2. Bulk Reducing vs. Bulk Gaining Industries
Chapter 11-Key Issue #2
Why are situation and site factors important?

3. Proximity to inputs
Manufacturers try to locate their factories as close as possible to both buyers and seller
Every factory uses inputs
Inputs= materials, energy, machinery and supporting services

4. Pg. 388
“The optimal plant location is as close as possible to inputs if the cost of transporting raw materials to the factory is greater than the cost of transporting the products to consumers.”

5. Proximity to markets
Manufacturers try to locate their factories as close as possible to both buyers and seller (repeat)

6. Pg. 388
“The optimal plant location is as close as possible to customer if the cost of transporting raw materials to the factory is less than the cost of transporting the products to consumers.”

7. Mineral Resources
Minerals are important inputs for many industries because they have an abundance of industrial uses
Non-metallic minerals
90% that humans use
Building stones, gemstones
Minerals used in fertilizers
Nitrogen, phosphorus, calcium, sulfur
Metallic minerals
Valuable for fashioning machinery, vehicles, and essential elements of contemporary society
Malleable and ductile
Good conductors of heat and energy
Ferrous alloys
Chromium, manganese, nickel, titanium, and tungsten
Non-ferrous alloys
Aluminum. Copper, lead, lithium, magnesium, zinc, and precious metals

8. Inquire and Think!!! “So What?”
Reflect on your notes so far and discuss with students around you, what have we learned so far that is important or worth further inquiry?

10. Bulk-Reducing Industry
Definition=An industry in which the inputs (materials, etc.) weighs more than the final product
(raw materials weigh more than the final product)
Needs to be located near its source of inputs to minimize transportation costs

12. Copper Industry Mining: Concentration: Smelting:
the ore extracted is mostly waste
Concentration:
transforms the heavy, bulky copper ore into a much lighter material of high value
Smelting:
input for the smelters, who remove more impurities (bulk-reducing example)

13. Bulk-Gaining Industry
Definition= Industry that makes something that gains volume or weight during production
(finished product weighs more than the raw materials)
Needs to be located near where the product is sold to minimize transportation costs
More expensive to transport

15. Bulk Reducing Examples (do not write)
Copper
Steel
Finished copper bar weighs less than the copper ore used to make the product
Several steps in the copper process that are bulk reducing
Most foundries also need to be located close to energy sources (part of inputs)
Steel is an alloy of iron, manufactured by removing the impurities
Two inputs for steel are iron ore and coal, weighs more than the final product
U.S. steel production location has changed b/c of changing inputs
Today, more concerned with being close to markets

16. Bulk Gaining Examples
Fabricated Metals
Beverage Production
Factory brings together metals (like steel) as inputs and transforms them into a more complex product
Located near markets because products are much bigger
Largest market for fabricated metal and machinery is motor vehicles
¾’s of vehicles sold in the U.S. are assembled in the U.S.
d/ /#
Empty cans or bottles given to producer and filled with beverage- thus adding bulk/weight
Water- heavy to transport, #1 ingredient in beverage

17. Single-market Manufacturer
Specialized manufacturers with only 1-2 customers
Close proximity to customers
Producer of parts for motor vehicles
Ship directly to the carmaker’s plants

18. Perishable Products Must be located near their market Bread and milk
Example: Newspapers, why is this “perishable”?

19. Motor Vehicle Production and Sales
Important to produce vehicles near market (why?)
Regional distribution of production is extremely close to that for sales
However, carmakers operate assembly plants in all 3 major industrial regions

20. Changing Situation Factors: Steel
In the past, steel production was a good example of a bulk-reducing industry that located near its inputs
the increasing importance of proximity to markets has contributed to the growth of steel mini-mills

21. Changing Distribution of World Steel Production
Between 1980 and 2013, the share of world steel production declined to 27% in developed countries (down from 81% in 1980)
Between 1980 and 2013, the share of world steel rose to 73% in developing countries (up from 19% in 1980)

22. Truck, Train, Ship or Plane?
Trucks – short distance delivery
Rail – used for 1+ days, longer to load, no daily rests
Ships – very long distances, slower than land based
Air – very expensive…used for speedy delivery, small, high-value packages

23. Break-of-Bulk Points Mixed modes of delivery are often used
Break-of-bulk point: a location where transfer among transportation modes is possible
Containerization
Costs rise each time inputs or products are transferred from one mode to another

24. Just-in-Time Delivery
Shipment of parts and materials arrive at the factory moments before they are needed
Suppliers must locate very close to they factories they supply
Advantages:
Reduces inventory costs
Allows for reduction of factory size
Example: computer manufacturers
Disruptions:
Natural hazards
Traffic
Labor unrest

25. Stop here

26. Site Factors in Industry
For some firms, site factors are more important than situation factors in locating a factory
The three most important site factors are labor, capital, and land

27. Labor Most important site factor on a global scale
Variation of labor costs around the world is large
½ billion workers are engaged in industry worldwide
China has 1/4th
India 1/5th
All developed countries combined: 1/5th
Labor-intensive industry
An industry in which wages and other compensation paid to employees constitutes a high percentage of expenses

28. Capital
The funds needed to establish new factories or expand existing ones