Whether indepenrlrnt prorliirer.-i or contrart growers are involved, in- 

 clusion of location anrl size as sliort-riin criteria for pavnient woulfl aid 

 the development of a supply area of smaller radius. The potential sav- 

 ings in assemhly costs would provide a hasis for financially encouraging 

 nearhy growers. New resources can be located clo'^er to the plant as a 

 policy matter if investment capital is provided contract growers or 

 assemblers own producing units outright. 



The establishment of an exclusive supplv area for the individual firm 

 would further cost reduction in assembly. Development of contract grow- 

 ing operations in new areas offers one Avay to do this. The firm might 

 also try to reshuffle supplv flocks with several competitors. But exten- 

 sive development in this direction would raise some legal and sociologi- 

 cal problems and necessitate changing grower payment procedure. i** 



The cost savings from increasing the volume per mile of truck travel 

 can be illustrated by using as an example a firm handling 30 million 

 pounds of poultry annuallv. If this firm picks up poultry at the rate of 

 TOO pounds per mile of travel, it would incur costs of 0.53 cents ner 

 pound, or $159,000, and its trucks would travel 300.000 miles. A reallo- 

 cation of supply flocks with several competitors, to create the beginnings 

 of an exclusive supply area could easily halve mileage, double density, 

 and reduce costs to 0.46 cents per pound, or $138,000. a savings of S2L000. 

 An additional $21,000 could be saved bv increasing the pounds per mile 

 of truck travel from 200 to 500 (Table 7) . While the continued increase 

 in the volume per mile of truck travel results in drastic reduction in 

 miles per trip and per truck per year, cost savings per unit become 

 smaller and smaller. 



Table 7. The effect of Increased Volume per Mile of Truck Travel for a 

 Hypothetical Assembly Firm Handling 30 Million Pounds Annually ^ 



' Assuming 7 trucks operated at capacity, 2 trips per day for 247 operating days. 



Systemic Efficiency in Assembly 



With 332 firms engaged in poultry assemblv in New England in 1957, 

 systemic costs totalled S4.64 million. Most firms obtained between 20 

 and 50 pounds of poultry per mile of truck travel. Only a few firms 

 obtained 100 or more pounds of poultry per mile of truck travel. 



^^ Apprehension exists relative to the extent to which firms can work jointly 

 without facing anti-trust investigation. In the present environment, the association 

 of buyer and seller, or fieldman and grower frequently may be based on personal 

 considerations rather than economic decisions. Furthermore, many growers experi- 

 ence difficulty in evaluating the alternative contracts offered. One solution would be 

 the periodic negotiation of uniform terms, practices, and supervision, with growers 

 assigned to assemblers on the basis of proximity to the plant. 



31 



