Location factor

Transport

Why is transport an important location factor? Raw materials are unevenly-distributed Transport is essential for moving RM and products

What sort of ind. is significantly influenced by transport cost? Ind. producing large, heavy, bulky but low val

ue goods Examples: jewellery, computer/hi-tech and hi

gh quality fashionable clothes

2 types of costs

Procurement cost = cost of transporting RM to factory

Distribution cost = cost of transporting finished products to market

2 elements in transport costs (Hoover)

Terminal cost = cost of using terminal facilities for handling the goods and storage which is fixed.

Haulage cost/line haul cost = freight rate, e.g. wages paid to drivers, fuel used in transport, insurance, etc., which vary according to the length of journey

Tapering freight rate

Average transport cost falls with distance

Initial steep rise But followed by gently

tapering curve Long haul cheaper ∵

TC is spread over Short haul cost more

∵ need to pay fixed TC

Step-shaped relationship

Transport cost may increase in steps

e.g. MTR fare Rate of increase↓as dis

tance ↑ Places far away from o

ne another are charged the same

e.g. postage

Raw material-oriented industry PC rises more rapidly

than DC Lower total cost near

the RM So, where is the

optimal location for industries?

Market-oriented industry

DC rises more rapidly than PC

Total transport cost is lower at M

So, where is the optimal location for industries?

Break-of-bulk points When goods must be

transshipped from A to B (e.g. rail to ship), additional terminal & handling costs are incurred

It destroys the long-haul advantage

So locating factories at the transshipment point can avoid this extra cost

i.e. factories are usually located near ports/rail terminals

These points are called break-of-bulk points.

How were goods transported in the past? Simple transport means like carts or

boats Primitive Small carrying capacity Low reliability

Influence on ind. location

High transport cost Accounts for high % of total production cost ∴ great influence on ind. location Poor technology required more RM PC > DC ∴ RM-oriented

Means of transport nowadays

Sea/land/air Mass transit Speedy Less costly More reliable Global deliveries possible

Influence on ind. location

Relatively lower transport cost Accounts for very low % in production cost Less influential than other factors/other factor

s being more important, e.g. labour RM can be made more ubiquitous ∴ Location is not tied to RM Industrial decentralization is more than loc

alization Products are served for global market

Transport rates

TC for road is the cheapest

TC for air is the highest For short haul, road

transport is the cheapest

For long haul, sea transport is the cheapest

Zones identified

How does transport cost affect industrial location?

Locational flexibility of ind. ↑

Many inputs are made ubiquitous Availability of skilled and professional

workers and IT are more important Improved highways, railway and shipping

services help lower transport cost

Industrial dispersion

Improvement in transport technology Population decentralization (suburbanization) Shift of labour from inner city to suburbs Efficient linkages between inner city and subu

rbs Cheaper land available for expansion Results in industrial dispersion e.g. industrial estates

Regional specialization of ind.

Well-developed transport networks attract more industries

Concentration of manufacturing ind. at nodal points The no. of factories serving isolated market areas ↓ Centralization in production Enjoy scale of economies Easy to specialize in particular kinds of production Globalization high value operations + R&D in M

DCs while low value labour operations in LDCs

Examples of regional specialization Brewing in USA – Milwaukee Automobile ind. in USA – Detroit Automobile ind. in Nagoya, Japan Ship-building around Inland Sea, Japan Electronic ind. in Silicon Valley, USA Textile ind. in Changjiang Delta, Central Chin

a Toy industry in PRD