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Station Bulletin 427 July 1956

Distributing and Handling
Grain-Feeds in New Hampshire

II. Problems In Retail Distribution

by
George B. Rogers and Harry C. Woodworth

AGRICULTURAL EXPERIMENT STATION

UNIVERSITY OF NEW HAMPSHIRE

DURHAM, NEW HAMPSHIRE

Contents

1. Introduction 1

2. Obtaining Volume 1

Location as Related to Railroads and Present Units 2

Number, Size, and Type of Farm as Related to Location 2

Grain-Feed Requirements by Towns as Related to Location 11

Delivery Routes as Related to Volume 11

3. Determining Fair and Equitable Pricing Practices 14

Inconvenience 14

Credit vs. Cash 15

Quantity Discounts and Charges for Delivery on Bagged Feed .... 16

Discounts for Bulk Feed 18

4. Achieving Delivery Route Efficiency 20

Physical and Institutional Factors 20

Route Rearrangements 22

Efficiency of Truck Loading , 28

Efficiency of Delivery and Unloading at the Farm 30

Formulating Route Time 35

Comparative Delivery Route Costs 38

An Alternative Method of Distributing Feed 45

Route Income 48

5. Handling Bulk vs. Bagged Feed 49

The "Potential Market" for Bulk Feed 50

Advantages and Disadvantages to the Dealer 54

6. Conclusions <> 59

Acknowledgments

The authors are indebted to the many feed companies and
individual retail grain dealers who so freely contributed the basic
information on which this bulletin and Station Bulletin 426 are
based. Acknowledgment is also due John Holmes and enneth Taylor
for outstanding performance in carrying out a large share of the
field work; and to E. T. Bardwell for his preparation of many of
the illustrations.

Distributing and Handling
Grain-Feeds in New Hampshire

II. Problems in Retail Distribution *

by

George B. Rogers, Research Economist

and

Harry C. Woodworth, Agricultural Economist*

1 . Introduction

TH I S is the second in a series of bulletins dealing with the area of
marketing and handling grain-feeds in New Hampshire. The first
bulletin dealt with the characteristics of firms engaged in milling and/or
distributing grain-feeds in the State. Field work on the project was com-
pleted in early 1954. Hence, the data obtained on the bulk delivery method
were largely confined to conventional auger-type bulk delivery equipment.
Since that time, bulk trucks using pneumatic equipment have come into
common usage in New Hampshire. In addition, some companies are now
using an alternative method consisting of a hopper and elevating mechan-
ism attached to a regular bagged delivery truck. H the study of bulk
handling could be extended, it would now be possible to make more precise
comparisons between regular bulk delivery equipment using either the auger
or pneumatic mechanisms and the alternative method.

Some of the principal problem areas confronting retail grain-feed
units directly and/or their parent companies or supplying mills are the
following: volume, fair pricing practices, retail unit and delivery route
efficiency, and the choice between bulk and bagged feed. This bulletin dis-
cusses such problems as the preceding and presents data, analysis, and
methodology which can be used to arrive at solutions for them. Discussion
will be phrased largely in terms of retail units, but the joint nature of most
of these problems is recognized and specifically inferred.

2. Obtaining Volume

T^ H E key to obtaining operating efficiencies and to lowering distribution
-* costs (and, by inference, feed costs to producers) lies initially in
choosing locations and practices which will promote volume operations.
The trend in the retail grain feed business away from the country store,
hardware store, or retail unit specializing in lines other than grain
feeds has made possible certain operating economies. With the ex-
pansion of the New Hampshire poultry i ndustry, many retail units
have been able to thrive in their old locations even though at present such
locations may be somewhat less than ideal (or central) in relation to the

* Professor Woodworth initiated this study and started much of the field work
prior to his death on September 18, 1953.

trade area they now cover. New units have opened in many towns and
cities; some older units have gone out of business due to company measures
to consolidate territories, inopportune management decisions, unfavorable
locations for securing, on an economical basis, a proportionate share of
the expanding market, or proprietary inclinations or deaths. The point is
rapidly being reached where the opportunities for opening additional re-
tail feed units and obtaining volume without excessive resort to certain
undesirable competitive practices may be more limited than in the past
two decades. To achieve additional economies in the future, it will be
necessary to place increased emphasis upon relocating existing units ac-
cording to detailed and careful locational analyses.

Location as Related to Railroads and Present Units

Optimum locations for retail grain-feed units might be determined in
part by reference to Figure 1. Utilization of railroad transportation to a
point as close to the center of the trade area as possible is desirable. Long
hauls by railroad being generally cheaper than by truck, and with the added
advantage of equalization through the milling-in-transit privilege, it is eco-
nomical to cover as much of the distance to the customer by rail as can
be accomplished.* Figure 1 is useful to determine where other retail units
have seen fit from experience to locate. It also shows the extent of com-
petition likely in and around a given area in terms of numbers of retail
units.

However, the assumption of past experience as a locational criterion
presupposes static conditions with respect to the availability of railroad
service and to location of the quantitative centers of consuming areas
(herein the number, type, and size of accounts serviced). For many com-
modities, truck transportation is steadily displacing rail transportation to
many points. At the time of writing one additional railroad route in the
State (Plymouth to Woodsville) was under study for discontinuance. There
are likely to be others in future years where overall revenue, use, or need
is below the level required by the railroad to justify continued operation.
In most instances, discontinuance of railroad service is likely to be to
the disadvantage of retail feed units serving the area. Actually many pre-
sent locations may be due to traditional or institutional factors, or to the
immobility of invested capital. For example, a retail grain-feed unit may
continue to operate at a given point in the short run if the net disadvantage
in operating costs is not significantly more than the depreciated value of
the cost of a unit at an optimum location less the salvage value on the
present unit (or similar comparisons involving rent at one or both points).
Eventually, however, present location may yield to other influences such
as those discussed below, or to those related to overall business in the
areas (such as the continuance or discontinuance of railroad services).

Number, Size, and Type of Farm as Related to Location

Some of the additional criteria which need to be considered from a
locational standpoint are the number, type, and size of producing units;
the relative concentration of grain-feed tonnage required; and the relative

* Out of 178 grain-feed dealers spotted on Figure 1, only 15 were located in towns
without rail facilities in 1954. More than half of this number had been served by
rail until fairly recent years.

2

■MB EXISTING RAILROAD LINES

■•• R.R. LINES DISCONTINUED
IN RECENT YEARS

■• RETAIL GRAIN-FEED
OUTLETS

riEH tlftpipsniat AiHicoLTuBJL

ElPERintMT St*1IOM.

Durham, H.tt,

Figure 1. Railroad lines serving New Hampshire and the location
of 178 retail grain-feed outlets in 1954.

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travel distances, stops, and quantities likely to be involved on delivery
routes. This section and those following will treat these points.

Data to illustrate these criteria should be for small areas (towns and
subdivisions and individual farms) but for the most part they are not
available in this form. For detailed locational analyses, census data by
towns, supplemented by information on individual units such as was ob-
tained in the Gilmanton-Barnstead area*, would be desirable, and should
form an important part of the background material. Deviations from the
county patterns inherent in Tables 1-3 are likely to be widespread. How-
ever, these data are useful to point up some of the characteristics to be
analyzed in locational problems.

Of the 13,391 farmsf in New Hampshire listed by the 1950 Census,
about 60 percent were in four counties: Rockingham, Hillsboro, Merrimack,
and Grafton. Over 80 percent of the farms in the State as a whole sold
products valued at under $6,000 annually. In only three counties, Coos.
Rockingham, and Hillsboro, did the proportion of farms with annual
sales of $6,000 or over annually exceed 20 percent. Table 1 shows the
numbers of farms and percentages of farms grouped by total value of pro-
ducts sold.

The preceding data once again point out the predominance of small
units among the customers available to retail feed outlets. Moreover, there
is not likely to be any sudden or extensive shift in this pattern. True, the
average size of "commercial" farms may continue to increase, but New
Hampshire will probably continue to have large numbers of "part-time"
or "residential" farms. Hence many sales to small units will continue to
be a characteristic of retail distribution of grain-feeds in the State, and
one which will play a significant role in determining: (a) the extent to
which bulk feed can be economically distributed; and (b) the practices
and economies which may evolve in bagged feed distribution.

Data on the numbers and proportions of farms under various 1950
census classifications are contained in Table 2. Less than half of the total
number of farms in the State are classified as "commercial"; and in only
three counties, Coos, Hillsboro, and Grafton do numbers of "commercial"
farms exceed 50 percent of the county total. All counties were contained
in the range of 13-24 percent "part-time" farms, and all counties, except
Coos, fell in the range of 26-46 percent "residential" farms. The largest
percentages of large "commercial" farms (value of products sold annually
$10,000 or over) were found in Rockingham, Hillsboro, and Merrimack
counties.

In terms of appraising a county as a market for grain-feeds, numbers
of farms are likely to be somewhat misleading unless tied to type of farm.
Table 3 shows numbers of farms by type. From these data it can be ob-
served that the largest numbers of poultry farms are in Hillsboro, Rock-
ingham, and Merrimack counties; and the largest numbers of dairy farms
in Grafton, Coos, Hillsboro, Rockingham, and Merrimack counties. It is
apparent that the distribution of dairy farms over the State is somewhat
more general than the distribution of poultry farms. Grain-feed needs of
poultry and dairy cattle would generally outweigh grain-feed needs of
other classes of livestock in locational analysis.

* N. H. Agr. Exp. Sta. Bui. 426, July, 1956, Tables 12 and 13.

fThe 1950 census definition of a farm was: "places of 3 or more acres — if
the value of agricultural products in 1949, inclusive of home gardens, amounted to
$150 or more."

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Figure 2. Annual grain-feed requirements in tons for milk cows,

by towns, 19S0.

8

— KEY —

2000 AND OVER

000-/999
500-999
100-499

I I UNDER 100

riEH tlAMPSniPt Agricuctubai.
EsPERIrttMT STAXrOtl,

Durham , tl.tt.

Figure 3. Annual grain-feed requirements in tons for laying hens,

by towns, 1950.

Table 4. Towns Requiring Largest Amounts of Grain-Feed for
Milk Cows and Laying Hens, by Areas, 1950

Annual Tonnage

of Grain-Feed for:

Milk Cows

Laying

Hens

Area

1,000 and over

500-999 2,000 and over

1,000-1,999

Connecticut
River
Valley

Colebrook
Lancaster

Haverhill

Bath

Lebanon

Claremont

Stewartstown
Jefferson
Columbia
Pittsburg

Piermont

Monroe

Lyme

Lisbon

Hanover

Littleton

Canaan

Charlestown
Plainfield

Walpole

Westmoreland
Keene

Walpole

Lakes Region
and Central
New Hampshire

Gilford
Belmont

Rumney

Merrimack

River Valley and
South central
New Hampshire

Concord

Loudon

Hopkinton

Henniker

Epsom

Concord
Loudon
Henniker
Chichester

Hollis

Bedford

Pelham

Goffstown

Hudson

Milford

Nashua

Weare

Goffstown

Hudson

Bedford

Manchester

Hollis

Nashua
New Ipswich
New Boston
Amherst
Mont Vernon
Peterborough
Merrimack
Pelham
Jaffrey

Southeastern
New Hampshire

Dover
Rochester
Derry
Salem

Brentwood
Kingston

Farmington

Rochester

Stratham

Candia

Raymond

Auburn

Chester

Derry

Danville

Hampstead

Salem

10

Grain-Feed Requirements by Towns as Related to Location

As noted previously, county data are unfortunately somewhat too
general for detailed locational analysis. Hence, for milk cows and laying
hens, estimates of grain-feed requirements by towns have been derived,
based on data from the State Tax Commission.* It would be possible to
derive similar estimates for some other classes of livestock by the methods
used for the preceding. f However, tax data do not include young chickens,
commercial broilers, or turkeys, and town census data were not available,
so one of the major grain-feed consuming classes of livestock (chickens
raised for meat or replacements) could not be taken into account. This
omission will certainly alter some of the conclusions which could be drawn
about the grain-feed requirements of particular towns from the data shown
in Figures 2 and 3.

Table 4 lists the towns, by areas, requiring annually 500 tons or over
of grain-feed for milk cows and 1,000 tons or over of grain-feed for lay-
ing hens. The principal concentrations of these towns using large amounts of
grain-feed for milk cows are in the Connecticut River Valley and the Mer-
rimack River Valley and South central New Hampshire. For laying hens,
the greatest concentrations of towns using large amounts of grain-feed
are in the Merrimack River Valley, South central, and Southeastern New
Hampshire.

Delivery Routes as Related to Volume

Inasmuch as more than four-fifths of the tonnage of grain-feeds sold
by a typical retail outlet is likely to be delivered, the territory so served
and the routes established are inherent in studying the question of volume.
Data such as those presented in Table 5 illustrate some of the comparative
expectations of density of stops, travel distances, and average purchases
per unit in various areas of the State. Comparing two counties, Rocking-

Table 5. Annual Tonnage Requirements of Grain-Feed, by Counties,
Related to Area Characteristics

Area

Road

Tons Required

Annually

per:

1,000

Road

Farm

Farm

County

(1,000 Acres)

Milesi

Acres

Mile

(all! 2

(Livestock)''

Belknap

256.0

782.44

38.1

12.7

11.5

38.9

Carroll

600.3

1,092.76

15.2

8.3

15.0

54.6

Cheshire

458.9

1,337.89

44.1

15.1

19.4

51.5

Coos

1,166.1

894.28

12.2

15.9

15.5

28.3

Grafton

1,098.2

1,943.57

24.9

14.1

15.7

35.2

Hillsboro

569.6

2.287.08

118.2

29.4

30.9

65.2

Merrimack

594.6

1,877.71

69.6

22.5

21.8

55.3

Rockingham

442.2

1,623.59

124.9

34.0

25.0

63.9

Strafford

241.3

809.73

102.4

30.5

25.4

74.2

Sullivan

343.7

1,007.91

36.3

12.4

12.8

32.4

1 As of March 1, 1953. Source: N. H. Higtiway Department.

2 Total number of farms reported in 1950 census.

''Total of dairy, poultry, livestock farms, general farms predominantly livestock, plus one-hall
number of general farms, crop and livestock.

* Fortieth Annual Report of the New Hampshire State Tax Commission, Tax
Year of 1950.

t Proration of the U.S.D.A. series among towns in proportion to numbers reported
for tax purposes times assumed level of grain consumption.

11

ham and Coos, which lie close to the extremes of these data, it can be ob-
served that for Rockingham County, the requirements per land area unit,
per road mile, and per farm are high. For Coos County, the reverse is true.
The conclusions which could be reached on the basis of Table 5 are some-
what modified from those which could have been reached on the basis of
Tables 1-3 alone, due to the introduction of the questions of dispersion of
customers and quantitative grain-feed requirements.

However, in order to explore these matters on a more specific basis,
data are summarized in Tables 6 and 7 from 60 grain-feed delivery routes
in the southeastern quarter of New Hampshire. Volume per route (meas-
ured in terms of 100-lb. units) achieved in this area averaged relatively
close to 5 tons for all routes. Bulk routes averaged close to 61/2 tons; bagged
routes better than 4% tons. These figures represent a high percentage of
the capacity of typical delivery equipment used.

In terms of number of stops per route, the average of 7.2 appears
relatively high despite the substantial number of routes with only 1 or 2
stops, there being only one observation at the 3-stop interval and none
at the 4-stop interval. H, therefore, the 3-stop and over data is averaged,
11.2 stops per route is derived. This is further illustrative of the coexistence
of routes involving one or two large customers and those involving large
numbers of small-unit customers. The latter group is a clue to the efforts
of retail grain-feed units to reach out considerable distances to achieve
volume and/or meet "competition". All bulk routes show an average of
1.3 stops per route as compared to 8.1 stops per route for all bagged routes.
Obviously, bulk feed routes concentrate exclusively on the larger accounts.

Table 6. Analysis of Quantity, Stops, and Mileage on 60 Grain-Feed
Delivery Routes in Southeastern New Hampshire

Number of

100 lb.

Number

of St(

aps

Number

of Mi

les

Bags Per

Route

Per

Route

Per

Route

Interval

Frequency

Interval

Frequency

Interval

Free

[uency

0- 19

3

1

18

0- 9

6

20- 39

5

2

6

10-19

8

40- 59

4

3- 5

8

20-29

7

60- 79

5

6- 8

8

30-39

12

80-109

15

9-11

4

40-49

6

110-139

17

12-14

6

50-59

9

140-159

6

15-17

3

60-69

1

160-179

3

18-20

4

70-79

7

180-199

2

21 up

3

80 up

2

98.21

602

7.21

602

38.81

582

93.33

524

8.13

524

36.63 9

524

130.05

86

1.35

86

58.35 10

66

10-1977

—

1-287

—

6-91.07

—

61-1748

—

1- 28

—

10-81.98

—

^ Average all routes.

2 Total all routes.

^ Bagged routes average.

* Bagged routes total.
^ Bulk routes average.

* Bulk routes total.

'' Range, bagged routes.

^ Range, bulk routes.

"Average miles per bagged route: 1 stop, 24.8; 2 stops, 30.5; 3 stops and over, 41.2.

^"Average miles per bulk route: 1 stop, 49.3; 2 stops, 76.1.

12

The marked difference between one- and two-stop routes and the three-
stop-and-over routes is again noticeable in the data in Table 7 relative
to the number of 100-lb. units delivered per stop. For the former group,
the average observed was 93.0 units per stop; for the latter group only 7.6.

Table 7. Analysis of Quantity per Mile and per Stop on 60 Grain-Feed
Delivery Routes in Southeastern New Hampshire

Number of 100-lb.
Per Mile

Units

Number of
Per

100-lb
Stop

Units

3

Stops

and Over

1 and

2 Stops

Per

Route

Per

Route

Frequency

Frequency

Interval

Frequency

Interval

of Routes

Interval

1 Stop 2 Stop

0.0- 0.9

6

0.0- 3.9

4

Under 12.0

1

1.0- 1.9

17

4.0- 5.9

13

12.0- 59.9

0

2.0- 2.9

14

6.0- 8.9

7

60.0- 79.9

2 6

3.0- 3.9

8

9.0-11.9

5

80.0- 99.9

3

4.0- 5.9

5

12.0-20.9

2

100.0-119.9

2

6.0- 9.9

2

21.0-29.9

3

120.0-139.9

3

10.0-14.9

2

30.0-38.9

1

140.0-159.9

5

15.0 up

4

39.0 up

1

160.0 up

2

2.5^

582

7.61

362

93.01

182

62

2..53 !>
2. in 10

524
66

7.63

364

87.53
104.0-'^

124
66

44

26

0.5-18.77

—

2.6-39.27

—

10-1507

—

—

0.8-14.0S

—

—

—

60-1748

—

—

^ Average all routes.

~ Total all routes.

^ Bagged routes average.

* Bagged routes total.
^ Bulk routes average.
" Bulk routes total.

' Range, bagged routes.

* Range, bulk routes.

^ Average number of 100-lb. units delivered per mile
stops and over, 2.1.
^^ Average number of 100 lb. units delivered per mil

on bagged routes: 1 stop, 4.2; 2 stops, 4.1;
! on bulk routes: 1 stop, 2.3; 2 stops, 1.1.

Introduction of route mileage into the analysis yields some interesting
results for these data. The average number of miles observed per route for all
routes was 38.8; for all bagged routes, 36.6; for all bulk routes, 58.3. For
the bulk routes included in the survey, this is indicative of only partial
conversion of larger customers to bulk feed and/or the scattered location
of these customers. Accordingly, mileage per route for 1- and 2-stop bulk
routes is about double the corresponding mileage for 1- and 2-stop bagged
routes, and for both 1- and 2-stop bulk routes in excess of average mileage
on 3-stop-and-and-over bagged routes. The average number of 100-lb. units
delivered per mile was 4.2 for 1-stop bagged routes. 4.1 for 2-stop bagged
routes, and 2.1 for 3-stop-and-over bagged routes. In contrast, the average
number of 100-lb. units delivered per mile on 1-stop bulk routes was 2.3,
and on 2-stop bulk routes, 1.1. Thus, for the routes surveyed, there was
evidence of excessive travel distance per 100-lb. unit delivered on bulk
routes as well as on those bagged routes where there were large numbers
of small-unit customers.

Multiple-outlet firms (either company-owned units or agents) are
characteristic of grain-feed distribution in New Hampshire, and are likely

13

to so remain because of economies of scale. Hence there will continue to
be marked differences between units in different territories. Some territories
will continue more economical than others, but within territories there is
room for selection of better locations. It is within this concept that the
matter of locational selection can be related to volume. The achievement of
better locations within territories is more significant than attempting to
minimize differences between outlets selling the same brand in different
territories. The eventual minimization of distribution costs lies in the appli-
cation of the principles suggested in this and in succeeding sections unit-by-
unit. Assuming continuation of a substantial degree of delivery-route-cost
equalization on a firm basis as now practiced, the problem becomes more
one of maximizing efficiency in each territory serviced step-by-step in order
to achieve a higher degree of efficiency for the combined territories.

3. Determining Fair and Equitable Pricing Practices

HAVING established a retail grain-feed unit at a location within a
particular territory which promises the opportunity for securing maxi-
mum volume, a second problem for examination is that of determining
fair and equitable pricing practices. This section concerns primarily those
aspects of pricing other than the base price. Base price, as used herein, is
the cost to or the transfer value of grain-feed arriving at the retail dis-
tribution point plus all added charges for a non-delivered sale of a single
100-lb. unit with payment within 30 days. It is assumed already to include
the cost of central office or local unit overhead and "service". It was not
a purpose of this study to appraise base prices in terms of the relative
nutritional values of different brands nor to judge the issue of "service".
With respect to the latter, it can be pointed out that "service" actually is
an overhead cost, but that it probably costs the individual producer who
makes extensive use of it less than if he actually hired such work done.
This is because the offering of extensive "service" is done on the basis
that relatively small numbers of customers actually take full advantage of
it, with the cost assigned over the entire number of customers, keeping
the per unit addition minimized. Hence, "service" contributes toward good-
will and may be a good investment for the company and the extensive user,
so long as use is not universal, while costing the user, non-user or partial-
user only a small amount per unit.

Service, as used hereafter, will refer to those operations performed in
the course of actual sale or delivery. Any distribution system results from
the interaction of the demand for such services by the consumer (in this
case the producer buying grain-feeds) and the willingness of one or more
distributors (in this case the grain dealers) to provide such services at
a minimum or no direct cost. In the distribution of grain-feeds, providing
the maximum in sales and delivery service and in convenience to the pro-
ducer is the rule rather than the exception. Furthermore, it can be asserted
with justification that the sales and delivery services, and the convenience
to the producer, are generally in disequilibrium with the costs actually paid
for them. In general, some producers are subsidized and some are penalized.

Inconvenience

The common reason given for doing things like unloading at difficult
spots, carrying bags to upper floors or over long distances, and dumping

14

bags was "competition would do these things if we didn't." Yet such things
unquestionably add to the cost of distribution, though the cost is spread
over all customers with the charge to the recipient small. It would be rather
difficult to justify an "inconvenience" charge, particularly if auxiliary equip-
ment could be had at a minimum cost which would alleviate the situation.
Some further discussion of these problems is contained in a later section.
Minimizing the cost effects of inconveniences to the delivery personnel and
of excessive wear-and-tear on delivery equipment might most expeditiously
come about through an informal "gentlemen's agreement" or a legally bind-
ing fair trade practices agreement entered into by feed companies and/or
dealers. True, progress has been made in working with producers to correct
difficult situations, and some companies have been known to drop customers
or to lose them over some of these points. In the final analysis, however, a
few non-cooperative producers, or one company wishing to secure advantage
in a given situation, could stand in the way of general improvement in the
absence of an agreement among all companies and/or dealers operating in
the State.

Such an agreement might, or might not be broadened to include
standard charges for delivery, credit, and quantity, and discounts for cash.
These are more determinate areas, though there is considerable variability
in values assigned to them by retail outlets. In a number of instances,
values observed in the study were obsolete (low) when measured against
the charges made by most companies, or without sufficient breakdowns (ex-
ample: some quantitative discounts did not start until purchases reached
5 tons). It is extremely doubtful, however, if breakdowns could become
very numerous without becoming a burden and a significant additional
bookkeeping and billing cost.

Credit vs. Cash

Data were not collected in this study which would enable a precise
appraisal of the costs of handling "credit" and "cash" accounts. Hence, no
exact values, charges, or discounts are suggested. Data were obtained on
collecting time on routes, but in order to make a numerical analysis, addi-
tional data would be needed on office time and carrying charges. However,
it is probably reasonable to assume that there should be little difference
in time collecting the bill at the farm or at the office where both are done
efficiently. Thus, the measurable difference is probably in carrying charges.

It is suggested that three breakdowns would be equitable within the
credit-cash area:

(1) Payment in full within 7-10 days.

(2) Payment in full between 7-10 days and 30 days.

(3) Payment at some time after 30 days.

The first alternative might carry a specific discount on either a dollars-
and-cents or percentage basis; the third, interest at a specified rate per
each additional 30 days or fraction thereof on the unpaid balances. The
second, payment between 7-10 and 30 days, is assumed to be a character-
istic of the base price, as discussed herein.

Few transactions are made in distributive channels wherein "spot cash"
is involved. A usual courtesy period of 5, 7, 10, or some other number of
days is allowed between delivery or billing and payment. In the case of
farm purchases of feed, payment for these is generally related to receipt of

15

a periodic check for eggs or milk. This interval in most instances would
correspond to the 7-10 day period suggested as qualifying for a "cash"
discount.

Within the concepts outlined, it is suggested that an average charge
be included in feed prices which would be sufficient to permit the carrying
of a share of accounts up to 30 days without penalty in the form of "addi-
tional charges'. However, in the interests of financial stability for both the
producer and the feed dealer, long-term credit (over 30 days) should be
carefully watched. For most producers, credit needs can be met more reason-
ably by regular lending agencies than through customary store credit rates.
In the long run, the feed dealer would be doing the producer a service by
suggesting this approach, and would also cut down on one of the big
headaches in the feed business today. The preceding observations relate
particularly to enterprises producing eggs or milk, which yield regular re-
turns. There is probably a place for some extension of credit on rearing
laying flock replacements, particularly where the grower can finance to a
point where credit needed to complete the growing period is equal to or
less than the meat value. Feed credit is widely used in broiler financing,
both in contract growing and by independent producers. Here, returns
are obtained in total several times a year. Certainly, feed credit has been a
necessary adjunct to the rapid expansion of broiler production, but just
as certainly, such credit has not always been wisely extended.

Quantity Discounts and Charges for Delivery on Bagged Feed

These two areas may be somewhat related, i.e., charges for delivery
sometimes vary with quantitative amounts. Generally, they are not well
developed in terms of breakdowns, at least from posted or printed price
sheets. It is known that in actual practice there are many separate and
varying bases used for determining prices, even between producers of
comparable size. The objective in these areas should be to standardize and
break down discounts and charges in some detail and roughly in relation-
ship to relative costs for handling various quantities.

It was mentioned previously that some quantity discounts do not start
until purchases reach 5 tons. Others apply to "1 ton and over". There
appear to be a number of points at which quantity discounts could logical-
ly be established to bear some relationship to relative costs. These are
shown in Table 8.

In the absence of comprehensive data, the "steps" in Figure 4 were
interpolated at the points listed in Table 8 from the curve of calculated
values using loading time (converted to time per ton) as the dependent

Table 8. Points for Consideration in Establishing Quantity Discounts

Quantity Discount Per Ton Reason

Under 1 ton none Below minimum

1.0- 2.9 tons $1.00 Upper 15% of customers

3.0- 4.9 tons 2.00 Large customer

5.0- 9.9 tons 3.00 Truckload

10.0-14.9 tons 4.00 2 truckloads

15.0-19.9 tons 5.00 3 truckloads

20.0-24.9 tons 5.50 Minimum to average carload

25.0 tons and over 6.00 Full carload

16

variable and quantity as the independent variable. It was assumed that
the rationale for quantity discounts lies in the progressive operating eco-
nomies realized by handling larger and larger unit sales up to the full
carload level, and that the economies bear a rough relationship to handling
times (i.e., herein loading times as derived from data summarized else-
where in the bulletin). The tentative amounts were interpolated from the
values reported by a number of retail units. Some units also distinguish
between mixed carloads and straight carloads of one feed in determining
quantity discounts. There are undoubtedly economies on the latter vs. the
former.

It is not intended to suggest that the entire list of points in Table 8
be applied to all situations, but rather that quantity discounts be made pro-
gressive by several stages, and alike for comparable unit purchases. There
is admittedly a problem of variation (or adjustment) when purchases of
a given producer vary seasonally, or for other reasons, and of specifying
the time period involved.

From data obtained in the study, the values in Figure 5 were inter-
polated. It is apparent that there are progressive economies obtained as
size of delivery increases. The rate of decrease after 2^/^ tons (50 bags),
however, is probably slight. The suggestion of decreasing per unit delivery
costs with increasing size of delivery points toward the equity of "actual
delivery costs" or a graduated system of charges rather than a constant per
unit charge. The idea of a minimum delivery charge is widely practiced
in the distribution of other commodities. For the retail grain-feed unit.

UJ
Q.

V)

q:

<

-J
-J
o

Q

3
O

o

\ 00 ?^

o

Figure 4. Comparison of assumed quantity discounts with net decreases

loading labor cost units.

in

17

25

20

CO
Q

o

CL 15
O

o
cc

UJ
CL

(/)

h-

U

o

10

FLAT CHARGE
OF 25 'FOR
lOR 2 BAGS

^

— KEY —

LOAD/NG LABOR COST

COLLECTING LABOR COST

DEL/VERY LABOR COST

TRUCK DEPRECIATION 8 OVERHEAD COSTS

TRUCK OPERAT/NG COSTS

TRAVEL LABOR COST

CONSTANT CHARGE

GRADUATED CHARGE

W///////////./y.y/^y///^y.7^

01 3 5 8 10 13 20 30 40 50 60 70

NUMBER Of \00 POUND UNITS

80

90

100

Figure 5. Conii)arison of constant and graduated delivery charges with per

unit costs by size of order.

il could justifiably be applied to very small purchases of grain-feed as
well as to minimum deliveries of other lines where no grain-feed is de-
livered at the same time.

The graduated delivery charges indicated in Figure 5 are not neces-
sarily those which best fit the data shown, or any individual situation, but
are a composite of several sets observed. However, the graduated principle
can be well supported by the results obtained in the study. Some graduated
steps and charges per unit which might be interpolated from Figure 5 are
shown in Table 9.

Figure 5 also shows costs per 100-lb. units according to number of
units, as calculated from data obtained in the study. Calculations are based
on bagged feed, 70 miles daily travel, labor at $1.50 per hour, and the
use of one man on delivery and two men in loading. Travel labor cost
(driving time) and truck operating costs (gasoline, oil, repairs, tires, etc.)
were treated as fixed costs; i.e., total value divided by total units (200).
Truck depreciation and overhead costs were allocated in proportion to load-
ing and travel time per unit. Labor cost of delivery, collecting time, and
loading time were interpolated from per unit averages. The four top costs
on the chart were variable. Greatest per unit variability occurs in collection
costs and delivery costs, and only very slight variability in depreciation
and overhead costs.

Discounts for Bulk Feed

The preceding discussions have been concerned primarily with bagged
feed. Present experience is much less extensive with distributing and pric-
ing bulk feed than with bagged feed. However, there are a number of points
about pricing bulk feed which require mention. There is little reason to

18

Table 9. Points for Consideration in Establishing Delivery Charges

Quantity
(No. of 100-lb. units)

Charge
Per 100-Ib. Uniti

Reason

1- 2

3- 9
10-19
20-49

50 and over

$.25 flat charge
.10
.09
.08

.07

Minimum delivery charge on
small orders

Above minimum; unit cost de-
clines rapidly

Half ton or over; unit cost
still declining rapidly

One ton or over, but under
half truckload; unit cost
savings decreasing

Half truckload and over; sav-
ings per unit small beyond
50 units

1 These unit charges might be smoothed to equate total charges at the quantitative breaking points.

expect any difference in the two methods concerning the credit-vs.-cash
area. With respect to the subject of inconvenience, there is the chance with
bulk that arrangements and facilities, being new, can be initially worked
out to be convenient to both dealer and producer. While the same would be
true of new plants which would receive bagged feed, it is not generally as
true of older plants.

Relative to quantity discounts and charges for delivery, data collected
in the study were not extensive enough to permit for bulk feed analyses
parallel to those made for bagged feed. Somewhat indicative of the ideas
of companies selling bulk feed regarding relative costs were the figures in
use. These paralleled the discounts and charges in effect on bagged feed,
except, of course, that the minimums were higher since bulk service wss
not made available to smaller customers. From the cost projections subse-
quently made, the potentional differences in per ton delivery costs are
probably not sufficient to justify differential treatment on that item. In the
absence of detailed information, the same quantity discounts could well
be applied to bulk and bagged feed, within operational limits.

At the time this study was made, two additional discounts were listed
for bulk feed by companies offering this service, i.e., "bag savings" and
"bulk discount". The former is not a net saving in the aggregate. Against
the unit value of new bags there is a partial offset in the form of "bag re-
turn credit". The extent to which the latter is offsetting depends upon the
price allowed for No. 1 bags returned and upon the percentages of No. 1
and undergrade bags (these at a substantial discount per unit).

"Bulk discount" represented a sharing with the producer of the aggre-
gate potential savings to the company on bulk feed and/or an incentive to
convert customers to bulk. Because of the difficulty of maintaining both
efficient bulk and bagged routes in many territories preliminary cost
appraisals indicate the likelihood of little or no potential average savings
on delivery cost exclusive of loading. There may be some long-run savings
at the mill and in loading. Hence, it is possible that real savings to feed
companies on bulk feed are less than the discounts offered by feed com-
panies when this study was made.

19

4. Achieving Delivery Route Efficiency

OVER four-fifths of the grain-feed sold by the average retail unit is
delivered on scheduled routes or to on-call customers. This pattern is
typical of the majority of retail units, though not of carlot distributors or
of units whose primary business is in lines other than grain-feed. Certain
costs are common to both delivered and non-delivered sales; i.e., receiv-
ing, warehousing (if any), collecting, and credit (if any). Credit was pre-
viously discussed; receiving and warehousing, where they occur, probably
involve identical cost factors whether the sale is delivered or non-delivered.
Collecting, as previously noted, should be about equal for both delivered
and non-delivered sales. However, in this study, as will be subsequently
developed, observed route collecting time was generally excessive.

There are a number of physical and institutional factors which bear
upon the efficiency of delivery routes. Among these are those relating pri-
marily to volume, i.e., location of the retail unit, number, size, and types
of farms, and area and characteristics. Some additional factors are geo-
graphical barriers, roads and driveways, company and/or retail unit char-
acteristics and policies, and farm facilities. There is also the area of route
rearrangement. Physical and institutional factors and route rearrangement
are treated first, followed by discussions of loading and delivery efficiencies
and costs.

The area of route rearrangement was studied through a survey of dealers
in Belknap County and those who were located outside, but sold within
the county.

In order to study the efficiency of route delivery of grain-feeds, data
were collected on over 60 separate routes. Such data covered the loading,
hauling, and delivery phases, and involved the number of men used, number
of orders, quantity of grain-feed, route mileage in the aggregate and between
stops, time required in loading, time required to place truck in position
for unloading, unloading time, collecting time, delay time and causes, and
the equipment used. These were recorded by field observers accompanying
the delivery truck. In addition, certain basic cost data were obtained.

Physical and Institutional Factors

A study of any good relief map of New Hampshire will readily suggest
areas and directions from distribution points wherein the delivery of grain-
feeds would appear the easiest. Relief features now determine to a consider-
able extent the locations of improved roads. However, in studying routes,
there is usually little opportunity to record precise data except on loads,
stops, and mileages. The ton-mile cost of delivery is undoubtedly modified
by relief features and roads, though it is dificult to measure these effects
statistically.

In the Belknap County area and surrounding territory, it is apparent
that Lake Winnipesaukee constitutes a geographical barrier between dealers
on one shore and prospective customers on the other. To a lesser extent,
hilly or mountainous country and difficult roads are a barrier to dealers in
Laconia, for example, who might serve customers in Barnstead or Ashland.
Distances from Laconia to these points, in terms of miles, are no greater
than to points currently reached.

While the association of moderate relief features with improved roads
is generally positive, there are numerous exceptions to the positive asso-

20

elation of the better potential farms and improved roads. The location of
better agricultural lands and/or farms has apparently been given only
minor consideration in the building of improved roads. There has been
little change in this respect since 1942, when it was concluded that:

"Inadequate rural road services in New Hampshire have contributed
to an uneconomic use of rural land and to an incomplete realization of
agricultural and recreational opportunities. . . .a large majority of the so-
called 'declining areas' are those districts most inaccessible in a town. . . .
many of the declining areas are made unfit for agriculture by uncontrollable
natural factors, . . . Nevertheless, too many areas in the state are declining
because they are not readily accessible. . . . "*

Hence, while some farm units may have gone out of production because
of inaccessibility, many have continued to operate. These oftentimes present
a problem to the feed dealer from the standpoint of added route mileage,
the fact that roads may be impassable at certain seasons, or the load limits
involved may require at times substitute delivery equipment. Although
such units are in the minority, their importance is significant.

Table 10 shows distributions of distances to farms over dirt or unim-
proved roads and kinds of roads on which farms are located. Belknap,
Carroll, Coos, and Grafton counties have a lower percentage of their farms
located where travel distances over dirt or unimproved roads is less than a
mile than the percentage for the state as a whole. On the other hand. Cheshire.
Coos, Merrimack, Rockingham, and Strafford counties have lower percent-
ages of farms actually located on dirt or unimproved roads than the per-
centage for the state as a whole.

The condition and location of roads is a paramount consideration in
determining route efficiency. Road condition, as will be discussed later, is
also a limiting factor to the extension of bulk feed delivery. The promotion

Table 10. Distances to Farms Over Dirt or Unimproved Roads and Kinds of
Roads on Which Farms are Located, New Hampshire and Counties

Distances to

Farms

Over

Kinds of Roads

on Wliich

Area

Dirt or

Unim

[proved

Roads

Farms Are

Located

Gravel

5.0 mi.

Hard Shell.

Dirt or

0.0-0.2

0.3-0.9

1.0-4.9

and over

Surface Shale

Unimprov' J

Percentage of A

Tea Total

The State

64.9

10.7

22.0

2.4

64.2 14.6

21.2

Belknap

53.6

17.0

27.2

2.2

48.2 19.2

32.6

Carroll

61.9

10.5

25.5

2.1

69.0 6.2

25.8

Cheshire

61.1

14.9

20.8

3.2

66.3 17.8

15.9

Coos

62.8

5.6

30.7

.9

66.3 20.1

13.6

Grafton

60.4

10.3

26.2

3.1

64.2 11.5

24.3

Hillsboro

67.6

9.4

20.7

2.3

62.4 13.3

24.3

Merrimack

65.9

10.1

22.5

1.5

66.0 17.3

16.7

Rockingham

77.0

7.3

13.6

2.1

76.5 9.1

14.4

Strafford

66.7

12.3

19.9

1.1

63.3 16.2

20.5

Sullivan

51.8

16.4

25.8

6.0

45.2 22.2

32.6

Source: 1950

Census of Agriculture.

* Parks, W. R., and J. C. Holmes, New Hampshire Rural Town's Comparative
Road Burdens and Road Services, N. H. Agr. Exp. Sta. and Bur. Agr. Econ. Cooper-
ating. Bui. 339, June, 1942, p. 6.

21

of improved, all-weather rural roads is of importance to both feed dealers
and producers; for the former such a program will make possible further
efficiencies in delivery service, and for the latter enable adoption of tech-
nological improvements in receiving and handling grain-feeds.

Company and/or retail unit characteristics and policies directly affect
route efficiency. These effects come about through the attitudes of manage-
ment toward serving customers at scattered locations or under inconvenient
circumstances on a regular basis, and through the pricing arrangements
made. The decision on whether or not to go into bulk feed may also have
a definite bearing on route efficiency, as will be subsequently shown.

Farm facilities, i.e., farm roads and driveways, receiving platforms,
location and number of grain storage points, as well as the attitudes of
producers, affect route efficiency. Variation in these matters shows up in
time required to set the truck in position and to unload.

Most of the preceding factors are not likely to be solved in the short
run, but rather form the framework within which short-run changes can be
made. In effect the physical and institutional factors, plus a number of
locational considerations are conditions of imperfect competition more or
less fixed in short-run analysis.

Route Rearrangements

Recognizing the existence of certain conditions of imperfect competition
fixed in the short run precludes from the study of short run route rear-
rangements any assumptions relative to redistributing customers and estab-
lishing an exclusive territory system.* The very nature of the present dis-
tributive system for grain-feeds in New Hampshire makes such possibilities
extremely unlikely in the absence of a national emergency requiring very
strict rationing of gasoline, tires, etc., and like regulation of the use of
manpower and equipment. Hence, in this study, route rearrangement is
developed in terms of present units retaining the bulk of present customers.
Obviously some turnover in customers occurs, but on the basis of con-
siderations other than delivery route efficiency. The question herein is how
to improve route efficiency; first from the standpoint of route rearrangement,
and second, in terms of operating economies on the individual routes.

Belknap County, New Hampshire, was selected as the focal area in
the study of route rearrangement. Although the county ranks next to last
in the State in terms of tons of grain-feed purchased, principles observed in
a smaller area are equally applicable elsewhere, and the field work is less
arduous. County boundaries obviously have little relationship to trade areas
(Figure 6).

Within Belknap County itself, dealers whose places of business were lo-
cated within the county served areas composing portions of Gilford, Alton,
Gilmanton, Belmont, Tilton, Sanbornton, Laconia, Meredith, and New
Hampton without substantial competition from out-of-county dealers (Figure
7). Belknap County dealers had substantial competition from out-of-county
dealers in much of the remainder of the county and in Sandwich, Moulton-
boro, Tuftonboro, and Franklin. County dealers delivered as far away as

* This type of aproach is well developed in the following bulletin: MacLeod, A.,
and C. J. Miller, Efficiency of Milk Marketing in Connecticut, 7. Milk Delivery in
Rural Connecticut, Storrs Ag. Exp. Sta. Bui. 279, July, 1943.

22

Tamworth, Ossipee, Boscawen, and Epsom. In the southeastern and north-
western portions of Belknap County, out-of-county dealers had about all
of the business.

,' NORTHFIELO

I

Figure 6. Delivery routes of Belknap County grain dealers.

23

Two or more dealers (both in-county and out-of-county) were competing
in all areas mapped within and without the trade area of Belknap County
dealers. The areas of heaviest competition observed in terms of numbers of
dealers — were in portions of Laconia, Meredith, Center Harbor, Alton,
Belmont, Gilmanton, and Tihon where five or six dealers made deliveries
(Figure 8).

7i - IN COUNTY

1- OUT OF COUNTY

^ - BOTH

Figure 7. Areas served by Belknap County and out-of-county grain dealers.

24

The six dealers in Belknap County rather thoroughly covered the towns
of Laconia, Gilford, Belmont, Gilmanton, Meredith, Center Harbor, Tilton,
and Moultonboro. They also delivered in Holderness, Sandwich, Tamworth,
Tuftonboro, Ossipee, Alton, Barnstead, Epsom, Northfield, Loudon, Canter-
bury, Boscawen, Franklin, Sanbornton, New Hampton, and Ashland. The

n-2

-4
-5
-6

^ — /

Figure 8. Numbers of grain dealers operating in Belknap County

and adjacent areas.

25

areas of greatest route travel were between Laconia and Meredith, Laconia
and Belmont, and Meredith and Moultonboro.

The grain delivery routes diagrammed in Figure 6 represent an estimated
weekly travel of 1,612 miles for the six dealers. By route rearrangements
this weekly mileage could be reduced to 1,312, a saving in travel distance of
18.6 percent. With the same territories, customers, and quantities delivered
being held constant for each dealer, percentage savings in travel distances
ranged from virtually none for two carlot distributors whose route business
was a minor factor to 37.1 percent for one dealer. Percentage savings in
travel distances for the other three dealers were 8.7, 13.7, and 20.0 percent,
respectively.

The approach to savings in travel distance through route rearrangement
necessarily must be made on an individual dealer basis. For example, one
dealer with 21 delivery routes had 18 routes where the outgoing truckload
was 5 tons or over; another dealer with 8 delivery routes had only 1 route
where the outgoing truckload was 5 tons or over. Hence, in the latter in-
stance, route rearrangement must also concern itself with maximum out-
going truckloads. One dealer made local deliveries six days per week while
other dealers performed these deliveries once or twice per week. Here,
cutting down the number of routes became a primary concern.

The requirements for studying route rearrangement are relatively few:

1. Large scale maps with roads and farm dwellings. The N. H. High-
way Department can furnish county maps suitable for this purpose
at a nominal cost.

2. Information on the location of each customer obtaining delivery
service and the average quantity purchased by each customer. Cus-
tomers can be located on the map by numbered pins or by pencil
coding.

3. The precise directions taken on each delivery route. Each route
can be plotted on the map.

4. A map measure or a piece of string for measuring revised route
mileage (and present route mileage in the absence of accurate
speedometer readings) .

For dealers where present outgoing truckloads are relatively near truck
capacity, the problem is essentially one of shifting customers from one route
to another to find the combination which will minimize travel distances.
For dealers where present outgoing truckloads are less than truck capacity,
minimization of travel distances and maximization of truckloads should
both be achieved. This can be done through shifting customers, combining
two or more present routes, and/or instituting less frequent delivery.

Following are three examples of route rearrangements which could be
made. The original data were taken from records of actual routes operated
by retail grain-feed dealers.

Example A

Route 1 serves 9 customers purchasing an average of 42 bags of grain
weekly. The round trip covers 53 miles. Roughly 80 pounds are delivered per
mile of travel.

By initiating delivery every other week, the load can be increased to
84 bags per trip, or 160 pounds per mile of travel. One trip of 53 miles is
eliminated — saving 26.5 miles per week.

26

Example B

Routes 2 and 3 serve two adjacent towns. The former involves 5 stops
and 20 bags with 34 miles of travel. The latter involves 9 stops, 29 bags,
and 36 miles of travel.

By combining Routes 2 and 3, 13 customers could receive 49 bags of
grain, with travel distance totalling 42 miles. This would represent a savings
of 28 miles per week.

If every other week delivery was initiated, 13 customers could receive
98 bags. The aggregate saving in travel would then equal 49 miles per week:

2 (34 + 36) = 140
1 (42) = 42

98 -^ 2 = 49

As the routes are now, 59 and 81 pounds are delivered weekly per
mile of travel on Routes 2 and 3, respectively. Combined into one weekly
route, 117 pounds would be delivered per mile of travel. With every other
week delivery, 233 pounds would be delivered per mile of travel.

Example C

Routes 4-9 inclusive involve local deliveries with the smaller of two
trucks owned by the store. There is one local route daily. The aggregate
mileage is 31.0, and the respective quantities 12, 12, 20, 20, 25, and 20
bags.

By combining these local deliveries into two routes, one Monday and
one Thursday, the loads could equal 57 and 52 bags, respectively. A saving
of 10 miles travel per week could be realized.

The preceding examples are concerned with reducing route mileages and
increasing pay loads. By route rearrangement, there are also likely to be
significant savings in time, thus reducing the labor cost of delivering grain-
feed. Subsequent sections will explore this matter more fully.

Less frequent delivery has been mentioned as a technique which can
be employed to aid in rearranging routes and delivery schedules to minimize
travel distance and time. But the question of defining the limits of less
frequent delivery cannot be answered herein on the basis of present evidence.
Aside from the wishes of producers, who may well demand and get weekly
or semi-weekly deliveries of grain-feeds because of inclination and/or man-
agement decisions, the issue is essentially one of the keeping characteristics
of grain-feeds. How long can grain-feeds be kept safely under various
storage conditions and in different seasons without undue loss of palatability
and/or nutritional value?

Answers to this question were sought by questionnaire from nutritional
specialists at the six New England colleges and a number of feed companies.
The replies indicate substantial differences of opinion and a lack of experi-
mental data applicable to the specific formulas and the range in farm storage
conditions on New Hampshire farms. The matter calls for controlled experi-
mentation before a precise answer can be formulated, or these answers
translated into recommended practices.

From a number of replies to the questionnaire, it would appear that
there is little danger of adverse effects from bi-weekly deliveries of grain-
feeds, but whether less frequent periods can or should be used is a matter
of considerable difference of opinion.

27

Efficiency of Truck Loading

Most stores and warehouses visited did not experience excessive delays
in loading from unsystematic piling of the various kinds of grain-feed
handled. Admittedly, the loading of a truck with a number of different
items is somewhat less efficient than where one or two items are involved,
but this is a problem common to all retail units and, hence, one which is
difficult of microscopic study for purposes of observing differences in per-
formance.

It was possible to secure sufficient observations to compare roughly
the efficiency of loading bagged feed with different numbers of men. In
general (Table 11) retail units do not utilize additional men efficiently in
loading. While the elapsed time in loading a truck may be reduced, there
is a general tendency for the man minutes per 100 pounds to increase as
additional men are added. There are some variations from this pattern, as
can be observed in Table 12. Here, an attempt was made to compile the data
for "loading mostly by carrying bags" to measure the effect of not only
number of men, but also number of bags and number of orders. These data
suggested the following:

(1) For a relatively small number of bags and few orders, one man
was most efficient in loading.

(2) As the number of bags loaded increased, one man became less
efficient, and on larger orders two men were most efficient.

(3) In all unit intervals related to number of bags, two men were
more efficient than three; three than four.

(4) As the complexity of loading increased (as measured by number
of orders) efficiency steadily fell where one, two, or three men were used.
Four men appeared most inefficient where there were very few or very many
orders in the load.

Table 11. Comparative Efficiency in Loading Grain Delivery Trucks by Various Methods

No. of
Men

No. of
Loads

Avorag'^
Averaae A%erac:e No. of Average
No. of Bass Weight Orders Weight
Per Load Per Load Per Load Per Order
(lbs.) (lbs.)

Man
Minutes
Required
Per Load

Man
Minutes

Per
100 Lbs.

100 lb.
Units

Loaded
Per Man
Minutes

Loading Mostly by Carrying Bags

1.3
2.1
3.0
4.0

4

19

6

7

85.75 8.575 8.8 980

94.74 9,474 6.8 1,395

119.66 11,966 11.3 1,056

91.86 9,186 10.0 933

Loading Mostly by Hand Truck and Ch

.55.1
62.1

104.7
134.6

ute

.64

.66

.88

1.44

1.56

1..53

1.14

.69

3.2

2

134.00 13.400 1.0 13,400

Loading Bulk Trucks from 100 lb. Bag

55.0
si

.41

2.44

2.1

2

98.00 9,800 1.0 9,800

112.5

1.15

.87

Loading Bulk Truck from Overhead Bins

Poultry Feeds:

1.0

3

lOftlfi !■? R1T>

12.7

.12

8.52

Dairy Feed:

2.0

1

6 100 10 6 inn

50.0

.82

1 22

1 Bags hand trucked, opened, dumped into overhead bulk bin; spouted into bulk truck bin; or
bags hand trucked, opened, dumped into bulk truck bin.

28

Examing the data in Tables 11 and 12 from another angle, it appeared
possible to increase efficiency by using a hand truck and other devices to
minimize carrying. In terms of man minutes per unit in loading, the filling
of bulk trucks from overhead bins, where one man handles the operation
and feed flows freely, appeared to be the most efficient method. However,
where bulk feed bridged rather badly (as dairy feeds may do), where it
was necessary to use more than one man, and particularly where bulk
trucks were loaded from bags, loading efficiency was very low. Those types
of situations represent some of the problems with bulk feed handling.

In seeking a more controlled answer to time savings from use of a
hand truck, the data from Table 11 "loading mostly by hand truck and
chute", could more properly be weighed against the two men data in
Table 12. The combination of one stop and over 130 bags with two men
hand loading should yield a figure somewhere between .44 and .67 man
minutes per bag as compared to the .41 man minutes from Table 12 for
loading by hand truck and chute. Another indication of this general trend
can be observed from Table 13. Here, it took one man .20 man minutes per
bag to load a truck from a railroad car using a hand truck. Two men load-
ing by hand took .33 man minutes per bag. Both were loading for one
destination, but the different number of bags per load probably accounted
for some of the previous difference.

Table 12. Effect of Number of Men, Number of Bags, and Number
of Orders on Man Minutes per Bag in Loading Grain

Unit

Average

Man

Unit

Average

Man

Intervals

Number

Minutes

Intervals

Number

Minutes

(No. of Bags)

of Bags

per Bag

(No. of Orders)

Orders

per Bag

1 man

1 man

Under .50

10.0

.33

1- 2

1.0

.33

50- 90

—

—

3- 6

5.0

.61

90-130

111.0

.65

7-12

—

—

Over 130

—

—

Over 12

14.5

.68

2 men

2 men

Under 50

35.5

.88

1- 2

1.4

.44

50- 90

72.4

.78

3- 6

5.0

.64

90-130

112.6

.67

7-12

8.4

.75

Over 130

159.0

.39

' Over 12

19.0

1.08

3 men

3 men

Under 50

20.0

1.28

1- 2

—

50- 90

88.0

1.36

3- 6

5.5

.81

90-130

108.5

.84

7-12

11.0

.84

Over 130

146.5

.76

Over 12

17.5

.98

4 men

4 men

Under 50

1- 2

1.0

1.80

50- 90

75.3

1.76

3- 6

4.5

1.14

90-130

97.0

1.39

7-12

11.0

1.06

Over 130

136.0

1.03

Over 12

16.3

1.76

Table 13 is interesting in another respect. Comparing the man minutes
required per bag with data from Tables 11 and 12 leads to the conclusion
that there are decided economies in operating routes from railroad cars as
against delivery from retail units. These are in addition to the elimination

29

of the extra handling, i.e., railroad car — > truck — > farm storage vs.
railroad car — > warehouse — > truck — > farm storage. (See also Figure
11 for diagramatic presentation of alternative methods of distribution ob-
served in the study.) Obviously, the method of operating from railroad
cars cannot be universally used since it requires more advanced ordering
and planning than could be obtained from most farm customers. Where it
can, however, it is certainly productive of economies in distribution in
terms of more efficient truck loading, elimination of one handling, and
elimination of retail unit warehousing space.

One of the problems common to truck route operations is that of
making the fullest use of the truck (or trucks). In the loading phase, this
is concerned with minimizing the delay time during loading and between
completion of loading and departure. Total loading time in man minutes
for 36 observations was 2,971. Predeparture delays totalled 535 man
minutes additional, or an amount 18 percent as large as total loading
time. On the 19 observations where predeparture delays occurred, loading
time totalled 1,836 man minutes; delay time was almost 30 percent as large
as actual loading time.

The most common causes of predeparture delays were servicing the
truck (gas, oil, water), getting bills and change at the office, sweeping,
waiting on customers, and side trips to get additional supplies. These are
not functions which can be eliminated entirely, but it should be possible
by better scheduling and division of work (particularly in multiple-employee
retail units) to prevent these delays from tying up the loaded truck.

Table 13. Comparative Efficiency in Unloading from Railroad Cars onto Trucks

Average Average Elapsed Total Man Man Minutes in Unloading

No. No. No. Bags Time Man Minutes in — —

Observations Men Per Load (Minutes) Minutes Preparation Total Per 100 lbs.

By Using Hand Truck

1

154

31.25 31.25
By Carrying Bags

2

100

20.75 41.50

2.25 29.00 .20

8.60 32.90 .33

Efficiency of Delivering and Unloading at the Farm

The various observed methods of delivering and unloading grain-feeds
at the farm are summarized in Table 14. The data were collected in such
a manner as to separate the various operations involved, i.e., setting truck
in position for unloading and preparing to unload where auxiliary equip-
ment was involved, unloading, collecting and obtaining orders, plus time
lost through various circumstances and time used in bag returns.

With respect to unloading time only. Table 14 indicates the possibility
of effectuating time savings through use of bulk unloading equipment, port-
able conveyors, and body jack arrangements for use on second floor de-
liveries. However, when portable conveyors were used, it took two men on
the truck and a considerable amount of extra time to put the conveyor on
the load, place it in position, shift it as the load was reduced, and retie on
the load. This extra time more than cancelled the time saved in unloading.
In the instance where the body jack arrangement was used, two men were

30

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31

on the truck. This unit had two practical limitations, i.e., the maximum
elevation of 5 feet above normal truck platform level, and the maximum
lift of 90 bags (60 was preferable). Time consumed in preparing to unload
bulk feed was not excessive, and unloading was. on the average, fast and
done by one man.

Just as the use of a hand truck offered certain economies in loading
bagged feed on delivery trucks, so it could offer economies in unloading.
The principal drawback to wider usage of hand trucks in unloading is the
variable and improper height of unloading platforms at the farm. For best
results such platforms should be close to truck platform level.

There would appear to be a definite place in the delivering and un-
loading of grain-feed on many routes for a system intermediate between
a complete bulk setup and the traditional method of handling bagged grain
by hand. Admittedly, there are many technical and cost problems involved
in developing a system which will permit the maximum flexibility with
economical operation. Two alternatives appear worthy of investigation:

(1) A conventional bag conveyor modified in such a way that it
could be attached to a base on the truck. This would eliminate tying, un-
tying, lifting, shifting, etc., as is now necessary with portable conveyors
used on some loads. It could be placed in position by power rather than
by hand. Two men would still be needed, one at each end of the conveyor.
Feed could be stored in bags or the bags dumped into bulk bins.

(2) A hopper and elevating mechanism attached to a base on the
truck, to be placed in position by power rather than by hand. Feed would
be hauled in bags and the bags clumped into the hopper, the feed then
being deposited in bulk in the farm bins. This system should be worked
out so it could be handled by one man and used only on orders where
quantities justified. One problem would be to assure the clearance of one
type of feed from the system before another was introduced.

The cost limitations of alternatives such as the two mentioned above
can be roughly defined. First, depreciation and maintenance charges should
be less than those experienced on the conventional bulk delivery equipment.
Secondly, total route operating costs should not exceed those experienced
on the most efficient bagged feed routes.

Data on making deliveries of grain in bulk, shown in Table 14, were
recorded on the auger-type body. Recently the pneumatic-type of body has
been introduced into the state. The pneumatic system makes it possible to
reach points more distant from the truck-setting position than is possible
with the auger system. This is accomplished by means of pipes (probably
stove-pipe) sealed at the joints and running from the outside of the house
to the storage bins. It may prove somewhat easier in operation to hook on
a short length of outlet pipe.

Even where bagged feed was unloaded by hand, the location of many
farm grain storage points required a considerable amount of time to ma-
neuver the truck into position for unloading. Extra men were largely
"dead weight" in this instance, as on collecting, travel, etc. In general the
additional men did not reduce the man minutes per 100 pounds in unloading.
Hence, as with loading, it must be concluded that additional men are, on
the average, not utilized efficiently.

The preceding conclusion is further substantiated by Table 15. Here
the primary purpose was to analyze the effect of size of delivery on time

32

requirements, but while the results show a steady decline in time per 100
pound bag as the size of the individual delivery increases, at no point is
it conclusive that additional men are utilized efficiently.

There is little reason to expect that the average time required to place
the truck in position for unloading, or to collect and obtain orders, would
be substantially different on larger orders than on smaller orders. Thus,
these items are relatively fixed in total irrespective of size of delivery, but
decline somewhat in relation to additional units unloaded at the stop. Time
needed to set the truck in position for unloading is more properly a function
of the number of separate settings of the truck, whether one or more per
farm, whereas collecting and reordering time is more properly a function
of the number of farms (or orders).

Just as the "position" time requirements appear excessive, so do the
time requirements for collecting and reordering. Both are a result of atti-
tudes and policies and can only be reduced by cooperation between the feed
dealer and the farmer. "Position" time is a direct result of the location of
farm grain storage points and the extra carrying the farmer expects or the
feed dealer is forced to do by competition. Collecting and reordering time
is affected by the regularity of delivery time, credit considerations, and the

Table 15. Effect of Number of Men and Size of Delivery on Man Minutes
per Bag Required in Making Deliveries of Grain

Man minutes per bag

spent on:

Size of

Delivery

(No. of

Bags)

No. of
Men

No. of
Del.

No. of
Bags

No. Bags
per Del.

Setting
Truck in
Position

Unloading

Collecting

and
Reorders

Total of
3 Items

1- 3

1

2

141

50

246
87

1.74
1.74

1.74

.30
.31

.96
1.64

1.14

2.13
3.05

2.34

3.39
5.00

Av.

1.26

191

333

.31

3.79

4- 9

1

2

72
28

454
167

621

6.31
5.96

6.21

.15
.33

.58
.87

.62
.83

.68

1.35
2.03

Av.

1.28

100

.20

.66

1.54

10-19

1
2

38

25

502
319

821

13.21
12.76

.09
.22

.14

.47
.69

.35
.52

.42

.91
1.43

Av.

1.40

63

13.03

.55

1.11

20-39

1
2

11

14

25

268
360

24.36
25.71

.09
.25

.44
.70

.59

.22
.20

.75
1.15

Av.

1.56

628

25.12

.18

.21

.98

40-79

1
2

2
15

81
826

40.50
55.07

53.35

.05
.12

.38
.58

.03
.06

.06

.46
.76

Av.

1.88

17

907

.12

.56

.74

80 and
over

1
2
3
4

1

7
3

1

123
804
310
100

1337

123.00
114.86
103.33
100.00

.05
.06
.15
.08

.43
.53
.98
.24

.02
.08
.17

.05

.50

.67

1.30

Av.

2.33

12

111.42

.08

.60

.73

33

amount of time the feed dealer is willing to have his driver spend in "good
will" and "service work". These two operations can contain decided in-
efficiencies; solving them can only come about through cooperation and
mutual savings.

While on the average, delay time on the route amounted to only 2.5
percent of other route time, there was wide variation due to circumstances.
Some factors, which were actually delaying, were measured in some instances
as part of other operations. Some examples of these were:

(1) Included under "position": "car stuck in drive"; "locked door";
"very poor and crooked drive"; "inquire where to unload".

(2) Included under "unloading": "empty the bags"; "long carry";
"difficult locations"; throwing or carrying to upper floors; "had to carry
around tools in barn floor"; "stop on main road, carry in on back"; "carry
75 feet to dairy".

(3) Included under "collect and reorder": "lonesome old man, wanted
to visit"; "new calf born while at this farm"; "leave advertising material";
"bags for return".

Some of the situations actually recorded as "delays", and for which
time was segregated were as follows: "get Town Report"; "stuck in soft
ditch"; "find party"; "inquire where to unload"; "place for sale — customer
moved away"; "call on old customers"; "stop at bank"; "talk with Field
Representative"; "bags returned"; "assist the farmer in the field"; "wait
for truck to unload and clear driveway"; "shut doors on inside and wait
for man"; "in Post Office"; "inquire location of new customers".

Most of the factors causing delays or slower rates of accomplishment
cannot be measured in averages because of their very nature. However
some of the unloading problems are compared in Table 16. These data,
while based on only a few parallel observations, are indicative of the ex-
cessive time required under difficult unloading conditions.

Table 16. Relative Unloading Times Under Specified Circumstances,

Selected Data

Index Number of
Unloading Time
Circumstances per 100 lbs.

1st floor unloading, average condition 100

Carrying to 2nd floor 125

Carrying to 3rd floor 300

1st floor unloading, emptying bags 250

Long carrying distance from truck to grain room 400

The procedures for returning used grain bags differed between com-
panies. Some gave the producer the alternative of shipping to a bag company
or returning bags via the grain truck; other companies left the matter en-
tirely up to a bag plant. In some instances the initiative for counting,
bundling, and tagging bundles of bags rested with the producer; in others
the grain dealer performed this service. In the latter situation, route time
was increased once again by the willingness of the grain dealer to perform
additional services without charge to keep accounts.

34

The most efficient way of handling the return of used grain bags would
generally be one under which the producer counted, bundled, and tagged
bundles of bags, and the grain truck picked them up for assembly at a
central point or delivery to the bag plant. Such a procedure, provided pro-
ducers did not cause extra work by incomplete identification of bundles, as
was reported in some cases, would minimize route time involved. It would
also utilize the return trip of the truck in a productive way. It would fur-
ther eliminate many route miles over which the grain truck and the bag
plant truck would otherwise both travel. However, under such a system it
would be necessary that both the producer and the grain dealer receive
equitable compensation for their services. One possible exception to the
preceding arrangement might occur where the grain dealer, for other rea-
sons, finds it feasible to dump bags for the producer. Here it would be just
as economical for the grain dealer to handle the counting, bundling, tagging,
and accounting. Considerations relative to the dumping of bags by the
grain dealer were discussed previously.

One other type of situation which causes inefficiency in delivery route
operation is catering to small orders. The time attendant to travel, position,
unloading, and collecting are oftentimes incurred on a sale of less dollar
value than a bag of grain. Some examples of small orders observed were
as follows: 12 lbs. oyster shells; 25 lbs. chick feed; towels, cleaner, filter
disks; one package of vegetable seeds; 5 lbs. dog food; 3 cans of dog food
— 47c. Many of the people making such purchases are old customers; some
may seasonally or in the future buy larger quantities. In any event, cater-
ing to small orders is costly and more sizeable orders must bear a share
of this cost. Such small orders could best be bought at the store.

Formulating Route Time

The man minutes per route, necessary to calculate the labor cost of
delivery, can be expressed by the following equation:

Rt = N [(M.m) + (P.p) + (S.c) + (Q-u)] + N[|Bi.d(T)]
In the preceding equation, the symbols are indicative of the following:

Rt — route time in aggregate man minutes
N — number of men on truck
M — route miles round trip
m ■ — average miles per hour expressed as 60

m
P — number of separate settings of truck
p — average time per setting in minutes
S — number of stops on route
c — average collection time per stop in minutes
Q — number of 100 pound units

u — - average unloading time in minutes per 100 pound unit
T — total man minutes in preceding bracket
d — average percentage of route delay time

There are presented in Table 17 a series of factors for use in the
examples which follow the table and Figure 9. Data in Table 17 were de-
rived from Tables 14 and 15 and from examination of the individual ob-
servations upon which those tables were based.

35

Table 17. Comparison of Average and "Most Efficient" Performances
of Certain Delivery Operations^

c (collecting

No. of

P 'f

losition)

and recording)

u (un

loading)

Method of

Data

"Most

Data "Most

Data

"Most

Unloading

Men

Average

Efficient"

Average Efficient"

Average

Efficient"

Mins.

per Setting

Mins. per Stop

Mins. per

100 Pounds

Hand

1

0.8

0.5

3.0 1.0

0.56

0.39

2

1.4

0.5

2.1 1.0

0.33

0.182

Conveyor

2

3.3

1.5

2.5 1.0

0.24

0.203

Bulk

1

5.1

2.0

4.6 1.0

0.29

0.19

(auger-

type)

^ Times can be converted to aggregate man minutes by multiplying by number of men.
- Carrying to upper floors almost eliminated.
^ Includes partial unloading to upper floors.

Figure 9 was designed for use with the preceding formula. In effect it
is the (M.m) position; route mileage can be read vertically to the curve
and the product (M.m) in minutes horizontally from that point. The curve
was interpolated from plottings of interval averages from actual bagged
and bulk routes. The interpolated curve exhibits the logical behavior of
increasing average miles per hour with greater route length. It can logically
pass through the origin since it covers only truck travel time and no other
time factors.

Following are some examples of the use of the route time formula,
utilizing data from Table 17 and the interpolated curve in Figure 9.

Examples
Assume the following:

(1) Route 40 miles round trip

(2) 6 stops on route, 9 settings

(3) 100 bags on load

(4) Average amount of delay for data average route;

none for most efficient

(A) With one man on truck
Data Average:

Rt = 1[95 + 9(0.8) +6(3.0) + 100 (0.56)] + 1[.025 (176.2)]
Rt = 180.6 minutes

"Most Efficient":
Rt = 1[95 + 9(0.5) + 6(1.0) + 100(0.39)] + 1 [.025(0)]
Rt = 144.5 minutes

(B) With two men on truck

Data Average:

Rt rr 2[95 + 9(1.4) + 6(2.1) + 100 (0.33)] + 2 [.025 (1532)]

Rt = 2 (157.0) =r 314.0

"Most Efficient":

Rt =r 2[95 + 9(0.5) + 6(1.0) + 100 (0.18)] + 2 [.025 (0)]

Rt = 2(123.5) = 247.0

36

0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80

ROUTE MILEAGE

Figure 9. Relationship between route mileage and truck travel time.

From the foregoing it is evident that the effects of doubling man minutes
in travel, position, and collection are hardly likely to be offset by increases
in loading efficiency eventually realized by using two men instead of one
man on delivery trucks.

The "most efficient" factors when used in the formula with actual route
specifications should provide a basis for comparison with actual route times
being experienced. Such a comparison, of present results against efficiency
standards constructed from actual observations, is a fair test of current
performance against a goal of more-or-less ideal conditions.

Under certain circumstances, a savings in elapsed time would be more
important than savings in man minutes per unit. If the savings in route
time by using additional men were sufficient to permit the utilization of less
equipment to cover a given territory, and the amount saved on equipment
and operating costs were greater than the savings in labor cost (man minutes),
additional men would be profitable. In terms of the results of this study
such does not appear to be the case when comparing one and two man
routes.

37

In the preceding examples the elapsed thnes on the "average" routes
for one and two men, respectively, were 180.6 and 157.0 minutes, or an
elapsed time saving with two men of 23.6 minutes. The additional cost in
man minutes, however, was 133.4 minutes. For the "most efficient" routes,
the elapsed times for one and two men, respectively, were 144.5 and 123.5
minutes, or an elapsed time saving with two men of 21.0 minutes. The
additional cost in man minutes with two men was 102.5.

Comparative Delivery Route Costs

The minimization of delivery route costs is the summation of the
efficiencies realized from maximizing volume, rearranging routes to mini-
mize travel distance and time, minimizing loading time, and minimizing de-
livering and unloading time. The most significant indicators of delivery
route efficiency are the following: number of 100-lb units, number of miles
on route, number of stops, number of 100-lb units delivered per mile and
per stop, man minutes spent per 100-lb unit, and cost of delivery per 100-
lb unit. Costs per mile or per ton-mile are likely to be misleading, in that
they yield unfavorable comparisons on shorter routes, somewhat irrespective
of what other measures show, and even though shorter routes are generally
desirable.

In Table 18, 3 routes were selected which approximate the extremes
and the modal area for the 60 routes on which comprehensive data were
obtained. Cost projections were made on the basis of preceding and succeed-
ing information. In terms of the data in the study the routes can be de-
scribed as follows:

Item

Route A

Low

Route B

Medium

Route C

Quantity (units)

High

Miles (No.)

High

Medium

Low

Stops (No.)

High

Medium to High

Low

Units/stop

Low

Medium

High

Units/mile

Low

Medium to Low

High

Time/unit

High

Medium

Low

Cost/unit

High

Medium

Low

This type of comparison has the obvious limitation of a number of
variables, the effect of each of which upon the final result (cost per unit)
is difficult to appraise. There are other variables such as truck size which
are frequently hidden in many sets of data based upon observed route costs.
Fortunately, this factor is not a variable in the three examples presented.

For analyzing many cost problems, and for that of grain-feed delivery
route costs in particular, more significant appraisals can be made through
a budgetary approach, wherein as many as possible of the variables can be
held constant, and varied one at a time. Hence, with respect to the problem
of analyzing relative costs of bagged and bulk delivery routes, "average
cost" comparisons for a number of combined routes or direct comparisons of
individual routes, similar in some respects but different in others, have been
avoided. In attempting to analyze the relative efficiencies of the two methods
the budgetary approach has been followed, holding most factors constant.

The two questions which Hypothesis 1 and Hypothesis 2, respectively,
arc designed to analyze are the following:

(1) Given a constant load, routes of equal distance, like numbers of
stops and settings, and relatively high efficiency, which is cheaper
— distribution of bagged feed or bulk feed?

38

21.0

81.0

150.0

45.0

37.0

8.0

8.0

7.0

1.0

146.5

201.0

124.0

2.63

11.57

150.0

.47

2.19

18.75

6.98

2.48

.83

1.49

2.04

1.26

3.66

5.02

3.09

3.15

2.59

.56

8.30

9.65

4.91

.395

.119

.033

.184

.261

.614

.174

.065

.082

7.90

2.38

.66

(2) If each type of equipment is fully used under similar conditions,
which is cheaper — distribution of bagged feed or bulk feed?

Table 18. Comparison of the Efficiency of Three Selected Bagged Feed Routes

Roiitf A: Route B: Route C:

Item Low Efficiency Medium Efficiency High Efficiency

Quantity (100-lb bags)

Route miles

No. of stops

Elapsed time (man minutes)

Bags per stop

Bags per mile

Man minutes per bag

Route costs:
Fixed^
Labor^
Other variable^

Total

Cost per 100 lbs.
Cost per mile
Cost per ton mile
Cost per ton

^ Proportional to time.
^ Proportional to mileage.

The assumptions made under Hypothesis 1 were as follows:

(1) Two loads per day for each truck; payload of 5 tons.

(2) One stop and one setting per load.

(3) Each route 40 miles round trip.

(4) Routes efficient from time aspects.

(5) One man used in loading and unloading.

The assumptions made under Hypothesis 2 were as follows:

(1) As many routes as practicable to utilize an 8 hour day for 1 man.
For bagged feed this was calculated to be 2 loads of 5 tons
each over 40 mile routes and 1 load of 1^/2 tons over a 9 mile
route. For bulk feed, two loads of 5 tons each over 40 mile routes
and 1 load of 7 tons over a 49 mile route were used.

(2) One stop and one setting per load.

(3) Routes efficient from time aspects.

(4) One man used in loading and unloading.

One of the primary problems in building efficient bulk delivery routes
is the higher daily depreciation costs on equipment. These costs for bulk
equipment may be two to three times those for bagged delivery equipment.
Hence, bulk equipment must be used extensively before route time savings
are sufficient to offset the higher depreciation costs. Depreciation costs for
bagged and bulk delivery trucks in use by one firm are presented in Table 19.

Under Hypothesis 1, the operating costs of a 3-ton bagged delivery
truck, other than labor, were assumed to equal 13 cents per mile. Gasoline
consumption was established at 7 miles per gallon for the bagged truck

39

Table 19. Comparative Costs of Depreciation on Bagged and Bulk Deiivery Trucks

Bagged Truck

Bulk Truck

New cost chassis
Less Trade-in Value

$4000.
1000.

$8600.

2600.

Cost for depreciation
Annual rate depreciation
Cost of body, etc.
Annual rate depreciation

3000.

25 7c

500.

10%

$750.
50.

6000.

25%
6000.
10%

$1500.
600.

Total depreciation annual
monthly
dailyl

800.
66.67
2.86

2100.
175.
7.50

''- 280 working clays p-r year.

and 6. .55 miles per gallon for the bulk truck. A small additional amount was
included under "other variable costs" for greater maintenance costs on the
bulk equipment. Driver's time was included at $1.50 per hour.

Under Hypothesis 2, "gas and oil" and "oi^her variable costs" were pro-
jected from Hypothesis 1 on the basis of the increased mileage; driver
cost on the basis of the increased time.

The time calculations used were as follows:

Bagged truck:

Route miles, 40, 9

Rt = 1[95 + 1(.5) -f 1(1.0) + 100(.39)] + 1 [.025(0)]

Rt

135.5 min.

Rt = 1 [27.5 + 1 (.5) + 1 (1.0) + 30 (.39)] + 1 [.025(0)]
Rt = 41.0 min.

Route
Miles

Quantity
per Load

Time

per Route

Adjusted for No. of Routes:

Time per Adjusted for Loading

Route No. of Rout'^s Time

Office
Timo

Total
Time

Hypothesis 1 :

40

10,000

135.5

271.0

98.0

40.0

409.0

A..dded for
Hypothesis 2:

9

3,000

41.0

41.0

10.0

20.0

71.0

FuU day

89

23,000

312.0

108.0

60.0

480.0

Bulk Truck:

Route miles, 40, 49

Rt = 1[95 + 1 (2.0) + 1 (1.0) + 100 (.19)] + 1[.025 (0) ]

Rt = 117.0 min.

Rt = 1[112 + 1(2.0) H- 1(1.0) + 140(.19)] + 1[.025(0)]
Rt = 145.0 min.

40

Route
Miles

Quantity
per Load

Time per
Route

Time

per Route

Adjust'^d for

No. of Routes

Adjusted

for No. of

Routes:

Loading
Time

Office

Time

Total
Time

Hypothesis 1 :

Added for
Hypothesis 2:

40
49

10,000
14,000

117.0
145.0

234.0

145.0

24.0
17.0

40.0
20.0

298.0
182.0

Full day

129

34,000

379.0

41.0

60.0

480 0

Under the conditions assumed for Hypothesis 1, it is apparent that
the delivery cost per ton (or coincidentally, per mile) is cheaper for bagged
feed than for bulk feed. The delivery cost per ton derived in Table 20 was
$2.06 for the former; S2.29 for the latter, at the 80-mile, 10-ton level. If
we calculate for comparative purposes, the number of bags per stop (100.0) ;
the number of bags per mile (2.5); and the man minutes per bag (2.04)
for the bagged routes in Table 20 seems slightly better than that in Ex-
ample B, Table 18 (from the modal area of the route data). Hence, this
suggests the following application: If bulk equipment is used to the extent

Table 20. Daily Operating Costs of Bagged and Bulk Delivery Trucks Under Assumed Conditions

Cost Item Bagged Truck Bulk Truck

Hypothesis 1:
Fixed costs:

Truck depreciation S2.86 $7.50

Other fixed costs 2.00 2.00

Variable costs:

Driver 10.22 7.44

Gas and oil 3.05 3.25

Other variable costs 2.50 2.75

22.94

Total operating costs: 20.63

Cost per mile: .258 .287

Cost per ton: 2.06^^ 2.29

Cost per ton mile:
Tons delivered per day:
Truck miles per day:

.0258 .0287

10.0 10.0

80.0 80.0

Hypothesis 2:
Fixed costs:

Truck depreciation 2.86 7.50

Other fixed costs 2.00 2.00

Variable costs:

Driver 12.00 12.00

Gas and oil 3.39 5.23

Other variable costs 2.75 4.40

Total operating costs: 23.00 31.13

Cost per mile: .258 .241

Cost per ton: 2.00 1.83

Cost per ton mile: .0224 .0142

Tons delivered per day: 11.5 17.0

Truck miles per day: 89.0 129.0

41

of average use of bagged equipment, the latter is more efTicient in terms of
overall delivery costs per unit.

However, under Hypothesis 2, each type of equipment is used to
feasible capacity (full 8-hour day for the operator), and the cost per ton
(or coincidentally, per mile) appears lo\v'er for delivering bulk feed than
Lagged feed. Here, the performance of the bagged delivery operation was
not changed much from that in Hypothesis 1 in terms of the cost per ton
(S2.00 vs. S2.06) ; number of bags per stop (76.6 vs. 100.0); number of
bags per mile (2. .58 vs. 2.50); and man minutes per bag (2.09 vs. 2.04).
It was not possible to do much with the bagged truck beyond the original
premise of 80-miles, 10-tons. But with the bulk equipment, performance
could be stepped-up considerably, and economies in operation resulted from
the substantial advantage in tonnage over the bagged equipment.

This result concurs with conclusions reached by Rickey on the basis
of data for a west coast cooperative using bulk delivery for a number of
years.* With the bulk equipment it is possible to deliver more feed in a
day, and when the full advantage can be had, unit costs become lower than
for bagged feed delivery.

The achievement of this result under New Hampshire conditions is
difficult in many areas. There is also the further problem of trying to main-
tain efficient routes for delivering bagged feed v/here the two systems exist
simultaneously. Here, if the larger customers are skimmed off to make
efficient bulk routes, the remaining customers must be re-grouped into effi-
cient bagged routes if the aggregate result is to be advantageous to the
company.

To construct hypothetical average cost curves with which to illustrate
the effect of the introduction of bulk feed delivery into an area, all condi-
tions except those varying with tonnage were held constant. Territory route
mileage was initially assumed at 80 and it was further assumed there were
two routes of approximately the same length and complexity (three stops
and settings). Thus, tonnage was the only variable up to the points where
full use was being made of the equipment (in terms of feasible tonnage and
full utilization of the drivers' time). As in the preceding examples, calcu-
lations were based on one man per truck. When the points of full use were
reached, it was assumed that a small truck would be added to carry bagged
feed on short local routes, in lieu of adding another piece of large equip-
ment (which would have abruptly jumped the average cost curves). The
costs assumed for the small truck are presented in Tables 21 and 22.

The route time formula was combined with loading time and office time
to compute the time component of total costs. For purposes of calculating
loading time, an average loading time of .12 man minutes per 100 pounds
was used for bulk feed. For bagged feed, the following estimates of loading
time in man minutes per 100 pounds, as derived from Table 12 were used;
up to 50 bags, .47; 50-90, .55; 90-130, .63; over 130, .71. These figures are
averages from the 1-man data classified by numbers of 100-pound bags and
by stops (in this example, 3).

From the average cost curves in Figure 10, the importance of securing
maximum utilization of bulk equipment is apparent. Only when this is done
does the average cost per ton for delivery fall below that for bagged feed

* Rickey, L. F., Delivering Feed in Bulk, Farm Credit Administration, U.S.D.A.,
Circ. C-143, January, 1952, p. 19.

42

delivery. Or, to restate an earlier premise, only then are the route time
savings sufficient to more than offset the higher equipment depreciation cost.

Table 21. Costs of Depreciation on Small Truck Delivering Bagged Grain

Item

Value

New cost chassis
Less trade-in value

$2000.

500.

Cost for depreciation

1500.

Annual rate depreciation
Cost of body, etc.
Annual rate depreciation

25%
100.
10%

$375.
10.

Total depreciation: annual
monthly
dailyi

385.
32.08
1.37

^ 280 working days per year.

Table 22. Daily Operating Costs of Small Truck Delivering Bagged Grain

Under Assumed Conditions

Fixed costs:

Truck depreciation

$1.37

$1.37

Other fixed costs

1.00

1.00

Variable costs:

Driver

2.37

4.74

Gas and oil^^

.53

1.05

Other variable costs

1.00

1.00

Total operating costs:

6.27

9.16

Cost per mile:

.3135

.2290

Cost per ton:

3.135

2.290

Cost per ton mile:

.1570

.0572

Tons delivered per day:

2.0

4.0

Truck miles per day

20

40

^Gasoline mileage — 10 miles per gallon; oil consumption — 1 qt./400 mi.

With Figure 10 as a working basis some of the theoretical competitive
aspects of the introduction of bulk delivery into an area can be explored.
Suppose, for example, that Company A decides to buy bulk equipment and
has arranged to shift over some of its largest customers to this method. If,
for example, Company A now has 3 trucks equipped for delivering bagged
feed and nearly maximum use is being made of these trucks the average

(2 x 14 = 28 \
1 X 12 = 21 I
40 /

delivery cost per ton for 40 tons daily I 1 x 12 r= 12 ■ is $1.82. If 10 tons

V 40 /

daily can be delivered in bulk (average delivery cost per ton — $2.32),
then the 3 bagged trucks divide 30 tons between them (average delivery
cost per ton for 10 tons — $2.15). Whereas, the average cost for all de-
liveries was formerly $1.82 per ton, it is now $2.19, per ton, i.e.,

43

New

10 X $2.32 = $23.20
30 X 2.15 = 64.50

Old

28 X $1.79 = $50.20
12 X 1.88 = 22.60

40 X (2.19)

87.70

40 X (1.82) = 72.80

Suppose, however, that Company A sells one of its trucks now used in
bagged deliveries and is able to convert 16 tons to bulk, dividing the re-
mainder between the two bagged trucks. Under such conditions the former
average cost for all bagged feed delivery was $1.82 per ton, but the new
arrangements would result in a new average cost for all deliveries of $1.73
per ton, i.e.,

New Old

24 X $1.88 = $45.12
16 X 1.51 = 24.16

28 X
12 X

n.79 = $50.20
1.88 = 22.60

40 X (1.73)

69.28

40 X (1.82) = 72.80

In both of the preceding examples, equipment is used at relatively high
efficiency. Use at less efficient rates would increase the likelihood that dis-
economies would result from the superimposing of bulk feed delivery on
top of an established bagged feed delivery system.

Any attempt to subdivide a given share of the market between two
systems obviously will increase average costs in the short run. Thus, fol-
lowing the same approach as the preceding, any new firm entering a given
market and taking customers away from the established firms because it
offers bulk delivery may: (1) experience difficulty even in the short run in
obtaining enough volume to cut its own costs to a reasonable level; (2)

o

I-

tK
UJ
Q-

m
a:

o

Q
I

h-

(n
o
o

-BULK FEED DELIVERY

MAXIMUM USE OF
BAGGED EQUIPMENT

-ADDITIONAL

EQUIPMENT

ADDED

BAGGED FEED DELIVERY

--^

MAXIMUM USE OF BULK EQUIPMENT

0 I 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

TONS DELIVERED PER DAY

Figure 10. Average cost curves for bagged and bulk feed delivery under

assumed conditions.

44

raise average delivery costs for the other firms. In order to keep customers,
some of the other firms might also go into bulk, but their short-run position
may turn out to be even worse than the new firm entirely on bulk or the
established firms which do not go into bulk, inasmuch as they are split
between two systems.

With the present alternatives of bagged or bulk delivery as used in
this section, the long-run picture will be dependent upon whether full use
can be made of either or both types of systems. In many areas of New
Hampshire it would be difficult to carve out efficient bulk routes without
going beyond the radius of feasible operation. In others, where efficient
bulk routes and efficient bagged routes can be developed, average delivery
costs could possibly be reduced in the long run.

An Aiternative AAethod of Distributing Feed

A promising alternative intermediate between regular bagged or bulk
delivery, lies in the development of a hopper-and-elevating mechanism
attached to a base on the truck, and which can be placed in position for
unloading by power rather than by hand. This would in effect be a com-
bination method, making bulk feed available to those customers who want
it, but permitting others who do not, or who have units of smaller size,
to be served with bagged feed.

Such a method would eliminate handling of bags by the farmer, but
would entail the opening and dumping of bags at the farm by the dealer's
crew in instances where this is not now done in unloading bagged feed.
However, it would be desirable and quite possible to sew bags in such a
fashion that they could be opened more rapidly than is possible with some
systems now in use. Bags could be taken back to the loading point without
entering the farm grain storage area. Several companies have for some time
been interested in a system of this general type to provide the option of
bulk or bagged feed to their customers. It is likely that such a unit could be
made considerably cheaper than conventional bulk bodies and mechanisms.
However, units of this type which have materialized from years of develop-
ment v/ork still require two men. As such, they do not offer the potential
economies which would exist if but one man could be used.

Using some of the time and cost data presented earlier, it is possible
to make rough estimates of the cost effects of a combination system. In
Table 23 there are presented estimates of the depreciation costs of such
delivery equipment. Since knowledge about the truck chassis is limited the
costs used are the extremes — bagged truck and bulk truck — and the
midpoint. Suppose further that submitted with the specifications to the
engineers is the provision that the body cost for the hopper-elevating unit
shall not exceed $3,000. In terms of depreciation, therefore, the truck and
unit cost will lie between those in Table 23 for regular bagged and bulk
trucks.

Basic to realizing the full economies of the hopper-elevating method is
the specification that it can be operated by one man. In the absence of data
regarding operating time, it can be further assumed that the truck and
mechanism can be readied for unloading at the farm in about the same time
as with regular bulk units. So far as unloading time is concerned, actual
unloading time per unit should probably not differ greatly from that for a
conveyor (see Table 17), except that one man rather than two can do the
job under our assumptions. If it is made easy for that one man to open

45

bags, he should be able to open and dump a bag into the hopper in about
the same time it would take him to lift a bag and place it on a conventional
conveyor. For purposes of uniformity of analysis, let us assume further that
the truck will be loaded by hand truck, and that one man would do the
loading (as for regular bagged and bulk comparisons). In Table 13
it was observed that one man using a hand truck could unload a railroad
car onto a truck at a rate of 0.20 man minutes per 100 pounds. But since
the loading of a delivery truck might be more complex, 0.30 man minutes
per 100 pounds has been used herein. Note that this rate is actually only
slightly lower than was achieved in certain instances of efficient loading
by hand.

In order to attempt to offset in part the time savings of gravity loading
of regular bulk feed, it would probably pay to mechanize loading, perhaps
to the extent of using a chute, conveyor, and additional men. This would
not tie up the truck for as long as having one man do the loading, but the
final decision would be based upon comparison of man minutes and truck
time involved.

Table 23. Estimated Costs of Depreciation on Hopper-Elevating Delivery Truck

Assumptions

Use

of Truck Chassis

Item

Use of Bagged

Truck Chassis

(dollars)

1

Use of Bulk

'ruck Chassis

(dollars)

Intermediate
Between Bagged
and Bulk
(dollars)

New cost chassis
Less Trade-in value

4,000
1,000

8,600
2,600

6,300
1,800

Cost for depreciation

3,000

6,000

4,500

Annual rate depreciation
Cost of hody, etc.

25%
3,000

750

25%
3,000

1,500

25%
3,000

1,125

Annual rate depreciation

10%

300

10%

300

10%

300

Total depreciation:
annual
monthly
dailyi

1,050
87.50
3.75

1,800
150
5.36

1,425
118.75
5.09

^ 280 working days per year.

Having outlined the assumptions of the analysis, they can be tested in
two ways:

(1) Using the hopper-elevating system as a pure method, paralleling
the calculations presented in Table 20 for regular bagged and bulk feed
as pure methods. This will test the costs of the hopper-elevating method
against the regular systems, (Hypothesis 3.)

(2) Since the hopper-elevating system offers greatest promise where
there may be a mixture of bagged and bulk customers, but perhaps not
enough of either to keep separate delivery units occupied at capacity, a
second test can be made of average costs (see Figure 10). Here, for sim-

46

plicity, it is assumed that the customers and volume are divided 50-50 be-
tween bagged and bulk feed, except that loading will be done by one man
using a hand truck. (Hypothesis 4.)

Under the first test, the same conditions can be used as under Hypotheses
1 and 2, and calculate time according to the delivery route formula and
other assumptions previously stated:

Hopper-elevating truck:

Route miles, 40, 28 +

Rt =r 95 + 1(20) + 1(1.0) + 100(.20) + 1(.025(0) )

Rt = 118.0 min.

Rt = 71 + 1(2.0) + 1(1.0) + 100(.20) + 1(.025(0) )
Rt = 94

Thus, with the hopper-elevating method as a pure system, it appears
from the preceding and succeeding calculations that the time requirements
for a route of 40 miles and 5 tons would be less than with the regular
bagged system, but more than those for the regular bulk system. In terms
of full use of the truck and driver, it seems probable that with the hopper-
elevating method, more miles and more tonnage would be indicated than
with the regular bagged system, but less miles and less tonnage than with
the regular bulk system. Admittedly, the precise values of miles and tons
in Tables 20 and 24 could be varied with different combinations chosen,
but herein the totals have been forced to equal 480 minutes, and an attempt
made to stay within reasonable mileage and quantities. The particular mile-
ages and quantities seem to work out rather conveniently in terms of the
various time rates considered. The reconciliation to 480 minutes follows:

Route

Miles

Quantity

per Loaf!

Time per
Route

Time

per Route

Adjusted for

No. of Routes

Adjusted

for No. of

Routes

Loading
Time

Office
Time

Total
Time

Hypothesis 3:
Hypothesis 4:

40
28

10,000
10,000

118.0
94.0

236.0
94.0

60.0
30.0

40.0
20.0

336.0
144.0

108

30,000

330.0

90.0

60.0

480.0

Combining the time analysis with the depreciation estimates and esti-
mates of variable costs other than labor results in the data in Table 24.
Comparing these results, particularly cost per ton, with those in Table 20,
indicate that for the 80 mile-10 ton calculations (Hypothesis 3) the hopper-
elevating method is cheaper than bulk, but may be more or less than bagged,
depending upon the truck chassis cost.

With full use of driver's time (Hypothesis 4), the hopper-elevating
method appears cheaper than bagged, and may even be cheaper than bulk
if the assumptions of the analysis hold and truck chassis can cost less than
that for regular bulk equipment. If this be true, then the hopper-elevating
method, operated efficiently by one man, would be an alternative well worth
exploration.

47

Table 24. Daily Operating Costs of Hopper-Elevating Truck under Assumed Conditions

Minimum Cost U

nit Maximum Cost Unit

Hypoth(

3sis 3:

Fixed Costs:

Truck depreciation

3.75

5.36

Other fixed costs

2.00

2.00

Variable Costs:

Driver

8.40

8.40

Gas and oil

3.10

3.20

Other variable costs

2.60

2.70

Total operating costs

19.85

21.66

Cost per mile

.248

.271

Cost per ton

1.98

2.17

Cost per ton mile

.0248

.0278

Tons delivered per day

10.0

10.0

Truck miles per day

80.0

80.0

Hypothesis 4:

Fixed Costs:

Truck depreciation

3.75

5.36

Other fixed costs

2.00

2.00

Variable Costs:

Driver

12.00

12.00

Gas and oil

4.18

4.32

Other variable costs

3.51

3.64

Total operating costs

25.44

27.32

Cost per mile

.236

.253

Cost per ton

1.70

1.82

Cost per ton mile

.0157

.0169

Tons delivered per day

15.0

15.0

Truck miles per day

108 +

108 +

To test the probable cost position of the hopper-elevating method where
it is used for both bagged and bulk deliveries, it is assumed that in actual
practice it is possible to mount the mechanism on a truck chassis inter-
mediate in price between the regular bagged and bulk trucks. Implicit are
the same conditions with respect to territory route mileage (80 per day),
number of routes (2 per day), and complexity of routes (3 stops and
settings each). Calculated delivery costs per ton for bagged, bulk, and the
alternative method, where quantity is the primary variable, are presented in
Table 25.

In Table 25 the alternative method shows up as intermediate in cost
per ton between regular bagged and bulk methods through the 10-ton level.
At that point it is equal to bagged delivery costs, but cheaper than the
regular bulk method. At the 14-ton level, it appears to be characterized
by the lov/est per ton costs.

Route Income

Some feed companies appraise the efficiency of grain delivery routes
by comparing the "net income" from the various routes. "Net income" is
the difference between gross income from delivery charges and calculated
costs. Gross income is calculated by: (a) multiplying the number of units

48

delivered by a constant delivery charge per unit, or (b) totalling units
times variable charges where delivery charges vary with quantity. Calcu-
lated costs are generally derived by adding equipment costs (mileage times
an average per mile value for fixed and operating costs) and labor costs
(driver and helpers' time at given rates per hour).

Such an analysis will aid to a degree in spotting some problem routes.
However, without further analysis it does not show the comparison of each
route with its potential efficiency. Use of estimated values for delivery charges
would in itself bias conclusions reached about particular routes. It is felt
that delivery charges per unit should evolve from cost analysis. Hence, it
is suggested that time-breakdown studies are a better approach to studying
route efficiency, and likely to yield more dependable results than the route
income approach.

Table 25. Costs per Ton of Loodingl^ and De'ivering Feed
by Alternative Methods, Assumed Conditions

Tons Delivered

M.-thod 2 4 6 8 10 12 11 16 18

Regular bagged
feed delivery $8.61 $4.53 13.20 $2.52 $2.15 $1.88 $1.79 $1.98

Bulk feed

delivery 11.00 5.58 3.77 2.87 2.32 1.96 1.70 1.51 1.58

Bagged feed:

50% unloaded by

hand, 50% by

hopper-elevating

mechanism 9.83 5.17 3.48 2.68 2.20 1.89 1.66

'■Regular bagged feed loaded by one man by hand; bulk feed loaded by gravity from overhead bins;
bagged feed loaded for combination method by one man using hand truck.

5. Handling Bulk vs. Bagged Feed

TH E distribution of grain-feed in bulk has substantially increased since
the method was introduced into New Hampshire a few years ago. As
of December 1, 1952, it was estimated that about 3 percent of the total
grain consumed in the State was delivered in bulk.* For 1953, it was esti-
mated that the proportion was about S^/i percent on an annual average basis.
On the basis of data obtained during the early part of 1954, the annual
average rate of bulk feed deliveries in 1954 probably exceeded 5 percent of
total usage of grain-feeds in New Hampshire.

The development and operation of bulk feed distribution in New
Hampshire to early 1954 was largely confined to the southeastern area of
the State, in the counties of Hillsboro, Rockingham, Merrimack, and Straf-
ford. This area offered the most fruitful field to convert present customers
or obtain new customers in sufficient numbers to permit some of the econo-
mies of bulk feed to be realized.

* Woodworth, H. C, Handling Grain in Bulk on New Hampshire Poultry Farms,
N. H. Agr. Exp. Sta., Ag. Ec. Research Mimeograph No. 11, Jan. 1, 1953, p. 1.

49

Further extension of the conventional bulk delivery method, and the
rate of that growth is dependent upon the size of the "potential market" and
upon the evaluation made of the advantages and disadvantages by dealers
and producers. Some dealers may add bulk service to follow the lead of
competitors, rather than on the basis of expected savings. This section will
discuss the "potential market" and the "pros and cons" of bulk feed from
the dealer's standpoint.

The "Potential Market" for Bulk Feed

Considerable interest has been manifested by feed companies in the
size of the "potential market" for bulk feed in New Hampshire. A gross
evaluation of the "potential" can be obtained from examination of data on
unit size distribution, but the attainable market for bulk feed at any one
time will be smaller to the extent of a number of limiting factors.

Table 26 shows the numbers of farms, by unit size, having particular
classes of livestock. Calculations with these data and per unit feed require-
ments indicate insufficient unit size and volume on a statewide basis to
justify carrying bulk feed for hogs and sheep (Table 26). The same is
probably true of horses and beef cattle. Indeed, carrying bulk feed for
turkeys also might prove impractical in almost all instances because of the
relatively small number of farms with minimum unit size justifying bulk
feed delivery. The feed company concerned should count up the number of
customers whose requirements meet its minimum delivery policy, and then

Table 26. Numbers of Farms Having Specified Livestock Classes,
by Unit Size Intervals, New Hampshire, 1950

Type of Stock

Total

No. of

Farms Re

porting by

Intervals

Cattle, all ages^

8,287

Under

10
4,941

10-24
1,905

25-49
1,088

50-99
311

100
and over

42

7,843
7,585

Under
5

.5-14

15-29

30-49

50-99

100
and over

Cows, including heifers

that have calved^
Milk Cowsi

4,503
4.342

2,005
1,954

1.039
1,005

242
235

48

47

6

2

6,973

4,066
306

Under
100

100-
399

400-
799

800-
1,599

1,600-
3,199

3,200
or more

Chickens on hand^
Chicken eggs sold^
Turkeys raised-

4,283
1,766
189

1,080
970
56

627
627
33

428
428
9

167
167
19"'

108
108

542

Under
5

5-9

10
and over

Sows and gilts for
spring farrowing-"^

431

64

47

348

Under
25

25-49

50-99

100-299

AH sheep and lambs'*

298

34

15

1

April 1, 1950

^ Number on hand
2 Number raised
' Number reported
* Number shorn
^ 1,600 and over

Source: 1950 Census of Agriculture

50

decide whether the aggregate justified tying up a bulk bin for the time
needed to fill and unload it in the course of regular deliveries of grain-feed
for that class of livestock (such as turkeys) and for other classes.

Thus, it appears that the "potential market" for bulk feed is limited
in most areas to dairy cattle, laying hens, and chickens for replacement
and/or meat. Even with these items there are areas where the number of
units of desired size will be insufficient to justify bulk feed operations for
one or more of the preceding classes of livestock. Hence the "potential
market" for bulk feed for dairy cattle, laying hens, and chickens for re-
placement and/or meat is smaller than could be inferred from the data in
Table 26 and per unit feed requirements, but the exact relationship cannot
be stated in the absence of a comprehensive survey of the area served by
each distributing unit. The existence of a number of sellers in each area
further reduces the "potential" at least in the short run, the customers of
sufficient size for bulk feed service being spread among these several sellers.

Data collected for southeai>tern New Hampshire in the course of route
efficiency studies are interesting from the standpoint of suggesting the un-
adjusted "potential market" for bulk feed in one area. For 60 bagged and
bulk delivery routes, 40 percent of the routes, or 24, were 1- and 2-stop
routes. These routes involved only 7 percent of the total number of stops,
but over 47 percent of the total tonnage. The average number of 100-pound
units delivered on 1-stop bagged routes was 104.3; on 1-stop bulk routes,
128.2. On 2-stop bagged routes, an average of 62.5 100-pound units were
delivered per stop; for 2-stop bulk routes, the comparable figure was 67.5.
In general, these are the types of routes which would receive first consider-
ation for conversion to bulk feed.

Data tabulated for 408 deliveries (stops) of grain-feed on bagged
routes involved a total of 4,647 100-pound units. Deliveries of 40 bags (2
tons) or over, involved only 7.1 percent of the stops, but 48.2 percent of
the total tonnage (see Table 27). Apparently, most of the large customers
are supplied via 1- or 2-stop routes (regularly scheduled or on call). With
deliveries of 20 bags (1 ton) or over, 13.2 of the customers and 61.7 per-
cent of the tonnage were covered.

These data are totals for all units operating in the area. It is unquestion-
ably incorrect to assume that the preceding data are indicative of the pro-
portion of customers or tonnage it would be possible to convert to bulk
feed for a number of reasons. It is known that the percentages should be re-
duced somewhat to account for the inclusion of several kinds of feed in
some of the orders. Neither is the area covered in the data typical for other
areas of the State.

Table 27. Analysis of 408 Deliveries of Grain-Feed in Southeastern New Hampshire

No. of

Percent of

Percent of

Average

100-pound

Total

Total Number of

Number of Bags

Bags per Delivery

Deliveries

Bags Delivered

per Delivery

1- 3

46.9

7.2

1.74

4- 9

24.5

13.4

6.21

10-19

15.4

17.7

13.03

20-39

6.1

13.5

25.12

40-79

4.2

19.5

53.55

80 and over

2.9

28.7

111.42

100.0

100.0

11.29

51

At this point it might be well to elaborate on a number of consider-
ations which limit the size of the "potential market" for bulk feed aside
from unit size and number of sellers. These are: (1) accessibility of farm
and farm storage; (2) inclination of the producer or specifications of con-
tractors or hatcheries; (3) feeding program followed; (4) feed company
policy relative to size of minimum delivery; and (5) keeping character-
istics of feed, i.e., determining frequency of delivery.

As previously noted, inaccessibility may exclude some farms from con-
sideration for bulk feed delivery. A suggestion, attributed to J. C. Taylor,
included the recommendation that a study of highway and farm driveway
conditions should be the basis for determining the use of the new style
of delivery, and the comment that a suitable truck road open the year round
with at least a 12 foot clearance is a practical need.* Weight limits, width,
overhead clearance, and seasonal variations in road and driveway condi-
tions, as well as maneuvering room need to be taken into account.

Because of the heavier truck chassis required for the bulk feed body
and unloading equipment, and the additional weight of those items them-
selves, the adoption of bulk feed delivery tends to increase tare weight.
Use of aluminum bodies would help minimize this effect. If a customer tak-
ing 5 tons of feed per delivery is located on a road with a load limit of 8
tons gross weight, a truck of 2-3 tons empty weight could make the delivery.
However, with a 3-ton truck chassis and a 214-ton bulk body and unloader,
a load of 5 tons would gross 101/4 tons, or in excess of the road limit.

During the spring months many New Hampshire roads are virtually
impassable due to mud. Hence, a customer normally receiving bulk service
might need to be serviced by a small truck and with bagged feed for the
duration of the difficult going. Such special arrangements are obviously
less efficient than standardized operations, and coming in number at one
time, might deter the introduction of bulk feed service to such units in
the first place.

Under-emphasis by some farmers upon the building and maintenance
of serviceable farm roads and driveways, which are frequently unsatisfactory
for non-bulk delivery, would initially preclude them from being serviced by
the heavier bulk feed delivery equipment. Somewhat more room is required
for maneuvering bulk delivery equipment into position for unloading than
is generally necessary for non-bulk delivery equipment. To provide adequate
facilities with respect to the preceding might require cash outlay and/or
time, rearrangement, building or rebuilding of a magnitude that a farmer
would be unwilling or unable to undertake.

Some producers, whose farms are of sufficient unit size to warrant con-
version to bulk feed, may not be inclined to make the move. As with most
agricultural service innovations, the impetus to secure adoption rests large-
ly with the supplier. Farmers generally have to be sold on the idea in
terms of convenience or efficiency, but in the case of bulk feed or any other
new method, requiring extensive building or remodelling, the presence of
an additional incentive in the form of a substantial cash savings is a help-
ful inducement. However, matters other than bulk feed are likely to receive
priority on some farms despite a convincing presentation of its merits.

A feed company may also find itself unable to extend bulk feed service
to additional farm units because of the inclinations of and limitations im-

* Benson, H. J., "Farm Delivery of Feed in Bulk," Eastern Feed Merchant, Jan.,
1952, p. 67.

52

posed by broiler contractors or hatcheries with respect to brand of feed,
feeding program, or installation of automatic feeders. Some broiler con-
tractors appear opposed to the use of the latter because they want growers
to work closely with their birds at all times and regard hand feeding as an
integral part of the program. Hence, bulk feed coupled with mechanization,
a strong selling point, cannot be pertinently suggested to the grower.

The type of feeding program which a producer follows on his own or
under direction, bears directly upon the feasibility of extending bulk feed
service to that farm. In general, the more complex the program — in terms
of kinds of separate feeds used — the larger the unit size must be before
bulk service can be used. For example, if it is proper to deliver about every
two weeks, and the company's policy permits deliveries of not less than
one ton of any one item at a time, then a producer feeding all-mash who has
about 500 laying birds might qualify. However, with a mash-and-scratch
program, and the same conditions of delivery, the flock would probably
need to be twice as large.

Size of minimum delivery and frequency of delivery may be inter-
related and thus are herein discussed together. The size of minimum delivery
is partially a resultant of the equipment in use for loading, weighing, and
hauling bulk feed. In weighing, it is impossible to stop the gravity flow on
the exact figure every time. In the interests of efficiency the load may run
over or under a few pounds. Below a ton, the same margin of error in
pounds would become progressively greater percentagewise, and even though
payment is on actual quantity, probably would be more troublesome to
smaller than to larger producers. With most bulk trucks now in use in the
State, bins hold about two tons each. It seems reasonable that one-ton de-
liveries be set as the minimum, though two is preferable from the cost
standpoint. However, a few one-ton orders mixed in with larger orders
would help keep the equipment operating close to capacity in many areas
without too much additional outlay. The use of a one-ton minimum delivery
in selected cases would not only help enlarge the "potential market", but
would he within the quantitative discount breakdowns suggested earlier in
the bulletin.

Frequency of delivery, as minimum delivery size, seems now to be
largely a matter of company policy and/or opinion. As previously pointed
out, controlled experimentation on the keeping characteristics of grain-feeds
under New Hampshire farm storage conditions is needed. This work should
concern itself with both bagged and bulk feed.

With producing stock (milk cows or laying hens), size of the animal
and level of production introduce some variation into computations. In
Table 29, however, a standard rate is used for milk cows, and variation
for laying hens covers only a few levels of production. The latter, as well
as body weight, actually effects only minor variation in laying flock cal-
culations.

With growing stock, minimum unit size shifts with age, i.e., as feed
consumption per unit increases. These shifts are obviously substantial
(Table 28). However, if a company can justify very infrequent delivery
for the first few weeks, or preferably, service with bagged feed, the mini-
mum number of growing chickens needed to justify bulk feed service is
rather low after that period. Hence, the bulk feed market could be enlarged.
In practice, this adjustment on growing stock might involve the following:

53

ig flock:

(a) On farms where there is a laying

( 1 ) bulk feed for layers

( 2 ) bagged feed for a few weeks for replacements carried on
side racks of bulk truck

(3) bulk feed for replacements after a few weeks.

(b) On farms where meat production predominates:

(1) bagged feed for a few weeks out of the nearest store,
and worked into regular routes

(2) bulk feed after a few weeks.

Table 28. Cumulative and Weekly Feed Consumption for Selected Meat Chicken Flock Sizes

Week

Cuniu

lative Feed Consumption (tons)

Weekly

Feed Consumption

(tons)

Number of Birds

Number of Birds

2,000

.2

5,000

10,000

2,000

5,000

10,000

1

.5

1.0

.2

.5

1.0

2

.5

1.25

2.5

.3

.75

1.5

3

1.0

2.5

5.0

.5

1.25

2.5

4

1.6

4.0

8.0

.6

1.5

3.0

5

2.4

6.0

12.0

.8

2.0

4.0

6

3.3

8.25

16.5

.9

2.25

4.5

7

4.4

11.0

22.0

1.1

2.75

5.5

8

5.6

14.0

28.0

1.2

3.0

6.0

9

7.0

17.5

35.0

1.4

3.5

7.0

10

8.6

21.5

43.0

1.6

4.0

8.0

11

10.3

25.75

51.5

1.7

4.25

8.5

12

12.2

30.5

61.0

1.9

4.75

9.5

13

14.2

35.5

71.0

2.0

5.0

10.0

14

16.4

41.0

82.0

2.2

5.5

11.0

15

18.8

47.0

94.0

2.4

6.0

12.0

16

21.3

53.25

106.5

2.5

6.25

12.5

17

23.8

59.5

119.0

2.5

6.25

12.5

18

26.2

65.5

131.0

2.4

6.0

12.0

19

28.5

71.25

142.5

2.3

5.75

11.5

20

30.8

77.0

154.0

2.3

5.75

11.5

In conclusion, it might be well to point out that the trend toward larger
units will progressively enlarge the "potential market" for bulk feed, other
things remaining equal. Also, any appraisal of the current situation relates
to equipment, methods and conditions now in existence, and new innova-
tions that will have their impact on this issue.

Advantages and Disadvantages to the Dealer

Bulk feed, where it can be introduced within the conditions set forth
in the preceding section, results in simplification of the marketing channels
for grain-feeds. In Figure 11 there are diagrammed the steps involved in
the marketing of grain-feeds in New Hampshire, as observed in the study.
In some other areas, bulk feed is shipped in railroad cars and at desti-
nation stored in bins or taken off directly onto trucks, but that method had
not yet made its appearance in the State at the time of writing. Here, bulk
feed thus far moves mostly directly from mill to producer via truck, except
in some instances where bagged feed is emptied into bulk trucks in the
absence of local milling of a particular brand. With the method of bulk

54

handling predominant in New Hampshire, several operations are eliminated
as compared to the most common method of handling bagged feed.

Not all of the advantages and disadvantages of bulk feed can be ascer-
tained with reference to such a marketing channels chart. Cases in point
relate to plant and equipment costs.

Obviously, the cost of facilities at the mill to handle bulk feed will
vary with volume. The system may be installed rather simply in new mills,
but costs of remodelling some of the older mills may be considerable.

One source reported a range of $1,300-35,000 in costs of converting
mills to accommodate bulk feed.* Another study reported data for 3 mills,
with a range in costs of installing bulk facilities of .$11,821-55,000. f Annual
charges for these mills ranged from $2,100-6,150, and costs per ton, with
bulk volumes at that time from $117-493. The same study reported little
additional investment for a New England mill which installed a by-pass
from the second floor to divert feed from the sacking scale out through the
side of the mill to a spot where trucks were loaded. Here, bulk feed was
available by appointment only and had to be hauled in farmers' trucks or
by local haulers.

Table 29. Number of Animal Units Required for Minimum Deliveries
of Bulk-Feed under Assumed Conditions

Class of

Every Week

Every 2 Weeks

Every 3 Weeks

Every 4 Weeks

Livestock

2 tons

2 tons

2 tons

2 tons

Numbi

■r of H-ad

Milk Cowsi

108

54

36

27

Laying Hens^

30% production

2,041

1,020

680

510

50%

1,905

952

635

479

70% "

1,786

893

595

446

Commercial

Meat Chickens^

1 week old

20,000

10,000

6,667

5,000

2 weeks old

13,333

6,667

4,444

3,333

3 '

t rr

8,000

4,000

2,667

2,000

4 '

t rf

6,667

3,333

2,222

1,667

5 '

t It

5,000

2,500

1,667

1,250

6 '

r tr

4,444

2,222

1,481

1,111

7 '

r tt

3,637

1,818

1,212

909

8

1 tf

3,333

1.667

1,111

833

9

t ft

2,857

1,429

952

714

10

t tt

2,500

1,250

833

625

11

t It

2,353

1,176

784

588

12

1 ft

2,105

1,053

702

526

13

1 It

2,000

1,000

667

500

14

1 ft

1,818

909

606

454

15

1 It

1,667

833

556

416

16

1 It

1,600

800

533

400

17

f ft

1,600

800

533

400

18

tt tt

1,667

833

556

416

19

'1 It

1,739

869

580

434

20 "

1,739

869

580

434

1 1930 pounds

of grain

per cow annually,

Table

3.

- Rates of consumption

from : Frick, G. E

, and

W

K. Burkett,

Farm Management

Reference Manual,

University of N.

H. Ext.

Service and BAE

Cooperat

ng, Ext. Circ

. 307, Sept., 1953

p. 17.

* Benson, H. J., op. cit.
tRickey, L. F., op. cit., p. 6-7, 16, 19, 22.

55

MIXING

/-

H

6

^

C^H

J ....

WAREHOUSE

H

RAILROAD
CAR

H

deliveryI

TRUCK 1

A BAGGING

nm^^i

^^B^^l

C

c

C

^ \

\

H%C

H^C

V

H \

SUPPLY
TRUCK

A

RETAIL
STORE

/

\

s^

\

\

\ -

C

ll producer's

^GRAIN STORAGE

' ^...^^

^

^

BULK
LOADING BINS

deliveryI

TRUCK 1

C

G

-

KEY-

1

■

MOST COMMON METHODS C " CONVEYOR
ALTERNATE METHODS G - GRAVITY FLOW

Figure 11.

H- HAND LABOR P- AUGER OR PNEUMATIC

Handling grain-feeds in New Hampshire from mill to producer's
grain storage.

The additional costs of the equipment for delivering bulk feed are sub-
stantial, i.e., from $3,000-6,000 for a mechanized bulk delivery body plus
an additional cost for a heavier truck chassis.* In addition, costs of main-
taining this equipment are likely to be higher than with bagged trucks.
Maintenance problems involve specialized knowledge, possiblv not available
locally. Temporarv breakdowns of bulk equipment may also involve the
additional costs of securing replacement trucks, sometimes from consider-
able distances away, while repairs are made.

It would appear that the weight of evidence points to the existence of
economies in handling grain-feeds in bulk as compared to bags. However,
the stage of development of bulk distribution, the area, the particular com-
pany involved, and the extent to which the "potential market" can be and
has been exploited, all affect the individual case. It is to be expected that
in the early stages of developjnent average costs are likely to exceed those
for the long-established method. From this situation it mav appear, as
frequently contended, that "two methods cost more than one". But this may
be a phenomenon of the short- run rather than the long-run, when adjust-
ments have been made to bring both methods toward maximum efficiencv.
Obviouslv, this end result might come about only after rather drastic
changes in capital and organizational structure of the particular company.
As with the situation on deliverv route costs, a newer company might have
fewer overall problems to solve than an older company where vested interests
and traditional methods pose formidable obstacles.

Some of the factors which presently appear as advantages and disad-
vantages in the matter of bulk vs. bagged feed are summarized below.

* Benson, H. J., op. cit.

56

Advantage

Disadvantage

At the Mill:

Investment
in
facilities

Unless the unit is to handle bulk
feed only, there is likely to be a
net increase in investment in
plant facilities (bins, conveyors,
scales) .

Bagging

Transfer
to
storage

Loading

Operation eliminated. A probable
saving of the time of one man for
that volume handled in bulk.

Grain transferred to storage bins
mechanically. Net saving in labor,
i.e., two men used to hand-truck
bagged feed to storage section.

Under proper conditions driver can
load, but there may also be a dis-
patcher-weigher to assist. With
bagged feed, two or more men may
be used in loading, plus a dis-
patcher. Net saving in labor of at
least the time of one man. Also, an
additional saving in man minutes
for the individuals involved, since
bulk feed can be loaded faster than
bagged feed under proper condi-
tions.

Delivery Routes:

Investment in
equipment

Equipment
maintenance

Labor

Aggregate
delivery
costs

Tare weight
of
equipment

Depreciation on bulk equipment
2-3 times greater than on bagged
equipment.

Higher cost on bulk equipment.
Repair involves specialized knowl-
edge. Replacement trucks may
have to be secured from consider-
able distance.

Bagged routes where more than one
man has been used, can be served
with bulk equipment using one man
except where farm deliveries are
difficult. Because bulk feed can be
unloaded faster than bagged feed
under proper conditions there is an
additional net saving in man min-
utes for the individuals involved.

Potential savings when equipment Probably higher under present
used near capacity. Can deliver rates of usage in most instances,
more bulk feed than bagged feed in
working day.

Probably increased with bulk
equipment. May preclude some
farms from regular service in
bulk.

57

Other:

Sales

arguments

Advantage

Lower cost to farmer; eliminating
potential disease hazard from used
bags; grain dealer saves farmer
some chore time, with auxiliary
equipment farmer can save substan-
tial amounts of time; bulk feed may
be fresher — dealers claim it is not
held as long.

Disadvantage

Mixed
orders

Labor Bulk feed eliminates most lifting

relations — this will appeal to many workers.

Can use older men when necessary.

Grain Bulk feed eliminates necessity for

bags procurement; arrangements for

handling used bags; and complaints
about grading of used bags. Elimi-
nates bag loss in dealer's storage.

Pollution Possibility of somewhat less loss of

of feed through pollution by rats and

grain mice with bulk feed.

Established
retail

outlets and
dealers

Bulk not adapted to situations
where small-to-medium-sized units
require several different types of
feed.

Bulk feed service may by-pass
existing outlets and dealers, vio-
late agreements on trade areas.
May take the largest customers.
May need additional servicemen
to replace service furnished by
local outlets and dealers. Short-
run cost problems because of in-
vestment in present distribution
setup for bagged feed.

58

In the early stages of the development of bulk feed handling in the
East, a number of mechanical and technical problems (rather than the pre-
ceding tabulations which are predominently economic problems) were cited
rather frequently as drawbacks to the new method. These related to bin
construction (new feed drawing through and clogging of bins) ; uniformity
of mixtures (feared separation of various-sized particles in storage and
hauling) ; tagging and weighing (feared inaccuracies) ; and others of this
type. However, these matters were rapidly resolved, and do not pose serious
objections today toward extension of the bulk handling method.

Conclusions

IN the 1955 Census of Agriculture there is ample evidence of a decline
in numbers of farms and an increase in unit size. Fewer small units to
service should contribute toward increasing the efficiency of retail distri-
bution.

Relocations and consolidations of retail feed stores are continually in
evidence. Determining optimum locations and areas to be serviced from
each is a matter of regular concern to feed companies. Much can be done
by these companies in the locational area as well as on delivery route re-
arrangement and efficiency. Further economies could undoubtedly be real-
ized by establishing an exclusive territory system if the institutional frame-
work of the industry permitted.

Further work is needed on the relative efficiencies of delivering feed by
auger-type bulk trucks, pneumatic-type bulk trucks, and the hopper-elevat-
ing attachment on regular bagged trucks. Each of these, as well as delivering
feed in bags, may be the least cost method under different situations.

Larger farm units will accelerate the swing toward bulk feed. Farm
bin plans can be developed for several typical situations, but the variation
in farm layouts requires modification before most of them could be used
for construction.

Recent changes in bulk feed pricing are indicative of a shift from the
"incentive discount" toward a discount more nearly reflecting actual savings.

Further work is needed on the keeping characteristics of feeds under
farm conditions. This is closely linked to the determination of frequency of
delivery and may well vary seasonally.

59

630. 72

N532

no. 426-450

DATE DUE

HOV 4 -^4

iiY 19^

SiM^?*^

^^T.23'Sg

i

L

F32a

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