Page 534 - Business Principles and Management

Chapter 19 • Product Planning and Production Management

most of the customers can be found in one
part of the country, when they need the prod-
ucts regularly and rapidly, or when trans-
portation costs of the finished products will
be very high.
Manufacturers that supply parts for the
auto industry usually locate near the automo-
bile production facilities. Some companies
locate near seaports if they have important
markets in other countries. Because soft drink
companies must provide a regular, fresh
supply of their product to many stores and
businesses, they have bottling plants and
distribution centers in most cities to reduce PHOTO: © GETTY IMAGES/PHOTODISC.
transportation costs.
Today some states are developing large
air freight centers. These are airports that are
surrounded by efficient distribution centers
and have easy access to interstate highways
and rail lines. Air freight centers are being
created to attract manufacturing businesses
that need to ship products quickly by air. What factors influence the
location of a manufacturing
ECONOMIC AND LEGAL FACTORS business?
A company also considers the type and amount of taxes it must pay in the loca-
tion of its manufacturing facilities. Some cities offer reduced tax rates or may
even waive some taxes for several years to encourage new businesses to locate
there. Others have taxes on inventory and equipment that increase the costs of
business operations. Most towns and cities use zoning laws to restrict where
businesses can locate and how they can operate. Environmental regulations con-
trol the use of water and energy as well as require businesses to avoid polluting
the water, air, and land.

CHECKPOINT

Why have some U.S. manufacturers relocated to China?

Production Planning

Developing a production plan can be compared to planning a meal. All the ingre-
dients must be available in the right quantities and at the right time. Cooking
utensils need to be assembled. Some foods require longer cooking times than
others, so preparation of each item must begin at the correct time. If scheduled
and completed correctly, all the dishes can be served at the same time.
When planning production, the company identifies all the resources required
to produce the product and estimates when each will be needed and in what
quantity. Because production occurs over a period of time and in a sequence, the
company will not need all resources at once. If the company receives the materials

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