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Preparing for the Lunar New Year and its Impact on the Global Supply Chain

You are currently viewing Preparing for the Lunar New Year and its Impact on the Global Supply Chain

The business year faces several challenges and the biggest is probably keeping up with the setbacks and the raised demands during festive holidays. Many businesses rely on production facilities located in Mainland China, since they serve as one of the world’s largest manufacturer and exporter of goods. The Lunar New Year in China, or Chinese New Year, is a mega spring festival that marks the end of the winter and the start of the new lunar year. The celebrations last for two weeks or even more, resulting in a major impact on the global supply chain causing businesses to rethink their strategies.

What is the Timeline for Shutdowns for Chinese New Year 2022?

Officially, the Chinese New Year begins on February 1st; however, the festivities can last for 2 weeks or more. The timeline for the upcoming Chinese New Year is:

Chinese New Year’s Eve: January 31, 2022

Chinese New Year’s Day: February 1, 2022

The Lantern Festival: February 15, 2022

How Does The Chinese New Year Affect the Global Supply Chain?

The Chinese New Year means the unavailability of the Chinese workforce and the temporary shut down of their factories. If your business relies on production and/or supplies from mainland China, then it may most likely suffer from production and delivery delays and even compromises in product quality, unless you plan accordingly and timely. Communicate with the necessary personnel and use historical sales data to make informed decisions.

Production Lag

In Mainland China, the Chinese New Year celebrations last for a good two weeks meaning the labor force is on holiday and the factories are shut. Therefore, there can be massive production delays. Not only that, but you will also most probably not be able to contact the employees in your China production base during this time.

Setbacks in Shipment

Many businesses have developed catering strategies over the years, which can mean more challenges for you. To get supplies early, the number of orders can be very high leading to delays in shipment either way. Therefore, businesses can suffer major setbacks in shipments unless the carefully devise a strategy.

Compromised Quality

Businesses suffer from a compromise on product quality that can affect customer loyalty and ultimately profits due to various reasons, such as limited staff replacements and staff shortages due to the holidays.

How to Prepare Your Business to Cope with the CNY Shutdowns?

If your business is based in mainland China or you carry out your production process there or have your suppliers based there, you will need to optimize your supply chain processes to meet your needs during this shutdown period. That means opting for a wholesome approach that focuses on designing a proper timeline and strategically planning your storing, packing and shipping, and entire retail logistics accordingly. Consider your entire framework of operations, so that you can maintain your dock-to-stock efficiency during this uncertain period as well.

Keep tabs on the market conditions as well as the wavering situation due to COVID strain variants and prepare contingency plans for every single element in your eCommerce fulfillment process. You will need to carefully forecast the potential demand of customers, inspect your warehouse for appropriate storage procedures and capacity, and ensure that you have enough inventory to make through the CNY shutdown period.

Consider taking these steps to prepare in advance for the lunar new year:

Forecast Demand and Plan Accordingly

Study the data and trends of your previous sales record during this time of the year to forecast consumer demand and make data-driven decisions to prepare for the upcoming CNY shutdowns. This is crucial if you want to have the right amount of inventory at hand.

Work Out a Production Strategy

Most of the successful and trusted suppliers that are based in Mainland China navigate through this time by satisfying their clients through an alternative strategy. Therefore, it’s best to timely communicate with the vendor and discuss any potential problems and your plan to work around them. Make sure to discuss production schedules and the shipping strategy during this time.

Stock Up Inventory

Bear in mind that despite your best plans to navigate through the shutdowns, production and delivery delays are likely, so it’s best to stock up just enough inventory. This stash must be just enough to last until the pipeline inventory reaches your warehouse storage, because you wouldn’t want to accumulate dead stock.

Find Alternative Manufacturers/Suppliers

A wise strategy would be to find an alternative vendor who operates outside of China, so you don’t have to solely rely on one. This will serve you well both in times like CNY shutdowns and in a financial perspective.

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