GUANGZHOU, CHINA - JAN. 31. 2016: People going toward trains on main railway station in Guangzhou, travel for the annual Chinese Lunar New Year and Spring Festival holidays.
Editor’s note: This is a guest post from Refael Elbaz, Founder & CEO of Unicargo.
The most important holiday in China is the Chinese New Year, which begins on the 15th of February in 2018. During this holiday, the entire industry completely shuts down. The Chinese New Year is celebrated for 15 days but the impact is estimated to be even longer than that, with total disruption usually reckoned at 35-40 days.
Here’s what you need to know to cope with the impact of the Chinese New Year.
Most of China’s industrial workers are migrants whose families still live in distant rural regions. For many of them the New Year is the only time they spend with their children, parents, and loved ones each year, so they cross the country to be together.
However, China is huge and public transport is chaotic, especially when almost the entire population is on the move at once. Trains and buses are overwhelming. It can easily take a whole week for workers to travel home. Even those who spend only a week with their families still take another week to return to work.
Once workers do return to work, business still doesn’t start up again as usual. In the last few years, workers would only come back to work if they got a pay rise. Factory owners face pressure from the pileup of orders at the same time as negotiating a new deal. Output declines while workers and owners agree on terms.
The Chinese New Year is also a time when workers compare working conditions and share tips about job opportunities. Not surprisingly, many workers move to a new job just after the New Year, leaving factory owners to recruit and train new workers before tackling the backlog of orders.
It’s important for customers ordering from China to know that there’s no guarantee that orders placed before the Chinese New Year can be filled on time after the holiday, thanks to this double lag in getting back to full production.
Because customers know that the Chinese industry is paralyzed for several weeks, they tend to order even larger amounts in the run-up to the Chinese New Year. Chinese factories face massive increases in production with huge pressure to complete the orders before leaving for the holiday. All too often, quality control drops under the strain. If you use external quality control you’ll need to allow more time than usual to replace defective products too.
Another issue is whether the factory has enough raw materials in stock to cope with the sudden increase in orders. If the factory is managed well, it will be able to take this in its stride. Of course, not every factory fits this description; and those that do, generally charge more than smaller, less-organized plants. After the holiday, there’ll be more delays until raw materials come through again.
It’s worth noting that in most factories you can place your orders with the Sales Department right through the Chinese New Year without being given any clue that the production floor is stalled and delivery times won’t be met. The factory you use could also transfer excess orders to subcontractors if they can’t complete them, which means you might not get the quality you expect.
Once your goods have been produced, you’ll still have to deal with the disruption to logistics, customs, and shipping. Although the company might promise to hold to regular delivery times with its own fleet of vehicles, drivers expect higher pay for working through the holiday and other land transportation fees jump too.
Although customs operate throughout most of the Chinese New Year, they work on “holiday time” which takes longer to process shipments. Smaller ports do close for a week and freight forwarders tend to leave for the whole holiday period. Demand for shipment space spikes shortly before and during the Chinese New Year and prices inflate along with it. Plan your orders carefully in the run-up to the New Year so that you don’t get stung by surprise fees or stuck without your products.
The reality is that not every order is going to be fulfilled in time for the Chinese New Year. Sales agents don’t want to refuse your order though, so they prioritize without regard to order date or commitment time. Prioritization generally goes to a regular customer and to those ordering larger amounts, but client relationship is also really important. Your order could be dropped in favor of a customer who sent more presents to the supervisor.
As you can see, the effects of the Chinese New Year last for around 40 days. If you want to avoid getting hit by this disruption then we advise planning your orders in September to November.
Contact Unicargo with further questions or to receive a consultation!
Refael Elbaz is a freight forwarding specialist with over a decade of hands-on experience in the fields of e-commerce logistics and cross trade. He is the founder of Unicargo, a successful international shipping company that harnesses the latest technology to streamline and improve the freight forwarding experience for end users, whilst keeping supply chain costs low.