If you outsource any product from China, you’re probably familiar with Chinese New Year (CNY) – the largest annual mass migration on the planet. For those not aware, CNY creates two to four weeks of radio silence from an entire country, including your suppliers, contract manufacturers, and partners. During this time, almost everything shuts down, including the government and factories, while ports and customs usually operate with a skeleton staff focusing on perishable and priority items.
The effect on the internal Chinese supply chain
The most important part of CNY is the family reunion. As most elderly parents live in rural villages and their children work in the cities, the “chunyun” (spring migration) is the biggest mass movement of people in the world.
If this isn’t enough of an impact on the logistics infrastructure, just add the increased movements of goods, products, food, and drink that must be planned for and distributed to the rural areas to handle this unimaginable surge in demand. And don’t forget the supply chain to plan, manufacture, and deliver all the fireworks and firecrackers that are set off on CNY Eve, First New Year Day, and the Lantern Festival – a custom that extends back more than 2000 years.
The effect on the global supply chain
So how is the global supply chain impacted when 1.3+ billion people go on vacation at the same time?
Although CNY is only for one week, many factories and businesses shut down up to 10 days before and several days after to allow time for the mass exodus of workers.
Since China is the leader in the global exporting industry, the effects of CNY can ripple around the world – and if you haven’t planned for it, this ripple could turn into a tsunami. To put it in perspective, China is currently the USA’s largest goods trading partner with $635.4 billion in total (two way) goods trade during 2017.
Planning for Chinese New Year
As is occurs every year just like Christmas, there is no way of avoiding CNY. But unlike Christmas, the date varies from year to year. So advanced planning is required to make sure you have the right products or materials in advance.
Here are a few suggestions to plan and manage around Chinese New Year (or any other big holiday, for that matter):
- Build strong relationships: Strong relationships with your Chinese suppliers and contract manufacturers lead to collaboration and information sharing that can give you visibility into the status of orders in process.
- Don’t wait to the last minute: If you wait until the last minute to place your order ahead of CNY, don’t count on receiving your order in a timely manner. If you do get your order, there’s a chance of downgraded quality due to rushed orders and high demand.
- Plan ahead: Build a strong picture of demand that incorporates both structured data (orders) and unstructured data (sentiment analysis, weather patterns, events). This can help ensure your company has enough stock to see you through CNY and beyond.
- Optimize your inventory: Build up inventory in the right locations around the world leveraging inventory optimization planning logic to map projected demand with projected supply.
- Get the logistics right: Manage logistics from your Chinese manufacturers to your door by planning, booking, and confirming transportation shipments well in advance of CNY. The closer you get to CNY, shipping costs increase while available shipping space shrinks.
- Plan for other options: Minimize or even mitigate risk altogether with alternate sourcing strategies that tap vendors outside of China. This can help during CNY and year-round as well.
- Monitor production levels: Plan to keep a close eye on production for the rest of the quarter after CNY, as it will take a while until production is back in full swing. It has been estimated that 30% of workers will not return after the new year.
Chinese New Year will begin Tuesday, February 5th, 2019. Happy 4,717, the Year of the Pig.
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