On January 25, the year of the Pig ends and the year of the Rat begins. The official celebration runs from January 25-30, and during that time tens of millions of workers will travel to celebrate with their families. The largest single movement of people in the world, it can also be the year’s biggest manufacturing and supply-chain challenge.
The Chinese celebration of the Lunar New Year has taken place for the last 3,000 years. Year after year, the event presents manufacturing challenges and disruptions that need to be foreseen and planned for, so that production and fulfillment plans aren’t blown off course.
Chinese New Year generally means factory closures for the week-long celebration. However, many employees head off early to avoid the inevitable travel chaos, which could mean the presence of skeleton staff and significant stress on those who remain in the factory. This, of course, can affect factory performance, both in terms of quality and delivery.
Operators can be distracted in the lead-up to the holiday, again resulting in quality or delivery performance issues. This disruption to normal factory rhythms can continue even after the millions of factory staff have returned to work. What’s more, factories experience a substantially higher turnover during this time, with some workers deciding to stay home rather than return to their jobs. Many large manufacturers plan for staff attrition during this period, but it’s far from predictable.
Couriers, shippers, and customs are also closed throughout the holiday period, and experience much higher demand during the buildup, causing tensions, delays, and backlogs. Inevitably, infrastructure is strained. Shipping routes are very busy in the lead-up to and immediately after Chinese New Year, so some of those challenges can continue well after the holiday, thanks to the enormous backlog when everyone returns. Typically, during the month of Chinese New Year, container movement is down around 25% in the key ports of Shanghai, Ningbo, Shenzhen and Guangzhou. In simple terms, it means delayed shipments, longer waits to get product through customs, and more communications chaos than usual.
Here are our thoughts on how best to mitigate the risks resulting from Chinese New Year.
The bottom line is, have a plan. From there, it’s easier to implement, communicate, and measure success. Every great partnership is built on great communication. Transparency between manufacturing partners is essential to building and maintaining trust. And to build trust you need open and honest lines of communication. You’ll also need to know who will be available during the holiday, and have a backup contact on hand for any issue.
The three big challenges that must be managed and planned for are quality, on-time delivery and logistics.
It’s essential to step up quality processes, such as onsite and outbound goods inspections. This focus needs to be maintained throughout the buildup to, and period following, Chinese New Year. If the factor is temporarily short-staffed, your reliable, go-to contact might not be available, so it’s crucial to have others available to reach out to.
When it comes to delivery, plan for a full factory shutdown of at least a week, accounting for the impact before and after. Realistically, a factory can lose close to two weeks of production output. During this time, you need to consider a demand-planning strategy that ships more product prior to the period of disruption. That’s not so easy to achieve, given that the prior period is December, which is already the busiest month for manufacturing in China. An alternative might be to switch on other capacity during this time, including in other geographies. Having alternative sources that can deliver, sometimes at short notice, is always invaluable.
Logistics is also a complicated issue, with ripple effects throughout the supply chain, not just for finished goods. Manufacturing materials will need to be onsite earlier than usual. If the materials required for post-holiday production are coming from overseas, they’ll need to arrive early enough to clear customs and be delivered before the holiday. That might mean shipping February production materials early enough to arrive in mid-January. Remember that this is an issue that everyone is facing, and all are reacting and planning in a similar fashion.
This challenging period is all about planning and communication. They are the
the cornerstones of good supply-chain relationships, but at times of stress they become even more valuable.
Nate Evans is co-founder and Chief Experience Officer with Fictiv.
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