The move to extend the New Year to contain the coronavirus outbreak by restricting public movement and large gatherings was a smart but pricy move.
The extended vacation of all business operations will impact everyone’s supply chain as most suppliers will only restart operations today February 10th.
If you import your product from China, you’re probably familiar with Chinese New Year, also known as CNY.
Your supply chain may have even experienced CNY before.
If so, you know that Chinese factories and companies take a 2 to 3-week break during the Chinese New Year.
It is usually the time that all the workers go back home traveling hundreds of miles to spend the holiday with their friends and families.
And just like in other places in the world, holidays are considered as family time and the Chinese business calendar clearly reflects that.
In 2018, an estimated 180 million workers, the majority in urban areas along China’s coast, traveled by road, train, and plane back to their rural hometowns during CNY.
This huge movement of millions of people traveling home causes a disrupt in production.
In meaning, No factories, no offices and no customs clearance or shipping for almost a month or so.
Everyone is pushing for deliveries before the holiday and everyone is desperate for goods after the holiday.
But, if this is the first time you experience the CNY.
Then, let us help keep your supply chain in check while reducing any negative impacts on your business.
Chinese New Year (CNY)
Chinese New Year also known as Spring Festival is celebrated by more than 20% of the world.
It’s the most important holiday in China and to Chinese people all over.
Typically, Chinese offices and factories close for about two to three working weeks, allowing workers time to travel back home to spend the holiday with their families.
This year, manufacturing and supply chain professionals all are supposed to be active at the beginning of February.
But, because of the coronavirus outbreak, factories and professionals supply chain were ordered by the government to stay inactive and not returning to work, and it seems like the Chinese New Year will be extended for another 2 weeks which means a disruption of almost 2 months, as it takes time to get workers back, factories need to rearrange themselves, arrange materials, finish outstanding orders that weren’t shipped before the holiday.
What Does Chinese New Year Mean For You?
Wondering why you should be mindful of and plan strategically for the largest Chinese holiday of the year? Well, there are many things to go after.
Although CNY officially only lasts for 2-3 weeks, many factories and businesses shut down about 10 days before CNY to allow time for supply chain professionals to travel home.
There is always a rush to ship products out of ports which leads to an increase in freight costs and longer transit times if there is a delay at the port or a container is not loaded on its intended vessel.
And, since China is an economic giant in the global exporting industry, the effects of CNY can reach all the world, especially for retailers and anyone else who counts on imports from China.
In all, the holiday can disrupt production and shipping schedules for up to three weeks or more.
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.
Unfortunately, Chinese and multinational companies are starting to feel more disruption in their supply chains as the coronavirus continues to spread; the Chinese government extended the shutdown of factories and businesses, and airlines canceled air routes in and out of the country.
Production disruptions would largely affect household goods, hi-tech goods and textile industries where China plays a major role in the global supply chain.
Also, production disruptions in these industries would hurt the global supply chain as companies would struggle to find alternative suppliers.
Overall, the coronavirus outbreak has already impacted the global manufacturing and transportation industries in China.
However, since then, the global supply chain has evolved and China’s role in the global industry increased, thus the final impact on industries will depend largely on companies’ capabilities to find alternative solutions and the success of governments across the world to overcome the virus outbreak.
How To Plan For Chinese New Year?
What can you do to keep your supply chain running smoothly while minimizing any negative effects on your business; when one of the world’s largest exporters shuts down for nearly a month?
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.
And as the coronavirus gains even more traction in the world, business owners are experiencing significant disruption and restrictions within their supply chains, and the economic impact of such restrictions is likely to last beyond the resolution of the current health crisis.
So, advanced planning is highly recommended to make sure you have the right products or materials in advance.
Below, we’ve listed our 10 actionable steps that you should follow to avoid supply chain delays during coronavirus outbreak and proactively plan for Chinese New Year:
- Confirm Your Supplier's Schedule
Make sure to contact your supplier ahead of time making sure you are well aware of the new schedule since CNY was supposed to end on February 1st. But, the Chinese government extended the vacation in an attempt to control the spread of Coronavirus.
So, be sure to get a clear answer about when he can resume production.
Being mindful and alert with your suppliers especially in places where different holidays are celebrated gives you time to manage and interact effectively with your supply chain.
- Inquire Deeply About Your Final Product
Ask about related items that compose your final product, parking, and branding materials, accessories or hardware, assume that your supplier also experiences delay in production and related items will be delayed as well due to the Coronavirus outbreak.
Ask to see pictures of both arranged materials and related items such as packing and branding.
Making sure that everything is lined up correctly and no sudden delays will disrupt your supply chain.
- Collaborate With A Trusted Freight Forwarder
Make sure you get the notice from your shipping company when shipping will resume.
In these difficult times where it is essential to book your space in advance based on the information provided by your supplier.
In the worst-case scenario, if more time is needed a simple reschedule will keep you ahead inline rather than booking late.
- Gain Data Insight
With the recent health crisis, making accurate decisions for your supply chain strategy depends largely on timely data and information.
Having real-time reports available at all times will provide valuable insight into the supply chain health of your manufacturing business.
- Be Careful With Payments
This extended vacation damaged a lot of factories, no local orders came in, no visiting clients in the near future, zero revenue from the beginning of January, but expenses stays the same, rent, employees’ salary needs to be paid and other expenses as well.
Factories and trading companies that overextend their cash flow or can’t get the employees back will probably shut down and the deposit will be lost.
Be careful about paying new suppliers or those who don’t perform well.
A smoothly running supply chain system depends on outstanding vendor performance.
Therefore, vendor performance needs to be monitored and rated.
Also, doing an in-depth analysis before paying the deposit will help you a lot. By utilizing tracking software or internal spreadsheets your design, you can monitor the whereabouts of your inventory.
This will help you know how much of your product you have, how much you need, as well as if anything happens to it.
Your staff must know how this system works so they can effectively log information, as well as participate in routine inventory assessments.
Other things to consider are the location and quantity of inventory, including finished goods, work-in-progress items, and raw materials.
- Manage The Delivery Dates
Delivery date on new orders will be longer than usual when the factories finally get back to work, employees will be returning slower than usual, and the same goes to the material supplier and hardware that the factories rely on to finish the production.
Even worse, Coronavirus will strongly slow down delivery dates since CNY was supposed to end on February 1st. But, the Chinese government extended the vacation in an attempt to control the spread of this health crisis.
Also, preferred clients will be taking care of first, not to mention orders from before the holiday will get priority over new orders.
Make sure you negotiate the delivery date as well, make sure you write revisions into the order in case delivery is delayed.
And, if possible monitor the product during production to make sure there are no mistakes; and the goods are manufactured on your specific requirements.
- Show Interest In The Supplier Well-Being
The coronavirus is a “punch in the stomach” for China.
A simple inquiry about the wellbeing of the supplier’s health and family by wishing him all the best and show him how much you care will help you build strong business correlation which will serve you well in the future.
- Improve Quality Control
Every solid supply chain strategy needs an efficient quality control system.
A good quality control system when importing from china in China is a must, more so these days the chinese manufacturers would focus more on moving new products out the door due to an increase of orders, and quality will not get the attention they deserve.
Being able to better manage returns will reduce waste and identify consistent product problem factors.
- Manage Future Orders
Assuming that most of the Chinese suppliers got hurt by the coronavirus outbreak.
Revealing and sharing your next couple of months’ quantity and shipping schedule will go a long way in establishing a solid business relationship.
- Get An Agent
A local agent in China is responsible for creating business links with Chinese manufacturers.
We at GuangzhouAgent guarantee efficient management of delivery time with consistent supply china management.
Supply Chain In Chinese New Year
Most Chinese factories and companies can sustain a few weeks of no income as they plan for it in advance and they are well prepared when it arrives.
Supply chain success in China is no more difficult than anywhere else in the world, as long as the company understands and follows the keys to China’s supply chain success discussed in this paper.
There are no short cuts to success!
And even though, staring the year so late will affect everyone because no one plan for the coronavirus nor mandatory vacation implemented by the Chinese government.
Proper planning will calm and assist the supplier production and cash flow when the going gets tough.
To summarize the article, make sure to get the following key actions right and the chances of supply chain success in China during Coronavirus outbreak will be greatly enhanced:
- Execute an effective supplier qualification process.
- Invest the time and effort before placing the first order.
- Refine and adjust the supply chain management process.
- Continually test alternative supplier options.
- Devise a distribution strategy.
- Gather data and establish information.
- Track your inventory.
- Improve Quality Control.
- Manage future orders.
- Get an agent.
Bottom Line
The 3,000-year-old tradition of celebrating the Lunar New Year (aka CNY) in China is one of the oldest and richest cultural events in the world, and one that needs to be appreciated.
And, with the recent current health crisis in China, businesses across the globe must prepare for the commercial repercussions that the coronavirus outbreak may bring.
With the right planning, proper execution and clear communications with supply chain professionals, you will be able to reduce significantly the impact and effects on your business.
