Note: Due to the COVID-19 pandemic, this year’s 2021 Chinese New Year celebrations will most likely be revised, with more travel and social restrictions to be implemented. Therefore, some of this information may not apply to this year’s Chinese New Year happenings, but still provides a good general overview of how you and your business should prepare for the holiday.
Chinese New Year, or Lunar New Year is a weeks-long celebration that begins on January 24th, on the Lunar New Year’s Eve. New Year’s festivities in China result in the largest annual migration of people on Earth. Of course, China is also one of the biggest manufacturers on Earth, meaning that significant supply chain disruptions are inescapable.
Unfortunately, if you’re just starting to worry about this now, it’s far too late. While the holiday itself lasts only five days, the associated down time will stretch for closer to a full month. All factories in the country close for the five-day holiday, without exception. However, production is typically halted for a week before the holiday and a minimum of two weeks after it. This is mostly to accommodate the time it takes to travel the enormous distances that some trek to visit their families in outer regions of China—travel times which are only worsened by congestion and delays due to the sheer volume of travelers. It’s estimated that this year’s travel will increase upwards of 13% over last year’s approximately 100 million people that traveled for the holiday. That adds up to a lot of empty desks for nearly a full month.
Luckily, not all work roles take breaks for as long as manufacturing does. Most administrative duties are back up and running within a week or so of the holiday. Trends are also showing that the periods of closure that companies take are slowly starting to shorten. It seems that Chinese companies are starting to feel the impact the holiday has on their bottom lines, in addition to the competitive hurdles involved, especially when U.S. tariffs already have importers considering buying elsewhere.
In spite of this, don’t expect supply chain operations to be functional until around the second week of February. Getting fully back to normal will take even longer, unfortunately. Chinese companies typically lose significant numbers in their workforces over the New Year, which means that even when your suppliers are back up and running, they may be doing so with a stunted capacity. It is customary to see workers quit over the holiday, sometimes giving no notice that they won’t return to work. Recent trends have also seen employees requesting raises during this time, choosing not to return to work if they don’t receive them. The loss in manpower, of course, means the need to hire and train new employees, and sometimes push production with limited staff. Because of this, the few weeks after Chinese New Year is a good time to pay attention to your quality assurance and vendor compliance processes.
If the effects the New Year has on timing aren’t enough to dampen your holiday spirit, there’s one more hurdle to consider. Those who do get their product ready to ship before the holiday are likely facing significantly higher transit costs than usual. With the mad rush to get product moving before the Lunar New Year, capacity will be filled the max. Additionally, those logistics providers that don’t close for the full month are likely paying employees higher wages to incentivize them to work over the holiday. And of course, some of those costs will be passed on to the importer.
After the new year, instead of bracing for costs, importers will need to plan for flexibility in their schedules. With less product being made in China, there will be less product coming out of China, which, of course, means lots of open space on cargo vessels coming out of the region. For you, that means even more blank sailings and delays.
Since it’s mostly too late to get ahead of the Lunar New Year disruptions, here are some ways to minimize them now:
- When shipping over the next few weeks, be nimble. Give yourself extra time for receiving product and be flexible on your port of discharge. While it may add some minor delays, it can give you more options for sailing on time.
- If your product ships in multiple containers, consider splitting it among several bills of lading. This can contain the impact of rolled shipments and delays to only a portion of your product.
- Stick to your normal providers during this time. Regular customers usually receive preferred status over new and occasional customers.
- Do what you can with the functions that are running. Now could be a good time to get a jump on design and negotiations for future product shipments. Typically, manufacturing is the function that shuts down for the longest period of time. Other roles like sales, engineering, and administration are only down for a week or two.
If you have questions about how your supply chain may be impacted during this time, want help managing your logistics, or would like to tap in to Navegate’s network of carriers and agents, contact us.
And of course, to our Shanghai team and to our friends celebrating, 新年快乐!