CSCMP's Supply Chain Quarterly
Global
February 21, 2020
Forward Thinking

Manufacturing slows in Asia as Chinese New Year begins Friday

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Logistics operations build up extra inventory as calendar flips to Year of the Rat, Dachser says.

Just a month after weathering the peak shipping rush over winter holidays in Europe and North America, global supply chains are bracing for another wave of turmoil as several Asian countries prepare to celebrate the Lunar New Year.

On the Chinese calendar, the result will be flipping a page from the Year of the Pig to the Year of the Rat, and will impact logistics facilities throughout China, Vietnam, and Korea. Also known as Chinese New Year (CNY), the event is typically honored by employees traveling to spend time with family at home, triggering a mass migration that effectively shuts down many factories and warehouses throughout the region.

To avoid disruptions to their supply chains, many companies have long been planning how their continuity of trade will remain seamless during this period, according to global logistics provider Dachser USA Air & Sea Logistics.

"The CNY holiday not only marks the beginning of a new year. This period also represents a complete shutdown of China's manufacturing infrastructure, when virtually all businesses and factories in China close from one to four weeks," Dachser said. "All suppliers will wind down operations one to two weeks in advance of the holiday. In total, the holiday impacts about two months of production."

To cope with those stoppages, experienced business plan ahead in four basic ways, Dachser said:

  • Build up adequate inventory, and find out if your Chinese source has inventory in non-Asian locations, so you can use other supply chains,
  • Inform your forwarder about your priority shipments, in case there is limited space,
  • Book shipments well in advance of CNY, and
  • Reserve space on passenger flights for shipments that cannot be delayed.

"With the upcoming Chinese New Year period, it is a time of many challenges for importers and exports," Guido Gries, managing director for Dachser Americas, said in a release. "Proactive planning and preparation are key to effectively navigating and managing supply chain issues that could occur during this time; ensuring that freight is handled consistently and without interruption."

Outside of logistics professionals, consumers may not be aware of the vast implications of Chinese New Year, but they will still see some trace of the holiday in U.S. culture, such as the U.S. Postal Service's Jan. 11 introduction of a new postage stamp design. USPS commemorated the event by issuing the stamp, which features a rat mask, drawn in the style of the finely decorated costumes often worn by people performing the dragon dance during new year's parades.

According to USPS, Asian communities around the world ring in a new year with a fresh start and wishes for good luck and prosperity through traditions such as shopping for food, hanging decorations, and ceremoniously cleaning their homes and streets. The rat is the first of the 12 zodiac animal signs associated with the Chinese lunar calendar, and for those born under its sign, is said to grant qualities such as being very clever, self-aware and highly social, the postal service said.

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