By now, the term ‘supply chain delays’ has almost become a standard phrase in global business. Just when you thought things would lighten up and start to flow again, the Chinese New Year is just around the corner. The 2022 Chinese New Year (CNY) will start on February 1, 2022, and officially last one week. Factories and businesses in China typically shut down about 10 days prior to the official CNY start, and there is also a delay in employees returning to work after the CNY ends. That means Chinese businesses can be down for up to three weeks for the Chinese New Year in the first quarter. Can your business handle an additional three weeks of delays? If not, you need to start planning ahead to manage the delays.
Order Ahead for Expected Downtime
You know your suppliers in China will be shutting down in late January until sometime in the middle of February for the Chinese New Year. Don’t just assume your partner is forecasting ahead for your orders. If you haven’t ordered ahead for the pending three weeks off, start that conversation now to avoid delays. Your business should have a forecast for components and products needed for a specific time period. To plan ahead for the Chinese New Year, you may need to change your orders and expected delivery schedules, particularly in light of the current supply chain crisis. Review your expected inventory needs for the first four months in 2022 and adjust your delivery schedule. Plan to have a percentage of the expected deliveries for March brought in late January just before the February shutdown. The remaining deliveries can be shipped from China just before the Chinese New Year, which should arrive in February while your Chinese partners are taking weeks off from manufacturing. Be aware of the factories being at capacity around the Chinese New Year. Foreign businesses that have experience with CNY always prepare ahead, and those that don’t recognize the challenges tend to be left out of the manufacturing plans.
Change Your In-Stock Inventory Quantity
Your in-stock inventory levels should change to accommodate the Chinese New Year downtime. You’re just a month away from seeing an impact, and now is the time to start getting ahead of the curve for inventory in your hands. If your partners can accommodate larger order levels at this point in the year, you may want to start increasing your orders now if you have the extra storage space at your business. If your storage is full, you may investigate if leasing additional storage space for extra inventory will make good business sense. A small increase in cost may be a better insurance plan to guarantee you will have components and products available next year when CNY comes. If you don’t plan any delivery changes, be sure to get your shipments to port no later than ten days prior to the deadline. It will be a rush at the port to get all containers loaded and shipped to foreign partners, and it’s commonplace for late deliveries to miss the boat.
Plan for a Reduction in Available Workers
We are experiencing something called ‘The Great Resignation’ here in the United States. Workers are leaving their current employment to seek other opportunities, or just choosing to leave the workforce altogether. China isn’t immune from workers leaving their jobs around the Chinese New Year. Employees leave for the holiday and don’t come back. It’s estimated that up to 30% of employees won’t return to their current employment and forecasting ahead for a slow start-up may keep you out of trouble. Your business may need to add in-stock inventory to plan for your Chinese partners slowly returning to full production. It could take weeks to return to full capacity, and you need to be prepared for that volume adjustment.
Look for Partners with Multiple Locations
It’s commonplace for manufacturers to have multiple locations producing the same widgets. Sourcing from just one location is rife with challenges because it’s putting all your eggs in one basket. If your current Asian partners have multiple locations, take advantage of them to prevent inventory slowdowns like the Chinese New Year mandates. If you take advantage of multiple sites, keep your quality management plan up-to-date with the global challenges to ensure consistent products and components are delivered from each location. You may find that increased inspection from particular locations is a requirement around holidays to ensure your incoming deliveries weren’t rushed out the door with missed steps or operations.
Move to a Vendor-Managed Inventory System
If you are challenged with inventory storage capacity, your partners may have an opportunity to shift inventory management to a vendor-managed system rather than keep everything at your storage location. Many businesses move in-stock inventory management to a partner to handle the volume adjustments around holidays and shutdowns. Having multiple locations in different countries can be challenging as each have different holidays that affect the manufacturing deliveries. Having a VMI (vendor-managed inventory) partner may be a better solution.
The Chinese New Year brings challenges that may take years to fully prepare for. Inventory and volume adjustments from a sales and distribution standpoint may require a deep dive through history to understand how CNY will affect your future business. Even then it may only show a glimpse of what can happen around the major holidays in foreign countries. It’s never too early to start planning for the potential supply chain challenges ahead. The Chinese New Year is the most talked about holiday in Asia, but China also has more shutdown days throughout the year that will affect your business. SEA-LECT Plastics has faced the challenges surrounding the Chinese New Year over and over again. We have an elite staff that can manage inventory, specialize designs for part assembly, and mitigate risks to keep your business on track. We are in the top ranking for turn-key manufacturers that can offer industry-specific design options, material selection for competitive cost and performance, and turn-key assembly options to produce it in-house in Everett, Washington. If you have a new idea or need help to navigate the global supply chain, call us (425) 339-0288 or email us at mattp@sealectplastics.mystagingwebsite.com. We can offer you advice on the best technology to use, the best materials to meet your product demands, and how to navigate through each development stage with ease.