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How the Chinese New Year Will Impact Production and What You Can Do Now to Prepare

By January 15, 2021 February 2nd, 2021 Blog
January 15, 2021

red lanternsThe Chinese New Year Is Almost Here

The Chinese New Year may begin on February 12, 2021 and last until February 26th, 2021, but the holiday isn’t limited to just one week. In fact, people in China celebrate the New Year for a full month, shutting down factories, businesses, restaurants, and shops up to two weeks prior and not fully reopening until a week after the official holiday. 

Other regions and countries with significant Chinese or Sinophone populations, including Singapore, Vietnam, Indonesia, Malaysia, Myanmar, Thailand, Cambodia, the Philippines, and Mauritius, typically celebrate the Chinese New Year for two full weeks. If any of your manufacturing partners are in China or these regions, you can expect the festivities will impact your production schedule. 

The good news is that with good planning, you can minimize disruption and keep your supply chain humming. The bad news is, COVID-19 has upended everything, and increased delays and costs are to be expected.

A Few Facts about Chinese New Year

The Chinese New Year is also called Lunar New Year or Spring Festival because the holiday coincides with the phases of the moon. Much like how much of the U.S. celebrates Christmas, Hanukkah, and Thanksgiving, the Chinese New Year is a time for food and family. Work is secondary.

Related: Considerations for Contract Manufacturing in China

The travel involved with bringing people together for the festivities has been called the largest annual human migration in the world. Nearly three billion people from across the country and various regions migrate to their hometowns to celebrate with all kinds of traditions. From elaborate decorations and haircuts ridding of last year’s bad luck to wearing red and exchanging envelopes of cash, the Chinese New Year is something to behold.

What to Expect with The Chinese New Year

While your U.S. operations may be thousands of miles from China, you will feel the impact of the Chinese New Year directly, particularly this year, as we are seeing massive impacts from Covid-19. We’ve seen port strikes, rising prices, equipment shortages and more over the past couple of decades, but what we are experiencing now is unprecedented. Never before have we had to compress 12 months of shipping into 7-8 months.

This year, the first week of February is likely the last day factories will operate. Mass production and sample orders will cease and factories will stop taking orders with pre-Chinese New Year shipment dates in December.

Shipping is a giant question mark, and costs have escalated to the point of breaking records. We are all all-time highs for ocean container rates, and air freight isn’t much better. Shipping lanes will experience significant delays, and customs will take longer to process deliveries. Trucks at California ports will be one to two weeks behind schedule leading up to the holiday. 

If you have been sourcing your manufacturing to China or other regions that celebrate the Lunar New Year, you may already have an annual process in place that accounts for all of these factors. For those new to overseas manufacturing or ones who feel they can do more to reduce their risks, there are several things you can do now to prepare.

Top Tips to Minimize Disruptions

Forecast Inventory

The first thing we recommend is forecasting your inventory. Assess your current inventory and estimate as accurately as possible as to when you believe you will stock out over the next six months. Even though you may have to spend more to store excess inventory to get you past the Chinese New Year, it can be catastrophic for a business to have depleted inventory where incoming orders cannot be fulfilled quickly. Customers expect to receive orders promptly, and many will immediately go elsewhere for similar products, even if they have to pay more, simply to get them faster.

If you anticipate a stockout before April 2021, you should go ahead and place your order now, well ahead of the Chinese New Year. If you estimate you are adequately stocked until the end of Q1 but will need inventory in the April or May 2021 timeframe, you will want to place your orders before January 2021. You should be able to wait until after the Chinese New Year to place orders if your inventory is healthy through May.  

Call Your Manufacturer

No matter where you have your products made, be aware that factories operate differently around the globe, even from year to year. So, even if this isn’t your first time dealing with the Chinese New Year, it is a good idea to contact your factory contact to have a conversation about their calendar. Make sure you get specific dates as to when they plan to shut down for the Chinese New Year and when you should place your orders to avoid disruption.

Expect Delays and Increased Costs

You can plan months ahead, accurately forecast inventory, and have in-depth conversations with the factory, but there is a good chance something will still fail to go as planned. Expect much higher shipping costs, as well as hiccups and delays somewhere along the supply chain. 

There are thousands of companies just like yours that are trying to plan around the Chinese New Year – ordering inventory ahead of time, making calls, etc. The demand on factories is at its peak during this time of year, and COVID-19 has only made things worse.

Related: How to Vet a Manufacturing Partner

We recommend working throughout the year to build a close relationship with your manufacturer. Having a personal connection with the factory may be the difference between getting inventory out on time and being pushed to the bottom of the list behind companies that have nurtured relationships.

Rethink Marketing Efforts

Marketing is a critical component to sell your products, but it can also compound issues with inventory if your forecasts were a bit off or you placed your orders too late. The last thing you want is to successfully drum up interest in your products with clever marketing tactics and then not be able to deliver within a reasonable timeframe. 

If you run into inventory issues, slow down your marketing to temporarily quell a surge in demand due to your marketing efforts. Save your inventory for your regular orders, and when factories are up again and you can replenish your inventory, resume marketing campaigns.

Dates to Consider

The Chinese New Year is a chaotic time of year for product companies. If you plan ahead, you will experience less disruption. We put together an approximate timeline to summarize the dates you should keep in mind:

November 17th: Confirm when your supplier is closing and reopening for the Chinese New Year

December 24th: Last day to place an order for delivery before the Chinese New Year

February 4th: Some suppliers and subcontractors stop production, causing disruption in the supply chain

February 8th: Many workers have already left the factories. Sales reps, engineers and management may still be available for a day or so longer

February 11th: All personnel has left the factory

February 12th: Chinese New Year

March 1st: Most sales reps and engineers are back at work and some factories are back online

March 8th: Most factories are operational and production resumes

March 15th: Factory operations are back to normal