We are at that special time of the year again: the Chinese Lunar Year Holiday. Many would agree that at this time we have more pressure with the congestion at the US west coast ports. Many shipments shipped in early January are still sitting at docks of west coast ports. Nothing went as planned for the industry. I have heard of the reached agreement on a new five-year contract between ILWU and PMA which are subject to ratification by both parties, and that is really great news.
The Spring Festival is once-a-year-event for family, friends and other loved ones to get together and celebrate. Although the official holiday is not more than a week, the whole process begins about 2 weeks before and lasts 2 weeks after the holiday. The financial impact is greater than any other countries’ holidays. Manufacturing stops across China, and millions make long trips back to their home towns from industrial cities. They travel by any means of transportation they can find. An increasing number of people also choose to travel to Asia-Pacific countries like Thailand, South Korea and Malaysia. This is a significant boost to the retail and hospitality sectors in these countries.
Traditionally, the US import and retailer industries prepare for this big holiday months in advance. They try to stock up to cover for the weeks they won’t receive any new merchandise. Even with all of the planning done, some importers (especially small ones) still can’t seem to avoid the delays. Factories tend to take care of bigger clients first. Even when they get goods ready on time, many things can stop those containers from arriving on time.
Shipping Lines, freight forwarding companies, China customs, truck drivers and labor at the ports are the key parties in the logistics side of the process. Except for 2-3 days, customs is operational at major ports like Shanghai. However, they are understaffed for the large amounts of containers coming to the ports during this time. It is wise to avoid shipping from small feeder ports as they are not operating.
A shortage of truck drivers is the biggest challenge during the Chinese New Year. Starting couple of weeks before the holiday, many drivers usually leave early. The remaining drivers trying to make more money for their service by increasing the cost to suppliers. Also, the ports are usually congested due the increasing amount of shipments. Shipping lines usually leave some containers behind for one week, or divert another vessel to the port to pick up the extra containers.
Although many companies experience inventory issues during this time, proper planning can help mitigate these problems. Having a diverse supply chain allows companies to procure materials and/or receive product from one factory when another is down. If you are single sourced, then building up a safety stock is another option. Communicate with your vendors on a daily basis, if possible, to be aware of any obstacles you may face. Place your orders at least a month in advance and, if possible, focus on quality control more. Many factories run out of raw material going into the Lunar New Year, and as a result the quality of many products decrease. Importers end up having to decide whether they should buy a product they don’t really want, or wait another 7-8 weeks for the correct product.