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 



