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11-2 Industry Situation

11-2 Industry Situation. Introduction. What is the purpose of industry? To maximize profit! How? One way is to minimize production “costs”. There are 2 geographical costs: Situation Factors and Site Factors. I. Situation Introduction.

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11-2 Industry Situation

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  1. 11-2 Industry Situation

  2. Introduction • What is the purpose of industry? • To maximize profit! • How? • One way is to minimize production “costs”. • There are 2 geographical costs: • Situation Factors • and • Site Factors

  3. I. Situation Introduction • A) Goal • B) Must consider 2 factors: • Cost of transporting_________ • and then • Cost of transporting_________ • C) Every manufacturer Where do I build my Smiley Face Making Plant??????

  4. II. Situation Factor 1: Location Near Inputs • A) Types of Inputs OR

  5. B) Bulk-Reducing Industry • 1) Definition - the final product weighs LESS than its inputs (raw materials) • 2) So the Wise Choice is to…. • 3) Examples:

  6. Example 1: Copper Industry in North America High Quality Ore is only about 15% copper so It makes sense to locate near the mines.

  7. Notice first the mines, then the refineries/smelters. Most where?

  8. Example 2: Steel Industry • A - Historically: • DONE BY HAND • (Hard work to keep fire • Going-mold the steel) • WHAT CHANGED THAT • IN THE INDUSTRIAL • REVOLUTION?

  9. B) Since the Industrial Revolution • What do you need, in large amounts, to make steel? Coal Iron Ore

  10. C) US Steel Industry has changed locations over time. • 1850 – Started around Pittsburg (coal & iron) • Late 1800’s/Early 1900’s – Moved west (Lake Michigan) closer to new Iron Ore finds. • 1950’s – East/West Coasts of US as Iron Ore has to be imported. • 2000 – Most US Steel Mills have closed and is a product that is imported.

  11. So Traditionally, Steel Plants were located near inputs • As Iron Ore started to run out…

  12. D) Steel Today New! Mini-Mills- use scrap metal (recycled) as main resource- have located near markets around the US

  13. Review WOW! YOU’RE SMARTER THAN YOU LOOK! • So why would an industry locate closer to inputs that to markets???????

  14. III. Situation Factor Number 2: Location Near Markets • ***3 REASONS: Bulk-GAINING, Single Market or Perishable. • A) Bulk –GAINING Industry (Reason 1) • 1) Definition –something that GAINS volume or weight during production. • 2) Examples

  15. Example 1: Beverage Production • What is a soda mostly made of? • Bottles – weight empty • Syrup – weight concentrated • Water – most weight, large % of Soda • So, where do you locate????

  16. Beer Bottling Coors used to be the exception – Why?

  17. Trivia Question: What is the best selling beer in the world? Snow Beer (China) – Sold double Bud Light last year. Why?

  18. Example 2: Fabricated Metals Industry • A) Definition: previously manufactured parts (main inputs) are used to make a more complex product. • B) Industries like: TVs, Refrigerators, etc. Most Important One?

  19. C) Cars! (AKA “Motor Vehicles”)

  20. About 40 car assembly plants in US (3/4th of all cars sold in US are assembled here – or Canada/Mexico.) • Mostly located • Interior of country (Michigan to Alabama) • Along interstate highways (Auto Alley)

  21. Why are most cars manufactured in the middle of the United States? • THEY ARE BULK- _______________ SO NEED TO BE NEAR _________________! (Wait! That’s not where most people live so???)

  22. B) Single-Market Manufacturers (Reason 2) • 1 - Definition: sold primarily in one location so being near that market is critical • 2 – Good Example: • Car parts makers “Just-in-time” delivery

  23. C) Perishable Products (Reason 3) • Definition: must be used quickly. • Examples: bakers, milk bottlers • daily newspapers

  24. Question? • Why are jobs in print publishing declining in the 21st century? • Answer: TECHNOLOGY!

  25. IV. Choice of Transportation Cheapest Slowest Fastest Most Expensive Which is best??????

  26. A) Distance • 1) general rule: further things must be transported the lower the costs per mile • (cost of loading/unloading remains same) • 2) Containerization

  27. B) Type of Goods • 1) Bulky Items • 2) “Perishable”/ “time-urgent” Items $ $

  28. C) Break-of-Bulk Points: place where you change transportation modes • Decision for a company – Should we locate here? (Ex: Seaports/Airports) Cargo removed from ships. . . . . . . . . . . then loaded onto trucks

  29. The End! Beer Truck – What Country???? South Korea

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