Worker Deficit Spurs Automation

An Expert's View about Sourcing in China

Posted on: 16 Apr 2010

Prohibitive costs limit adoption to tier 1 enterprises, but local governments are doling out subsidies to encourage more factories to upgrade.

 

Raising compensation and benefits to retain or entice workers is not the only approach China suppliers are taking to maintain output levels amid a still challenging labor situation. Many are also turning to automation.

 

Swimwear makers that produce their own fabrics, for instance, are replacing manual knitting machines with computerized units. In addition to boosting efficiency, the advanced equipment minimizes the need to retain a large workforce.

 

The same is true for suppliers of fashion jewelry and watches. Companies are bringing in automatic thermal presses, and copper and phosphorus slug cutters to boost productivity even with a downsized labor pool.

 

Bathroom scale manufacturer Zhongshan Camry has actually been able to raise daily output from 10,000 units to 50,000 when it imported surface-mount equipment from Samsung of South Korea. The size of its PCB insertion department was also reduced 70 percent.

 

The company also shifted from manual to automatic calibration, thereby improving the scales' accuracy and reaction times. Developed in-house, equipment for the latter process was introduced at the start of 2009 and has trimmed the number of workers in the production line from 50 to 45. It has raised efficiency by about 30 percent as well.

 

Toothbrush and massager specialists are also investing in computerized and automated machines. Doing so has helped speed up production turnaround and minimize manual processes.

 

A solution that emerged during 2007's widespread worker shortage, upgrading equipment helped many suppliers ease their dependence on labor, while improving quality and stabilizing delivery time. In fact, several garment plants in the Dongguan town of Humen in Guangdong province have been utilizing computerized weaving looms since 2007. Each machine was able to replace 20 workers and required only two people to operate. As a result, manpower was reduced without affecting efficiency.

 

In general, apparel factories with annual output of about 2.5 million pieces need 700 to 800 workers putting in 12-hour shifts. Procuring 200 advanced machines can bring down the manpower requirement to just 200. This, however, can amount to an investment of up to $14 million.

 

Government support

 

Understanding that substantial investment is the main barrier to automation, several local governments have implemented policies that can alleviate this obstacle. The provincial authorities in Zhejiang, for instance, set up a 514 million yuan ($75 million) fund during Q2 2009 for industrial upgrading and automation. Among the supported endeavors are high-tech projects, advanced equipment procurement, computerized production management and technology development.

 

Even city officials have set similar measures in place. Zhoushan, a city in northeastern Zhejiang, implemented a rebate system in Q1 2010. Enterprises that invest up to 10 million yuan ($1.5 million) in purchasing advanced equipment can receive a 2 percent refund. Expenditure exceeding 10 million yuan has an equivalent rebate of 5 percent.

 

Shengzhou, a tie hub in Zhejiang, has been subsidizing up to 5 percent of factories' production upgrade costs since 2007. As a result, the quality of ties from the city has improved to a level where nothing has been rejected during spot checks carried out in the past two years.

 

Government policies, however, may not be a big enough incentive for China's export manufacturers to automate. With subsidies and rebates capped to 5 percent, companies will still have to shoulder the bulk of investment costs. In addition, the financial aid applies only to businesses that import advanced machinery. As such, it is mainly enterprises with adequate capital, sufficient and stable orders, and a confident export outlook that will undertake steps to upgrade production equipment.

 

 


Read the rest of the story at Global Sources, a leading business-to-business media company and a primary facilitator of trade with China manufacturers and India suppliers, providing essential sourcing information to volume buyers through our e-magazines, trade shows and industry research.


Posted: 16 April 2010

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