est to largest plant (or the smallest plant to the low-cost point for low 

 levels of volume per mile of truck travel) indicate a spread of 1.9 cents 

 per pound or more, live weight basis. 



Greater flexibility in operations of the firm can be secured by com- 

 bining assembly and processing. Either a single-function firm (engag- 

 ing only in assembly) or a combined-function firm (engaging in both 

 assembly and processing) may realize economies by: (a) Increasing 

 density of supplies while holding volume constant; or (b) increasing 

 \olume at a given density. But a single-function firm would face in- 

 creased costs per pound for assembly if it expanded volume by enter- 

 ing a supply area of lower density. On the other hand, the preponderant 

 intluence of decreasing per unit costs of processing upon the total per 

 unit costs of the combined-function firm would make feasible expansion 

 of \ olume by entering a supply area of lower density. 



This feature may find application mainly as a short-run expedient. 

 Over a longer period, the competitive interests of the firm would be en- 

 hanced by reducing the size of the supply area and reducing both assem- 

 bly and processing costs. 



The following example illustrates the extent to which increased costs 

 per pound in assembly could be offset by economies of scale in process- 

 ing. Suppose Firm A is assembling and processing 20 million pounds of 

 poultry and Firm B, 40 million pounds, in a supply area where poultry 

 is available at the rate of 1,000 pounds per mile of truck travel. If Firm 

 A can increase volume 20 percent, it can reduce processing costs from 

 3.036 to 2.965 cents per pound. Firm A's assembly costs can be increased 

 from 0.327 to 0.398 cents per pound, or the volume per mile of truck 

 travel reduced from 1,000 to 300 pounds, without increasing total unit 

 costs. Firm B, in increasing volume 20 percent, can reduce processing 

 costs from 2.777 to 2.715 cents per pound. This means assembly costs 

 can be increased from 0.305 to 0.367 cents per pound, or the volume per 

 mile of truck travel reduced from 1,000 to 200 pounds, without increas- 

 ing total unit costs. 



Cost reduction, of which integration of the assembly and processing 

 functions is but one method, will encourage further development of 

 stratified competition. At present this feature is most noticeable in the 

 alignment of small farms, small assemblers and processors, and small 

 outlets versus large farms, large assembler-processors, and volume out- 

 lets. But declines in firm numbers and further adjustments of firms to 

 supply areas will accentuate the sectional aspects. For example, small 

 local slaughterers and firms servicing alternative marketing channels 

 (live-poultry stores and live-poultry buyers) will constitute the main 

 outlets for producers in non-commercial areas. In contrast, large com- 

 bined-function firms will dominate in commercial areas. The partici- 

 pation of smaller and older types of firms will be limited to filling 

 limited needs for certain market classes at favorable prices, buying 

 small and mixed lots, and handling excess fowl. 



Optimum Adjustments for Selected Supply Areas 



The establishment of a least-cost system for a particular supply area 

 initially depends on maximizing the efficiency of the operations of the 

 individual firm. The accumulation of these efficiencies, plus the develop- 



37 



