After dealing with one supply chain, shipping and logistics challenges after another throughout 2021, a lot of companies may be looking forward to a more predictable, manageable shipping environment in 2022. Unfortunately, there’s yet one more disruptive event to get through before that can happen: Chinese New Year.
Also called Lunar New Year, the annual festival in China and Chinese communities around the world begins with the new moon that occurs sometime between January 21 and February 20 according to Western calendars. Festivities last until the following full moon and can impact supply chains for weeks or even months as factories are shuttered as workers return home for the annual celebration.
This year, the holiday falls on February 1 but its impacts on the world’s supply chains will likely be felt long before and after that specific day. The celebration starts on February 1 and will then culminate with the Lantern Festival on February 15. The holiday may last up to 16 days with just the first seven being considered a “public holiday” in China.
Understand Your Supply Network
So, what can companies do to keep their supply chains running when one of the world’s largest exporters shuts down for nearly a month? Michael Paynter, Head of Trades in Asia, Indian Subcontinent, Australia and New Zealand for DB Schenker said, “The situation requires transparency around what your needs are, manufacturing alignment on productivity and proactive planning by all stakeholders to understand market expectations during this dynamic supply chain situation.”
In How to Plan for Chinese New Year, East West Manufacturing, LLC says simply understanding how the holiday works can help companies navigate its complexities. “Once you understand that China shuts down nearly everything for CNY and nothing, absolutely nothing will get out of China during that time, the better you can plan,” the design, manufacturing and distribution firm advises.
“Your orders need to ship prior to CNY and don’t forget to plan for inventory needed to get you through the holiday,” it continues. “There is no way to avoid CNY — it happens every year (albeit on different dates) and it requires advanced planning to minimize interruptions on your end.”
Use Good Forecasting
Good forecasting is equally as critical at this time of the year, when knowing exactly how much product your company will need through the first quarter of 2022 may give it a leg up on its competitors. For example, East-West came up with this rule to help account for CNY delays: For orders normally received in March, take 50% of the volume and receive it in January. Receive the other 50% of that volume in February.
“Another great advantage of providing a forecast to your supplier or manufacturing partner is that the factory will be able to see your demand after CNY,” it adds, “so the factory can begin recruiting and training workers earlier, already knowing that a portion of their staff will not return.”
According to Transport Topics, both the Chinese New Year and the Winter Olympics—which are being held in Beijing from Feb. 4-20, may create more supply chain bottlenecks over the coming months. These bottlenecks may further impact ocean shipping—which has experienced a high degree of delays, congestion and shortages in 2021—as a result of slowed factory production in China.
Transport Topics says supply chain challenges also are impacting the nation’s railroads. “At our intermodal yards, Chicago, Memphis, St. Louis, and Kansas City, more containers are being taken in than can be taken out, to their final destination, a warehouse,” the American Association of Railroads’ Ian Jefferies told the publication. “We’re adding capacity, reopening dormant intermodal facilities, and adding incentives to get freight during nonpeak hours.”
Make Your Move Now Versus Later
According to promotional products marketing agency The ODM Group, Chinese New Year is one of the biggest and most celebrated times of the year. The celebrations not only happen on mainland China but also in neighboring countries such as Indonesia, Malaysia, North Korea, Singapore, South Korea, Vietnam, the Philippines and Brunei.
“For most factory workers, this is the only time of the year when they see their families. Not to mention the long journey they have to make before reaching their homes, primarily from the remote and rural areas of this vast country,” the company points out. “Consequently, it causes them to leave way before the holiday officially begins.”
Shippers that are working to balance the current supply chain constraints with the looming Chinese New Year should work closely with their logistics providers to develop accurate forecasts, do the necessary demand sensing and then secure their freight capacity well in advance. Paynter concludes, “With the pandemic making the production, movement and delivery of goods more difficult right now, factor in the extra time needed to get goods from point A to point B at a time when many other organizations will be making similar moves.”