Until a few years ago, Chenab Ltd. made high end sportswear and bed linen for some of America’s best known retailers, from Macy’s to Tommy Hilfiger to Victoria’s Secret, in the industrial region of Punjab, Pakistan. A workforce of 14,000 fed rolls of cloth into state-of-the art Italian and German machines or sewed garments on sprawling automated production lines. Today, crippled by the shortages of electricity that have paralyzed the country in the past 5 years, most of the machinery stands idle, the staff has shrunk to 4,500 and sales are down nearly 75%. The plant, running at 1/3 of capacity and turning down orders, represents one of the biggest challenges for Pakistan: finding a way to end power outages of up to 12 hours a day in cities and 18 hours a day in the countryside that have enfeebled industrial production and added misery to day-to-day lives.
Industries in Punjab get gas to operate 3 days a week during summer, and none in winter, when gas is diverted to heat homes. For Chenab Ltd., which needs both gas and electricity, that means there isn’t enough power to run two 8-hour shifts. Textiles, which make up more than half of Pakistan’s $25 billion annual export earnings, have been particularly hard hit. The export volume of ready-made garments has fallen 32% in the past 6 years.
Power shortages cost Pakistan about $12.5 billion, or 6% of gross domestic product, last fiscal year, reports The Wall Street Journal (Nov. 29, 2013). The country of 180 million is producing 12,000 megawatts of power, compared with demand of at least 18,000 megawatts. By comparison, California, with a population of about 40 million, produces nearly 60,000 megawatts. For households, life can seem preindustrial. Refrigerators don’t run; children can’t do homework in the dark. One Pakistani, complaining sleep is impossible in the heat without a working fan, called Pakistan “a nation of sleep-deprived zombies.”
Classroom discussion questions:
1. What factors should global firms consider in selecting a country to locate (see Chapter 8)?
2. Why is electricity shortage a critical OM issue?