What Is a Material Index? Definition, Rule, 4 Facts

A material index is a collection of material qualities that, when maximized or decreased, optimizes the performance of an engineering component in some way.

What Is a Material Index?

The material index is a factor that industrial enterprises frequently evaluate when determining where to locate. This index indicates the ratio between the weight of local materials used to create a product and the weight of the completed product.

What Is a Material Index?

Rules Of Material Index

When the material index is larger than 1, the raw materials lose weight during the production process. If the material index is less than 1, it implies that weight is added during the manufacturing process, so that the final product weighs more than the local raw materials utilized.

This is crucial when comparing the cost of transporting raw materials to the cost of delivering the final product.

Economist Alfred Weber’s model of industrial location

Alfred Weber’s concept of industrial location implies a company chooses the place with the lowest costs for establishing operations. A company would like to be located close to either the source of its raw resources or its markets, a decision influenced by the expense of transporting the commodities.

In actuality, a decision on where to site would also be influenced by other elements of company economics, such as labor costs, which may offset any savings on transportation of products.

What Is a Material Index?

Weber’s model predicts that companies with a high material index will seek to locate close to the source of their local raw materials in order to save transportation costs. In this instance, the business is considered to be materially oriented.

Examples of industries with a high material index include food processing, where components are extracted from agricultural inputs, such as sugar refining.

Other conditions being equal, it is expected that these companies would save money by locating close to where agricultural raw materials are produced.

Special Point

Industries with a low material index would be more inclined to locate closer to their final markets, hence decreasing the expenses associated with shipping produced goods.

What Is a Material Index?

These companies would possess a market orientation. A sector with a low score may employ generally available, non-regional resources.

A maker of soft drinks, for instance, would utilize substantial amounts of water throughout the manufacturing process. Even if the company used local fruit in its manufacture, the final product would outnumber the amount of local fruit used.

Conclusion

A material index is an index that tells you the value of a material based on its chemical composition and how it reacts with other materials.

A material index gives you a quick estimate of the value of a material, so you can plan your project without having to measure each and every piece of material yourself.

What Is a Material Index?

Some common materials indices are the Cost of Goods Sold index, which gives you an idea of the total cost of goods sold for a period, and the Gross Profit Margin index, which tells you how much of the purchase price was made up of markups, discounts, and profit.

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