Preparing for the 2025 Chinese New Year

November 4th 2024 10:10:10 AM

If you’ve been in the manufacturing, distribution, logistics or warehouse industries for any period of time, you likely have a few battle stories to tell. Delays in raw materials or other parts of the supply chain. Disruption of an otherwise faultless workflow. Quality control issues. Maintenance and repair.

How about the Chinese New Year celebration?

Yes, you heard us right. How can a national festival cause warehousing or distribution hiccups, you ask? Consider that U.S. exports to China accounted for 7.5% of all 2022 exports, and additionally the U.S. received 16.2% of China’s total exports in 2023, as per the Office of the United States Trade Representative. No matter what your company manufactures, stores or distributes, chances are that Chinese (and Taiwanese, as they celebrate the holiday along with several smaller countries) companies are involved somewhere in your design-to-materials sourcing-to-prototyping-to-assembly-to-packaging process — which means that a national weeks-long celebration taking precious production hours from its working businesses might have an impact on your operation in the States.

What exactly is Chinese New Year? When is it? And what should you do to ensure your responsibilities aren’t affected? Read on.

A Background of Chinese New Year

The Chinese New Year (also referred to as the Spring Festival, marking the end of Winter) is an annual festival celebrating the start of a new year for the customary lunisolar Chinese calendar. The first day of the New Year, determined by the date the new moon first appears (and thus has a different start date every year in mid-late January), kicks off the festival that continues throughout the period the moon is present. The most revered holiday in Chinese Culture, the New Year is celebrated with many customs and myths, from familial reunion dinners, house cleanings, and door-window decorations consisting of red paper ‘cuts’ and Chinese poetry.

Now that we’ve given you a brief overview of Chinese New Year, let’s get down to what you need to know for the 2025 edition. Next year’s festival commences Wednesday, January 29, 2025, starting the Year of the Earth Snake. As a recognized public holiday, nearly all Chinese workers will get seven (7) days off from Tuesday, January 28 — New Year’s Eve — to Monday, February 3. Likewise, Chinese schools align their Winter breaks with the New Year. During the total 40-day celebration period, more than 3.6 BILLION TRIPS are made within China, according to China’s National Development & Reform Commission (NDRC).

What does the nearly unanimous observance of Chinese New Year mean for your company if it does any trade with China?

1. Your business will be impacted…and for longer than 7 days

Manufacturing, distribution and warehousing professionals know one fact too well: a minor hiccup in your production cycle can have a domino effect, throwing off more than meets the eye. While many Chinese factories may be closed for only 7 days, they’ll see a definite ramp-down in the days preceding the break, and getting back up to full production once they return will take some time as well. Moreover, most goods and service corporations (including manufacturers, suppliers, sourcing, warehousing and logistics) may close for an additional 2-4 weeks — before and/or after the festival — if transportation networks (road, rail, air travel, etc.) are closed or otherwise compromised during peak travel days (referred to as Chunyun — the most significant human migration in the world) when residents return home to gather with their families. It’s not incomprehensible to think that the disruption to your operation could last the better part of a month.

These delays can lead to depleted inventory levels (also known as ‘stockouts’), which can be a precursor to significant consequences such as disrupted operations, lost sales, and higher-than-normal inventory replenishment and operational costs. The result? A negative impact on cash flow and a damaged brand reputation, as your customers turn their attention to competitors who can get them what they need, when they need it.

2. Place orders, schedule production well ahead of time

Remember, Tier I-III suppliers and other secondary parts-component manufacturers will also close, so make sure you include these folks in your plans if necessary. Although Chinese/Taiwanese businesses may answer your emails or phone calls during the break, it’s highly unlikely during the New Year festivities.

Your best strategy is to plan ahead for all your materials and product needs — well ahead. Sit down with your team, look at timelines from previous New Years’ orders and deliveries, etc., and discuss any missteps. Best practices for the upcoming New Year will arise from these conversations, and you can apply these learnings to your inventory, demand and production forecasts. Having a manufacturing and warehouse automation partner like Scanco can maximize speed and accuracy significantly, eschewing the element of human error that can lead to over-/under-ordering, or trying to manage too many items in a harried time such as this.

TIP: There is no such thing as planning too far ahead. Some Chinese factories stop accepting new orders up to 4-6 weeks before the holiday. With all the pre-, during- and post-festival variables flying around, the sooner you get your orders in, the better…even if it’s months ahead of time. This will ensure a favorable position on your partners’ project priority list — and minimize any peak shipping and loading fees, tariffs, higher holiday pricing, etc.

3. Have transparent communication with your Chinese partners, internally

Open an intentional, straightforward dialogue with your foreign partners’ leadership teams regarding their projections for the New Year, and what delays may occur. Initial discussions can start as early as August-September regarding order placement, production scheduling, etc., with a firm order deadline agreed upon by both sides to guarantee arrival before the holiday. Also, talk to them about schedules after workers have returned, as it typically takes plants at least 30 days to return to normal production levels once they reopen.

Some Chinese companies give incentives to staff who work during the Chinese New Year, recognizing that most of their customers are in the middle of production. However, it’s more common to work overtime throughout the year to bank the hours off to maximize their New Year’s vacations. At 3.7 MILLION square miles (the third-largest country by area in the world, behind Russia and Canada), you can imagine that many employees spend countless hours simply getting to and from the various provinces where they’ll celebrate the New Year.

Finally, make sure that everyone in your own organization is on the same page, and moving in lockstep with whatever plan you choose to execute.

4. Keep an eye out for QA issues

Stateside warehouses may see an uptick in product quality issues with Chinese/Taiwanese materials or product in the weeks leading up to Chinese New Year. As manufacturers and suppliers prepare for the time off, it’s a race to produce and ship as many orders as possible — even for customers who had the foresight to plan a couple of weeks ahead. Given a fulfillment speed much brisker than usual, resultant quality may suffer. Then, when the New Year concludes, up to 1/3 of factory workers do not immediately return to work as they extend their vacations, with many never returning (as movement between factory jobs by migrant workers is more fluid than in other countries). Consequently, plants are forced to either get by with a skeleton crew, or recruit temporary — and less skilled — crew members across all levels of hierarchy to get them through. All of these factors contribute to significant risk that potentially affects quality assurance, compliance, and the like.

TIP: Implement strong QA and inspection protocols to ensure greater diligence. Third-party inspection companies are available for situations just like these.

5. Have a provisional plan in place

Including worst-case scenarios in your Chinese New Year disruption avoidance plan is always wise. Do you have alternative ways to get the materials or products you need? Can you source them either from a plant in your partner’s network outside the celebration area or possibly another supplier in your vendor universe in the event your Chinese-Taiwanese partner can’t deliver? Can you increase your provisional ‘safety’ stock levels to guard against potential stockouts? What other measures can you take that will yield minimal impact on your operations?

There are infamous stories of large retail and B2B corporations losing millions in sales when inventory is depleted due to poor planning for the Chinese New Year. Ensure you get ahead of the game so your business isn’t one of them.

With a proactive approach, you can avoid Chinese New Year disruptions. Start planning now to keep your supply chain flowing without hiccups. Contact us online or call (330) 645-9959 today to make an appointment with a Scanco Solutions Expert to take the first step toward helping Scanco automate your Sage warehouse and manufacturing operations for this season and beyond!