Transport and Location of industries

Raw Materials and Finished Goods both incur transport costs

• Industries locate where there are efficient, appropriate and cheap modes of transport to move their raw materials goods to markets and the labour force.
• Generally there are two types of transport costs an industry incurs:
  1. Assembly costs (ACs) – these are the costs of collecting or assembling all raw materials used by an industry, including imported ones.
  2. Marketing costs (MCs) – these are the costs of distributing and selling (marketing) finished products to consumers.
• Therefore, total transport costs (TTCs) should equal assembly costs and marketing costs.
• If assembly costs are greater than marketing costs (ACs > MCs), the industry locates at the raw material source.
• If the MCs are greater than the ACs, the industry locates at the market.
• However, most industries choose what is called the least transport cost location to minimize both assembly and marketing costs.
• Other industries are attracted by already existing transport infrastructure more than anything else.
• Some industries locate at break-of-bulk or transshipment points where the mode of transport changes from water to land (rail or road) or vice versa.
• Examples include oil refining and petrochemicals at Port Elizabeth (in RSA), Port Talbot (in UK).
• In advanced countries, most large modern industries rely on imported raw materials and so their location is costal or riverine or along high-speed rails or motorways.
• Similar explanations prevail for export-oriented industries.

To access more topics go to the O Level Geography Notes page