For many countries across East and Southeast Asia, the Chinese New Year or Lunar New Year is one of the year’s most significant celebrations. During this time, many businesses across the region shut down. China has made the first seven days of the 16-day celebration public holidays. Manufacturing, transportation and more shut down as people travel across China to celebrate with loved ones, halting most supply from the country.
This shutdown causes significant delays in shipping since global supply chains rely on the goods manufactured by China and Asia. China’s Zero-COVID policy compounds the impact of the holiday. Essential manufacturing regions shut down overnight to contain any COVID outbreak.
This time of the year is a peak season for the logistics industry. Companies need to plan so that delays in shipments have less of an impact on operations, especially with Valentine’s Day coming up shortly after the end of the Chinese New Year holiday.
What Is Chinese New Year?
Chinese New Year is similar to Thanksgiving and Christmas because it is a family celebration. It is the most significant Chinese celebration and lasts up to 16 days. In 2023, the Chinese New Year is from January 22 to February 5. January 22-29, 2023 will be a week-long public holiday across China.
Also known as the Lunar New Year, the Chinese New Year is tied to the lunar calendar. The New Year begins with the new moon that occurs towards the end of January and February and lasts until the full moon. Families honor and celebrate their ancestors and household and heavenly deities during this time. Many people in the city will travel to spend time with their families during the week-long public holiday.
Some countries that celebrate Lunar New Year include Singapore, Indonesia, Malaysia, Myanmar, Thailand, Cambodia, the Philippines and Mauritius.
Why Does Chinese New Year Affect Supply Chain?
In 2023, China will shut down for the last week of January to celebrate the Chinese New Year. The capacity from China and most of Asia will be full as countries participate in the holiday. Asia is one of the largest producers in the world. From 2001 to 2020, the region increased its share of world trade to 36%. China is now the world’s largest manufactures and accounted for 28.9% of output in 2019. Any disruptions to the region’s supply and manufacturing capabilities are felt worldwide.
China is also still battling COVID-19 outbreaks that hamper the country’s growth. The harsh measure taken by the Chinese government directly affect manufacturing and logistics. Key industrial regions in the country are subject to sudden and total lockdowns. These so-called Zero COVID measures have created backlogs in supply that remain a concern. These lockdowns restrict travel in different regions, further impacting transporting of goods. Chinese New year celebrations add to these delays, especially as many factories shut down entirely for the festivities.
Closed Factories and Limited Workforce
As one of the only times workers in the manufacturing and logistics sectors can go home, many factories will shut down for longer than the week-long public holiday. The extended shutdown allows staff enough time to travel to their families, often in rural regions. Workers may also receive bonuses before the holiday and take additional annual leave. Most factories closed for a minimum of a week and remain understaffed for up to two weeks after Chinese New Year.
Shipping Delays
Chinese workers from every transport industry will benefit from the week-long public holiday. As a result, most ports, trucking companies and other transport facilities shut down for a week, causing significant delays and backlogs in shipping. As a result, there are hikes in shipping costs before and after Chinese New Year.
The delays in shipping might result in higher storage costs along with extra demurrage and detention costs. Also, the delays in returning to normal manufacturing levels can result in new orders taking longer to prepare and ship.
Production Backlog
Many factories try to complete orders before they close for the holiday. An influx of orders from around the world hampers their ability to do so. This sudden influx can cause delays in regular orders as the factories work to keep up with demand. Many of these orders will only be completed after the holidays, resulting in additional delays even once operations are back to normal.
How to Avoid Chinese New Year Supply Chain Delays
Valentine’s Day is shortly after Chinese New Year. In 2022, consumers in America spent $23.9 billion for the Valentine’s holiday. Missing out on this spike in demand can be detrimental. Knowing how Chinese New Year affects shipping empowers you to prepare for delays and keep your operations as smoothly as possible. Below are some steps you can take to strengthen your supply chain:
- Analyze your supply chain: Take a deep dive into your supply chain partners. Where are they located? Will they also be affected by the holiday? Use the information to understand how the holiday will affect your supply chain and set up contingency plans.
- Plan in advance: Using the information from analyzing your supply chain allows you to develop contingency plans for disruptions. Remember, shipping and production delays might continue for a few weeks after Chinese New Year, so factor that into your planning. One simple step you can take is shipping orders three to four weeks before the public holiday.
- Build up inventory: Use the time leading up to Chinese New Year to order additional stock. Order multiple shipments in waves to ensure you have supplies at different points in the supply chain. Consult freight schedules to see when you can order additional stock
- Find alternatives: As prepared as you are, you might require emergency shipments for several reasons. Look for alternative suppliers or transport methods that will be able to handle your emergency shipping needs.
- Diversify supply locations: Lunar New Year is celebrated across Asia, affecting production and shipping from the region. Consider sourcing products from different areas during the holiday to alleviate the pressure. Additional costs might be involved but it will strengthen your supply chain during the holiday. This diversification can be temporary or part of your long-term business strategy.
- Track production: Monitor production in your own and third-party manufacturers for a few months after the holiday. Production levels will take some time to recover, so you must be aware of stock availability.
Partner With Stockwell International Inc.
The best way to be prepared for shipping disruptions is to partner with an expert freight forwarder. Our team has over 50 years of experience in freight forwarding. We work closely with our clients and partners to minimize as many of the impacts of Chinese New Year as possible. Be prepared. Get a quote from us today!