Chinese New Year 2021 & Supply Chain October Updates

In the haze of hunting for toilet paper, quarantining, and presidential debates, you’ve likely lost track of time.  Head’s up, it’s October!  If you haven’t started already, you’re nearly too late to plan for Chinese New Year.  While it’s possible to place an order in November that may be completed before CNY, October is really your last shot.  In today’s post, we’ll be reviewing the recent changes in supply chain.  We’ll also share some tips on final preparations you can do on the cusp of Chinese New Year.

Recent Changes and Challenges in Shipping

Unless you’ve been hiding under a rock (which, hey, no judgments here), you’ve probably noticed that shipping costs have skyrocketed.  In a recent appearance on The Asian Seller Podcast, Francois Jaffres predicted that shipping prices would, “continue to increase month over month until we get to Chinese New Year”.  He further explained that the price of 40 foot containers from port to port have more than doubled in the last year.  “This time last year, prices were about $1,600 – $1,800 for a 40-foot container going from Shanghai to Long Beach, port to port.  Now they’re over $4,000”.

The continued increase in shipping costs led to the unprecedented involvement of Chinese Authorities.  While a conference between the Chinese Transport Ministry and transpacific carriers aimed at lowering these GRIs was held in early September, rates continued to rise throughout the end of the month.  It wasn’t until the first of October that we began to see those prices stabilize.  As reported by Flexport on October 1, GRI’s decreased to $3,800 West Coast and $4,700 East Coast and held steady throughout the first half of the month.  We should expect to see further decreases or at least stabilization for the second half of October.

Flexport October 1, 2020 Market Update

This image was pulled from the Flexport Market Update from October 1, 2020

Decreased GRIs definitely are a welcomed change. However, with China exporting more than they’ve been importing in 2020, there are fewer 40-foot high cube containers available than usual.  Francois’ recommendation in a recent episode of the Global From Asia podcast is that Sellers should be working with their freight forwarders to see what equipment is available.  With regard to requests from FFs to use a different kind of container, he noted, “It’s for a reason.  It could be to get it there faster, it could be because it’s cheaper”.  

To further complicate the shipping and logistics world, ports have been congested.  Sellers should anticipate longer wait times at the ports.  There are also fewer trucks available to pick up shipments at the port. 

Anticipated Impact of Prime Day…s

Batten down the hatches folks, Prime Days are tomorrow! (Or today depending on when you’re reading this)…….(Or already happened, again depending on when you’re reading this).  Rumored dates for Prime Day 2020 made headlines last month but were later confirmed by Amazon on September 27th.  It’s expected that over the next two days, Amazon will see nearly $10 billion in global sales.  The American market is expected to generate $6.17 billion of that. 

This immediately follows Golden Week which was one day longer than usual because of the Mid-Autumn Festival. Build a relationship with your suppliers by asking them how their Golden Week vacation was and how they spent their time! This is akin to Thanksgiving for Americans, and they’ll appreciate your interest!

Building this relationship is important in China as “guanxi” and is an essential part of building relationships in China.

CNY is Around the Corner

At the risk of sounding like a broken record, Chinese New Year starts in February.  Again, the effects of this holiday are felt long before and after the celebrations have concluded.  Do you remember last week during Golden Week when your suppliers were closed and relatively unresponsive?  You should expect a similar lack of communication during CNY.  

It’s also important to be aware that factories will begin prioritizing their larger orders, trying to get as many done before closures as possible.  However, in order to get this done, it’s highly probable that they’ll be outsourcing their work to smaller factories and quality will begin to slip.  

Be warned that if they haven’t started on your order by the end of this month, it’s likely not going to get completed until after the holiday.  If they’re produced closer to CNY, you may run the risk of quality control issues.

Some proactive steps that you can take to curtail these obstacles before Chinese New Year 2021 are;

  1. Communicate with your suppliers now on your plans for the next few holidays and how those will affect your orders.  Clue them in on when you plan on ordering and in what quantities.
  2. Research 3PL fulfillment centers as Amazon FBA is continuing to limit inbound orders to 200 units for most Sellers. Keeping enough inventory to last through the holidays is vital to the success of your eCommerce business.
    ProTip: Be prepared to run FBA and FBM listing simultaneously.  This will ensure you don’t run out of stock.
  3. Re-send your Key Quality Indicators (KQI) to your suppliers to remind them of what you’re going to be inspecting.  This way they have no way of forgetting your standards.
  4. Account for an additional 3-5 weeks for your products to be received and made available by Amazon FBA when planning order placement.
  5. Ask your supplier if they’re able to prioritize your order in their production queue if you place a larger order to be produced before CNY.  They will see this as a sign of growth and trust.  Remember, they’re going to be shut down for about a month, so cash is king during this time.
  6. Speak with your freight forwarder about ensuring they’ve booked your cargo. Freight forwarders are juggling several clients and processes manually most of the time.  Checking in can ensure your order is booked on time and your cargo is top of mind.

Here are some things to NOT do right before Chinese New Year 

  1. Try to haggle your pricing even if you’re ordering more than your usual order size.
  2. Add more customizations to an item already in production.   The Factory engineers are slammed and may not get them right completely.
  3. Don’t wait until the last minute to book your freight. You’ll want to book at least 2-3 weeks in advance of the cargo ready date (CRD).

The last item to be aware of is the ability to communicate via WeChat still hangs in the balance.  While Judge Beeler’s injunction has prevented the banishment of WeChat from app stores, for the time being, we don’t yet know what the future holds.  It may be wise to begin exploring other communication platform options with your suppliers. 


Stay up to date on Noviland and industry news by subscribing to our monthly newsletter!

Subscribe for more!


 

 

 

 

 

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.