Functions of Food Production
In ancient times, the basic purpose of food processing was preservation, allowing people to store food longer. Today, the industry produces a huge variety of foods. Without these procedures, many products wouldn't be available out of season or in distant locations.
The food industry also provides timesaving options for those who can't spend several hours preparing food from raw ingredients. Some procedures also help improve the quality of life for people with allergies and other dietary limitations, like lactose-free milk or sugar substitutes for diabetics.
While many processes involve preserving a product or providing additional nutrients, others have been controversial because of the potential health risks. However, most facilities today follow strict hygienic codes and are more concerned with the health risks of additives in the products they provide. Many firms also pay more attention to their environmental impact.
Factors Affecting Location
The location of food production facilities depends on many different factors. Companies look for places with the right combination of accessibility, transportation, economies of scale, and favorable legal conditions. Let's look at each of these aspects one at a time.
1. Access to Markets
The logistics of taking products to the final consumer are often complex. Therefore, some facilities look for convenient locations from which they can easily reach consumers. They base their location on the access to consumer markets.
Some facilities are highly automated, requiring little labor. Others require many skilled workers to function, so the access to the labor market is important. Some firms operate in cities where they can find a suitable workforce or in nearby areas. In this case, location is determined by the labor market.
Then again, taking raw materials to the facilities might be complicated, so some businesses prefer to be near the source of raw materials. These facilities prioritize the resource market.
For example, the Turkish and Iranian caviar industries developed on the coasts of the Caspian Sea, close to where the fish came from. The eggs are the only part of the animal they used, so it was more convenient to be close to the water, transporting the small finished product, than taking the fish somewhere else.
2. Transportation
Regardless of the product, packaging and transportation are always required for taking it to the consumers. Therefore, infrastructure is a very important factor. If a facility is in a remote, rural area only accessible by narrow roads, the transportation costs will be high and the business is unlikely to be profitable.
Having easy access to major roads, ports, or railways is a strong competitive advantage and can help keep production costs low. Transportation is determinant and is one of the reasons why so many facilities are located close to major transport channels.
3. Economies of Scale
The principle of economy of scale is that the more units, the lower the individual cost. Mass production is usually more effective and affordable than individual production.
Locating one small facility close to each farm would probably be a logistical nightmare and a financial disaster. Most companies prefer taking the product from their suppliers to one single factory where they mass produce their product.
Heinz uses tomatoes from farms in several states but mostly produces the well-known ketchup in one plant, located in Ohio.
4. Government Policies
If a local, regional, or national government imposes high taxes on food-processing activities, manufacturing facilities are very likely to move to another region that offers similar infrastructure but enjoys friendlier taxes. On the other hand, if a government offers subsidies and incentives, industries are more likely to consider operating in that area.
Companies also consider other legal factors such as labor regulations and minimum wages. Two regions might have skilled workers but in one of them, the worker cost per hour might be higher because of wages and other benefits required by law. Therefore, companies often try to establish where labor costs are low.
The Indian government has taken steps to be an attractive location for food facilities. It has established subsidies and state-run facilities for prepared food industry workers, it promotes foreign investment, and labor costs remain low. The government's goal is to attract more producers in order to meet the growing demand for food and also to bring employment and contribute to the national development.
Lesson Summary
All right, let's take a moment to review what we've learned in this lesson. We learned about food production facilities, which are industries that take raw fruits, vegetables, or animals and process them to produce ingredients used for cooking or into foods that can be directly eaten. Some are vegetable preservation, meat processing, and sugar refineries, among others. Food-processing helps to preserve food and has evolved into a huge variety of products. It offers variety, timesaving options, and products for people with special dietary conditions.
Some factors affecting the location of food production facilities are:
- Access to markets, which affects whether a factory is located close to consumers, labor or resources.
- Ease of transportation. Most companies are located close to transport channels.
- The economy of scale (which basically states that the more units, the lower the individual cost) often leads companies to process food in big facilities despite the raw materials coming from multiple places.
- Government policies that might attract or prevent food facilities from establishing operations in a certain region.
