Chinese New Year is the most important festival in China. It signals a new start, wishes of good fortune, and time spent with family. But how will a break for New Year celebrations affect your fashion business?
China’s total population covers up to 1.3 billion people. Its textile manufacturing industry is one of the world’s biggest apparel exporters to the west. The workers in China are mostly migrant which means they work far from their homes.
During Chinese New Year (view dates here), an estimated 340 million workers make the annual pilgrimage from their workplaces to their hometowns and villages.
It is one of the largest human migrations in the world.
Chinese New Year: The Bigger Picture
On an average, the Chinese railway carries 6.4 million passengers every day. But, during the Chinese New Year, there’s a 50% increase in demand. Chinese workers buy tickets weeks before holidays begin to deal with the excess transportation problems. The same problem happens while buying tickets for the return journey. Most of the factory workers return several weeks after the official end of the holiday, which makes it a month-long holiday.
The Chinese term called “Zao Zou Wan Hui”, which means “Leave early and return late”. That perfectly sums up the length of the holiday.
The above reason states that Chinese factories shut down anywhere from two weeks to a month or more during Chinese New Year and this affects the entire Chinese supply chain.
Some factories will warn regular clients around six months prior to Chinese New Year of their planned opening hours, to ensure that orders are in. However, the responsibility is on you as a business owner to plan ahead.
If a supplier has closed their factory then automatically a manufacturer cannot produce the goods even if they are back from the break. During Chinese New Year, many links in the supply chain break which makes it difficult to organise the order delivery process.
For example, even if the factory promises that it will only be closed for two weeks that does not mean their raw material and component suppliers will be open. And it doesn’t mean that the logistics providers will be open. If the factory returns to work after two weeks, but their raw material suppliers are still closed until after four weeks, there’s no way they can begin production until the entire supply chain is back online.
The same issue goes with logistics as well. For example, the week before the Chinese New Year there is a trucking nightmare. Long lines of trucks form, leading to the ports. In some cases, the factory has their goods ready but because of trucking delays, the goods miss the closing date to be loaded into the port and as a result, it misses the vessel.
There are many moving parts involved – meaning, if a supplier has closed their factory then automatically a manufacturer cannot produce the goods even if they are back from the break. During Chinese New Year, many links in the supply chain break which makes it difficult to organise the order delivery process.
Change in the Mentality of the Workers
After the holiday many workers DO NOT RETURN and many factory workers, after taking time-off – reflect and decide that they don’t want to work hard and be so far away from family and friends. So, they decide to look for more comfortable service-industry jobs in their hometowns.
The older generation believes that the younger generation is not willing to “Chi Ku” or “eat bitter” and work as hard as their parents. This means that rather than toiling away in a faraway factory, away from their friends and family, they would look for a job at a local restaurant or hair salon in their hometown. The work is easier and the pay may sometimes even be higher.
From the macro perspective, this is exactly what the Chinese government wants. They are incentivizing ways for China to be more a service-oriented economy and while gradually moving away from its role as the “world’s factory”
The western world is accustomed to weeks of business closure during Christmas and Easter holidays, and automatically plan this into production schedules to avoid delays and a lack of supply.
It is important to remember that factory closures are not a problem if you prepare your business for Chinese New Year by building your knowledge and communicating clearly.
Business Before, During and After the Chinese New Year
There are several ways to deal with the problems associated with the Chinese New Year.
1. Keep Up With Your Factory
This is a reminder to be aware of the cultural traditions of the country that your factory is based in – doing so is an important factor in the organisation of your production.
Some factories will prioritise orders, sometimes based on the client or the materials that will be available.
Build a strong relationship with your factory to develop trust and mutual understanding, and discuss their plans for closure over the holiday season.
The factory’s own cut-off dates can’t be trusted either. If for some reason they don’t keep their promised delivery date in mid-Jan and the order is not completed before Chinese New Year then it would take the expected order to be shipped out by late-Feb or March at the earliest.
This additional 30-45 day lead time could result in thousands of dollars in lost sales.
2. Be Direct
If your production is particularly time-sensitive, politely discuss this with your factory contact.
Ask questions such as:
- Will production times differ?
- What are order deadlines (to get stock for a specified date)?
- How will the delivery service that your manufacturer relies on, and Border Customs, be affected?
- When can you expect communications to cease for the holidays, and when will they resume?
Related reading: 11 Questions to Ask a Factory Before Working With Them
3. Be organised and specific
Make sure that your schedule is as achievable as possible, all year-round, so that you are not in an unfortunate position if delays at Chinese New Year do happen.
If you decide to increase your inventory in advance to allow for a possible stock shortage during the factory closures, make the necessary arrangements for safe product storage.
In some cases, sellers plan ahead and place larger orders leading up to Chinese New Year so they will have enough inventory in stock during the Chinese New Year factory closures.
4. Plan for the Future
One can place the orders early than mid or late-November from which the factory will have a full 60+ day lead time before the Chinese New Year rush. This improves the chances of delivery before the holiday.
In months before Chinese New Year, factories are inundated with orders. This means the factory will have other orders in their pipeline already, and their delivery times will be longer than normal.
If a normal delivery lead time is 30 days, It’s no surprise if the factory can only promise 45 days in the months leading up to Chinese New Year. By placing the order earlier, one can get in front of the line to get their delivery sooner.
5. Don’t Forget About Shipping
Another option is to plan the shipping by sea before Chinese New Year, by booking a vessel date at least 1-2 weeks before the holiday to avoid the huge rush and risk of your goods getting stuck and missing the boat!
6. Forward Plan your Inventory Well
In some cases, sellers plan ahead and place larger orders leading up to Chinese New Year so they will have enough inventory in stock during the Chinese New Year factory closures. This strategy can be effective if planned properly. But it carries additional inventory risk if the product doesn’t sell as expected.
For example, if a new competitor enters the marketplace, if competition undercuts your pricing or if there are problems with your product which affects demand.
Another risk of holding additional inventory in stock is the negative effect to the cash flow.
In other words, one would be tying up more cash in inventory where it can be invested elsewhere to earn greater returns.
7. Alternate Sourcing Channels
To deal with Chinese New Year, many established purchasing professionals have alternative channels of sourcing besides China.
They source from China, but also from other regions such as India, Southeast Asia, Mexico, or the US.
Rather than forcing the issue with your Chinese supplier and trying to compete with the pre-Chinese New Year rush, consider sourcing from regions unaffected by Chinese New Year.
India, for example, may be able to manufacture similar products and sometimes at a lower cost.
Manufacturing of products such as textiles and shoes are being shifted to Southeast Asia to take advantage of the lower labour costs.
Few things one should be aware of doing is that if one has placed the purchase order too late then they should not expect an on-time delivery. One should not plan to rush a shipment out before the holiday. There are too many moving parts in this equation so it’s better not to try to force them to do something that won’t happen. Pushing them overboard increases the risks of mistakes, defects, and even more headaches down the line as the entire supply chain is already under stress.
For various reasons, factory staff turnover can be high after Chinese New Year.
Ensure that your Spec Packs are clear and have been recorded properly by your factory. This will ensure consistency if your contact becomes permanently unavailable, and will also help with quality control measures.
If you have any questions about this article or general feedback then please share your views in the comment section below.