The next Chinese New Year, falling on Saturday, January 25, is an auspicious occasion but also an event that promises to slow your company’s production and create supply-chain disruptions before, during, and after the holiday. Ushering in the Year of the Rat, factories in mainland China and Hong Kong typically shut down for approximately three weeks to give their employees time to travel home and celebrate with their families. If you import goods or parts from China, you might want to order in advance or set up a contingency plan to expedite shipping. Even though the Chinese holiday recess is still weeks away, choosing a strategy now to cope with the slowdown could help minimize any potential revenue losses during the first quarter 2020.
Plus, the U.S.-China trade war will be in full swing by the end of January. The new U.S. tariffs, set to hit Dec. 15, 2019, will affect many Chinese-made items on America’s holiday shopping lists such as smartphones and laptops. As it stands now, almost all goods traded between the U.S. and China will face higher tariffs by the end of 2019, including new automobiles. With the Chinese New Year approaching, it is especially important that businesses understand the new tariff increases, how they apply to their sector, and exactly when the rules come into effect so that they can properly prepare.
Even with the increased tariffs and trade tensions with China over the past year, the U.S.’ third largest trading partner– after Canada and Mexico–is still China. Hundreds of thousands of U.S. companies depend on goods and products produced in China, so this predictable Chinese work hiatus will cause a dramatic ripple effect in 2020.
Here are some key production and logistics considerations to help your company be prepared for the impact of the Chinese New Year:
To make sure you can meet customer demand during the disruption period, it is critical to be as accurate as possible in determining what that demand will be. Based on careful estimates, your company should place orders for goods well in advance to allow for production and transportation times.
Accurate forecasting of customer demand will require a careful analysis of past sales. Remember, your competitors will also be ramping up orders and looking for logistics support, which means that further delays might occur.
Overcommunication is Key
Manufacturing facilities in China will close at different times, and they will stop accepting orders in advance of their shutdown times. It’s crucial that you communicate carefully with your suppliers, pinpointing exactly when they will close and reopen. Keep in mind that some manufacturers might miss their back-to-business deadlines, since workers often use the holiday as a time to move on to new jobs. This means that facilities could be short-staffed when they begin to ramp up operations again after the holiday.
The Chinese New Year break impacts more than just production. It also has far-reaching implications on the border clearance process, as well as on related transportation and shipping schedules. Again, to ensure timely clearance, it is imperative that you place orders as early as possible. At the same time, you’ll want to work with international logistics experts who understand border requirements as well as the latest tariff updates.
At DHL, our trade experts work with our customers to help them understand the changing tariff rules and regulations, ensure compliance, and avoid delays and penalties.
Plan for the Aftermath
After the Chinese New Year, it may take longer than expected for businesses in China to get back to normal levels of production and fulfillment.
Finally, anticipate extended disruptions by forecasting correctly and searching for alternative suppliers.
What is your company’s Chinese New Year strategy for 2020? Let us know on Twitter at @DHLUS.