Chinese New Year; Managing Logistics During a Production Vacuum

When China closes its factories for New Year celebrations, 28% of the world’s manufacturing ceases. Chinese New Year causes the lights to go out on approximately 2.8 million production lines. It’s no surprise that when this annual event occurs, supply fails to meet demand. This two-week window is felt the world over, as 1 in 2 consumer products are produced in the socialist republic.

One of main reasons the majority of Western products find their origins in China, is the low cost of labour. A country with a population of 1.4 billion has no issue sourcing staff to work in factories and assembly lines. This is the reason many Western companies like Nike, and Adidas have set up infrastructure in the country to take advantage of their lucrative labour model, apparel like this accounts for 12% of exports. Electronics companies like Apple and Microsoft also rely on the internal business ecosystem to source intricate parts like OLED screens and microchips. Computer components like these make up 43% of China’s exports.

Stopping the Manufacturing Powerhouse

China enjoy not only a thriving production economy, they also take advantage of the demand from overseas. The total for 2019 stood at 2.5 trillion dollars, while their exports accounted for 17.4% of the national Chinese GDP.

Halting this operation is a massive undertaking. It sends ripples throughout the global economy. Nevertheless, the population of China enjoy a two-week break that sees businesses nationwide close. Companies like Apple and Nike must ensure they have business continuity by continuing to supply their global consumers.

Stocking Up for Shutting Down

Exports to the EU account for $4.5 billion, the two-week productivity vacuum could cripple multi-national businesses overnight if the proper precautions aren’t made.

Preparations for Chinese New Year begin long before the celebrations, the last orders made to Chinese factories must be placed early January as factory employees begin to finish for the holidays by the end of January and the start of February.

The sheer volume of orders, from businesses that recognise this fact, means productivity is stretched at the start of the year. This causes a delay in output, and possibly reduction in quality. This influx of orders has a knock-on effect to the logistics industry, where shipping and freight is asked to transport a higher volume of products. This leads to higher rates, and delays at border crossing, and ports where congestion builds up.

To prepare for this eventuality, we suggest;

  • Building up sufficient stock, of up to four weeks either side of the Chinese New Year.
  • Providing a forecast of your expected cargo to your logistics partner.
  • Informing your logistics partner about priority shipments, in the case of reduced capacity.
  • Reserving space on passenger flights that cannot be delayed, this measure increases rates but will ensure your supply chain is undisturbed.

The Logistics Experts

Managing a supply chain during this period can be difficult, we understand that it may not be your area of expertise. To be successful, you must partner with a firm that has years of experience providing a logistics service in this market.

We have hubs located in key strategic locations across the globe, operating in 70 countries, and have connections to customs and border agencies in some of the busiest ports in the world. We can operate your supply chain without interruption, as proven before countless times.

To find a logistics partner with the expertise to deliver your supply chain this New Year, get in touch with our team today.