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P U R D U E U N IV E R S IT Y

THIS IS TO CERTIFY THAT THE THESIS PREPARED UNDER MY SUPERVISION

by

John William Hicks

ENTITLED

THE ECONOMICS OF MILK DELIVERY IN FOUR INDIANA HÀEKETS

COMPLIES WITH THE UNIVERSITY REGULATIONS ON GRADUATION THESES

AND IS APPROVED BY ME AS FULFILLING THIS PART OF THE REQUIREMENTS

FOR THE DEGREE OF

P r o f e s s o r in C h a r g e o f T h e s is

H ead o f S c h o o l o r D e pa r tm en t

19

V

û

TO THE LIBRARIAN: — IS — » THIS THESIS IS NOT TO BE REGARDED AS CONFIDENTIAL.

GBAD. S C H O O L F O R M 9— 3.49—1M

THE ECONOMICS OF MILK DELIVERY IN FOUR INDIANA MARKETS

A Tiiesis

Submitted to the Faculty

of

Purdue University

by

John William Hicks

In Partial Fulfillment of the Requirements for the Degree

of

Doctor of Philosophy

June, 1950

ProQuest N um ber: 27714148

All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is d e p e n d e n t upon the quality of the copy subm itted. In the unlikely e v e n t that the a u thor did not send a c o m p le te m anuscript and there are missing pages, these will be noted. Also, if m aterial had to be rem oved, a n o te will ind ica te the deletion.

uest ProQuest 27714148 Published by ProQuest LLC (2019). C opyright of the Dissertation is held by the Author. All rights reserved. This work is protected against unauthorized copying under Title 17, United States C o d e M icroform Edition © ProQuest LLC. ProQuest LLC. 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106 - 1346

ACKNOWLEDGMENT

The author expresses sincere appreciation to: Dr* G* B. Wood, under whose direction this thesis was written, for his guidance and leadership; The Indiana milk distributors and other members of the milk industry whose cooperation made this study pos­ sible; The routemen who cooperated so willingly and cheer­ fully that the collection of the information was a real pleasure ; Miss Dorothy Stichter, for her help in tabulating and calculating the results ; Miss Darlene Ropp and Mrs* F* B. Morse for the typing And to his wife, Elizabeth, for her help and in­ spiration*

VITA

JOHN WILLIAM HICKS Australia.

Born December 2, 1921, at Sydney,

Came to the United States permanently in 1932.

Graduated from New Rochelle High School, New Rochelle, New York, 1939*

Entered University of Massachusetts,

September, 1939• Inducted into armed forces March, 194-3•

Served in

Army Air Forces for three years in the United States and Pacific areas* Completed undergraduate work at Vassar College and the University of Massachusetts, receiving a Bachelor of Science degree from the latter in August, 194-6* Instructor of Agricultural Economics at University of Massachusetts, September, 194-6 through June, 194?* Entered Graduate School of Purdue University, July, 194-7.

Received Master of Science degree, June, 194-6.

Title of thesis :

Some Farmstead Problems in Central Indiana.

Instructor in the Department of Agricultural Economics at Purdue, February 1, 1950 to the present•

To receive

Ph. D. degree from Purdue, June, 1950; major in Agricul­ tural Economics, minors in Economic Theory and Economics* Married Elizabeth Johnston, June, 194-7• One son, John IV, October, 194-6•

TABLE OF CONTENTS Page ABSTRACT

...................

i

INTRODUCTION ............................................ Purpose of Study

..................................

1 1

Method of Study »................................

2

The Sample Studied

4

.................

The Period of the Study . ........................ The Adequacy of theSample .......................

7 7

THE DELIVERY OF M I L K ...................................

10

Theoretical Analysis The Type

Analysis of the Delivery Operation *..•

10

of the Firm and Costs of C o m p e t i t i o n ......

10 16

The Job of Delivery

..... *

21

Retail Delivery ......................... Wholesale Delivery .............................. « Types of Retail Routes ....................... ....... Types of Wholesale Routes Mixed Routes ............. ............... . Services Performed by Milkmen Frequency of Delivery ...... Split Stops . . . .................................. The Ideal Routeman .........................

21 23 2k 2o 27 27 28 30 31

Summary

..........

..........................................

LABOR TIMES ON RETAIL ROUTES

........................

Times of Individual Operations ..........

33 35

. ..

35

Getting and Returning Truck ............ Waiting to Load and U n l o a d ..................... Loading and Unloading .......................... Running Books and Turning in Money .. .......... I cing Load ...................................... Driving Between Stops ... ............ Customers Per Mile ............. Delivery from Truck ......................... » Influence of Volume on Delivery Time . .. .. ... Collection Time ..................................

35 3& 39 L\.2

4-3 4-5 47 4& 49 50

TABLE OF CONTENTS (Continued)

Times of Individual Operations (Continued) Bookkeeping on Routes ........................« Marking Customer C a r d s ............... . Selling .................................... Customer Service ..................... Rearranging Loads ...... ................. . Filling the Carrier ..... » < Miscellaneous Operations ................ The 7 0 1clock Law in Indianapolis .......... . Personal T i m e ............ ....... . Total Route Time .

.... ...... ................ .

Use of Average Total Times ................. . Seasonal Variation in Delivery ............. Customers Served Per Hour .................. . Summary

........................................ .

LABOR TIME ON WHOLESALE ROUTES ..................... Average Times for the Various O p e r a t i o n s ..... . Getting and Returning T r u c k ................ . Waiting to Load and Unload ».......... . Loading and Unloading ................ ...... . Icing Load ............................... Running Books and Turning In Money ...... . Driving Between Stops ............... . Customers Per Mile .......... ...... ........ Effect of Volume on Delivery Time .......... . Selecting Merchandise ......... .......... . Customer Servi ce .................... Effect of Paper Containers on Time .... . Collections ••••............................. Other Operations ............... ......... . Personal Time •••••...................... . Total Route Time ................................ Use of Average Total Times .... ............ Customers Served Per Hour .... . Wholesale Delivery Costs Versus Retail Delivery Costs ............. ...........................

TABLE OF CONTENTS (Continued) Page Wholesale Delivery Costs Versus Retail Delivery Costs (Continued) Differences in Time Costs

8l

Summary . ......................... DELIVERY MANAGEMENT AND ORGANIZATION

82 ...............

Management Personnel .....

85

Large Dairies ................................ Small Dairies ................................... Comparison of the Selling Job ................ Effectiveness of Supervision .................... Route Organization

85

..........................*

Assignment of Routemen to Routes ................ Wholesale Stops on Retail Routes ................ Payment Plans for R o u t e m e n ....................... Payment of Retail R o u t e m e n ..................... Evaluation of Retail Payment Plans .............. Payment Plans for Wholesale Routemen ......... Evaluation of Wholesale Payment Plans .......... Levels of Payments ............................ Other R e m u n e r a t i o n s ................ Payment of Spares, Foremen and Supervisors .......

85 8? 87 89 90

90 91 $2

92 93 97 99 99 100 101

Days Off and Vacations ....................

102

S u m m a r y ..............................................

103

CONCLUSIONS AND RECOMMENDATIONS .......................

106

Recommendations of Other Studies

.......... .

Recommendations of the Present S t u d y

106 108

Milk As a Public U t i l i t y ...........................

113

Difficulty of Making Changes .......................

III4.

TABLE OF CONTENTS (Continued) Page APPENDIX A ............................................. Definition of Terms

..........

General Terms ..... ........................... Route Operations ................................ APPENDIX B.

T A B L E S ...................................

BIBLIOGRAPHY AND CITED REFERENCES

...................

Il6 Il6 116 117 121 135

LISTS OF TABLES AND FIGURES

List of Tables Table !»





Page Mileage, Number of Customers, and Number of Packages Delivered on $0 Retail Milk Routes in 4- Indiana Cities, 194^”^949* • •* *

8

Mileage, Number of Customers and Number of Packages Delivered on 23 Wholesale Milk Routes in 4 Indiana Cities, 1948-1949 ....

9

Daily Loads as Percentages of Average Daily Loads, 3 Day and Every Other Day Delivery, 10 Indianapolis Dairies, 1948 .....

30

4*

Operations Included In a Retail Milk Route and Their Relative Importance, go Indiana Retail Milk Routes, 1948-1949 ............

5*

Average Time Waiting to Load and Unload Trucks, 50 Indiana Retail Milk Routes, 1948-1949•• 37

6#

Average Time Loading and Unloading Truck on 50 Indiana Retail Milk Routes, 1948-1949*•

39

Average Time Running Books and Turning in Money on 50 Indiana Retail Milk Routes, 1 9 4 8 -1 9 4 9 ..................................

43

Time and Method Used Icing Load on 32 Indiana Retail Milk Routes, 1948-1949.............

44

Customers Per Mile, and Time Per Customer Driving Between Stops, 50 Indiana Retail Milk Routes, 1948-1949 ..................

48

Time Per Package Delivering Milk from Truck for Various Quantities, 50 Indiana Retail Milk Routes, 1948-1949 ....................

50

Average Times for Serving Various Numbers of Customers on Routes of Various Lengths, 50 Indiana Retail Milk Routes, 1948-1949•♦

58

Total Daily Time Required to Run Route Computed from Average Time Figures, and Total Time Actually Taken Running Route, 50 Indiana Retail Milk Routes, 1948-1949••

6l

7*

8. 9*

10*

11*

12*

List of Tables (Continued) Table 13*

l4«

15#

l6.

17 «

Page Customers Which Can Be Served Per Hour on a Retail Route Computed From Average Times on 50 Indiana Retail Milk Routes, 1 9 4 8 - 1 9 4 9 ...............................

63

Operations Included in a Wholesale Milk Route and Their Relative Importance, 23 Indiana Wholesale Milk Routes, 1948-1949••

66

Time Driving Between Stops Per Customer and Number of Customers Per Mile on 23 Indiana Wholesale Milk Routes, 1948-1949 .......

70

Average Time Per Customer for Various Opera­ tions of Delivering Milk from Truck, 23 Indiana Wholesale Milk Routes, 1948-1949••

72

Average Times for Wholesale Delivery of Milk in Glass Bottles for Various Numbers of Customers and Different Length Routes, 23 Indiana Wholesale Milk Routes, 1948-1949••

76

18.

Average Times for Wholesale Delivery of Milk in Paper Containers for Various Numbers of Customers and Different Length Routes, 23 Indiana Wholesale Milk Routes, 1 9 4 8 - 1 9 4 9 7 7

19•

Total Hours Actually Worked and Total Hours Required Under Average Times for 23 Indiana Wholesale Milk Routes, 1948-1949••

20 e

21 *

22*

23*

78

Customers Which Can Be Served Per Hour on a Wholesale Milk Route Computed from Average Times on 23 Indiana Wholesale Milk Routes,

1948-1949 .............................

79

Comparison of Cost Per Unit Attributable to Retail Routeman1s Salary Under 3 Different Types of Payment Plans «............. ..

94

Comparison of Cost Per Unit Attributable to Retail Routeman1s Salary Under Payment Plan Including Fixed Salary, Commission and Customer Account . ..................

94

Comparison of Cost Per Unit Attributable to Wholesale Routeman1s Salary Under 3 Types of Payment Plans .................

98

List of Appendix Tables Appendix Table lo



3a

4-a

Page

Frequency Distribution of Time Involved Carrying Milk to the C u s t o m e r s Door for Different Types of Stops, 50 Indiana Retail Milk Routes,194-8-194-9 *•• •

121

Frequency Distribution of Time Involved Re­ turning from Door to Truck, 50 Indiana Retail Milk Routes, 194^"1949

121

Time Involved in Various Operations on Retail Milk Routes in 4- Indiana Markets, 194®“ 1949

122

Time Involved in Various Operations on 23 Wholesale Milk Routes in 4 Indiana Mar­ kets, 194.8-1949 ..........................

131

List of Figures Figure 1. 2. 3* 4#

Hypothetical Curve of Average Costs for a Dairy . .................... .

13

Hypothetical Curves of Average Costs for Milk Delivery Routes ......

13

Hypothetical Curves of Average Delivery Costs for a Dairy . . . . . . .

15

Hypothetical Average Total Cost Curve for a Dairy ......................... ...........

15

i

THE ECONOMICS OF MILK DELIVERY IN FOUR INDIANA MARKETS (abstract of thesis) by John W. Hicks Milk is one of the most important of all food pro­ ducts from the standpoint of public health and nutrition. Probably no industry offers its customers as complete de­ livery service.

This service is an expensive item, making

up from 15 % to 30 % of the price the consumer pays for fluid milk.

If distribution costs could be reduced, and

the saving passed on to consumers in the form of lower prices,

society would benefit.

This study was designed to investigate the labor in­ puts and costs of retail and wholesale milk delivery in 4 Indiana markets,

and to discover steps which members of

the industry might take to reduce these costs*

Fourteen

dairies in the markets of Indianapolis, Fort Wayne, Gary and Frankfort cooperated in the study.

Time studies were

made on 50 retail and 23 wholesale routes.

Information

was also collected on route management and organization, driver payment plans, and other general aspects of milk delivery in local markets. Sales and service competition, rather than price com­ petition, is characteristic of local milk markets.

Sales

efforts of individual dairies depend largely upon the

ii

personality of the routeman, and on extra services provided by the dairy*

This type of competition is costly.

Every other day or 3 day a week retail delivery is ap­ parently well established in the 4 markets.

The practice

of one customer taking milk from more than one dairy, how­ ever, is a threat to the savings these delivery systems have brought, and also an item of expense in wholesale de­ livery. More than 60% of the retail routes studied did not offer a full 8 hour day of work to the routeman and truck. The real measure of the amount of work required to run a retail route is the number of customers served; yet most dairies gauged the size of their routes by the number of units delivered.

Under average conditions, a routeman could

have served approximately 200 customers in an 8 hour working day on routes between 11 and 20 miles in length. Increasing the quantity delivered per customer and in­ creasing the number of customers per mile are 2 important means of delivering more milk per unit of time.

Large

dairies served more customers per mile than small dairies. Improved methods on the part of the routeman, along the lines of work simplification, could also lead to the de­ livery of more milk per unit of time.

At many dairies,

the time loading and unloading, checking in money, etc., could be reduced, deliver milk.

thus giving the routemen more time to

ill

The number of customers served and the quantity de­ livered per customer are the best measures of the work re­ quired on a wholesale route.

About 50$ of the wholesale

routes studied did not offer a full day of work to the routeman or truck.

Special service to customers took over

12$ of the wholesale routeman1s working time.

Delivery of

all paper containers took less time than the delivery of all glass bottles or a mixture of the two, mainly because it was not necessary to pick up and sort bottles. In general,

the time required to deliver one quart

wholesale was less than half that required to deliver one quart retail. Large dairies generally appeared to be doing a better selling job than did small dairies, due to better super­ vision and training of routemen. cording to a number of plans.

Routemen were paid ac­

Under different existing

payment plans at existing rates, payment per unit delivered varied by as much as 1 #5 ^ per quart retail and .8/ per quart wholesale.

Retail payment plans which included a

fixed salary, a commission and a customer account appeared most equitable and satisfactory.

For wholesale routemen,

a small fixed salary plus a commission seemed best.

Route

foremen and spare routemen probably should be paid on a commission basis. In light of the results of the study, the following measures offered themselves as the most important considéra-

iv

tions in reducing milk delivery costs while operating in the existing institutional pattern: 1,

Bring existing routes up to an optimum size*

2.

Increase the quantity per customer,

3*

Consider expanding the use of paper containers in wholesale delivery.

1|_.

Joint action by dairies to limit service to customers, and otherwise lower costs.



Limiting of markets by small dairies.

6.

More information needed on truck costs•

7.

Improved methods to increase delivery efficiency.

It is easier to suggest measures of lowering delivery costs than to carry the measures through; but if retail de­ livery is to survive rising costs, a careful soul-searching appears necessary.

1

THE ECONOMICS OF MILK DELIVERY IN FOUR INDIANA MARKETS

INTRODUCTION Purpose of the Study

Milk is one of the most important of all food products from the standpoint of public health and nutrition.

Prob­

ably no other industry offers its customers as complete delivery service.

In nearly every town and city in the

nation, milk is delivered to the customer1s door at least three days a week.

Many rural areas have similar service.

In addition, nearly all stores and eating places which handle milk can receive delivery six times a week if necessary# From 30% to 60% of the price the consumer pays for fluid milk goes for the functions of assembling, process­ ing and delivering.

The cost of delivery makes up from

one third to two thirds of the total of these three opera­ tions.

A recent study in New York City showed delivery

costs to be as high as 7^ per quart at one plant.i/

Many

Indiana dairies report their delivery costs to be between 3/ and 6/ per quart.

If these delivery costs could be

reduced, and the saving passed on to consumers in the form

1/ See Legislative Document (194-9) N o . I4.6 , State of New York, An Analysis of the Spread Between Farm and Con­ sumer Milk Prices in New York City Under Present Practices » Albany, 1949•

2

of lower milk prices,

the result would be beneficial#

Not

only would consumers benefit; producers too would gain in that more milk could be moved into consumption at the lower prices♦

Present trends indicate continued increases in

milk production* The magnitude and nature of the delivery operation apparently offer large opportunities for an increase in ef­ ficiency and a decrease in cost*

This study was designed

to investigate some of the factors influencing the cost of the delivery operation as carried out in Indiana markets, and to suggest means by which members of the industry, acting singly and as a group, might reduce delivery costs*

Method of Study Time Costs Studied Instead of Dollar Costs The study was planned to investigate the cost in labor time of the delivery operation, rather than the dollar costs of d e l i v e r y . D o l l a r costs vary with different firms, with the price level and with accounting practices; but labor time, given approximately similar methods.

2j

Labor costs, of course, are not the only costs involved in milk delivery. Truck costs are important, and items of administration also enter. This study, however, was limited to labor costs. For some information on truck costs, see Truck Costs and Labor Requirements on Milk Delivery Routes» Storrs Agricultural Experiment Station Bulletin 2i).b, July, 195-3*

3

remains relatively uniform.^/

If dairy operators could

know the approximate labor time being utilized for delivery of various quantities under various conditions,

they could

then apply whatever cost and price relationships happened to exist at a given time, allocate overhead and management as they saw fit, and determine labor costs in both an aver­ age and marginal sense.

Knowledge of delivery time require­

ments would also give dairies an opportunity of checking the efficiency of their own delivery operation against that existing elsewhere, and of determining reasons for their own strengths or weaknesses. The method of study consisted of making detailed time studies of a number of retail and wholesale milk routes in four selected markets over the state.

From these studies.

The usual type of cost study analysis, consisting of examination of the records and accounts of the dairies studied and computation therefrom of average dollar costs of delivery for individual dairies or the entire market, was not considered suited to the present study for a number of reasons: !• Such a study is entirely historical in nature, and the results are not applicable to any other eostprice relationship than that existing at the time of the study. By the time most such studies appear, the material is out of date, 2 e Records kept by dairies are often not comparable, and in many cases incomplete, 3, Such studies show only average costs, telling nothing of marginal costs. Average costs so computed for an entire market really apply to no individual dairy, 1|_, The results of such a study do not show an individual dairy where its own strengths and weaknesses lie, 5» The results of such studies are often misin­ terpreted by people and may be used in a manner contrary to the public interest. Use of such cost figures in es­ tablishing "fair” prices for milk is not economically sound.

4 average times were computed for each, of the operations in­ volved in a milk route, under various conditions.

Using

these average times, it was possible to construct a set of theoretical time figures for any given route, and develop a norm against which the route could be measured.

If a given

route is found to be operating below the norm, further in­ vestigation and comparison with the average time figures will often show where the trouble lies, and offer opportunity for improvement.

If the route is found to be exceeding the

norm, further investigation might also be desirable to de­ termine the reason and further capitalize on it* In addition, information was collected on the type of payment plans used for route personnel; methods of route supervision and management, and various other items which might influence the delivery of milk.

Direct observation

and personal contact made it possible to gather a consider­ able amount of information on the whole process of selling and distributing fluid milk and related products.

At each

dairy studied at least one, and often several interviews were obtained with the president or manager.

These inter­

views were extremely valuable in gaining a general and an inside view into the whole system of fluid milk distribu­ tion and its many problems#

The Sample Studied The sample used in this study was selected in a

5

purposive manner, in an attempt to get data which, might be applicable to the various conditions of milk delivery found in Indiana cities.

The four markets of Indianapolis,

Port Wayne and Frankfort were studied.

Gary,

In each market,

dairies were selected to get a cross section of the plants of various sizes in the market.

The measure of size of

dairy used was the number of wholesale and retail routes. lL Dairies Studied Routes from llj. different dairies in the four markets were studied, 5 dairies each in Indianapolis and Fort Wayne,

and 2 each in Gary and Frankfort.

Indianapolis.

Indianapolis, population 3 8 6 , 9 7 2 , ^ h a d

18 dairies operating within the market at the time of the study.

Three of these dairies operated 75 or more routes,

6 operated between 15 and 50 routes and the remaining 9 operated 15 or fewer routes.

The Indianapolis dairies

selected for the study included 2 of the large dairies, one medium-sized dairy and 2 of the small dairies.

One of

the small dairies studied was an all wholesale, all paper container operation. Fort Wayne.

At the time of the study there were 12

dairies operating in Fort Wayne, population 118,^10.

Two

of these dairies had over 30 routes each, and served twothirds of the market; each of the remaining dairies had

ij/ All population figures quoted are from the 19I4.O U. S. Census•

6

less than 12 routes.

The Fort Wayne dairies selected for

the study included both the larger dairies and 3 of the small dairies.

One of the small dairies studied was an

all wholesale, all paper container operation, Gary,

Gary, population 111,719» had 6 dairies located

in and operating in the city at the time of the study.

Of

these, 3 had over 25 routes, the remainder fewer than 1 0 , One of the larger and one of the smaller dairies were studied.

In addition, 2 or 3 Chicago dairies were doing

business in Gary at the time the study was made, Frankfort.

There were 2 dairies operating in Frank­

fort, population 13»706, at the time of the study* study was made at each.

Some

Each of these dairies had fewer

than 10 routes, 50 Retail and 23 Wholesale Routes Studied The routes to be studied at the various dairies were also selected in a purposive manner, usually in consulta­ tion with the sales manager or route supervisor.

It was

found that routes could usually be classified into a limited number of categories depending upon the type of area and customers served,

and the mileage.

An attempt

was made to get a cross section of the types of routes found at the dairy, and to select routemen who would co­ operate in the collection of the data,

A total of 50 re­

tail routes and 23 wholesale routes was subjected to

7

detailed time studies (Tables 1 and 2)

^

The Period of the Study The field work on the study was done between July 194-8 and September 1949*

The time studies were made dur­

ing all seasons of the year, but the majority of them was made during the summer months» Adequacy of the Sample During the course of the study, records were obtained for a total of 7125 retail deliveries, deliveries*

and 715 wholesale

The adequacy of the sample was tested by

plotting frequency distributions of the major delivery operations such as driving between stops, carrying milk to the door, etc*^/

When sufficient cases were obtained so

that the addition of more routes did not appear to m a ­ terially alter the distribution, the sample was considered adequate*

Information on some of the less frequently per­

formed operations, be representative*

such as loading and unloading, may not The data collected, however, were con­

sidered adequate to serve the purpose of this study*

No

leveling for rate of activity of routemen or methods used was undertaken.

It is believed sufficient cases were

studied to make such leveling unnecessary» See Appendix A for a definition of the term "route" as used in this study* 6/ See Appendix B, Table 1 for an example of these fre­ quency di stri butions *

8

Table 1*

Mileage, Number of Customers, and Number of Packages Delivered on $0 Retail Milk Routes in Pour Indiana Cities, 19^.8-19^9»

Market

Average

Range

Length of Route Indianapolis Fort Wayne Gary Frankfort

5 -6 9 0 -6 8 1 0 -3 2 9 -9 3

miles miles miles miles

2 2 *1 1 9 *3 2 1 .0 2 6 .2

miles miles miles miles

Number of Retail Customers Indianapolis Fort Wayne Gary Frankfort

78-2 l6 7 8 -2 9 6 87-139 8 5 -2 9 1

customers customers customers customers

156 151 111 163

customers customers customers customers

0 *3 0 .3 3 *5 3 *1

customers customers customers customers

4-99 4.09 34-7 4-13

packages packages packages packages

Number of Wholesale Customers Indianapolis Fort Wayne Gary Frankfort

0- 5 0- 3 0- 5 1 -1 1

customers customers customers customers

Number of Packages Delivered-Retai1* Indianapolis Fort Wayne Gary Frankfort

3I8-65I4. 200-534233-4-50 277-755

packages packages packages packages

Number of Packages Delivered - Wholesale Indianapolis Fort Wayne Gary Frankfort

5-218 9 -1 2 5 3 -2 7 0 8 -1 2 4

packages packages packages packages

66 packages 56 packages 102 packages 74- packages

* A package is any single container, regardless of size, in which milk, cream, or other product is sold. See Appendix A.

9

Table 2*

Mileage, Number of Customers and Number of Packages Delivered on 23 Wholesale Milk Routes in Four Indiana Cities, 19^8-19^-9o

Market

Range

Average

Length of Route Indianapolis Fort Wayne Gary Frankfort

6-44. miles 15-40 miles 8-60 miles 8 -1 5 miles

25 22 29 13

miles miles miles miles

1 0 -4 2 24 *3 9 34-50 I0 -2 6

25 31 42 21

customers customers customers customers

Number of Customers Indianapolis Fort Wayne Gary Frankfort

customers customers customers customers

Packages Delivered Indianapolis Fort Wayne Gary Frankfort

62O-I896 6 0 0 -2 7 7 6 60O- 720 12 00 -lo00

packages packages packages packages

1105 1585 660 1400

packages packages packages packages

10

THE DELIVERY OP MILK

Theoretical Analysis of the Delivery Operation While the empirical sections of this study are con­ cerned with the delivery of milk, the management of a dairy must also consider the cost of materials, production costs (in the case of a dairy the cost of processing and bottling milk), and the competitive situation of the market in which he sells, before reaching a final decision upon the de­ livery operation*

A brief theoretical discussion of the

position of the individual firm and its costs with special emphasis on delivery costs, and of the competitive situa­ tion in the markets, should help in viewing the influence of these factors in their proper perspective» Analysis of the Firm and Costs The management of a dairy, like the management of any firm, seeks to operate in such a manner as to maximize profits*

Profits are maximized at the scale of operation

at whi ch marginal

cost is equal to marginal revenue*!/

The marginal and average cost curves of an individual dairy follow the general characteristics of the cost curves

2/

Discussion and clarification of this point may be found in any one of a number of basic economic texts• See, for example, K. E. Boulding, Economic Analysis, Revised Edition, Harper & Brothers, New York, 19^8 > pT 528*

11

usually found in economic analysis»

The average cost curve

at first falls, then levels off and eventually rises, being cut at its lowest point by the rising marginal cost curve* In the case of a dairy, the average unit cost will fall as the volume of milk handled increases, and machines, build­ ings and labor are more fully utilized»^/ ever, an optimum point will be reached,

Eventually, how­

after which average

costs will begin to move upward.

Breakdowns from overloaded

equipment, overtime pay to labor,

and increased waste are

among the factors contributing to the rise.

Average costs

will finally reach a point at which the management will no longer find it profitable to increase the volume of milk handled, or will choose to make an addition to plant,

re­

sulting in a new set of cost curves* The problem is made more complex to the management of a dairy by the fact that there are actually two different sets of costs to consider : livery

c o s t s *2/

the processing costs and de­

The "plant” with which processing costs

8/ Some recent studies suggest that the curve of average processing cost of a milk plant may level off or con­ tinue to decline slightly up to 100% of capacity rather than turn upward. The Connecticut study. Economies of Scale in Specialized Pasteurizing and Bottling Plants, Tstôrrs Agricultural Experiment Station Bulletin 259 $ June 19^-8) considering plants of less than [(.800 quarts per day capacity, showed the average cost curve of processing to decline over the entire range* It was further indicated that "».*evidence suggests that the decline in costs continues in volume ranges beyond the range covered in the study*” Other studies have shown that excess capacity is common in the dairy industry* 2/ Delivery cost also includes a large part of the selling cost, as will be explained later in this section*

12

are concerned consists of coolers, machines, buildings,

etc.

storage tanks, bottling

With a given amount of labor,

any quantity of milk from one quart to the physical limit of the plant may be processed in a single day, unit costs varying with the amount (Figure !)•

The delivery "plant",

on the other hand, consists mainly of delivery trucks, each of which may be used to deliver from one quart of milk to the physical capacity of the truck,

A dairy may make a

number of additions to delivery plant before one addition is necessary to the processing plant.12/ Hypothetical average cost curves for each of a number of individual delivery routes are shown in Figure 2.

Aver­

age cost falls and reaches a minimum as truck and driver are used at optimum efficiency (point M), then rises as overloading causes increased depreciation, overtime pay, etc.11/

When the lowest unit cost is reached on a given

route (point M on ACRq), the management must decide whether

10/ Empirical studies have shown delivery costs to be con­ siderably higher than processing costs. In the New York study (Legislative Document I4.6 , 194-9» State of New York), average delivery costs at different dairies ranged from about 3 -1/ 2/ to 6-1/ 2/ per quart as com­ pared to average processing costs of 2-1/ 2/ to 3/ per quart. 11/ That average costs for individual routes follow this general pattern is borne out by actual studies. For example, a study by Perry of Maine, (Maine Agricultural Experiment Bulletin 451» July 1947» Costs of Distribut­ ing Milk in Maine Markets), showed delivery costs per quart to average ^>,2/ per quart on routes of less than 150 quarts per day, and 2 ,4 / per quart on routes over 450 quarts per day.

Unit Coat

AC

Volume FIGURE 1,

HYPOTHETICAL CURVE OF AVERAGE COSTS FOR A DAIRY,

ACR.

Unit Coat

Volume FIGURE 2#

HYPOTHETICAL CURVES OF AVERAGE COSTS FOR MILE DELIVERY ROUTES

i4 to extend the route into the rising section of the curve, or to add another route (ACRg).

Delivery is being carried

out most efficiently when each route at the dairy is operat­ ing at point M.

Any point to the right or left of this

means delivery at a higher unit cost.

The number of routes

will depend upon the most profitable volume of operation considering both delivery and processing costs• The curve of average delivery cost, ADC in Figure 3# shows the delivery costs of a dairy operating a given number of routes, each at its most efficient point.

Delivery costs

fall as the volume of delivery (in this case dependent upon the number of routes) increases, due to certain internal economies.

Management and supervisory expense is spread

over a larger volume; better management can be hired, so forth.

and

Eventually, however, unit delivery costs again

begin to rise as the organization becomes too large for proper supervision, waste increases, and markets are ex­ tended to areas of less dense population.

Curve ADC will

be at its lowest level when each route is operated at the most efficient point (M in Figure 2), and will move upward (ADC^) as individual routes are operated at a volume greater or less than optimum* In determining the ultimate scale of operation, the management is concerned with total costs.

Thus processing

and delivery costs (including any other selling and admin­ istrative expenses) must be considered together.

The

Unit Coat

Volume FIGURE 3,

HYPOTHETICAL CURVES OF AVERAGE DELIVERY COST FOR A DAIRY,

Ubit Coat

ATC

Volume FIGURE A,

HYPOTHETICAL AVERAGE TOTAL COST CURVE FOR A DAIRY,

16

volume at which either of these two operations will be carried on cannot be determined independently of the other* Total cost is obtained by addition of the processing cost

12/

and the delivery cost (Figure Ij.)^

This curve, along with

its related marginal cost curve, are the curves to which the management of a dairy must pay particular attention if the dairy is to be operated at the point of highest returns# The minimum point on this average cost curve may not be at the same volume as the minimum point on either the cost of delivery curve or the cost of processing curve#

It must,

however, lie somewhere between the minima of these two curves*

For the average total cost curve (Figure lj_) to be

the lowest possible average total cost curve,

each indi­

vidual delivery route must be operated at its most efficient point (M in Figure 2)* The management of a dairy, then, must not only adjust total volume in such a manner as to obtain maximum returns ; it must also attempt to operate each delivery route at its point of highest efficiency in order to assure minimum costs* The Type of Competition The local markets for fluid milk possess certain

12/ The cost of the raw product must, of course, also be included* But since in most fluid markets the raw product cost to any individual distributor is uniform regardless of the quantity taken, it can be left out here without affecting the analysis#

17

general characteristics which are influencial in determining the type of competition existing in the market• le

The nature of the product is such that markets are

fairly well isolated, though there is some connection be­ tween markets around the fringes and, to a certain extent, due to the effect of competition between non-perishable dairy products and fluid milk. 2.

The actual quality of the different brands of fluid

milk sold is quite uniform.

Only a trademark separates one

brand from another. 3*

There are a comparatively small number of distribu­

tors in a market, and often two or three of these control a large share of the business in the market* 4-e

Federal milk marketing orders and producer-dealer

agreements usually result in uniform class prices being paid for milk by the various processors.

Some of the wage

rates paid by distributors are uniform due to union con­ tracts or custom.

This lends a large degree of inflexi­

bility to cost curves of individual dairies.

Costs of the

various dairies are likely to be quite similar except for economies of scale and superior management. 5»

In most markets, fairly strong dealer organiza­

tions exist which exert some influence upon the type of competition. It is not the purpose of this study to enter into a full discussion of all the aspects of the competition

18

existing in local milk markets# tition, however,

One result of this compe­

is obvious and of great importance to the

cost of the delivery of milk.

Generally, there is little

or no price competition in local markets for fluid milk, and this price uniformity often extends to other products sold from the milk truck#

When the price of milk to con­

sumers changes, these changes usually occur almost simul­ taneously at all dairies in the market#

Existing theories

of monopolistic competition explain how this can come about with no agreement or collusion on the part of distribu­ tors*^/

13/ Chamberlain1s analysis of ”The Small Group: Oligopoly Plus Product Differentiation,” (The Theory of Monopo­ listic Competition, 5th edition. Harvard University Press, Cambridge, 194-6, pp# 100 ff, ) offers an ex­ planation which appears to approximate the situation in many local milk markets# The condition is considered of a market in which there are only a few sellers, each fully aware of his influence upon the actions of his competitors# dd 1 is the demand curve for the product of the individual seller, show­ ing the increased sales he will enjoy if he alone lowers his price# D D 1, however, shows the effect of a lowered price by all sellers in the market when they retaliate to the lowering of price by any one individual. PP 1 is the average cost curve of each firm# ”If each sought to maximize his profit, with regard to his influence, direct and indirect, upon the situation, the price BQ,, yielding the maximum total profit to all, would be set To be sure, any individual could, by reduc­ ing his price from this point, secure larger profits

'I

19

With a uniform selling price, and uniform quality of the product due to health ordinances and regulations,

the

main competitive efforts which firms can undertake are the selling of services♦

Only a comparatively small amount of

newspaper, magazine and radio advertising is done in local milk markets*

The main sales effort on the part of dairies

falls on the route salesman*

Although the different brands

of milk are of about the same quality and sell for the same price,

the attempt is made to win customers and keep them by

superior service*

This service includes the personality of

the routernan, special service he renders customers, loaning of additional equipment and various extra inducements to wholesale customers,

and other i t e m s * ^ /

as indicated b y the demand curve dd* , provided the others did not follow suit* But since their own losses by his action would be considerable, the pro­ vision does not hold. Each would, therefore, hold his price BQ because the ultimate consequences of his doing anything else would be less advantageous•,f Thus if each dealer had complete knowledge of his rivals actions, he would not lower his price be­ low the point Q, for to do so would be to decrease his profits. The result is a uniform price for milk throughout the market, without the necessity of any kind of agreement on the part of the industry• Monopoly profits might or might not exist, depending upon the relationship of the price to the average cost curve, Under this analysis, it is possible for very small firms to undersell the market without invoking retaliation because of the insignificance of their sales as compared to the total sales of the market* ill/

Considerable discussion of this practice and its im­ plications is included in Monograph 1, Investigation of Concentration of Economic Power, (Temporary National Economic Committee, U. S. Government Printing

20

All of the sales effort exerted does not go merely to alter the distribution of sales anong dairies.

Some

actually increases the total consumption of milk in the market*

Promotional efforts of organizations such as the

Dairy Council and the American Dairy Association have just such a purpose,

and advertising by individual companies also

sometimes leads to an increase in the total consumption of milk.

To the extent that this is true, all dairies in the

market stand to gain from the selling efforts of any one. Similarly, milk is subject to the competition of all other foods,

and to some extent, of all other items competing for

the consumer’s dollar. The delivery of milk, then,

in the existing type of

competitive market is tied to the selling of milk»

Selling

costs and delivery costs cannot be separated, for the salary of the routeman is partially a reward for delivering and partially a reward for selling,1^/

No true allocation of

the two can be made.

Office, 194.0) * The point is made that while price is a universal measure and the significance of a price differential is readily understood, the appraisal of difference in content or quality, or the ’’translation of collateral terms of sale into price equivalents” is much more difficult for the average consumer. Another consideration is that a service differential is some­ times preferred by sellers as compared to a price dif­ ferential because it is more permanent. A price advan­ tage can be lost, but a service advantage is more difficult to overcome. 15/ In actuality, the average cost curve in Figure 4- above, is really a curve of both production (processing and delivery) costs and selling costs. In the Theory of

21

Because of this selling cost, the cost of delivering milk is materially increased above that which would be necessary to provide for the mere transportation of milk from the plant to the consumer or retail outlet *

Yet the

individual dairies, given uniform selling prices and qual­ ity of product, have only the choice of continuing these selling expenses as long as competitors do the same, or of losing businesso The cost of these services must ultimately result in higher marketing margins*

The consumer is faced with a

given price, regardless of how much or how little of the available service he wishes to purchase *

He does not have

the choice of foregoing the service and paying a lower price for milk. The Job of Delivery Retail Delivery The retail delivery of milk is a rather complex opera­ tion requiring a number of different talents on the part of the routeman*

He begins in the morning, usually between

5 a*m. and 7 a.m., by getting his truck from its parking

Monopolistic Competition, Chamberlain states : *'Cost of production includes all expenses which must be met in order to provide the commodity or service, transport it to the buyer, and put it in his hands ready to satisfy his wants. Cost of selling includes all outlays made in order to secure demand, or a market for the product. The former costs create utilities in order that demands may be satisfied; the latter create and shift the demands themselves.”

22

place and driving to the point where loading begins*

Some­

times the interior of the truck is swept or washed down with a hose.

The truck must be loaded,

if the weather is warm*

checked, and iced

The routeman is then ready to begin

his day's work of delivery. When out on the route away from the dairy, the route­ man becomes a combination truck driver,

delivery-man,

sales­

man, bookkeeper, collection agent and symbol of good will* He may drive between 5 and 100 miles a day over all kinds of roads, finding his way where there are neither street signs nor house numbers.

He will carry milk to the door of from

75 to 350 customers, and return

to the truck

with empty bottles.

record of the quantity and

He keeps a

as many times

value of the delivery to each customer on his route,

col­

lects from those who want to pay, and tries to convince those who do not want to pay that they should give him at least a dollar on account.

He may call on one or a dozen

prospective new customers, and he may spend fifteen minutes trying to keep a dissatisfied customer from quitting*

He

will be asked for rides in his truck or for a piece of ice to eat by innumerable children,

be

barked atby innumerable

dogs, and be expected to listen

to the cares

and happinesses

of innumerable housewives. Sometime between noon and 5 p.m., depending on the route, the day and other variables, turn to the dairy.

the routeman will re­

He then unloads his truck,

turns in the

23

milk he has not sold, and returns the truck to its parking place*

In the dairy office he turns in anywhere from a

few cents to hundreds of dollars he has collected that day, makes out a report of his dayfe business,

sometimes

must spend as much as an hour finding mistakes in his accounts, and finally estimates the amount of milk he will require for the next day's route. Wholesale Delivery The wholesale route is in some respects different and in some respects similar to the retail route*

The driver

may arrive at the dairy as early as 3 :3 0 a*m* to load his truck,

and will usually leave the dairy for his route

earlier than retail drivers*

The loading operation is more

strenuous, because a wholesale route may deliver from two to four times the load of a retail route•

Occasionally,

wholesale trucks are preloaded for the driver before he arrives® The wholesale route will usually serve between 10 and 50 customers, over nearly any distance up to 100 miles* Some wholesale customers leave it entirely up to the route­ man as to how much milk to leave each day, so the route­ man must be familiar with the manner in which milk moves, especially over holidays, forth.

changes in the weather, and so

The routeman is nearly always required to carry

the milk into the store or restaurant, and in many cases to place the milk, often bottle by bottle, into the cooler

24

or display case*

He makes out a bill for each, customer,

and presents it for collection or charge•

He collects all

the empty bottles and cases he can find, sometimes an arduous task, for they may be scattered over a considerable area*

Wholesale men also must listen to customer com­

plaints and troubles, be as sympathetic as possible,

and

agree or keep quiet during tirades against taxes, politi­ cians and the monopolistic action of the milk industry. At the completion of his route, between 10 a.m. and 5 p.m., he returns to the dairy and there goes through the same process as the retail routeman* Types of Retail Routes The retail routes studied may be divided into four types depending largely upon the type of customers and areas they served. 1»

City routes A* B.

2*

Apartment routes Suitcase routes

Residential routes A* B.

Medium rent routes High rent routes



Fringe routes

4*

Rural routes

City routes were generally quite short in length, often less than 10 miles, traffic was heavy.

but operated in areas where

Apartment routes usually served the

medium and higher income groups.

Deliveries per customer

25

were usually small since many apartment dwellers had no children and often both husband and wife worked. tions were made by the week or month.

Collec­

Many apartment stops

were "bottle out" stops, where the customer left out the number of bottles she wanted delivered.

Suitcase routes

were so designated by routemen because they served low rent tenements and rooming houses where customers moved often, and lived "out of a suitcase."

Quantity delivered per cus­

tomer was usually small, and collections were made daily or weekly because of the large turnover in customers. In the markets studied, made

the

bulk of the deliveries were

to residential districts ofone type or another.

In

the medium rent districts, houses were fairly close to the street and deliveries were often made to the front door. The quantity delivered varied from one quart to 12 quarts per stop.

Payment was made by the week or month, usually

in cash to the routeman.

On this type of route, the route­

man was often very familiar with most of his customers.

In

the high rent districts, the distance the driver had to walk from the truck was sometimes as much as 300 feet, and most

deliveries were made to the back door.

Volume per

delivery was about the same as in the medium rent districts, but more butter and eggs were sold. by the month, dairy.

Payment was usually

in many cases by check mailed directly to the

Often the routeman did all nis contact work with a

cook or maid, and seldom saw the lady of the house.

Fringe routes were those serving the perimeter of the city.

They included some very low rent shacks and shanties

and some new housing developments. were often very bad.

Roads on fringe routes

Some customers were bad pay risks,

and collections had to be made often.

In colored districts

customers were good pay risks if collections were made reg­ ularly on pay day or the day following, but only then. Fringe routes usually required a good deal of driving. Rural routes included delivery to farms, small vil­ lages and houses in rural areas.

These routes required

the most driving of all, sometimes as much as 80 or 90 mile a day.

Roads were often not the best.

Types of Wholesale Routes There were three general types of wholesale routes: 1.

Downtown routes

2.

Perimeter routes

3.

Rural routes

Downtown routes served mostly restaurants and drug stores in the business districts of the city.

Trucks

usually left the dairy early to avoid traffic, and also re­ turned early. of time.

Even so, traffic delays took a large amount

Parking was often a problem where police regula­

tions were strict against double parking. Perimeter routes served the grocery shopping centers around the perimeter of the cities, including supermarkets, grocery stores, and some eating places.

These routes did

27

the bulk of the wholesale business. Rural wholesale routes served areas similar to rural retail routes. Mixed Routes It was sometimes the practice to include some whole­ sale stops on a retail route.

This was especially the case

if only one or two groceries or restaurants were located in the area of a retail route, but where no wholesale route passed.

Many rural routes were of a mixed variety#

Milkmen Perform Many Services Retail and wholesale customers, especially the latter, received a considerable number of services from their milk­ men in addition to the mere delivery of the product#

Both

retail and wholesale sales were often on a credit basis, payment being made weekly or even monthly.

At any given

time, a route had hundreds of dollars in accounts outW standing, and the extension of such credit is costly. The retail routeman performed such services as carry­ ing a house key and placing the milk in the refrigerator for customers who were away, or packing the bottle with a little ice from his truck if the milk had to stand outside. Routemen have been called on upon occasion for such mis­ cellaneous items as putting food out for the dog, helping l6/ In actuality, this cost is partly borne by the farmer as dairies usually pay farmers for milk only every two weeks or once a month.

28

with storm windows, and taking in the housewife's wash if it looked like rain» Wholesale customers received a considerably larger amount of service than did most retail customers»

Tne

wholesale routemen sfudjed spent over 12 % of their total working time extending special services to customers. included putting milk in coolers and display cases,

This

in some

cases cleaning out coolers, and various other services,, Customers paid the same price for milk whether all or none of these services were recei ved@ To hire route salesmen who will do all these odds and ends cheerfully and maintain customer goodwill, costs much more than to hire a man who does nothing more than drive a truck and carry milk to a door»

Yet to meet the competi­

tion, dairies feel they must hire the higher priced type of routeman,

and higher marketing margins result»

Frequency of Delivery All of the markets studied were operating under either every other day delivery or three day a week retail de­ livery.

All Indianapolis dairies had been on three day de­

livery since October 194-8.

Dairies in Gary had been on

three day delivery for an even longer period.

Some dairies

in Fort Wayne had operated three day a week delivery since

1947,

while others were still continuing every other day

delivery at the time the study was made. dairies delivered every other day *

Both Frankfort

29

Three day delivery appears well established in the Indianapolis and Gary markets*

How long Port Wayne will

remain under the present situation cannot be said.

It is

doubtful that every day delivery will ever return to any of the markets studied.

The additional cost would add at

least 2 or 3 cents per quart to the cost of milk. Three day delivery as compared to every other day means that the milk formerly delivered in seven days is delivered in six.

Trucks, then, travel only about six-

sevenths of their former distance during a week.

A saving

in delivery personnel has also been attained in some Port Wayne dairies, since it was not necessary to keep as many routemen to run routes on days off. however,

In Indianapolis,

the additional routemen have been retained and

routemen got an extra two days off every two or three weeks depending on the dairy. days a week.

In Gary, routemen worked only five

There also has been considerable saving at

the plant from three day delivery, as the only labor neces­ sary at the plant on Sunday was two or three men to receive milk.

Indianapolis dairies reported a monthly saving in

gasoline of over 6% for November 1948, as compared to September when every other day delivery was still in effect. Under three day delivery, Friday and Saturday loads are large as compared to the rest of the week (Table 3)» Nearly all wholesale customers received delivery six times per week.

Some which used only limited quantities

30

instructed the routeman to stop only every other day.

A

few stops needed so much milk over weekends that special arrangements were made for Sunday delivery*

Some stops had

limited storage space, and required such a large quantity of milk, that the routeman stopped in the morning and again in the afternoon, leaving milk both times•

Table 3»

Daily Loads as Percentages of Average Daily Loads, Three Day and Every Other Day Delivery, 10 Indianapolis Dairies, 1 % 8 . * Daily Load as Percent of Average Daily Load Every Other Day Three Day

Day Monday Tuesday Wednesday Thursday Friday Saturday Sunday

100 98 76 100 101 109 95

96 91 06 90 119 120

Information from Indianapolis Milk Foundation*

Split Stops Are Costly One factor threatening three day or every other day delivery on retail routes, and one which increased the cost of wholesale delivery, was the split stop. Some retail customers, desiring delivery every day, took milk from two dairies, each of which had a truck passing the customer1s house on alternate days*

It is

impossible to judge how widespread this practice was, but it did exist to some extent In all markets studied*

If

31

such a practice becomes general, it will defeat the purpose of every other day delivery; that of reducing delivery cost. Many stores and supermarkets carried two or three dif­ ferent brands of fluid milk for their customer1s choice* This resulted in a duplication of delivery and accounting services which did not make for the most efficient delivery of milk*

It is questionable as to whether such a practice

is necessary to increase the sale of milk* The Ideal Routeman Dairy operators and sales managers hold the opinion that the routeman is the heart and soul of their entire sales effort.

They desire their routemen to attain certain

standards of personality and action,

and they are willing

to pay well for men who can measure up to those standards• Actually, the sales effort of the routeman is of an extremely low pressure character, cessful*

if it is to be most suc­

It does not consist of a fast line of talk, or

the type of Insistence found in some types of sales work. Rather, it is made up of every action of the routeman while he is in view of the public* The ideal routeman is expected to be a man who dresses neatly and cleanly while on the job, is cleanly shaven, and gives a general appearance of health and well-being. has a pleasing,

"folksy" personality,

He

jokes with customers

who wish to be joked with, and remains quiet with those who

32

prefer qui et service.

Realizing he may be constantly under

the eye of some customer or prospective customer, he must be careful not to cut across lawns, not to talk to customers with a cigarette hanging out of his mouth, not to appear too familiar with women customers, to love children, and to per­ form such little services as placing the morning paper on the porch beside the milk, moving children* s tricycles from the sidewalk onto the grass, etc. The ideal routeman must also be one who is convinced that his product is the best in the city, or even the world, yet never criticizes the product of a competitor.

He must

be friendly even to those who are not his customers, always with the hope they may someday switch to him.

He should

be punctual, so that customers may know exactly what time to expect him each day.

His main effort must always be

to have as many people as possible aware of the fact that he desires to give them excellent and courteous service, so that if anyone becomes dissatisfied with her present milk­ man, she will think first of him. Of course, few milkmen live up to all these require­ ments, but this is the goal at which dairy operators are aiming with respect to their own routemen. are not found among the majority of workers,

Such qualities and this is

the reason some routemen have been making salaries of ^5000 and more per year during the past few years. Generally speaking,

a little less sales ability is

33

required

of

whole sale routemen than of retail routemen*

Wholesale routemen meet fewer customers.

The work of

getting new wholesale stops is often handled by plant sales­ men instead of the drivers themselves.

It appears that

some dairies put their less effective salesmen on wholesale routes rather than retail routes•

Nevertheless, service

and salesmanship are both necessary on wholesale routes, and most dairy operators would desire much the same quali­ ties in both types of routemen.

Summary !•

A study of delivery costs alone does not tell the

management of a dairy how far the delivery operation can profitably be carried.

Consideration must be given to the

total cost of the delivered product, and to the revenue returning from its sales. 2«

The physical inputs necessary for various incre­

ments of delivery are important to the management of a dairy in determining the points of optimum operation* 3* petition,

Sales and service competition, but not price com­ are characteristic of local milk markets.

This

type of competition depends largely upon the selling personality of the routeman, and upon extra services pro­ vided by the dairy.

The services provided wholesale cus­

tomers are greater than those provided retail customers * All of these services are costly, and must eventually

3b

manifest themselves in higher marketing margins* b.

Split stops offer a threat to every other day

delivery and three day delivery on retail routes•

They

increase the cost of both retail and wholesale milk de­ livery*

LABOR TIMES ON RETAIL ROUTES

Times of Individual Operations Detailed time studies were made on each of the 50 re­ tail routes s tudied.^/

For purposes of analysis,

these

routes were broken down into 19 separate operations,

and

average times computed for each of these operations These operations were found to vary in importance from less than one percent to more than 20% of the total route time (Table ip) « Time Getting and Returning Truck Less at Small Dairies At most dairies it was necessary to get the truck from its parking place and drive it to the loading platform,

and

to return it to the parking place after the day's work was completed*

The time for this operation averaged slightly

over 2 minutes per day at the small dairies, as compared to about 5 minutes per day at the large and medium-si zed dairie s At the larger dairies, more parking space was required and thus the garage was often a greater distance from the loading platform than at the smaller dairies*

In addition.

17/ See Appendix B, Table 3® 18/ For a description of each operation,

see Appendix A®

19/ See Appendix A for definition of "large", "medium-sized and "small" dairies®

36

Table ij_.

Operations Included in a Retail Milk Route, and Their Relative Importance, 50 Indiana Retail Milk Routes 1948-194-9» Average Time Minutes

Operation 1* 2. 3» 4* 5o o* 7« 8o 9. 10* 11* 12* 13. 14* 15» lo. 17* 18© 19*

Get, return and check truck Wait to load and unload Load and unload Drive to and from route Drive between stops Walk to door with milk Return to truck Collect Sell Customer service Fill carrier Rearrange load Bookkeep on route Run books and turn in money Miscellaneous Personal time Wholesale stops Ice load (summer only) Mark customer cards (Indianapolis only)

Average Percent of Total Route Time*

4.1 1 1 .5 1 7 .0 1 9 .8 9 6 .3 68.8 4-8.1 29.9 17.0 2.7 16.5 14.3 22.0 21.8 9.6 2 8 ,0 1 3 .8 10.8

0*9 2*5 3 .8 4 .5 2 1 .5 1 4 .9 1 9 .3 6 .3 3 .7 0 .6 3 .5 2 .4 4 .7 4-9 2 .1 6 .2 3 .0 1 .1

1 8 .4

3.9

* Will not total 100% as items 18 and 19 did not occur on all routes•

some of the larger dairies required that routemen make out a brief check sheet on the condition of the truck after each day's driving.

This was a desirable practice, taking

not more than one minute of the routeman1s time on the average û Waiting to Load and Unload Less at Smaller Dairies At the large and medium-sized dairies, the time waiting to load and unload averaged nearly 18 minutes per route, and

37

on some individual routes was over 45 minutes*

In contrast

to this, such waiting time was negligible at the small dairies (Table 5)• Table 5«

Average Time Waiting to Load and Unload Trucks 50 Indiana Retail Milk Routes, 194^-1949• Time Waiting to Load and Unload, Min Range Average

Dairy Large Dairies Dairy A Dairy B

6.6-33.2 0.0-15.5

23.5 7.5

Medium-sized Dairies Dairy C Dairy D Dairy E Dairy F

22.2-47.9 6.0-49.5 0 .0 -2 0 .8 0 .8 -1 8 .1

38.4 2 1 .2 8 .1 7.2

—*— 0 .0 -3 .8

0 1.5 0 0 0

Small Dairies Dairy G Dairy H Dairy J Dairy K Dairy L

— — —

~ ~

It was necessary for routemen to wait to load and un­ load because there were more wishing to perform those functions at a given time than there were facilities*

In

the morning, most retail trucks were loaded over a period of from one to 2 hours*

None of the larger dairies had

provisions for loading more than 3 trucks at a time, though a total of from 45 to 90 trucks was loaded at each* In the afternoon, most of the trucks returned to the dairy between 2 and 4 o*clock, and at none of the

38

larger dairies could more than ij_ trucks unload at one time® At the smaller dairies,

those with less than 10 routes,

time waiting to load and unload was negligible, because there were few trucks to load and unload* At dairies A, C and D, the average time waiting to load and unload was over three times that of dairies B, E and F, though the dairies were of comparable size.

The lower times

resulted mainly because some measure of success had been obtained in having routemen arrive at the dairy in the morn­ ing on a staggered schedule.

Thus when each arrived, it

was only a short time until facilities were available for him to load.

Routemen at these dairies also returned to

the dairy in the afternoon in a more scattered fashion* Such scheduling can never be completely successful so as to reduce waiting time to zero, but it can have considerable effect.

Ûsyyct.

Supervision of the loadingAunloading operations by

route supervisors can also do much to reduce unnecessary de­ lays by keeping the trucks moving in an orderly manner, and making immediate use of available loading or unloading stations.

This was especially noticeable at dairies B and

F where route supervisors were on duty during most of the loading and unloading operation,

ironing out delays and

speeding up the operations* With proper organization and supervision, there appears no reason why time waiting to load and unload cannot be reduced to, at most, 10 minutes in medium-sized and large

39

dairies.

In small dairies, only an occasional minute or

two need be wasted in such delays• Loading and Unloading Time Averaged 17 Minutes The loading time of the routes studied averaged 9 minutes, and the unloading time 8 minutes, for a total of 17 minuteso

(Table 6).

Differences in methods were respon­

sible for some of the variation among dairies of different si zes