5
>N BULLETIN 476
APRIL 1963
Marketing New England Poultry
4. Structure and Performance of the
Assembly System
By George B. Rogers and Edwin T. Bardwell
AGRICULTURAL EXPERIMENT STATION
UNIVERSITY OF NEW HAMPSHIRE
DURHAM, NEW HAMPSHIRE
in cooperation with
Aipricultural Experiment Station, University of Massachusetts
and Marketing Economics Division, Economic Research Service,
United States Department of Agriculture
5
^1
>N BULLETIN 476
APRIL 1963
nh
Marketing New England Poultry
4. Structure and Performance of the
Assembly System
By George B. Rogers and Edwin T. Bardwell
AGRICULTURAL EXPERIMENT STATION
UNIVERSITY OF NEW HAMPSHIRE
DURHAM, NEW HAMPSHIRE
in cooperation with
Agricultural Experiment Station, University of Massachusetts
and Marketing Economics Division, Economic Research Ser^ico.
United States Department of Agriculture
MMMmm^^^m
■■Sii'mM'm
mm^t
■'hie study was completed as'pjrfrl of & Northeast Regional Pro-
ject, NEM-21, "The Effect of Marketing Changes Upon Market-
ing Costs and Upon Demand and Consumption of Poultry Pro-
ducts,** a cooperative study involving Agricultural Experiment
Stations in the Northeastern Region and supported in part by
regional funds from the Economic Research Service (formerly
Agricultural Marketing Service). United States Department of
Agriculture.
Preface and Acknowledgemeiils
This bulletin is the fourth in a new series to be issued by
Agricultural Experiment Stations in the New England States
and involves, in most instances, direct cooperation with the Eco-
nomic Research Service, (formerly Agricultural Marketing Ser-
\ ice ) U.S.D.A. The series deals with various aspects of poultry
marketing in New England. This publication describes the main
features of the assembly system, based largely upon a stratified
random samiilc of 75 firms, and analyzes the possibilities for
reducing costs of the assembly function alone and in combi-
nation with processing.
The authors appreciate the cooperation of the assemblers of
live poultry who furnished data on practices, costs and input-
output relationships. Much valuable information was also ob-
tained from the State departments of agriculture in New Eng-
land who maintain records incident to the licensing and bond-
ing of assemlily firms. The authors wish especially to acknowl-
edge the assistance and critical appraisal received from W. F.
Henry, of the Agricultural Economics Department of the Uni-
versity of New Hampshire; A. A. Brown, of the University of
^lassachusetts; and from Norris T. Pritchard, Marketing Eco-
nomics Division, Economic Research Service, U. S. Department
of Agriculture. Harold B. Jones aided materially in the collec-
tion and analysis of the data. John Payne and Frank M. Conley
aided materially in the analysis of data.
TABLE OF CONTENTS
Paire
SUMMARY 3
I. BACKGROUND OF STUDY 5
Structure of the Present Assembly System 6
Types of Assemblers Defined 6
Importance of Various Types of Assemblers 9
Supply Sources and Market Outlets 9
Area differences in Assembly Systems 11
The Effect of Declining Resources in the Assembly System 12
n. PERFORMANCE AND COSTS IN THE PRESENT SYSTEM OF LIVE
POULTRY ASSEMBLY 13
Labor Performance 13
Truck Operating Performance 15
Present Costs of Live Poultry Assembly 17
III. REDUCING COSTS OF LIVE POULTRY ASSEMBLY 19
Methodology and Assumptions 19
Effect of Firm Size on Costs of Live Poultry Assembly 22
The Influence of Volume per Mile of Truck Travel on Costs of Live
Poultry Assembly 24
Least-Cost Combinations of Resources in Live Poultry Assembly 25
Importance of Cost Group in Producing Cost Reductions 29
IV. SOME IMPLICATIONS OF REDUCED COSTS OF ASSEMBLY AND
PROCESSING 30
Institutional Changes which would Facilitate Assembly Cost Minimization 30
Systemic Efficiency in Assembly 31
Combining the Assembly and Processing Functions 33
Optimum Adjustments for Selected Supply Areas 37
V. APPENDIX 42
Suminary
Declining demand for live birds at the retail level, the movement of
proce8sing toward large-scale country plants, the advent of contract
growing, and dwindling niimljers of producers and small processors have
caused a substantial decline in numbers of live assemblers in recent
years and changes in the characteristics of the remaining firms. During
1951-57 the number of firms licensed by State departments of agricul-
ture to haul live poultry in New England declined 55 percent. The num-
ber of poultry trucks licensed declined 47 percent.
The present assembly system in New England is a mixture of the old
and the new. The older system is characterized by decreasing operations
as numbers of small slaughterers, live-poultry stores, buyers of live
poultry, terminal market live-poultry receivers, and city dressing plants
dwindle. Newer types of firms, such as large piocessing plants, contract
haulers, and contractors, have made tremendous gains at the expense of
the older types and through extensive use of contract production.
The size of the supply area for most firms has been shrinking. At the
same time volume per firm has increased. As farm unit sizes have in-
creased and the number of small firms has declined, itinerant live buy-
ing has virtually disappeared. Commercial meat chicken production now
greatly exceeds the volume of fowl in most areas. The increasing im-
portance of contract growing, particularly as firm size increases, has
contributed to producing larger lots and enabled better scheduling of
plant operations.
The decline in the number of firms engaged in assembly, the changes
in the types of assembly firms and in their practices, and the dominance
of commercial meat chickens in total output have narrowed assembly
margins and reduced resources devoted to that function. Nevertheless,
the present assembly system is characterized by a sustantial excess of
capacity and by duplication of travel and expense. Possibilities exist for
further sizeable cost savings through enhanced firm and structural ef-
ficiencies.
The individual firm can increase efficiency and lower costs per pound
in assembly by: (1) Capacity operation of a minimum number of trucks
and optimum pickup crew organization; (2) increasing total volume to
obtain any inherent economies of scale; and (3) increasing the volume
of poultry per mile of truck travel. As volume increases, from quite
small sizes, decreasing per pound costs result in part from the ability
of the firm to handle flocks of larger average size with the least-cost
combination of resources.
On the basis of an analysis of cost data from 75 assemblers of live
poultry in New England, unit costs in assembly declined from 0.90 cent
per pound for one million pounds to 0.47 cent per pound at 50 million
pounds when poultry was available at the rate of 100 pounds per mile
of truck travel. Increasing the pounds per mile of truck travel to 1,000
lowered unit costs to 0.60 cent per pound for one million pounds and
0.35 cent per pound at 50 million pounds.
Increased density in the supply area can be achieved by establish-
ment of exclusive supply areas for individual firms and/or a more active
role l)v a>^(Mnl>l(-i> iti (Unmnininji tlic location and !^'izc of prodncing
units. In an environment where independent farm units predominate,
?uch units are likely to be located without reference to any one asseni-
hlv firm. Where contract jjroduction is invohed some discretion exists
as to farm location. But this feature has not been fully exploited he-
cause of the heavy reliance upon the use or conversion of existing re-
sources rather than on new investment. Cost savings availa1)le from in-
creased volume and increased densitv would enable assemblers to oifer
incentives to maximize the size of nearby farm units.
About 330 firms assembled 470 million pounds of poultry in 1957 at
a cost of S4.6 million. If these firms doubled the volume hauled per mile
of truck travel, assembly costs could be reduced to 83.9 million. Fur-
ther developments to create exclusive supply areas, plus a reduction of
60 percent in firm numbers to enable operation at 100 percent of capaci-
ty, could have reduced costs to $2.9 million.
Combining the assembly and processing functions imder one manage-
ment can eitect cost savings. In 19.57, 70 percent of the 470 million
])ounds of poultry assembled was handled by combined-fimction firms.
The combination of assembly and processing under one management
further increases '.he comj)elijive advantage of large })lant*. However,
the savings in assembly costs arc" relatively small compared to those in
processing. In the short-rtm, larger firms can secure additional volume
l)y increasing the size of their supply area and offset increased costs per
j)ound in assembly by savings obtained by processing the larger volume.
But in the long-run, elTorts to reduce assembly costs by decreasing the
size of the supply area and increasing its density will most enhance the
competitive position of the firm.
In 19S7 the con)l)!nfMl costs for assembling and processing New Eng-
land poultry totalled S23.8 million. If the voluiiu> leaving the area in
live form and sold live and processed through the older marketing
channels remained constant, substantial savings could be obtained by
reducing numbers of combined-function firms handling one million
pounds or more annually and by creating exclusive supply areas. The
additional savings in assembly an»l processing would total S8.0 million.
Economic pressures are likely to force a continued reduction in plant
numbers, but the extent to which maximum cost savings are realized
will depend upon changes in institutional arrangements and develop-
ments in the distributing function.
Marketing New England Poultry
4. Structure and Efficiency of the
Assembly System
By George B. Rogers and Edwin T. Bardwell*
1. Background of Study
Marked changes have taken place in the pouhry industry in New Eng-
land and in the United States in the last two decades. Technological ad-
vances in production, assembly, processing and packaging, transporta-
tion, and distribution have enabled the industry to reduce costs and to
furnish consumers with larger quantities of higher quality poultry at
lower prices.
Previous reports in this series on the marketing of New England poult-
ry have dealt with (1) the characteristics of the processing industry,
and (2) the costs and economies of scale in chicken processing. The
first report was concerned primarily with description of poultry pro-
ducing areas and plants in New England, including problems of plant
organization and equipment, buying and selling practices, and assem-
bling and distributing methods. The second report presented detailed
analyses of the costs and economies of scale in the processing of broilers
and fowl. This report, the fourth, summarizes the changing character-
istics of the assembly system, describes the techniques and practices
used, and the costs involved. However, the value of the report is not
expected to be limited to the New England poultry industry. Assemblers
in other regions of the United States are confronted with many of the
same problems and physical and economic conditions that New England
live assemblers currently face.
The advent of contract growing, increased specialization of certain
areas in commercial meat chicken production, and larger producing and
marketing units have facilitated volume handling of live birds. In addi-
tion, the shift of poultry processing toward large-scale country plants has
enabled the assembly function to become more localized. Hence, the
number of assembly firms has declined sharply, their characteristics
have changed and assembly has become more closely-integrated with
growing and processing. ^
* Mr. Rogers is Agricultural Economist, Marketing Economics Division, Economic
Research Service, U.S.D.A. Mr. Bardwell is Cooperative Agent, New Hampshire and
Massachusetts Agricultural Experiment Stations and Economic Research Service,
U.S.D.A. stationed at the University of New Hampshire.
1 Rogers, G. B., E. T. Bardwell and D. L. Deoss, Declining Numbers of Live Poul-
try Dealers in New England; Causes and Effects. Agr. Exp. Sta. Univ. of New Hamp.
Agricultural Economics Research Mimeograph No. 16, Dec. 1957.
Structure of the Present Assembly System
The present assembly system in New England is a mixture of the
old and the new. The older system is characterized by decreasing oper-
ations and a pessimistic outlook as numbers of small slaughterers, live-
poultry stores, live-poultry buyers, terminal market live-poultry re-
ceivers, and city dressing plants dwindle. The newer types of firms have
gained at the expense of the older types as well as through extensive
use of contract production. The forces which have produced the changes
in the assembly system are still operating, but the question of predomi-
nance has long since been decided.
Most meat chickens now are produced under contract arrangements
with large processors, feed companies, hatcheries, and independent con-
tractors. This development has increased control of these firms over
production and sales practices. Large processors, the contract haulers
they employ, and contractors who also haul live poultry have become
more important in recent years as assemblers of live poultry. Many
large processors and contractors formerly were buyers of live poultry
and other former independent live-poultry buyers have affiliated with
specific processing plants as contract haulers.
The small poultry farms of the past, largely selling fowl, were ser-
viced mainly by small-volume assemblers. But the substantial decline
in the number of poultry farms and an increase in their average size
have reduced supplies available to the small assembler. Such firms
usually are unable to handle large lots and larger assembly firms have
evolved. Average size per lot acquired rises substantially with increas-
ing firm size. This occurs in part because of the decline in lots per
farm as emphasis shifts from fowl and related classes'^ toward broilers
and other commercial meat chickens.-^ Many egg producers practice
periodic culling, selling frequent small lots plus one large lot when the
balance of the flock is liquidated. In contrast, meat chickens are grown
on a regular schedule, with several large lots per year per farm.
Yet small firms are important in gathering such small and scattered
lots of poultry which remain, particularly in non-commercial poultry
producing areas. In addition, the older types of assembly firms such as
live-poultry buyers, live-poultry stores, and small slaughterers are still
important in supplying customers who prefer to examine live birds at
the point of slaughter.
Figure 1 diagrams the channels through which New England live
poultry moves during the assembly process.
Types of Assemblers Defined
Most assemblers carry on several marketing functions in addition to
hauling poultry. These may include buying and selling, contracting,
growing, processing, and distributing. However, for each type of firm
2 Included in this group are hens culled during or sold at the end of the egg-
laying period, roosters, cull pullets, and some young chickens, mainly surplus cock-
erels from egg strains of birds. Since fowl account for the major share of volume,
this group is hereafter referred to in this report as "fowl."
3 Included in this group are broilers, fryers, roasters, caponettes, capons and pullets
grown strictly for meat purposes. Since broilers account for the major share of
volume, this group is hereafter referred to in this report as "broilers."
Figure 1. Channels Involved in Live Poultry Assembly, New England 1957
Poultry
from outside
New England
2.6
Chicken produced in
New England
472.9
Turkey
produ ced
in New
England
2.4
Total supply 477.9 ^
Handled in live form by ossembl/ng firms 473.0
289.4 H
Proces sing
r
Contract
^
Sold from
farms as
processed
pou Itry.
4.9
Sold in processed form
429.9
Sold in
live form
outside
New England
43.1
• Includes 3.4 million (lbs.) delivered to assemblers by producers,
t All figures — million (lbs.)
one function is clearly primary to its existence, organization, and oper-
ation. The major features of each type of assembler of live poultry are
listed below:
Processing plants slaughter and eviscerate poultry for sale to volume
buyers. Other functions are contributory in nature. Most plants are lo-
cated at country points.
Contract haulers truck poultry mainly for processing plants at a fixed
contract rate per pound. They seldom take title to any poultry. Contract
haulers are of two types: (1 ) Those who haul the entire volume for par-
ticular plants or a share of it on a regular basis: and, (2 I those who
haul only during periods of peak receipts for plants which own their
own trucks.
Contractors finance growing operations. They obtain the bulk of
their volume from contract growers to whom they extend financing for
cash items. They commit some lots in advance to specific plants and
negotiate sales of other lots when birds reach market size.
Live-poultry buyers purchase small and mixed lots of poultry from
scattered, independent producers and resell them in live form.
Table 1. Pouhry Assembly Firms: Type, Number, Volume, and Market Classes
of Poultry Assembled, New England, 1957
Volume
Type
of Poultry
Hauled
Total
Hauled
Type of Firm
Firms
Volume
From
Heavy
Handled
Farms
Broilers
Young
Other
1
Chickens
2
Total
million
million
number
pounds
pounds
percent
percent
percent
percent
Processing
plants
35
422.9
285.6
75.8
15.1
9.1
100.0
Contract
haulers
10
81.5
81.5
84.7
5.9
9.4
100.0
Contractors^
22
45.5
45.4
60.4
35.7
3.9
100.0
Live-poultry
buyers
125
56.1
52.6
11.4
50.6
38.0
100.0
Live-poultry
stores
90
6.0
3.9
41.1
41.0
17.9
100.0
Small slaugh-
terers
50
0.8
0.6
17.0
34.0
50.0
100.0
Inactive and
transitional
units
184
5
6
—
—
—
—
Total or
average
350
612.8
469.6
68.3
19.7
12.0
100.0
1 Excludes ofF-farm deliveries by producers to assemblers, but includes acquisitions
at cooperative live-poultry auctions.
-Mostly fowl and roosters; includes minor quantity of turkeys.
•* Includes only firms which haul.
* Including 7 formerly engaged in processing.
•'■' Not available.
^ Insignificant.
8
Live-poultry stores sell to the Kosher trade and to other customers
wishing to purchase, or select, live birds at the point of slaughter. They
are part-time slaughterers. Usually they are located in heavily popu-
lated areas.
Small slaughterers combine local assembly with processing, sales, and
delivery to nearby retail outlets and consumers. Volume per plant is
usually less than 30,000 pounds a year and operations generally are on
a part-time basis.
Importance of Various Types of Assemblers
Of 350 potential assemblers of live poultry in New England in 1957,
fewer than 20 percent were processing plants, contractors, and contract
haulers (Table 1), but these 67 firms hauled nearly 88 percent of the
volume available from farms. The remainder was hauled by 265 buyers
of live poultry, live-poultry stores, and small slaughterers. About 5
percent of the 350 firms were inactive or in the process of transition
to wholesale distributing or retailing operations.
Assemblers delivered to other types of assembly firms almost 30 per-
cent of the 470 million pounds of live poultry they hauled from farms.
The pre-dominant movement between types of firms was from contract
haulers, contractors, and live-poultry buyers to processing plants. In
addition, firms of like type (such as j)rocessors) sometimes exchanged
poultry with each other. This exchange helped to equate supplies of
individual market classes on hand with customers' requirements.
The older (and smaller) assembly firms haul a higher percentage of
fowl than the newer firms. However, most assembly firms now handle a
larger volume of broilers than of fowl. Although most of New England's
turkey output is produced, processed, and sold by specialized units, all
types of assembly firms acquire a few turkeys, mostly surplus young
birds and breeders.
Supply Sources and Market Outlets
Almost two-thirds of the 470 million pounds of live poultry hauled
by New England assembly firms in 1957 was from farms under contract
to, or owned by, the hauler or his employer (Table 2) . About two-thirds
of the volume that processors hauled was from contract sources; for
contractors, the proportion was more than 95 percent; and for contract
haulers, 83 percent. In contrast, more than 93 percent of the volume
hauled by live-poultry buyers and almost 100 percent of that hauled
by live-poultry stores and small slaughterers was from independent
sources.
Fowl came largely from independent farms since integration had not
developed to the same extent in New England in egg-producing enter-
prises as in broiler enterprises. But almost three-fourths of the broiler
volume was from farms under contract to assemblers of live poultry and
their affiliates. About 4 percent of the total supply of live poultry in
1957 originated on farms owned by assembly or processing firms.
Of the total volume of 473 million pounds of live poultry handled by
assembly firms and sold by producers in 1957, nearly 91 percent was
in
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slaughtered within New England and 43.1 million pounds, or about 9
percent, left the region alive. Movement of live poultry into New Eng-
land was relatively small, about 2.6 million pounds. Live-poultry buyers
accounted for the bulk of the out-movement which has declined sharply
in the last decade.
Producers delivered about 3.4 million pounds of live poultry to vari-
ous assemblers in 1957 and sold about 4.9 million pounds (live basis)
as processed poultry. The five New England cooperative live-poultry
auctions still functioning in 1957 handled only about 2.5 million pounds
of poultry. The principal buyers on these auctions were live-poultry
stores, processing plants, and live-poultry buyers — ■ in that order.
Area Diflferences in Asseniljly Systems
The nature of the assembly system in particular areas is determined
by the characteristics of the areas: (1) surplus-deficit status; (2) degree
of commercialization of production; (3) human population density;
(4) distance to principal consuming centers; (5) relative importance of
commercial meat chicken production to egg production; and (6) in-
stitutional considerations, particularly the degree of control exercised
by marketing firms over production units.
Assembly firm numbers are largest, and average firm size smallest in
heavily populated areas such as western Connecticut, Massachusetts and
Rhode Island where live buyers, live stores, and direct marketing by
producers are important. Where concentrations of commercial process-
ing have developed, as in southern Maine, eastern Connecticut, and
southern New Hampshire, there are fewer, but larger firms. Firm num-
bers and average firm size are small in sparsely-populated non-com-
mercial poultry areas such as Vermont, and northern Maine and New
Hampshire. In such areas live buyers face less competition from large
processors and producers and small local firms are important in servic-
ing local demand.
Maine. Broiler production is paramount. The area is surplus, sparsely-
populated and remote from markets. There are few assembly firms in
relation to volume. In southern Maine, large-scale commercial processors
have a substantial share of volume under direct contract. Northern
Maine is non-commercial. Few Maine firms pick up poultry outside the
State. Few out-of-state buyers operate in Maine. Newer types of assem-
blers account for 98 percent of volume.
New Hampshire. Fowl are almost as important as broilers. The area is
surplus, sparsely-populated, and intermediate in distance from markets.
Northern New Hampshire is non-commercial. But in southern New
Hampshire, commercial processors stress fowl and many buy live poult-
ry in two or more states. New Hampshire attracts a large number of
ovit-of-state buyers, particularly from northeastern Massachusetts. Over
85 percent of volume is hauled by newer types of firms.
Vermont. Poultry production is small and strongly oriented toward
market eggs. The State is deficit and sparsely-populated. Direct market-
ing by producers and older types of assembly firms are relatively more
important than in other sections remote from markets but whose poult-
ry production is more commercialized. A few Vermont dealers buy out-
11
side the State, but their purchases are more than offset by the oper-
ations of dealers from Massachusetts and New Hampshire who buy in
Vermont. The numlier of assemblers operating in the State is small.
Rhode Island. Although poultry production is small, and strongly ori-
ented toward market eggs, the State is deficit, and heavily-populated.
The number of assemblers is larger in relation to volume than in Ver-
mont. This results in a relatively greater role for the older types of
firms. A few out-of-state firms buy in Rhode Island, and most Rhode
Island firms also assemble poultry in other States.
Connecticut. Although poultry production is highly-commercialized
and broilers predominate, the State is heavily-populated. The role of
older types of assemlily firms and producers engaged in direct market-
ing is large. Since the State is surplus, it attracts many out-of-state buy-
ers. A small proportion of buyers resident to Connecticut seek supplies
outside the State. The number of assembly firms in Connecticut is large,
but more than 75 percent of the volume in the State is hauled by a
limited number of newer types of firms.
Massachusetts. The assembly system in Massachusetts is somewhat
parallel to that in Connecticut, with newer types of assembly firms
handling more than three-fourths of the output. Since Massachusetts is
deficit, many of the large number of resident firms seek supplies in
adjacent States. Despite a substantial production of poultry meat, with
supplies of broilers exceeding those of fowl, relatively few out-of-state
firms buy in Massachusetts.
The Effect of Declining Resources in the Assembly System
During 1951-57 the number of firms licensed by State departments
of agriculture to haul live poultry in New England declined 55 percent.
The number of poultry trucks similarly licensed declined 47 percent.
The number of one-truck firms declined 58 percent; firms with 2 to 6
trucks, 53 percent. Firms with 7 or more trucks increased in number,
and the average number of trucks per firm increased.
Output of poultry meat in New England increased about one-third
from 1951 to 1957. Hence, over the 6-year period, average volume of
poultry hauled per licensed firm almost tripled and average volume per
licensed truck increased 21/2 times. These increases in volume per firm
and per truck helped reduce assembly costs. Higher labor efficiency re-
sulted from handling fewer but larger lots of poultry and from the use
of larger crews. Travel time was reduced through localization of the
assembly function. Furthermore, contract production permitted econo-
mies through better truck-route organization and location of producing
units, but full exploitation of these possibilities has not yet been
achieved.
12
II. Performance and Costs in the Present System
of Live Poultry Assembly
In New England in 1957, the average volume of poultry hauled per
truck year, per mile of travel, and per man-hour generally increased
with the size of assembly firms. The rate of utilization of truck capacity
was also higher for larger firms. Increased efficiency with size of firm
may be the result, in part, of a close relation between the size and type
of firm, as well as the result of cost savings as size of firm increases.
Table 3 summarizes measures of performance efficiency, by type of firm,
for 75 live poultry assemblers.
The decline in the number of assembly firms and changes in their
characteristics have increased the overall efficiency of the assembly
system. Newer types of assembly firms have realized substantial econo-
mies through expanded volume and increased control over it. But the
efficiency of assembly operations may still receive little attention from
older-types of firms, particularly live stores and small slaughterers, be-
cause of the wider margin these firms obtain from processing and/or re-
tailing.
Labor Performance
Rising labor productivity in response to change in type of firms from
the old to the new results from the following factors: increased crew
Figure 2. Relationship Between Pounds Handled per Man Hour of Total
Time of Labor and Annual Volume, 75 New England Live Poultry Assemblers,
1957
400
unus rc.r« MAn-nn. i i_ivt dmoio;— ^
300
- X^^
/ LOG Y = -.75220 + .70838 LOG X -.03400 LOG X*
200
'
100
■
0 5 10 15 20 25 30 35 40
ANNUAL VOLUME ASSEMBLED (MILLION POUNDS)
13
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14
size and specialization, larger average flock size'*, and a higher ratio
of work time to travel time because of increased density of production.
Figure 2 shows the relationship, calculated from survey results, between
output per man hour of total time of labor and annual volume.
At the farm a major share of time is involved with catching birds and
loading crates. Other jobs performed include: positioning trucks, hand-
ling empty crates, tying and untying loads, covering loads during in-
clement weather, weighing, making out purchase slips and paying. In
some instances, only part of the crew is fully occupied at these tasks.
A substantial segment of total time elapses during travel between plant
and farm units and only the driver can be considered as productively
employed. As volume increases, crew organization shifts from one man
per truck to one or two men riding with the driver of each vehicle. A
further shift, with additional volume, is to foremen and crews who re-
main in the field and load vehicles which ferry back and forth to the
plant. The crew moves from farm to farm in passenger vehicles. This
type of operation reduces travel time for the crew and contributes ma-
terially to enlianced productivity.
Figure 3. Relationship Between Pounds Hauled per Mile of Truck Travel and
Annual Volume, 75 New England Live Poultry Assemblers, 1957
POUNDS PER MILE(UVE BASIS)-
10 15 20 25 30
ANNUAL VOLUME ASSEMBLED (MILLION POUNDS)
Truck Operating Performance
The number of pounds of live poultry handled per mile of truck
travel increases as volume increases (Figure 3). This is due in part to
the use of larger trucks^ and a higher rate of utilization of truck ca-
pacity.
^ Appendix Figure III shows the relationships of crew size to annual volume, and
Appendix Table IV contains detailed data from four actual plants, showing the in-
crease in average lot size which occurred with increasing plant size.
^ Appendix Tables V and VI show the distribution of truck sizes and inventory
value for vehicles registered by assemblers of live poultry in New England in 1957.
15
Moreover, the largest firms are oriented toward large flocks and assem-
ble poultry in the most-eonimcrcializcd areas. On the other hand, the
orientation of small firms is toward small flocks and non-commercial
areas. Although influenced hy the nature of local production, emphasis
also shifts from fowl to broilers as firm size increases ( Appendix Table
VII). This substantially increases the poultry available per stop and
per mile.
In New England in 1957, three-fourths of the assembly firms operat-
ing one vehicle utilized trucks of II/2 tons rated capacity or less. In
contrast, for firms operating 7 or more vehicles, three-fourths of the
trucks were of 21/^ tons rated capacity or larger (Appendix Table V).
Nevertheless, many firms have trucks of larger capacity than the
current volume they handle would require, and there is a wide distribu-
tion of ages of trucks registered by poultry handlers (Appendix Table
VIII j . This is because: (1) The volume of business of many smaller
firms is declining; and (2) secondhand trucks ai*e widely used by
smaller firms to help reduce costs. Truck depreciation is not a major
item in the total costs of the assembly firm, and obsolescence is a minor
consideration. Furthermore, trade-in allowances and secondhand values
are not proportionate to truck capacity. Hence, in the present system,
decisions on vehicle replacement can be made solely on the basis of
repair bills vs. annual depreciation.
Trailers are owned by many large firms because of their substantial
capacity and assumed efficiencies. However, many firms do not use them
regularly and are replacing them with large trucks because the trailers
Figure 4. Relationship Between Percent of Annual Trucking Capacity* Used
and Annual Volume, 75 New England Live Poultry Assemblers, 1957
PERCENT OF CAPACITY-
40
30
20
10
LOG Y = .65653+30747 LOG X
O 5 10 15 20 25 30 35 40
ANNUAL VOLUME ASSEMBLED (MILLION POUNDS)
* Crate capacity of each truck times average weight per full crate of birds times
two trips per day for 247 operating days.
16
are difficult to maneuver into position for loading at the farms and too
hard to handle on many hack roads. Improvement of huildings, yard
lay-outs, and secondary roads to enhance pickup efficiency has received
too little attention.
Factors which influence the rate of utilization of a firm's total truck
capacity, are: (1) The number of days of operation per week; (2)
the typical load compared with vehicle capacity; (3) the number of
vehicles on hand and the regularity of their use; and (4) the use of
trucks for purposes other than hauling poultry. Figure 4 shows the re-
lationship between percentage of annual truck capacity used and size
of firm.
Most small slaughterers and live-poultry stores pick up poultry only
one or two days per week. Most live-poultry buyers operate 3-5 days
per week, and contractors, contract haulers, and processing plants gen-
erally 5 days per week. On the average, the smaller the firm, the greater
the seasonal variation in volume it experiences. Hence, the percentage
of excess capacity may be relatively larger for smaller firms than the
comparison of operating days per week would suggest.
Present Costs of Live Poultry Assembly
Total costs per pound for assembling live poultry decline as firm size
increases (Table 4). This is also true for the two main variable cost
items, labor and truck operation costs, as well as for fixed costs such
Table 4. Average Costs for Typical Sizes and Types of Firms Assembling
Live Poultry, New England, 1957-581
Typical Firm Size:
Typ
(ical Firm Size:
Total Pounds Hauled
Estimated
Tota:
I Pounds Hauled
Estimated
per Year
Total Costs
per Year
Total Costs
(cents per pound)
(cents per pound)
50,000
4.10
2,500,000
1.40
100,000
3.25
5,000,000
1.25
200,000
2.75
10,000,000
1.00
300,000
2.52
15,000,000
0.75
400,000
2.27
20,000,000
0.65
500,000
2.10
30,000,000
0.55
1,000,000
1.60
40,000,000
0.50
Range in
Type of Firm
Labor Cost
Other Costs Total Costs
Total Costs
(cents per pound)
Processing plants
0.43
0.36
0.79
0.50-1.00
Contract haulers
0.47
0.38
0.85
0.70-1.00
Contractors
0.49
0.95
1.44
0.80-1.75
Live-poultry buyers
0.70
1.00
1.70
Live-poultry stores
1.52
1.982
3.502
1 1.45-10.002
Small slaughterers
3.30
4.202
7.502
■
1 For input-output data on the same firms, see Table 3. Based on a stratified random
sample of 75 firms.
2 These cost levels appear excessive, and may include charges assignable to other
activities.
17
as the ownership of equipment. However, the cost reductions with in-
creasing firm size suggested l)y examination of average costs of actual
firms may differ from those obtained by the synthetic metliod. This
difference occurs because of short-run considerations which will be nulli-
fied by the eventual replacement of resources, further structural adjust-
ments, and by differences in basic assumptions and methods of analysis.
Smaller firms, whose costs on any standardized basis seem excessive,
are able to survive in the present environment by:
(1) Using "unpaid" family labor to reduce out-of-pocket costs;
(2) Paying lower factor prices;
(3) Acquiring and using secondhand vehicles;
(4j ComJjining labor and vehicle used for poultry pickup with
use for farming operations, egg hauling, distributing poult-
ry and eggs, or hauling other items;
(5) Absorbing any "loss" on pickup operations in other oper-
ations; and
(6) Confining operations to areas of "non-commercial" poult-
ry production which may be by-passed by large firms, and
sometimes by paying lower prices.
In a marketing system composed of a mixture of integrated organ-
izations and independent firms carrying out successive single functions,
some higher-cost firms selling to volume outlets are afforded short-run
protection by marketing margins established on a bulk-line basis. *^ But
with continued progress toward higher operating efficiency as a major
weapon of competition, the assembly margin will be progressively nar-
rowed over time and its impact more apparent for all sizes of firms.
Despite the association of increasing volume and declining costs, vari-
ations from the average may be substantial for any one firm size (or
volume level) . These differences reflect: locational and institutional con-
siderations; market-class composition of supplies; and, managerial com-
petence.
While a substantial number of assembly firms may operate in most
sections, the supply areas of two or more individual firms rarely coin-
cide. Thus, the supply area of each firm exerts a unique effect on costs.
The rapid changes in the industry in recent years have disrupted
established procurement patterns. Some assembly firms have success-
fully adjusted to these forces by establishing closer tie-ins with pro-
ducers or contractors and between the assembly and processing func-
tions. For others, particularly older firms, with committed resources and
long-established relationships which curtailed adjustment prospects, the
result has been distortion of the size and shape of the supply area and
excessive assembly costs.
Costs per pound for assembling fowl are generally higher than for
broilers. Both average flock size and density of volume are likely to be
lower with fowl. Heavier weight per bird is usually not sufficient to off-
set these factors.
In an environment where independent farmers predominate, produc-
ing units are likely to be located without reference to any one assembly
firm. Whore contract production is involved some discretion exists as
to farm size and location. But the cost reduction possibilities inherent
^ A bulk-line margin is wide enough to cover a major share of the volume needed.
18
in size and location of producing units have not been fully achieved as
yet because of the heavy reliance upon use of or conversion of existing
resources rather than on new investment.
Management has not yet assumed its full role in increasing efficiency
and lowering costs of assembling poviltry. Moreover, it is difficult to
ascertain from cost data from actual firms the degree of success man-
agement has achieved in minimizing costs. This is because of the vari-
ations in levels of operation, equipment, practices, market classes and
weights, prices of inputs, density of the supply area' and the extent of
integration of production and marketing functions. The following chap-
ters examine the effect of standardization of some of these factors on the
level of assembly costs. They also suggest some of the forces which have
resulted in declining assembly costs and some of the changes by which
present firms can further reduce costs.
III. Reducing Costs of Live Poultry Assembly
Methodology and Assumptions
Average costs for groups of firms are derived from a mixture of vary-
ing situations and circumstances. A substantial number of factors in-
fluence the assembly costs of the individual firm. Some factors are pri-
marily geographically-oriented. Examples are: The proportions of vari-
ous market classes available; the volume obtainable per square mile
and per road mile; and the rate at which truck travel may be accom-
plished. Other factors are primarily institutionally-oriented. Some of
these are: The number, size, and age of trucks; the level of factor
prices; the number and type of firms competing in a supply area; crew
size and organization; labor input-output relationships; and the num-
ber, type and location of farm units.
The original data, taken at a particular point in time, provides a
cross-section of an industry in transition. Historical series cited, and
case studies of individual firms, give further evidence of the speed and
direction of changes. Chapters I and II describe the present industry
and its practices and costs. This chapter translates the present indus-
try, by standardizing size and some other factors, into a set of simpli-
fied models representing completed stages rather than a mixture of firms
in all stages of transition. This is done to facilitate the study of the
effects of a continued movement toward fewer, larger, and more highly
integrated firms.
By standardizing many of these diverse factors, more precise and
meaningful relationships can be synthesized. These provide helpful
guidelines for assemblers of live poultry by: (1) Suggesting the results
they can expect by imitating their more successful (and sometimes
"^ In synthesizing assembly costs, one can project the size and density of supply
areas well beyond levels which may exist in practice. Processing plants studied in
1955-56 obtained more than three-fourths of their volume within 50 miles of the
plant. This held true even for the largest plants, though the size of the supply area
increased with plant size. In the aggregate, the size of the supply areas for most
firms has continued to shrink in recent years. Hence, a 40 mile mean radius would
now appear to constitute a reasonable limitation to the supply area of most individual
firms or groups of reasonably homogeneous firms. See Appendix Table IX for a dis-
tribution of firms by average lengths of haul in 1957.
19
larger) coni[)etitors; (2) by explaining the reasons for the present cost
structure.
However, the cost levels in this chapter are not necessarily "pure
costs," as derived from a rigorous study of the relationship of size of
firm to average costs, and the level of costs might be reduced somewhat
by a more microscopic approach, particularly in terms of labor input-
output relationships. These differences occur because the assumptions
one would make under a rigorous size-cost study would not l)e identical
with the procedure employed in the analysis in this chapter. Yet, the
use of observed relationships as a basis of projecting what a firm might
experience seems realistic and appropriate. In other words, while this
analysis does standardize some factors, some beterogeniety remains. For
example, this analysis does standardize firm size, as would be done in
selecting model firms for a synthetic cost study. In contrast, flock size
and crew size are allowed to increase with increasing firm size, as they
were found to do among existing firms. In a more restricted analysis
flock size and crew size might be standardized for all firm sizes. How-
ever, the use of these looser assumptions is believed to be more typical
of the conditions which firms have and would still encounter in increas-
ing volume from given levels. Thus, the objectives of this analysis are
distinctly different from those of a more rigorous study and the assump-
tions used are varied accordingly.
The resulting analysis is expressed first in terms of the relationship
between firm size and costs per unit of product for selected average
lengths of haul. Other factors are varied with size, on the basis of ob-
served practices and relationships. These include: truck size, crew size,
labor input-output functions, flock size, and the percentages of broilers
and fowl handled. Because of the aggregative nature of the original data,
it is impossible to separate out the precise effects of each of these fac-
tors on costs.
Secondly, since the assumptions of given volumes, given truck sizes,
and given lengths of haul result in sets of observations where volume
per mile of truck travel mav varv. the best levels of performance were
selected for each of several levels of volume per mile of truck travel
in order to standardize this factor. These relationships are then used
to examine the effects of: fa) Holding volume constant, but obtaining
it from shorter or longer average lengths of haul: (b) increasing vol-
ume while holding average length of haul constant: and, (c) changing
both volume and average length of haul.
The results from making adjustments relating primarily to total
volume and volume per mile of truck travel may be viewed in two ways.
First, given a supply of specified quality, quantitv. and geographical
location, how could assembly costs be minimized if a number of firms
of discreet sizes and types constituted the alternatives? Secondly, if a
firm of particular size and type was able to overcome institutionalized
restrictions and change to another size and type, what would the re-
sults be in terms of costs?
Data were adjusted to standardize levels of operation, prices of inputs,
weights per bird, volume of poultrv per mile of truck travel, travel
time for specific lengths of haul, and equipment and practices. The re-
sults of the survey of 75 firms assembling live poultry in New England
were used to determine progressive changes, with increasing firm size.
20
in crew sizes, labor input-output relationships in handling poultry at
the farm, flock size, and the proportion of broilers and fowl handled.
Some of the principal assumptions and techniques on which this an-
alysis is based are:
(1) Ten sizes of assembly firms were selected. These were capable
of handling the poultry requii'cd by processing plants with capacities
of 150; 300; 600; 1,200; 1,800; 2,400; 3,600; 5,000; 7,500; and 10,000
broilers per hour, as established in a previous study. ^
(2) Initial cost budgets were prepared for 12 selected truck sizes
found in use by New England poultry assemblers. These were capable
of carrying 2, 5, 10, 20, 30, 60, 100, 130, 160, 190, 220, and 320 crates each.
This selection served to establish the nature and extent of cost relation-
ships without considering an almost unlimited number of truck com-
binations.
(3) Firm capacity was increased by adding additional trucks of the
same size as in the initial budget. Costs at 100 percent of capacity were
determined with annual mileage traveled per truck at 2,500; 5,000;
6,250; 10,000; 12,500; 25,000; and 50,000. For each firm capacity and
mileage level, costs were then determined at 10, 40, 70, and 130 percent
of capacity. The mileage levels used were equivalent to two trips per
day (for 247 operating days) of the following average round-trip lengths
in miles: 5, 10, 12.5, 20, 25, 50, and 100.
(4) Truck travel time was basically determined by using average
rates of speed which increased with distance (see Appendix Figure I).^
Where passenger vehicles were required to transport pickup crews be-
tween farms, additions to travel time were made at a rate which de-
creased per man added to the crew.
(5) Statistically-computed curves were used to establish labor input-
output relationships for work performed at the farms. Output per man-
hour was determined by removing travel time from the data used for
Figure 2 (see Appendix Figure II). Crew size was determined from
Appendix Figure III.
(6) Flock size was progressively increased with annual volume
hauled as indicated in the survey. Appendix Table VII shows the in-
crease from an average of 3,000 pounds per lot per farm at one million
pounds annually to an average of 30,000 pounds per lot per farm at
40 million pounds and above annually.
(7) The percentage of broilers was progressively increased with
annual volume hauled. The proportions of broilers ranged from 50
percent for small a!=sembly firms to 98 percent at 70 million pounds
annually. Appendix Table VII shows the proportions used at selected
volume levels.
(8) Since the cost projections resulting from the preceding assump-
tions were made with mileage per truck held constant, volume per mile
of truck travel varied. This occurred because of the increase in the
S Rogers, G. B. and E. T. Bardwell, Marketing New England Poultry. 2. Economies
of Scale in Chicken Processing. N. Hamp. Agr. Expt. Sta. Bui. No. 459. April 1959.
9 Based on truck mileage and time relationships in: Rogers, G. B. and H. C.
Woodworth. Distributing and Handling Grain-Feeds in New Hampshire. II. Problems
in Retail Distribution. N. Hamp. Agr. Expt. Sta. Bui. 427, July 1956. Fig. 9, p. 37.
21
sizes and numl)er of trucks. Least cost-conil)inations of trucks, labor and
other resources were chosen to derive cost curves for specified vohimes
of pouhry per mile of truck travel, as illustrated in Figure 5.
(9) The shrinkage in live weight which occurs in hauling was not
included as a cost item in this report. Shrinkage is less for short than
for long hauls. Thus, reducing the length of haul would result in cost
reductions in addition to those shown in this report. In practice, shrink-
ages resulting from different lengths of haul are averaged out in paying
prices or transfer values of live birds. Moreover, there is a definite need
for a new study of the precise relationship between shrinkage and length
of haul under present conditions and with the modern type of broiler.
Figure 5. Poultry Assembly Costs Related to Annual Volume and Pounds
per Mile of Truck Travel
CENTS PER POUND(LIVE BASIS)-
0.3
ACTUAL COSTS
FOR SAMPLE FIRMS
— 100
—200
—.500
1
J-
3000
10 20 30 40 50 60
ANNUAL VOLUME ASSEMBLED (MILLION POUNDS^
70
(The number on each solid lined curve indicates the pounds of poultry obtained
per mile of truck travel)
Effect of Firm Size on Costs of Live Poultry Assembly
Using tlic assumptions and methodology previously described, costs
of asscml)ling live poultry are hereafter analyzed in terms of a set of
10 model firms. Net differences in the unit costs provide a measurement
of the savings or increased revenues which the firm with the less efficient
operations must accomplish by other means if it is to remain competi-
tive.
This analysis does suggest that costs of assendjling live poultry can
be reduced from present levels by increasing firm size and thus achiev-
ing the dcsiral)lc characteristics of new type firms and by increasing
the density of the sujiply area. Moreover, the cost patterns outlined
help explain the reasons for the rapid concentration of poultry assembly
22
in fewer and larger hands in recent years. Inherent in this development
is the spread of vertical integration, including the selection and ex-
pansion of contract flocks.
For any size of assembly firm there is a substantial cost advantage in
maintaining operations as close to capacity as possible. Figure 6 shows
Figure 6. Pouhry Assembly Costs for 10 Model Plants Related to
Size of Firm and Use of Capacity*
CENTS/POUND (LIVE BASIS)
PERCENT OF CAPACITY
* When poultry is obtained at rate of 500 pounds per mile of truck travel.
(The number on each curve indicates the capacity of the model firm in million
pounds of poultry annually.)
23
derived average cost curves for 10 model firms with poultry available
at the rate of 500 pounds per mile of truck travel. Similar sets of curves
can be derived for otlicr levels of volume per mile of truck travel. In
assembly operations, 100 percent of capacity can be exceeded only in
the short-run without adverse elfects on costs. The hauling capacity of
trucks (crates, birds) is an important limiting factor. Hence, in the
long-run, operation above 100 percent of capacity results in a discon-
tinuous average cost curve because additional equipment is required
or other costs increase sharply. ^^
When derived average cost curves for the series of model plants are
plotted in relation to percent of capacity, each successively larger plant
has an advantage over the next smaller unit. This is because unit costs
are successively lower, almost without exception, for each percentage
level as firm size increases. Relative advantages are generally minimized
at 100 percent of capacity, but widen below this level.
The Influence of Volume Per Mile of Truck Travel
on Costs of Live Poultry Assembly
Declining costs per pound of poultry assembled, associated with firm
size, result from changes in the number and size of vehicles, increased
labor efficiency, economies in management and facilities, larger flock
sizes, and a greater proportion of broilers hauled. Such factors often
can more than oflset the effects of increased total mileage per truck
and per firm as volume increases. Moreovei-, these savings can be sup-
plemented substantially by increasing the volume of poultry per mile
of travel. Thus, density of supplies, as well as absolute volume, is re-
lated to the achievement of miniunim costs in assembling live poultry.
The density of the supply area and the average length of haul have
an important effect on costs. ^ ^ Figure 5 compares the curves computed
for selected levels of volume per mile of truck travel with actual aver-
age costs incurred by firms of various sizes under 1958-59 conditions.
Because of variations in use of capacity, input prices, and performance
levels as well as volume obtained per mile of truck travel, the curve
connecting the actual average costs cuts across several of the curves
representing costs with volume per mile of truck travel standardized.
This situation shows the greater degree of success already achieved by
larger assembly firms in reducing costs. Figure 5 also illustrates the
opportunities which may be open to assembly firms of a given size to
reduce costs through contractiiig the size of the supply area and reduc-
ing the average length of haul.
Present firm size seems related to the relative cost reductions which
actual firms can realize through: (1) Increasing volume and adopting
1^' Costs predicated upon 130 percent of capacity do not represent a sustained
level of operation. In the short run, 100 percent of capacity can be exceeded
without adverse effects by additional crates, placing more birds in each crate, or
handling birds of heavier wieght, if this can be accomplished \vithout exceeding
legal load limits. Hut the methods of projecting costs, described in the Appendix,
probably do not fully reflect the increased rates of use of inputs and the added
repairs which sustained heavier loading might necessitate, nor the costs of break-
downs during the operating week.
'1 For purposes of this report, density of poultry production and pounds per mile
of truck travel are used interchangeably,
24
the techniques and practices of their larger competitors; or, (2) retain-
ing their present size of husiness, techniques, and practices and increas-
ing volume per mile of truck travel. Except for small firms picking up
poultry at a low rate per mile of truck travel, a given percentage in-
crease in volume would usually provide greater dollar savings than the
same percentage increase in volume per mile of truck travel. Firms with
annual volume of 2 million pounds or less and picking up poultry at a
rate of less than 200 pounds per mile of truck travel can make the great-
est short-run savings hy increasing volume per mile of truck travel. How-
ever, once present firms attain a level of 200 pounds per mile of truck
travel, their greatest gains may lie in expanding firm size.
Costs per pound for live poultry assembly will not continue to de-
cline indefinitely as annual volume increases. With volume per mile of
truck travel at 200 or below, miles per truck increase rapidly with in-
creases in annual volume. Despite other potential savings, such as those
from using larger trucks and crews, the increased time and distance is
sufficient to cause an eventual upturn in costs. Hence, least cost points
will be attained at smaller and smaller annual volumes as pounds per
mile of truck travel declines from 200. However, in this study, continued
cost reductions were indicated for levels of 500 pounds per mile of truck
travel and up throughout the range of volumes studied (Table 5).
Least-Cost Combinations of Resources in Live Poultry Assembly
At most volume levels, several alternative combinations of resources
and inputs will achieve the minimization of total per pound costs —
within a fraction of a cent range. For most levels of volume per mile of
truck travel, least-cost points for successively larger firms involve greater
numbers of trucks of larger size operated at or near 100 percent of ca-
pacity. Table 6 illustrates some of the alternative combinations of re-
sources indicated in this study for selected annual volumes and mileages
per truck. Since subsequent discussions will involve minimum-cost com-
binations of assembly and processing, the annual volume levels selected
are about equivalent to those for model processing plants developed in
a previous report.
For example, if a firm assembles 25 million pounds of poultry by
using at capacity five 21/2 ton trucks traveling 25,000 miles each, about
55,000 man hours of labor would be required, and total costs per pound
would approximate 0.475 cents. At 35 million pounds, capacity use of
seven 2^ ton trucks or six 3 ton trucks, traveling 25,000 miles each,
would require about 71,000 man hours of labor and cost 0.440 cents
per pound of live poultry assembled.
In actual practice, some individual assembly firms own and operate
trucks of various capacities. Such combinations may be indicated at
some volume levels to enable the firm to develop least-cost combinations
under the standardized conditions involved in this analysis. Further-
more, in applying this study to a specific situation, truck size may be
further modified because of variations in average flock size from the
levels assumed herein.
For example, if the volume of a firm lies between 25 and 35 million
pounds annually, it might achieve its least-cost combination with five
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28
2^/^ ton trucks plus a tractor-trailer or plus two 2 ton trucks. But if its
volume is expanded to a level of 35 million pounds annually, it might
replace the tractor-trailer (or the two 2 ton trucks) with 2 trucks of
the 21/^ ton size, or move to six 3 ton trucks.
Economies in truck ownership and operation can he ohtained hy: (1)
Minimizing the total numher of trucks owned; (2) maximizing the
percentage of capacity at which each is operated; and, (3) minimizing
the numher of vehicles required to load out the average size of flock
in order to restrict the numher of stops per vehicle per trip and the
num])er of partial loads. However, the volume level at which the mini-
mum cost per pound for truck ownership and operation is achieved may
not coincide with the low-cost point for the firm.
The lahor prohlems of the assemhly firm involve: (1) Minimizing
crew size, if workers regard pickup work as of inferior "status" and are
difficult to ohtain and retain; (2) minimizing the amount of overtime
wages; (3) moving the field crew, other than those who accompany
trucks, most expeditiously; and (4) maximizing the output per man-
hour.
Unless one or more of the preceding situations is restrictive, the com-
hination of resources and inputs that will minimize the total per pound
cost at any given volume level takes precedence. Least-cost points for
the specific ohjectives rarely coincide. In studying cost reduction possi-
hilities, the relative importance of specific ohjectives in the decision-
making process of the firm is likely to differ in the long-run from that
in the short-run. (See Chapter II for a discussion of actual costs and
the reasons therefore.)
Importance of Cost Group in Producing Cost Reductions
Costs incurred in live poultry assemhly can he segregated, according
to their behavior as volume increases, into three main groups. These
are, in order of importance: lahor, truck costs, and management and
facility costs.
Lahor costs per pound of poultry decline as volume increases. The
lower per pound costs result from the use of larger crews, increased
specialization, minimization of in-field travel hy crews through the use
of supplementary vehicles, and handling flocks of larger average size.
The precise effects of each of these factors are not ascertainable under
the methods used.
Labor is the single largest cost in assembling live poultry. It accounts
for 60 to 67 percent of total costs per pound. The share of total unit
costs represented by labor declines as volume increases. This occurs
because savings from increased labor productivity continue well beyond
the volume levels where per pound costs for truck ownership and oper-
ation level off. But at any one volume level, the proportion of total per
pound costs represented by labor increases as annual mileage per truck
or per pound increases. This results from the increase in the ratio of
travel time to work time and from the greater effect of overtime wage
rates.
Appendix Tables X and XI show the unit costs which resulted for
selected combinations of trucks and other resources as mileage per
truck and total volume increased. Appendix Table XTI indicates the
truck sizes used in cost projections and the costs for truck ownership and
29
operation at capacity when hauling hroilers. Costs for truck ownership
decline with increasing truck size. At a level of 5000 miles per truck per
year, least costs per pound are realized at the II/2 ton size ( 130 crate
capacity per load I . For greater annual mileages, larger trucks give costs
per pound as low or lower than the II/2 ton size. Within the area of
declining costs per pound, increasing cost per mile is more than offset
hy the larger volume carried.
Truck costs per pound of poultry hauled rise rapidly, for any par-
ticular truck size, as average length of haul increases. The ahsolute,
and in many cases, the relative advantage of larger trucks increases as
length of haul increases.
While the cost savings attrihutahle to ownership and operation of
larger trucks are fully realized at small volumes,^ ^ further savings are
realized on lahor costs per pound as volume increases. In addition, costs
per pound for management and facilities continue to decline as volume
increases.
The cost items involved in assemhling live poultry can he separated
into accounting categories developed in a previous study. ^-^ The be-
havior of individual cost items with increasing annual volume, truck
size, and mileage per truck is shown in Appendix Table XIII. Further
information on the synthesis of individual items of cost is contained in
the Appendix.
IV. Some Implications of Reduced Costs
of Assembly and Processing
The preceding chapter of this report discussed the extent and nature
of cost reductions which assembly firms can achieve within the present
system. Full realization of these savings can come about only in the
long-run. Overtime, the need to replace resources will generate greater
mobility. Furthermore, gradual institutional changes would be required,
including further integration of the growing, assembly, and processing
functions. An additional condition to the full realization of these assem-
bly cost reductions would be the continued development of production
technology, including adequate disease control and methods whereby
diseconomies of scale in growing did not appear.
Institutional Changes Which Would Facilitate
Assembly Cost Minimization
As firm numl)ers decrease further, the number of pounds of poultry
available to each firm as well as that available per mile of truck travel
may increase in many areas. Yet with several firms operating in an area
the duplication of travel and expense would still be considerable. Fur-
thermore, the random location of farms and variability in their size
and layout would maintain costs above minimum levels.
Two direct steps can be taken which will aid the individual firm in
minimizing assembly costs: (1) Selection, retention, and expansion of
producing units of suitable size and layout as close as possible to the
plant; and, (2) movement toward an exclusive supply area for the firm.
^2 Less than 6 million pounds annually for trucks traveling all mileages (S.OOO;
10,000; 25,000; 50,000) per year. Appendix Table XII.
13 N. H. Bui. No. 459, op. cit., p. 9-14.
30
Whether indepenrlrnt prorliirer.-i or contrart growers are involved, in-
clusion of location anrl size as sliort-riin criteria for pavnient woulfl aid
the development of a supply area of smaller radius. The potential sav-
ings in assemhly costs would provide a hasis for financially encouraging
nearhy growers. New resources can be located clo'^er to the plant as a
policy matter if investment capital is provided contract growers or
assemblers own producing units outright.
The establishment of an exclusive supplv area for the individual firm
would further cost reduction in assembly. Development of contract grow-
ing operations in new areas offers one Avay to do this. The firm might
also try to reshuffle supplv flocks with several competitors. But exten-
sive development in this direction would raise some legal and sociologi-
cal problems and necessitate changing grower payment procedure. i**
The cost savings from increasing the volume per mile of truck travel
can be illustrated by using as an example a firm handling 30 million
pounds of poultry annuallv. If this firm picks up poultry at the rate of
TOO pounds per mile of travel, it would incur costs of 0.53 cents ner
pound, or $159,000, and its trucks would travel 300.000 miles. A reallo-
cation of supply flocks with several competitors, to create the beginnings
of an exclusive supply area could easily halve mileage, double density,
and reduce costs to 0.46 cents per pound, or $138,000. a savings of S2L000.
An additional $21,000 could be saved bv increasing the pounds per mile
of truck travel from 200 to 500 (Table 7) . While the continued increase
in the volume per mile of truck travel results in drastic reduction in
miles per trip and per truck per year, cost savings per unit become
smaller and smaller.
Table 7. The effect of Increased Volume per Mile of Truck Travel for a
Hypothetical Assembly Firm Handling 30 Million Pounds Annually ^
Pounds per
of Tra
Mile
vel
Truck Miles
per Year
Miles
per Trip
Average
Assembly Cost
per Pound
As
Total
ssembly Cost
Net Annual
; Additional
Savings
100
200
500
3,000
(1,000)
300
150
60
10
(number)
90
45
18
3
(cents)
0.530
0.460
0.391
0.344
($1,000)
159
138
117
103
fSl,000l
21
21
14
' Assuming 7 trucks operated at capacity, 2 trips per day for 247 operating days.
Systemic Efficiency in Assembly
With 332 firms engaged in poultry assemblv in New England in 1957,
systemic costs totalled S4.64 million. Most firms obtained between 20
and 50 pounds of poultry per mile of truck travel. Only a few firms
obtained 100 or more pounds of poultry per mile of truck travel.
^^ Apprehension exists relative to the extent to which firms can work jointly
without facing anti-trust investigation. In the present environment, the association
of buyer and seller, or fieldman and grower frequently may be based on personal
considerations rather than economic decisions. Furthermore, many growers experi-
ence difficulty in evaluating the alternative contracts offered. One solution would be
the periodic negotiation of uniform terms, practices, and supervision, with growers
assigned to assemblers on the basis of proximity to the plant.
31
To proviflo a point of reference for evaluating present and prospective
systems of live poultry assembly in New England, the number of firms
of several sizes needed to assemble output and the systemic costs for
selected density levels are indicated in Table 8.
Table 8. Number of Firms of Selected Sizes Required to Assemble 19.'57
Volume of Live Poultry in New England and Resulting Systemic
Costs at Various Volumes per Mile of Truck Travel
Firm Size
Number
of Firms
Pounds of Poultry per
Mile of Truck Travel
20
50
100
200
500
2000
(mil. lbs.)
Total Systemic
Costs
(annually)
(million
dollars)
1.17
401
5.78
4.44
3.74
3.25
2.47
2.19
2.37
198
5.34
4.24
3.58
3.11
2.27
2.04
4.61
102
4.98
4.02
3.36
2.89
2.11
1.88
8.85
53
4.63
3.68
2.98
2.57
1.95
1.74
12.88
36
4.45
3.46
2.77
2.41
1.86
1.65
17.02
28
4.28
3.23
2.59
2.26
1.79
1.59
25.21
19
4.12
2.99
2.35
2.06
1.70
1..52
34.66
14
4.08
2.85
2.22
1.92
1.62
1.46
51.96
9
4.32
2.76
2.06
1.77
1.55
1.43
69.24
7
5.02
2.94
2.11
1.76
1.49
1.40
The present live poultry assembly system in New England is char-
acterized by the existence of excess capacity. Tf all the trucks owned by
assembly firms operating in the region in 1957 had been used at 100
percent of capacity, volume handled through the system could have
been more than tripled. Processing plants alone could have handled
the entire volume. Or. the truck resources of any two of the three next
largest groups — contract haulers, contractors, and live-poultry buyers
— would have sufficed (Table 9).
Table 9. Characteristics and Capacity of the System of Live Poultry Assembly
in New England, 19.^7
Percent of
Capacity
of Present
Number
of 1957
Average
Capacity at
Firms
if Each
Firms
Volume
Volume
which Group
Operated at 100
per Firm
Operated ^
Percent <
jf Capacity
Total
Per Firm
(mil. lbs.)
(1000 lbs.)
(percent) (mil. lbs.)
(1000 lbs.)
Processinp Plants
35
285.6
8,160
40.0
714.0
20,400
Contract Haulers
10
81.5
8,150
38.0
214.5
21,450
Contractors
22
45.4
2,064
19.0
238.9
10,859
Live-Poultry Buyers
125
52.6
421
18.5
283.8
2,270
Live-Poultry Stores
90
3.9
43
9.5
41.1
457
Small Slaughterers
50
0.6
12
7.0
8.6
172
Total
332
469.6
—
1,500.9
—
Average
—
—
1,414
31.3
—
4,521
1 Based upon the number and capacity of trucks if each used to haul two full loads
per day for 247 operating days.
32
Substantial reductions in firm numbers from 1957 levels are likely.
Even with no change in density of production, systemic costs would be
reduced materially due to increased volume per firm. But the reduc-
tion in firm numbers may also be accompanied by increased volume per
mile of truck travel for mo«t firms, and hence, further cost reductions.
Savings in the system, as for individual firms, would be augmented by
efforts to increase the volume per mile of truck travel beyond the level
resulting from reduced numbers of firms.
Tf the firms engaged in poultry assembly in 1957 took steps to double
the pounds of poultry per mile of truck travel, systemic costs could be
reduced from $4.64 million to S3. 93 million, or a saving of more than
$700,000 annually (Models I and IT. Table 10). These results could be
achieved by more attention to flock selection and by movement toward
exclusive supply areas.
Table 10. Number of Firms Required and Aggregate Costs of Alternative
Model Systems of Assembling New England Chicken Output
Model I
Model 114
Mc
.del III 5
Firm Size Volume
No. of
Assembly
Assembly
No. of
Assembly
and Typei
Firms2
Costs 3
Costs
Firms
Costs
fmil.lbs.)
a 000 dollars)
(1000 dollars)
aOOO dollars)
Processing Plants
285.6
35
2,256
1,914
28
1,448
Contract Haulers
81.5
10
693
587
8
451
Contractors
45.4
22
654
554
11
384
Live-Poultry Buyers
52.6
125
894
763
40
552
Live-Poultry Stores
3.9
90
117
94
25
78
Small Slaughterers
0.6
50
27
20
12
19
Total
469.6
332
4,641
3,932
124
2,932
^ Under each type, firms of different sizes occur.
2 From Table 1.
3 Average per pound costs from Table 4 except unit costs for live-poultry stores
and small slaughterers are adjusted to 3.00 and 4.50 cents per pound, respectively, on
the assumption vehicles are used for purposes in addition to live poultry assembly.
Pounds per mile of truck travel from Table 3.
4 Same number and volume, by types of firms, and rate of use of truck canacitv.
as for Model I. Pounds per mile of truck travel doubled from rates in Model I. Unit
costs in Model I adjusted by using percentage changes from data for Table 5.
5 Use of a more limited number of vehicles at 100 percent of capacity, a reduction
in firm numbers based on the preceding plus known mortality. Unit costs derived
from data for Table 5. Pounds per mile fractionally higher than in Model XL
Further developments to create exclusive supplv areas plus a suffici-
ent reduction in firm numbers to enable operation at 100 percent of
capacity would further increase savings. The reduction in firm numbers
would approximate 60 percent, and the additional cost savings a million
dollars annually (Model III. Table 10).
Combining the Assembly and Processing Functions
By combining the assembly and processing functions under one man-
agement, savings can be achieved in unit costs. These arise from the
33
elimination of a duplicate set of personnel engaged in managerial, buy-
ing, and office duties and from the economies obtained by including gar-
age and bolding space in the greater square footage of a processing plant
rather than in distinct facilities for an assembly firm. The magnitude of
unit savings decrease as firm size increases (Table 11). In the 1957
system, it was estimated that 70 percent of the 469.6 million pounds
handled bv assembly firms was already included under combined-func-
tion firms.
Table 11. Annual Savings Obtainable from Combining the Poultry
Assembly and Processing Functions under One Management
"
Savings Obtainable
from
Model Plant
'^olume
Combining
Assembly
and Proces
>sing
Number
Annual ^
Per
Fii
rm
Sy^emic ^
(million
lbs.)
(cents per
(dollars)
(1000 dollars)
pound) -
I
1.17
.129
1,509
606
II
2.37
.110
2,607
517
III
4.61
.093
4,287
437
IV
8.85
.075
6,638
352
V
12.88
.065
8,372
305
VI
17.02
.063
10,723
296
VII
25.21
.058
14,622
272
VIII
34.66
.051
17,677
239
IX
51.96
.042
21,823
197
X
69.24
.042
29,081
197
^ If system composed of firms of successive uniform sizes. See Table 12.
2 Live weight basis.
'•''N. H. Sta. Bui. 459, op. cit. At 100 percent of rapacity, 150 broilers or 120 fowl
per hour vs. 10,000 broilers or 6,000 fowl per hour. Broilers weighing 3.5 pounds
each and fowl 6.0 pounds each.
Figure 7 shows the combined cost curves (assembly plus processing)
for selected levels of volume per mile of truck travel. At levels of 1,000
pounds per mile of truck travel and over, unit cost savings for any par-
ticular plant size become exceedingly small as volume per mile of truck
travel increases. But the dollar savings, at any level of volume per mile
of truck travel, may be substantial as plant size increases.
For example, suppose poultry is available at the rate of .500 pounds
per mile of truck travel. One large firm could assemble and process 69
million pounds of poultry for 2.898 cents per pound, or Si. 999. 620. Costs
for the same voluiue handled by two firms, each with half the capacitv
of the larger firm, would erfual .3.162 cents per pound, or $2,181,780
(Table 12). Of the total saving** of $182,160 economies in processing
would account for $165,220 and economies in asseniblv for the balance
of .SI 6,940.
Combination of the assembly and processing functions further in-
creases the advantage of large plants as compared to small plants. For
the processing function alone, the cost savings from the smallest model
plant to the largest model plant ^ '' is estimated at 1.75 cents per pound
live weight basis. For the combined functions, comparisons of the small-
34
Figure 7. Costs for The Combined Assembly and Processing Functions at
Various Annual Vohimes and at Selected F*ounds per Mile of Truck Travel
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36
est to largest plant (or the smallest plant to the low-cost point for low
levels of volume per mile of truck travel) indicate a spread of 1.9 cents
per pound or more, live weight basis.
Greater flexibility in operations of the firm can be secured by com-
bining assembly and processing. Either a single-function firm (engag-
ing only in assembly) or a combined-function firm (engaging in both
assembly and processing) may realize economies by: (a) Increasing
density of supplies while holding volume constant; or (b) increasing
\olume at a given density. But a single-function firm would face in-
creased costs per pound for assembly if it expanded volume by enter-
ing a supply area of lower density. On the other hand, the preponderant
intluence of decreasing per unit costs of processing upon the total per
unit costs of the combined-function firm would make feasible expansion
of \ olume by entering a supply area of lower density.
This feature may find application mainly as a short-run expedient.
Over a longer period, the competitive interests of the firm would be en-
hanced by reducing the size of the supply area and reducing both assem-
bly and processing costs.
The following example illustrates the extent to which increased costs
per pound in assembly could be offset by economies of scale in process-
ing. Suppose Firm A is assembling and processing 20 million pounds of
poultry and Firm B, 40 million pounds, in a supply area where poultry
is available at the rate of 1,000 pounds per mile of truck travel. If Firm
A can increase volume 20 percent, it can reduce processing costs from
3.036 to 2.965 cents per pound. Firm A's assembly costs can be increased
from 0.327 to 0.398 cents per pound, or the volume per mile of truck
travel reduced from 1,000 to 300 pounds, without increasing total unit
costs. Firm B, in increasing volume 20 percent, can reduce processing
costs from 2.777 to 2.715 cents per pound. This means assembly costs
can be increased from 0.305 to 0.367 cents per pound, or the volume per
mile of truck travel reduced from 1,000 to 200 pounds, without increas-
ing total unit costs.
Cost reduction, of which integration of the assembly and processing
functions is but one method, will encourage further development of
stratified competition. At present this feature is most noticeable in the
alignment of small farms, small assemblers and processors, and small
outlets versus large farms, large assembler-processors, and volume out-
lets. But declines in firm numbers and further adjustments of firms to
supply areas will accentuate the sectional aspects. For example, small
local slaughterers and firms servicing alternative marketing channels
(live-poultry stores and live-poultry buyers) will constitute the main
outlets for producers in non-commercial areas. In contrast, large com-
bined-function firms will dominate in commercial areas. The partici-
pation of smaller and older types of firms will be limited to filling
limited needs for certain market classes at favorable prices, buying
small and mixed lots, and handling excess fowl.
Optimum Adjustments for Selected Supply Areas
The establishment of a least-cost system for a particular supply area
initially depends on maximizing the efficiency of the operations of the
individual firm. The accumulation of these efficiencies, plus the develop-
37
uieiit oi exclusive supply areas, will make a substantial contribution.
But lurther reduction in systemic costs can be achieved by elimination
ol redundant resources and the realignment of supply areas.
In any gi\en area, the least-cost combination of resources will involve
maximizing the number of the largest feasible plant sizes. Taking the
upper limit of projections in this and an earlier study ^'* — 70 million
pounds annually at 100 percent of cajiacity — as the present technologi-
cal limit, one plant of tliis size would sulfice if usable volume i' in the
area was 70 million pounds. If volume in the area were less than this
level, one plant of a smaller capacity would provide the best adjust-
ment. If volume exceeded 70 million pounds, one 70 million pound plant
plus one additional smaller plant, rather than two or more medium
sized plants, would provide the least-cost combination. In an area where
volume exceeded 140 million pounds, two large plants and one smaller
plant would be optimum.
The least-cost system for an area might place certain plants at a com-
petitive disadvantage. Hence, in practice, if usable volume would sup-
port more than one large plant, such plants would tend to approximate
each other in size. The competitive position of a small plant would be
enhanced if it concentrated on fowl, with larger plants concentrating on
broilers where economies of scale are greatest.
At the time data collection for the study of live poultry assembly was
begun there were 28 commercial poultry slaughtering plants ^'^ oper-
ating in i\ew England, excluding those engaged in processing specialty
items. By mid-1959, only 21 were still operating. Figure 8 shows the
areas lying within 10, 25, and 50 miles of these plants and the areas
where there are two or more plants within 10 and 25 airline miles. This
illustrates the extensive overlapping of supply areas which can exist in
the present environment.
In contrast. Figure 9 shows how exclusive supply areas could be de-
vised for a more limited number of firms of larger average size than at
present. Such a system assumes eventual moliility of capital investment,
a distinct possibility with rapid depreciation of plant equipment and
the pressures of intra-regional and inter-regional competition. The re-
alignment of supply areas results in 10 commercial plants — excluding
those handling specialty items and those oriented toward supplying both
the Kosher and poultry store trade.
Since preceding comparisons in this report were based on the 1957
system, the cost estimates in Table 13 are presented in these terms.
Residual demand for live poultry outside New England and for live and
processed birds through the older marketing channels is held constant.
The difference in the cost estimates relates to the substitution of the
exclusive supply areas and reduced numbers of plants of larger average
capacity for the commercial assembly and processing structure existent
in 1957. The reduction in systemic costs could approximate 35 percent,
or a savings of $8,000,000. To a considerable extent, the exclusive supply
16 Ibid.
17 "Usable volume" may be defined as that available from producing units of a
size sufficient to warrant assembly or purchase by commercial plants. Excluded
would be small and mixed lots which might better be handled through alternative
marketing channels.
1^ Annual volume exceeding one million pounds.
38
Table 13. Aggregate Costs of Model Systems of Assembling and Processing
1957 New England Chicken Output
Volume Model IVi Model V2
(million pounds)
Assembled by New England firms 469.6 469.6
Processed by New England firms 429.9 429.9
Live Poultry Hauled from New England 43.1 43.1
Systemic Costs (million dollars)
Live Poultry Hauled from New England 1.3 1.3
Assembled and Processed within New England
By Commercial Plants 20.8 12.8
By Other Plants 1.7 1.7
Total Assembly and Processing 22.5 14.5
Total Costs 23.8 15.8
1 The 1957 Assembly System.
~ Fewer but larger plants with exclusive supply areas handling same volume.
areas in Figure 9 permit continued operation by remaining plants in
many sections where they traditionally operated or which would have
been advantageous to them on the basis of Figure 8.
In the Maine supply area, one plant would be concentrating on fowl
and the other three almost entirely on broilers. In Vermont, fowl would
predominate. In the New Hampshire, Massachusetts, and Connecticut
areas fowl would be more important than in Maine. Hence, all of these
plants would handle 15-25 percent fowl. These adjustments are necessi-
tated by the availabilitv of particular market classes from local pro-
duction and influence the maximum plant size considered feasible in
the various supply areas in Figure 9.
Just as assembly cannot be viewed in isolation from processing, so
the combined assembly and processing functions cannot be viewed with-
out regard for distribution. Minimization of the movement of poultry
between plants and ultimate consimier, including saturation of local
needs from adjacent production, can be accomplished with a model
system similar to that shown in Figure 9. This would be true whether
a least-cost distributing system involved an expanded role in direct-to-
store delivery by plants or service from centrally located distributing
points in each geographic area.
39
Figure 8. Duplication of Live Poultry Supply Area for Commercial Poultr
Processing Plants, New England, 1958-59
KEY
10 25
Planfs •
50
mile radius
Number of plants competing
within 10 mile radius - 2 or more •??
within 25 mile rodius— 2
3
4
\XXX/^
^ ^
og econ 9/59
6
7
40
Figure 9. A Model System of Poultry Assembly for Commercial Poultry
Processing Plants, New England"'
og econ 9/59
* Exclusive supply areas based on 1957 volumes.
41
APPENDIX
Methods of Standardizing Individual Cost Items
Wages
Travel time was basically rlctormined hy route mileage (Figure I).
A.S route mileage increases, the average rate of speed rises to a maxi-
mum level. ^ However, hours in travel were adjusted for the nundier of
men accompanying trucks and for in-field travel via passenger vehicles.
For 1 and 2 truck models, three men were assume<l to be carried per
truck, including drivers. For other models the total number of men
carried on trucks was as follows: 3 trucks. 7.5; 4 trucks. 9.0; 5-10 trucks,
10 men; 11 trucks, 11 men; 12 trucks. 12 men.
In-field travel time per crew member above those carried on trucks
varied from 0.7 of truck travel time with one man to 0.4 with 8 men,
0.3 with 13. and 0.2 at 55 and over.
The number of foremen was as follows: 1 with 6-10 in the crew; 2
with 11-22; 3 with 23-33: 4 with 34-44; 5 with 45-55: 6 with 56-66: and
7 with 67-77. The salaries of foremen were related to volume, and their
hours were limited to 1976 (247 days of 8 hours each) for purposes of
calculating overtime wages. With volume below 5 million pounds annual-
ly, the annual salary of a foreman was $4,000: with volume up to 20
million pounds annually, §4.500. In larger operations some were valued
at $5,000 and others at $4,500.
Where part of the crew travelled in passenger vehicles, the cost of
operating passenger vehicles was included at 7 cents per mile. It was
assumed each vehicle could haul up to 8 men. The first such vcdiicle
operated was assumed to travel the same distance as trucks. Thereafter,
the distance travelled per passenger vehicle ranged from 0.6 the truck
travel distance for the second vehicle to 0.4 per vehicle for the second
and third, to 0.2 per vehicle when 7 additional vehicles above the first
were required.
Work time involved in loading and related functions were combined
in these analyses. The levels of output per man hour were determined
by reference to Figure IT. These relationships probably contain some
inefficiencies subject to reduction through detailed time-and-motion
study or improvement of farm facilities. These data were derived from
information used in Figure 2, with estimated travel time, as established
in Figure I, being substracted from the asrgregate hours of labor.
Wage rates used were $1.50 per hour for drivers and $1.20 per hour
for helpers, plus 5 percent fringe benefits. Time-and-a-half was paid for
work by the crew beyond 1976 hours (247 days of 8 hours each) per
year. Figure III shows the relationship of volume and crew size, as
determined from survey records.
1 Travel lime for routes of 60 miles round trip or less determined by reference to:
N. H. Sta. Bui. 427, op. oil.. Fig. 9, p. 37. This fipure derived from records on de-
liveries to farms by grain trucks traveling over New England routes. Above 60 miles,
a constant speed of 46.2 miles per hour was used.
42
Figure I
Relationship Between Route Mileage and Truek Travel Time
Figure II
Calculated Relationship Between Annual Volume and Pounds Handled
per Man Hour of Labor in Loading Live Poultry*
LBS. PER MAN HOUR (LIVE BASIS)
I — : — r — I — I I II ri) — ■■ — I — I — rr
600
500
400
300
200
100
rrri m ■ — i 1 — i i i i 1 1 1 ■ — i 1 — i i i i i n — i 1 — i i i i 1 1
Log r = -108768 +.96ri7logx- 05906 log x' .
Log /- 6.03260 - L68393 logX +.18070 logx ^ -
-Logy=2.3ZI2l-.70293logX +.13936 logx
I I I I I I I : 1 1 1 I I I I I I : I 1 1 I [ I 1 M : 1 1 ' I I I I I
t»w*uiNr rou.^uiNr i«w*.yiN-~ row.^tn.-^- rsj
o o o o o o S o o o o o g o b o b o o p
o ooooog §g§§§§ §
ANNUAL VOLUME ASSEMBLED (THOUSAND POUNDS) ag.ecoa"9/59
Truck Costs
Repairs and Maintenance. These costs depend basically on truck size,
age, miles travelled, rate of loading, and road conditions. For purposes
of this study road conditions were assumed to be constant and rate of
loading to have a negligible effect.
As truck size increases, repair and maintenance costs increase, but not
in proportion to truck capacity or purchase price. Over the range of
truck sizes studied, capacity increases more than 150 times, but aver-
age costs per mile for repairs and maintenance only four times. The
larger (and more costly) the truck, the higher the repair bill for any
particular job, but the greater the "length of life," or the miles which
can be travelled before major overhauling becomes necessary. In these
calculations, for example, major overhauling was specified at 60,000
miles for pickup trucks and at 90.000 miles for 3-ton trucks.
For any particular truck size, repair and maintenance costs per mile
tend to increase with mileage travelled at an increasing rate until it
becomes necessary to carry out a major overhaul or replace the motor.
However, time depreciation affects repair and maintenance costs. If, for
example, a truck travels 50,000 miles in one year, the repair bill per
0009 ooooo
000
* (Excluding truck and crew travel time.)
44
Figure III
Relationship Between Annual Volume and Average Number of Men in
Pickup Crew, 75 New England Live Poultry Asscmblert^, 1957
mile is likely to be lower than if the 50,000 miles is spread over five
years. This point requires some modification of the relationship of re-
pair costs to total miles travelled when annual mileage travelled varies.
In these analyses it was assumed that vehicles would be traded prior
to major overhauling or engine replacement. Aormal mileage per year
was assumed to be 10,000. Based upon data from assembly firms, dollar
costs per successive 10,000-mile intervals were constructed for each truck
size. The accumulation of these through the 10,000-mile interval preced-
ing major overhauling or engine replacement yielded the "cycle cost."
Regardless of age or mileage, some "maintenance" work is required,
providing an irreducible base to which "variable repairs" are added.
Maintenance is estimated at 1 percent of new cost per year.
The following formula was used to calculate repairs and maintenance:
RM = 'C + (Y-X.01 N> ^,
m
In the preceding formula:
RM := annual $ cost of repairs and maintenance for specified
annual mileage m'.
C = "cycle cost" — based on increasing rate per mile for
period prior to major overhaul.
Y ^ number of years to major overhaul at m' miles per year.
X = number of years to major overhaul at 10,000 miles per
year.
N = new cost of vehicle in dollars (truck -)- ^ body or
trailer, if separate) .
m =: miles in cycle to major overhaul,
m' = specified annual mileage.
Oil. Costs per mile decrease with annual miles travelled. Although
oil consumption increases with aggregate mileage, calculations in these
analyses are centered on average rates of consumption for the life cycle
of the engine. Furthermore, proper servicing requires oil changes based
on time periods when annual mileage is low. Hence, it is assumed oil
will be changed every 2,000 miles or 90 days, whichever results in most
frequent changes. Oil consumption for periods between changes is esti-
mated at one quart per 250 miles for vehicles of 5-quart crankcase ca-
pacity, with consumption for vehicles of different capacity proportional
to this rate. A price of 30 cents per quart was used.
Lubrication. Costs per mile decrease with annual miles travelled to
the minimum level and are constant beyond this point. It was assumed
vehicles would be serviced every 2,000 miles or 90 days, whichever
occurred most frequently. Costs per job were increased with truck size.
Tires. As truck size increases, the size and ply of tires increases.
Hence, the cost of a new tire or of a recapping rises. However, as size
and ply increase, the original mileage obtainable, the number of re-
capping possible, and the mileage per recapping increase. The number
of tires per vehicle increases as dual wheels become standard (or as a
tractor-trailer is used) .
46
The mileage obtainable per tire cycle — original plus recapping mile-
age — is modified by the time factor. As more years are involved in the
cycle, total mileage falls. Hence, a modified iiormiila, similar to that
derived by Clarke and Bressler,- was used to determine total mileage
obtainable with various levels of annual mileage:
TY =
m' + 4,240
In the preceding equation, T Y := tire life in years; m = normal
miles obtainable from tires for the particular truck size; m' =: annual
miles of travel. To obtain the annual cost for tires (and tubes), the fol-
lowing equation was used:
r
TC =
TY
in which C =^ the dollar cost per tire cycle for original purchase plus
recappings and TC r= the annual dollar cost.
Gasoline. As truck size increases the number of miles obtained per
gallon declines. On the basis of data obtained in the survey and from
secondary sources, gasoline con^iumption was assumed to decline from
16 miles per gallon for the smallest truck size to 5 miles per gallon for
a tractor. A price of 25c per gallon of gasoline was used.
Other investigators have divided gasoline consumption into a fixed
amount per day plus a variable component related to miles travelled."
However, the size of the fixed item is likely to be of minor importance
for trucks such as those used in poultry assembly, whereas for delivery
truck* making numerous stops it would be relatively larger.
Other Fixed Operating Costs. These include: registration and license
fees, bonding charges, and purchase of anti-freeze. Registration and
bonding costs were established in relation to truck capacity by inter-
polatins fi'om information obtained on field schedules. License cost's
were established at $3 per vehicle, the modal value of charges levied
by the New England states when transfer costs were included. Cost of
anti-freeze. at $2 per gallon, was determined by radiator capacity. Pro-
vision was made for temperatures of -30°F.
Federal Excise Tax. This has been included at $1.50 per year for each
1,000 pounds taxable gross weight paid by registrant on truck combi-
nations over 26,000 G.V.W.^
- Clarke, D. A., Jr., and R. G. Bressler, Jr. Efficienry of Milk Marketing in Conner-
ticut: 6. Truck Costs and Labor Requirements on Milk Delivery Routes. Storrs
(Conn.) Agr. Exp't. Sta., Bui. 248. June 1943, p. 8.
Y ^ ; Y =r years of life; R ^ the annual rate of travel.
R + 4,240
This formula was intended to apply only to tires with a life of 20,000 miles.
For other situations the factor of 4240 should be adjusted.
■'' Clarke, D. A. Jr., and Bressler, R. G., Jr., op.cit., p. 4.
* Motor Truck Fnrts, Automobile Manufacturers Association, Detroit, Michigan,
1957 Edition, p. 28-33.
47
Other Taxes. Other Federal excise taxes on motor truck sales, tires,
parts, accessories and gasoline, general State sales taxes. State gasoline
taxes, tolls, special city and county taxes, etc.. are assumed to be in-
cluded under other cost items.
Hi ehxvay-lJ ser Tax. Taxes are levied by States against truck operators
on the basis of mileage or value. However, these generally exclude oper-
ators of vehicles not for hire. Hence, since contract haulers would be
the only group of poultry assemblers materially affected, no cost has
been included for highway-user taxes in these analyses.
Devrociatinn — Trucks. A standardized list of percentages of oriainal
cost, by years of age. was derived by using published "book values" for
trucks.'' These percentages decline progressively — from 25 percent in
the first vear to 3.2S percent between the 9th and 10th years. Appendix
Table T summarizes these rates. Depreciation rates established by refer-
ence to automotive industry pricing are presumed to reflect "normal"
wear depreciation and time depreciation. Vehicle age and aggregate
mileage were a«sumed to offset each other and "condition" was assumed
as standardized at trade-in time bv the repair and maintenance pro-
gram. New cost prices were established by 19S7-58 values quoted by
poultrv assembly firms in New England.
Furthermore, it was assumed that trucks would be traded every 10
years or prior to a maior overhaul or engine renlacement. whichever
occurs first. For vehicles where chassis and bodv can be purchased
separately fin this study. 1-ton trucks and larger with nlatform bodies),
it was assumed the body would be traded half as frequently as the
chassis, or at least every 10 years.
Interest — Trucks. Annual costs were determined according to the
formula:^
(r) fn + l)
(P — S)
(2) ( n )
where I represents annual cost. P the original investment, r the rate of
interest, n the years of expected use. and the S the salvage value at the
end of the useful life. Charges for chassis and bodv. with different
years of expected use. were separately determined and combined into
the total charge.
Property Taxes — Triick'^. The "normal" denreciated values, described
under the section entitled "denrec'ation-trucks." were used a« a basis
for calculating the property tax. This was levied at the rate of 3 mills
per dollar of value for the particular number of years of age. with a
minimum charge of S4.50 per year per truck.
Insurance — Trucks. Rates for trucks of various sizes were inter-
polated from information on field schedules. Considerable variation ex-
ists from State-to-State. and rates are also influenced by distance travel-
led and extent of coverage desired. Herein, modal values were used.
^ Offirial Automobile Guide, Price Edition, Recording and Statistical Corporation.
87th Edition, Jan. 1958.
® Clarke, D. A. Jr., and R. G. Bressler, Jr., op. cit., p. 14.
48
Other Co8l8
Management. Annual costs for buying, management, and office func-
tions were determined for each truck size, and for mukiples of each
truck size up to 12. These were based upon fractional allocations from
data for these and other functions, plus selling, for the entire operation
of a poultry processing plant.' Allowance for selling live birds is not
included in the "management" group figures for this study. Multiple
unit firms (additional trucks of the same size) are able to realize econo-
mies of scale in management. Economies also exist in moving from a
given truck to one of larger capacity provided volume is expandable.
Depreciation — Crates. Crates are an item of considerable expense to
poultry assemblers. Probably careful handling, periodic repairing, and
minimizing exposure to the elements would reduce costs below the
present levels.
Tn this analysis, depreciation was varied according to the percent of
capacity at which the unit operated. Each 10 percent change in volume
was accomnanied by a charge of 10c per crate per year for depreci-
ation. For example, at 50 percent capacity, the charge was $1.50 per
crate per year, and at 100 per cent capacity, $2.00 per crate per year.
The number of crates owned was determined to be proportionate to
numbers established in an earlier study involving model processing
plants.'^ Crate numbers are more than double the number per truck
to allow for crates held at loading and unloading points and in the pro-
cess of repair. The number of crates required was approximated by the
following formula:
Annual volume in pounds
„ . at 100 percent capacity
I\o. oi crates = = — ., , ,^„
11,667
Buildings
Building space provided for model assembly firms includes provision
for areas devoted to an undercover unloading dock, platform for full
and empty crates, crate cleaning and storage, weighing, and office. Most
assembly firms do not provide garaee space for vehicles: at best, some
misht back vehicles into the unloading area. Although some firms pro-
vide space for repairing and servicing vehicles, herein, no provision is
made for special areas for these purposes. While some firms may have
space devoted to holding birds in batteries, such is regarded in these
analyses as related to processing or selling rather than assembly. Hence,
no batterv area is included under building space.
The scTuare feet of building space provided for assembly firms was de-
termined in relation to annual volume. The amount of space was de-
termined in proportion to that provided in an earlier study of process-
ing nlants for the same purposes enumerated above. The total cost of
such space was established by using the costs per square foot for pro-
cessing plants of like area.^
Appendix Table II shows the rates used to determine certain fixed
overhead costs, and Appendix Table III the dollar investment required
for selected model firms.
7 N. H., Sta. Bui. 459, op. cit.. Table 8, p. 30.
^ Op. cit.. Appendix Table I, p. 52.
^ Op. cit., data used to calculate Tables 5 and 6, p. 24 and 26.
49
Appendix Table I. Depreciation Rates on Trucks Used for the
Assembly of Live Poultrv
Year
1
2
3
4
5
6
7
8
9
10
11
12
Trade-in Value as
Annual
Percentage of
Depreciation
New Value i
Rate-
75.00
25.00
60.00
15.00
51.00
9.00
43.00
8.00
36.00
7.00
30.00
6.00
25.00
5.00
21.00
4.00
17.50
3.50
14.25
3.25
11.75
2.50
10.00
1.75
1 End of Year
- Relative to new price
Appendix Table II. Rates Used to Determine Certain Fixed Overhead
Costs per Year for Firms Assembling Live Poultry
Item
Percent of
New Cost
Depreciation — buildings
Repairs and maintenance — buildings
Insurance — buildings and equipment other than trucks
Property tax — buildings and equipment other than trucks
Interest — trucks, buildings, equipment
5
3
1
1
3
Appendix Table III.
Investment Required for Selected Model Firms
Assembling Live Poultry
Firm
Investment
Model
Annual Volume
Trucks
Buildings
Crates
Total
Per pound of
No.
Ai
nnual Capacity
(mil. lbs.)
(dollars)
(cents)
1
1.17
2,400
4,000
300
6,700
0.57
II
2.37
3,050
4,700
600
8,350
0.35
III
4.61
4,800
5,800
1,200
11,800
0.26
IV
8.85
8,250
7,300
2,400
17,950
0.20
V
12.88
11,250
8,375
3,600
23.225
0.18
VI
17.02
15,750
9,300
4,800
29,850
0.18
VII
25.21
22,500
11,100
7,200
40.800
0.16
VIII
34.66
30,000
12,600
9,000
51,000
0.15
IX
51.96
45.000
15,100
13,500
73,600
0.14
X
69.24
60,000
18,500
18,000
96,500
0.14
50
s
3
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SI
Appendix Table V.
Distribution of Sizes of Trucks Registered by Assemblers
of Live Poultry, New England, 1957
Firms with Specified Numbers
of
Trucks
Item
1 truck
2-
-3 trucks 4-6 trucks
7
or
more trucks Total
Firms
Trucks
Classification:
232
232
D
istrib
( number)
82 15
184 69
ution of Truck Sizes by Tonna
ige
13 342
131 616
Classification
Va
1
\y
2
VA
3
Trailers
18.1
11.4
18.1
27.3
22.9
2.2
0.0
0.0
(percent)
4.4 4.9
8.7 3.3
11.5 6.6
24.0 9.8
33.3 39.3
9.3 3.3
2.2 18.0
6.6 14.8
0.0 8.5
2.8 7.8
4.2 11.8
4.2 19.3
15.5 25.9
18.3 81
15.5 6.0
39,5 12.6
Total
100.0
100.0 100.0
100.0 100.0
Appendix Table VI. Inventory Value of Trucks Owned by Assemblers of Live
Poultry Registered in New England, 1951-57^
Assembler
Size by Number of Trucks
2
Value
Average
Value
1
2-3
4^
7 or more
all
Trucks Each
Year
Truck
Trucks
Trucks
Trucks
Trucks
Assembler
(dollars)
1951
428,536
332,401
131,673
58,717
951,327
1252
1952
397,256
305,057
119,780
92,211
914,304
1293
1953
345,644
280,276
91,746
117,434
835,100
1338
1954
321,402
251,223
59,465
109,164
741,254
1303
1955
283,084
217,898
75,606
109,164
685,752
1353
1956
236,164
173,464
59,465
133,974
603,067
1426
1957
181,424
158,083
59,465
109,164
508,136
1486
^ At 1957 price level
Automobile Guide" -
Boston 25, Mass.
^ Includes trucks and truck trailers
Retail value averaged for several makes as given in "Official
87th Edition — The Recording & Statistical Corporation,
52
Appendix Table VII. Proportions of Young and Mature Chickens and Average
Lot Size Hauled by Selected Sizes of Model Assembly Firms
Young
Mature
Average Lot
Firm Capa<
:ity
Chickens ^
Chickens -
Size per Farm
(million pounds
(percent)
(percent)
(pounds)
hauled annually)
0.5 and ]
less
50
50
3
1.0
56
44
3,000
2.0
60
40
4,600
3.0
63
37
5,500
4.0
67
33
6,400
5.0
70
30
7,000
7.5
75
25
8,000
10.0
80
20
9,000
12.5
81
19
10,000
15.0
82
18
12,500
17.5
83
17
15,000
20.0
84
16
20,000
25.0
86
14
27,000
30.0
90
10
28,000
35.0
94
6
29,000
40.0
95
5
30,000
50.0
96
4
30,000
60.0
97
3
30,000
70.0
98
2
30,000
^ Broilers, caponettes, roasters, pullets. 52.5 pounds per crate.
- Fowl and roasters. 60.0 pounds per crate.
3 From 40 pounds at 2,000 pounds annually to 1,400 pounds at 500,000 pounds
annually.
Appendix Table VIIL Age of Trucks Owned by Assemblers of Live Poultry
Registered in New Hampshire, 1957
Age
in
Years
Assembler Size by Number of Trucks^
1
2-3
4-6
7 or more
All
Truck
Trucks
Trucks
Trucks
Trucks
(percent)
6.8
2.2
2.0
2.9
4.5
20.0
9.8
6.1
10.4
18.2
26.7
17.6
27.3
21.9
18.2
4.4
11.8
3.0
9.8
13.7
4.4
17.6
18.2
13.3
9.1
17.8
9.8
9.8
9.1
6.7
13.7
18.2
11.6
4.5
11.1
11.8
6.1
8.7
15.9
6.7
5.9
21.2
11.62
100.0
100.0
100.0
(years)
100.0
100.0
5.7
4.8
5.3
6.0
5.4
1
2
3
4
5
6
7
8
9-18
Total
Ave. Age
^ Trucks and truck trailers.
- 24 percent of trailers are from 9-18 years old.
9.5 percent of trucks are from 9-18 years old.
53
Appendix Table IX.
Average Length of Haul for Live Poultrv Assemblers,
New England, 19571
Numb(
er of firms whose
a vera]
?e
W
eight!
sd average
Firm size
round-trip
haul was
given
route length
number of miles
;
in
miles
Less
26-
SI-
76-
101-
Over
Total
Annual Volume
than 25
50
TS
100
125
125
(1,000 pounds)
Less than 50
2
5
S
2
0
0
14
51.1
50-300
0
0
7
5
3
1
16
85.3
300-1,000
0
0
0
2
5
4
11
116.3
1,001-4,000
0
0
0
1
8
3
12
119.8
4,001-10,000
0
0
2
4
1
1
8
86.6
10,001-20,000
0
0
0
3
5
0
8
102.7
Over 20,000
0
0
1
4
1
0
6
88.0
Total
2
5
15
21
23
9
75
1 Based on a stratified random sample of 75 firms.
Appendix Table X. The Effect of Increasing Truck Size and Annual Mileage
on the Cost of Live Poultry Assembly l
Model number
Annual
Volume
Cost
Group
Annual Milea;
?e per Truck
and
description 2
5,000
10,000
25,000
50,000
E
% Ton-30 crate
(1,000 lbs.)
965
Labor
Other
.605
.231
(cents per
.674
.264
pound)
.916
.344
1.244
.462
capacity
Total
.836
.938
1.260
1.706
H
iy2 Ton-130 crate
3,535
Labor
Other
.342
.155
.396
.166
.559
.198
.792
2iS
capacity
Total
.497
.562
.757
1.040
K
3 Ton-220 crate
5,924
Labor
Other
.333
.145
.373
.153
.514
.181
.695
.224
capacity
Total
.478
.526
.695
.919
L
Trailer-320 crate
8,572
Labor
Other
.289
.147
.335
.154
.449
.182
.615
.226
capacity
Total
.436
.489
.631
.841
1 At 100 percent of capacity.
2 Single truck operation.
54
Appendix Table XI. The Effect of Increasing Firm Size and Annual Mileage
on the Cost of Live Poultry Assembly ^
Number of
Annual
Volume
Cost
Group
Annual Mileage
per Truck
Trucks 2
5,000
10,000
25,000
50,000
1
(1,000 lbs.)
5,924
Labor
Other
.333
.145
(cents
.373
.153
per
pound)
.514
.181
.695
.224
Total
.478
.526
.695
.919
3
17,464
Labor
Other
.275
.123
.306
.130
.398
.152
.510
.190
Total
.398
.436
.550
.700
5
28,825
Labor
Other
.251
.115
.267
.123
.321
.145
.397
.183
Total
.366
.390
.466
.580
7
40,061
Labor
Other
.243
.108
.257
.116
.274
.138
.365
.177
Total
.351
.373
.412
.542
9
51,431
Labor
Other
.239
.103
.251
.110
.282
.132
.331
.171
Total
.442
.361
.414
.502
1 At 100 percent of capacity.
~ 3 ton trucks of 220 crate capacity — Model K.
Vrfjic
55
Appendix Table XII. Costs of Operating Various Sizes of Trucks at Various
Annual Mileages per Truck in Assembling Live Broilers ^
Truck S
ize
Annual
volume
Annual Mileage
per Tru(
•k
Model
Tons
Crate
No.
capacity
5,000
10,000
25,000
50,000
(1,000 lbs.)
(cents per pound)
A
Homemade^
2
52
.042
1.418
2.568
4.297
B
Homemade^
5
129
.405
.607
1.080
1.798
C
Homemade-
10
259
.220
.325
.576
.948
D
V2 ton
20
519
.128
.187
.324
.527
E
% ton
30
908
.083
.119
.203
.328
F
1 ton
60
1,556
.056
.078
.133
.217
G
1 ton
100
2,594
.041
.055
.093
.152
H
IV2 ton
130
4,372
.035
.048
.081
.133
1
2 ton
160
4,150
.037
.048
.079
.126
J
21/2 ton
190
4,928
.039
.049
.078
.125
K
3 ton
220
5,681
.042
.050
.079
.124
L
Trailer-^
320
8,299
.055
.062
(cents per
.091
mile)
.136
A
Homemade^
2
52
9.78
7.36
5.33
4.46
B
Homemade^
5
129
10.48
7.85
5.59
4.65
C
Homemade-
10
259
11.42
8.43
5.98
4.92
D
y2 ton
20
519
13.30
9.69
6.73
5.47
E
% ton
30
908
15.04
10.79
7.40
5.96
F
1 ton
60
1,556
17.30
12.09
8.27
6.74
G
1 ton
100
2,594
21.16
14.23
9.64
7.89
H
IV^ ton
130
3,732
23.74
16.06
10.92
8.99
T
2 ton
160
4,150
30.94
19.78
13.05
10.43
J
21/2 ton
190
4,928
38.86
24.34
15.44
12.31
K
3 ton
220
5,681
47.28
28.64
17.97
14.08
L
Trailer^
320
8,299
91.56
51.36
30.24
22.61
^ At 100 percent of capacity-15 broilers, 3.5 pounds each, 52.5 pounds per crate.
Includes: repairs, maintenance, oil, grease, lubrication. Fed. excise tax, tires, gas,
registration, license, bond, anti-freeze depreciation, interest, insurance, property tax.
- Car and trailer or bomemade pickup truck.
3 Tractor-trailer combination.
56
ApiXMulix TabFo XIII. (Ihaiigrfi in Per Pound Coiitb of Poultry A??senibly of
Selected Items with Changes in Vohinie, Truck Size, and Miles Travelled
Co!?t Group
Change in Cos-t per Pound:
Item
As firm volume
increases
As truck size
increases
As mileage per
tru<'k increases
^ ariahle
operating
T,aI)or 1
Truck repairs
and maintenance
Decreases
Decreases
Decreases
Decreases
Increases
Increases
Constant-unit
operating
(^iisolinc -'
Oil, li)l)ricat'on
Tires -
Fed. excise tax ■
Decreases
Decreases
Decreases
C-onstant
Decreases
Decreases
Decreases
Constant
Constant -
Constant -
Constant -
Constant
Fixed
operating
Management
Miscellaneous ^
Truck insurance
Decreases
Decreases
Decreases
Decreases
Decreases
Decreases
Constant
Constant
Constant
Fixed
overhead
Truck depreciation
Truck interest
Truck property tax
Crate depreciation
Building costs •''
Decreases
De<Teases
Decreases
Decreases
Decreases
Decreases
Decreases
Decreases
Constant
Decreases
Constant
Constant
Constant
Constant
Constant
1 Drivers, helpers, foremen.
- Gasoline consumed in starting and idling, oil changes and luhrication at time
intervals, and time depreciation (age) on tires constitute an initial cost. Thereafter,
rates of use related to mileage.
•' Flat rate per pound on largest trucks only.
' Registration, license, bonding, anti-freeze.
•' Depreciation, interest, taxes, insurance.
'57
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