Why Are Situation Factors Important? Chapter 11: Industry Key Issue 2

Proximity to Inputs  Situation factors – issues involved with transporting materials to and from a factory  Goal: minimize the cost for producing product (maximize added value)  Inputs: materials, energy, machinery, and supporting services  Try to locate as close as possible to buyers & sellers  If raw materials cost more to transport, then close to materials  Bulk-reducing industry  If final product costs more to transport, then close to consumers  Bulk-gaining industry

Proximity to Inputs  Copper – bulk-reducing industry 1.Mining – most of what is mined is waste (gangue), copper is less than 1% 2.Concentration – increasing amount of copper to about 25% 3.Smelting – reduce impurities even more (to as much as 99% copper) 4.Refining – final step for purest copper  Most copper mines found in SW US

Proximity to Inputs  Steel – bulk-reducing but changing location  Best locations have access to iron ore & coal  Changes over time: 1.mid 1800’s – mostly in Pittsburgh area 2.Late 1800’s – moved toward west end of Lake Erie 3.Early 1900’s – southern end of Lake Michigan 4.mid 1900’s – East & West Coasts (imported iron ore) 5.Late 1900’s – mostly closed except where close to markets (Midwest & East Coast)  Today scrap metal is most important for production

Proximity to Markets  Three types of industry prefer proximity to markets:  Bulk-gaining, single market, & perishable  Bulk-gaining  Fabricated metals  Metals that are shaped and combined (welded & riveted)  Automobile manufacturing the biggest user of fabricated metal  Beverage production  Water (the main ingredient) is available everywhere  Cheaper to ship other ingredients and prepare closer to consumers

Proximity to Markets  Single Market Manufacturers  Only have one or two costumers  Close location means products can be shipped and used instead of extra costs associated with storage  The smaller the part the greater distance it can be from the assembly plant  Perishable Products  Need to be close so doesn’t spoil  Newspaper is the same: too much time to get it out = not “news” anymore

Shipping  Trucks – short distance delivery  Loaded & unloaded quickly  Train – coast to coast delivery  Don’t need to make stops, unlike trucks  Can haul larger loads  Ships – very low cost/mile  Slower but good for intercontinental trade  Air – most expensive  Small-size but high-value products  Many methods are often employed  Containers have helped make it efficient  More modes means more expensive