Key Issue #4: Why Are Location Factors Changing? Attraction of New Industrial Regions ①Proximity to Low-Cost Labor Industries moving to lower wage locations (especially textile/apparel industries) Move within countries – U.S. in early 1900s – textiles in NE; low wage immigrant labor – Moved to SE U.S. in mid-1900s – small towns in Appalachian, Piedmont, & Ozarks (especially NC, SC, GA, AL) due to low wages, less unionized, interstate highways – SE wage rates at textile mills higher than world rates Move to LDCs – Loss of about 1 million jobs in U.S. (similar in W. Europe) – Transports of apparel to U.S. increased $9 million in 1980 to $60 million in 2000 – From Latin America, China, other Asian countries, rest of world

Key Issue #4: Why Are Location Factors Changing? Attraction of New Industrial Regions ②Outsourcing Transnational corporations identify steps to be completed by low-wage, low-skill labor Labor cost difference often outweighs transportation cost New international division of labor – transfer of jobs to LDCs Outsourcing – turn over production responsibilities to independent providers – Contrast of vertical integration – where a company controls all phases in a complex process – Outsourced production increasingly locating in LDCs – Example: autos » Car makers used to make all parts, then assemble » Now, they outsource parts production & just assemble » Other companies able to make at less cost & better quality (specialization) Each step in process is carefully analyzed to determine most cost-effective locations & whether or not to outsource

Key Issue #4: Why Are Location Factors Changing? Renewed Attraction of Traditional Industrial Regions ①Proximity to Skilled Labor Found primarily in traditional regions (training, experience, education) Fordist or mass production – Each worker performs 1 specific task repeatedly; assembly line – Pioneered by Ford Motor Company (Dearborn, MI near Detroit) in early 1900s – Low-skilled workers, often immigrants from Europe or U.S. South Post-Fordist production (lean or flexible production) – Pioneered by Toyota – Teams – work out tasks in teams – Problem-solving – consensus to work through problems – Leveling – workers, managers, veterans treated as equals (uniforms, cafeteria, parking, etc.) Computer manufacturing – high skill, high wage – Near major universities in CA, MA, NY, TX – High-end apparel/clothing – NE U.S.; more skill in cutting/assembly

Key Issue #4: Why Are Location Factors Changing? Renewed Attraction of Traditional Industrial Regions ②Proximity to Market for Just-in-Time (JIT) Delivery Parts & raw materials for cars, computers Parts arrive at factory daily, perhaps hourly Factory gives parts maker a few days’ notice – exactly what is needed, quantity needed, and when needed Reduces cost of wasteful inventory/warehousing Reduce size of factory (limited storage space) JIT suppliers locate near customers Dell & Gateway eliminated inventory completely to take phone/Internet orders Wal-Mart reduces inventory but shifts inventory responsibility to suppliers (must hold on to inventory in case of sudden surge in demand or for seasonal items) 2 disruptions in JIT – Labor unrest – strike can shut down production or delivery – “Acts of God” – weather (blizzards, hurricanes, floods, tornadoes) or terrorist attacks (9/11 grounded planes for days)