Retaining supply chain fluidity amid Chinese New Year shutdowns
Chinese New Year (CNY) is one of the most impactful events to international trade. In 2020, January 25th will be the first day of CNY, known as the “Year of the Rat”. The Lunar New Year is also celebrated in other Asian countries such as Vietnam and Korea also at the same time. This is typically a time when Asians travel and visit relatives to celebrate the festivities with loved ones. For instance, some 80 million Chinese workers, most from urban areas along China’s coast, travel back to their rural hometowns.
Ahead of the holiday, suppliers doing business in Asia have long been in the midst of operational scheduling and planning how their continuity of trade will remain seamless during this period. The CNY holiday not only marks the beginning of a new year. This period also represents a complete shutdown of China’s manufacturing infrastructure, when virtually all businesses and factories in China close from one to four weeks. All suppliers will wind down operations one to two weeks in advance of the holiday. In total, the holiday impacts about two months of production.
With the upcoming Chinese New Year period, it is a time of many challenges for importers and exports. Proactive planning and preparation are key to effectively navigating and managing supply chain issues that could occur during this time; ensuring that freight is handled consistently and without interruption. At Dachser, we aim to minimize any impact to our customers.Guido Gries Managing Director, Dachser Americas
It is typical that freight volumes build just a few weeks before the holiday period, as factories will speed up their production, which will not resume until a week or two after the holidays. There are two events that occur during this time, the Official Holiday and the Traditional Holiday, causing some factories to stay closed longer. In fact, some suppliers remain shutdown for more than a month.
How your business can be impacted:
- All business during CNY will face delayed production time, as will quotation requests.
- Many workers will not return to their workplace immediately after the holidays, which means previously estimated production times might be extended.
- If orders are placed late, it is possible they will be placed further back in the production line.
- With more than a month’s worth of orders backed up to start with, factories will favor orders from their preferred partners.
Depending on Chinese sourcing, businesses should plan ahead:
- Build up adequate inventory, considering a period of up to four weeks after Chinese New Year and even find out if your Chinese source has inventory in non-Asian locations, so you can use other supply chains.
- Inform your forwarder about your priority shipments, in case there is limited space.
- Book shipments well in advance of CNY.
- Reserve space on passenger flights for shipments that cannot be delayed. The rates are slightly higher, but this measure will keep your supply chain running.
“We have reviewed the critical steps that are needed to prepare for Chinese New Year with our customers well in advance. This proactive preparation helps to ensure that there is minimal disruption to their global supply chains.” added Gries.