The festive atmosphere around the CNY is not to be misjudged. The national “holiday mood” often contradicts the tremendous pressure felt by foreign managers. Put bluntly, from a business standpoint, the CNY poses challenges to almost all companies doing business in China. And this year, these challenges will be compounded and intensified by the presence of Covid-19.
CNY challenges in 2021
Work routine disruptions
Usually, the Chinese New Year is characterized by the world’s largest human migration. A wave that starts way before the holiday and continues in full force throughout the festivities. As a result, the workforce and output of domestic companies shrinks dramatically. While employees can sometimes get a 12-day vacation, factories in China will usually be closed for an even longer period (stretching from February 6th-20th).
However, this year, Chinese authorities both on national and provincial levels have issued new regulations, encouraging people to avoid traveling.
Cancellations & delays
Way before the “real” holiday starts, production and shipping processes are accelerated. Exporters and manufacturers rush to produce and ship as much as they can before employees are off to vacation and factories are closed for the holiday. This causes a bottleneck in ports and customs offices, so delays and cancellations start to take shape.
This year, the pandemic’s implications and preventative measures added have served to complicate companies’ supply chain management.
Shortage of labor force
In the event that the rate of contagion begins to creep upwards again in China, the Chinese government is primed to issue additional regulations and protective measures to constrain the spread. One such regulation could be locking down high-risk areas and putting thousands of people in lockdown once again.
Shortage of containers
While the global demand for goods is booming, and manufacturers working tirelessly to keep up, exporters have been left dumbfounded by a severe shortage of containers. Thousands of shipping containers are stuck in overseas ports, unable to return to China due to the suspension of shipping lines.
The race for completing orders has also resulted in a 10%-50% increase in the prices of raw materials (such as plastic and steel). Also, the imbalance between China’s import vs. export capabilities and the consecutive shipment delays that have occurred outside of China have had the effect of skyrocketing shipping costs from China to international destinations.
QUICK TIPS – prepare your China business for CNY
For companies doing business in China, creating a logistical plan and roadmap is crucial. Here are some tips to help you prepare, avoid delays, cancellations and headaches:
- Check carefully all the stages of your production, shipping and the handling of your products around the Chinese New Year dates.
- Increase orders: ordering sufficient inventory for Q1 is highly recommended, in order to mitigate the negative effects that may will be experienced in your supply chain.
- Prepare at least half of your inventory for shipment after your quality control inspection.
- Make early flights or shipping reservations. Keep in mind that from late January through mid-February arrival and delivery times of shipments are speculative to say the least.
- Plan your orders for after CNY, so employees can resume work immediately after the holiday.
- Make sure to document all the communications with employees and suppliers.
- Keep a close eye on your products’ raw material index price.
- Draft contingency plans in case the Chinese government extends the holiday break or issues travel regulations that prevent the proper resumption of work.
Immediately after the holiday:
- Re-check schedules: workforce fallout during CNY and delays in getting back to full production may temporarily affect standard production & delivery time.
- Put back to work the employees who live closest to the factory, due to the potentiality that travel restrictions will not allow all employees to return to work.
Have a happy and prosperous New Year!