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AP Human GeographyMrs. BellisariChapter 11 – Industry and Manufacturing 4886960142240Key Issue #2Alfred Weber’s Least Cost Theory or Theory of Industrial LocationGerman Economic GeographerPublished Theory of Location of Industries in 1909.“What is the best (most profitable) location for manufacturing plants?”3 major factors that determine location of manufacturing 1. Transportation (most important)- Raw materials (inputs) to factory- Finished goods (outputs) to market- Distance and weight most important factors.2. Labor- High labor costs reduce profit- May locate farther from inputs/ market if cheap labor can make up for added transport costs.3. Agglomeration- Similar businesses cluster in the same area. - Businesses support each other, reduce costs Situational Factors of Industrial LocationTransportation costs Near who we buy from or who we sell to?Mode – Rail, truck, ship, or air?Line cost (MODE) vs. terminal cost (handling of goods at each end of a route)Total costs per mile Route flexibilityBreak of bulk point/entrepots(terminal cost)Airports and seaports most commonWhat is a “Break of bulk point”?How does it relate to modern container shipping? 4762956-303581Bulk Reducing Industry – Proximity to inputs “Material Orientation” Inputs weigh more that final product. Weight is lost during the production processCost of shipping inputs to factory > cost of shipping outputs to market.Therefore, factory is located near raw materials/ inputs.Examples: copper, steel, lumberBulk Gaining Industry – Proximity to Markets“Market Orientation”Finished product weighs more than the inputs.Weight is gained during the production process.Cost of shipping outputs to market > cost of shipping inputs to factory.Therefore, factory is located near the market.Examples: Automobiles, beverages, single-market producers (EU countries producing just for European countries), perishable products 1756410133353365509525Single Market Manufacturers – “Market orientation”Factories that produce products for 1 or 2 customers.Ex. “We build the seats for Ford cars”Finished seats are shipped to assembly plant.Agglomerate near the larger plant. This allows for “Just In Time” delivery. Parts are sent to factory right as they are needed…reduces need for warehouse space. Perishable Products -“Market Orientation”Must be located near marketShort shelf live/ fast expirationBread goes bad within the weekNewspaper good only for 24 hrs. - “Yesterday’s News!”What theory is this similar? Why? Site Factors in Determining Industrial LocationLabor (most important in labor-intensive industries like textiles) – Cost and Skill-levelLandCost of landCost of livingAmenities/ClimateAccess to Capital – loose investors – people willing to take chances!Alfred Weber's model of the “Least Cost Theory”Companies attempt THREE thingsMinimize transportation costs (most critical)Air, truck, rail, or ship Break of bulk transportation nodes important in reducing costsMinimize Labor costs Maximize Economies of AgglomerationCheaper suppliesAbundance of skilled labor Larger marketSpecialization of each company/Division of laborEx: Silicon valley Ex: Michigan Ex: Lake Erie-Pittsburgh area Agglomeration diseconomies – pollution, increase commute time/congestion, high taxes, high bid rents 658495269875Silicon Valley, California ................
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