Situation Factors in locating industry Targets 11.3 / 11.6

Terms/Concepts Inputs Situation factors Proximity to Inputs Proximity to Markets Transportation costs

Two Geographical Costs A manufacturer typically faces two geographical costs when determining a location Situation factors Site factors

Situation Factors Inputs are the materials which are brought into a factory. May be resources from the physical environment (minerals, woods, animals), or they may be parts or materials made by other companies. Products are what leave the factory. Situation factors – Involve transporting inputs to and from a factory – A factory seeks a location that minimizes the cost of transporting inputs to the factory and finished goods to consumers.

Situation Factors Proximity to Inputs – If inputs are more expensive to transport than products, the optimal location for a factory is near the source of inputs. – If the cost of transporting the product to customer exceeds the cost of transporting inputs, then the optimal plant location is as close as possible to the customer (ex. bulk- reducing industry – copper)

Situation Factors Proximity to Markets –Bulk-gaining industry (ex. bottling) –Single-market manufacturers (ex. Car parts) –Perishable products (ex. Milk production)

Bulk-reducing Bulk-reducing industry: An industry in which the inputs weigh more than the finished product –Industry location closer to inputs! –E.g., copper production Copper ore is heavy when mined so mills, which locate near the raw-material site, concentrate the copper by removing less valuable rock Potato chips

Bulk-gaining Bulk-gaining industry: An industry that manufactures something that gains volume or weight during production –beverage bottling –automobile manufacturing –Industry location closer to market!

Transportation Costs The farther something is transported, the lower is the cost per mile –Airplanes usually most expensive reserved for speedy delivery –Ships -attractive for very long distance -cost is very low –Trains -usually to transport things over one day away -do not need to stop for rest breaks –Trucks -short-distance delivery -easily loaded and unloaded

Break-of-Bulk Points Break-of-bulk points: A location where transfer among transportation modes is possible –Facilitated by containerization

Just-in-time Delivery Just-in-time delivery: Shipment of parts and materials to arrive at a factory moments before they are needed –cars, computers –reduces wasteful inventory

Terms/Concepts Inputs Situation factors Proximity to Inputs Proximity to Markets Transportation costs