to so remain because of economies of scale. Hence there will continue to 

 be marked differences between units in different territories. Some territories 

 will continue more economical than others, but within territories there is 

 room for selection of better locations. It is within this concept that the 

 matter of locational selection can be related to volume. The achievement of 

 better locations within territories is more significant than attempting to 

 minimize differences between outlets selling the same brand in different 

 territories. The eventual minimization of distribution costs lies in the appli- 

 cation of the principles suggested in this and in succeeding sections unit-by- 

 unit. Assuming continuation of a substantial degree of delivery-route-cost 

 equalization on a firm basis as now practiced, the problem becomes more 

 one of maximizing efficiency in each territory serviced step-by-step in order 

 to achieve a higher degree of efficiency for the combined territories. 



3. Determining Fair and Equitable Pricing Practices 



HAVING established a retail grain-feed unit at a location within a 

 particular territory which promises the opportunity for securing maxi- 

 mum volume, a second problem for examination is that of determining 

 fair and equitable pricing practices. This section concerns primarily those 

 aspects of pricing other than the base price. Base price, as used herein, is 

 the cost to or the transfer value of grain-feed arriving at the retail dis- 

 tribution point plus all added charges for a non-delivered sale of a single 

 100-lb. unit with payment within 30 days. It is assumed already to include 

 the cost of central office or local unit overhead and "service". It was not 

 a purpose of this study to appraise base prices in terms of the relative 

 nutritional values of different brands nor to judge the issue of "service". 

 With respect to the latter, it can be pointed out that "service" actually is 

 an overhead cost, but that it probably costs the individual producer who 

 makes extensive use of it less than if he actually hired such work done. 

 This is because the offering of extensive "service" is done on the basis 

 that relatively small numbers of customers actually take full advantage of 

 it, with the cost assigned over the entire number of customers, keeping 

 the per unit addition minimized. Hence, "service" contributes toward good- 

 will and may be a good investment for the company and the extensive user, 

 so long as use is not universal, while costing the user, non-user or partial- 

 user only a small amount per unit. 



Service, as used hereafter, will refer to those operations performed in 

 the course of actual sale or delivery. Any distribution system results from 

 the interaction of the demand for such services by the consumer (in this 

 case the producer buying grain-feeds) and the willingness of one or more 

 distributors (in this case the grain dealers) to provide such services at 

 a minimum or no direct cost. In the distribution of grain-feeds, providing 

 the maximum in sales and delivery service and in convenience to the pro- 

 ducer is the rule rather than the exception. Furthermore, it can be asserted 

 with justification that the sales and delivery services, and the convenience 

 to the producer, are generally in disequilibrium with the costs actually paid 

 for them. In general, some producers are subsidized and some are penalized. 



Inconvenience 



The common reason given for doing things like unloading at difficult 

 spots, carrying bags to upper floors or over long distances, and dumping 



14 



