CHAPTER 3:

Factors of Industrial Distribution

3.0: Introduction and objective

Industries seek to maximize profits by minimizing costs. That is why
geography intends to explain why one location may prove more profitable for a
factory than others. This brings us to the notion of situation and site as major
factors of industrial location. Although a variety of situation and site costs explain
the location of industries, the particular combination of critical factors varies
among firms. This section explains the reasons why industries prefer to locate in
one area than the other.

Objective of the chapter

At the end of chapter three, learners are required to explain the following:

1. Learners must be able to make a difference between situation and site factors
in industrial location.
2. Explain the situation factors of industrial location.
3. Explain the site factors of industrial location.

3.1: Situation factor of industrial distribution

Situation factors refer to the cost of transporting both inputs into the factory
and products from the factory to consumers. Every manufacturer buys and sells.
They buy from companies and individuals who supply manufacturing inputs. They
sell to companies and individuals who purchase the product. One objective of
every company is to minimize the aggregate cost of transporting inputs to its
factory and transporting finished products from its plant to consumers. The farther
something is transported, the higher the cost. That is why the manufacturer tries to
locate its factory as close as possible to both buyers and sellers. Two major factors
can be used to explain the situation factor of industrial location.

3.1.1: Location near the source of raw materials (inputs)

All industries use raw materials or inputs from the physical environment or
parts of materials made by other companies for production. Raw materials are the
base of industrialization and are vita for the initiation and sustenance of any
manufacturing. They are scattered all over the world and vary in quality, cost of
exploitation, weight, bulk as well as perishability. As a result of this, industries will
tend to locate beside the source of raw material depending on the evaluation of the
cost incurred in obtaining them. Therefore the degree of influence of raw materials
on the location of an industry will depend on the condition that the cost of
transportation is cheaper. When a raw material witnesses much weight loss in the
manufacturing process, the location of the industry is bound to be nearer the source
of raw material since it will minimize the cost of transportation. This is the case
with heavy weight and bulky materials which are more costly to transport as inputs
than when they have been processed as finished products. Whatever the case, once
the cost of transportation is minimized in the manufacturing process, the choice of
location of an industry will be determined.

3.1.2: Location near the market

Production is a process that becomes complete when the goods are in the
hands of the consumer. This indicates the important role that the market plays in
manufacturing activities since the cardinal aim of industries is to produce goods for
sale. This is significant where the cost of distributing the finished products
constitute an important part of total cost and the greater part of total transport cost.
The influence of the market in industrial location is widening especially as the role
of other factors such as raw material and energy is reducing with time. Industrial
regions are therefore established near consuming areas where there is heavy
concentration of people even where the raw materials are unfavorable.
Manufacturers prefer locating near markets so as to reduce transportation costs of
the final product since they raise total cost and prices of goods. Therefore, if the
cost of moving finished products forms a greater percentage of total cost than
moving raw materials, industries tend to be located nearer the market. However,
despite this position of the market, producers make a comparison of revenue and
costs in the quest of optimal locations.

3.1.3: The influence of transport

It is a very vital economic factor and remains a central consideration in the
problem of industrial location. The road, rail, water and air transport modes are
used to facilitate the arrival of inputs to the factory and the distribution of finished
products to the market. Since the primordial aim of every entrepreneur is to reduce
transport costs, they will always search for areas which are better served with
developed transport networks. This is because of the quest for the least cost
locations to the benefit of more profits. The influence of transport cost depends on
the size and quantity of goods and as well as the distance. Such freight movements
are all taken into consideration as determinant factors of location by
manufacturers. Water transport for example is the ideal for the transportation of
heavy and bulky products while air is best for faster and less bulky ones. The
availability of varied modes of transport will facilitate the transportation of goods
from one place to the other and ease the problem of location. The problem
therefore in the present dispensation is not on the cost of transport, but on the type
of mode used with respect to the quantity and quality of goods transported. The
manufacturer therefore makes a choice and arrives at an optimum result which will
benefit both producer and consumer.

3.2: Site Factors

Site factors of industrial location deal with the influence of land, labour and
capital.

3.2.1: Availability of Land

Land is exerting an increasing influence on industrial location nowadays
than in the past even though technological advances have made modern industries
more space efficient recently. During the period of the industrial revolution,
entrepreneurs had a free choice of location and were only bothered on the payment
of the cost of the desired area. In recent times however, demand for land by
industries has become very high with varied constraints. The modern industry
needs more land than the traditional ones since their design is horizontally
structured. Land in recent times is needed to erect the plant, warehouse and
residential quarters for workers as well as parking space for those not at the
resident sites. Much space is as well needed for future expansion envisaged, which
increases the demand for land. These demands make land to be an important factor
in industrial location. Areas of level land are suitable for industrial location since
the cost of construction is reduced. Furthermore, areas were the land is suitable for
waste disposal and is easy to acquire and cheap as well as land that has no
requirements of adapting buildings to recreational facilities as national parks have
lower cost of development. These areas greatly pull industrial location. This
explains why lowlands and level land tend to have high concentrations of
industries than other areas. Some examples are coastal areas of West Africa,
Western Europe, South East Asia, Australia and South America. Despite this
widening need of land by industries, the passage of time instead sees more areas
being placed off limits to industry for environmental conservation.

3.2.2: The influence of Labour

Despite the increasing automation with the use of machines and robots, or
the capital intensive manner of manufacturing, labour remains important in
industrial location since it offers both physical and mental resource to the smooth
functioning of industries. Labour varies greatly in its cost and availability. It is this
geographical disparity that projects labour as a veritable force on industrial
location. The degree of pull of labour on industrial location varies between
industries since they have different labour requirements. Nevertheless, when labour
supply tends to dominate industrial location, the following four conditions exist.
The first is the demand for great quantities of labour in the case where the
industries are labour intensive. In such cases, the industries require huge labour
force of above 2500 workers and therefore tend to locate in areas where labour
stability is ensured especially if they need relatively unskilled one. The second is
the demand for high quality of labour since it is scarce and expensive. This skilled
labour force is highly localized in particular areas especially where their
professional training facilities are and a tradition of industrial skills. An example is
the location of industries in Harvard (USA). And especially in areas of higher
training centers as universities and polytechnics the world over. Others include
high labour costs and special techniques which require the industries to weigh the
costs and determine where to locate in order to minimize it.

3.2.3: The influence of capital

Capital refers to the amount invested to start up a business and keep it in
production. In manufacturing, capita is largely considered to refer to those tools
and instruments of production that are not yet consumed. Capital is necessary for
every operation in the industry. It is needed to purchase land, erect buildings,
purchase and install machinery, pay workers and in the day to day running of the
industry. It can either be physical or fixed capital which refers to the buildings
and equipment which is not mobile or social capital which refer to investment in
housing, schools, hospitals and other amenities valued by the community which
may attract a firm to a particular location. This is inked to those aspects that give
workers comfort and leisure after work. Hence, areas where these social facilities
exist may attract a firm, particularly its management to it, having significance on
industrial location. It can as well be working or circulating capital which is the
money capital. The source of this capital is from the firm’s profits, shares from
shareholders and loans from financial institution as banks. That is why areas of
viable financial institutions attract industrial location. Nevertheless, the role of
working capital in industrial location has significantly reduced in recent times.
This is because, capital is highly mobile nowadays both occupationally and
geographically. It can be easily converted from one use to many others in the
manufacturing process occupationally, while geographically it is easy to raise and
move capital quickly within and across international borders. As a result of its
great mobility, it is the least influential factor in industrial location. Despite the
influence of site and situation factors in industrial location, problems still exist
which are important to study and seek for solutions to ensure a smooth industrial
production and distribution in the world.