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The Effect of Chinese New Year on Supply Chains

Nov 5, 2019 | General, Manufacturing in China

Cultural events can have an unfortunate effect of supply chains for many businesses. Annual events like Christmas and bank holidays can put a halt to the manufacturing and production of products. For many businesses sourcing manufacturing from abroad, there may come a time in the year where supply chains are affected due to a cultural celebration in the country they manufacture. One example of this is the Chinese New Year.

Chinese New Year has no fixed date but takes place between January 21st –  February 20th In 2020, it lands on January 25th. This can have an effect on your manufacturing; indeed, it has a massive effect on supply chains as the majority of factories will be closed for 4 weeks.

This means businesses manufacturing in China requires a process in place that allows for this time. Building stock, agreed deals with the factory and time management are all important when preparing for Chinese New Year.

With workers returning home for the holidays, factories closing and an increase in demand for shipping, it is inevitable that your supply chain will be put under pressure.

What do you need to consider for your supply chains in the run-up to Chinese New Year?

Firstly, if your product-based business has a “just in time” ordering system, this has to be built into the process to avoid stock shortfalls. Making sure your stock is full and available will be important in keeping your business running smoothly over the 4 weeks.

Additionally, the factories will be at maximum production in the run-up to Chinese New Year trying to meet the demand for goods to be shipped before the holiday. This means lead times will be longer than normal and shipping costs will rise as the freight companies capitalise on the higher demand.

On the topic of shipping, you also need to consider the effect of Christmas. More specifically, take note of warehousing as these will be closed for up to two weeks during the holiday so you need to be careful shipping goods.

As most factory workers in China are migrant workers, their family will potentially live many miles away and they are likely to only travel home once a year at the Chinese New Year. Officially, the holiday duration is a week, but the workers often ask for longer due to the travel. Staff retention after the holiday is important so factories are willing to compromise on the duration to keep the skilled workers and ensure they return after the holiday.

All this can have an effect on your supply chain and the manufacturing of your products. Without good planning and efficient processes in place, late shipments, low stock and other factors can impact your sales and company reputation.

Learning about the culture and holidays of the country you source manufacturing from is essential to running an efficient and profitable business. Keep your supply chain working efficiently by following these steps and ensuring you are prepared for the Chinese New Year.

Remember, building strong relationships with Chinese suppliers, planning ahead and minimising risks by planning other options are all ways you can ensure your supply chain remains productive.

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