11-2 Industry Situation

Introduction What is the purpose of industry? To maximize profit! How? One way is to minimize production “costs”. There are 2 geographical costs: Situation Factors and Site Factors

I. Situation Introduction A) Goal B) Must consider 2 factors: Cost of transporting_________ and then C) Every manufacturer Where do I build my Smiley Face Making Plant??????

II. Situation Factor 1: Location Near Inputs A) Types of Inputs OR

B) Bulk-Reducing Industry 1) Definition - the final product weighs LESS than its inputs (raw materials) 2) So the Wise Choice is to…. 3) Examples:

Example 1: Copper Industry in North America High Quality Ore is only about 15% copper so It makes sense to locate near the mines.

Notice first the mines, then the refineries/smelters. Most where?

Example 2: Steel Industry A - Historically: DONE BY HAND (Hard work to keep fire Going-mold the steel) WHAT CHANGED THAT IN THE INDUSTRIAL REVOLUTION?

B) Since the Industrial Revolution What do you need, in large amounts, to make steel? Iron Ore Coal

C) US Steel Industry has changed locations over time. 1850 – Started around Pittsburg (coal & iron) Late 1800’s/Early 1900’s – Moved west (Lake Michigan) closer to new Iron Ore finds. 1950’s – East/West Coasts of US as Iron Ore has to be imported. 2000 – Most US Steel Mills have closed and is a product that is imported.

So Traditionally, Steel Plants were located near inputs As Iron Ore started to run out…

D) Steel Today New! Mini-Mills- use scrap metal (recycled) as main resource- have located near markets around the US

Review WOW! YOU’RE SMARTER THAN YOU LOOK! So why would an industry locate closer to inputs that to markets???????

III. Situation Factor Number 2: Location Near Markets ***3 REASONS: Bulk-GAINING, Single Market or Perishable. A) Bulk –GAINING Industry (Reason 1) 1) Definition –something that GAINS volume or weight during production. 2) Examples

Example 1: Beverage Production What is a soda mostly made of? Bottles – weight empty Syrup – weight concentrated Water – most weight, large % of Soda So, where do you locate????

Beer Bottling Coors used to be the exception – Why?

Trivia Question: What is the best selling beer in the world? Snow Beer (China) – Sold double Bud Light last year. Why?

Example 2: Fabricated Metals Industry A) Definition: previously manufactured parts (main inputs) are used to make a more complex product. B) Industries like: TVs, Refrigerators, etc. Most Important One?

C) Cars! (AKA “Motor Vehicles”)

About 40 car assembly plants in US (3/4th of all cars sold in US are assembled here – or Canada/Mexico.) Mostly located Interior of country (Michigan to Alabama) Along interstate highways (Auto Alley)

Why are most cars manufactured in the middle of the United States? THEY ARE BULK- _______________ SO NEED TO BE NEAR _________________! (Wait! That’s not where most people live so???)

B) Single-Market Manufacturers (Reason 2) 1 - Definition: sold primarily in one location so being near that market is critical 2 – Good Example: Car parts makers “Just-in-time” delivery

C) Perishable Products (Reason 3) Definition: must be used quickly. Examples: bakers, milk bottlers daily newspapers

Question? Why are jobs in print publishing declining in the 21st century? Answer: TECHNOLOGY!

IV. Choice of Transportation Cheapest Slowest Fastest Most Expensive Which is best??????

A) Distance 1) general rule: further things must be transported the lower the costs per mile (cost of loading/unloading remains same) 2) Containerization

$ $ B) Type of Goods 1) Bulky Items 2) “Perishable”/ “time-urgent” Items $ $

C) Break-of-Bulk Points: place where you change transportation modes Decision for a company – Should we locate here? (Ex: Seaports/Airports) Cargo removed from ships. . . . . . . . . . . then loaded onto trucks

The End! Beer Truck – What Country???? South Korea