The Power Grid in China

In 1990, China produced less than 3% of global manufacturing output by value. Today their market share is nearly a quarter (Economist). To become the world’s largest manufacturing nation, China built thousands of new facilities to handle large-scale production. Unfortunately, the power grid in China was not set up to handle such rapid expansion. As a result, outages and blackouts continue to occur frequently and often without warning. Since manufacturing facilities use the most electricity, they are usually shut off first, especially during hot summer months when power plants are particularly strained.

As China invests in more high-tech machinery for manufacturing, the demand on the power grid continues to increase. In fact, between 2000 and 2010, the country’s electricity output doubled.

Since the Chinese government tightly controls information about the country’s infrastructure, finding recent statistics on power outages is nearly impossible. However, the following limited information on power shortages from summer 2011 is illustrative:

  • Electricity in some areas was turned off one in every four days
  • Factories opened only at night and weekends to avoid high energy demand times
  • Export prices rose 2.8% due to lower productivity and the high cost of using diesel generators

In addition to high growth stressing the power infrastructure, power shortages are also increased by droughts, higher fuel prices, and environmental regulations.

 

Power Loss & the Factory’s Bottom Line

In a study published in Scientific Research and Essay, the authors looked at the effect of power quality on manufacturing costs in the textile industry. They observed a number of negative effects from power shortages that impact the factory’s bottom line.

Here are a few examples from the textile industry:

  • Textile weaving: This equipment has many different sensors, drivers, CPU units, encoders, and other digital devices that operate on various voltages. Interruptions due to electricity loss or fluctuation can lead to several hours of downtime as machines get back up to speed, the breaking of equipment components due to power surges, and the shortened life of the equipment.

 

  • Dyeing process: Like textile weaving, this equipment has many digital and electronic components that can be harmed by power surges. Additionally, process times are increased and materials may be ruined.

 

  • Finishing process: One part of the finishing process is the drying process, which uses a stenter machine with hundreds of control elements. If the fabric is stopped in the dryer, which is an average of 50 meters long, the heat will make the product unusable. Fifty meters of fabric can cost upwards of $1,000.

Although this study focused on textile manufacturing, the same type of issues hold true for garment production. For instance, if a factory has a production rate of 240 pieces an hour and each piece represents a profit of $10, one hour of downtime would cost $2,400 in lost revenue. Manufacturers will have to manage these costs somehow – some of it will inevitably turn into higher costs for product companies.

 

What This Means For Your Product

The effects of these power grid issues can definitely impact product companies that have supply chains in China. Rolling blackouts during hot summer months can easily delay production by five to 10 days, pushing a normal 30-35 day production time closer to 40-45 days.

Not being prepared for delays during summer production can be disastrous for product companies that are relying on consistent inventory to meet customer demand. It’s important to plan extra time for summer production runs so you aren’t demanding turnarounds that the infrastructure can’t meet or end up without product when you need it. At Blacksmith, we help you know the challenges of production and meet them proactively so production speed and quality is never compromised.