Chinese New Year & its effect on the Supply Chain.
Although a time of great happiness and joy for over 1 billion people, Chinese New Year can be a real headache for importers if one's Supply Chain is not properly managed over China's longest festival.
China has recently entered the Year of the Tiger. The Tiger is part of a 12-year-cycle of animals that make up the Chinese zodiac. Chinese New Year (CNY) is an important traditional holiday celebrated at the turn of the Chinese calendar. In China, it is also known as the Spring Festival, and celebrations traditionally run from Chinese New Year's Eve, the last day of the last month of the Chinese calendar, to the Lantern Festival on the 15th day of the first month – making the festival the longest in the Chinese calendar.
Due to the fact that the Chinese calendar is lunisolar (i.e. dates indicate both the moon phase and the time of the solar year) the annual date of CNY on the Gregorian calendar changes from year to year. For example, CNY this year was celebrated on 1st February, but in 2023 it will be celebrated on 22nd January – the start of the Year of the Rabbit.
Importers dealing with Chinese manufacturers need to be acutely aware of these dates and the national holidays associated with them, as the entire country essentially grinds to a halt to celebrate the New Year festivities, with not a single factory or port in operation over this period.
During this time, all of the factories’ workforce leave for their family homes, which are often located in a completely different part of the country. The CNY holiday is therefore, in practice, a lot longer than the official week-long holiday on the government calendar. Generally, workers will leave their factories and offices a week or so before the actual CNY date, to make it home on time for the festivities, the Spring Festival holiday itself is officially 1 week long, and the workforce then returns approximately 1-2 weeks after the holiday ends. So, in reality, as far as manufacturers are concerned, the Chinese New Year holiday lasts for the better part of 3-4 weeks.
Essentially, what this means is that there is a 3 to 4 week break in the production cycle.
Apart from this, there are always shipping bottlenecks at the ports just before and after the CNY holiday as importers try to get their orders on the water as quickly as possible either just before CNY port closures or after CNY port re-openings. The main shipping lines naturally take advantage of this increased demand for limited container and vessel space and generally introduce GRI’s (General Rate Increases) over this period as well.
It is therefore imperative that you plan your ordering and production schedule so as to minimise the various effects of the CNY holidays.
As far as is practically possible, Sulis Import Solutions advise our clients look to have their orders confirmed and into production in such a time so that – taking into account the factories’ specific manufacturing lead-times on orders – the goods should be completed, QC inspected, loaded and shipped at least 2 weeks prior to CNY itself.
If an order is not completed and shipped before this time, there is a high risk that the goods will either sit part-finished on the factory floor until the workers return after the CNY holidays, or in a container yard in port until it re-opens and a loading slot on a vessel becomes available. Many factories also experience labour shortages during the first couple of weeks after the CNY holidays, as workers use this period as an opportunity to look for new employment opportunities; which then has an adverse effect on a factory’s production line and lead-times.
Although CNY and its associated holiday period might seem like an incredibly daunting prospect to any would-be importer, if properly prepared-for and managed, one can take advantage of having your products completed, shipped and actively being sold in the market whilst your competitor’s goods are still sitting on some factory floor, literally gathering dust.