Chinese New Year (CNY) is a festive and important national holiday for China. It is so important that the majority of businesses within China, including production facilities, shut down for an extended period of time. The CNY holiday shut down can cause disruptions to your supply chain if not planned for in advance.
When is Chinese New Year 2021?
Chinese New Year, more formally known as the Lunar New Year, falls on Friday, February 12, 2021.
Many businesses shut down before and after the holiday to give employees a long break to partake in the celebration, travel to their home provinces, and reconnect with their family and friends. The closures are typically between 2 - 3 weeks.
How does Chinese New Year affect manufacturing?
Manufacturers are part of the long list of businesses that shut down during Chinese New Year. This means that no production, tooling, or shipping is happening. Any products that are needed during the shutdown need to be accounted for before the holiday closure takes place. A good manufacturer will notify you of the upcoming shutdown so that you can plan in advance to prevent major supply chain disruption.
Businesses looking to get their product design set up at a manufacturing facility at this time need to be aware that any new orders will be handled after the holiday.
Unfortunately, this often does not mean immediately after the production facility reopens. The manufacturer will be focused on existing customers in mass production and getting their workforce back to capacity and trained.
Many factories see the highest turnover rate of employees during this timeframe as many leave to see families and do not return to the same employer. The time it takes to recoup their employees and train them on the processes will add to the delay before the manufacturer takes on new production business. This delay can be an upwards of 4 - 5 weeks after the Chinese New Year holiday.
Coronavirus (Covid-19) and Chinese New Year
The pandemic is still a major factor to current supply chain disruptions. China’s lack of transparency as to total cases, total deaths, and current mitigation measures makes it difficult to predict what may happen during the Lunar New Year holiday. Many people travel during this holiday and the likelihood is that there could be outbreaks throughout the country. Though 2 - 3 weeks of disruption is standard in normal years, in 2021 we expect an extended period of 2 - 3 months before full production capacity resumes.
Areas of Supply Chain Disruption
We’ll see disruption in a few areas beyond just factory closures after Chinese New Year:
Components and materials from China for electronics will continue to see disruption. With Chinese New Year travel, there is potential for factories to see limited workforce upon reopening. This may be due to workers needing to quarantine or disruption to travel options for them to return to the factory.
Global travel bans are being lifted as more countries are opening up slowly. With travel restrictions and health screenings in place, more people are open to traveling abroad. However, this could quickly change if there is reason to tighten restrictions. Many air shipments are through commercial flights. If flights are reduced or cancelled, air freight will be significantly affected.
Though the physical size of a warehouse building is not affected, the workers that manage the flow of goods within the warehouse are. There are still capacity and social distancing measures in place that limit the number of people that can be in an area of a building. This means that the processing time to ship goods to their final destination is greatly extended.
How to Mitigate Supply Chain Disruption from Chinese New Year
Here are few tips for you to limit your supply chain risk after the Chinese New Year holiday:
- Confirm your delivery dates on orders that are needed immediately after the holiday. Do not rely on past quotes for timelines.
- Check your supplier’s lead time immediately following the holiday. Lead times may be extended.
- Purchase finished goods early so that you have your own stock in your own warehouse.
Chinese New Year is a holiday that comes every year. Good contract manufacturers will plan in advance and notify their customers to ensure they are adequately prepared. However, this year is unique. Communicate with your manufacturer and make the best plans for your business so that you can minimize supply chain disruption from Chinese New Year 2021 and other global events.