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October 20, 2016

Chinese New Year: Time to Prepare for Supply Chain Disruption


 A few days ago a friend of mine posted a picture on Facebook of a Christmas display at his local home improvement store. It’s mid-October. We haven’t even hit Halloween and a store already has a Christmas display up? Sometimes it seems that planning well in advance of the holidays goes a little overboard, but how many folks have found themselves shopping on Christmas Eve?

Okay. What’s that got to do with Chinese New Year (CNY)? Again, it’s all about planning. And at East West Manufacturing, we encourage good holiday planning. We first mentioned CNY a little over a month ago on the blog, September 13. That might have seemed kind of early — sort of like that Christmas display at the home improvement store — but frankly, it’s not. And you don’t have to take my word for it. I went to the experts.

I talked with a couple of our customer service representatives (CSRs) about the subject of CNY and asked what their experience has taught them when dealing with customers and the CNY holiday. The reps I spoke to said that one of the biggest misconceptions customers have is that they view CNY as limited to the official holiday schedule. In 2017, the holiday officially begins on January 27 and runs through February 2. Just seven days, right?

But this is the biggest holiday of the year in China (and other places that celebrate CNY). Workers leave their factories and travel hundreds of miles to their hometowns, usually in the countryside. That mass migration begins up to a week before the holiday and can last up to two weeks after the holiday. An interesting phenomenon is also occurring in that a significant percentage of factory workers will go home for CNY and simply remain there. A manufacturing facility won’t even know if they will have the manpower to fulfill orders once the holiday is over. Thus, even in the best case scenario, you’re looking at four weeks of disruption to a factory’s capability to not just produce, but to ship product. And that disruption runs up and down the supply and distribution chain.

Let’s say Company A places an order immediately before or during CNY and allows just one extra week to their planning lead time. Short of paying for costly air freight or hiring drivers to get the shipment from the West Coast, they are out of luck. They will not get the shipment in time.

Once the holiday is over, workers are back and production has commenced, there’s still going to be a backlog of orders that are all vying for the first cargo vessel leaving China after the holiday. It sounds like a real New Year nightmare doesn’t it?

So what do you do? How do you determine when to place your order early enough to get around all the disruption and late enough to not sit on inventory? Here are two action items:

Chinese New Year is all about making way for good luck. And everyone from athletes to entrepreneurs know that the best way to have good luck is to have great preparation. Start creating your good luck by planning smart, and planning now, no matter what size company you have. You might not be ordering the volume of Apple or Walmart, but when that last ship sails before CNY, you want your goods to be on it — or you’ll be out of luck.

Don't delay! Download the Ultimate Planning Guide for Chinese New Year, today!


Filed Under: chinese new year