Chinese New Year (CNY), also referred to as Spring Festival, is China’s most important national holiday. It is a holiday when multigenerational families gather and observe the turn of the Chinese calendar by celebrating familial traditions. Many people travel very far to return to their hometowns for Chinese New Year and require a significant amount of time off. Due to the importance of CNY, businesses within China, including factories, shut down for a period of time. If not planned accordingly, these closures could negatively affect your supply chain - leaving you without the inventory you need.
With factory workers returning home, factories will close during the CNY holiday with production and shipments completely halted. Depending on the facility, closings can range from 2 – 3 weeks with additional delays of 2 weeks as the factory gets back into production post-holiday. With such variance in closing and delays due to CNY, you must plan ahead to help minimize any threat to your supply chain.
When is Chinese New Year 2018?
Chinese New Year holiday is a week-long celebration. The official date for the Chinese New Year Day in 2018 is February 16. Depending on the production facility, you can expect factory closure dates between February 11 through February 23.
Keep reasonable expectations for any output from your supplier for the entire month of February and leading into the month of March
Though the Chinese New Year celebration lasts only one week, the actual closure timelines of factories is typically 2 full weeks. One week prior to closure, most factories start ramping down their workload, which includes shutting down production and finalizing the rush of product deliveries being requested before the holiday. And when the factories re-open after Chinese New Year, it takes a couple of weeks for production to ramp back up to full capacity. Why? Many factory workers do not return to the same production facility. The workers will either switch industries completely or find work at a different facility that offers better benefits or may be closer to their hometown. Typically, factories will see a 20 – 30% drop in their returning workforce, although this number can vary widely depending on the type of manufacturing being done. The employment drop requires extra time after the CNY closure for a factory to hire and train new workers before it is back up to full capacity.
With the ramp down prior to the Chinese New Year holiday, the vacation time, and any training for new factory workers after the holiday, you can expect major disruptions to your supply chain for upwards of 4 to 5 weeks. If you are planning to launch your product for next year's Christmas shopping season, ensure you hit your target launch date by allotting extra time for CNY delays. In short, keep reasonable expectations for any output from your supplier for the entire month of February and leading into the month of March.
How to prepare your supply chain for CNY closings and delays
- Know the lead-time for your product and if your order coincides with the Chinese New Year holiday.
- Place orders to ship by the end of January. This will ensure your product will be out of the facility and on its way before the bustle of the holiday closure begins. For example, if your product has a 14 week lead time, you will want to order by the last full week of October. If possible, order 1-2 weeks in advance to provide a safe delivery date buffer.
- Order enough product to get through the entire first quarter of the year. It is best to think beyond your need leading up to CNY and understand your supply requirements through March. By having enough product on hand, any factory closures or delay in getting back up to full production will have minimal impact on your supply chain.
How to Avoid Supply Chain Delays After the CNY Holiday
- Do not rely on past quotes for timelines on delivery dates. Ensure you confirm your dates with orders that are needed during this time.
- For orders that overlap with the Chinese New Year holiday, add 3 to 4 weeks to your lead time and place your order earlier than usual. For example, if you need shipment of a product with a typical 14-week lead time before the end of April, you will want to place an order by December 15.
- Check your supplier’s lead time immediately following the holiday. Depending upon the workforce fallout during CNY and any time needed to get back to full production capacity, standard production lead time of a part may temporarily be impacted (i.e., what was a typical 14-week lead time could now be 17 weeks).
Chinese New Year is a wonderful, long holiday that lets families celebrate their heritage together. With the long holiday, factories close for a significant amount of time to allow their workers to return home to celebrate. These factory closures can cause delays to your supply chain if you do not prepare properly.
Take the necessary precautions by ordering enough product in advance to ensure your stock pipeline is secure before, during, and after the Chinese New Year holiday.