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Chinese New Year really is an amazing celebration with millions of workers returning to their families for the celebrations. But with the shutdown and mass migration come stress on infrastructure, supply chain and the whole manufacturing and fulfillment ecosystem. I asked a few Industry experts what they thought the key issues are and what advice they’d offer.
Just how much disruption can we expect to the supply chain?
Howell Wang, Founder and CEO, Insight Solutions Global: Since the Chinese New Year holiday is a regular event, it wouldn’t impact the whole supply chain as most of the factories and our clients have made relevant arrangements already. However, purchasers and supply managers should verify and validate with their suppliers to make sure the backup plan is in place and implemented.
Nate Evans, Co-founder and CXO, Fictiv: Chinese New Year represents the largest annual human migration on the planet. On January 25th, the year of the Pig will have drawn to a close and the year of the Rat will begin. The official holiday this year is January 25th to 30th, and tens of millions of people will travel home from the cities in which they work and live to their family homes to celebrate the New Year. The bad news is that this creates the largest manufacturing and supply chain disruption. The good news is, it has happened for the last 3,000 years, we’ve seen it before and we’ve got it covered!
Ron Keith, Founder, Executive Director & Senior Consultant at Supply Chain Resources Group: Many factories shut down or work with skeleton crews up to two weeks prior to the holiday, which is officially only seven days. Around 10 days before Chinese New Year the great “chunyun” migration begins, the largest annual migration on the planet. This year, some 90 million Chinese will travel between 75 and 3,000 kilometers to visit relatives, typically in the province of their ancestral home. Chunyun is arguably the single most disruptive annual event in the global supply chain. Manufacturers must plan and carefully manage operations to minimize the impact on customers and key operating metrics. Thanks to our friends at Baidu and the Chinese Ministry of Transportation, we have pretty good data on chunyun travel patterns. Most of the migration and supply chain disruption happens in the period leading up to the beginning of the official holiday period.
Misha Govshteyn, CEO MacroFab: The simple answer is a lot! Typically, Chinese New Year is the biggest annual supply challenge on the planet, so planning is needed. This year has been an odd year for manufacturing in China and with trade wars and tariffs disrupting things, some companies have already moved production or are in the process.
Beyond the holiday itself, Chinese New Year creates a huge logistical challenge, what will that mean in terms of deliveries and customs?
Howell Wang: Normally the suppliers will consolidate the shipment demand to do the customs clearance and transportation arrangement.
Nate Evans: Couriers, shippers and customs are closed throughout the holiday period and experience much higher demand during the build-up, causing tensions, delays and backlogs. Inevitably, infrastructure is strained. Shipping routes are very busy in the lead-up and immediately after Chinese New Year. Some challenges continue well after the holiday, thanks to the enormous backlog when everyone returns to work.
Ron Keith: Outbound shipments of finished goods or subassemblies need to be at the port ten days prior to the start of the holiday. The ports will be very busy with both inbound and outbound freight and lead time for loading increase significantly.
Misha Govshteyn: With shipping routes from Shanghai, Shenzhen, Ningbo and Guangzhou already the busiest in the world, stress is inevitable. Customs clearance and freights companies will also take holidays so expect disruption before, during and after the celebration.
What advice would you offer to companies working with Chinese manufacturers, or with quotes out for bid, to minimize the disruption at this important time of year? And what advice do you give to your own customers?
Howell Wang: We advise companies who work with their Chinese manufacturers and get their Chinese New Year plan. They should request regular update with proof of their plan implementation status. Now is the peak season for production and shipment, so delivery schedule and quality might be jeopardized. If you don’t verify the details of the plan and a written agreement with the suppliers you could be in a lot of trouble. We advise our clients to share the forecast early so we can plan our resources to meet clients’ critical requirements.
Nate Evans: Over recent years we’ve been busy developing expertise in China, building a team with diverse industry experience to ensure our customers get the best quality and performance at globally competitive prices. In that time, we’ve learned a good deal about what works where and when in China. Our team there is led by Cameron Moore, who himself has been living and working in China for more that 14 years, both in manufacturing and supply chain.
Firstly, on the question of quality and performance. We’ve seen this before so we will be stepping up our own inspection processes and factory site visits to ensure we continue to monitor and maintain the highest quality and best performance from our manufacturing partners. Planning is essential. Our last order day for ordering CNC parts from China is January 8th. Lastly, if your deadlines don’t work, consider getting a part made in the US for this iteration. Or perhaps consider 3D printing a part if that will get you what you need when you need it.
Ron Keith: Step up product and process quality surveillance immediately before the holiday. Plan on two full weeks of lost production, even though the official holiday is just one. Have all incoming material for the post-holiday re-start on site and through incoming inspection at the factory at least a week before the holiday. Avoid, if possible, NPI activities immediately prior to the holiday. Not only are the people distracted with travel and holiday planning but getting around China becomes increasingly difficult and time consuming. Understand who the key people are on the line and supporting the line in the factory. Have some of your staff or your representatives on-site at the factory beginning a day or two after the end of the holiday. Institute additional external and independent quality checks, in-process inspections, and out-of-box audits for at least the first two weeks after the end of the holiday. I detailed this more in my recent piece “8 Supply Chain Steps to a Worry Free Chinese New Year.”
Misha Govshteyn: There’s a lot of great advice out there and in this feature for those manufacturing in China, but the bottom line remains that while you want world class prices, you also want a supply chain that is robust yet agile. This is just one of the many challenges that arise from the old EMS model, which is China dominant and as easy to maneuver as the freight ships used to move the manufactured goods. We think there’s a better way. With a network of vetted manufacturing partners in the US and a fast digitally-first platform, we think Manufacturing-as-a-Service models like ours can save the day when things like Chinese New Year disrupt your supply chain and indeed your business. More than that, we think these platforms will change the way manufacturing is accessed.
Most importantly, assume there will be delays and plan accordingly. Every year there is a mad rush to order ahead of Chinese New Year, but ultimately dates around the end of January start to drift as factories rush to get the orders out before the break. Inevitably, the Chinese supply chain falls behind. So, set your own customers’ expectations accordingly and allow extra time for delays.
Chinese New Year is an amazing celebration and tradition, one that goes back at least three millennia. We look forward to a great occasion and welcoming in the year of the Rat. I hope those celebrations are enjoyed with the minimum disruption and stress…