Key Issue #4: Why Are Location Factors Changing?

• Attraction of New Industrial Regions① Proximity to Low-Cost Labor• Industries moving to lower wage locations (especially

textile/apparel industries)• Move within countries

– U.S. in early 1900s – textiles in NE; low wage immigrant labor– Moved to SE U.S. in mid-1900s – small towns in Appalachian,

Piedmont, & Ozarks (especially NC, SC, GA, AL) due to low wages, less unionized, interstate highways

– SE wage rates at textile mills higher than world rates

• Move to LDCs– Loss of about 1 million jobs in U.S. (similar in W. Europe)– Transports of apparel to U.S. increased $9 million in 1980 to $60

million in 2000 – From Latin America, China, other Asian countries, rest of world

Key Issue #4: Why Are Location Factors Changing?

• Attraction of New Industrial Regions② Outsourcing

• Transnational corporations identify steps to be completed by low-wage, low-skill labor

• Labor cost difference often outweighs transportation cost• New international division of labor – transfer of jobs to LDCs• Outsourcing – turn over production responsibilities to independent

providers– Contrast of vertical integration – where a company controls all phases in a

complex process– Outsourced production increasingly locating in LDCs– Example: autos

» Car makers used to make all parts, then assemble» Now, they outsource parts production & just assemble» Other companies able to make at less cost & better quality (specialization)

• Each step in process is carefully analyzed to determine most cost-effective locations & whether or not to outsource

Key Issue #4: Why Are Location Factors Changing?

• Renewed Attraction of Traditional Industrial Regions① Proximity to Skilled Labor

• Found primarily in traditional regions (training, experience, education)• Fordist or mass production

– Each worker performs 1 specific task repeatedly; assembly line– Pioneered by Ford Motor Company (Dearborn, MI near Detroit) in early 1900s– Low-skilled workers, often immigrants from Europe or U.S. South

• Post-Fordist production (lean or flexible production)– Pioneered by Toyota– Teams – work out tasks in teams– Problem-solving – consensus to work through problems– Leveling – workers, managers, veterans treated as equals (uniforms, cafeteria,

parking, etc.)

• Computer manufacturing – high skill, high wage– Near major universities in CA, MA, NY, TX– High-end apparel/clothing – NE U.S.; more skill in cutting/assembly

Key Issue #4: Why Are Location Factors Changing?

• Renewed Attraction of Traditional Industrial Regions② Proximity to Market for Just-in-Time (JIT) Delivery

• Parts & raw materials for cars, computers• Parts arrive at factory daily, perhaps hourly• Factory gives parts maker a few days’ notice – exactly what is needed,

quantity needed, and when needed• Reduces cost of wasteful inventory/warehousing• Reduce size of factory (limited storage space)• JIT suppliers locate near customers• Dell & Gateway eliminated inventory completely to take phone/Internet

orders• Wal-Mart reduces inventory but shifts inventory responsibility to suppliers

(must hold on to inventory in case of sudden surge in demand or for seasonal items)

• 2 disruptions in JIT– Labor unrest – strike can shut down production or delivery– “Acts of God” – weather (blizzards, hurricanes, floods, tornadoes) or terrorist attacks

(9/11 grounded planes for days)