Research Progress Report 165
		        March, 1965

Analysis of a Dairy Management Information System

M. A. Jacobson and E. M. Babb, Agricultural Economics
SUMMARY
	This study of four cases was to determine the value of a proposed management information system in fluid milk operations. The four cases selected were two bottling and vendor operations and two sales branches of a large dairy. These operations are independently managed, within the realm of over-all company policy, and are treated as separate financial entities.

	The management information system for the four operations was developed through meetings with the central office management and managers of the individual operations and was tested over a six-month period.

	A list of management information items (Table 2) was used to determine the specific items of information to include in the management information system. Not much additional information was considered to be needed for the bottling operations. However, a substantial amount of additional information was provided for the sales branches.

	The additional information was provided to the managers in the form of monthly reports. These reports were prepared by the accounting staff which also prepares monthly financial statements for the individual operations. No additional labor costs were incurred by the company as a result of preparing these reports. However, their preparation did require time of existing personnel. Presumably this time has an opportunity
cost.

	The total hours required to prepare the reports for the two sales branches declined from 93 hours the first month to 85 hours the last month. The opportunity cost fell from $411 the first month to $236 the last month. Most of the decrease in cost occurred as the preparation was being done by less costly labor after the format for preparation was developed by the head accountant. The $236 represented a hypothetical 3.5 percent increase in the cost of accounting for the two sales branches.

	General financial results at all four operations improved during the six-month study period. Marked decreases in monthly losses on retail sales at sales branch A and mixed sales at sales branch B occurred during the study period. The information system was monitored for four months after the six-month period of intensive analysis was completed. The same general improvement in performance was noted.

PURDUE UNIVERSITY • Agricultural Experiment Station • Lafayette, Indiana