The Chinese New Year, or Lunar New Year, marks the beginning of the biggest holiday for the Asian country. Are supply chains ready?
With what is also known as the Spring Festival, the calendars are approaching a momentous event. And it is not only for the more than 1.45 billion inhabitants of the country. This date is also a critical moment for the global market.
Given its length, the holiday often lasts until the next full moon. It can therefore affect supply chains for weeks and even months, as companies, factories and workers return home for this annual celebration.
The translation is simple. For almost a month, one of the world's largest exporting businesses closes.
This directly affects capacity to and from China. Shipping delays, long transit times and flight cancellations are all possible consequences. But before addressing them, let's ground the concept of Chinese New Year.
What is Chinese New Year and when is it celebrated?
China's most important holiday is a celebration centred on home and family. This tradition is reflected, above all, in the Gathering Dinner, an event that takes place on the eve of the Chinese New Year.
During this time, all family members return home, sometimes from far away, to share the most important meal of the year.
The date of the ANC, or CNY, varies from year to year. It is therefore crucial for companies working with the Asian giant to be aware of this holiday.
In 2023, the Chinese welcome the Year of the Rabbit on Sunday 22 January and the celebrations culminate with the Lantern Festival on 5 February. The celebrations last up to 16 days, but only the first seven days are considered public holidays.
Thus, the public holidays are from 21 to 27 January.
How does this affect the supply chain?
Since the holidays start at the end of January, the supplying companies start to reduce production in the last week of December. Only the minimum workforce works in the factories in the middle of the month, with the factories closing on the 21st.
After that, most of the workforce returns in mid-February, so that normal production levels resume in four to six weeks.
The logistical challenges of CNY 2023
While the impact of the holiday is becoming more controlled, there are five areas of the supply chain that are directly affected by this bank holidays.
1. Factory closures
The mobilisation of millions of people and the closure of production plants means that many goods will not reach the ports from the factories. Therefore, while shipments can be made to and from Chinese ports, deliveries will not leave or arrive at the factory until the activity resumes.
2. Production stoppages
The closure of the factories means that the manufacturing industry will come to a complete halt. It will only return to normal from 5 February, with the Lantern Festival. Manufacturing companies will be less able to provide quotations or accept new orders, so organisation is crucial.
3. Decreases container availability
Although ports in China will continue to operate as usual during the Chinese New Year period, they may operate at lower capacity. With the seasonal shipping rush and supplier businesses looking to book to avoid being affected by Chinese New Year closures, it is possible that containers will fill up faster than usual.
4. Port delays
Ports operating at lower capacity may cause delays in container handling.
5. Increase in freight rates
The limited capacity and extended holidays will increase fares from December 2022 to February 2023, so that pay services may become particularly expensive at this time.
How can the supply chain be prepared?
The key to successfully getting through these dates lies in one concept: anticipation. Knowing when the event will occur and the impact of the event, any link in the supply chain should follow these tips:
- Don't forget to plan your holiday inventory.
- Contact your supplier company and understand their level of production and capacity.
- Try to ship your order before CNY and plan departures from terminals in China a few days before the holiday.
- Declare shipment as soon as possible: Customs offices throughout China will be closed on national holidays.
- Be aware of policy changes that may influence the supply chain.
- Work closely with the logistics provider to develop accurate forecasts.
Generally speaking, the supply chain is by nature flexible and changeable. Therefore, in the face of critical changes such as the one generated by the Chinese New Year, it is imperative to have trusted and experienced partners capable of ensuring the normal flow of goods.
