There's a lot of talk about supply chain disruptions and potential recessions and what affect these things have on the global economy. After the last several years of surprising events, if teams knew an event was CERTAIN to affect their business and did nothing to prepare for it, they'd be considered incompetent, wouldn't they?
The same is true for planning for Chinese New Year (CNY). It’s an event we know will happen, and we even know the date.
Sure, the 2023 CNY has already happened, but it's time to put next year's planning on your radar.
If you're new to manufacturing in Asia or new to dealing with supply chains in Asia, brace yourself. Chinese New Year is like nothing you've ever experienced. The holiday is rife with traditions.
- The date changes from one year to the next — it's connected to the Chinese zodiac.
- There are family gatherings all over the country. It is celebrated on a massive scale.
- The public and private sectors close up shop for up to two weeks (often longer) and if you're not prepared — meaning if you haven't ordered and shipped product well in advance — you are out of luck.
How Can Chinese New Year Disrupt My Supply Chain?
Very often the problems of Chinese New Year aren't happening at Chinese New Year at all. They occur well before or well after the actual event. That's because of poor planning. Here are some of the problems that cause supply chain disruptions at CNY:
Problem: Your order can't be filled because the factory is at capacity. This happens because other customers planned ahead and the factory is filled with orders that got in ahead of yours.
Problem: Your order is stuck at the port because the port is full. Congestion at the ports as the holiday approaches can cause massive delays and even rolled shipments, when your booking gets bumped or your shipment doesn’t have the correct documentation. When the closing bell rings, the workers leave and the port closes.
Problem: The holiday is over but your order is in the back of the queue after factories start production. Factories shut down for about at least two weeks, and usually more. Production ramp up is slow because close to 30 percent of workers do not return to their jobs after Chinese New Year.
Problem: Purchase orders require approval but post-holiday communication can be delayed due to the shutdown. You will probably need to allow for more time to get purchase orders approved after CNY.
Simple Steps To Prepare Your Business for Chinese New Year
The key to surviving Chinese New Year is good forecasting and planning. You should forecast the amount of product you’ll need for the first three to four months of the year so that you’ll have enough inventory to get through CNY without a hiccup.
Here’s a simple way to help you manage delays caused by CNY:
Rather than accepting orders in March, take 50 percent of the volume and receive in it January. Arrange to receive the other 50 percent of the usual March volume in February.
- Ask your supplier/contract manufacturer customer service representative (CSR) about whether they offer an inventory program or other temporary storage solutions for holding higher inventory than usual. You might not need it, but it’s better to be aware of what’s available in the off-chance that you need it rather than scrambling at the last minute and paying a premium for storing inventory elsewhere.
- Diversifying your supply chain is never a bad idea. Can you find a supplier in a location other than China? Vietnam also celebrates Lunar New Year (it's called Tet) but it's not quite as disruptive. This is also a prime example why nearshoring portions of your production is gaining steam as a best practice. Mexico is a leader in this category.
- Talk to your customer service representative about their deadlines for Chinese New Year orders as it may vary from one supplier to the next. Don’t delay! Other customers are planning for CNY, too.
Chinese New Year is a significant service disruptor, but only if you let it! Armed with the right information — your past sales data and sales projections — you can develop an informed, accurate forecast. Combine that with ordering guidance from your suppliers on timing, shipping and logistics, and you will be in good shape to maintain your inventory to serve your customers through CNY without a hitch.
Don't put it off! Download our Ultimate Chinese New Year Planning Guide! Click on the link below: