location factor transport. why is transport an important location factor? raw materials are...
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Location factor
Transport
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Why is transport an important location factor? Raw materials are unevenly-distributed Transport is essential for moving RM and products
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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
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2 types of costs
Procurement cost = cost of transporting RM to factory
Distribution cost = cost of transporting finished products to market
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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
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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
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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
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Raw material-oriented industry PC rises more rapidly
than DC Lower total cost near
the RM So, where is the
optimal location for industries?
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Market-oriented industry
DC rises more rapidly than PC
Total transport cost is lower at M
So, where is the optimal location for industries?
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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.
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How were goods transported in the past? Simple transport means like carts or
boats Primitive Small carrying capacity Low reliability
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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
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Means of transport nowadays
Sea/land/air Mass transit Speedy Less costly More reliable Global deliveries possible
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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
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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
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How does transport cost affect industrial location?
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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
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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
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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
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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