successful house. 
 
 By 
 
 CHAPTER VI 
 
 56. What are the three classes of customers for a 
 manufacturer? Why can we have no typical method of 
 selling organization? If a manufacturer reaches all 
 three classes, what must his selling organization con- 
 tain? 
 
 57. How does a manufacturer's selling organization 
 differ from that of a wholesale and of a retail store? In 
 a factory are the buying and selling functions closely 
 connected? What is the basis of departmentation, if 
 there is any? 
 
 58. In a manufacturer's organization, what are the 
 duties of the sales manager? To whom is he responsi- 
 ble? 
 
 59. Who is directly responsible for the salesmen? If 
 lie has subordinates, who are they? 
 
 60. When are specialty salesmen employed by a 
 manufacturer? Where is the place of all salesmen in 
 the scheme of organization? 
 
582 
 
 QUIZ QUESTIONS 
 
 61. Describe the organization of branch-houses? 
 What are the functions of the typical branch-house? 
 
 62., What is the agent? Is he on the manufacturer's 
 pay-roll? Is the manufacturer further interested when 
 goods have been taken by an agent ? 
 
 63. Does a manufacturer ever operate his own retail 
 store? If so, describe its organization. 
 
 64. What is the place of the mail-order department 
 in a factory? 
 
 65. Discuss the relations of the sales and the advertis- 
 ing departments. What is the purpose of commercial 
 advertising? Why is it disadvantageous for the adver- 
 tising manager to be subordinate to the sales manager? 
 Is advertising selling?? 
 
 66. Why are the credit and the traffic departments 
 not essential parts of the selling organization? What is 
 the main purpose of the credit man, of the traffic man? 
 When do their duties begin? 
 
 67. What modifications of the organization plan 
 given may be made when the manufacturer does not 
 sell to consumers or to retailers? 
 
 CHAPTER VH 
 
 68. How does the efficiency of the sales department 
 reach its highest development? How may co-operation 
 between departments be encouraged? 
 
 69. Explain the importance of the human factor in 
 gaining co-operation. How should the sales manager 
 treat his subordinates? How may tact be encouraged 
 in the business organization ? 
 
 70. How may the employes be made to take a direct 
 interest in the business as a whole? Will profit-sharing 
 accomplish this? Discuss carefully. 
 
QUIZ QUESTIONS 
 
 583 
 
 71. What is the committee system? Will it induce 
 co-operation? What does it accomplish, and how? 
 Can it be used by manufacturers and by wholesalers as 
 well as by retailers? Which organization has applied it 
 most effectively? 
 
 72. What is the executive committee? Is it more 
 important than the other committees? Of what officials 
 is it composed? What may it do with matters brought 
 before it? Does it aid co-operation? To whom is it 
 responsible? Discuss the executive committee of a cor- 
 poration. 
 
 78. Who makes up the factory committee? What 
 representative should it certainly inchide? Of what 
 value is it in co-operation? 
 
 74. What is the sales committee? What departments 
 are represented? Discuss the majority rule as ap- 
 plied here. What is brought before the sales com- 
 mittee? 
 
 75. Describe the advertising committee. What au- 
 thority has it? 
 
 76. Who makes up the office coinmittee? How is the 
 sales department represented? 
 
 77. What is the conunittee of principal employes? 
 What is its purpose? How may it be effective? Dis- 
 cuss the system of committee organization. 
 
 78. What objections may be urged against the com- 
 mittee system? What are its practical results? 
 
 CHAPTER VIII 
 
 79. Discuss the purpose of the selling campaign. 
 How does departmental co-operation help? Why has 
 the retailer the least difficult problem to solve? 
 
584 
 
 QUIZ QUESTIONS 
 
 80. Wliat one feature is common to almost all sellinff 
 campaigns? In the campaigns of mail-order houses, 
 now important is advertising? 
 
 81. What are the four main qualifications of a sales 
 manager? Should he be drawn from amongst the sales- 
 men? State his general duties. 
 
 82. How is the sales manager able to choose an ef- 
 ficient selling force? Should he decide purely by in- 
 clination? F > y m 
 
 83. How may system aid in the selection? Give a 
 list of questions to be asked applicants. How are refer- 
 ences looked up? What questions are asked his former 
 employers? 
 
 84. What may be decided by a personal interview? 
 «5. Of what importance is the question of appear- 
 ance? Do clothes matter? 
 
 86. How much importance should be given to con- 
 versational ability? 
 
 87. Should a salesman know more than just his line? 
 
 CHAPTER IX 
 
 88. Discuss in detail the training of salesmen. Can 
 goods be sold to-day simply on the personality of the 
 salesman? In what three principles should the sales- 
 man be trained? 
 
 89. Is there a science of salesmanship? If so how 
 may it be learned? Is selling experience all that is 
 necessary to make a good salesman? 
 
 90. Of what importance to the salesman is a thorough 
 knowledge of his line? How are prospective buyers ap- 
 proached to-day? 
 
QUIZ QUESTIONS 865 
 
 91. Give and explain three methods of training sales- 
 
 men. 
 
 92. What are the two advantages of having salesmen 
 employed in the factory previous to making sales? 
 Discuss in detail. 
 
 93. How may a salesman be trained in selling 
 methods? Of what advantage is this? 
 
 94. How are the standard selling talks prepared? 
 Of what advantage are they? 
 
 95. How may the standard selling talks be adapted 
 for a variety of uses? What is the "school-room"? 
 
 96. How are the retail stores training their salesmen? 
 Why have the jobbers been slow to follow? How 
 may the sales manager keep his men efScient? 
 
 CHAPTER X 
 
 97. How should the salesman be supervised? Ex- 
 plain carefully. 
 
 98. State five ways of assisting the salesman in mak- 
 ing particular sales. 
 
 99. State several means of interesting the salesman 
 in general activities. 
 
 100. What is the importance of personal relations 
 between the sales manager and the salesman ? 
 
 101. How may the manager keep in touch with sales- 
 men? What care should be used in making necessary 
 reprimands? 
 
 102. Do competitive schemes promote selling effi- 
 ciency? What is the quota system? How is it used? 
 What are the difficulties in its use by jobbers? How 
 may these be avoided? When is the system of chief 
 value? 
 
586 
 
 QUIZ QUESTIONS 
 
 1C3. Show how house organs may be valuable aids 
 in the selling organization. 
 
 104. Give four purposes for having selling confer- 
 ences. Explain the value of each. 
 
 105. Besides the supervision of salesmen, what are 
 the three main duties of the sales manager? 
 
 106. How are salesmen compensated? Which 
 method of compensation furnishes the greater in- 
 centive to the salesman? Which is usually employed? 
 
 107. How are salesmen's expenses to be treated? 
 Discuss several methods. Should a salesman "buy 
 business "? 
 
 108. How should territories be assigned to salesmen? 
 What is the limitation of the population unit of assiim- 
 ment? 
 
 109. How may the manager keep in touch with his 
 men? IJiscuss various means. 
 
 110. Why is knowledge of the business important for 
 the sales manager? What is meant by this phrase? 
 
 CHAPTER XI 
 
 111. What are credit reports? How are they pre- 
 pared? Why are they important in selling? 
 
 112. State the five purposes of the direct reports 
 from the salesmen. What data in the reports tends to 
 accomplish these purposes? 
 
 113. Give the material contained in a typical report. 
 Of what value is this to the manager? 
 
 114. To what extent must the salesman's power of 
 observation be trained? Upon what items, outside of 
 his particular line, should he report? Of what value to 
 
QUIZ QUESTIONS 
 
 587 
 
 the manager is such information? What is the most 
 important result of a careful study of the report? 
 
 115. What is a town record card? Explain its use. 
 What information is entered upon it? Discuss an effi- 
 cient statistical system. 
 
 116. What is the salesman's share in promoting the 
 efficiency of the sales department? What are the three 
 th'ngs expected of the salesman? Discuss in detail. 
 
 CHAPTER XII 
 
 117. What is salesmanship? Explain its purpose, 
 features and duties. 
 
 118. What is a salesman? May the owner of a plant 
 be a salesman; the advertiser; the manufacturer; the 
 promoter? 
 
 119. What are the four main steps in a sale? 
 
 120. Describe various methods of attracting the 
 buyer's attention. Should a customer be approached 
 on his "blind side"? 
 
 121. Having attracted the customer's attention, how 
 may his interest be held? What is the value of specific 
 language? Should the customer's point of view h^ ob- 
 tained? 
 
 122. How may the customer be induced to want the 
 goods offered? What is the best method of argument? 
 How may suggestion be used in the salesman's argu- 
 ment? 
 
 128. How may the salesman close the sale? How 
 may he retain the customer's good-will? What is the 
 "psychological moment"? 
 
 124. What is the importance of these steps in a sale? 
 
588 
 
 QUIZ QUESTIONS 
 
 Must the salesman be conscious of them? Why should 
 they be studied? ^ 
 
 CHAPTER XIII 
 
 125 What are the three factors in a sale? Explain 
 the relation between the factors and the steps in a sale 
 
 126. Is the personality of the salesman important? 
 Must a salesman be born and not made? What are the 
 essential qualities of a successful salesman? 
 
 127. What are some false incentives toward enter- 
 ing the business? What is the true incentive? 
 
 ^?; '^^J^''^ ^''*^"* ^*^« «"«^ess depend upon the 
 mental ability of the salesman? Is will power impor- 
 
 129. What part has education in the making of a 
 salesman? Is the best salesman always the most fluent 
 talker? 
 
 130. Why is it necessary for the salesman to have 
 good health? Are personal faults still excused by the 
 manager if the salesman turns in a fair volume of «iles? 
 
 131. Of what importance is the appearance of the 
 salesman? 
 
 182. Why is honesty of especial importance in sell- 
 ing? Show why the salesman is especially liable to 
 temptation. 
 
 133. Should a salesman believe in his work? Why 
 must the salesman be sincere? 
 
 134. What is fidelity in salesmanship? 
 
 135. What is courtesy in salesmanship? Is it more 
 than good manners? 
 
 136. Why is industry especially important in sales- 
 manship? Has a salesman "working hours"? 
 
QUIZ QUESTIONS 
 
 589 
 
 187. Show that open-mindedness is a valuable asset 
 to the salesman. 
 
 188. Why must a salesman have persistence? 
 
 189. Show that tact is especially important. How 
 may a salesman cultivate tact? 
 
 140. \ ^y is the salesman with initiative usually the 
 most efficient? 
 
 141. What three subjects are included in "knowledge 
 of the business"? Explain their importance. Why is 
 it advisable for the salesman to be in touch with the 
 home office? Why is it wise for him to be familiar with 
 the methods and policies of his house? Why should he 
 acquire knowledge of the competitive field? 
 
 142. Explain why a salesman should have confidence 
 in himself, in his house, in the goods he sells. Show 
 that it is the business of the salesman to be creating con- 
 fidence in the mind of the customer. 
 
 148. Of what value is enthusiasm? How may it be 
 worked up? 
 
 144. What are the opportunities for success in sales- 
 manship? 
 
 CHAPTER XIV 
 
 145. Explain why buying is the universal business 
 activity. Show how it enters into all lines of work. 
 
 146. What is the modern tendency in respect to the 
 duties of the buyer? What is the relation of these du- 
 ties to those of other employes? 
 
 147. What are the especial problems of the buyer? 
 Why is the small order especially hard for the buyer? 
 
 148. How is the buyer often hampered in his work? 
 Discuss the requirements of economical buying? 
 
5U0 
 
 QUIZ QUESTIONS 
 
 149. How may he avoid the temptation to purchase 
 ^rretTesf ''''' --derations Lit the si^ TAt 
 
 n.l7'J^l tye^f "'^^ '°^ ""^^"" ^"-«*^ *o ^ 
 by'the hup'* "*'"* ™"^* '^P'^-*-" »>^ --idered 
 
 lirhis"";^^^^^^^^^^^ ""^"^*^ ^^^^^^ - *»^^ ^-y- to 
 
 m.lf ;J' 'P^^"'«*^^« »»"y'ng ever permissible? How 
 must the successful buyer treat this? 
 
 IT,' ^^l ^"" *^' ^°"'* qualifications of the buyer? 
 the ht . wl^^T* ^^ knowledge of the house by 
 
 ^IS '^'' '''-' *^"^ --* '^^ ^-- - thi^ 
 156 What knowledge of manufaeturing processes 
 
 must the buyer have? Compare this knowIe^^Ttha 
 
 possessed by a salesman. *^ 
 
 157. Why is it necessary for him to be famOiar with 
 
 departmental needs of his house. Discuss 
 
 the to. ^*^^/.^°"j^ ^' k"°^ the important employes of 
 the house? Give four items under the knowledge of the 
 house which the buyer should know. 
 
 159 Explain why it is important for the buyer to 
 know the market, the extent of the demand, possib e 
 competition etc. In this respect why is the p oblem of 
 
 than r; °;;r.™'*T^^ '^^ *^^ ^-*-y -«- simpL 
 
 Can this knowledge be systematized? 
 
 160 Discuss the especially difficult problem of the 
 buyer for the retail or wholesale store. 
 
 161. What knowledge of values of the goods to be 
 purchased should be possessed by the buy^? How 
 
QUIZ QUESTIONS 
 
 A91 
 
 may he purchase intelligently? How may he acquire 
 familiarity with raw materials and productive processes? 
 How may he know selling costs, possible profits, etc.? 
 
 162. How may the buyer judge future prices? 
 Why must such judgment be given with great care? 
 
 168. How may the buyer acquire knowledge of the 
 sources of supply? What is included in this? 
 
 164. Why is the location of the houses from which he 
 purchases of much importance to the buyer? 
 
 165. Is it necessary for the buyer to know the ability 
 of the house from which he purchases to keep its 
 promises? 
 
 166. Must he know the financial responsibility of the 
 house with which he deals? 
 
 167. Show that it is important for the buyer to know 
 productive costs before he agrees upon the price of the 
 goods he purchases. Under what circumstances may 
 he try to "beat down" the price? 
 
 168. Why should the buyer know the selling methods 
 of the house with which he deals? Why do manufac' 
 turers sometimes make the list price higher than the one 
 they would accept? 
 
 169. Show that the one price idea is gaining among 
 buyers and manufacturers. 
 
 170. Why is tact an essential quality of the success- 
 ful buyer in his relations with his own house and with 
 others? 
 
 171. Why should the buyer cultivate friendly rela- 
 tions with the salesmen? 
 
 172. Besides tact and a knowledge of the business, 
 what qualities should the buyer possess? 
 
 173. Discuss the importance of the buyer's position. 
 Why does the owner often prefer to do the buying? 
 
 !i 
 
A»2 
 
 QUIZ QUESTIONS 
 
 174. What two methods may be adopted by factories 
 for their buying system? Explain the advantages and 
 disadvantages of each. 
 
 CHAPTER XV 
 
 175. What are two general classes of buyers? Why 
 is a universally applicable system of buying not pos- 
 sible? 
 
 176. State three requirements of an adequate pur- 
 chasing system. What data should be classified? 
 
 177. Define and explain the subject index. What is 
 its purpose? 
 
 178. What is the firm index and what should it con- 
 tain? What is the meaning of "firm" as here used? 
 
 179. What records of possible suppliers should be 
 kept by the buyer? What cross references should be 
 made between the subject and the firm indexes? State 
 and explain carefully two reasons for having the two 
 indexes. 
 
 180. What is the quotation file, and how is it made 
 up? What price data is included? 
 
 181. What information contained in the indexes men- 
 tioned is put in the order record? Give a typical order 
 record card. Of what value are this record and the 
 others to the buyer? 
 
 182. How are orders placed? What data does the 
 order blank contain? How many copies of the order 
 are made and to whom do they go? 
 
 188. In what manner may the buyer keep track of 
 orders placed? What is the "tickler" file* How may 
 the buyer know when the supplier's acknowledgment is 
 received? How does he know when the goods are re- 
 ceived? 
 
QUIZ QUESTIONS 
 
 mn 
 
 184. When partial deliveries are made, what system 
 may be used to keep track of the orders? What is the 
 final result of any system of checking orders? 
 
 185. What data should the buyer enter upon the in- 
 voice sent by the consignor? What is then done with 
 the invoice? Explain in detail the method of handling 
 the invoice after its receipt. 
 
 186. How may the buyer know when purchases are 
 necessary? What record is kept? What data is given 
 on this record? 
 
 187. May the purchasing system given be modified? 
 Discuss. 
 
 188. May the system given be applied to a retail 
 store? If modifications are necessary, what should they 
 be? Explain why a purchasing system is advantageous 
 even to a small retail store. 
 
 189. Why should the jobber introduce a good pur- 
 chasing system? What records should he keep? How 
 should his system diflPer from that used in a factory? 
 
 PART 11: CREDIT AND THE CREDIT 
 
 MAN 
 
 CHAPTER I 
 
 1. What is the basis of aU business relations? 
 
 2. In what respect does the law of contract support 
 confidence? Why is credit sometimes defined as a 
 "right of action"? 
 
 8. What relation does the medium of exchange bear 
 to credit? Why is money a sign of economic progress? 
 4. tVhat is meant by "credit economy"? 
 
 C— m— 88 "^ 
 
594 
 
 QUIZ QUESTIONS 
 
 "money economy'* differ from 
 
 5. Wherein does 
 "credit economy"? 
 
 6. What is the relation of bank credit to general 
 mercantile credit? In what respect is the relation 
 that the cash reserves of the banks hold to their out- 
 standing credits, a guide to the commercial credit opera- 
 tions? 
 
 7. What relation does credit bear to panics? In 
 what respect is a rigid credit giving standard helpful? 
 
 8. What is meant by the term "credit of limited ac- 
 ceptability"? What is meant by the term "credit of 
 unlimited acceptability"? Differentiate between the 
 former and the latter. Why is there a tendency for 
 the demand of money to decrease when the use of credit 
 is increasing? 
 
 9. What compels, nowadays, the business man to turn 
 over his capital oftener? ^Tierein do long-time credits 
 differ from short-time credits? 
 
 10. Define "investment credit," "banking credit" and 
 "commercial credit." What are the advantages of 
 credit in the various branches of economic activity of 
 production, exchange, distribution and consumption? 
 
 CHAPTER II 
 
 11. What relation does 'credit economy" bear to 
 money? 
 
 12. In order of origin, which credit holds first place? 
 What caused banking and commercial credits to develop 
 rapidly? 
 
 18. Can a personal credit system be as well organized 
 as a banking credit system? Why? 
 
QUIZ QUESTIONS 
 
 595 
 
 14. What are the reasons that cause some lenders to 
 neglect making proper inquiries about borrowers? 
 What part does the "business sense" play in such cases? 
 What advantage does a merchant gain by a study of 
 credit? Describe the "Indianapolis Plan." Name the 
 three fundamental ideas that underlie the working of 
 this system. 
 
 15. What are the effects of the extension of personal 
 credit? How does it affect prices? 
 
 16. In what way does a "too ready credit" affect the 
 consumer? Why is it asserted that the curtailing of 
 credit among working classes would tend to raise them 
 morally and economically in the scale pf social better- 
 ment? 
 
 17. What connection is there between extravagance 
 and credit? Explain the following statement: "The 
 merchant should be more interested in the surplus which 
 the customer can devote to the purchase of goods, than 
 to the size of the bills for the rent of house and automo- 
 biles." 
 
 18. Why is the credit system complementary to the 
 commercial sys^^em? 
 
 19. What were the factors that caused changes in 
 the credit system? What effect has long-time credit 
 on prices? 
 
 20. What is meant by the term "dating"? Why is it 
 regarded by some as detrimental to a sound credit sys- 
 tem? ^ 
 
 21. Differentiate between the terms "dating" and 
 "book account." What caused the rise of commission 
 houses dealing in book accounts? 
 
 22. In what ways are book accounts usually assigned? 
 Which is the most preferable method from the borrow- 
 er's point of view? ^ 
 
596 
 
 QUIZ QUESTIONS 
 
 CHAPTER III 
 
 23. Differentiate between "consumptive" and "in- 
 vestment" credit. Define "long-time investments." 
 
 24. Mention a few of the elements of safety in capital 
 credits. 
 
 25. What are the principal forms of capital credit? 
 What is the relative percentage of investments in "in- 
 dustrials" as compared with investments in "railroads"? 
 
 26. What are the principal sources of capital funds? 
 
 27. What relation does banking credit bear to com- 
 mercial credit ? 
 
 28. What are the limitations of bank credit? 
 
 29. Is the field of credit operations open to a bank 
 dependent upon the degree of convertibility among 
 credit instruments? 
 
 30. Define the term "business paper." What is 
 meant by a "single-name" paper? What by a "double- 
 name" paper? Define accommodation paper. 
 
 CHAPTER IV 
 
 81. What elements must be emphasized regarding the 
 nature of credit? What are consequently, the functions 
 of a credit department? Can a general hard rule be 
 laid down as to information that would fit all lines of 
 business? What, in the last analysis, are the main fac- 
 tors forming the basis of credit? 
 
 82. Name the two most important considerations in 
 connection with an estimate of a wholesaler's credit. 
 Wliat is the practice of the Chicago wholesale house 
 with respect to its customers? What other factor, be- 
 
QUIZ QUESTIONS 
 
 597 
 
 sides the business getting quality of a consumer, is to 
 be taken into consideration? 
 
 88. Why is the manufacturer in a more favorable 
 position in choosing his customers, than the wholesaler? 
 How is the manufacturer handicapped in his direct 
 trade with the consumer? 
 
 84. Upon what consideration does the retailer base 
 his opinion of the trustworthiness of a customer? Is 
 there any compensation for his uncertainty? 
 
 85, What are the provisions of the installment plan? 
 
 CHAPTER V 
 
 86. State the three es&2ntials of business credit; which 
 is the most important one? 
 
 87. State the two methods of investigation open to 
 the credit man; describe the direct way of getting in- 
 formation. What is the advantage of a statement pre- 
 sented by the applicant? 
 
 88. What are the factors making the average busi- 
 ness look upon a financial statement with distrust? 
 Where is the method most usual ? State briefly the dif- 
 ference between Form I and Form II. State briefly 
 what facts the creditor js interested in when requiring 
 the prospective customer to fill out the Property State- 
 ment Blanks, and point out the differences between 
 them. What principle should be applied by the credit 
 man to the various assets appearing on a statement? 
 
 89. Illustrate the analysis of a statement by a com- 
 parison of the items with the general business situation. 
 Taking up rent, should we compare it with profits, gen- 
 eral expenses or capital? Why? 
 
 40. Who takes usually the place of the credit man 
 
598 
 
 QUIZ QUESTIONS 
 
 in out-of-town investigations? Describe the methods 
 of inquiry by a reporter. Under what conditions is a 
 traveling representative employed? What is the ad- 
 vantage of using this expensive method? 
 
 41. Why is it not a sound policy to combine the two 
 offices of salesman and credit man in one person? 
 What information may be easily supplied by the sales- 
 man? By whom is that infonnation obtained in case of 
 concerns selling through branch houses? 
 
 42. Describe the commercial agency method of get- 
 ting information. What are the two other informants 
 at the disposal of wholesale houses? 
 
 43. What is the history and present standing of the 
 two largest commercial agencies? 
 
 44. Describe a system of collecting information by a 
 standard commercial agency. How are reports on 
 unexpected changes procured? 
 
 45. What are the contents of an agency's report? 
 How is a special report obtained and transmitted? 
 
 46. How is general information about merchants and 
 ratings distributed? What does a special report con- 
 tain? Of what use to the merchant are the weekly re- 
 views? What do they contain? 
 
 47. What privileges are extended to agency mem- 
 bers? At what cost? 
 
 48. What are the agency's sources of information? 
 Why is it essential that the statements obtained from 
 firms be signed by some member that is legally responsi- 
 ble for the firm ? 
 
 49. Into how many kinds are the reports divided? 
 Upon what elements are these divisions based? How 
 does capital rating affect credit rating? 
 
 50. Explain the following: "All risk is a result of 
 lack of knowledge." What is the purpose of agency 
 
QUIZ QUESTIONS 
 
 599 
 
 • 
 
 reports? What are the usual complaints made against 
 mercantile agencies? 
 
 51. What are the causes that brought forth co- 
 operative credit methods? Describe the contents of the 
 form referred to in this section. What were the rules 
 proposed at the 1911 Convention of Credit Men? De- 
 scribe briefly the plan of operation used by the Colum- 
 bus association of credit men. 
 
 52. What are the advantages of the interchange sys- 
 tem? 
 
 58. To what extent does a local bank or a local attor- 
 ney serve indirectly as a medium of getting credit in- 
 formation? 
 
 54, To what extent do results of litigations tend to 
 gauge the credit standing of a merchanti 
 
 CHAPTER VI 
 
 55. What serves to support the structure of the 
 credit system from the outside and in what respects? 
 What is the general principle underlying every form of 
 insurance? 
 
 56. How does the general principle appty to credit 
 insurance? How does the insurance company deter- 
 mine its risk in this case? Illustrate by example. 
 
 57. How does a credit underwriting company classify 
 its applicants? 
 
 58. State the arguments in favor of credit insurance. 
 
 59. State the weak points in credit insurance. 
 
 60. Upon what fundamental principle are the laws 
 of bankruptcy based? Upon what presumption are the 
 bankruptcy laws of the present day formed as con- 
 trasted with early insolvency laws? What were the 
 
600 
 
 QUIZ QUESTIONS 
 
 disadvantages of the creditor in absence of a national 
 bankruptcy act? 
 
 61. State the advantages of the present bankruptcy 
 law. 
 
 62. State the amendments to the bankruptcy law 
 passed in 1910, their meaning and importance to the 
 business world. 
 
 63. What steps have been taken by various business 
 associations to aid the effective administration of the 
 present national bankruptcy law? Why is the latter 
 satisfactory to the business conmiunity? 
 
 64. Why was co-operation originally opposed by 
 credit men? State the arguments for conmion action. 
 
 65. Which was the first national credit organiza- 
 tion? State the objects of that association. By what 
 means does it further its ends? 
 
 66. By what reasons do the credit departments of 
 every line of business act as the points of nearest ap- 
 proach between the various business units? 
 
 67. State the relation of the sales department to the 
 outsider; in what relation does the collection depart- 
 ment stand to the public? In what relation does the 
 credit department stand to the other departments of a 
 concern? What data does a well organized credit sys- 
 tem take care of? 
 
 68. Describe a suitable method of handling the in- 
 coming mail in a wholesale concern. Why is a card 
 system most convenient for the credit department? 
 What is the object of having differently colored cards? 
 How is delay avoided in filling orders of new custo- 
 mers? Describe a system showing the close connection 
 between the credit department and the other depart- 
 ments. What is a "tickler"? 
 
 69. What is the universal policy every collection de- 
 
QUIZ QUESTIONS 
 
 601 
 
 partment should adhere to? State the successive steps 
 ill the collection of an account. 
 
 70. How should a delinquent account be treated? 
 Why is it of importance that the credit man should pay 
 close attention to debtors who failed to meet their obli- 
 gations? 
 
 71. What helps the credit man in analjrzing the finan- 
 cial statement of a prospective customer? What ques- 
 tions should, according to Prof. Bollse, the man unfa- 
 miliar with accounting ask when analyzing a statement? 
 What additional questions would Mr. Thome ask? 
 Is the amount of capital the only criterion by which to 
 determine the basis of credit? Show by example how 
 the kind of assets, i. e., the nature of capital, and the 
 proportion of assets to liabilities, should affect the 
 amount of credit to be extended to a customer. 
 
 72. Explain the nature of the advantage arising from 
 membership in a Canadian credit association. In what 
 way do these credit associations protect an honest debtor 
 who has gotten into temporary financial difiiculties? 
 What reasons can you suggest for the ease with which 
 long credits have hitherto been granted in Canada? 
 
 73. What are the defects of the general bankruptcy 
 procedure in Canada? Why do business men so easily 
 abandon bad debts? What definite plan would you sug- 
 gest for protecting creditors against dishonest debtors 
 in Canada? What are the particular difficulties in the 
 credit situation in the prairie provinces? 
 
 74. Why is only a small part of the debt of an in- 
 solvent estate secured by the creditor? What objec- 
 tions can be made to the work of liquidators in the Prov- 
 ince of Quebec? Why does not the average small cred- 
 itor interest himself in creditors' meetings? Draw up a 
 statement of failures in Canada within the last six 
 
60S 
 
 QUIZ QUESTIONS 
 
 months, and comment on the causes for the same. What 
 part do credit associations play in protecting creditors? 
 75. Explain in detail the good features of the English 
 bankruptcy laws. To what extent should those princi- 
 ples be adopted in Canada? Explain the necessity of a 
 uniform bankruptcy law for the whole of Canada. 
 What is the relation between credit institutions in Can- 
 ada and the country's general progress? Show the im- 
 portance of confidence as an element in credit, and the 
 bearing of that feature upon the problems that arise in 
 bankruptcy. 
 
 PART III: TRAFFIC 
 
 CHAPTER I 
 
 1. What was the influence of its waterways on the 
 early development of Canada? 
 
 2. What was the next development in the transporta- 
 tion routes of Canada? Where were the first "grand 
 trunk roads" built? 
 
 3. What was the first Canadian railroad? What im- 
 portant roads were built before Confederation? 
 
 4. What was the prime reason for the building of 
 the Canadian Pacific? 
 
 5. Compare the recent expansion of Canadian rail- 
 roads with the growth of American railways. What 
 has been the tendency in Canadian railroading lately? 
 
 6. How has the building of the trunk lines influenced 
 railway development in Canada? 
 
 7. Locate some of the Canadian railroads. 
 
 8. What are the freight resources of this territory? 
 
QUIZ QUESTIONS 
 
 60S 
 
 9. Compare the distribution of the population in the 
 provinces with the distribution of the railway mileage. 
 
 10. What may serve as an index of the potential rail- 
 way traffic ? Whai percentage of this traffic is furnished 
 by each province? 
 
 11. How does the actual traffic compare with the 
 potential traffic? 
 
 12. Describe the traffic interrelations of Canada and 
 the United States, 
 
 18. What is the volume of this traffic? What is its 
 effect? 
 
 CHAPTER II 
 
 14. Why is classification necessary? Give examples 
 of some of the early classifications. 
 
 15. How does it happen that different classifications 
 may be in effect on different parts of the same road? 
 
 16. Discuss classifications in the United States. 
 
 17. Discuss the Canadian classifications. 
 
 18. What classifications apply in traffic between Can- 
 ada and the United States? 
 
 19: Why has the Canadian classification been ex- 
 panded? 
 
 20. Why is the carload used as the unit in determining 
 carload differences? W^hat are the regulations regard- 
 ing carload ratings? 
 
 21. What are the measurements of the standard box 
 car? On what basis is the minimum carload increased? 
 
 22. What are the arguments for and against higher 
 rates on L. C. L. than on C. L. shipments? 
 
 23. How have the Canadian Freight classifications 
 been built up? 
 
604 
 
 QUIZ QUESTIONS 
 
 24. What is the mixing privilege? What are the reg- 
 ulations governing mixing ? 
 
 25 How have the regulations governing the "mixing 
 prmlege affeeted western Canada as eompared wTth 
 the effect m eastern Canada? 
 
 26. What factors influence classifications? 
 
 27. How does value influence classification? 
 
 tion '"'' ^""^ "^"'^^^ ^' ^^'y *^^^ *^»«««fi<^a- 
 
 tion!? "°'' '*°^' *^' "''' °^ '"'''^«' ^^^ <^l*««fica- 
 
 80 Of what importance are facilit-s and equinment 
 required in making classifications. ^q^'P^ent 
 
 *hf r ^Y "/ ^^^ regulations governing charges in 
 the Canadian freight classification? ^ 
 
 82. How is false classification punished? 
 
 CHAPTER III 
 
 than fh^' *^' ^""'^^^ *''^' °" *^'*"*^«" ^^a^-o^ds greater 
 than the passenger traffic? How has this influenced the 
 growth of the Canadian railroads? 
 
 ada ? ' ^^^ "' "^^""^^ '^*'' °^ "'P^'«* ^*"*^'e«* in Can- 
 
 J fuT^^lt ^.'^^^^P'^^i^n^ «f Leland Stanford and 
 36 ™! "".^'^^"^"r' °' competition upon rates. 
 36. Wherein does the business of the railroad differ 
 
 from the manufacturing or mercantile business? 
 al Zt, ^^•^""t;^"^ ^'^ th^'-^ to paralleling of lines? 
 
 89 Twhir ^r "'^*""^ ^" *^^ ^^-* Shore case? 
 40 WhZ r *^^^^•^""^^"t« for flat rates based? 
 40. What IS the equal mileage theory? Discuss it. 
 
gUIZ QUESTIONS 
 
 605 
 
 41. Can rates be based on capitalization? Why? 
 
 42. Discuss physical valuation as a rate basis. How 
 do you think it would affect rates? 
 
 48. Why is the cost of service difficult to use as a 
 basis in tate-making? 
 
 44. What is cost of service? 
 
 45. Discuss the "What the traffic will bear" policy of 
 rate-making. 
 
 46. Can this policy be applied profitably in other lines 
 of business? 
 
 47. Use a newspaper as an illustration of this policy. 
 
 48. Do you agree that "rates are based on competi- 
 tion, comparison, and compromise"? Why? 
 
 49. What is the test of the reasonableness of a rate? 
 
 CHAPTER IV 
 
 50. What is a commodity rate? Under what condi- 
 tions is it granted ? What is the German practice in this 
 connection? What are class rates? 
 
 51. Compare the average carload in the United States 
 and Canada with the average carload in Germany and 
 England. 
 
 52. What two component factors enter into the rate? 
 Itemize the headings under each factor. 
 
 58. What is "grouping"? How does it affect rates? 
 Give examples of "grouping." What are percentage 
 groups? Illustrate. 
 
 54. What road sets the rate among competing lines? 
 Under what circumstances does the longest route set the 
 rate? 
 
 55. What is a differential rate? Illustrate by the 
 Canadian Pacific differential rate. 
 
006 
 
 QUIZ QUESTIONS 
 
 36. How does water competition influence rates if II- 
 lust'-ate. 
 
 37. Why does changing the center of population or 
 industry affect rates? 
 
 38. How do the ports affect rates? 
 
 59. Should the rate regulative tribunal change rates so 
 that all industries may compete on an even keel? 
 
 60. Does net profit of operation influence improve- 
 ments in roadbed and rolling stock? Name some of 
 the improvements made. 
 
 CHAPTER V 
 
 61. How are freight tariffs classed under the Railway 
 Act? ' 
 
 62. What regulations govern the standard tariff? 
 Give examples of the standard freight tariffs on the Ca- 
 nadian Pacific. 
 
 68. What regulations govern special and competitive 
 rates? 
 
 64. How are the transcontinental rates fixed? 
 
 65. What are distributive rates? Why are they 
 made? 
 
 66. Discuss the International Rate case. What were 
 the results of the decision in that case? 
 
 67. How are rates fixed in eastern Canada? What 
 are "town tariffs"? 
 
 68. What is the "traders" tariff arrangement? Ex- 
 plain its effects. 
 
 69. What principle applies in making export rates? 
 
 70. Why is a low import rate justified? 
 
 71. What factors influence the rate problem in Can- 
 ada? 
 
QUIZ QUESTIONS 
 
 607 
 
 72. How do import rate anomalies arise? 
 78. Explain the attitude of the railways. 
 
 74. Discuss the manufacturing in transit arrange- 
 ments and tlieir eflFect on industry. 
 
 75. What is the practical result of being able to 
 change the dest* ation of a shipment while it is in 
 transit? 
 
 76. What are concentration rates? What is the ad- 
 vantage of concentration rates? 
 
 77. What special rate reductions are sometimes 
 made? 
 
 78. Trace the history of cartage service by the Ca- 
 nadian railroads down to the present time. 
 
 CHAPTER VI 
 
 79. Why are some of the factors which influence 
 freight rates negligible in affecting passenger rates? 
 
 80. How does distance affect the passage rate? 
 
 81. Why are excess fares necessary if the railway is 
 to operate the high speed trains profitably? 
 
 82. Is the terminal charge per unit less in the 
 case of passenger traffic than in the case of freight 
 traffic? 
 
 88. Why is it simpler to apply the equal mileage the- 
 ory to passenger rates than to freight rates? To what 
 extent is the tapering rate theory applied to passenger 
 rates? Is the empty car movement important in pas- 
 senger traffic? 
 
 84. To what extent would you regard the passenger 
 department as essential in gaining business for the 
 freight department? 
 
608 
 
 QUIZ QUESTIONS 
 
 3 t 
 
 85. What is the proportion of passenger r^. 
 freight receipts? 
 
 86. What is an index of increasing business? 
 
 87. What is the effect of economic depression on pas 
 senger business ? On freight business ? 
 
 88. Is maximum loading possible in passenger busi 
 ness? 
 
 89. Why is "dead weight" greater in passenger busi 
 ness than in freight business? What effect has this oi 
 the cost of passenger business? 
 
 90. How are passenger rates classified in Canada 
 What can the railroad do in the way of making specia 
 rates? 
 
 91. What are the standard rates'now in effect in Can 
 ada? 
 
 92. Describe the ticket regulations of the Canadiai 
 Pacific. 
 
 93. Under what conditions is sleeping car service fur 
 nished? 
 
 94. Why has classification in passenger rates not pro 
 ceeded on the Canadian railroads as it has on the Euro 
 pean roads? Name some of the rates in effect. 
 
 95. Describe passenger classifications in Europe 
 What is the zone system of fixing rates? 
 
 96. Compare railway trafiSc here with that of Eu 
 rope. 
 
 CHAPTER VII 
 
 97. What are the conunon law obligations of the rail 
 ways? 
 
 98. Describe the bill of lading and its conditions. 
 
 99. What are the limitations of the railroad's liabil 
 ity? 
 
QUIZ QUESTIONS 
 
 600 
 
 100. Is insurance recoverable by the railroad if it 
 pays for the damage done? 
 
 101. What is the extent of the railroad's liability as 
 a warehouseman? 
 
 102. How is the loss or damage computed? How and 
 when should the claim be made. 
 
 103. If the freight charges are not paid how does 
 the railroad get its money? 
 
 104. What are the forms of the bill of lading? 
 
 105. What does "due diligence" mean? 
 
 106. What is the actual car movement ? Do you think 
 there is room for improvement in this respect? 
 
 107. What is demurrage? What are demurrage 
 charges? 
 
 108. What are the causes of demurrage? 
 
 109. What is the relation between demurrage and car 
 shortage? 
 
 110. Who is to blame for the car shortage? 
 
 111. Would higher demurrage charges remedy the 
 situation? 
 
 112. What is the "average demurrage" plan? What 
 are its advantages? 
 
 118. Discuss reciprocal demurrage? What are the 
 arguments for and against it? 
 
 114. What are the advantages of a car pool? What 
 is the per diem charge? 
 
 115. What are the provisions of the order relating 
 to inter-switching? 
 
 116. Discuss the work of the claims department. 
 How can the claims department help the road's busi- 
 ness? 
 
 c— iii-ai 
 
GIO 
 
 QUIZ QUESTIONS 
 
 CHAPTER VIII 
 
 117. What is express service? Discuss its scope. 
 
 118. Who was William Herndon? What was his con- 
 nection with express service? Describe the early his- 
 tory of the modem express companies in the United 
 States. 
 
 119. How did the express companies develop in Can- 
 ada? What is the difference between the Canadian and 
 American companies? 
 
 120. What is the arrangement between the express 
 companies and the railroads? 
 
 121. Are there express classifications similar to the 
 freight classifications? Discuss them. 
 
 122. What factors are considered in making freight 
 classifications? 
 
 123. What are the express company's limitations as 
 to liability? 
 
 124. What are the standard mileage tariffs? 
 
 125. Are differences in traffic conditions allowed to 
 influence rates? Why? 
 
 126. How many standard tariffs are there? How 
 are they built up? 
 
 127. What are local and transfer tariffs? How are 
 the local tariffs quoted? How are the transfer tariffs 
 made? 
 
 128. Are the factors affecting express rates analogous 
 to those influencing passenger rates or freight rates? 
 Discuss them. 
 
 129. May the express rate be expressed as a multiple 
 of the first class freight rate? 
 
 180. How are commodity rates put in force? What 
 influence have the commodity rates on the rates to in- 
 termediate points? 
 
QUIZ QUESTIONS 
 
 611 
 
 181. What is the graduate table? How is the rate 
 for any given weight found in the graduate table? 
 
 182. Are the graduate table rates built up on a sci- 
 entific basis? Why? 
 
 188. What is the "single" graduate? What is its ef- 
 fect? 
 
 CHAPTER IX 
 
 184. To what extent does water transportation reg- 
 ulate freight rates? What affects the efficiency of in- 
 land water transportation? 
 
 185. How do shallow rivers affect the efficiency of 
 waterways? 
 
 186. Why may the location of a canal terminal make 
 it unprofitable to use the canal? 
 
 187. What is the relation of highway costs to other 
 costs of transportation? 
 
 188. Describe the Canadian lock and canal route. 
 
 189. Describe the Georgian Bay Canal route. Com- 
 pare it to other routes. WTiat are its possibilities? 
 
 140. What is the importance of the Ottawa Canal 
 system? 
 
 141. How are the canal charges paid? 
 
 142. Compare the traffic passing through the Sault 
 Ste. Marie Canals with that handled by the Suez Canal. 
 
 148. What'percentage of the total Upper Lakes traf- 
 fic is handled through the "Soo" Canal? 
 
 144. What is the character of the freight carried on 
 the Lakes? 
 
 145. What percentage of Canadian wheat is carried 
 on the Lakes? 
 
 146. How has the specialized character of the traffic 
 
612 
 
 QUIZ QUESTIONS 
 
 Muenced the type of boat, which ply » the Gre.t 
 pom«o^ir«' *' '°™'«"" of the <W. Tr™. 
 
 ican lake ton mUe rate '"''*™ "°^ ^^°»'- 
 
 CHAPTER X 
 
 158. With what countries does r'or.-j j 
 her fon^ign business, ^tS^cSrof'tJ^^rf °' 
 porta ar. manufactured produS^- *°'^ "" 
 
 154. What articles form the hnlt «* .t • 
 
 sports between G.at ^H^ '.:fd' ^^ ^^ ""^ 
 
 155. Canada and the United States? 
 l«8. Canada and Fnuice? 
 
 Ill' ^^ "^ "■* ^™'^ American countries* 
 
 merof'tiL^^,r^ '°f tte differ.* in move- 
 
 porte and the pc^tT^^^ ^^'STS'r^ 
 161. Sununanze the rituation at Montreal ^^ 
 
 f 
 
QUIZ QUESTIONS 
 
 613 
 
 162. Why is so large a part of Canadian grain moved 
 by American channels to American ports? 
 
 168. How does insurance affect the St. Lawrence 
 route? Why? 
 
 164. What steamship lines are most heavily subsi- 
 dized? How are the subsidy contracts administered? 
 
 165. What are the two main classes of ocean vessels? 
 What is a "* amp" steamer? Describe a possible voy- 
 age for a ti .np sailing from Montreal. 
 
 166. What is a charter party? What are the terms 
 of the Anglo-American Cotton charter party? 
 
 167. How are ocean freight rates fixed? How may 
 the vessel be measured? 
 
 168. Distinguish ocean traffic from railway traffic. 
 
 169. What is the effect of harvests on ocean rates? 
 
 170. Name the conditions of water carriage. How 
 do they differ from the conditions of railway carriage? 
 
 171. How do the ocean rates affect Canada? What 
 is meant by "spread"? 
 
 172. Have lumber rates increased recently? 
 
 178. What is the attitude of the carriers towards the 
 rates on wheat and flour? 
 
 174. Sum up the ocean rate situation in Canada, 
 bearing in mind the rate "conference." 
 
 175. What is the weak link in Canada's transporta- 
 tion system? 
 
 176. What are the prospects of the Hudson Bay 
 Railway? 
 
 177. Discuss the possibilities of the Pacific route. 
 
 178. Summarize the changes in trade routes affected 
 by the opening of the Panama Canal. What are the 
 possibilities of the Tehuantepec route? Compare it 
 with the Panama route. 
 
INDEX 
 
 AbUity, 
 Mental, 150. 
 
 Uf salesman's house to keep his 
 promises, 183. 
 Accounts, 
 Suspended, 318-319. 
 Two methods of assigning, 341- 
 949. 
 Acquaintance with important em- 
 ploy^ 176. 
 Act, 
 Canada grain, 486. 
 Harter, 569-563. 
 Railway. (See RaUway Act.) 
 Adaptation of standard selling 
 
 talks. 111. 
 Advantage in purchasing power, 16. 
 Advantage to employer of sales- 
 men's information, 98. 
 Advantages of direct sales only to 
 
 consumer, 38. 
 Advantages of direct sales only to 
 
 retailers, 37. 
 Advantages of interchange system, 
 
 291. 
 Advantages of making direct sales 
 
 only to jobbers, 35. 
 Advantages of present law, 303. 
 Advantages of selling through re- 
 tail stores, 14. 
 Advertiser, the, a salesman, 137. 
 Advertising, 
 And publicity campaigns, 40. 
 And sales departments, relation 
 
 of, 73-74. 
 Committee, 80. 
 Department, 57. 
 RaUway, 456, 458. 
 
 Agents, 
 Definition of, 79. 
 Use of, 43. 
 Criticism of, 981-984. 
 Agency method, 973-974. 
 Agency reports, content of, 977. 
 Agency service, cost of, 979. 
 Agency, the commercial, 975. 
 Agriculture, influenced by roads, 
 
 337. 
 Alabama Midland case, 443. 
 Amendments, meaning of recent, 
 
 304-305. 
 Analysis of credit information, 319- 
 
 394. 
 Appearance of salesmen, 99. 
 
 Importance of, 153. 
 Application of committee system 
 
 to manufacturers' organisation, 
 
 diagram of, 85. 
 Argiunents in favor of credit insure 
 
 ance, 999-300. 
 Arousing interest, 141-149., 
 Assignment of sales territory, 194. 
 Associations of credit men, 307. 
 Attomeys-at-Iaw, servkxs of, 993. 
 AUracting attention, 13S-14a 
 
 B 
 
 Ballast, 548-549. 
 
 Banks and mercantile houses, credit 
 
 latitude of, 948. 
 Banking and credit, 917. 
 Banks as sources of information, 
 
 999. 
 Bank credit. 
 Limitation of, 947. 
 Its relation to commercial credit^ 
 
 S46. 
 
 615 
 
616 
 
 INDEX 
 
 Bankruptcy lawt^ 
 
 Evils of Canadian, 3S9-333. 
 
 Future of, 306-307. 
 
 National, 301-303. 
 
 Procedure in Canada, 336-399. 
 Bargains which involve future de- 
 livery, 215. 
 Bessemer Steamship Company, 537. 
 Bill of Lading, 
 
 Conditions of, 477-478. 
 
 Export, 560-563. 
 
 Forms of, 483-483. 
 Blanketing, 388, 458, 571. 
 Blue Funnel Line, 418. 
 Book acount, 338-340. 
 Bradstreet's Agency, 975. 
 Branch-houses, organization of, 73. 
 Brokers, 43. 
 "Bunching rule," and demurrage, 
 
 487. 
 Business, 
 
 Houses classified by credit under- 
 writers, 298. 
 
 Knowledge of, 161-164. 
 
 Large scale of, 41. 
 
 Meeting of problems peculiar to, 
 111-113. 
 
 Paper, 349-351. 
 
 Policy or expediency, 3S-35. 
 Buyer, The, 
 
 And his work, 168-191. 
 
 Duties of, 169. 
 
 Knowledge of his house, 174. 
 
 Problems of, 170. 
 
 Qualifications of, 174. 
 
 Qualities important to possess, 
 188. 
 
 Task of, 173. 
 
 Wholesale or retail, 178. 
 Buyers, work of, 53. 
 Buying, 
 
 And selling, 1-211. 
 
 By whom done, 188. 
 
 Data, necessity of cross-referenct^' 
 for, 195. 
 
 Speculation, 174. 
 
 System in, 191-311. 
 
 The unirersol business ■etlTity, 
 16& 
 
 Call loans, 34& 
 
 Canada Grain Act and demurrage 
 
 charges, 486. 
 Canada Transjiortation Lines, Ltd., 
 
 formation of, 537. 
 Canadian Credit Men's Association, 
 
 334, 325, 336. 
 Canadian Freight Association, 
 On demurrage, 489. 
 On minimum weights, 36S-.164. 
 Rearranging rating on tobacco, 
 
 376-377. 
 Requirements of, when making 
 rate changes, 379. 
 Canadian Manufacturers' Associa- 
 tion, 325, 401-403. 
 Canadian Passtnger Association, 
 
 499. 
 Canals, 527-539. 
 Canvasser, The, 19. 
 Capital or investment credit, 943. 
 Elements ot safety in, 944. 
 Principal forms of, 945. 
 Cars, 
 
 Freight, 364-365, 435. 
 "Legal tender," 498-409. 
 Passenger, 463-466. 
 Cartage service, 451-453. 
 Catalogue file, 196. 
 Catalogue of mail-order house, 31. 
 Character, the ability to read, 139- 
 
 140. 
 Charter party, 556-558. 
 Checking deliveries, 903. 
 Checking invoice, Ci>;-305. 
 Checking partial deliveries, 303. 
 Chief factors in selling campaign, 
 
 93. 
 Claims department of freight busi- 
 ness, 501-504. 
 Classes of credit, various, 999-994. 
 Closing a sale, 145. 
 Collection methods, 3I7-SI8. 
 
INDEX 
 
 617 
 
 Combination! of retail wUiog meth- 
 ods, S3. 
 Corobinationa of wholesale selling 
 
 methods, SO. 
 Commercial agency. The, 9T5. 
 Commercial agencies, need of, 973- 
 
 i74. 
 Commission merchants, 43. 
 Committee, 
 Advertising, 80. 
 Factory, 87. , 
 
 OiBce, 89. 
 Sales, 88. 
 Committee system. 
 As an aid to cotfperation, 89-83. 
 For manufacturers, diart of, 85. 
 Practical results of, 90. 
 Common law obligations of rail- 
 ways, 476-477. 
 Compensation of salesmen, 191-199. 
 Competition and railway traffic, 490- 
 
 491. 454-4A5. 
 Competitive schemes to promote 
 
 selling efficiency, 116-119. 
 Complementary commodities, 499. 
 Conference, sdllng, 190. 
 Confidence, 
 An essential of selling, 164. 
 Relation of, to business, 919. 
 Supported by contracts, 913. 
 Conrad, Professor, on credit, 993. 
 Considerations, 
 Financial, 179. 
 Two opposing, 170-171. 
 Consumer, 
 Advantages of direct sales only 
 
 to, 38. 
 Defined, 3. 
 Disadvantage of direct sales only 
 
 to, 38. 
 Effect of too ready credit upon, 
 933. 
 Contents of the agency reports, 
 
 977. 
 Contracts support confidence, 913. 
 Conversational ability of salesman, 
 100. 
 
 Cofiperatlon, 
 
 Between selling and other depart- 
 ments, 78-91. 
 
 Induced by profit-sharing, 81-89. 
 
 Use of tact in, 79-80. 
 Cost of agency service, 979. 
 Costs, important to know, 184. 
 Courtesy, 156. 
 Cowles' "A General Freight and 
 
 Passenger Port," 387-380. 
 Creating desire, 143-144. 
 Credit, 
 
 Advantages of, 993. 
 
 And banking, 917. 
 
 And the credit man, 919. 
 
 And traffic departments, 75. 
 
 Associations in Canada, 394-396. 
 
 Capital or investment, 943. 
 
 Coflperative methods, special agen- 
 cies, 984-991. 
 
 Department, functions of, 959- 
 957. 
 
 Division of, 995, 943-951. 
 
 Estimations, forming of, 959. 
 
 Extension in wholesale trade, 953. 
 
 Giving, by retail house, 955. 
 
 Giving, three essentials In, 958. 
 
 Granted by manufacturing con- 
 cern, 954. 
 
 Granting of, to consumers, 15. 
 
 Information, sources of, 958-995. 
 
 Information, special sources of, 
 963-995. 
 
 Latitude of bank and mercantile 
 house, 948. 
 
 Mercantile, 935-936. 
 
 Nature of, 919-994. 
 
 Other abuses of, 934. 
 
 Personal, 996. 
 
 Personal, system not well organ- 
 ised, 996. 
 
 Protective, 996-394. 
 
 Rating of seller, 184. 
 
 Relation of money to, 916. 
 
 Time as factor in. 991. 
 
 Various classes of, 999-994. 
 Credits, installment house, 956-957. 
 
618 
 
 INDEX 
 
 Cppdll Insuranrr, 997. 
 Arguments In favor of, 999-300. 
 Wcnk points in, 300. 
 Credit man. relation of. to firm, 319. 
 Crwiit men's nssociations, 307. 
 
 Iniimrtiinee of, 311. 
 Cre«lit Men, Vational Association 
 
 of. 308-310. 
 Credit system, factors that have 
 
 changed, 937. 
 Cre<llt underwriters, business houses 
 
 classified by, 298. 
 Criticism of agency methods. 281- 
 284. 
 
 Cross-references for buying data, 
 
 necessity of, 195. 
 Cullom Comniittee on "what the 
 
 traffic will bear," 397. 
 
 Dating, custom of, 238. 
 "Dead weight," 464-463. 
 Declining Importance of middle- 
 man, 40. 
 
 Definition of Salesmanship, 136. 
 Deliveries, 
 
 Checking, 203. 
 
 Checking partial, 203. 
 Demand, knowledge of, 177. 
 Demonstration of wares, 149. 
 Demurrage, 
 
 And car shortage, 487-489. 
 
 Average, 493-495. 
 
 "Bunching rule," 487. 
 
 Causes of, 486-487. 
 
 Defined, 485-486. 
 
 Georgia Railroad Commission on. 
 494. 
 
 Higher charges, 490. 
 National rules of the United 
 States, 493. 
 
 Pacific Car Demurrage Bureau 
 49»-493. * 
 
 Reciprocal. 495-497. 
 Density of traffic, 461-469. 
 
 Department efficiency. 
 Knowledge of business ■ factor In 
 
 promoting, 190. 
 Salesman's part In promoting. 
 133-135. 
 Department managers, 61. 
 Department organisation, variations 
 
 In. 55. 
 Department store, 48. 
 Departments of house, familiaritr 
 
 with, 176. 
 Dependence of manufacturers' sell- 
 ing organisation upon selling 
 methods, 67. 
 Depreciation, possibility of, 179. 
 Depressions and panics, relation of 
 
 credit to, 217-991. 
 Desire, creating, 14.3-144. 
 Differences between manufacturer's 
 and . wholesaler's or retailer's 
 selling organisation, 69-70. 
 Differential rates, 415-416. 
 Direct to consumer business, 39. 
 Disadvantages of direct sales only 
 
 to consumer, 238. 
 Disadvantages of direct sales only 
 
 to Jobbers, 36. 
 Disadvantages of direct sales only 
 
 to retailers, 38. 
 Disadvantages of retail seUing by 
 
 mall-order, 23. 
 Disadvantages of selling through 
 
 retail store, 15. 
 Discounts and loans, 249-951. 
 Distribution, Importance of problem 
 
 of, 1-3. 
 Distributive rates, 435-436. 
 Division of credit, 225, 243-951 
 Dominion Transport Company, 
 452. ' 
 
 Due diligence, 484. 
 Dundas Road, The, 337. 
 Dun's Agency, 275. 
 Duties and reports of salesmen. 
 
 128-1.35. 
 Duties of sales manager. 114^ 
 
INDEX 
 
 619 
 
 Economic depreuion and passenger 
 
 business, 469-463. 
 Kronomic progress, money sign of, 
 
 914. 
 I-'ducation, gene d\, lAl. 
 K (Torts to secure protection, 396. 
 Kly, Professor, on Credit, W4. 
 Kinbargo, 488. 
 
 Kmployds, acquaintance with, im- 
 portant, 176. 
 Employment in factory, best meth- 
 od, 107. 
 Enthusiasm, 165-166. 
 Example of statement analysis, 969- 
 
 270. 
 I''xamples of successful mail-order 
 
 selling, 93. 
 Excess fare trains, 4A5-4M, 464. 
 Executive committee, 84. 
 Expediency, or business policy, 33- 
 
 35. 
 Expenses of salesman, 193. 
 Express service, 505 et ttq. 
 Classification. 510-511. 
 Defined, 505. 
 History of, 506-508. 
 In Canada, 508-509. 
 Rates, 514-595. 
 Scope of, 505-506. 
 
 Piirtors in a sale, 148. 
 
 Kiirtors in distribution, 1-19. 
 
 Factors in solution of first prob- 
 lem, 39. 
 
 Factors that have changed credit 
 system, 937. 
 
 Factory committee, 87. 
 
 Factory purchasing agents, 189. 
 
 Familiarity with .departments of 
 house, 176. 
 
 Fidelity, 156. 
 
 File, quotation, 197. 
 
 Files, catalogue, 196. 
 
 Financial coiuiderationa, 179. 
 Pink, Albert, on Tiaflc. 397-398. 
 Firm index, 194. 
 First problem of manufacture, 3L 
 
 Factors in solution of, 39. 
 Foreign trade of Canada, percent- 
 age summaries of, 544-545. 
 Forming of credit estimations, 959. 
 Freight 
 
 Cars, 364-365, 495. 
 
 Character of. in lake trafflc, 534- 
 
 Resources, 34 -346. 
 Freight classification. 
 Expansion of Canadian, 900-369. 
 History of, 359-353. 
 Hr built, aM-357. 
 In Canada, 358-359. 
 In iniemational traffic, 359-360. 
 In United States, 357-358. 
 Necessity of, 359. 
 Recognising quantity differences, 
 369-364. 
 Friendly relations with salesmen, 
 
 187. 
 Functions of credit department, 
 
 959-957. 
 Future of Bankruptcy Law, 306- 
 307. 
 
 General education, 151. 
 
 General sales manager, 63. 
 
 General system and specific condi- 
 tions, 191. 
 
 Georgia Railroad Commission and 
 demurrage, 494. 
 
 Goods to be purchased, knowledge 
 of, 179-181. 
 
 Goods to be sold, training In use 
 and construction of, 105. 
 
 Government railroads. 349-343. 
 
 Graduate table in express rating, 
 599-593. 
 
 H 
 
 Harter Act, 569-563. 
 Health, 159. 
 
eao 
 
 INDEX 
 
 Herndon, Wm^ flnt expreu car- 
 rier. M7. 
 
 High way I, 
 Influrncr on afrriculture, 3ST. 
 Influence on trade. 337-338. 
 
 Hinton. W. P.. on the relation of 
 freight and passenger biuineas, 
 460. 
 
 Honesty. 144. 
 
 House-organs, 119. 
 
 Houses dealt with, selling methods 
 of. 185. 
 
 How Information is collected, 975- 
 878. 
 
 Illustrations of depreciation, 173. 
 Illustrative method, mail, index 
 
 cards, etc., 313-316. 
 Importance of credit men's associa- 
 tions, 311. 
 Importance of location, of various 
 
 houses, 183. 
 Importance of personal appearance, 
 
 153. 
 Importance of site in mail orders, 
 
 17. 
 Important to know costs, 184. 
 Imports, 
 British, 545. 
 French, 546. 
 Mexican, 546-547. 
 United States, 545-546. 
 Inciting to action, 144-146. 
 Inclination for work, 149. 
 Index cards, mail, etc., SlS-316. 
 Index, 
 
 Firm. 193-194. 
 Subject, 193-19a 
 Inducing resolution and inciting to 
 
 action, 144-146. 
 . Industry. 157. 
 Information, 
 
 Banks as source of, S92. 
 Gathered by salesman, 979. 
 How collected, 975-976. 
 
 Method of distribatlng^ 971. 
 Sources of, 979. 
 Initiative, 
 Importance of, 160. 
 In selling, 140. 
 Inland water transportation 
 Affecting railway rates, 596. 
 Compared to rail transportation, 
 596-597. 
 Inquiries, reason for not making 
 
 proper, 997-939. 
 Installment Jiouse credits, 956-457. 
 Insurance. 
 And the St Lawrence route, A59- 
 
 554. 
 Railway, 480. 
 Insurance, credit, 997. 
 Arguments in favor of, 999-300, 
 Weak points in, 300. 
 Intelligence and general Information 
 
 of salesman, 100. 
 Interchange system, adyantages of, 
 991. 
 
 Interest, arousing, 141-149. 
 International Rate Case. 436-4a& 
 Interswitching, 499-501. 
 Inventory form, 907. 
 Inventory, perpetual, 906. 
 Investment or capiUl credit, 943. 
 Investigation., methods of, 958. 
 Invoice, checking the, 904-905. 
 Itinerant merchant, prototype of, 
 8-19. 
 
 Jobber, The, 
 Defined, 5. 
 
 Advantages of direct sales to, S5. 
 Advertising department ot, 64. 
 Place of, in merchandising tya- 
 
 tem, 41-43. 
 Purchasing system of, 910-9U. 
 Salesmen paid on commission, 37. 
 Sales organisation of, diart of, 
 
 59. 
 Selling problem of, 95. 
 
INDEX 
 
 Ml 
 
 Johnson. Emorjr R^ on Panama Ca- 
 nal, MO-Ml. A7S-AT4. 
 Judging future prico, lU. 
 
 Kanaaa, rates to, 40ft. 
 
 Keeping in toudi with salesmen, lift. 
 
 Klapp, J. O., on average demurrage, 
 
 404-4«ft. 
 Knowledge, 
 or business, 1A1-I64. 
 Of business, factor in promoting 
 sales department eflcienry, 196. 
 Of demand, 177. 
 Of goods to be purchased, 179- 
 
 181. 
 Of houses hy which buyer is em- 
 ployed, 174. 
 Of manufacturing processes, 17A. 
 Of sources of supply, 180. 
 
 Lachine Canal, SM. 
 Uke 
 
 And canal movements, comparison 
 between, ft41-ft49. 
 
 And canal routes in Canada. ft99- 
 ftS4. 
 
 Rates, ft40-ft4S. 
 
 Shipbuilding, ft37-AS8. 
 
 Vessels, ft36-A37. 
 Liability of railroads, 478-481. 
 limitation of bank credit. i47. 
 Line boats, ftftft. 
 Liquidation 
 
 In Canada, 396-339. 
 
 In England, 339-334. 
 Liquidator, power of, 398-399. 
 Loans and discounts, 949-951. 
 Location of houses, importance of, 
 183. 
 
 M 
 
 MwI.eod, Henry D., on. crises In 
 
 business, 918. 
 Mail, index cards, etc., SlS-Slf. 
 
 Man 
 
 Disadvantage of seUing bjr, M. 
 RetaU seUing by. It. 
 Mall-order business, the. 
 And retaU selling, 13-84. 
 Growth of, 19. 
 Mail-order department defined, 
 
 73. 
 Mail-order house, the. 
 Area of operations of, 90. 
 Catalogue of, 91. 
 Managers of departments, 60. 
 Managers, department, 61. 
 Manufacturer, The, 
 Defined, ft. 
 Committee system of. diagram of, 
 
 8ft. 
 Problems of, S1-4A. 
 Retail stores. 73. 
 Sales department organisation of, 
 
 67-77. 
 Sales organisation of, chart of, 68. 
 Second selling problem of, 39. 
 Selling methods of, 31. 
 Selling organisation, chart of, 
 method of adapting, 76. 
 Manufacturing concern, credit 
 
 granted by, 9ft4. 
 Manufacturing processes, knowledge 
 
 of, 174. 
 Meaning of recent amendmoits, 
 
 304-30ft. 
 Mental ability, IftO. 
 Mercantile credit, 93ft-9S6. 
 Mercantile house and bank, credit 
 
 latitude of, 948. 
 Merchandise manager, ftO. 
 Merchandising system. Jobbers' place 
 
 in, 41-tS. 
 Methods by which credit informa- 
 tion is distributed, 978. 
 Methods of assigning accounts, 941- 
 
 949. 
 Methods of conducting retail store. 
 
 I4-Ift. 
 Methods of coBperation, 78-81. 
 Methods of Investigation, 9ft& 
 
62« 
 
 INDEX 
 
 Methods of training salesmen, 103- 
 113. 
 
 Methods of wholesale seUing, 36. 
 
 Middlemen, declining importance 
 of, 40. 
 
 Milllng-in-transit privilege, 447-440. 
 
 Mixing privilege, the, in freight ship- 
 ping. 367-371. 
 
 Modification of typical purchasing 
 system, 308. 
 
 Money, 
 Relation of credit to, 316. 
 Sign of economic progress, 314. 
 
 Montreal hart)or, 550-554. 
 
 Morgan, E. F., on commercial 
 agencies, 383. 
 
 Murphy, D. B., on business losses, 
 339. 
 
 N 
 
 National Association of Credit Men, 
 308-310. 
 
 Form used by, 395. 
 
 Purposes of, 395. 
 National banlcruptcy laws, 301-303. 
 Nature of credit, 313-334. 
 Nature of product, S3. 
 
 Objections, how to overcome, 145. 
 Ocean traffic, 
 
 Distinguished ftom railway traffic, 
 559. 
 
 Factors affecting, 555-556. 
 
 Freight rates, 558-560. 
 
 Liability, 560-563. 
 
 Tonnage, 547-548. 
 Office committee, 80. 
 Ontario Wholesale Grocers' Guild, 
 
 376. 
 Open-mindedness, 158. 
 Opportunities in salesmanship, 136. 
 Opposing considerations, 170-171. 
 "Order" bill. 483-483. 
 Orders, 
 
 Placing, 300. 
 
 Tracing, 301. 
 
 Order record, 198-199. 
 Ottawa Canals, 336. 
 
 Pacific Car Demurrage BnrMO, 499- 
 493. 
 
 Panama Canal, 569-574. 
 
 Panics and depressions, relation of 
 credit to, 317-331. 
 
 Particular sal^ supervision over, 
 114. 
 
 Passenger fare a multiple of rate 
 and distance, 457-458. 
 
 Passenger traffic, 454 «< mj. 
 
 Pedler, The, defined, 8. 
 
 Per diem charge, 497-499. 
 
 Perpetual ip-entory, 906. 
 
 Persistence, 159. 
 
 Personal credit, 396. 
 Relations of, to other credits, 999. 
 System not well organised, 336. 
 
 Personal interviews, 115. 
 
 Personal interviews with salesmen, 
 99. 
 
 Personality of salesman, 148. 
 
 Placing orders, 300. 
 
 Possibility of depreciation, 173. 
 
 "Postage stamp" rates, 387-380. 
 
 Potential railway traffic, 346-347. 
 
 Practical results of committee sys- 
 tem, 90. 
 
 Present law, advantages of, 90S. 
 
 Price scales, variable, 186. 
 
 Prices, judging future, 181. 
 
 Principles of organisation, 46. 
 
 Principles of salesmanship, 136-147. 
 Training In, 103. 
 
 Problem of distribution, importance 
 of, 1-3. 
 
 Problems, buyer's, 170. 
 
 Problems of manufacturer, 31-45. 
 
 Problems peculiar to business, meet- 
 ing of, 111-113. 
 
 Profit-sharing to induce eoBper»> 
 tion. 81. 
 
 Promises, ability of salesman's house 
 to keep his, 183. 
 
INDEX 
 
 623 
 
 Property stateipentB. forms of, 960- 
 987. 
 
 Protection, credit, 396-334. 
 
 Protection, efforts to secure, 996. 
 
 Prototypes of itinerant merchant, 
 8-19. 
 
 "ublicity and advertising cam- 
 paigns, 40. 
 
 "Pull-bacl(" system in ocean rating, 
 571. 
 
 Purchasing agents, factory, 180. 
 
 Purchasing system. 
 Jobber's, 910-911. 
 Modification of, 308. 
 Requirements of adequate, 199. 
 
 Purpose of selling campaign, 99. 
 
 Qualifications of buyer, 174. 
 Qualifications of sales manager, 94. 
 Qualities important for buyer to 
 
 possess, 188. 
 Qualities of the salesman, 148-167. 
 Quotation file card, 197. 
 
 Railroads, 
 And express service, &09-510. 
 Compared with mercantile and 
 
 manufacturing business, 384- 
 
 385. 
 Competing with water trafltc, 416' 
 
 419. 
 Competition among, 383-384, 414- 
 
 415. 
 Construction of, in Canada, 338- 
 
 340. 
 Distribution of railroad nilcage, 
 
 346. 
 EvHs of parallel lines between 
 
 competitive, 385-387. 
 Interrelation of Canadian and 
 
 TTnited SUtes, 349-351. 
 Liabiiity of, 478-481. 
 Relation of, to port competition, 
 
 490-481. 
 
 Relation of, to trade competition, 
 401-493. 
 
 Rs 
 
 Act 
 
 510- 
 
 bill of lading, 477-478. 
 / "artage charge, 453. 
 A t • xpress classification, 
 
 5i'i. 
 And freight tariffs, 496-497. 
 And passenger rates, 466-479. 
 And payment of charges, 481-489. 
 Railway system in Canada, 338 «t 
 
 *eq. 
 Rates 
 And cost of service, 309-307. 
 Based on capitalisation, 391. 
 Based on physical valuation, 391. 
 Classified (passenger), 471-479. 
 Component facMrs of, 406-495. 
 Concentration, 450-451. 
 DifferenUal, 415-416. 
 Distance, 389-390. 
 Distributive, 435-436. 
 Express, 514-535. 
 Freight, 353, 381 et teq. 
 Import and export, 443-440. 
 Ocean, 555-574. 
 Passenger, 454 tt teq, 
 "Postage stamp," 387-388. 
 Railway, universal interest in, S83> 
 
 383. 
 Special (passenger), 466. 
 Standard (passenger), 466. 
 Transcontinental, 433-435. 
 Reasons for distribution through 
 agents, brokers, and commission 
 merchants, 44. 
 Reasons for not making proper in- 
 quiries, 997-938. 
 Reciprocal value of a signed state* 
 
 ment, 963. 
 Record, order, 198. 
 Reglna Rates Case, 499, 440, 459- 
 
 453. 
 Relation of confidence to business, 
 
 919. 
 Relation of credit man to firm, 
 318. 
 
624 
 
 INDEX 
 
 
 Relation of credit to panics and 
 
 depression, 317-931. 
 Relation of money to credit, 316. 
 Relation of personal credit to other 
 
 credits, 333. 
 Relation of sales and advertising 
 
 departments, 73-74. 
 Report, typical salesman's, 129. 
 Reporter and traveling representa- 
 tive, the, 270-371. 
 Reports, 
 And duties of salesmen, 138-135. 
 Kiads of, 380-1281. 
 Salesmen's purpose of, 128. 
 Requirements of adequate purchas- 
 ing systea. 199. 
 Retail, 
 Buying, system in, 308-210. 
 Department organisation, 47. 
 House, giving of credit by, 365. 
 Organization, chart of, 49. 
 Selling and mail-order buaness, 
 
 13-34. 
 Selling by mail, 18. 
 Selling by mail, advantages of, 
 
 19. 
 Selling, by n.eans of salesman, 
 & 
 
 Selling methods, combination of, 
 
 33. 
 Store, buyer for, 178. 
 Stores, 13. 
 Stores, advantages of selling 
 
 through, 14. 
 Store sales department organisa- 
 tion, diagram of, 49. 
 Stores, manufacturer's, 73. 
 Retailer, The, defined, 4. 
 Retailers, 
 Advantages of direct sales to, 37. 
 Disadvantages of direct sales 
 
 only to, 38. 
 Selling problem of, 7. 
 Retail Merchants' Association, 395. 
 Rideau Canals, 338. 
 Ripley, W Z., on railway expendi- 
 tures in Canada, 394-395. 
 
 Roads, 
 Influence on agriculture, 337. 
 Influence on trade, 337-338. 
 Ross, W. G., on the movement of 
 Canadian grain to Americao 
 ports, 551•^553. 
 
 S 
 
 Safety, elements of, in capital 
 
 credit, 344. 
 Sale, 
 
 A, steps in, 138. 
 
 Factors in, 148. 
 
 Importance of steps In, 146-147. 
 Sales 
 
 And advertising departments, re- 
 lation of, 73-74. 
 
 Committee, 88. 
 
 Department organisation, 46-96. 
 
 Force, general information and 
 intelligence of, 100. 
 Salesman, The, 
 
 Appearance of, 99. 
 
 As gatherer of Information, 979. 
 City, 63. 
 
 Compensation of, 121-129. 
 
 Conversational abilify of, lOOl 
 
 Defined, 136-137. 
 
 Duties and reports of, 198-135. 
 
 Kxpenses of, 123. 
 
 Friendly relations with, 187. 
 
 General, 62. 
 
 Keeping in touch with, 125. 
 
 Keeping in touch with, by letter, 
 
 116. 
 Must observe closely, 130. 
 Part of, in promoting department 
 
 efllclency, 133-135. 
 Personality of, 148. 
 Promises of, ability of bonae to 
 
 keep, 183. 
 Qualities of, 148-167. 
 Report of, a typical, 199. 
 Report of, purpose of, 198b 
 Salesmen, 
 Different kinds of, 79. 
 
INDEX 
 
 625 
 
 Salesmen (contiim$d). 
 
 Methods of training, 109-113. 
 
 Personal interview with, 97. 
 
 Selection of, 95. 
 
 Specialty, 61. 
 
 Store, tiS. 
 
 Supervision of, 114-127. 
 
 System as aid in selection, 96-98. 
 
 Traveling, 63. 
 Salespeople, A3. 
 Sales manager, the, 170. 
 
 Duties of, 114. 
 
 Other duUes of, 191. 
 
 Qualifications of, 94. 
 Salesmanship, 
 
 Definition of, 136. 
 
 Opportunities in, 166. 
 
 Principles of, 136-147. 
 Scope of buyer's duties, 169. 
 Second selling problem of manu- 
 facturer, 39. 
 Seller, credit rating of, 184. 
 Selling, 
 
 Activities, superintendents of dif- 
 ferent kinds of, 71. 
 
 And buying, 1-911. 
 
 And other departments, 78-91. 
 
 At wholesale, 35-30. 
 
 By mail, 99. 
 
 Campaign, 99-101. 
 
 Campaign, chief factors in, 93. 
 
 Campaign, purpose of, OS. 
 
 Campaign sales mana^r, 93-101. 
 
 Conference, 120. 
 
 Efficiency promoted by competi- 
 tive schemes, 116-119. 
 
 Methods of houses dealt with, 185. 
 
 Methods of manufacturer, 31. 
 
 Methods, training in, 108. 
 
 Problem of jobber, 35. 
 
 Problem of retailers, 7. 
 
 Talks, 109-110. 
 Semi-jobbers and manufacturing 
 
 wholesalers, 6. 
 Settlement, influence of waterways 
 
 upon, 335-336. 
 Shedden Company, 452. 
 C—III— 40 
 
 Signed statement, reciprocal value 
 
 of, 263. 
 Sincerity, 155. 
 Sources of credit information, 958- 
 
 995, 263-395. 
 Sources of supply, knowledge of, 
 
 189. 
 Special agencies, credit cooperative 
 
 methods, 984-991. 
 Specialty salesman, 10-13, 61. 
 Specific conditions and general sys- 
 tems, 191. 
 Speculative buying, 174. 
 Spillers and Bakers Case, US. 
 Standard mileage tariffs in express 
 
 service, 514-518. 
 Standard selling talks, 109-110. 
 
 Adaptation of. 111. 
 Statement analysis, example of, 968- 
 
 970. 
 Statements, property, forms of, 
 
 960-967. 
 Statements testing reliability of, 
 
 959. 
 Statistical system, typical, 131-139. 
 Steps in a sale, 138. 
 
 Importance of, 146-147. 
 Subject index, 199-193. 
 Subsidies of steamships, 554-555. 
 Suggestion in selling, 144. 
 Supervision of salesmen, 114-127. 
 Supervision over particular soles, 
 
 114. 
 Superintendents of different kinds 
 
 of selling activities, 71. 
 Suspended accounts, 318-319. 
 System, 
 As an aid in selection, 96-98. 
 In buying, 191-211. 
 In retail buying, 208-910. 
 Variations in, 90. 
 
 Tact, 
 Importance of, 15S. 
 In buying, 186. 
 Use of, in codperation, 79-80. 
 
626 
 
 INDEX 
 
 Talbot Road, The, 337. 
 Tariffs, 
 Class, 404-4M. 
 Commodity, 404-406. 
 Competitive, 430-433. 
 Freigiit, 363, 426 et $«q. 
 Local (express), 518-519. 
 Special, 430-433. 
 Standard mileage (express), 414- 
 
 518. 
 Town, 436-443. 
 Transfer, 518-519. 
 Task of the buyer, the, 173. 
 Territory, assignment of, 124. 
 Testing reliability of a statement, 
 
 359. 
 Three essentials in credit giving, 
 
 258. 
 Thornton, Henry, on notes, 250-251. 
 Time as factor in credit, 221. 
 Tonnage of ships. 
 Inland, 547. 
 Ocean, 547-548. 
 "Too ready credit," effect upon con- 
 sumer, 233. 
 Town tariffs, 436-442. 
 Tracing orders, 201. 
 "Traders' tariff" arrangement, 439- 
 440. 
 
 Traditional factors in distribution, 
 
 9. 
 Traffic, 
 
 Actual, 347. 
 
 And credit departments, 75. 
 
 Combined inland and ocean, 539- 
 
 540. 
 Density ot, 461-462. 
 Freight, comparisons of, 406-408. 
 Importance of freight, 381-382. 
 International, freight classification 
 
 of, 359-360. 
 Interrelation of Canada and the 
 
 United States, 349-351. 
 Ocean, 547-548, 555-574. 
 Of lakes, character of freight of, 
 
 534-535. 
 Potential railway, 346-347. 
 
 What the traffic will bear, 39T- 
 40a 
 Training, 
 
 In construction and use of goods 
 
 to be sold, 105. 
 In principles of salesmanship, 
 
 103. 
 In selling methods 108. 
 Of salesmen, 102. 
 Tramp vessels, 555-556. 
 Transit arrangements, 446-451. 
 Transportation of Canadian grain, 
 
 535-536. 
 Tran8|)ortation of packages, 22. 
 Traveling representative and re- 
 porter, the, 270-271. 
 Trunk lines, influence of, 341-343. 
 
 U 
 
 Uniformity, lack of, in wholesale 
 
 selling, 58. 
 Universal business activity, buying, 
 
 168. 
 
 Vaile, Samuel, and "stage" tariff 
 
 system, 473. 
 Variable price scales, 186. 
 Variations in system, 90. 
 
 W 
 
 Walsh, J. E., on reciprocal demur- 
 rage, 495-496. 
 Water competition affecting rates 
 
 of railway traffic, 416-419. 
 Waterwajrs, 
 Influence on settlement, 335-336. 
 Efficiency of, 597-528. 
 Weak points in credit insurance, 
 
 300. 
 Welland Canal, 336, 531-532. 
 Wellington's "Economic Theory of 
 
 Railway Location," 388-389. 
 West Shore Cose, 387. 
 
INDEX 
 
 627 
 
 What the tniffio will Iwar, Xt7-im. 
 Wheeler. W. II., on .spcrial Hgeney 
 
 wiirk, i'M. 
 Wheeler, W. R., ooinparing rail and 
 
 water. .Ji(i-5?7. 
 White, Horace, on bank loans. Ji»- 
 
 2V9. 
 Wholesale Groeers' Oiiild, 3:35. 
 Wholesale selling. ;25-30. 
 B_v salesmen. 27. 
 I-Hok of iinifomiity in. 58. 
 Methods of, 2Ck 
 .Methods, combination of. ;{0. 
 Orfranization, special applicntion.s 
 of. fi5. 
 W holesale store, buyer for, 178. 
 Wholesale trade, credit extensions 
 in, 3S3. 
 
 Wholesalers, nianiifacturing, 6. 
 Wisconsin Railway Commisition, 
 Computing terminal costs in 
 
 freight liusineNs, 411. 
 On car raeasuranent.s, SflS-.Tfifi. 
 On regulation of freight rates, 
 .•«.i-3.0f!. 
 
 On "what (he traffic will bear,* 
 WO. 
 Wool shipment.s, 411-41.1. 
 Work, inclination for, 149. 
 Work of salesmen, 38. 
 
 /.immernmn. T. ,1., on commercial 
 
 agencies. 27 i. 
 Zone tariff svstem, 473-471.