Happy (Chinese) New Year!
Chinese New Year! You may protest – what’s the relevance of that festival if you are not Chinese? Well, you are a manufacturer aren’t you and if you operate a factory in the Far East or source goods from Chinese factories, you need to put a big, bold X on your calendar for the Chinese New Year (and the entire month leading up to it) because this will likely cause you the worst supply nightmare of your entire year.
Read on to find out how you can be the best-prepared manufacturer on the block when the Chinese New Year rolls around.
Chinese New Year – The Production “Coma”
Many manufacturers are well-equipped to deal with Christmas as it is a known entity but something that can take businesses by surprise if they do not have experience in the region, is the massive impact on production caused by the Chinese New Year. If you are new to working with Chinese factories you might think that calling this period a production “coma” is a bit extreme – it isn’t!
In 2020, the Chinese New Year falls on January 25th (Saturday), and the festival will last until February 8th, about 15 days in total. As an official public holiday, Chinese people get seven days off from work – this year, that will be from January 24th to 30th. The Chinese New Year is a chaotic period during which the entire Chinese manufacturing industry, including the field of logistics, is shut down for almost an entire month, often more. The impact of ceased production during this long period spreads far beyond China as it ripples out to the hundreds of global markets that rely on Chinese manufacturers for their goods.
Here are some things manufacturers would be advised to consider in advance of the Chinese New Year:
- The Early Bird Catches The Worm: Manufacturers cannot afford to wake up in December and start making contingency plans to account for the production blackout that is Chinese New Year. With some forward planning, you can absolutely overcome this massive hump and ensure that you get your goods out as needed despite the massive decline in factory output spanning the entire period from before the new year until after the holiday ends. A good rule of thumb is to ensure you have everything you need from affected suppliers at least ten days before the holiday.
- Keep an eye on quality: In many cases, the tremendous pressure caused by the month-long holiday and the high demand for goods posed by the season results in a massive decline in quality control. Chinese factories may be so desperate to meet the demand created by the holiday period that they drop their standards. Another factor contributing to this decline in standards is the fact that managers, supervisors and those in charge of production are often on holiday themselves so there is no one to supervise production properly in the period leading to the Chinese New Year. This is something you must take into consideration particularly if high-quality standards are part of your brand. Consider stockpiling goods that were produced before the holiday pandemonium ensued to avoid this issue.
- Make sure you order raw material in good time: To produce the goods you ordered, factories must order the raw materials and components required for production. The impact of the New Year on the supply of components and raw materials must also be taken into consideration. It is always best to plan ahead and order any raw materials and components well in advance.
- Logistical Nightmare: If you rely on goods that are shipped from China, you have to take into account the logistics of shipping. Customs at China’s ports are open through the majority of the holidays and only close for three days. However, customs tend to be in operating in “holiday mode” at this time of year, meaning fewer workers and longer processing times. Small ports, which redirect activities to the bigger ports in China, could be closed for as long as a week and many freight-forwarders close for two weeks. Speak to your shippers and suppliers in China well in advance of the period to plan how to overcome these hurdles.
- Hidden costs: It’s worth noting that during the holiday period land transportation fees are higher than usual. Employees that are willing to work two weeks before the holiday, as well as during the holiday, also expect to be paid accordingly so higher wages and bonuses during the holiday season are the norm. It is common for Chinese companies to try and allay your fears by saying they have “their own fleet of vehicles” and can guarantee regular delivery times. These claims are often pie-in-the-sky. Better to get your orders and deliveries in early. Another hidden cost of the season occurs at the ports. Generally, the ports are filled with containers at this time of year and everyone wants their containers to get on the next ship. Operators of cargo aircraft and ships, know that they can charge a premium at this time of year, so expect to pay more.
Truth be told, the real message in all this is to always plan ahead – this doesn’t need to be specifically regarding the Chinese New Year or any other holiday. The more on top of your planning and organization you can be, the better prepared you will be for any expected or unexpected disruption to your supply chain. Lucky for you, you have a myriad of technological tools at your disposal to help ensure you maximize your efficiency and profitability.