Power Outages in a Business

Power Outages in a Business

Introduction and Problem Statement

Power or energy is considered an important factor of production in business. Businesses rely on power to support various functions in the supply chain, including the production of products and services that are sold to generate revenue. One of the power-related factors that affect many businesses across the world is power outages. A power outage is defined as a disruption of power supply resulting in no access to power for consumers. According to Chen et al. (2022), the nature of power as an interconnected, hierarchical, large-scale critical infrastructure makes it hard to maintain the continuous reliability of the power systems, especially when there are high electrification rates and a high cost of installing renewable energy. Therefore, many businesses have to constantly adjust their operations to deal with the disruptions caused by power outages to reduce and prevent losses. The two forms of power outages that businesses experience include unplanned and planned outages. A planned outage occurs when power is disconnected in a substation or specific region to allow the maintenance team to conduct maintenance and repairs on power systems in the region or substation. Unplanned power outages, on the other hand, occur when the power supply is abruptly interrupted due to damages in the power supply system. The main causes of unplanned outages include weather conditions, cable theft, old infrastructure, illegal electricity connections, and building developments.

Over the past decade, many regions across the world, especially in developing countries, have raised concerns about the reliability of electricity. Although electricity impacts both households and businesses, businesses suffer more when a power outage occurs because they rely on power to maintain operations. In some cases, some businesses are forced to close down until power is restored because they cannot function without power. Power is also linked to internet access in businesses because most businesses use Wi-Fi connections for inventory management and surveillance. Therefore, lack of power also limits a business’s ability to use technology to increase efficiency in their operations, which could impact profitability. Therefore, reliable power supply is among the most critical elements in business operations, which is why it is important to research the impact of power outages on a business to give business people insight into what they should expect when power outages occur and demonstrate the need for investing in a reliable power supply.

Literature Summary and Sampling Comments

Various researchers have reviewed the issue of power outages in business. One of the research studies relating to the issue is a study conducted by Fakih et al. (2020) on the effects of power outages on the performance of manufacturing firms in the Middle East. The study found that the impact of power outages is mainly felt by smaller firms. The study also found that the main effects of power outages on businesses include a decrease in annual growth, a decrease in sales, and reduced employment. The authors reached their conclusion based on two main sampling considerations outlined in three statements. The first statement suggests that the primary empirical findings highlight the detrimental effects of power outages on manufacturing companies’ performance in the Middle East and North Africa (MENA) area, specifically with regard to sales and labor productivity growth rates (Fakih et al.,2020). The second statement suggests that power outages have some detrimental but rather minor influence on the rate of job growth (Fakih et al., 2020). The third statement suggests that power outages show variations based on the size of the organization, with smaller firms experiencing more major power outages (Fakih et al., 2020). The study concluded that firms in the Middle East region are worst hit by power outages compared to firms in other developing countries. The study also concluded that a decrease in a firm’s performance negatively impacts national economic output, hence the need to improve power infrastructure in the Middle East region to reduce the impact of power outages on the performance of businesses in the region.

A second study was conducted by Cissokho & Seck (2013). The authors studied the relationship between power outages and the productivity of small and medium enterprises in Senegal. The study found that power outages can improve business performance because some businesses perform better during power outages. However, power outages reduce scale efficiency because of the challenges of meeting the expected production levels when there is a power outage. The study also found that businesses that rely on alternative internal electricity production incur higher costs than economies of scale. The findings were influenced by two sampling considerations outlined in two statements. The first statement suggests that electricity adds directly to businesses’ output as a distinct input. It also indirectly influences how much other direct inputs, such capital equipment, are consumed (Cissokho & Seck,2013). The second statement suggests that due to budgetary constraints arising from blackouts, certain businesses might not be able to meet their energy needs. (Cissokho & Seck, 2013). The study concluded that there is a need to address the issue of power outages to help businesses save the extra cost they incur in generating alternative power.

The impact of power outages on business was also explored by Boakye et al. (2016) in their study on the impact of power outages in Ghana’s hotel industry. The study found that power outages led to massive layoffs of employees in the hotel industry. The study also found that power outages affected equipment in the hotel industry because heat control devices were disabled in staff working areas, which made it hard for staff to meet their targets because they could not perform as expected when working under high temperatures. The power outages also reduced profits because the hotels could not reach their production targets, and their food products went bad. These findings were influenced by sampling considerations outlined in two statements. The first statement suggests that the additional power from thermal plants intended to boost Ghana’s electrical supply hasn’t succeeded in counteracting the country’s insufficient and unstable energy supply (Boakye et al., 2016). The second statement suggests that more than US$ 3 to 10 million in property damage might arise from a power outage that lasts for one to four seconds (Boakye et al., 2016). The study concluded that Ghana experiences frequent power interruptions, leading to reduced competitiveness among hotels and reduced productivity. The study also concluded that most businesses in Ghana are already used to power outages and their impact on their business to the point that they do not calculate the losses incurred when the outages occur.

Research Methodologies

According to Dodiya et al. (2015), a research methodology summarizes the specific approaches or techniques used by a researcher to complete a study. A research methodology is influenced by the research topic and the nature of the study. Past research studies on power outages in business have used different research methodologies to determine the link between business operations or performance and power outages. For example, the study by Fakih & Ghazzawi (2020) used the WBES database that includes observations of companies in the Middle East region. Cissokho & Seck (2013) used a questionnaire to gather data from various businesses in Senegal. The questions in the questionnaire focused on gathering data relating to a business’s general information, electricity, finance, cost and production issues, and employment-related issues. The authors used a final sample of 6000 companies to complete the study. Boakye et al. (2016) also used a questionnaire to gather information. The study sample included 100 hospitality destinations from 2, 3, 4, and 5-star hotels.

Problem Evaluation

According to Asgary & Mousavi-Jahromi (2011), power outage risks and problems are increasing in the business sectors because of the increase in the sophistication of networking and computing technologies. The power risks and problems pose various issues for businesses, especially those that rely on power to maintain operations. Doe et al. (2014) argue that increasing cost is one of the main impacts of power outages on businesses. Power outages increase operating costs, leading to decreased profitability because power is a fixed cost that businesses must meet to maintain operations. The costs that emerge from power outages can be classified into direct and indirect costs. Direct costs include idle factor costs, lost product, restart costs, shutdown costs, damaged equipment and raw materials safety costs, and health and backup costs (Asgary & Mousavi-Jahromi, 2011). Indirect costs, on the other hand, include the costs that are passed to the final consumers, such as delays in access to products and services. Power outages also increase maintenance and operation costs, especially if the power outages result in equipment damage. Businesses may also be forced to incur additional costs on marketing to win back customers who may have shifted to competitors during the power outage.

Power outages in a business also result in massive losses, especially for businesses whose main operations rely on electricity. According to Thomas & Fung (2022), the losses caused by power outages can be classified based on where they occur in the supply chain and the relative period in which they occur. The authors add that the losses in the supply chain are incurred by the people who experience the disturbance and those who rely on the business experiencing the disturbance for supplies. For example, a retailer may experience losses if their supplier experiences disturbances. The suppliers may also incur losses because they will not deliver the required supplies, resulting in upstream and downstream losses. Thomas & Fung (2022) argue that losses can be short-term or long-term. Short-term losses include those that a business can recover within a short time. For example, if a business shuts down during a power outage for a few hours and resumes operations when the power is back, the losses incurred are classified under short-term losses. Long-term losses, on the other hand, impact the business for a long time. For example, if a business supplies perishable products such as food shuts down during a power shortage and the food goes bad before the power is restored, the business incurs long-term losses because it needs to produce new fresh products and throw away the spoilt products.

According to Asgary & Mousavi-Jahromi (2011), the impact of power outages on a business is influenced by the frequency, duration, and magnitude of the outage, the extent of advance notice, and when the outage occurs. Magnitude includes the extent to which the outage deviates from normal operation. Large deviations interrupt services and damage equipment, while small deviations may not be noticed by the consumers. Duration includes the length of time the outage lasts. Durations may vary based on the type of outage. For example, the duration of planned outages may be small compared to the duration of unplanned outages. Frequency includes how often an outage occurs. For example, an outage can occur daily, weekly, once a week, or monthly. Frequent outages create a risk of damaged equipment and may affect profitability, especially if a business is shut down every time there is a power outage. Timing includes the specific time an outage occurs. For example, in planned power outages, businesses may be informed that the power outage will occur at night or in the morning. Understanding the timing of a power outage is essential in preventing losses because a business can adjust its operating hours to schedule operations that require power when there is power and schedule those that do not require power at the time when the power outage is scheduled to occur. However, in unplanned outages, timing may disrupt business operations and increase the risk of losses.

The issue of power outages and their impact on businesses has forced businesses to respond in various ways to mitigate the costs associated with the outages. According to Abdisa (2018), the most common coping strategy that businesses use to respond to power outages is investing in self-generation. Self-generation includes sourcing energy from different sources, such as wind and solar. Abdisa (2018) argues that self-generation can help a business avoid the disruptions caused by power outages. However, it may undermine a business’s productivity by forcing the business to invest most of its finances in less productive investments. According to Oseni & Pollitt, 2015), self-generation may be more expensive than sourcing energy from the public electricity grid. The high cost of self-generation may have long-term impacts on a business’s profitability and productivity by impacting capital utilization and pushing businesses to selectively use production strategies that save energy to reduce energy production costs. Abdisa (2018) adds that businesses may alter how they use input when the cost of power is high, leading to reduced operational efficiency and capacity.

Conclusion and Recommendation

The dilemma of the most efficient way to reduce the disruptions caused by power outages without increasing a business’ operating cost has forced many businesses to adapt to unreliable power supply patterns, especially in developing countries, and focus on minimizing losses when outages occur by adjusting their schedules. Although this strategy may effectively maintain business operations and minimize losses, it does not contribute to long-term business sustainability. Therefore, there is a need to focus on a more reliable solution to the problem. One of the solutions that can be considered is installing an uninterrupted power supply within the business. An uninterrupted power supply can help the business maintain its equipment’s power supply and create enough time to shut down the equipment properly or offer additional time to continue using it. It is important to ensure that the uninterrupted power supply has surge protection to prevent a power surge and reduce damage that may be caused by an unstable power supply. Businesses should also consider having a back-up generator to prevent unplanned disruptions in their operations. A back-up generator is effective in reducing downtime when a power outage occurs because generators can supply power for a long time as long as they have enough fuel. Businesses may also consider using an alternative source of energy, such as solar energy. Solar energy can serve as an effective supply of backup power because solar panels are charged by solar energy and can retain energy for a reasonable amount of time to maintain business operations.

Addressing the power outage issue in businesses also requires involving people and altering processes. This can be achieved by developing a business continuity plan. A business can plan for business continuity in the event of a power outage by shifting operations from automatic to manual operations. For example, if a business relies on power to supply power to the computers and machines used to record data, it can maintain business operations by considering manual data entry. The most effective way to reduce disruptions in businesses that use computers for their operations is to train employees to complete the tasks completed by the computers so that operations can continue running even when power outages occur. Processes can be altered by adjusting the task schedules in the business. For example, a business can engage employees in completing tasks that do not require power when there is a power outage and resume automated operations when power is restored. Although these strategies are effective in reducing the disruptions caused by power outages, they may not apply to all businesses, especially businesses that cannot operate without internet and technology tools that rely on power. Therefore, there is a need for additional research into coping strategies that can be applied in different sectors and how they should be applied to prevent power outage disruptions.

References

Abdisa, L. T. (2018). Power outages, economic cost, and firm performance: Evidence from Ethiopia. Utilities Policy, 53, 111–120. https://doi.org/10.1016/j.jup.2018.06.009

Asgary, A., & Mousavi-Jahromi, Y. (2011). Power outage, business continuity, and businesses’ choices of power outage mitigation measures. American Journal of Economics and Business Administration, 3(2), 312–320. https://doi.org/10.3844/ajebasp.2011.307.315

Boakye, N. A. B., Twenefour, F. B., & McArthur-Floyd, M. (2016). The impact of power outage “Dumsor” on the hotel industry: Evidence from Ghana. Journal of Energy Technologies and Policy, 6(8), 39-47.

Chen, H., Yan, H., Gong, K., Geng, H., & Yuan, X.-C. (2022). Assessing the business interruption costs from power outages in China. Energy Economics, 105, 105757. https://doi.org/10.1016/j.eneco.2021.105757

Cissokho, L., & Seck, A. (2013). Electric power outages and the productivity of small and medium enterprises in Senegal. Investment climate and business environment research fund Report, 77(13), 2013.

Dodiya, N., Dodiya, N., & Malviya, N. (2015). Research methodology. Ess Publications.

Doe, F., & Asamoah, E. S. (2014). The effect of electric power fluctuations on the profitability and competitiveness of SMEs: A study of SMEs within the Accra Business District of Ghana. Journal of Competitiveness, 6(3), 32–48. https://doi.org/10.7441/joc.2014.03.03

Fakih, A., Ghazalian, P., & Ghazzawi, N. (2020). The effects of power outages on the performance of manufacturing firms in the MENA region. Review of Middle East Economics and Finance, 16(3), 20200011.

Thomas, D., & Fung, J. (2022). Measuring downstream supply chain losses due to power disturbances. Energy Economics, 114, 106314. https://doi.org/10.1016/a:link {text-decoration: none;}a:visited {text-decoration: none;
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The week 7 research paper (POWER OUTAGE/BLACKOUT IN A BUSINESS) should be 9 pages in length, double-spaced, including the title page and the reference page. The meat/outline of the paper should consist of the following:
An Abstract (separate page)
An Introduction with Problem Statement
A summary of the literature presented in your article reviews with sampling comments

An analysis of research methodologies found (including survey instruments or models from research)
A thorough analysis and evaluation of the problem (from the research topic)
Recommended research design/solution (which can be people, process, hardware, data or software-based
Conclusion and Future Research Considerations
Please remember to provide within-paragraph and end-of-paragraph cites for documentation. Follow APA 6th Edition guidelines. Also, where necessary, visit the Writing Center to get assistance with proper format and grammar.