January 06, 2017 | Industry Insights, Insights
Impact of the Chinese New Year on the Global Supply Chain
The centuries-old Chinese New Year, also known as the Spring Festival, will be celebrated on January 28 as we enter the Year of the Rooster in 2017. The public holiday begins in China the day before and runs through February 2. But, in reality, the holiday creates about 10 to 15 days of radio silence from the entire country including suppliers, agents, and partners, which has a huge impact on global supply chains originating in China. This is why it’s so important to plan ahead.
During this time, the government, construction, and factories shut down, while ports and customs usually operate with minimal staff focusing on perishable priority items. Many manufacturers treat the holiday as an annual break and even close down for two weeks or longer. As a result, many companies manufacturing in China rush their goods out in advance of the holiday, usually at higher quantities to prepare for the lost work week(s). That rush, both before and after the Chinese New Year, puts an increased stress on the supply chain, causing congestion and capacity issues for shippers. It also means higher freight rates. In fact, some estimates have rates rising as much 25%, which is why it’s prudent to lock in rates beforehand.
If you haven’t done so already, it’s critical that you and your clients are supply chain-ready. This means making sure that your clients place orders well in advance so that shipping deadlines can be met. The Chinese New Year break not only impacts production, but it also has far-reaching implications on the border clearance process. It is critical that clients place orders early to ensure clearance. In addition, preparing customs declaration documents well in advance of the holiday is advisable. Ports will have major congestion the week leading up to and after the New Year as factories gear up for the shut down and return to work.
Be aware that shipments must be at port at least 10 days before the Chinese New Year to ensure shipment before the break starts. Shipments must also be booked at least two weeks in advance because space quickly fills up. If you ship a large amount around that time, then congestion will likely bump at least one of your shipments to a later date, often a week after the Chinese New Year.
The key is not to wait until the last minute so that you can get competitive rates and to ensure that goods will be shipped and delivered on time.
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