As we bring 2020 to a close (which I know we’re all pumped for), we simultaneously draw nearer to a second closure. The Year of the Rat ends on February 11th and on February 12th begins the Year of the Ox. In celebration of the Chinese New Year, factories will be closed down for multiple weeks, though the celebration is only seven days long. You’ve likely already been met with responses from suppliers that they are no longer accepting orders ahead of CNY. This, in addition to roadblocks and restrictions caused by COVID, only add to the strain on the international supply chain as the world shifts further into an eCommerce dependency. So the question is, do you know how your business will be affected by China’s annual shutdown? In this installment of our monthly series, we’ll evaluate some of the happenings in China before, during, and after Chinese New Year closures. Where necessary, we’ll highlight how these closures affect the main pillars of supply chain; sourcing, logistics, and 3PL fulfillment.
Before the Closures
The middle of December marks the unofficial cutoff most factories maintain for accepting new orders. Throughout the end of December and into January, factories are working overtime to meet the year-end demand. Factory employees working longer hours at a faster pace create hectic work environments and leads to issues in QC management. (Insert second “I Love Lucy” chocolate factory reference here). The weeks before Chinese New Year, between Mid-January and early February, factory workers begin traveling to their hometowns. Factory management will still be in the office organizing the final shipments going out.
Pro Tip: QC inspectors will charge more or expect you to pay more. A good rule of thumb is to offer more than usual or agree to the inflated rate. This way, they’re less likely to speed through your QC, avoiding defects or deficiencies.
Leading up to the holiday, factories are not focusing on new orders, but instead directing their efforts to completing larger ticket orders. The more complex and customized your product is, the less likely they are to take on your project leading into CNY. For the new orders they do accept, they’ll wait to start production until after the factories reopen, as a way of building up their post-CNY queue.
When you are reaching out to your suppliers before the Chinese New Year, be sure to confirm:
- The date they’ll be closing the factory/when they expect their workers to start leaving
- Their estimated factory reopening date
- If you have a new project on the agenda, ask when would be a good time to start
- Realistic sample creation timelines
- If the pricing for a product is expected to increase/decrease after CNY
Most China-based freight forwarding companies don’t have software to track shipments. These are often tracked manually via Microsoft Excel, making it difficult for your FF to tell where your shipment is, or if it has shipped yet. Some employees do not own home computers, making working from home impossible. Certain FF companies will provide laptops to their employees, but in general, receiving updates will be very difficult.
In addition to diminished communications, ports are operating at less-than capacity. Sellers can also expect spiked container prices which will continue into January.
Try checking in with your partnered Freight Forwarder more often during these times to ensure that even if your cargo gets rolled, you can expect it to go onto the next ship!
Third-party logistics facilities are struggling to ship out products due to equipment limitations. In fact, many 3PLs are being cut from their routes due to these capacity limitations. With outbound shipments from warehouses being restricted, many containers are sitting in truck yards and ports with nowhere to deliver products, worsening the equipment shortage. As a result, December is peak season for accessorial charges. In addition to this lack of equipment and capacity, the eCommerce holiday rush further extends already longer than usual processing times.
Chinese New Year Observed
The New Year officially begins on February 12th, which to those of us in the US is actually February 11th. Between the 12th and the 22nd, families reunite and come together for what’s regarded as the most important meal of the year. Factory management and owners who continue to work will be discussing plans for 2021 after reopening. During this time, you should expect little to no communication from overseas contacts. While you likely won’t receive a response, make time to wish your contacts a Happy New Year!
Many of the smaller feeder ports in Southern China will shut down starting early January due to COVID spikes in the HK area. This causes a domino effect of cargo getting to the larger ports, delaying shipments. Ports will sometimes do a full shutdown for 2 or 3 days during Chinese New Year, causing delays.
Ramping Up Production
Between the end of February and early March, factories will reopen and employees will slowly return, but not all of them. You see, many of these factory workers take time while in their hometowns to find jobs closer to their families. If they secure a new job, that leaves an opening at the factory that management has to backfill for. Quality control remains an issue as factories are onboarding and training new employees.
It’s around this time that the ports will also begin to normalize. Your factory communications, order leads times, and logistics should begin to normalize as well.
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 Duluth, Georgia.