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What the Chinese New Year Means for Your Supply Chain

As 2019 comes to an end, China is preparing for it the festival season to celebrate the New Year.

Chinese New Year and the Year of the Rat will begin Saturday, January 25th, 2020. The holiday season is a time for families to return to their hometowns and celebrate for several weeks. Businesses shut down for the entire duration of the celebration. The festivities have a huge impact on the Chinese manufacturing business. The absence of business has a domino effect that further disrupts international business partners that are reliant on Chinese productions.

In anticipation of the Chinese New Year, factories experience a production peak and rush before the close of business in order to make up for and overcompensate for the time that is lost during the off period. During this time it is common for both ocean and air freight costs to spike while taking advantage of the demand for capacity. Similarly, ports in China face congestion as shippers rush to get their cargo out.

China is an economic giant in the global exporting industry and the CNY has a ripple effect around the world, but there are ways to proactively prep the supply chain to mitigate losses and risks when one of the world’s largest exporters closes its doors. It's important to understand the holiday in order to prepare effectively. This includes shipping all orders prior to the business shutdown and account for inventory needed to get through the holiday season.

Chinese factories face immense pressure in the time building up to the New Year. It's necessary to build a valuable relationship with your Chinese supplier. During the annual holiday crunch time, the supplier is not likely to prioritize the newly registered account. It takes time; however, you will reap the benefits of investing in the supplier relationship overtime. Being selective and measuring the supplier based on their operations is a great tool to build trust.

During this time of year, there is no such thing as too much planning. A good way to ensure that your supply chain will not suffer is by building a forecast. Account for volume of orders based off of company data in the time that the Chinese supplier will be unavailable and share it with your supplier in months prior to the New Year so they can meet demands.

If you outsource any product from China, then you are aware that the Chinese New Year is in a class of its own. Keeping your supply chain on track during this time of year can be a challenge; however, it is not impossible to manage. Knowing what to expect is half the battle. Advanced planning is crucial to minimize internal interruption and to overcome the temporary absence of suppliers.

What we’ve seen: Our Chinese partners and clients are extremely busy in the weeks building up to the Chinese New Year. Although the time is hectic, supply chains that are agile and proactive make it through the holiday season unscathed. Preparation and due diligence go a long way for both the company bottom line and the partner relationship.

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