How to Prevent Chinese New Year Shipping and Inventory Disasters
Is your supply chain prepared for Chinese New Year Shutdown 2020? It’s the most important question you should be asking as soon as the Western holiday season ends. The Chinese New Year (CNY), beginning this year on January 25, signals a 3-4 week shut down of Chinese commerce, as the majority of the nation’s workforce returns home to celebrate the hallowed traditions of China’s biggest holiday. This happens every year, and it’s important for importers working with Chinese factories to understand the impact this holiday can have on their supply chain.
Understanding what will happen before, during and after the Chinese New Year can give you a leg up on competitors and prevent future delays and disasters.
1. Plan Ahead
The Chinese New Year manufacturing exodus begins at least one week prior to the official start of the 3-week holiday. With this is mind, create surplus and be prepared for shipping delays on expected orders during the holiday.
2. Prepare for Increased Shipping Costs
With the long factory closures and the rush to get products out beforehand, manufacturers will generally charge more on orders shipped closer to CNY. This busy time of year also means heavy volumes and only a limited number of ships are going to the ports before the holiday, resulting in an increase in shipping rates. Plan around CNY 2020 and try to avoid shipping during peak times in order to lower your overall costs.
3. Mitigate Post-Holiday Lag
More than one-third of migrant workers will not return, adding more stress to Chinese manufacturers. Understand the amount of demand and available product in your warehouses and distribution centers and manage accordingly.
4. Be Supply-Chain Savvy
If you’re unable to store needed materials and goods, want to avoid the delays caused by the Chinese New Year, or believe you are already at capacity, the holiday is a good time to liquidate older goods at inexpensive prices. It may quell demand for newer items and alleviate pressure from your Chinese sources.
Benefit from Being Prepared
Western demand for goods and parts will be bottlenecked without proper foresight and preparation. Though many businesses have risen to ensure that a steady supply of desired goods is on hand at warehouses and distribution centers, there are those that are caught off guard by China’s nationwide shutdown. And as more workers decide to stay home and not return after the holidays, creating a surplus is more crucial to meeting demand because Chinese factories are slowed in the weeks following the holiday.
Thankfully, January and February are slower consumer periods in much of North America and Europe, so savvy companies use the Chinese Holiday as a chance to offer older inventory at inexpensive prices. This avoids overstocking and alleviates the bottleneck of demand that occurs after the Chinese New Year shutdown.
Alleviating the stress of the Chinese New Year on your supply chain can be a benefit rather than a detriment if you use a little planning and business acumen and prepare to have increased coordination with your carriers during this time of year. Knowing what is to come is half the battle, and being prepared is the best way to distinguish your supply chain.
Learn more about how enVista can help you prepare with our Transportation Consulting Services.