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KcmcALGeo.
Content1 Introduction
2 Finding out the least cost location
3 Material index
4 Cost profile
5 Location triangle
6 Drawing isodapanes
7 Application
Go to
Go toGo to
Go to
Go to
Weber’s model
Go to
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KcmcALGeo.
Weber’s model of industrial location
Cost minimization approach
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KcmcALGeo.
Average cost
Price/revenue
BA C
Seeking for the least cost location
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KcmcALGeo.
Assumptions
• Presence of an isotropic plain• Natural resources are either ubiquitous or
localized• Transport system is uniform• Labour is at fixed points and of different
wages• Markets are at fixed points and demand is
unlimited
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KcmcALGeo.
Assumptions
• Perfect competition exists, the price of a particular goods is identical.
• Industrialists are economic men, trying to minimize their costs or maximize profits.
• Apart from transport cost, labour cost and agglomeration economies, all other factors are not considered.
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KcmcALGeo.
The three locational factors
• Transport cost
• labour cost
• agglomeration economies
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KcmcALGeo.
Steps of finding out the least cost location
• Step 1: find out the least transport cost site
• Step 2: consider if the production unit will move to a cheaper labour cost site
• Step 3: consider if the production unit will move to a site where
agglomeration economies are available
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KcmcALGeo.
Total transport cost equals to
Cost of moving raw materials to the production unit/ procurement cost
Plus
Cost of moving finished products to the market/ distribution cost
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KcmcALGeo.
Raw material market
Procurement
cost Distribution cost
Total transport cost
Seeking for the least transport cost site
Step 1
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KcmcALGeo.
Groupings of raw materials
ubiquitous localized
pure gross
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KcmcALGeo.
Working out of the material index(MI)
MI = Weight of raw material
Weight of finished product
Method 1
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KcmcALGeo.
Material index of sugar milling:
7 tonnes of sugar cane =
1 tonne of raw sugar
7
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KcmcALGeo.
Material index of beer manufacturing
10 tonnes of wheat = 100 tonnes of beer
0.1
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KcmcALGeo.
Material index of manufacture of cloth:
10 tonnes of yarn =
10 tonnes of cloth1
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KcmcALGeo.
M.I. Greater than 1
Weight-loss industry
Material-oriented
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KcmcALGeo.
M.I. Small than 1
Weight-gain industry
Market oriented
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KcmcALGeo.
M.I. Equal to 1
No weight-gain nor weight loss industry
Footloose location
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KcmcALGeo.
Total transport
cost
Procurement co
st
Distribution cost
R M
Where is the least cost location?
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KcmcALGeo.
Total transport cost
procurementcost
distribution
cost
R M
Where is the least cost location?
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KcmcALGeo.
Total transport cost
Procurement cost
Distribution cost
R M
Where is the least cost location?
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KcmcALGeo.
Tapering freight structure
Distance
Tra
nspo
rt c
ost
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KcmcALGeo.
distance
Transport c o st
Stepped freight rate
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KcmcALGeo.
distance
Transport cost
Road
Rail
Sea
Different transport rates
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KcmcALGeo.
R MTransshipmentlocation
Procurement costDistribution cost
Total transport cost
Locating at a transshipment point
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KcmcALGeo.
Summing up
• Freight rate varies from goods to goods
• Freight rate tends to taper off with increasing distance
• Freight rate varies among different transport means
• Transshipment point offers additional advantage
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KcmcALGeo.
RM1 RM2
M
50km 50kmX
87km
Weber’s locational triangle
100k
m
100km
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KcmcALGeo.
M
RM1
RM2
RM3
(1 unit)
(2 units)
(3 units)
(2 units)
*
Centre of gravity
Using the Varignon frame
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KcmcALGeo.
*R *M
R M(8)
(9)(10)
(11)
Drawing isodapanesLines of Total transport cost
Where is the least cost location?
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KcmcALGeo.
M
Rm2
*
**
Rm2
.
L1.L2.
T($8)
($?)
($?)
$9
$10
$11
Labour saving at L1 & L2 is $3
Which is the critical isodapane ?
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KcmcALGeo.
F1F2. .
($8) ($8)
$10
$12
($10)
($12)
Which are the critical isodapanes?
If F1 & F2 locate side by side,production cost declines by $4
Where will F1 and F2 be moving to?
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KcmcALGeo.
Applicability of Weber’s model
To what extent the model represents the reality?
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KcmcALGeo.
Assumption 1: an isotrophic plain,uniform physical and human settings
Reality: it rarely exists in the real world
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KcmcALGeo.
Assumption2: uniform transport system,freight rate is directly proportional to weight and distance of haulage.
Reality: it rarely exists, freight rate tends totaper off with increasing distance.
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KcmcALGeo.
Assumption 3: labour is at fixed points and with different rates
Reality: labour is more mobile and with different skill levels
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KcmcALGeo.
Assumption 4: markets are at fixed points,perfect competition exists.
Reality: they exist as an area, monopolylikely occurs.
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KcmcALGeo.
Assumption 5: industrialists are economic men, profit maximizers.
Reality: it is hard for them to have complete knowledge, they tend to be a satisfizer.
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KcmcALGeo.
Assumption 6: apart from transport, labour and agglomeration economies, other factors don’t vary spatially.
Reality: land price, government policy, technology and behavioral factors become increasingly significant in industrial location.
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