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. 



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