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 



