What Effect Does Chinese New Year Have on My Business?

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Importers who work with Chinese factories need to understand the impact of the Chinese New Year on their supply chain. If they place an order in December and expect to receive it in February or March, they may only receive it in April or May. The Chinese New Year slows business down more than holidays in other parts of the world like Europe, the U.S. and Australia.

Since China plays such a large role in exporting globally, the impact of the CNY ripples across the world. This means companies need to forecast their shipment needs well in advance and order extra stock earlier to adjust for factory downtime. Proactively planning for the CNY can minimize any supply chain disruptions.

When is Chinese New Year (CNY)?

Chinese New Year celebrates the beginning of a new year on the Chinese lunar calendar. Unlike the Western New Year, It does not fall on a set day but it always takes place between January 21 and February 21. The lunar New Year is also celebrated in other Asian countries like Vietnam and Korea.

This CNY is the most significant holiday for the Chinese people. As most factory workers are migrant workers, they may have to travel hundreds of miles to return home, so the factories typically close down about ten days before the CNY.

For many migrant workers, it is the only time of the year when they may get to see their parents or children. Traveling to their homes is described as one of the world’s largest annual migrations.

In 2021 February 12 is the first day of the Year of the Ox and the official holiday is from February 11 to 17. In 2022, February 1 is the first day of the Year of the Tiger and the dates of the official seven-day holiday are yet to be decided.

Ramping back up after CNY

After the CNY, it takes time for factories to begin ramping up. People may switch jobs and up to one-third of them do not come back to work at all. They may stay on until the CNY receive their end of a year bonus and then go home and decide not to return. It is easier to find a new job at this time as many others also leave their jobs. Workers may make their return dependent on a pay raise as they know this is a sensitive time for the factories.

Investing time in finding new skilled workers or training new workers leads to longer production times. Factories usually function at low capacity at this time. It is only towards the middle of March that they return to full capacity. For these reasons, it is better to place orders earlier rather than later.

Custom lead times for popular products:

Each product class and category has different production lead times.

  • 8 to 12 weeks: Custom boxes
  • 10 weeks: Pre-roll tubes
  • 10 to 12 weeks: Barrier/exit bags, pre-roll cones, glass/concentrate jars
  • 11 to 14 weeks: Retail bags
  • 13 weeks: Non-woven bags

Problems that occur before and after CNY

More mistakes tend to occur before and after CNY: The rush before the holiday means more quality issues than at other times. After the holiday, new workers will tend to make more mistakes than experienced ones. This means that companies may have to do more product inspection at these times.

The cost of shipping goes up: Shipping products out of port before the shut down can result in longer transit times and increased freight costs due to the rush. There are heavy volumes going to the ports and a limited number of ships. Planning around CNY and avoiding shipping during peak times can help companies to lower their overall costs.

Companies may lose a deposit paid before CNY: In China, one of the most common times for a factory to close forever is the CNY period and so this may mean losing a deposit paid just before the holiday.

Proactive planning tips for CNY

Develop a strong, trusting relationship with suppliers: For companies sourcing from China, it is important to establish a strong relationship with suppliers or manufacturing partners, early on. Otherwise, their goods might have the lowest priority when it comes to ordering shipping before CNY. Working together closely with companies that have experience handling the situations can help ensure orders are received in time.

Forecast how much product is required: If companies are able to forecast how much product they need for the first three or four months of the CNY, they can ensure they have enough stock on hand.

Increase inventory beforehand: Companies could begin ordering a little more product in advance and hold it in inventory to accommodate for the lack of orders that will be received during CNY.

Book shipments with steamship lines well in advance of CNY: Steamship lines notoriously take advantage of CNY. They will often impose high freight charges during this time.

Consider working with manufacturers who have operations in other countries: This could diversify a supply chain and make it possible to find backup suppliers during CNY.

Put a quality management plan in place: Thoroughly inspecting goods during this time is essential for companies who do not want to risk shipping defective goods to customers.

Coronavirus and supply chain disruption

The COVID-19 pandemic disrupted the supply chain during the past CNY. Factories were either not allowed to open or had a scarce workforce due to travel restrictions. Getting materials or components from China was difficult and even if it was possible to receive goods, there was a minimal workforce at receiving ports to unload them.

As COVID-19 spreads in overcrowded environments like trains and buses, government travel regulations are likely to be imposed before CNY 2021. Workers may be forced to leave factories early to make it back home in time which could mean earlier disruptions to the supply chain.

A final word

The Chinese New Year brings manufacturing and supply across China to a standstill for at least seven days. However, the effects last much longer than seven days. Factories begin to experience less output and increased quality issues before the official holiday and this continues afterwards as they take time to ramp-up to full capacity.

Preparing for the supply chain disruptions means companies need to forecast what they need well in advance and place their orders as early as possible to make sure they have all the components, materials or finished products in their warehouses.

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