Why Does Chinese New Year Affect the Supply Chain?

Chinese New Year (CNY) is an important time of year for many people in China. Much like the Christmas holiday in the U.S., it is a time for celebration and family, though on a larger scale. It’s the largest Chinese holiday of the year, and business calendars in the country reflect that.

If you have ever outsourced product from China or utilized a supply chain that extends overseas, you have likely at least heard of the impact the holiday can have on the manufacturing industry. But for those that have ever wondered why the impact occurs, we’d like to give you a bit of insight into Chinese New Year.

Traditionally, Chinese New Year, also known as the Spring Festival or Lunar New Year, was a time to honor deities and ancestors, with the first day of the New Year falling on a new moon. Many important customs and traditions, often surrounding themes of good fortune, happiness, wealth, or longevity, are weaved throughout the holiday. During this time, millions take the opportunity to celebrate with family, often far away, creating a huge migration that leaves tons of businesses closed for a few weeks.

During the 1970’s, economic reforms in China caused huge growth in coastal regions. Many that lived in more rural areas, packed up and moved hundreds of miles away from home in search of more stable jobs. Today, millions of workers still travel home during CNY. This is why many factories and businesses are shut down for 3-4 weeks surrounding the holiday, despite it officially only lasting about 1 week.

Prior to the shutdown, there is always a rush to get product shipped out and taken care of. Factories scramble to make up for time they will lose during the holiday, but workers are often too eager to get home—because of this, there is a chance for more mistakes to be made, increasing costs and delaying timelines. Since it’s often one of the few, if only times these migrant workers make it home during the year, it’s common for many to take their time returning to work, or to not return to the factories at all. This creates a slow ramp up in factories after CNY, as they first have to replace workers and train new ones to get back on schedule. This is one reason why it is important to plan for Chinese New Year.

Understanding that the CNY shutdown happens every year and can’t be avoided is key to keeping your supply chain on track. Advanced planning is necessary to make sure you have enough inventory to last a few extra weeks because it is next to impossible to get any product out of China during this time.

At E-BI we encourage good advance planning because we want to avoid any issues just as much as you do. A great, detailed manufacturing plan is important any time, but especially during CNY, because let’s face it—many factory workers are more concerned with watching fireworks or enjoying a big festive dinner with family back home than the success of your product. But we’ll work with you to help make your manufacturing and supply chain experience as successful as possible. Cheer to the New Year!