Compare transport costs with production networks

Compare transport costs with production networks

Question and record

Is the cheapest factory location always nearest the market?

A fictional plant needs 3 tons of raw material to ship 1 ton of finished output. A mine and market are100 km apart. Freight costs1 credit per ton-km. Candidate sites are the mine, halfway and the market; labor and energy costs are initially equal.

The quantities and graphs are teaching assumptions, not observed policy outcomes.

Mechanism and worked calculation

Industrial-location models compare transport, labor and agglomeration forces. Weight-losing production can favor a raw-material location under simple freight assumptions. Agglomeration offers shared services and labor pools but can also produce congestion and high rents. Outsourcing and offshoring refer to different organizational and geographic changes.

At the mine freight cost is1×100=100. Halfway costs3×50+1×50=200. At the market it is3×100=300. If material need falls to1 ton, all three sites cost100 under linear equal-rate assumptions; other factors can decide.

Challenge the interpretation

A port location offers supplier clusters and skilled labor but higher land cost. A later process uses only1 ton of raw material per ton of output. Global value chains divide design, components, assembly and distribution across places, so one-factory freight arithmetic is incomplete.

Your evidence task

Draw the supply route with tonnage on each leg, calculate all sites, then build a multi-criterion location comparison including labor, energy and supplier links.

Revise your answer to “Is the cheapest factory location always nearest the market?” using both source IDs. Separate the checked calculation from a judgment, and identify evidence that could reverse your judgment.

Vocabulary

Agglomeration: Concentration of activities that can create shared benefits and costs through proximity.

Assumption: A condition accepted for a model or argument; it needs justification before applying the result elsewhere.

Independent extension

Independently extend the investigation “Compare transport costs with production networks” with a documented real dataset or scholarly source. Preserve definitions, recreate one calculation or evidence table, compare a rival explanation and report why the teaching example cannot establish the real-world conclusion.

Worked graph

Segments depict the supplied linear relationships over the shown ranges. Table labels provide a non-color way to identify every series. Axes begin at zero.

Series	Factory distance from mine (km)	Freight cost (credits)
Three input tons	0	100
Three input tons	50	200
Three input tons	100	300
One input ton	0	100
One input ton	50	100
One input ton	100	100