Savvy decision-makers are not like rookie shippers. They plan for the Chinese New Year shutdown many months before the event. The better prepared you are, the greater your chances of ensuring that this yearly supplier shutdown results in as little trouble as possible. In this article, we will look at the challenges shippers face due to the lunar new year and how Avercast, a division of TransImpact, can help.
The 2024 Chinese New Year Shutdown
Every year, manufacturing factories in China and neighboring countries such as Indonesia, Malaysia, Singapore, South Korea, Vietnam, and Brunei slow down and eventually shut off to celebrate the lunar new year. For most factory workers, this is the only time of the year when they get to visit their families. In 2024, the Chinese New Year holiday will take place from February 9 to 15. During this period, production across China will stop, and all shipping activities will be delayed.
Most businesses in the United States that import from these countries need to anticipate this supply chain planning disruption, so they don’t have to experience a stock shortage. The main problem behind this major supply chain disruption is that while the public holiday lasts only seven days, the overall celebrations last around 10–15 days (about 2 weeks). Manufacturers will stop production for at least two weeks to allow workers to visit their homes and families in other parts of the country and then return to the cities again.
How will the 2024 Chinese New Year shutdown affect your business?
If your supply chain management relies on Chinese manufacturers that celebrate the holiday, the Chinese New Year shutdown will significantly affect your business.
Production slows down
The Chinese New Year is a public holiday. All factories are closed during this time, and employees go on holiday leave for at least two weeks. As this includes inventory management and production overseas at these factories, you may not be able to contact your supplier during this period. All production activities will halt, and you will lose contact with the factories until the holiday ends.
Reduced production quality
When factories restart operations after the Chinese New Year holiday, workers may not return immediately—or sometimes not at all. When workers don’t show up, factories must replace them right away, which can result in lower quality because now untrained staff are working on the production line. As you can imagine, when new and unskilled workers are on the production line, many products will not be produced as they should be.
Regrettably, this doesn’t mean the factories will remake your products, and in some cases, they will ship the poor-quality products along with the rest of your order. Eventually, you may end up paying extra for degraded products, especially if you need those items immediately.
Shipping delays due to CNY shutdown
Because the Chinese New Year shutdown occurs every year, many businesses do their best to manufacture all the orders before the factory shuts down. This often leads to an overload of shipments that must be delivered before the holiday begins. There are high chances of workers leaving early to headstart their holidays, and you may end up getting delayed shipments in all this built-up series of events.
The pandemic and its consequential supply chain challenges have motivated businesses to build resilience into their processing, from developing pre-mishap plans to evaluating much earlier inventory planning.
How do you deal with the Chinese New Year supply chain disruption?
As many businesses understand, prepping for the CNY shutdown can be challenging due to many moving variables. For instance, how much excess stock do you need to fulfill your forecasts? When are you going to place the order? Do you want a different plan of action for different suppliers? Is it sufficient to streamline your overall supply chain management process?
Let’s consider these four factors for a better understanding of how to manage the CNY shutdown:
Spend time on planning and accurately crafting your demand forecasting
You will probably need to develop more demand forecasts than usual. So, make sure that you connect your business with the best demand planning software that can scrutinize your historical data and consider aspects such as seasonal events, demand trends, or promotions, which can enable you to adjust your base demand for a specific timeline.
Share demand planning projections and communicate with your suppliers
Planning in advance always helps you and your suppliers mitigate unforeseen interruptions like those that can occur during the 2024 Chinese New Year shutdown. Ensure that you share your forecasts with your suppliers as early as possible, so they can prepare the items you need during the CNY period and when you want them to leave the factory. Discuss upcoming hurdles with them and together figure out a solution.
Manage shipping backlogs
As a shipper, you must understand the gravity of sudden future discrepancies in your supply chain. That is why, in order to streamline your entire processing, it would be wise to bring your orders a little further forward than usual in 2024 to mitigate any supply chain-related problems.
Increase safety stock to avoid inconsistencies
Due to the CNY shutdown, you may have to expand your safety stock level to avoid stockouts in the early half of the year. This scenario is critical if you are not sure of the accuracy of your forecasts or if some of your products have erratic demand.
However, if you are doing your demand forecasting and reorder planning manually, this can become quite complicated. Then comes the human element, where a fear of out-of-stock situations can lead to over-ordering. To effectively manage your supply chain and avoid human errors, you must automate your entire process for better control and optimization.
How can Avercast empower your business?
Avercast’s Demand Planning software delivers end-to-end visibility and improved control of your demand projections. With 280+ algorithms, our brilliant solutions effectively anticipate seasonality, shifting trends, and market uncertainties and provide accurate forecasting to enhance your decision-making. So, never run out of stock and plan efficiently during the 2024 Chinese New Year shutdown with Avercast, a division of TransImpact. To learn more about our products and services, schedule a demo or talk to our experts.