For companies that import or manufacture products in China, now is the time to prepare for significant supply chain disruptions due to the upcoming Chinese New Year. The official public holiday runs from February 11–17, 2021, but production facilities across China will close for varying amounts of time starting January 31 through the beginning of March. In many Asian countries, the Chinese New Year is called the Lunar New Year, with celebrations that also lead to manufacturing shutdowns and slowdowns. Countries that take a Lunar New Year break include Vietnam, South Korea, Thailand, Cambodia, Malaysia, Indonesia, Brunei, Singapore, Japan, and the Philippines.
Because of the global pandemic, you can expect this year’s Chinese New Year disruptions to be even more complex than usual. Over the last 10 months, COVID-19 has made international logistics more challenging by pushing supply chains into overdrive while also slowing production for various intervals. Businesses have responded by becoming more adept at finding alternative manufacturing and logistics pathways and should use that experience to navigate the fast-approaching shutdowns in China and across Asia.
As tariffs and trade conflict with China pushed some companies to find alternative manufacturing partners in the past two years, China still remains the third-largest trading partner for the U.S. This suggests just how many organizations will be affected by the upcoming holiday celebrations.
Steps to preparing for the interruption in production should include accurately projecting inventory needs for the upcoming months, securing products in advance when necessary, and prioritizing efficient logistic practices. Let’s take a closer look:
Overcommunicate with Suppliers
Act now to understand exactly when your suppliers will close and reopen and, because some factories will close at different times, learn when they will stop accepting orders in advance of the shutdown. In addition, some factories will resume on their stated reopening date while others may ramp up operations with limited staff. Since Chinese workers often use the holidays as a way to move on to new jobs, some manufacturers might miss their back-to-business deadlines altogether and could be short-staffed when they resume operations.
Accurately Assess Demand
Meeting customer demand when your supply chain is interrupted requires solid planning and data analytics. To determine what your customers will need over the next several months, thoroughly examine past sales data and current market trends to establish an accurate estimate. With the estimate on hand, place orders in advance of the Chinese New Year manufacturing shutdowns. But remember, your competitors will be ordering in advance as well. A short-term surge in production demand may create delays, so it is critical to start early and work closely with suppliers.
Focus on Logistics and Shipping
Customs clearance agencies in the Americas, China and across Asia face mounting pressure in the pre-holiday period. To ensure timely delivery of your goods, it is essential to navigate complex and changing border clearance requirements with the help of experienced international logistics and transportation experts. At DHL, our trade experts educate customers about tariff rules and regulations, compliance measures, and how to avoid delays and penalties.
As production resumes in China and other Asian countries after the new year, transportation demands will increase, and you might face growing competition for on-time delivery. To get ahead of this competition, it is critical that you work with a shipping partner that has specific experience in international and high-volume transport, as well as express delivery.
Build Resiliency into Your Supply Chain
While the Chinese New Year creates annual and predictable interruptions in manufacturing, supply chain disruptions can occur at any time — and your company should be prepared. As part of long-term planning, move towards more flexible supply chain solutions so that you’ll be ready for future Chinese New Year shutdowns as well as other unplanned disruptions. A flexible supply chain consists of multiple manufacturing points, resilient shipping options, and warehousing that is properly distributed from a geographic standpoint.
Plan for Production to Resume
After the Chinese New Year, many facilities may resume production on a limited scale and start-back times may vary from manufacturer to manufacturer. As a result, continuing delays into the month of March should be anticipated.
Do you do business in China or other countries in Asia? If so, what’s your strategy regarding the Chinese and Lunar New Year holidays in 2021? Let us know on Twitter @DHLUS.