Key Issue #1 & #2

CHAPTER 11: INDUSTRY

Key Issue #3

“Why Are Site Factors Important”

3 Production Factors that Vary Among Locations:• Land, • Labor • CapitalThe most important SITE factor on a global scale is LABORChina supplies 1/4th

world’s labor-- India = 1/5th

– All MDCs = 1/5th

Labor Intensive Industry = an industry in which wages and other compensation paid to employees constitute a HIGH % of expenses Capital Intensive Industry = an industry with a much lower than average expenditure on labor.

Site Factors

Why have most labor intensive industries

moved to LDCs?

Textile industry is labor intensive because requires less skilled, low-cost workers

- 3 principal steps

• Spinning of fibers and other prep work to make yarn from natural fibers

• Weaving or knitting yarn into fabric also finishing by bleaching or dyeing

• Cutting or sewing of fabric for assembling into clothing or other products.

Textiles

Spinning is primarily done in low-wage countries. China produces 2/3rds of world’s cotton thread

Regenerated synthetics are produced from natural raw materials modified to produce fibers suitable for weaving 1st –rayon (cellulose in wood pulp)

True synthetics fibers are produced from chemical substances (such as oil) 1st –nylon from petroleum (1937) –Polyester – leading true synthetic (1/3)

Spinning

Weaving / SewingMen were traditional manual weavers because it was physically hard work

-fabric laced together by hand on a loom -93% worlds woven cotton fabric produced in LDCs – China & India dominate producers –lower labor costs offset shipping costs

Sewing is an older activity than spinning or weaving – needles have been found dating back tens of thousands of years (bone needles/iron needles)

- 1st functional sewing machine invented by French tailor – 1830 - Sewing uniforms for army in 1841. Parisian tailors stormed factory - destroyed the machines fearing they would put them out of business.

Why does China produce more cotton thread than

any other country?

FactoriesEarly factories were located in cities dues to a combination of situation & site factors: • Attractive situation –

proximity to large local market

• Convenience to shipping to national market thru rail

• Attractive site – proximity to large labor supply & sources of capital

• Lacked abundant land!!

Modern Factories - More efficient as 1 STORY Building!Raw materials at one end – go through process to be shipped out at other endLand much cheaper in suburban or rural area – than city center

What are 2 major differences between

situation & site?

Cluster in industrial parks located near suburban highway junctions – trucks move resource/product in & out.

Cheaper land – more efficient and cheaper transport – close to beltways/ring roads surrounding cities

Distinctive Amenities = mild climate, recreational activities, proximity to cultural facilities, and major league franchises

Low cost energy sources – depending on needs of industry i.e. aluminum high energy needs.

Factories

Key Issue #4

“Why Are Location Factors Changing?”

Detroit became center of car industry -Michigan banks more willing to lend $$ to early automotive industry than eastern banks.

Ability to borrow money crucial to distribution of industry in LDCs. LDCs short of funds, so new industries must seek $$$ from MDC banks. But loans often depend on if:

• Stable political system

• Amount of debt

• Economic policies

Development Loans

-Labor is changing dramatically in 21st century. Moving to areas w/ lowest wage rates

-In U.S. labor is shifting to south & west of country /

-In Europe gov’t policies have pushed relocation to economically distressed peripheral areas.

Site Factors

Population moved south 1950-2009 – stimulated by gov’t policies –• TVA – electricity to rural South• road construction in mountains• air conditioning

Right-to-work Laws = deals with labor unions – is very attractive for manufacturers due to keeping out unions and tend to keep wages lower.

• requires a factory to maintain an “open shop” – prohibits “closed shop”

• Closed shop means union and owners agree that all must join the union to work there

• Open shop – joining union is not condition of employment

• More difficult for labor unions to organize in south

Right-to-work Laws

The textile labor force moved from NE to SE during mid 20th century in order to take advantage of lower wages and less ee interest in labor unions

• Appalachians, Ozarks, Piedmont, etc.

• Took advantage of interstate system built in the 1950s.

Convergence – E. & S. Europe incomes lag behind European average

Competitive & Employment Regions –Europe’s core industrial regions – much job losses in recent years.

Gov’t actively encourages industrial relocation to these regions – to strengthen industry

Movement of Labor

Why did European gov’t actively encourage

movement of labor?

What factors helped push labor to the

southeast in the U.S.?

Europe /U.S. world industry change:1970 - ½ 1970 - ⅓2010 - ¼ 2010 – ¼

East Asia – will continue to grow, increasing it’s share of world industry – includes China, Japan, S. Korea (world’s largest producer of container ships)

MDCs losing productions in key industries to LDCs – steel from 1980 -2008 world’s steel production declined 40% in MDCs and grew 60% in LDCs China alone – 38% more than all MDCs together

Changing Industry

Outsourcing = turning over much of the responsibility for production to independent suppliers.

• For example a car maker may have a different manufacturer make cup holders and seats for their car.

• American jobs may be lost as some jobs are sent overseas where they may be completed at a lower cost.

Industry remaining in MDCs:

-Availability of skilled workers and rapid delivery to market

• Computer manufacturing

• High-end clothing

American Industry

What kind of clothing is still

made in the USA?

Fordist/mass production = one workers is assigned one specific task and performs it over and over. (non skilled)

-least cost….

• Post-Fordist/lean production =

Worker is in charge of ordering and

installing part - best quality….

TOYOTA known for Lean Production

1. Teams

2. Problem Solving

3. Leveling

Post-Fordist/lean production

Optimal lean production (meets in middle)

Auto Industry

JIT = Shipment of parts and materials to arrive at a factory moments before they are needed.

• Needed for delivery of inputs like parts and materials (i.e. for autos)

• No cost of inventory storage

• Suppliers must locate near to factory

• Be ready to supply needed parts/materials w/ a few days

BONUS for manufacturers – smaller factory because not as much inventory to store!!!

Just-in-Time Delivery

Less cushion against disruptions in the system.• Labor unrest• “Acts of God”