Final answer:
Traditional location analysis may be less effective than locating near other supply chain nodes due to the advantages in logistics, transport costs, and supply chain efficiency. Factors including labor costs, supply reliability, transport quality, governance, and environmental costs also influence site location decisions beyond just proximity to customers or raw materials.
Step-by-step explanation:
Traditional location analysis, focusing on proximity to customers or raw materials, may not be as effective as situating a business close to other supply chain nodes due to various logistical advantages. Shipping finished goods over congested street networks or jammed freeways can increase costs and reduce profits, suggesting locations near uncrowded freeways or those with access to rail or water transport can be more cost-effective. Alfred Weber's Least Cost Location Model indicates that a factory's optimal site is nearest to the input or output with the highest transport costs, although this model considers other factors as well. Cities that serve as major market functions or trade sites often grow larger due to advantageous situation factors, such as a central location or intersection of multiple transportation modes, forming a break of bulk point.
Multiplicity in transport options and connectivity with other logistical hubs can both reduce transportation time and costs and improve supply chain efficiency. In addition to these considerations, factors like the costs of labor and financial capital, availability of reliable suppliers, quality of local transportation, communications, and electrical power networks, tax levels, and governance also play a substantial role in the decision-making process when it comes to factory location. Contrary to the 'race-to-the-bottom' scenario, financial incentives to relocate to areas with weaker environmental rules are often overshadowed by these other determining factors.