Transport Costs Surfaces and Location

Transport Costs Surfaces and Location

Weber’s location triangle can be solved by the generation of cost surfaces. This example assumes that to produce 500 tons of a good to be sold at market M, 1,000 tons and 800 tons of raw materials available at S1 and S2 respectively are required. Considering transport costs of $1 per ton-km, the goal is to find an optimal location P that minimizes total transport costs. From each point (M, S1, and S2) isovectors (lines of equal transport costs) can be drawn. For instance, the $1,000 isovector from market M indicates that at that location (along the line) it would cost $1,000 to transport the 500 tons to M. Concurrently, the $1,000 isovector from supply source S1 indicates that it would cost $1,000 to transport 1,000 tons from S1 to that line. By overlaying these isovectors, a cost surface can be estimated and where point P corresponds to the minimal summation of total transport costs. Figuratively, P is at the “bottom” of the cost surface.