How will Chinese New Year affect supply chain?

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Chinese New Year is a 15-day festival in China and Chinese communities around the world beginning with the new moon, which occurs between 21st January and 20th February, according to Western calendars. This year it falls on Tuesday 1st February and is the year of the Tiger, known as king of all beasts in China. What a happy little accident for us.

Chinese New Year is also referred to as the Lunar New Year, it creates the biggest annual mass migration in the world where people head home to enjoy the celebrations with friends and family. That means there is a serious impact on the global supply chain and the break in production for Chinese based suppliers, manufacturers and partners can last up to four weeks. But, like the tiger, we hope to battle any supply chain disruptions ferociously and below we share our top tips of how to do this.

So, what is going on? Over two thirds of respondents to a global survey conducted by Container xChange, one of the leading technology logistics companies, expect Chinese New Year factory closures to further disrupt container shipping. It is also thought that the holiday will exacerbate transit times, reduce the availability of containers, and increase freight costs. However, Dr. Johannes Schlingmeier, CEO of Container xChange, has commented that predicting the impact of Chinese New Year in 2022 is far more difficult than it has been in previous years, due to China’s policies on internal travel following the pandemic. Even if workers are allowed to travel home, it is unknown if they will need to quarantine before they can return to work. Further potential disrupters include the Beijing Winter Olympics, beginning early February, and possible power cuts.

The freight rate for a 40-foot container from Asia to the US west coast increased by 2% last week, compared to the previous week, according to the Freightos Blatic Index. That puts the rate 225% higher than this time last year. Port congestions and supply-chain delays at Chinese ports have already worsened in the past few weeks due to strict coronavirus prevention measures. Data shows that the transit time to US ports is now around 44 days, a stark contrast to the 16 days pre-pandemic.

So, what can we do to mitigate the impact? Here are a few ways your business can prepare –

Plan ahead – Consider creating a long-term forecast for how CNY may continue to impact supply chain up until Spring. You may want to build up your inventory to ease delivery times.

Consider all the disrupters – As noted by the CEO of Container xChange, this year is more difficult to predict due to COVID-19 restrictions. We also must factor in the current state of global supply chain and the upcoming Beijing Winter Olympics, which make for an unpredictable quarter.

Find alternatives – If you’ve identified a link in your supply chain that may potentially break, find an alternative solution ahead of time. You may want to consider sourcing elsewhere or find alternative transport.

The good news is that the pandemic has taught us to be adaptable and flexible when managing our supply chains and out of all the uncertainty that has brought, Chinese New Year is a consistent annual event. This means you can plan and apply the learnings when dealing with Chinese New Year closures.

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