For businesses with supply chains linked to China, the normal production schedules experience changes over the Lunar New Year period. Here’s how to stay on the front foot.
In 2020, the Lunar New Year falls on 25 January, with celebrations continuing until 8 February. However, manufacturing will also be shutting down in the lead up to the festival to give employees time to return home to their families.
These are issues well known by Joey Prochilo, the Director of SmartPak, a family-owned business with more than 50 years’ experience in the table grape industry. He sources plastic punnets from China for his February harvests, and typically needs to adjust his supply chain during the Lunar New Year period.
Does Lunar New Year affect shipping?
“Coming into the Lunar New Year, there are delays in production and the ships are all full,” Prochilo says.
“Manufacturers and employees in China take up to six weeks off over that period.”
This means orders due for completion in the immediate lead-up to the New Year are at particular risk.
“No one’s going to work for an extra week to get an order through. Once the last manufacturing shipment leaves port, everything just stops,” Prochilo says.
Prochilo warns things often don’t go to plan when it comes to shipments around Lunar New Year.
Minimising business disruptions during the Lunar New Year shutdown
To avoid these shipping delays, Prochilo says small businesses need to order their products well in advance of Lunar New Year and be prepared for disruptions.
Other hold-ups can include problems with quality, he says, as the production pressures ahead of the Lunar New Year shutdown can mean that quality control can sometimes suffer.
“The first time I ordered punnets, the labelling wasn’t pristine, and the plastic wasn’t as pure and clean and vibrant as I’d expected. It still did what it had to do but it wasn’t up to standard.
“There can be batch number mistakes and spelling mistakes. There are so many things that can hold you up.”
Prochilo says it’s also worth considering enlisting some back up in the form of a sourcing and logistics specialist if you’re worried about quality.
“I tried to do it on my own but there were a lot of headaches so I ended up getting a third party, Sourci, to take care of things for me.”
David Thomas of the Australia China SME Association says business owners looking to build strong relationships with their suppliers could use the Lunar New Year celebration as a way of deepening bonds.
“It’s a very good time for people to send nice messages, saying thank you for your help,” he says.
“There are many websites where you can copy very lovely Lunar New Year messages in Chinese, which you can then paste into a message to your Chinese suppliers. Do it in a timely way and with your heart.“
5 tips to navigate the Lunar New Year holiday
1. Make sure your orders ship before Lunar New Year
Yes, Lunar New Year officially only lasts for a couple of weeks, but many factories shut down about 10 days before to allow time for workers to travel home. This means everyone is hoping for their orders to leave the ports before the country winds down for the holiday. Order well before Lunar New Year to avoid shipping delays and higher freight costs.
2. Forecast, forecast, forecast
If you can predict how much product you’ll need for the first quarter of the next year, you’ll be in a better position to make sure you have enough stock to last you through Lunar New Year.
3. Consider adding other supply chain options
Think about diversifying your supply chain to include manufacturers with operations outside of China – even if it’s just as a back-up supplier during the Chinese holiday.
4. Implement a quality management plan
With Chinese factories operating at full-tilt in the lead-up to Lunar New Year, quality can sometimes take a back seat. Having a thorough quality management plan in place will reduce the risks of delays due to issues of poor quality.
5. Factor in delays after Lunar New Year
In China, the new year is also a time when many workers change jobs. That means companies often need to find new staff. Workforce changes mean it can take a while for factories to get back up to normal production speed. And that means even longer production times.
If Lunar New Year shutdowns threaten to challenge your supply chain, talk to a Prospa small business lending specialist about whether a line of credit could help you smooth out your cash flow.
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