The Year of the Ox will begin on February 12, 2021, the first day of the Chinese New Year (CNY). In celebration of this holiday, Chinese businesses, including factories, close for weeks at a time.
During this time off, some employees choose to look for jobs closer to home. If they are successful in their search, they will not return to the factory after the holiday. Factories also use this time to decide which product lines they want to continue making and planning out their manufacturing for the rest of the year.
For these reasons and many others, you should start planning for Chinese New Year now. You read that correctly; now. Yes, I realize that it’s still August. However, getting ahead and being strategic about your supply chain management leading up to the holiday closures can minimize the potentially devastating impact on your business during this time. This is especially true if you’re an Amazon Seller.
What Is Chinese New Year?
Chinese New Year, also known as Lunar New Year, is a week-long celebration when Chinese people from all over the country, and the world, travel home to spend time with their families. Dinner on Chinese New Year’s Eve referred to as “reunion dinner”, is regarded as the most important meal of the entire year. Friends and family members gather around their TVs to watch traditional performances, exchange gifts of prosperity and luck, and set off fireworks. (Sound familiar?)
Timeline Of Events
In the weeks leading up to Chinese New Year, factories may stop accepting new orders and clients, or inform their clients that production will begin post CNY. Sometimes, they’ll even stop communicating with their current clients altogether. Larger quantity orders are prioritized as they near the holiday in an attempt to minimize the inevitable production backlog after reopening. Chances are that if your suppliers have not started production on your orders by early January, they will likely remain untouched until April. You can combat this by placing larger quantity orders earlier in the year.
Reasons To Start Planning For Chinese New Year Now
Over-promising, under-delivering, and price gouging.
While Chinese officials cracked down on price gouging on COVID-19 prevention supplies earlier this year, it is common practice for factories to exponentially increase their pricing prior to the holiday to discourage certain customers from placing new orders. Additionally, factories will almost never accept a new concept order leading into CNY or take on requests for quotes (RFQs) that are not fully developed. Suppliers have also been known to over-promise and under-deliver on production timelines so they can lock in orders to line up the business for after the holiday.
Production queues & MOQs typically increase.
While this ties directly into over-promising and under-delivering tactics, it’s worth mentioning separately. Remember, these factories are going to be closed for about a month. They’re going to try to lock in as many orders as possible, but definitely make it worth their while by increasing the minimum order quantities (MOQs).
Quality begins to slip as factories rush to complete orders.
We’ve all seen the chocolate factory scene from I Love Lucy. Lucille Ball and Vivian Vance working furiously to wrap what pieces of chocolate they can catch speeding down the conveyor belt. Those that are wrapped are done so haphazardly, while others are thrown on the floor. All around, it’s enough to make a QC professional cringe. Or perhaps you’re familiar with the old adage “measure twice, cut once”. Quality production takes time, and when orders to fill outweighs days left on the calendar, quality falls by the wayside.
Logistics become unpredictable and more expensive starting in December.
General Rate Increases (GRI) will go into effect as we get closer to the end of the calendar year. Lead times on booking freight increase, taking at least 3-4 weeks. The chances of your shipment being rolled are higher than normal too. Further, selecting the cheapest shipping option will more so increase your risk of being rolled.
Backlog of orders that weren’t completed before closing the factory leads to delays in production.
The first-in, first-out principle does not apply here. The most lucrative orders take priority both before and after Chinese New Year.
Key supplier employees don’t return to work after the holiday.
In addition to a factory’s manual workforce, key players such as manufacturer points of contact and trade agents may not return to work after the holiday. Be sure to have a backup with your supplier, or utilize an end-to-end sourcing company that can mitigate these changes in staff on your behalf. Noviland’s COO recently met with a hardware factory that produces plumbing fixtures for some of the largest name brands around the world and employs over 300 people. When asked about CNY labor return rates, they said the factory loses about 30% of its labor-force post-CNY every year. That’s nearly 100 positions they need to fill, requiring interviews, training (typically re-skilling), and close managerial oversight.
Quality concerns while training new employees that are back-filling for those who left.
It’s not uncommon for new employees to make mistakes, and the manufacturing industry is no different. Immediately following reopening, employees that have not yet been fully trained are working on the production floor. This is due to the backlog of orders not completed before closing and inadequate staffing. It may take some time for all new employees to be fully trained and meeting quality measures.
Factories may choose to discontinue making certain products or close down for good if demand is too low.
It’s never a good idea to pay your deposit right before CNY. Many small factories may choose to sell off their machinery and tooling, and close their doors. Many also choose to pivot their product focus based on changes in the market.
New Unique Challenge For Amazon Sellers
As many are aware, Amazon announced in July 2020 in response to COVID-19 that sellers may store a maximum of 200 units of product in FBA warehouses. This presents a unique challenge when planning for Chinese New Year, as the recommendation is to order more, order earlier. With this added hurdle to maintaining your Amazon IPI score, it’s best to utilize a third-party logistics (3PL) company that can accommodate greater order quantities.
Guiding You Towards Success
While Chinese New Year undoubtedly has the greatest effect on your supply chain, it’s not the only Chinese holiday that warrants extended closures. Noviland has created a resource that outlines the dates and duration of these Chinese holidays. This outline includes steps you should take in order to prepare your business for these production delays.
Lisa Kinskey is the Marketing Assistant of Noviland, Inc., a rapidly growing sourcing & purchasing solution making sourcing from overseas factories simpler. Lisa has a background in sales, marketing, and event planning and currently resides in Kennesaw, Georgia.