The objective of this research was to determine the optimal number, size, and location of fluid bottling and manufacturing plants, under a totally coordinated marketing system, in the southeastern United States.

A transshipment model was developed through which economies of size in processing were taken into consideration. Sources of Grade A and B raw milk, fluid consumption centers, each a potential fluid processing site, and potential manufacturing sites were delineated. Quantities supplied or demanded at 1976 levels were estimated for each location. Consumption centers were given the option of being served from distant plants. Transportation costs were calculated from raw sources to processing sites and from processing sites to final demand points. Processing cost functions for both types of plants were specified.

The results indicated that, given the data and assumptions, the economies of size in processing are not great enough to offset the diseconomies in transportation to the extent that fluid consumption centers can be served from plants in other locations at a lower total cost. The number of manufacturing plants operated was limited to the number of plants necessary to provide sufficient total processing capacity to manufacture the regional manufactured product requirement.

It was concluded that considerable adjustment in the fluid processing sector has taken place with respect to location and number of plants. It was further concluded that once fluid processing locations and quantities are known, that an organization may coordinate only the assembly and manufacturing functions in a manner approaching optimal.