The Chinese New Year, also known as the Spring Festival, is a major holiday in China and other Asian countries. It is a time for family reunions, celebrations, and travel. However, for businesses that rely on imports from China, the Chinese New Year can cause significant delays and disruptions in the supply chain leading to issues for brands looking to provide unparalleled customer experience.
In this article, we will discuss the impact of the Chinese New Year on supply chains. It will also provide tips on how to best prepare and avoid delays during this holiday season.
The Impact of Chinese New Year on Supply Chains
There are a multitude of supply chain impacts that can be felt at this time of year, many of which you will be familiar with as experienced sellers. When speaking with a selection of brands, we found that the three with greatest impact are:
Factory Closure
During the Chinese New Year, factories in China shut down for an extended period, typically two to four weeks. This is because workers travel back to their hometowns to celebrate the holiday with their families. As a result, production comes to a halt, and shipments are delayed.
Shipping Delays
The Chinese New Year also affects shipping schedules. With factories closed, there is a backlog of orders waiting to be shipped once production resumes. This leads to a surge in demand for shipping services, causing delays and increased shipping costs.
Communication Challenges
Another challenge during the Chinese New Year is communication. With factories closed and workers on holiday, it can be challenging to get updates on production and shipping schedules. This lack of communication can lead to uncertainty and delays in the supply chain.
Tips for Preparing for the Chinese New Year
Plan Ahead
As with other major holiday moment like Black Friday or Christmas, the key to avoiding delays during the Chinese New Year is to plan ahead. Start by understanding the holiday schedule and how it will impact your supply chain. The Chinese New Year falls on a different date each year, so it is essential to check the holiday schedule well in advance.
Once you have the holiday schedule, work with your suppliers to plan production and shipping schedules accordingly. It is also a good idea to place orders earlier than usual to ensure that they are produced and shipped before the holiday.
Diversify Suppliers
Relying on a single supplier can be risky, especially during the Chinese New Year. If your supplier shuts down for the holiday, you may face delays and disruptions in your supply chain. To mitigate this risk, consider diversifying your suppliers.
Having multiple suppliers can help ensure that you have a backup plan in case one supplier is unable to fulfil your orders. It also gives you more negotiating power and can help you secure better prices and terms.
Communicate with Suppliers
Communication is crucial during the Chinese New Year. Make sure to stay in touch with your suppliers and get updates on production and shipping schedules. This will help you plan and make any necessary adjustments to your supply chain.
It is also a good idea to communicate your expectations and deadlines with your suppliers well in advance. This will help them plan and prioritise your orders, reducing the risk of delays.
Tip from our partner Portless: Stock up on Best-Sellers and Seasonal Products
Gear up for Chinese New Year by ensuring your shelves are brimming with top-performing favourites and seasonal products. Prioritise stocking up on your best-selling items to fortify your inventory and alleviate any strain on your suppliers post-Chinese New Year.
This year, Chinese New year falls on February 10th, which means that production will come to a halt 1-2 weeks before and after the celebration. So brace for a production hiatus from January 28th to February 26th. As factories wind down, the importance of gearing up for upcoming seasonal events like Easter and early Spring becomes even more important.
Considering the factory shutdown during Chinese New Year, meticulous planning is paramount. This year, Good Friday is on March 29th, making it essential to arrange for the shipment of your Easter and early Spring products well in advance of the Chinese New Year break. Stay ahead in the game by strategising your inventory to meet the demands of the season seamlessly.
Consider Air Freight
If you have urgent orders that need to be shipped during the Chinese New Year, consider using air freight. While it may be more expensive than sea freight, it can help you avoid delays and ensure that your orders are delivered on time.
Air freight also has a shorter transit time, which can be beneficial if you need to restock inventory quickly. However, it is essential to book air freight well in advance as space can be limited during the holiday season.
Additionally, air freight is a costly option and therefore isn’t recommended for all inventory orders from the far east. If necessary, it should instead be reserved for those products with higher margins or a brand’s best sellers as a means of avoiding stock outs.
Funding for inventory purchasing
Access to working capital can provide the much needed boost when it comes to securing appropriate stock levels around major holiday moments like the Lunar New Year.
Often it is best to bulk order from suppliers to ensure the inevitable factory closures and shipping delays are covered. But often, there isn’t sufficient cash to cover large up front payments. So what do you do?
Enter Uncapped. Whether it be to cover larger inventory purchases than usual, prove loyalty to your manufacturers or even bump yourself to first in line with suppliers, the availability of capital can prove instrumental in getting suppliers on side. And Uncapped can help with that!
To learn more, get in touch today.
Real-World Examples of Supply Chain Preparations for the Chinese New Year
MORI
Leading kidswear brand MORI know the value of prior preparation and have a meticulous supply chain management approach. However, to most effectively prepare for any delays, they needed to be sure they had access to working capital.
Working with Uncapped they were able to get the working capital funding needed to cover larger than usual inventory orders from their suppliers and used these deposits to get first in line with suppliers.
This ensured their European warehousing facility and US fulfilment centre’s stock reserves were at the desired level, there was no additional waiting on suppliers and they could provide expectant customers with MORI’s much sought after products. All of which led to a record breaking period in the company's growth.
Browze. An example from our partner, Portless
Browze, a home and kitchen brand that directly ships from China, experiences a smoother transition through the Chinese New Year compared to other retailers that are reliant on cargo shipments.
Given that carriers in China typically observe a shutdown period of up to 5 days during the festive season, Browze proactively adapts its operations to mitigate any potential disruptions. In preparation for the annual Chinese New Year shutdown, the brand extends its standard shipping windows from 8-10 days to 12-15 days.
This adjustment ensures that customers are well-informed about the anticipated shipping timelines when placing their orders.
Nike
Even industry titans feel the pinch in the lead up to the Lunar New year and have to take proactive measures to prepare. They start production earlier and increase inventory levels to meet demand during the holiday season. They also work closely with their suppliers to ensure that they have enough raw materials and components to keep production running smoothly.
Nike also uses air freight to ship urgent orders to avoid Chinese New Year delays and ensure that their products are delivered on time.
Nike are not short on cash and therefore the costs to cover the price of these preparations are less of a consideration.
Conclusion
The Chinese New Year can cause significant delays and disruptions in the supply chain, but with proper preparation, these can be avoided. By planning ahead, diversifying suppliers, and communicating effectively, businesses can minimise the impact of the holiday on their supply chain.
It is also essential to learn from real-world examples and best practices, such as those used by MORI, Browze and Nike, to improve supply chain preparations for the Chinese New Year. By taking these steps, businesses can ensure that their supply chain remains efficient and effective, even during the holiday season.
