1. © 2011 Pearson Education, Inc. W4/4/12 Industrial Situation Factors Ch. 11.2 - pp. 350-355

2. © 2011 Pearson Education, Inc. I. Proximity to Inputs A. Overview –Situation factors – transportation important shipping supplies & final product want to minimize cost location important to minimize trans. costs Optimal location depends on costs –Which is more expensive trans.? – supplies or customers? –Must determine whether bulk-reducing or bulk-gaining product –Answer will help determine location

3. © 2011 Pearson Education, Inc. I. Proximity to Inputs (cont.) B. Bulk-Reducing Industries Two (2) Examples: copper & steel 1. Copper –Involves 4 major steps, 3 of which are bulk-reducing »Mining, concentration mills, smelting »Location is closer to copper’s source –Final step, refining, has little bulk reducing »Location can be further away from source –Other important factor: energy source »Traditionally located near cheaper source OR work out agreement w/ power company –See map – »concentration mills & smelters near source (AZ) »foundries, where iron is manufactured into finished product, near markets (east & west coasts, Gulf Mex)

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5. 5 I. Proximity to Inputs (cont.) B. Bulk-Reducing Industries (cont.) 2. Steel –not mass-produced until Bessemer process in 1855 »Henry Bessemer invents simple casting process –steel requires 2 items: iron ore & coal »where located? »ideal location is b/w 2 mineral sites –location changed over time b/c of cost »Pittsburgh - Lake Erie - Lake Michigan - E & W coasts –shift over time due to change from proximity to resources to proximity to market »change in part due to new elements of steel –creation of minimills using scrap metal »available everywhere - no location restrictions 5

6. 5 Steel Industry Historical Overview

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8. © 2011 Pearson Education, Inc. II. Proximity to Markets A. Bulk-gaining industries –adds weight or bulk during production –need to be closer to market –1. Fabricated Metals motor vehicles (cars, trucks, etc.) –75% of U.S. vehicle sales made in U.S., most of rest in N.A. –about 40 assembly plants in U.S. –thousands of plants for parts most U.S. manufactured cars made in “auto alley” –Michigan to Alabama (I-65 & I-75) –traditionally most U.S. made in Detroit –2. Beverage Production heavy weight of filled bottles requires localized bottling

9. 9 “Auto Alley” I-65 & I-75

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11. 11 II. Proximity to Markets –B. Single-Market Manufacturers specialized products - usually a manufacturer will purchase (not consumers) –car parts location is near manufacturer - –vehicle parts - esp. car seats (bulky) –“just-in-time” parts - minimal storage time »other parts of cars may be far away b/c not expensive to ship –C. Perishable Products bread & milk are more localized –butter & cheese are not - last longer (WI) daily newspaper –losing out to internet news b/c of speed & accessibility –jobs lost in print news, gained in e-news 11

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13. © 2011 Pearson Education, Inc. III. Ship, Rail, Truck, or Air? –The farther something is transported, the lower the cost per km/mile –Cost decreases at different rates for each of the four modes Truck = most often for short-distance travel Train = used to ship longer distances (1 day +) Ship = slow, but very low cost per km/mile Air = most expensive, but very fast –break-of-bulk point - use of multiple transport modes based on pricing - switch from air or ship to truck during delivery –often seaports or airports –L.A. (CA), Port Elizabeth (NJ), Memphis (TN)