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Group Title: Staff report
Title: Dairy delivery case losses in Florida
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Permanent Link: http://ufdc.ufl.edu/UF00094235/00001
 Material Information
Title: Dairy delivery case losses in Florida costs and controls : executive summary
Alternate Title: Staff report - Florida Agricultural Market Research Center
Physical Description: 7 leaves : ; 28 cm.
Language: English
Creator: Mathis, Kary, 1936-
Degner, Robert L.
Florida Agricultural Market Research Center
Donor: unknown ( endowment )
Publisher: Florida Agricultural Market Research Center, Institute of Food and Agricultural Sciences, University of Florida
Place of Publication: Gainesville, Fla.
Publication Date: 1977
Copyright Date: 1977
 Subjects
Subject: Dairying -- Costs -- Florida   ( lcsh )
Crates -- Costs -- Florida   ( lcsh )
Genre: government publication (state, provincial, terriorial, dependent)   ( marcgt )
non-fiction   ( marcgt )
 Notes
Statement of Responsibility: prepared by Kary Mathis and Robert L. Degner.
General Note: "A preliminary report to the Florida Dairy Products Association, Inc., presented at the FDPA Annual Convention, Palm Beach, Florida, June 21-23, 1977."
 Record Information
Bibliographic ID: UF00094235
Volume ID: VID00001
Source Institution: University of Florida
Holding Location: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: oclc - 362957181

Table of Contents
    Front Cover
        Page i
    Main
        Page ii
        Page 1
        Page 2
        Page 3
        Page 4
        Page 5
        Page 6
        Page 7
        Page 8
        Page 9
        Page 10
        Page 11
Full Text

ii `t


Staff Re


C


AGRICULTURAL MARKET RESEARCH CENTER
FOOD AND RESOURCE ECONOMICS DEPARTMENT
Institute of Food and Agricultural Sciences
University of Florida
Gainesville, Florida 32611


NOV 10 1977
IYFAS Uiv. ot Florid
ort .. .. .


pit







A Preliminary Report
to the
Florida Dairy Products Association, Inc.
Presented at the FDPA Annual Convention
Palm Beach, Florida


June 21-23, 1977







EXECUTIVE SUMMARY


Dairy Delivery Case Losses in Florida:

Costs and Controls
























Prepared by

Kary Mathis and Robert L. Degner
Florida Agricultural Market Research Center
Institute of Food and Agricultural Sciences
University of Florida
Gainesville












I. Introduction


A. The Florida Dairy Products Association requested the Agricultural
Market Research Center to identify and evaluate measures to
reduce losses and improve reuse of milk delivery cases. Specific
objectives were to:

1. Determine the extent of delivery case losses, and estimate
costs of these to processors and retailers.
2. Identify feasible and acceptable measures to reduce case
losses, and estimate costs of implementing these measures.
3. Determine retailers' and other users' practices and problems
with delivery cases, and their reactions to possible control
measures.

B. Procedures

1. Executives in 36 dairy plants operated by 34 firms, and executives
in 16 retail organizations were personally interviewed.
2. Dairy product association representatives and processors in
8 other states were contacted by telephone.
3. Executives in 4 soft drink, 2 egg marketing, and 9 case
manufacturing firms were interviewed by telephone.
4. The president of the Florida Dairy Carton Case Exchange was
personally interviewed.

II. Findings

A. Case usage in Florida

1. About 75% of all cases used in the state are plastic. Some
dairies use wire exclusively.
2. Florida dairy case purchases in 1976: 519,000, $1.3 million
total; 87% plastic.
3. Dairies were classified by annual volume, expressed in cases
of fluid product:

Size Volume (cases) No. firms

Large Over 2,750,000 10
Medium 1,000,000 2,749,999 13
Small Under 1,000,000 11

4. Processors purchased an average of 8.8 cases per 1,000 cases
of product volume in 1976. Case purchases varied considerably
by firm size, with a wide range within each size class (table
1).








5. Total case requirements (float) reported by firms varied
from 1.5 to 7.5 cases per case of product.
6. Dairies must discard an average of one case per 1,000 cases
of product volume or an average of 35 cases per firm per
week. Total cost of cases discarded was about $170,000 in
1976.

B. Case losses and where they occur

1. Case losses cost Florida dairy processors $1,329,720 in 1976
(table 2). This includes new cases, and other costs such as
plant downtime and other inefficiences resulting from missing
cases. This is an average of $39,109 per firm, or $21.18
per 1,000 cases of product, and 0.53t per gallon (table 3).
2. Half the processors interviewed feel their case losses
are "extremely serious" and another 35% view case losses
"serious". All the large firms and 11 of the 13 medium-
sized firms described their case losses as extremely
serious or serious, as did 8 of 11 small firms.
3. All or a majority of processors in all areas of the state
considered case losses serious or extremely serious.
4. Dairy executives felt most losses were from stacks of
empty cases behind supermarkets. While supermarkets handle
about 50% of milk volume, processors felt that 70% of
losses took place from outside storage there. Other types
of outlets were thought to account for less case losses
than their proportionate volume.
5. Processors interviewed rated other dairies as most likely
to make unauthorized use of their cases, followed by pro-
duce merchants, supermarkets, other food processors and
independent groceries (table 4).

C. Internal control measures

1. ea rated 7 control measures internal to dairy firms
or used within the dairy processing industry: drivers'
case inventories, educational efforts with drivers aimed
at cutting case losses, driver incentive plans for retain-
ing or retrieving cases, case identification, membership
in the Florida Dairy Carton Case Exchange, incentive plans with
retailers, and warnings against misuse printed on cases.
The writ of replevin to recover cases was also evaluated.
2. Rated on a scale of 0 (extremely ineffective) to 9 (extremely
effective) driver inventories rated 5 or of some value,
and driver education rated almost as well. These two
measures were judged effective by about a third of the
processors interviewed, as was a driver incentive. The
remaining measures were rated significantly lower, and
judged relatively ineffective.





-3-


3. Only one plant of the 36 contacted uses a regular driver
incentive payment for case returns. None charge drivers
for cases taken out. Several Florida processors have used
driver charges or incentive payments in the past but have
discontinued them.
4. The Florida Dairy Carton Case Exchange was felt to be
effective in reducing case losses by 14% of processors
and to have some value by another 38%; 48% considered it
relatively ineffective. Case exchange charges of 30,per
case compare with 454-65t in Massachusetts, and 90t in
Chicago.
5. Retailers do not count or keep records of cases now, since
they have no reason to. No Florida dairies had used
retailer incentives, nor did processors feel they would
be effective.
6. Retailers were very critical of dairies for not picking
up cases often enough. About 44% of the retailers
interviewed said drivers do not pick up all empty cases
belonging to their firms when they make deliveries.
7. The writ of replevin, a civil remedy to recover property,
was judged inadequate by two thirds of the processors.
The writ is rarely used in Florida or other states.
Processors in central and south Florida were significantly
less pleased with it than processors in other areas of the
state.

D. Additional Control Measures

1. Mandatory case deposits: a mandatory deposit was the most
preferred option among processors, with an average rating
of 3.6. This option would probably be effective in re-
ducing case losses, as responsibility for security would
be placed on customers. Bottlers have had deposits for
many years, but they have also had considerable market
power.

Retailers, especially supermarkets, strongly dislike
mandatory deposits. Their average rating was 8.1.
Convenience stores, also disliked a deposit rating it
5.6 (table 5).

Costs are a major consideration to processors and retailers.
Costs to processors ranged from zero to $94,000 per firm
per year; the average was $20,500 per firm for an industry
total of nearly $700,000 (table 6). Deposits would cost retailers
approximately $65 per store per year (labor costs only),
for a state total of $487,500 annually. Processors and
retailers combined costs: $1,184,000. There would be
additional unknown enforcement costs which could be
substantial.








In those states with deposit systems, the major benefit
stems from improved case control by dairies. Florida
processors felt that the deposit, if adopted, should be
from 254 per case to the full vq.lule of cases. The average
was $1.11.
2. Voluntary deposit system: Virtually everyone was opposed
to a voluntary deposit system. Processors rated it 7.4,
retailers 8.3. Processors feel that competitive pressures
would make the system infeasible. Retailers oppose any
type of a deposit for obvious reasons, with more dislike
apparent for a voluntary deposit.
3. Universal Case Plan (UCP); A UCP offers greater efficiency
of case usage in markets where accounts are not loyal.
Processors and retailers both tended to dislike this option,
rating it 7.1 and 6.6, respectively. Both felt that it
would increase, not decrease case costs. One UCP is
currently functioning in Cincinnati, Ohio, but it has not
reduced case costs.
4. State Inspector: This measure may be used to discourage
unauthorized use by business firms at relatively low cost.
However, this alternative was unpopular among processors
and retailers. The primary complaint was "we have too
many inspectors already". Their ratings were 6.2 and 6.9,
respectively. Present sanitation inspectors should not
be used as policemen, according to some dairy representatives
in Florida and other states.
5. Warning signs: Signs could be used to inform the public
that taking cases is illegal. They could also be used
as part of a retailer PR effort to show seriousness of the
problem. Processors in Central Florida and the West Coast
generally approved, but those in all other areas tended
to dislike this possibility. The average rating was 5.8.
Dairy executives were pessimistic about effectiveness,
concerned about increasing losses by attracting attention
to cases and concerned about costs. Retailers generally
favored; their average rating was 3.6.
6. Fenced enclosures: Fenced enclosures are presently used
by some retailers, primarily for storage of soft drink
bottles. Enclosures may be feasible for high-loss
locations, but processors and retailers tended to dislike
this alternative. Their ratings: 5.4 and 5.8, respectively.
Processors and retailers concerns were cost, convenience
of use, maintenance, and sanitation.
7. Public relations: A PR effort to educate consumers as to
the increased costs of products they buy.as a result of
"missing" dairy cases, shopping carts, etc., was met with
general indifference by processors and convenience stores.
Their average ratings were 5.0 and 5.5, respectively.
Supermarkets were slightly favorable, rating it 3.7.
Processors feel that publicity might aggrevate the problem.
Experiences in other states have not been very encouraging
except for isolated instances.








8. Bulk delivery systems: Large rolling racks designed to
replace cases are presently used by a few firms, and studies
have shown them to be labor-saving. However, this approach
was especially disliked by processors and convenience
stores, rating it 7.5 and 7.6, respectively. Supermarkets
rated it 6.1. The primary reason for disliking bulk handling
is changover expense. Convenience stores' limited space
creates special problems.
9. Case redesign: Nesting or collapsible cases would facilitate
greater indoor storage and make transportation of cases
back to plants easier for drivers. Dairies were generally.
neutral on this possibility (rating: 4.9). Their interests
for such cases were tempered by pessimism. They felt
that such cases are a physical impossibility because of
abuses cases are subjected to, or that costs of cases and
handling equipment would be prohibitive. Retailers liked
the idea, rating it 3.1. Only a few case manufacturers
have worked on this problem recently. One developed collapsible
and nesting cases. Both types were more expensive, required
additional labor or machinery, and did not perform as well as
the standard case.

III. Recommendations

A. Improve Case Control

1. Basic accounting: Make sales department responsible for
cases rather than production department. Sales staff is
closer to the problem and can put pressure on personnel
responsible.
2. Keep accurate records of case purchases and discards. Most
firms have the information on purchases somewhere, but it
is rarely used. Only one firm of the 34 had kept records
of case discards.
3. Determine case life. Accurate costs per unit cannot be
determined without detailed knowledge of case life. If
acquisition dates are put on all cases, this information
alone with case purchases can be used to statistically
estimate case life to assist in making decisions of types
of cases to buy, etc.
4. Develop strict case inventory and accounting procedures:
Making drivers responsible for cases on a customer basis
has been one of the most effective measures discovered any-
where. Drivers will tend to return cases rather than let
them accumulate at stops. Further, if drivers know exactly
which customers are losing cases, they can frequently gain
more cooperation from stores. Cases must be carefully
accounted for, however, "estimates" will not work.
5. Develop improved case collection procedures: In addition
to close supervision, drivers need help too, particularly
those less experienced. Assist in establishing route








patterns to minimize case return problems. In urban areas
where high-volume supermarkets have tremendous stacks of
cases that cannot possibly be retrieved on Monday a special
case collection route may be feasible to collect empties
quickly, rather than expose them to damage and pilferage
for several days.
6. Consider one-way cases. One-way cases are presently too
expensive for general use. However, for certain types of
accounts, such as ports (ships) and airports where case
losses may be excessive, "expensive" one-way cases may be
the most economical.
7. Consider use of a case scout. One major midwest dairy
processor has recently hired a retired police detective to
assist in retrieving cases. The scout is employed full time
at an annual salary of $18,000 plus car and expenses. He
has retrieved enough cases in several months to justify his
salary. Most cases to date have been retrieved from other
dairies, although he looks for cases everywhere. His only
authority is company authorization backed by the states'
Writ of Replevin and occasional police protection. This
approach may be used where severe problems exist. However,
the economic effectiveness may diminish when other dairies
stop using each others' cases.
8. Consider "ugly" cases. Brightly colored cases, especially
plastic ones, apparently have aesthetic appeal to many
consumers for home use. While people who are primarily
concerned with the functional attributes of the case will
not be deterred from taking them, others may be.

B. Public Relations Effort with Customers

1. Develop a PR program directed at customers. Retailers,
particularly, are aware that cases are expensive; on the
average, retail stores executives estimated the value of
a plastic case to be $5.86 and the value of a wire case to
be $8.35. They do not realize how many are being lost at
their stores; however, once adequate loss records are
available on a store by store basis, a PR effort with re-
tailers will probably be effective.
2. Make personal visits to top management by top management,
armed with specific loss problems and specific requests for
cooperation.
3. Have route supervisors make personal visits to individual
problem stores, armed with specific loss data and requests.
Mentioning visits with top management to store people will
usually get their attention.

C. Legislative and regulatory measures

1. Consider revising the procedures for applying the writ of
replevin, to make the writ more easily applied and more
effective in recovering cases.








2. Develop the legal and administrative framework for a mandatory
deposit system, which could be implemented if judged necessary
by the dairy processing industry. Such a program would,
of course, require approval and enactment by the legislative
and administrative bodies of government. The need for and
workings of a deposit system for cases would also have to
be explained thoroughly to retailers and other customers.
3. Dairy processors plagued with continued and extensive unauthoriz-
ed use of cases by a particular firm or individual should
consider using legal measures currently available. The
writ of replevin, and registration under the state's trade-
mark law offer certain remedies.
4. Explore with the State Department of Agriculture and Consumer
Services the possibility of having inspection station personnel
check any trucks with empty cases for illegal interstate move-
ment. These inspection stations have been of great service to
Florida agriculture, so that many groups have requested assist-
ance from them. Adding functions may not always be possible.
But, this option could be investigated.

D. Changing Technology

1. Processors and retailers should investigate carefully and
consider using labor-saving methods such as bulk handling
systems for new plants and stores. These systems seem
to offer greater security for cases and dollies, as well.
2. Current bulk systems still use cases, and many retail outlets
will continue to need cases for dairy products. Florida
dairy processors should explore possible modifications or
new types of cases with manufacturers. Public agencies,
such as universities and the USDA, could also contribute
research and development for more efficient, less bulky or
one-way cases.

E. Ethics

1. If each dairy did everything possible to use only its qwn
cases, one source of loss would be reduced. Perhaps more
important, processors would no longer suspect each other of
heavy "borrowing". If substantial case loss still continued,
the true culprits could be more easily identified.
2. Improving case control measures on delivery routes would
include discouragement of drivers picking up other firms'
cases. Involving route delivery and supervisory personnel
in case control and recovery measures would help insure
cooperation and effectiveness.












Table l.--Case purchases relative to volume for the period of
1975-76 by firm size

Case purchases per
Size of Number 1,000 cases product
firm of firms Average Low High

Large 8 8.9 4.2 19.3

Medium 8 9.6 3.2 20.7

Small 5 7.3 4.5 10.9

Allb 21 8.8 3.2 20.7

alf two additional small firms are included, the average for the
remaining firms becomes 5.9 and the low figure becomes 1.5 cases.
These firms were excluded because their case purchases are not
typical of the majority of processors.
bAll 34 firms purchased cases during 1975-76, but 13 could not
supply sufficient data for analysis.


Table 2.--Estimated costs of case losses by size of firm, 1976

Size of Estimated losses
firm Average per firm State totals
----------------- dollars ---------------

Large 68,715 687,147

Medium 36,799 478,387

Small 14,926 164,186

Totals 39,109 1,329,720













Table 3.--Estimated costs of case losses as related to volume, by size
of firm, 1976

Average direct Average indirect Total Total
Size of firm costs costs costs costs

--------- dollars per 1000 cases---------- Cents per gal

Large 19.75 2.24 21.99 0.55

Medium 16.71 1.67 18.38 0.46

Small 23.09 6.66 29.75 0.74

Total 18.79b 2.39 21.18 0.53b

aDirect cost is the value of missing cases to each firm (weighted by
proportions and replacement costs of plastic and wire cases) less the
firm's estimates of discarded cases. This amount does not include
costs of the dairy case exchange program, which amounted to a total
of $21,000 for large firms, 29,728 for medium, and 11,189 for a grand
total of $61,917 for 1976.
Indirect costs include down time of processing plant, idle labor and
increased transportation costs.












Table 4.--Occupational and population groups suspected of
by processors, by area


unauthorized use of delivery cases


Group Northwest Northern Central West Coast South All areas

--------------------------- Mean ratings --------------------------

Other dairy processors 8.5 5.0 6.3 6.0 6.4 6.6
Produce merchants 2.9 6.2 4.7 6.3 4.8 4.9
Supermarkets 3.6 5.8 4.3 5.2 3.7 4.4
Other food processors 2.8 4.2 3.7 4.6 6.4 4.4
Independent groceries 3.1 4.8 3.7 5.0 4.7 4.3
Plumbers 2.6 5.8 6.0 5.1 3.9 4.2
Electricians 2.4 5.8 6.0 4.7 3.9 4.2
Commercial fishermen 3.7 3.8 4.5 4.8 4.0 4.1
Restaurants 2.6 5.0 3.7 4.2 4.7 3.9
Convenience stores 2.6 3.8 3.7 4.5 5.0 3.9
College students 2.9 2.2 4.0 4.7 3.8 3.5
Apartment dwellers 3.6 3.5 1.0 2.6 4.0 3.2
Water bottlers 1.5 4.8 5.0 3.3 2.4 3.0
Schools 3.5 2.8 1.7 3.2 3.0 3.0


aMean values are based on
likely.


a rating scale where 0 = extremely unlikely, and 9 = extremely













Table 5.--Processors and retailers' ratings of case loss control measures

Retailers
Convenience All
Measure Processors Supermarkets stores retailers

Mandatory deposit 3.6 8.1 5.6 6.7
Voluntary deposit 7.4 8.4 8.2 8.3
Universal case plan 7.1 6.2 7.0 6.6
State inspector 6.2 5.9 7.9 6.9
Warning signs 5.8 2.9 4.4 3.6
Fenced enclosures 5.4 6.4 5.2 5.8
Voluntary inside storage 5.8 4.7 2.6 3.7
Public relations program 5.0 3.7 5.5 4.1
Bulk delivery system 7.6 6.1 7.6 6.9
Case redesign 4.9 2.3 3.7 3.1

aScale of 1 to 9, where I was "like very much" and 9 was "dislike very
much".





Table 6.--Processors' estimates of the cost of a deposit system by size
of firm

Size of Averagea Estimated
firm No. cost Low High state totals

Large 10 29,774 0 93,985 297,742

Medium 9 23,467 0 65,000 305,071

Small 9 8,499 0 17,160 93,489

All 28 20,479 0 93,985 696,302

aTwo medium firms did not make specific estimates, although they did
indicate a deposit system would entail "small, unknown costs". An
arbitrary figure of $500 per year was estimated for these two firms.




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