Worker Deficit Spurs Automation

The prohibitive costs restrict adoption to Tier 1 companies, but local governments are offering incentives to help encourage factories to improve their facilities.

Offering higher compensation and benefits in order to keep or attract employees isn’t the only option China suppliers are using to ensure that their production levels are maintained in the current labor market crisis. A number of them are also considering automation.

The manufacturers of swimwear who make their own fabric such as those that produce their own fabrics are replacing traditional knitting machines by computerized machines. Along with increasing efficiency, the latest technology reduces the need to keep an entire workforce.

This is also true for the manufacturers of watches and fashion jewelry. Businesses are investing in automatic thermal presses and copper and phosphorus-based cutting slugs to improve efficiency, even with a smaller labour pool.

Bathroom scale maker Zhongshan Camry has actually been successful in increasing daily output by 50,000 units from 10,000 units when it purchased surface-mount technology made by Samsung in South Korea. The size of the PCB inserting department was cut by 70 percent.

The company has also switched from manual calibration to automatic which has improved the accuracy of the scales and response times. Made in-house, the equipment to support this procedure was launched at the beginning of 2009 and reduced the number of employees in on the line of production from fifty to just 45. It has improved efficiency by around 30 percent.

The specialists in massagers and toothbrushes are investing in computers and automated equipment. The move has helped improve production times and also reduce the need for manual work.

Stories of success in Tongxiang

A city of second class in Jiaxing in northern Zhejiang, Tongxiang is among the numerous regions in China that are experiencing the shortfall in labor. Factories have taken measures to automatize since 2007. Many factories are following the same path. Indeed, the town bought over 1,000 computers after the 2010’s Chinese New Year celebrations.

Jiaxing Mengdi Import and Export Co. Ltd. (Sweater Branch) bought 50 flat-knitting computerized machines in the last few months. The complexity of the design, each machine will make around 800 sweaters per month. The use of such equipment allowed the company to reduce two-thirds of its employees. The remaining machine operators however, are paid around 2000 dollars ($293) per annum in salary. Jiaxing Mengdi estimates the expenditure could be recouped in 5 years.

Since it began to improve the production machinery in 2007 Jiaxing Strong Imp. & Exp. Co. Ltd has managed to purchase 48 flat-knitting computerized machines and then retired all its manual machines. The company was once home to 300 employees. With every computer capable of delivering the requirements from three to four manual workers The workforce has now reduced to 170. The yield per year, however, increased by 10 percent. The efficiency has also increased and, as a result deliveries have also been reduced. Since the modern machines produce better quality knits with more intricate designs, Jiaxing Strong can also sell more expensive pullovers and sweaters. The fact that this is the case, in fact, has been a reason for the company to believe that it will be able to recoup its cost of the investment in equipment in the next three years.

Long-term trend

A solution was found in 2007’s massive shortage of workers and the upgrading of equipment has helped several suppliers lessen their dependence on workers, while also improving quality and increasing the time of delivery. In actuality, several clothing manufacturing facilities in the town of Dongguan in Humen in Guangdong Province are using computerized weaving looms from 2007. Each machine was able replace 20 workers and require only two persons to operate. This meant that workers were reduced, but without impacting the effectiveness.

In general, factories that manufacture apparel that produce an annual production of around 2.5 million pieces require 700-800 workers working in 12 hour shifts. Purchasing 200 modern machines could reduce the number of workers needed to around 200. This can result in an investment of as much as $14 million.

In the end, only a few businesses took this route despite the benefits. Computerized weaving looms, for example can cost anywhere between 400,000 to 500,000 yuan ($58,500 or $73,100) per. Flat-knitting machines that are computerized however could cost as little to 35,000 dollars ($5,000) or more than 400000 Yuan. These are locally manufactured machines. While they aren’t expensive but the quality of the produced by these machines is typically lower than what manual machines can create. The domestically-made units that produce high-quality knits are in the 120,000-160,000 Yuan range ($17,600 or $23,400). Imported machines, like ones from Germany are the most priced. They are also more efficient and can create more intricate designs and have a 20-percent higher efficiency.

Due to the huge gap in costs for equipment Due to the huge disparity in equipment costs, it’s only the large , well-established companies which can bring in imported equipment. Small and midsize businesses typically purchase locally manufactured flat-knitting machines.

Additionally, employees needed to run the equipment typically demand more pay. Based on their skills the technicians could ask for upwards of 1000 yuan ($146) increment in salary.

Support for the government

Recognizing that large investment is the primary obstacle to automation, various local authorities have implemented policies that could help ease this issue. Provincial authorities in Zhejiang for example, established 514 billion yuan ($75 millions) fund in Q2 2009 to support industrial upgrades and automation. Some of the projects that are supported include high-tech initiatives, modern equipment acquisition as well as computerized production management technological development.

City officials have also put similar guidelines in place. Zhoushan the city in the northeastern region of Zhejiang has implemented the rebate program in Q1 of 2010. Companies that invest as much as 10,000 yuan ($1.5 million) in purchasing advanced equipment are eligible for an amount of 2 percent in refund. Spending more than 10 million Yuan will be reimbursed at 5 percent.

Shengzhou is a hub for tie making in Zhejiang is subsidizing as much as 5 percent of the factories’ upgrades since 2007. In the process, the quality of tie products from the city has increased to a point at which no ties have been rejected in inspections on the spot in the last two years.

The policies of the government, however, could not be an enough motivation for Chinese exporters to implement automation. With rebates and subsidies limited at 5 percent, businesses are still expected to bear the majority of investment costs. Additionally the financial aid will be available only to companies that purchase advanced equipment. This means it’s typically companies with adequate capital, stable and sufficient orders, and a positive export prospects that can take measures to upgrade their production equipment.

The shortfall in manpower is affecting mainly workers-intensive industries like garments shoes as well as toys, textiles furniture and leather products. There are some effects on some electronic lines, particularly those that still do manual assembly. The vast majority have automated equipment and processes like Plastic injection as well as SMT.

However, a few of companies in the field are looking at different areas in which they can automate. Foxconn one of the biggest EMS manufacturers in the world for instance, plans to build a fully automated manufacturing facility in Taiwan. One production line that is fully automated is currently in its testing stage. If it proves effective, the manufacturer plans to build similar facilities in diverse locations across the globe which includes mainland China.