Bulk Reducing vs. Bulk Gaining Industries

Bulk Reducing vs. Bulk Gaining Industries - PPT

Chapter 11-Key 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 Industries

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Bulk Reducing vs. Bulk Gaining Industries
Chapter 11-Key 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 sellerEvery factory uses inputsInputs= materials, energy, machinery and supporting services
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
.”
Proximity to markets
Manufacturers try to locate their factories as close as possible to both buyers and seller (repeat)
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
.”
Mineral Resources
Minerals 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 metals
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?
0
Bulk-Reducing Industry
Definition=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 costs
1
2
Copper Industry
Mining:
the ore extracted is mostly waste
Concentration:
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)
3
Bulk-Gaining Industry
Definition= 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 transport
4
5
Bulk Reducing Examples (do not write)
Copper
Steel
Finished copper bar weighs less than the copper ore used to make the productSeveral steps in the copper process that are bulk reducingMost 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 markets
6
Bulk Gaining Examples
Fabricated Metals
Beverage Production
Factory brings together metals (like steel) as inputs and transforms them into a more complex productLocated near markets because products are much biggerLargest market for fabricated metal and machinery is motor vehicles¾’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 beverage
7
Single-market Manufacturer
Specialized manufacturers with only 1-2 customersClose proximity to customersProducer of parts for motor vehiclesShip directly to the carmaker’s plants
8
Perishable Products
Must be located near their marketBread and milkExample: Newspapers, why is this “perishable”?
9
Motor Vehicle Production and Sales
Important to produce vehicles near market (why?)Regional distribution of production is extremely close to that for salesHowever, carmakers operate assembly plants in all 3 major industrial regions
0
Changing Situation Factors: Steel
In the past, steel production was a good example of a bulk-reducing industry that located near its inputsthe increasing importance of proximity to markets has contributed to the growth of steel mini-mills
1
Changing Distribution of World Steel Production
Between 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)
2
Truck, Train, Ship or Plane?
Trucks – short distance delivery
Rail – 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 packages
3
Break-of-Bulk Points
Mixed modes of delivery are often usedBreak-of-bulk point: a location where transfer among transportation modes is possibleContainerizationCosts rise each time inputs or products are transferred from one mode to another
4
Just-in-Time Delivery
Shipment of parts and materials arrive at the factory moments before they are neededSuppliers must locate very close to they factories they supplyAdvantages:Reduces inventory costsAllows for reduction of factory sizeExample: computer manufacturersDisruptions: Natural hazardsTrafficLabor unrest
5
Stop here
6
Site Factors in Industry
For some firms, site factors are more important than situation factors in locating a factoryThe three most important site factors are labor, capital, and land
7
Labor
Most 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 expenses
8
Capital
The funds needed to establish new factories or expand existing ones