This chart explains the Chinese New Year Season, which covers December, January and February. You can think of December as the “run up”, January is where all the action happens, and February is where things start to get back to normal.
What to expect?
The reason we have a blog post for this is because China shuts down for a week during the New Year Festival. However, the actual disruption to the supply chain is more than just a week delay. It actually covers about 3 weeks, and without out a plan, companies can experience pretty severe delays. All the pieces of the puzzle will not only stop for a week but will be very strained for the weeks before and the weeks after. Most production projects are putting together several manufacturers and suppliers so if one part gets jammed up the dominoes start to fall.
December: The Run Up
For the month of December, it is a good idea to add a week on each lead time for an order submitted. This would mean that if you place an order that was quoted at 4 weeks, be prepared for it to take 5 weeks. Early on in December is still a considerable time before the New Year holiday but there is much anticipation, so things get strained already.
January: Crunch Time
Things get tense in January, there is tons of pressure to get stuff out and everyone involved in the manufacturing process needs to stay on top of orders in the pipeline.
Labor Shortage
Nearly all Chinese will travel home to their families during this holiday. It is the largest migration of people on planet earth and all the trains, planes and automobiles in the country cannot handle the burden. Many seasonal workers, unskilled workers and people who are far from home will start to make their way back earlier to avoid the peak travel times which cause fares to spike and available to reduce to nothing.
Limited Shipping
Truck drivers are workers too and they need to get home like everyone else, however since their “jobs” will take them away from home for days on end anyway, this part of the supply chain breaks in the week before New Year and its effects are severe. Anything other than full-container loads tend to become less and less available in the week before new year because truck drivers are scarce. This effects goods moving between facilities as well as goods moving up to ports.
New Year Holiday
A common misconception is that everything closes during this holiday. This is not exactly true. Big factories continue to run (shutting down furnaces costs tons of money) and seaports and air ports continue to run as well. Just as with the points mentioned above, labor shortages hit here and there is a massive surge of orders. This means that if everything was done right and orderly, shipments often get “bumped” at the ports and are delayed until the next available voyage.
February: Back to Work
The same challenges faced before the holiday are faced after, but they are much less severe. Orders that carry over the holiday are restarted but this generally does not happen right away because the dust is still settling, and people are making their way back.
Summary
There is no silver bullet to mitigate what will take place with this holiday shutdown. Even when all plans are solid in place, proofs are approved, productions scheduled and shipments booked, there can still be bumps in the road.
Key Challenges
- Port Delays – Ports get overloaded during this time and labor supply becomes demised. This causes shipments to get delayed all over the place. Steamship lines also deploy a strategy referred to as “blank sailings” which means they route vessels to ports without a firm schedule, they wait until they fill, then they ship off. This often causes delays and uncertainty.
- Little Room for Error – With a hard deadline approaching, there are not a lot of opportunities to fix a problem or adjust something mid-production. Every facility from a large factory making bottles, boxes or bags to a small supplier applying labels will have queue of orders to finish with considerable pressure to hit a deadline. If something goes awry, the order could get snagged and bumped until after the holiday because the pieces simply cannot come together.
- Increased Order Volume – A similar pattern exists in both China and the US, companies tend to buy a lot at year’s end. This means US companies will increase their buying in December and Chinese companies will do so in January. Under normal conditions a week-long holiday would be a strain, but here it really creates a double-whammy.
Pro Tips:
- Order early – This may seem obvious, which it is, but the simple fact remains that the sooner your project ‘gets in line” the better you will fare. It should be noted we realize the US consumer has little regard for this shut-down, they have the Christmas season to deal with on their own. However, instilling this point on all stakeholders is a good idea.
- Book transport in advance – This is a variable that can be controlled. Make sure you have a shipping plan in place well-ahead of time. This gives the supplier the autonomy to use all the resources at their disposal to make plans and have things arranged. If you are waiting until the last minute to decide FCL, LCL, air or hybrid, chances are you are going to pay the price.
- Have a Plan B – No one in our position is supposed to suggest this (except for now). We are tasked with getting it right the first time and delivering quality consistently. However sometimes things happen and it’s good to have plans in place for partial shipments, doing some sort of decoration stateside or even having a backup supply in advance.
