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. 



