As Chinese New Year starts, the logistics industry is bracing itself for more supply chain disruption. This year, on 1 February 2022, China ushers in the Year of the Tiger, with a national holiday being observed from 31 January to 6 February.
Traditionally, just Chinese New Year on its own has posed a great enough challenge to supply chains in a pandemic-free world. Now, this challenge is being exacerbated by ongoing container and driver shortages, air and ocean capacity constraints, the issuing of service permits and global restrictions imposed by rapidly changing regulations due to COVID-19. Navigating industry closures throughout China during the country’s largest annual celebration will undoubtedly be one of the most formidable challenges logistics service providers such as Rhenus Air & Ocean will face in the logistics industry in the first quarter of this year.
Chinese New Year in the logistics sector: What to consider while preparing for the holiday period
The closure of factories and manufacturing hubs usually begins one week before the New Year’s celebrations and extends for a similar period afterward in order to allow workers to travel to be with their families. A bottleneck effect occurs in the weeks leading up to these closures as customers ramp up demand for the goods they will need to last them through the holiday period. Suppliers scramble for parts, and production is in overdrive in order to meet demand. The knock-on effect is that there is no time for the Chinese industry to provide new quotations or to take any new orders in the weeks leading up to the holiday.
After the festival is over, the slow return to full capacity – with workers going back to work at different times – means that the pace of orders, production and shipping does not return to normal for four to six weeks. While ports remain open in China during the public holidays (operating at a much lower capacity), the closure of factories means that goods cannot be transported to or from the port.
On top of that, this year, Rhenus Air & Ocean is also facing added pressure caused by (1) newly implemented electricity rationing in China that is designed to curb the country’s carbon emissions, (2) the 2022 Winter Olympics, which will be held in Beijing from 4 to 20 February and (3) New Year’s celebrations in other Asian countries at different times of the month, all of which will lead to potential further manufacturing delays.
How to minimise the impact of Chinese New Year on your business
Rhenus Air & Ocean has prepared a suggested plan of action designed to help maintain supply chain resilience during this period:
- Request emergency contact information from suppliers so that you can remain in contact.
- Plan for a deeper inventory to overcome any delays or stock shortages.
- Work with a trusted freight forwarder who has the necessary expertise, and request their emergency contact information.
- Get ahead of supply chain risks by analysing sailing schedule delays in order to detect bottlenecks, and integrate realistically pragmatic sailing schedules in the actual supply chain process.
- Plan freight schedules for the beginning of January in order to avoid bottlenecks towards the end of the month.
- In order to miss the post-holiday shipping rush, do not plan any freight movements until the end of February (for departure mid-March) unless absolutely necessary.
- Communicate with your freight forwarder ahead of time about freight movements during this period.
- Monitor the trade route of the originally planned sailing schedule and brace for unexpected changes using a backup plan.
- Work together with your freight forwarder on potential emergency routings.
There is a lot to consider when it comes to planning for Chinese New Year (e.g. the type of product; indirect connections for airfreight, ocean freight or rail freight; Pacific bridge products). Rhenus Air & Ocean is more than happy to assist you with finding the best solutions.