Chapter 11Key Issue 2 Why are situation and site factors important Proximity to inputs Manufacturers try to locate their factories as close as possible to both buyers and seller Every factory uses inputs ID: 591049
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Bulk Reducing vs. Bulk Gaining IndustriesChapter 11-Key Issue #2Why are situation and site factors important?Slide3
Proximity to inputsManufacturers try to locate their factories as close as possible to both buyers and seller
Every factory uses inputs
Inputs= materials, energy, machinery and supporting servicesSlide4
Pg. 388“The optimal plant location is as
close as possible to inputs
if the
cost of transporting raw materials
to the factory is
greater
than the
cost of transporting the products to consumers
.”Slide5
Proximity to marketsManufacturers try to locate their factories as close as possible to both buyers and seller (repeat)Slide6
Pg. 388“The optimal plant location is as
close as possible to
customer
if the
cost of transporting raw materials
to the factory is
l
ess than
the
cost of transporting the products to consumers
.”Slide7
Mineral ResourcesMinerals are important inputs for many industries because they have an abundance of industrial uses
Non-metallic minerals
90% that humans use
Building stones, gemstones
Minerals used in fertilizers
Nitrogen, phosphorus, calcium, sulfur
Metallic minerals
Valuable for fashioning machinery, vehicles, and essential elements of contemporary society
Malleable and ductile
Good conductors of heat and energy
Ferrous alloys
Chromium, manganese, nickel, titanium, and tungsten
Non-ferrous alloys
Aluminum. Copper, lead, lithium, magnesium, zinc, and precious metalsSlide8
Inquire and Think!!!“So What?”Reflect on your notes so far and discuss with students around you, what have we learned so far that is important or worth further inquiry?Slide9Slide10
Bulk-Reducing IndustryDefinition=An industry in which the inputs (materials, etc.) weighs more than the final product
(raw materials weigh more than the final product)
Needs to be located near its source of inputs to minimize transportation costsSlide11Slide12
Copper IndustryMining: the ore extracted is mostly wasteConcentration:
transforms the heavy, bulky copper ore into a much lighter material of high value
Smelting:
input for the smelters, who remove more impurities (bulk-reducing example)Slide13
Bulk-Gaining IndustryDefinition= Industry that makes something that gains volume or weight during production
(finished product weighs more than the raw materials)
Needs to be located near where the product is sold to minimize transportation costs
More expensive to transportSlide14Slide15
Bulk Reducing Examples (do not write)Copper
Steel
Finished copper bar weighs less than the copper ore used to make the product
Several steps in the copper process that are bulk reducing
Most foundries also need to be located close to energy sources (part of inputs)
Steel is an alloy of iron, manufactured by removing the impurities
Two inputs for steel are iron ore and coal, weighs more than the final product
U.S. steel production location has changed b/c of changing inputs
Today, more concerned with being close to marketsSlide16
Bulk Gaining ExamplesFabricated Metals
Beverage Production
Factory brings together metals (like steel) as inputs and transforms them into a more complex product
Located near markets because products are much bigger
Largest market for fabricated metal and machinery is motor vehicles
¾’s of vehicles sold in the U.S. are assembled in the U.S.
http://www.msnbc.msn.com/id/3032619/#42140012
Empty cans or bottles given to producer and filled with beverage- thus adding bulk/weight
Water- heavy to transport, #1 ingredient in beverageSlide17
Single-market ManufacturerSpecialized manufacturers with only 1-2 customers
Close proximity to customers
Producer of parts for motor vehicles
Ship directly to the carmaker’s plantsSlide18
Perishable ProductsMust be located near their market
Bread and milk
Example: Newspapers, why is this “perishable”?Slide19
Motor Vehicle Production and SalesImportant to produce vehicles near market (why?)
Regional distribution of production is extremely close to that for sales
However, carmakers operate assembly plants in all 3 major industrial regionsSlide20
Changing Situation Factors: SteelIn the past, steel production was a good example of a bulk-reducing industry that located near its inputs
t
he increasing importance of proximity to markets has contributed to the growth of steel mini-mills Slide21
Changing Distribution of World Steel ProductionBetween 1980 and 2013, the share of world steel production declined to 27% in developed countries (down from 81% in 1980)
Between 1980 and 2013, the share of world steel rose to 73% in developing countries (up from 19% in 1980)Slide22
Truck, Train, Ship or Plane?Trucks – short distance deliveryRail – used for 1+ days, longer to load, no daily rests
Ships – very long distances, slower than land based
Air – very expensive…used for speedy delivery, small, high-value packagesSlide23
Break-of-Bulk PointsMixed modes of delivery are often used
Break-of-bulk point: a location where transfer among transportation modes is possible
Containerization
Costs rise each time inputs or products are transferred from one mode to anotherSlide24
Just-in-Time DeliveryShipment of parts and materials arrive at the factory moments before they are needed
Suppliers must locate very close to they factories they supply
Advantages:
Reduces inventory costs
Allows for reduction of factory size
Example: computer manufacturers
Disruptions:
Natural hazards
Traffic
Labor unrestSlide25
Stop here Slide26
Site Factors in IndustryFor some firms, site factors are more important than situation factors in locating a factory
The three most important site factors are labor, capital, and landSlide27
LaborMost important site factor on a global scale
Variation of labor costs around the world is large
½ billion workers are engaged in industry worldwide
China has 1/4
th
India 1/5
th
All developed countries combined: 1/5
th
Labor-intensive industry
An industry in which wages and other compensation paid to employees constitutes a high percentage of expensesSlide28
CapitalThe funds needed to establish new factories or expand existing ones