Key Issue #2: Why Do Industries Have Different Distributions? Situation Factors – Involve transporting materials to and from a factory (resource to factory

Key Issue #2: Why Do Industries Have Different Distributions?

• Situation Factors– Involve transporting materials to and from a factory

(resource to factory to goods to market)– Inputs: raw materials, parts, machinery, energy– Farther the distance, the higher the transportation costs

– want to find most efficient location between inputs & customers/market

– Alfred Weber – Least-Cost Theory (Weberian Theory)① Proximity to Inputs• Bulk-reducing industries (input is more bulky than product;

loses weight/bulk through processing)• More expensive to transport bulky inputs; these industries

locate close to inputs


• Situation Factors① Proximity to Inputs• Copper Industry

– Copper ore – in U.S. it is about 0.7% copper; waste is known as gangue

– Process:» Mine the copper ore – less than 1% copper» Concentrate the copper (copper mills) – 25% copper» Smelting (copper smelters) – matte (60%), blister (97%),

anode (99%)» Refining - 99.9%; not as bulk-reducing

– AZ has most mills & smelters (and most mines-2/3)– Importance of source of energy – often inexpensive

hydroelectricity


• Situation Factors① Proximity to Inputs

• Origin of the Steel Industry– Bulk-reducing industry; steel is an iron alloy– Formed by removing impurities such as silicon, phosphorus, sulfur, & manganese;

add limestone & chromium– Wrought-iron (rivets, bolts, fences)– Cast-iron (pipes, engines, machines, pots)– Pig-iron (processed iron used in steel)– Steel (weapons, tools, buildings, ships, machines, autos)– Steam engine (1769 by James Watt in Glasgow, Scotland) – kept ovens heated

properly for steel; also benefited textiles– Henry Cort (1783) – puddling & rolling techniques– Needed a source of carbon to heat furnaces & steam engines (wood/biomass at

first; later coal)– Coke – purified carbon made from coal, more combustible – used first in iron

production by Abraham Darby at Shropshire– Steel – more durable than iron but not cost effective until 1855 Henry Bessemer

(Bessemer steel-casting process)


• Situation Factors① Proximity to Inputs

• U.S. Steel Industry– mid-1800s – near Pittsburgh (SW Pennsylvania) – near iron & coal in

Appalachians– Late 1800s – steel mills built near Lake Erie (Cleveland, Youngstown, Toledo in

OH; & Detroit, MI) – shifted due to rich iron ore in Mesabi Range of northern MN (shipped on Great Lakes); coal continued from Appalachians

– 1900 – mills in Gary, IN & Chicago – closer to Mesabi Range; more iron used in steel than coal

– Early-mid-1900s – new mills on East & West Coasts (Baltimore & Trenton, NJ) – imported iron ore from Canada, Venezuela, other countries; increasingly used scrap iron

• Changing U.S. Steel Industry– Many steel plants have closed; open ones have increased production– Access to markets more important than to inputs now– Steel “minimills” – usually only complete one step in process; less expensive to

operate & build; makes up 25% of U.S. steel market; locate near cities/markets; use scrap metal as input


• Situation Factors② Proximity to Markets

• Bulk-gaining industries – gain volume/weight/bulk during production– Bottling (soft drinks, water, alcohol, etc.)– Soft-drinks – input syrup (concentrated, easy to transport) & water (more

bulk, expensive to transport); bottlers are in hundreds of communities using local water; syrups (proprietary recipes by CocaCola & Pepsi, etc.) shipped

– Filled bottle is same volume but heavier than an empty bottle; minimize cost of transportation by being close to market

• Fabricated Metals & Machinery (Assembly)– Steel, other metals, & parts assembled into a more complex product (largest

volume/weight/bulk)– TVs, refrigerators, air conditioners, appliances, farm machinery, office

machinery– Machine shops/metal fabricators – shape metal into structural pieces for

building, bridges, vehicles, machines– Larger volume than sum of parts – cost of shipping to consumer is most

important factor


• Situation Factors② Proximity to Markets• Fabricated Metals & Machinery (Assembly)

– Motor vehicles – average of 3,300 lbs; 54% steel, 11% iron, 8% plastic, 7% aluminum, 6% fluids, 4% rubber, 3% glass, 6% other metals

– $200 billion worth of parts in new vehicles in U.S. annually– 60 final assembly plants; parts produced at thousands of plants– Most U.S. assembly plants located in interior; “Auto Alley” – MI to AL

(I-65 & I-75 corridors); importance of access to population/market– Change in past 30+ years – Ford & GM once divided U.S. into regions

& located assembly plants in each in/near large cities– Now, plants closed on East & West coasts; new plants built in interior;

plants specialized for single models & nationwide distribution (100 models in 1950 vs. 700 in 2000)

– Japanese & German automakers have also located assembly plants in the interior U.S.


• Situation Factors② Proximity to Markets

• Single-Market Manufactures– Auto parts manufacturers once made in Michigan & shipped to

warehouses/distribution centers; then sent to assembly plants– Now, direct shipping from parts assemblers to auto assemblers – located in

Auto Alley; practice Just-in-Time delivery (used immediately at assembly plant not stored)

• Perishable Products– Locate near markets– Food producers (bakers, milk, etc.)– Frozen, canned, preserved foods can be located further from market (cheese

& butter also)– Daily newspapers

» Europe – national newspapers can be printed in largest city & transported around the country (small sizes)

» Satellites/Internet allow U.S. national newspapers to be printed in multiple cities and shipped (NY Times, USA Today, Wall St. Journal)


• Situation Factors– Ship, Rail, Truck, or Air?

• Cheapest option varies with distance – the farther the distance, the lower the cost per mile (labor cost of loading & unloading is major cost – called the terminal cost)

• Trucks – short distances, quicker/cheaper load/unload, flexible• Train – long distances over land• Ships – very long distances over water• Air – most expensive for all distances; advantage of speedy delivery

of small-bulk, high-value packages; often combined with truck from airport to local delivery

• Break of Bulk Points– Costs rise each time inputs or products are transferred from 1 mode to

another; may have warehouse for storage– Break of bulk – location where transfer among modes is possible & cost

effective (seaports & airports, intermodal facilities)


• Situation Factors– Footloose Industries• Industries for which transportation cost is not a factor• Can be located anywhere• Produce small, high value products that don’t lose

value• Often employ a smaller workforce• Usually low to no pollution• Examples: diamonds, computer chips


• Site Factors① Labor• 150 million employed in manufacturing worldwide according to UN

(20% in China, 10% in U.S.)• Labor-intensive industry – where wages & other compensation paid

constitutes a high % of expenses• In U.S., labor accounts for 11% of manufacturing cost (higher = labor

intensive, lower = capital intensive)• MDCs – average wage > $20 per hour; add health care,

retirement/pension, other benefits• LDCs – average wage < $5 per hour• High wage industry does NOT equal labor intensive

– Auto workers paid more than textile workers, but auto wages account for low % of cost (more in materials)

• Textiles – woven fabrics; usually low-skill, low-cost labor– 6% of world manufacturing income, 14% of labor


• Site Factors① Labor• Textile & Apparel Spinning (yarn, thread)

– Before Industrial Revolution, spun at home by women & children; collected by merchants (cottage industry)

– Richard Arkwright (1768) – spinning frame, carding process, first textile mill (located near moving water for power)

– Cotton & wool (natural fibers) account for ¼ of thread today– ¾ of thread now synthetic fibers: regenerated (rayon) or true

synthetics (petrochemicals such as nylon & polyester)– Spinning is labor intensive – ¾ of spinning in LDCs (China,

India, Pakistan, Indonesia); only major MDC cotton grower & spinner is U.S.

– Synthetic fibers – 50% LDC/MDC– Steam engine improved textile mill production


• Site Factors① Labor

• Textile & Apparel Weaving (Cloth, fabric)– Traditionally worked by men (looms are large, require physical hand

strength)– Edmund Cartwright (1785) – power loom– Weaving more labor-intensive than spinning – 86% in LDCs (China, India)– Bleached & dyed before being cut into patterns– Chemical industry often developed with textiles – bleach, dye; also, food

processing & preservation (drying, fermenting, pickling, preserving, canning)

• Textile & Apparel Assembly (Sewing)– Garments, carpets, home products (linens, towels, curtains), industrial uses

(auto/furniture upholstery)– Sewing Machines – Thimonnier in France (1830), Singer in U.S. (1850s –

infringed Elias Howe’s 1846 patent)– Asia produces ¾ of shirts/tops, ½ suits/dresses, most

undergarments/nightwear, much of the pants/skirts– Europe & North America produce more woolens, coats– High-value, luxury clothing often still made in Europe, North America


• Site Factors② Land

• Land suitable for a factory can be found many places• Critical to include natural & human factors (climate, topography,

recreational opportunities, cultural facilities, cost of living, etc.) – attractiveness of a site

• Proximity to low-cost energy sources – rivers & forests before industrial revolution, coal in late 1700s, electricity in 20th century

• Electricity produced from: coal, oil, natural gas, hydroelectricity, nuclear, solar, wind

• Industries can purchase at lower rates than homes from local utility companies (use much more electricity)

• Aluminum requires large amount of electricity – usually locate near dams for low-cost hydroelectricity– Alcoa, Inc – world’s largest aluminum producer; plants in Massena (NY), Alcoa

(TN), Badin (NC); owns its own dams on Columbia R. in WA, Ohio R. in IN & Cooper R. in SC


• Site Factors③ Capital

• Must borrow money to build new factories & expand/refurbish existing

• Auto industry developed in MI in early 1900s in part due to the area banks being more willing to lend money than eastern banks

• Silicon Valley in central CA (Palo Alto, San Jose, etc.) – high-tech industries; considered very risky; banks lent money more freely than other areas of the country

• ¼ of all capital in U.S. is spent in Silicon Valley• Proximity to skilled labor, higher education (Stanford, Cal-Berkley,

Cal PolyTech, etc.)• Agglomeration – clustering of similar businesses to reduce costs,

attract customers, share/do business with other• LDCs – capital is very hard to come by; must borrow from MDCs;

may be seen as too risky/unable to repay debt

Documents

Key Issue #2: Why Do Industries Have Different Distributions? Situation Factors – Involve transporting materials to and from a factory (resource to factory