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November 25, 2020 32 min
In This Episode...

Sofeast's CEO, Renaud, and Adrian from the team discuss the forthcoming Chinese New Year holiday which is officially between Feb. 11th to 17th 2021 (CNY day is Feb 12th). We'll look into how and why this holiday has a serious impact on lead times, quality, supply chain risk, and managing suppliers; greater than at any other time of the year.

Renaud also shares some tips and strategies that importers can implement to plan and prepare for CNY, as well as mitigating risks that may arise from your suppliers.

Show Notes

00:00 - Introduction.

02:18 - Discussing what the Chinese New Year holiday, or Spring Festival, is and some of its unique features. 

05:28 - What staff turnover around CNY tells you about the factory. A high turnover is indicative of an employer who has work to do with treating and/or paying staff well.

06:40 - Some problems which typically occur after Chinese New Year. If staff have left, new staff aren't as efficient which may lead to quality issues. Even new quality inspectors may not pick up problems as well until they're familiar with your requirements.

07:17 - Points of stress for importers before CNY. The pressure to clear a backlog of orders and staff starting to leave early for the holiday makes the pre-CNY period quite treacherous for importers. Orders may be delayed, quality may be affected, there is no time to rework defective batches, suppliers may not focus on future orders urgently, etc.

11:00 - The length of time that different factories may be closed for. Assembly factories will typically be closed for 12-15 days, a relatively short time. The problem is with component and material factories. These guys can be closed for up to a whole month.

12:32 - Summarising the problems and risks at CNY. Also includes shipping backlogs, where demand drives up shipping costs and there is enormous demand for quality inspections just before CNY, too, when everyone is (rightly) worried about poor quality.

13:42 - The dates for Chinese New Year 2021 and pre-CNY wind-down.

14:36 - An additional risk for importers: Supplier bankruptcy. It's at this time, the end of the year in China, that suppliers who have been struggling financially may decide to file for bankruptcy and shut down. They may or may not pay off outstanding wages and debts, but either way, it's going to leave you in the lurch. Due to the financial stresses of 2020, this could be a larger problem in 2021 than usual. Big tip: DON'T wire any advance payments for the period after CNY to a supplier just before the new year holiday.

16:31 - Preventive measures that importers should follow to navigate the CNY period securely. Plan ahead diligently, get inventory made Oct/Nov, avoid production too close to CNY due to quality issues, if things may be in a rush, negotiate with suppliers to have smaller orders made better (if possible) to release some pressure on them, arrange post-CNY orders with your supplier so they can coordinate with sub-suppliers in advance in order to get things running faster after the holiday, increase inspection work on products and components/materials pre and post CNY.

21:27 - Will CNY 2021 be any different to usual due to COVID19? At the moment, due to the very low cases of the coronavirus in China, it looks that it won't be particularly affected, unlike in 2020. However, importers should be aware that if the virus spreads due to the holiday, factories could be hampered or shut down in the new year if cases are found.

25:24 - Contingencies to deal with supply chain risks (such as viral outbreaks). Keeping some extra inventory if possible, having more than one supplier per product gives a safety net and this even better if they're located in different areas of China or even different countries (such as one in China, one in Thailand), suppliers can hold some stock or components, etc.

27:48 - Risks other than a pandemic to be aware of. This could be a fire in the factory that puts them out of action, financial problems causing them to go out of business, having IP stolen, disastrous manufacturing and quality issues, and more. Importers would be wise to consider arranging a backup supplier. Plan ahead and have a risk-based approach to cope with risks that you rank from worst to least if they should happen.

Extra information you may find helpful
  • Renaud wrote about how to manage issues caused by the holiday here: Chinese New Year: how to manage the disruption?
  • You can learn more about the CNY festival itself, dates, etc, from this handy page: Chinese New Year – China's Grandest Festival & Longest Public Holiday
  • There are a number of really great posts from Renaud about supply chain risks and how to put in place contingencies to manage them collected here in a series: Supply Chain Risk Management Blog Posts
  • Read more about arranging a backup supplier here: Why you Need a Backup Factory for your China Production
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