Chinese New Year can cause a disruptive effect on the shipping industry and global supply chains as certain countries temporarily shut down production facilities and operate transportation services with limited personnel.
This can cause a bottleneck in the global supply chain, especially with production dependency on China and other Southeast Asian countries. To what degree supply chains are affected and what companies can do to mitigate downtime and risk will be explored in this article.
Here’s a quick overview of the content we will cover:
- What is Chinese New Year?
- How CNY Affects Supply Chains
- CNY Effects On Your Shipments
- How to Plan Around CNY
- CNY Shipment Calendar
What is Chinese New Year (CNY)?
Chinese New Year is an annual celebration marking the start of the year in the Chinese calendar. It is also known as the Spring Festival or Lunar New Year to some and is a public holiday in the following countries:
- Hong Kong
- South Korea
While Chinese New Year is a public holiday in certain countries, it’s celebrated around the world where Asian communities are present. The official public holiday will typically start between the last week of January to the first two weeks of February and last between 1 – 7 days, depending on the country. However, some companies can remain closed for weeks.
During this time, families travel home and take time off work to be together to celebrate the lunar new year. While in China the official public holiday is officially three days, most companies don’t reopen for about 2 – 3 weeks.
As a result, the supply chain virtually shuts down as factories, logistics companies, and ports are either completely shut down or only operate at a very limited capacity.
How Does Chinese New Year Affect the Supply Chain?
Due to the temporary suspension and capacity of businesses, goods exported from or imported into the respective countries will commonly experience heavy delays. This is especially true in Mainland China.
Therefore, work is expected to build up about 1 to 2 weeks before and after the Chinese New Year period. It’s common for service providers and manufacturing companies to finish work and deliveries before the festive season starts.
This can cause a bottleneck in the overall supply chain, as orders flood in about 1 – 2 weeks before Chinese New Year. Here is a more detailed view on the effects of Chinese New Year on the shipping industry.
Effect on Trucking
Transportation of containers to and from ports are expected to ramp up to not only meet shipping line and port cutoffs, but the overall increase of demand before the festive season.
It is almost certain that trucking operations will already have a plan up to when they can expect trips to be scheduled. Additionally, as people travel back to their hometowns, trucking companies usually struggle with driver shortages. This can leave containers unaccounted for, at the factories or in the port.
Effect on Courier Services
Like other service providers, couriers operate with minimal staff to ensure that core services are rendered. However, this could mean that packages and parcels are heavily delayed, especially when ordered through Chinese e-commerce websites.
There is a high chance that national couriers will only be able to deliver high priority or critical items due to the expected shortage of staff and resume normal deliveries once office schedules return to normal.
Effect on Customs Clearance
The same principle applies to customs clearance agents, which are typically local companies. As these companies work with limited staff (some even completely shut down), customs clearance may take a prolonged amount of time.
Multinational freight forwarders who provide customs clearance services usually still operate, albeit with limited staff that are dedicated to cargo clearance. It will be a challenge to clear the cargo if it arrives towards or during the holidays.
Effect on Manufacturing
Though the official holidays are only a few days up to one week, employers often give workers more time to travel to their respective hometowns. Many factory workers also take annual leave just after Chinese New Year and only return about 1 – 2 weeks after the public holidays.
Therefore, local factories tend to shut production down for at least 2 – 3 weeks during the Chinese New Year period. This means that orders will not get fulfilled and shipped during Chinese New Year and manufacturing typically resumes rapidly once the plants and facilities reopen.
Effect on Freight Forwarding
Freight forwarding companies will experience a heavy workload to fulfill bookings, pickups, and deliveries before and after the Chinese New Year holidays.
Limited staffing is expected during these holidays to attend and support critical shipments only. Clients can expect to receive delayed replies to shipment updates and limited customer service.
Moreover, costs such as demurrage and port storage put more pressure on deliveries before the holidays, increasing the demand of shipment coordination.
Effect on Ports
While shipping ports and airports remain open during Chinese New Year, they run at limited capacity. This means that while shipments still get loaded and discharged, the overall process may be delayed due to limited personnel and cargo deliveries.
How Chinese New Year Can Affect Your Shipments
All the above mentioned effects on the supply chain can have considerable consequences on shipping with regards to freight rates, delays, support and more. Here is what you can expect for your shipments during the CNY period.
Increased Freight Rates
Carriers may take advantage of the demand for space and increase freight rates for shipments moving out of China and other countries. This generally means a price premium may be imposed on companies and consumers buying goods.
Major shipping and freight forwarding activities such as trucking, customs clearance and delivery of shipping documents may be affected if the timing is not properly planned ahead.
This could lead to difficulties in loading of shipments, increased storage costs, additional demurrage and detention costs and overall shipping delays, as labour during Chinese New Year is limited and demand is increased.
Limited Customer Service & Support
System-based replies or canned texts may be received during Chinese New Year, as most companies run at limited capacity. Replies on inquiries typically take a few days and in the worst-case scenario may only resume upon the business reopening.
Lack of Equipment
As the busiest period is about 1- 3 weeks before Chinese New Year, much of the equipment has already made its way from China and other Southeast Asian countries, Westbound to Europe and Eastbound to the United States, which causes limited availability of equipment at origin.
How To Plan Your Shipments Around Chinese New Year
Taking note of the potential effects that Chinese New Year can have on shipping, it’s extremely important to plan well in advance. Doing this will greatly reduce the risk of running into increased costs and shipment delays.
Here are the 7 most useful tips to ensure that you are well prepared for the Chinese New Year period and that will help you plan your shipments accordingly.
1. Understand Your Supply Chain
It’s important that you fully understand the supply chain constraints of your business during Chinese New Year. This will allow you to plan ahead and evaluate options well ahead of time.
You should also know the number of supply chain partners (truckers, agents, brokers, forwarders, etc.) and where they are located. Establish contact matrixes and set up contingencies accordingly.
2. Plan Your Shipments Well in Advance
Knowing that moving cargo during Chinese New Year is extremely challenging, you should consider getting your items shipped at least 2 – 3 weeks before the public holiday starts.
Sailing schedules are readily available from carriers. Use them to your advantage when planning shipments or purchasing items. Most carriers publish them 4 – 8 weeks in advance and if you’re working with multiple vendors or partners, inform them of your shipments as early as possible.
If you’re resorting to sea freight, file rates and space early in the year. This is usually done at origin and if you’re working with a freight forwarder, make them aware as early as you can.
3. Build Strong Partnerships with Your Service Providers
Any supply chain has many moving parts. Open communication and continuous performance evaluations are key to building great relationships with customs and suppliers.
It’s also advised to connect regularly with your stakeholders and all relevant supply chain partners (internal and external). The more information is shared, the better the preparation can be.
4. Diversify Your Service Provider Network
During the Chinese New Year period, you may want to consider working with multiple carriers, truckers, and brokers. This will help you diversify the workload and mitigate the risk of potential service failure.
While you don’t require to use these additional service providers on a regular basis, it’s best to at least keep them as a backup option for festive seasons like this.
5. Diversify Your Supply Chain Locations
Chinese New Year mainly affects imports into and exports from Asia, mainly China and several other countries. Consider procuring your products from multiple locations during CNY, in order to mitigate the risk of a bottleneck.
Although it may temporarily increase costs, it could offset the risk of having all your cargo moving out of one location and potentially being stuck.
Depending on your business, you may also use this as a temporary method, in case you foresee that your cargo will not ship in time.
6. Use Proper Supply Chain and Planning Tools
Combining past data with present market conditions is always a good way to plan ahead. Using the right tools can make a huge difference between getting your orders shipped in time, or having your cargo stuck at the port during Chinese New Year.
Predictive analysis software may be worth an upgrade to oversee aspects of your supply chain dynamics and a sophisticated order management set up will enable smoother order and shipment coordination.
7. Use a 3PL or 4PL Service
Depending on the size and dynamics of your supply chain, you may want to engage a third party logistics (3PL) or fourth party logistics (4PL) provider. They understand global supply chains and have the ability to use best practices to plan shipments on your behalf.
They understand your industry, as well as its constraints and issues that arise during Chinese New Year and have handled this for various other customers over the years. It’s important to note that working with a reputable and reliable partner is key.
Chinese New Year Calendar for Shipment Planning
In order to help you plan ahead, you can use this calendar for reference to check how long Chinese New Year is in each country, when the public holidays are and the potential effect it can have on shipping.
|China||Full Week of CNY||1 – 3 Weeks||Heavy|
|Hong Kong||First 3 Days of CNY||3 Days||Medium|
|Vietnam||First 3 Days of CNY||3 – 5 Days||Medium|
|South Korea||First 3 Days of CNY||3 Days||Medium|
|Taiwan||First 4 Days of CNY||4 – 5 Days||Medium|
|Malaysia||First 2 Days of CNY||2 Days||Low – Medium|
|Singapore||First 2 Days of CNY||2 Days||Low – Medium|
|Brunei||First Day of CNY||1 Day||Low|
|Indonesia||First Day of CNY||1 Day||Low|
|Macau||First 3 Days of CNY||1 Day||Low|
|Philippines||First Day of CNY||1 Day||Low|
|Suriname||First Day of CNY||1 Day||Low|