The Chinese New Year, also known as the Spring Festival, is a reference to the date of celebration of the beginning of a new year adopted by several eastern nations that follow the traditional Chinese calendar. The differences between the two calendars mean that the start date of the festivity falls each year on a different day in the western calendar, since the Chinese calendar takes into account both the phases of the moon and the position of the sun. Chinese New Year usually falls on a day between the end of January and the beginning of February. In 2016, the event will take place on February 8.
Although much has changed in China, this tradition still remains strong. The Chinese New Year is very important for the population, as, for the vast majority of Chinese people, this is the only period they have in the year to return to their hometowns and reunite with their families. As a result, the operation of companies changes completely during this period, greatly impacting companies that have Chinese suppliers.
Below are some of the main situations that occur before the holiday:
- In order for the order to be delivered before the holiday, purchase orders need to be placed by October, otherwise the chance of delivery delays is huge. This makes companies work under great pressure to deliver all orders before the holiday and workers work longer hours, which also ends up causing a significant drop in product quality;
- Even though it is officially a one-week holiday, a large part of the employees is released for a longer period because, for example, they negotiated overtime during the year to make better use of the period or because they amend it with the holidays they are entitled to;
- Many factories, aware of the long period in which they will be inoperative, do not buy raw materials, that is, they burn the stock they already have and start to deny new orders, mainly for new customers;
- The transport system is practically unavailable due to the huge flow generated, mainly the terrestrial one. This is because buyers from all countries, knowing that they will have problems with delivery, have been trying to stock up since December. In addition, natural complications of the western end of the year and the fact that it is winter in Asia aggravate the situation. Due to this increase in demand, the freight rates charged tend to increase significantly as well.
As if the pre-holiday problems weren't enough, there are still those that will occur after the end of the Spring Festival:
- There is a considerable difference between the time that the factories return to operation and the effective start of production, since almost all of them are without raw materials. Internal transport is in chaos, as it has to serve the thousands of Chinese factories placing “urgent” orders;
- A large part of the workforce, mainly immigrants from rural Chinese areas, no longer return to work, deciding to move to other areas or seek better opportunities. In some cases, around 50% of the workforce does not return to the factories, which means hiring and training new employees in a short period of time;
- The entire quality control system of most Chinese suppliers is quite compromised, given the many different problems that arise, such as the total lack of technicians to ensure the operation of certain machinery, lack of supplies and equipment and inexperience of new professionals, between others;
- Many Chinese companies, due to these impacts, and also to the country's own difficulties, take advantage of this moment to permanently close their factories.
With all these impacts, it is clear that customers of Chinese companies need to plan ahead and in a structured way to avoid supply problems at the beginning of the year. The formation of lung stock before the Chinese New Year is one of the main measures taken by organizations and is fundamental to guarantee the operation of the operation in the periods close to the Chinese festivity, an event that is entering the agenda of all Supply Chain professionals on the planet .
References
<http://blog.baumannconsultancy.com/ano-novo-chines/>
<http://www.thesourcingblog.com/effects-of-the-chinese-new-year-on-manufacturing-part-1/>
<http://www.thesourcingblog.com/how-does-the-chinese-new-year-impact-product-quality-production-time/>
<http://www.thesourcingblog.com/avoid-logistical-delays-shipment-chinese-new-year/>
Fernanda Monteiro
More than 11 years of experience in training and consultancy projects, focusing on Logistics and Supply Chain. In consultancy, he carried out projects such as Transformational Logistics Plan, Diagnosis of logistics operations, Strategy and Calendarization of Transport Operations, Measuring the Cost of Serving, Market Study, Mapping of Inventory Reduction Opportunities, Review of the S&OP Process, Management Plan Training and Implementation of Commercial Processes in companies such as Nestlé, Raia Drogasil, Ipiranga, Lojas Americanas, B2W, Coca-Cola, Andina, Embraco, Martins Atacado, Loja do Mecânico, Santo Antônio Energia, Ecoporto and Silimed. She is currently one of the teachers of the Inventory Management Course taught every six months by ILOS. She worked on the development and management of Online Courses in Logistics and Supply Chain, Supply Processes, Demand Planning, Inventory Management and Industrial Management. Still in the training area, she was responsible for applying ILOS business games in companies such as Raia Drogasil, Fibria, NEC, Novartis and Moove.
