Chinese New Year (CNY), also known as Lunar New Year or Spring Festival, is an annual 15-day celebration in China and communities around the world. It begins with the new moon and lasts until the following full moon, occurring sometime between January 21st and February 20th.
New Year festivities usher out the old year and are meant to bring luck and prosperity into the new one. It is a time to feast, visit family, and honor relatives who have passed. This year, celebrations will begin on January 22, 2023, bringing in the year of the Rabbit, and will conclude after the Lantern Festival on February 5, 2023.
The first 7 days are considered a public holiday where non-essential businesses will close their doors, but a lot of Chinese offices and factories will close operations for about three working weeks to allow workers time to travel back home to spend the holiday with their families.
While this is a cause for celebration in China, the holiday can disrupt production and shipping schedules for up to three weeks or more. China is an economic giant, and the effects of CNY can ripple around the world, especially for businesses who rely on imports from China.
So, you may be wondering how this affects you and why your business should plan for the largest Chinese holiday of the year. Sit back and grab a pen (or phone, tablet, keyboard, some writing device) because we have some helpful tips.
In the United States, we do not have any public holidays where the majority of businesses shut down for an entire week. It may be hard for us to understand why any business would want to shut down for a long period of time. Because China shuts down businesses every year for CNY, if you take the time to understand the importance behind the holiday and how it affects your business the better you can plan for any disruptions to your business operations.
To prepare your business for the upcoming Lunar New Year, we recommend looking over your sales history and putting together a forecast for the first 6 months of the new year. It’s important to work with your suppliers and plan for before and after the celebration as delays in production and shipping may continue into the spring.
The forecast you created will come in handy when checking inventory levels. Once you understand how much product you will need for the next 6 months, you can begin ordering in advance. The forecast is also helpful to keep your inventory at manageable levels, so you do not over-order products.
Inventory programs are a business model that allows your supplier to maintain an agreed level of inventory for the parts you need most. Suppliers will analyze your forecasted usage, current inventory levels, and demand shifts in the market before replenishing. Inventory programs, whether they are blanket orders, stocking programs, or consignment programs, are ideal for businesses dealing with lead time challenges and are cost-effective.
*Our Pro Tip: Make sure you are working with a supplier that is familiar with the Lunar New Year and takes into consideration the effects the holiday has on the supply chain when managing your inventory programs.
As we mentioned above, it’s never too early to start planning but you should also plan for after the holiday ends. It’s possible that not all workers will return to their old job after the New Year. If there is a labor shortage, it could take factories weeks or even months to get production back to normal. Utilizing the forecast you created when placing orders should help hold you over while factories get back on their feet.
Spend time building strong relationships with your suppliers and contract manufacturers. This could help you collaborate and get better visibility into the status of your orders being processed.
The Chinese New Year holiday will affect your supply chain, but you can protect your business if you are prepared. Reach out to our team if you have any questions or need help forecasting for the New Year. We are experts at helping OEMs navigate CNY and mitigate supply chain constraints. We are here to help you create what’s next!