How Chinese New Year will affect your business.
If you outsource any product from China, you’re probably familiar with Chinese New Year, also known as CNY. If so, you know that Chinese New Year brings production and shipping disruptions. However, if this is your first Chinese New Year let us help keep your supply chain on track while minimising any negative impacts.
Chinese New Year will begin on Friday, February 16th, 2018. Typically, Chinese offices and factories close for about three working weeks, as most factory workers will travel a long way to spend the holiday with their families, so there will be additional closings, delays and disruptions in the weeks before and after CNY. Interestingly, the CNY holiday is also considered a prime time to switch jobs, and many workers don’t return to work at all. This can lead to even longer production times as factories struggle to find new workers and ramp up on production orders. All in all, factories are closed and/or operating at diminished capacity for at least 4 weeks.
As CNY approaches, ocean and air freight rates will increase significantly, space will become more difficult to secure, and carriers will be overbooked earlier than usual. Rates normally begin decreasing again 1-2 weeks after Chinese New Year.
What does Chinese New Year mean for you and your products?
What can you do to keep your supply chain running smoothly when one of the world’s largest exporters shuts down for nearly a month? We’ve outlined the following tips to proactively plan for Chinese New Year to minimise any disruptions to your supply chain:
- Your orders need to ship prior to CNY
And don’t forget to plan for inventory needed to get you through the holiday. There is always a mad rush to ship product out of ports before the country shuts down, so the best strategy is to plan ahead and work closely with us for rates and space. If you can, try and book your sea freight at least 3 weeks before CNY, so anytime from now.
- Don’t put all of your eggs in one basket
If you are shipping multiple containers, we recommend splitting these among several bills of lading. This way if your shipment is rolled, it won’t impact all of your containers.
If you aren’t able to plan ahead, another option is to choose a service with a slightly longer transit time. In general, the fastest transit-time services are more likely to be overbooked; if you select a transit time that’s longer by a couple of days, your cargo is less likely to be rolled to the following week.
If your cargo is travelling inland, you could opt to be flexible about the port of discharge. This can result in a slightly longer transit time, but it will allow for more options when choosing a sailing.
- Create a forecast to get you through CNY and beyond
If you’re able to forecast how much product you’ll need for the first 3 to 4 months of the year, you’ll have a head start when it comes to ensuring your company has enough stock to last you through CNY. This simple rule can help account for CNY delays:
- For orders normally received in March, take 50% of the volume and receive it in January. Receive the other 50% of that volume in February.
- Put a quality management plan into place
The last thing you want is for an order of goods that has quality issues to ship right before CNY. Sometimes quality suffers in the run up to CNY as the factory is producing in high gear and rushing to get product out the door. This is the time when a trusted supplier or manufacturer relationship will help tremendously. Having a quality management and thorough inspection plan in place will drastically reduce the risks of a delayed shipment due to quality issues, or worse, shipping defective goods to your customer’s door.
- Plan for AFTER Chinese New Year
Remember not all the factory workers will return to their old job after CNY, so you don’t just need to plan for before the holiday, but afterward as well. If there’s a workforce shortage, it could take weeks, sometimes months, for the factory to get back up to normal production speed as they look for replacement workers.
- Start planning early
It’s never too early to start planning for China’s biggest holiday. The earlier you begin, the better your supply chain will be. Analyse your sales history from the past year, start putting a forecast together and work with your suppliers and manufacturing partners now to begin planning for next year’s Chinese holiday.
TPS Global Logistics Customers
For customers of TPS Global, we recommend speaking to David or Paige to book in your sea freight shipments now, to secure space and rates and ensure we can implement the necessary strategies to keep your supply chain full over the CNY period.
Call us on +44 (0)1622 237979 or email email@example.com