One of the biggest scheduled disruptors in the supply chain domain is around the corner and that is the Chinese New Year. Also known as the Lunar New Year, this is the most important festival of China and marks the waning of winter, in the dawn of the spring season. The festive season is marked by merriment, homecoming and a widespread celebratory atmosphere. People working in distant cities travel back to their hometowns and villages to spend time with their loved ones. This mass exodus calls for excruciating pressure on inland transportation systems and availability of rail tickets gradually becomes more difficult as the festive season draws near.
Institutionally, the holiday season lasts for one week. This year the new year falls on February 1st and thus the holiday season will last roughly from 31st of January to 6th of February. In this one week, most of the services will stay closed. Factories, government offices, corporate organizations would shut their operations down for this week and ports and customs offices would only deal with essential and perishable items.
Though the declared public holiday lasts only for a week, the repercussions of the CNY can be felt for several weeks post CNY as well. Even after the holiday season is over, the factories will not have a full workforce to run their services. There will be a limited number of staff and it usually takes some weeks before the operations normalize. It takes as late as March before the operations resume in full swing. China is a major economic hub in the world right now. They hold a major share in producing items that are exported all over the world, making them a leader in the export sector. Therefore, such a prolonged shutdown that runs over several weeks creates disruptive pressures on the supply chain industry and it has been happening for years.
Though CNY is a scheduled event, this year the situation has been made complicated by certain other incidents that are going on in tandem. The Winter Olympics are scheduled to take place in Beijing from 4th of February and several travel restrictions would run in parallel with the exodus woes that are compounded by the CNY. Moreover, the recent outbreak of the omicron variant of coronavirus has made freight forwarding an even more daunting task. Omicron is a highly transmissible variant and several countries, including India have seen astonishing figures in its COVID spike. China has taken stringent policies in its aim to curb the spread. These include travel restrictions, strict quarantine measures among others. The uncertainty that is looming large due to the omicron spread may lead to suspension of air and ferries from certain major trade points of China. While trade-rush is a traditional phenomenon in China during these peak times, the COVID-induced capacity crunch is likely to exacerbate the picture.
The paradox lies in the fact that while the supply part of the business comes to a screeching halt during these days, the demand spirals up in the festive seasons. The ensuing rush leads to either inordinate delays or substandard services. Though factories work overtime to meet the demands before hitting the New Year holidays, lack of judicious planning may lead to stockpiling in the ports. With blank sailing and no takers, supply hits rocky bottoms. The lack of storage space thus eventually leads to unavailability of containers and the containers/carriages that are finally booked, run on sky-high prices.
Therefore it is recommended that businesses understand the situations that may emanate and plan their freight accordingly, so that they receive less of the disruptive impacts. Listed below are certain measures that companies, retailers, importers, exporters, shippers may take in order to have a smooth sail even while the situation is averse.
Sensible Planning: In order to weather the difficult phase, the most important thing that companies need is appropriate planning that will keep the operations nimble not only during the festive week but also for the upcoming month. Strong forecasting of demands is a prerequisite and commensurate with the demand pattern, orders need to be placed earlier than usual. Otherwise, the ensuing rush and chaos compounded by the COVID-charged volatility would result in overstocking, increased transit time, order delays and last-minute confusion.
Look for Alternatives: With the entire freight forwarding management of China under heavy duress before the shutdown, it would be wise for the companies to leverage multimodal communications. Instead of relying on a single source of conveyance, various sources can be merged for a timely and better shipment.
Alternative Supplier: Though China is one of the biggest suppliers of goods, it would be a more sensible decision to rope in suppliers outside China to shore up the bottomline with their sourcing.
Create Deep Inventory: It is advisable that companies create a deep inventory level and keep their inventory in proper places so that swift action can be taken in case one trade point runs out of stock. Meticulous observation over production and stocking seems to be the only option over here.
Forge Ties with Suppliers: Situations that create bottlenecks bear testament to the fact that in the supply chain industry, having trust on the partners is an imperative thing. Companies must invest their time and money in striking deals with trusted partners/suppliers/shippers/freight forwarders and check with their schedules. Only with trusted partners, can retailers or manufacturers be able to overcome the tricky situations.
Symbolically, the year 2022 is going to be the year of the tiger, according to Chinese tradition. The year will begin with the year of the ox coming to an end. While the people born in the year of the ox are considered to be perseverant, hardworking, and trustworthy, the people born in the year of the tiger are strong, optimistic and brave. In these days and time, with everything appearing to be blurry and the restoration of normalcy appearing to be far-cry, we pray for the best of both these traits to strengthen the supply chain and make it more resilient and credible at the same time. Have a great year and a wonderful time with your friends and family ahead! Happy New Year!