We shall first cover the main milk collection systems used by dairies and then try to break down costs in each in an attempt to help the industrial dairy farmer to choose among the various possibilities.
4.1.1 In the simplest, door-to-door milk collection system, the milk truck stops at each farm, loads the milk cans and leaves an equal number of cleaned, sterilized empties.
This is a low-yield pick-up method, slow and interrupted by numerous stops. The transport vehicles wear out fairly quickly; the route may include bad roads. Also, the full carrying capacity of the trucks is not used because the milk cans, which come from different farms, are not all filled up to the same level.
Milk collection under such conditions is inevitably costly. But though it may be irrational, it is the only feasible method in many areas where a very large number of very small dairy farms are located in remote areas throughout the countryside.
Pick-up of uncooled or barely cooled milk in cans requires strict adherence to rules governing the duration of the collection period and the distance covered. Failure to observe these rules can easily alter the quality of the milk delivered to the dairy.
4.1.2 The method described is no longer valid in areas where people live close together or where small farms are grouped around villages. The best system in such cases is a collection centre to which farmers deliver milk every day, or preferably morning and evening, using their own means of transport. This system facilitates pick-up enormously as the milk truck loads the entire output of a village or milk-producing-area at a single stop. The time saved means that greater distances can be covered.
The structure of the collection centre may vary greatly depending on whether the milk is shipped from the centre to the dairy in bulk or in cans.
The milk may remain in the cans of individual farmers and the centre limit its role to providing a central pick-up point and cooling facilities, with a milk cooler its only working equipment. The milk delivered by individual producers will continue to be accounted for at the receiving platform of the dairy plant and the cans will be washed and sterilized in the plant.
The disadvantage is that the milk truck loads a larger number of cans, some of which will not be filled to the brim.
The milk may be mixed at the collection centre. In this case the centre is responsible for keeping the accounts with individual milk producers. The centre may also wash and sterilize cans not to be returned to the plant.
The centre may sometimes transfer the milk from the initial cans into larger-capacity pick-up cans. This type of centre is not advisable for handling amounts exceeding 1 000 litres/day.
For centres handling larger quantities of milk, the slow and fairly laborious practice of keeping milk in cans gives way to bulk holding.
In this case the centre's equipment will consist of a milk reception and weighing station; a milk cooler to lower milk temperature to some +4°C; insulated or refrigerated storage tanks for cooled milk; pumps and piping to distribute and transfer milk and a station with hot water, detergents and disinfectants for cleaning apparatus and milk producers' milk cans.
4.1.3 Bulk conservation of cooled milk by the producer and transport in tank truck to dairy plant.
This system has the following advantages:
Milking can be organized separately from milk collection, thus freeing the producer from delivery timetable constraints.
The milk is cooled rapidly after milking which enhances its bacteriological quality.
The longer-keeping stored milk can withstand a longer collection period which means the pick-up and delivery round can also be lengthened. Pick-up can be made every two days where milk quality permits (though a three day pick-up is definitely to be discouraged as the risk of psychrotrophic flora is too high).
Milk reception at the dairy plant under this collection system is also different. Mainly in that the timetable for milk deliveries is more flexible, allowing more intensive use of dairy equipment, reducing the work force and increasing productivity all round.
In technical terms, however, bulk collection is conceivable only under the following circumstances:
The milk producers must have enough business to justify purchasing or otherwise making available a cooling tank.
This also presumes a rural power network sufficiently developed and reliable to accommodate the power demand from cooling tanks without excessive risk of blackouts.
The milk in each tank must be of good quality to avoid any risk of contaminating the milk in the tank truck.
The tank truck must be able to back right up to the cooling tank (maximum distance 8–15 m).
In areas accessible only to small trucks working with milk cans, bulk pick-up with large-capacity, heavyweight tank trucks is simply not feasible.
It should be remembered that all-zone bulk pick-up will rarely be possible. The first consideration in choosing a milk collection system should be to maximize both technical and economic advantages. Where possible, the collection area selected should lend itself to gradual expansion.
4.1.4 In a uniform collection zone, the dairy plant can set up a single collection system. Unfortunately, in the Third World the dairy industry is frequently part of a development process which includes milk producers of all sizes and so the plant will have to adopt a mix of approaches:
In a specific collection zone where large milk producers are in the majority, the producers are equipped with cooling tanks, and pick-up is by tank trucks. Tank trucks may have an additional rack for milk cans from small producers. Barring that, the milk produced by several farmers will have to be picked up at a central collection point. A combination milk can/refrigerated tank truck pick-up is risky because of possible contamination and overheating.
Where small producers are in the majority, the plant may have tank trucks to collect milk from several collection centres as well as from one or more large producers equipped with cooling tanks.
As they work out their refrigeration and collection costs, some dairies may even have to contemplate the following option for areas where access is difficult:
Setting up a collection centre
Small-scale or cottage industry cheese manufacture at milk production sites as a means of reducing transport costs.
Whichever pick-up system is chosen, the cost of milk collection is clearly almost entirely dependant on:
the truck (depreciation, maintenance);
labour.
The goal of sound management should therefore be to minimize these two major cost items. The first thing to do is to optimize milk pick-up rounds and then:
identify the number and size of trucks needed;
minimize the working hours of the milk collector whilst assuring the delivery of high-quality milk.
To optimize milk pick-up rounds, the milk collection area must be mapped out. This involves:
Classifying collection sites by village, hamlet, isolated farm or collection centre.
Classifying the number of milk producers at each site in accordance with maximum milk output per producer. Where necessary, milk quality may also be indicated.
Totalling peak and slack period milk totals for each collection point.
Listing the peak load of the various types of trucks or tank trucks available on the market.
With these elements in hand, several milk round models can be “tested”. At this point, there is a temptation to reduce rounds to the minimum number by lengthening their duration, using bigger trucks and having longer intervals between pick-ups.
At this stage, economic factors cease to be the sole consideration. Depending on milk quality and the collection system selected, the maximum interval between two pick-ups (daily or every two days) is the next thing to be worked out, remembering that pick-up frequency has a major bearing on costs.
In fact, in two-day pick-up service, more milk is collected, necessitating bigger trucks and closer pick-up points.
Any attempt to maximize the length of milk rounds is limited to how long the milk can be kept without cooling it: this is particularly true of milk cans. This interval depends on how big and fast the truck is and on milk production density within the pick-up area. Maximum round length may also be limited by the following factors:
No round can exceed the maximum number of hours the driver is legally allowed to work each day.
The plant may be organized in such a way that milk rounds need to end at specific times during the day.
Timetables of access to farms.
Highways or roads which can only be used during the day, or at certain times of the day.
The above limiting factors on the length of milk rounds need also be considered in determining truck size.
One practical way of deciding which of the different round patterns “tested” is more attractive, not forgetting the above imperatives, is to compare them as follows:
The total mileage for each round is divided into the active sector, i.e. the mileage between the first and last milk producer (kr) and the downtime zone, meaning the distance between the dairy and the first producer and between the last producer and the dairy (kt).
The number of litres of milk picked up daily per kilometre of active
distance 
corresponds to what is often designated as production
density or technical density.
The number of litres of milk picked up daily per kilometre of active
distance plus downtime zone: 
which constitutes the pick-up
density.
Round optimalization makes it possible to increase pick-up density without increasing vehicle size.
The direction of the pick-up circuit should permit the maximum average truck speed and the shortest standing time for milk.
Two plants who whish to optimize their milk rounds should avoid overlapping and superimposed pick-up zones.
Rounds have been worked out “manually”, and often very cleverly by professionals since the beginning, but today the use of information technologies and sceintific estimates can do a quick, flexible, highly effective job.
For correct optimization of pick-up rounds, the various segments of pick-up working time require consideration.
In optimizing pick-up rounds, the total time necessary for the round should be taken into account. This interval can be divided into:
The collector's time in the truck.
The collector's time at farms or collection centres.
Time spent in the truck can, in theory, be calculated by measuring distance, truck speed and road conditions. Another simple method is to use a chronometer.
Time spent at the farm or collection centre should be split into major operations for greater precision. These major operations will differ in accordance with the collection system selected by the plant.
For bulk collection the major operations may be divided into:
Preparation
Pouring out the milk
Final operations
Sampling
Sales to producers
Breaks, downtime.
The first three are compulsory, the last three optional and there may be a certain overlapping between some operations.
The three compulsory operations are classified into two types: those where the time interval is proportional to the amount of milk (pouring out the milk) and those where the time interval has nothing to do with the amount of milk. The optional operations are fixed-time operations. Fixed-time intervals are far more important for tank truck pick-ups than variable intervals depending on the amount of milk delivered.
It is essential to divide the time into fixed-times and variable intervals proportionate to the amounts of milk collected. This is so that time can be budgeted to account for eventual changes in the amounts of milk collected, and so as to predict the length of time necessary to pick up different hypothetical amounts of milk.
Fixed can-pick-up times are relatively inflexible as they do not include truck start-up and stop time. If the pick-up is organized by the dairy plant, milk samples are always taken at the plant.
Optional operations are included fixed times and, as for bulk collection, include:
Sales to producers
Breaks, downtime.
4.3.1 Fixed times for bulk collection
Fixed times include preparation:
Getting out of the truck
Unrolling the milk hose
Inserting the vacuum pump hose or coupling the pump intake valve.
Reading the gauge (unless the truck has a counter) and recording milk intake.
Starting the filling operation (opening the vacuum pipe or switching on the pump).
At the start of the pumping operation, taking a milk sample, putting it in a flask and putting the flask away (optimal).
A study carried out in France showed that the overall preparation time per producer ranged from 0.2 to 4.2 minutes - the average time was 0.96 minutes.
The most important variable factors are:
The distance from the milk holding tank to the tank truck parking site.
Accessibility of the tank
The location, quality and number of attachments of the tank truck and tank.
The collector's skill and ability to organize operations.
Variable factors also include the length of the final operations:
Turning off the pump (where there is a pump) or closing the vacuum intake valve.
Possible quick rinse of the tank or turning on the programmer.
Rolling up the hose and vacuum pipe.
Reading the counter, if there is one, if it lacks an automatic recording device; where applicable, return of ticket to producer or recording the amount of milk on the collector's sheet.
Getting back into the truck.
A French study showed that the time spent on these final operations ranged from 0.15 to 3 minutes, averaging 0.89 minutes. Where the tank was rinsed out, from 0.7 to 0.8 minutes was required for this operation alone, nearly doubling the total final operation time.
Taking milk samples is an optional fixed-time operation. A study produced the observation that hand-sampling required from 0.07 to 2.66 minutes, averaging some 0.78 minutes. Obviously, automatic or semi-automatic samplings are a real time-saver.
4.3.2 Proportional intervals for bulk collection
Milk pumping time, the only time period which varies with the amount of milk delivered, also varies with the capacity of the pump or vacuum system and with hose length and diameter. Where these factors are constant, the interval varies only with the amount of milk pumped, though in practice, it is highly variable.
As a basis of estimation, a reasonable interval would be some 0.60 – 0.85 cm/m/1 of milk.
4.3.3 Services and supplies
Where the milk is collected in cans, the time spent returning the cans is always extra, whereas in bulk collection return time and milk pumping time can overlap.
How many products are distributed, and whether the collector is paid or just keeps a record of merchandise sold has a great bearing on the time taken by this operation.
Can/return time, however, needs to be accounted for separately so that the cost can be compared with the profit from other services and supplies. (These may be dairy products produced by the plant, detergents for cleaning the tank and milking machine, brushes, etc.)
Well-organized supplies are a source of profit for the dairy plant and are recognized as a service rendered to milk producers. A separate management system should be organized for such services.
4.3.4 Breaks, downtime
It is true that downtime must be kept to a minimum. Quite a number of dairy plants, however, noticed that the collector was the only person at the plant who had any real contact with the milk producer, and this gave them the idea of using the collector as an extension agent. Indeed, who better than the collector is in a position to spend a few minutes to pass on some message on milking hygiene, the use of concentrates for dairy cows, and so forth.
Spectacular results have been obtained in achieving specific targets set by the plants for milk collectors.
The time spent by the collector in “training and/or informing” producers should be accounted for under some such heading as “Training milk producers”.
Note: The need for optimizing milk rounds and job times needs to be explained to collectors. They must abide by the schedules of when rounds begin and when the milk is delivered to the plant. They also need to be able to justify any delay or time overrun within the management audit context.
The various items under collection costs depend largely on whether milk is collected in cans or in bulk; the following considerations will help identify the corresponding costs:
Tank truck pick-up is often one way of avoiding Sunday collections but it needs to be remembered that the Saturday and Monday pick-ups will be 50 percent bigger than on the other days of the week.
Before opting for bulk pick-up, thereby completely modifying the equipment and methods of producers, collectors and plant, it would be good to get as much information as possible on the financial consequences of bulk operations. Usually, the change over to a bulk collection system comes about when the equipment of the older pick-up system has either depreciated or can be switched to another pick-up zone. A shift to bulk collection in a given area should be preceded by a global study, even where bulk collection is only to be sectional.
The term peak or seasonal imbalance coefficient is given to the ratio:
Q1 corresponds to the milk supply in litres of the day or days of heaviest pick-up.
Q2 corresponds to the yearly pick-up of litres of milk divided by 365.
The fleet of vehicles can be designed to allow peak-day pick-up rounds to coincide with those of slack production periods. Vehicles are only used at maximum capacity Q1 during the peak period. On the other hand, it may be attractive in some instances to assume that the milk trucks will make two rounds at nominal load Q1 during peak days, and plan the vehicle fleet accordingly.
In this case the number of trucks necessary will be: 
Truck or tank trunk capacity, and thus the number of vehicles needed, has a great bearing on collection costs. It is therefore advisable to look for a model which can minimize collection costs per hectolitre and which bases the analysis of cost forecasts for milk collection on anticipated volumes. This involves “testing” the various possible types of vehicles. Table 1 shows a cost forecast for can pick-up. The table assumes the volumes to be collected in the coming years to be a known quantity. Usually, however, volume is not an exact known quantity so there is an assumed floor and an assumed ceiling. Three such tables are therefore necessary to verify the low-, medium- and high-volume assumptions.
A similar type of table can be prepared for bulk pick-up. If what is wanted is to shift from can pick-up to bulk pick-up, a simple table like Table 1 should not be used because mixed (i.e. bulk + can) pick-up modifies the cost of reception at the plant and also adds on the cost of refrigeration at the farm. Can depreciation and maintenance is also subject to modification.
| Collection cost forecast breakdown | YEAR X | YEAR X + 1 | YEAR X + 2 | YEAR X + 3 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| New truck capacity | New truck capacity | New truck capacity | New truck capacity | |||||||||
| (1) | (1) | (1) | (1) | |||||||||
| assumption | assumption | assumption | assumption | assumption | assumption | assumption | assumption | assumption | assumption | assumption | assumption | |
| 1 | 2 | 3 | 1 | 2 | 3 | 1 | 2 | 3 | 1 | 2 | 3 | |
| PURCHASE OF NEW TRUCKS | ||||||||||||
| • Unit purchase price | ||||||||||||
| • Number of trucks | ||||||||||||
| • Total purchase price for trucks | ||||||||||||
| FIXED COSTS | ||||||||||||
| • Depreciation on existing vehicles new vehicles | ||||||||||||
| • Insurance | ||||||||||||
| • Taxes | ||||||||||||
| • Staff (salaries + charges) | ||||||||||||
| • TOTAL ANNUAL FIXED COST | ||||||||||||
| VARIABLE COSTS | ||||||||||||
| • Fuel | ||||||||||||
| • Oil | ||||||||||||
| • Tyres | ||||||||||||
| • Maintenance/repairs | ||||||||||||
| • TOTAl ANNUAL VARIABLE COSTS | ||||||||||||
| TOTAL ANNUAL COSTS MILEAGE | ||||||||||||
| TOTAL COSTS/KILOMETRE | ||||||||||||
| • Annual milk collection in hectolitres | ||||||||||||
| • Cost (collector + truck)/Hl milk | ||||||||||||
Table 2 shows the various items which might appear under collection costs for milk pick-up in cans.
Labour costs are considered fixed costs in some plants and variable costs in others. Indeed, where collectors work only a few hours a day collecting milk and spend the remaining time distributing dairy products or concentrated feeds, milk collection time can be considered proportional to the amount of milk collected, and labour costs should be listed under variable costs. If, however, the collector's free time is used for minor maintenance of and cleaning his truck, labour should be considered a fixed cost.
Variable costs for trucks should be reckoned so as to show the per kilometre cost of each truck for each litre of milk collected.
A portion of the item “structural costs” needs to be included under fixed costs. The following structural costs will be invoiced to milk collection as fixed costs:
Management of the “Milk Production” department
This service does in fact have its own staff for managing the fleet of vehicles and service staff, and handling relations with producers. This service will have its own premises, and such various management costs as
General management
Purchasing service (vehicles, cans, …)
Personnel service.
Table 2 COLLECTION COST (milk pick-up in cans)
| DESCRIPTION | AMOUNT |
|---|---|
| FIXED COSTS | |
| Depreciation: | |
| - Trucks | …… |
| - Cans | …… |
| - Garages or parking areas | …… |
| - Tools | …… |
| Insurance and taxes: trucks | …… |
| Garage and parking costs: | …… |
| - Maintenance | …… |
| - Electricity | …… |
| - Heating (where necessary) | …… |
| Labour | …… |
| Invoicing of part of structural costs | …… |
| TOTAL FIXED COSTS | …… |
| VARIABLE COSTS | |
| Fuel | …… |
| Oil | …… |
| Tyres | …… |
| Vehicle maintenance and repair costs | …… |
| (spare parts and labour) | …… |
| Can maintenance costs | …… |
| Tool maintenance costs | …… |
| TOTAL VARIABLE COSTS | …… |
| TOTAL COSTS (FIXED + VARIABLE) | …… |
4.5.1 The various cooling systems
Farm cooling systems use mechanical compression. The basic principle of these machines is to lower temperatures through forced evacuation of an appropriate liquid refrigerant, usually freon. All compression equipment includes the following:
An evaporator, usually a coil, in which the liquid refrigerant is evaporated for quick cooling of the ambient temperature.
A compressor which acts as a suction and force pump, taking in the steam from the evaporator and compressing it in the condensor.
A condensor or liquefier externally cooled by water or air in which the fluid is liquified under pressure.
A trigger valve regulating the return flow of the fluid in the evaporator where it is reconverted into steam.
In direct expansion refrigeration, the most commonly used type, the cooling medium, i.e., milk, is in direct contact with the evaporator.
In other cooling machines, some other liquid, which may be water, is cooled by direct expansion. This is then used to cool the milk.
In bulk collection, the milk is kept in direct expansion cooling tanks. If, on the other hand, the milk is collected in cans, the cans are set in a milk cooling vat with a flow of chilled water.
Just for the record, there is also the heat plunger (can immersion coolers), which is a direct expansion apparatus with a condensing unit and a rod attached by a flexible tube. This rod includes an evaporator and a shaker. The heat plunger may be introduced directly into the can but this practice is not recommended for bacteriological reasons. The thermal plunger system can be used to cool the water in the can immersion tank.
4.5.2 Bulk collection: selection of cooling tank
The first thing is to select the volume of the cooling tank. Remember, cooling and pick-up are two parts of a single system. The cost of the alternate day tank is higher then that of the every day tank, but the system does help minimize collection costs.
Tank volume depends on the producer's needs. The coefficient of use (U C) of each tank must be calculated.
The U C is a ration in which:
or to put it another way:
L: daily milk production
C: working capacity of tank for an every day tank:
It is advisable to achieve an average annual coefficient of use close to 70 percent so as to maximize the efficient use of the cooling equipment. When the coefficent of use drops, cooling costs go up (see Figure 1).
The following points are important:
Collection is a money saver where large amounts of milk are collected at each pick-up point.
Apparently, some 150 1 of milk per producer each day is the minimum figure at which bulk pick-up represents savings. This is an indicative figure, however, and may vary greatly from one country to the next.
Bulk collection is a money saver, in absolute terms, under less favourable collection conditions, where many miles need to be covered. Less money is saved, however, when pick-up is slowed by the need to serve a great many small producers.
Figure 1. Cooling costs as coefficents of tank use (Source BDPA - FORMA)
4.5.3 Expenditure of energy for milk cooling
Trials at the CTGREF in Anthony (France) on two cooling tanks with capacities ranging from 200 to 6 140 1 at + 20°C ambient temperature (and for cooled milk from 35 to 4°C) indicate:
An average consumption of 19 Wh/1 for alternate day utilisation.
This consumption figure drops as tank capacity increases. For every day use, the figure goes from 25 ha/1 for capacities under 300 1, to 15 W/h/1 for capacities over 3 000 1. For alternate day use, under the same conditions, the figure goes from 30 to 20 Wh/1.
This consumption fluctuates considerably around these average values with the quality of the equipment ranging from 10.8 to 30.9 ha/1 for every day use and from 14.7 to 36 Wh/1 for alternate day use, without these ranges being significant in terms of tank capacity or their cooling system (direct expansion or ice bank system).
In addition to providing users a wider selection of better-performing equipment the following are recommended ways of lowering consumption:
Never exceed alternate day storage. Collecting milk every three days is unacceptable not only on milk quality grounds: power consumption increases to the point where it is no longer offset by lower transport costs.
Develop energy recovery systems. Two complementary techniques can be used at the dairy plant for this purpose: chilled water pre-cooling of milk, and heating water with the calories recovered from the the condensing unit of the tank.
4.5.3.1 Pre-cooling milk with chilled water (Diagram 1)
The objective is cheap removal of negative kilo-calories from the chilled water to cool the warm milk by a plate heat exchanger which lowers the temperature to under 20° in just seconds.
Some two to two-and-a-half times as much chilled water as milk is necessary. The milk is pumped intermittently through the heat exchanger by the milk pump from the extractor of the milking machine. The milk outlet of the exchanger requires a flow regulation valve to set up a slight counterpressure. The water outlet has an electromagnetic valve to avoid wasting chilled water. The exchanger requires a filter to avoid rapid clogging of the pre-cooler.
Fuel savings mount as the temperature of the cooling water drops, so the system is an unattractive solution in hot countries.
Diagram 1. Diagram of a pre-cooler used with a direct expansion refrigeration unit.
4.5.3.2 Heating water from calories recovered from condenser
As negative kilo-caleries are produced by the evaporator, calories are produced and evacuated by the condenser. This is, in fact, the principle of the heat pump.
From the calorie standpoint, the amount of heat given off by the condensor equals the amount of heat extracted from the cooled medium plus the energy absorbed by the compressor. Globally, one kilowatt supplied to the compressor is considered to allow recovery of from 1 to 2.5 kilowatts from the condenser.
The milk calories are transferred by the exchanger to the water as in Diagram 2.
The hot (80°C) gases from the compressor are directed to a tubular heat exchanger where they give up their calories to the chilled water, heating it. The gases then move across the air condenser to the tank evaporator where they expand.
Where an accumulator-type regenerator is used (Diagram 3), the exchanger is placed inside a heat accumulator tank. A well-chosen system can produce water which retains a constant temperature of 60°C until the next milking from each batch of milk cooled. If desired, even hotter water can be obtained (up to a maximum 80°C). During periods of low milk production, an electric coil can also be added to this system to top up the heat supply.
Pre-cooling milk in chilled water is only appropriate for large herds or collection centres handling at least 2 000 1/day of milk. Heating water by means of heat recovery from the condensor, however, is a suitable technique for many dairy plants. Each individual country needs to do its own economic investigation of investment and power costs.
Diagram 2. Principle of a heat regenerator mounted on a milk tank.
Diagram 3. Principle of an accumulator-type regenerator mounted on a milk tank.
4.5.4 Refrigeration cost components
Refrigeration costs include fixed costs and variable costs.
Fixed costs
Fixed costs, which are independent of the amount of milk cooled, include:
Depreciation of the tank (including interests on loans requested or remuneration of invested capital). The usual amortization period is five years.
In consideration of seasonal variations some milk producers buy large tanks, though this increases refrigeration costs. Financing the investment is always a problem. The burden may fall on the dairy, if it is lending the tank to the producer, or upon the producer who will then expect to recover his expenditure and be compensated for his efforts to improve milk quality.
Depreciation on the building in which the tank is kept.
Tank cleaning costs.
This item should be listed under fixed costs as cleaning is compulsory after each milk pick-up irregardless of the volume of milk produced between two collection periods.
Tank cleaning, whether manual or automatic, includes:
labour
cleaning agents
cold water
cost of heating water
power consumption of pump for automatic washing.
Variable costs
Variable costs depend on the amount of milk cooled. They include:
Power consumption
Maintenance costs.
This is an undefined item which depends on the specific operating conditions of each apparatus.
Cooling equipment is so highly specific and milk quality so dependent on a smooth-running cooling system that a great many dairies prefer to take on the responsibility for maintenance of the cooling tanks of their suppliers. This service may be provided free of charge. On the other hand it may be invoiced, in which case there are two possible systems:
invoicing separate interventions at real costs;
a maintenance contract.
In the latter case, the producer pays a set sum each year and there is no separate charge for servicing.
In this case “maintenance - repairs” is classed under fixed charges.
4.5.5 Sharing refrigeration costs between producer and plant
Either the dairy plant or the producer may be responsible for financing the cooling tank.
The producer purchases the cooling tank himself. In most cases, the dairy pays a compensatory sum for each litre of milk produced. The producer should deduct any compensatory sums paid by the dairy when reckoning refrigeration costs.
It must also be remembered, particularly where bulk pick-ups are concerned, that milk is almost always priced in accordance with quality. One common criterion is the total microflora content in the milk. Refrigeration helps to retard bacterial development, thus ensuring that the producer gets a better price for his milk.
The producer should consider per litre price differences for different grades of milk in calculating real costs for refrigeration.
The investment cost is borne by the dairy.
In this case, the dairy opts for one of the following three approaches:
The tank is lent to the producer free of charge.
The drawback for the dairy is that it is the sole investor. The advantage is that it can tailor tank capacity to the variable production of individual producers and adapt to changes in the collection system, i.e., modification of the milk rounds or different pick-up schedules.
The dairy does not have to pay compensatory sums to producers in this case.
Leasing the tank to the producer.
Leasing may take the form of a fixed monthly payment or a discount on each litre of milk produced.
As in the preceding instance, the dairy remains the owner of the tank.
Leasing/sale of the tank.
This follows the same pattern as the other two cases but after two, three or five years, the tank becomes the property of the milk producer.
| TYPE OF EXPENSE | AMOUNT | ||
|---|---|---|---|
| FIXED COSTS | |||
| Depreciation: | - | tank | …… |
| - | premises | …… | |
| Cleaning tank: | - | labour | …… |
| - | cleaning agent | …… | |
| - | chilled water | …… | |
| - | power (for automatic cleaning) | …… | |
| - | heating water (where applicable) | …… | |
| Share of structural costs | …… | ||
| TOTAL FIXED COSTS | …… | ||
| VARIABLE COSTS | |||
| Power | …… | ||
| Maintenance and repairs | …… | ||
| TOTAL VARIABLE COSTS | …… | ||
| TOTAL COSTS (FIXED + VARIABLE) | …… | ||
| Annual compensatory allowance (to be deducted) | …… | ||
| Estimated price difference for quality (to be deducted) | …… | ||
| Leasing tank to dairy plant (to be added) | …… | ||
| TOTAL REAL COSTS | |||
| Litres of milk cooled in one year | …… | ||
| PER LITRE REFRIGERATION COST | …… | ||
The cost of milk can be reckoned at the farm or at the dairy plant reception platform.
Our study shows that proper organization of “refrigeration - collection - reception” is quite complex. It seems that “collection - reception” should definitely be the responsibility of the dairy. It would therefore be advisable to determine milk costs at the farm level, where possible. In this way, even if independent truckers are responsible for pick-up, transport operations will be under the authority and supervision of the dairy.
The global “refrigeration - collection - reception” cost will be calculated by the dairy which will retain out of refrigeration costs only the share for which it is responsible. Global cost is the item which allows the dairy to compare the merits of different collection systems.
It needs to be stressed that a well-organized cooling and collection system has a major bearing on milk quality and hence on processing costs and the quality of finished products. Therefore not only costs, but also the higher-quality finished product, which is not always easy to express numerically, need to be considered.
In bulk collection, there are slight differences between the amounts of milk for which the producer is paid and the amounts actually reaching the plant. These milk losses need to be calculated for each round. If the dairy organization has several plants, quantity control should make it possible to compare plant performance.
