Forget perfection, focus on reducing supply chain risk
Rather than trying to perfect the supply chain, a better approach is to focus on risk, then build out the capabilities needed to manage it.
Chinese New Year (CNY), also known as Spring Festival, symbolizes the end of winter and the beginning of a new year in the Chinese lunar calendar. It also triggers one of the largest annual travel waves in the world as families reunite and celebrate. (In 2023, the Chinese New Year falls on January 22nd, with the week being a public holiday. February 5th marks the end of the celebration, closing with the Lantern Festival).
But Chinese New Year supply chain disruption across the globe is nothing to cheer about.
“Each year, the pause before, during and after Chinese New Year increases pressure on global supply chains as millions of people take time off from work to celebrate Chinese New Year with their families. As a result, companies are pausing production and causing delays in the delivery of finished goods”, says Uwe Haizmann, Partner, EAC International Consulting, Munich.
CNY’s one-week production halt often means it can take up to four weeks for China-based suppliers, contract manufacturers, and partners to resume normal operations.
During this time, almost everything is closed, including government offices and factories, while ports and customs usually operate with a minimum of staff and focus on perishable and priority goods.
Impact of 2023 Chinese New Year on supply chain
This year’s planning around CNY could be challenging in terms of the uncertainty in production supply and possible disruptions, despite recent relaxation of COVID restrictions by the Chinese government.
Even though manufacturers and suppliers promise to maintain production during the holiday, there’s still the possibility of unexpected shutdowns due to lockdowns.
“But now, as China suddenly moved away from its Zero-COVID policy, we expect positive COVID cases to accelerate in Q1 of 2023, which will result in a significant labor shortage in the entire Chinese supply chain, and which in turn will cause further disruptions in the global supply chain,” adds Haizmann.
Here’s where robust forecasting and planning is essential.
According to a study from EY, “forecasting must become a core competency with an emphasis on analyzing data from multiple and sometimes novel sources to understand not only your customers’ plans, but also the potential change in who your customers are and how you deliver value to them.”
Supply chain planning: Keeping promises, no matter what
Supply chain planning is hard even during the best of times. How can wholesale distributors make good on their promises during a crisis?
5 ways businesses can survive CNY disruption
Here are additional tips that can help global businesses manage Chinese New Year supply chain issues.
1. Plan ahead
Plan not only for the pre-CNY period, but also for the post-CNY period, as the impact on the supply chain may last until spring. Based on structured data (orders) from the past as well as unstructured data such as current sentiment analysis, weather patterns, COVID spikes and other events, businesses can create a meaningful picture of supply and demand to guide inventory build.
2. Review and optimize your inventory
With many multi-channel order fulfillment processes, inventory is typically distributed across many locations throughout the supply chain, making it important to know what inventory is where. Using inventory optimization planning logic, forecast demand can be matched with forecast supply to ensure customer orders are fulfilled, shorten lead times, and minimize inventory shortages and over-ordering.
3. Check alternative delivery options
For urgent deliveries during Chinese New Year supply chain disruption, business may want to consider alternative transportation options, such as ship-to-rail or an alternative sea-to-air combination.
4. Expand the supplier base
Rely on a variety of suppliers and expand your network to have fallback options in the event of a disruption. Consider expanding your supply network to include reliable partners in geographically neighboring regions of the current production site.
5. Implement a quality management plan
Make sure quality doesn’t fall by the wayside when production is running at full speed because product needs to get on the road quickly. With a quality management and thorough inspection plan in place, you can reduce the risk of late delivery due to quality issues or, worse, delivery of defective goods to your customers.
Knowing what to expect during Chinese New Year is half the battle. However, being well prepared is the best way to avoid any negative impact on the supply chain. With this in mind,
Happy Chinese New Year!
Xin nian kuaile! (新年快乐! )
Gong xi fa cai! (恭喜發財! )
