Playbooks & Guides

Chinese New Year 2024: Impact on Australian Supply Chains.

1
February
2024

Some disruptions are unpredictable, others we see year after year. Is your team primed for the disruptions in sight?

Take Chinese New Year (CNY), for example. Every year, the ripple effect of CNY is felt by traders around the globe, with all sectors, from retail to manufacturing, feeling the pinch.

We got Explorate’s experts to share their tried and tested insights and advice to build this guide to help you dodge the Chinese New Year disruption in 2024. Continue reading and join the ranks of businesses ready to tackle foreseeable disruptions head-on with essential know-how.

When is Chinese New Year 2024?

Whether you know it as the Lunar New Year, Chinese New Year, Spring Festival, Seollal, or Tết, one thing remains constant — it marks the celebration of a new year. Celebrated in North and Southeast Asian nations, the duration of these festivities can extend anywhere from a few days to well beyond a week.

Below, outlines the anticipated schedules for disruption from different participating countries.

NOTE: The holiday's dates vary yearly as it aligns with the lunar calendar.

How long will Chinese New Year impact my supply chain?

Beyond the official week of Chinese New Year, the lingering impact of closures, operational slowdowns, and congestion significantly prolongs the effects on supply chains.

This year, with the CNY dates falling later, we’re seeing workers going on holidays now.

The timeline of impacts you can expect is as follows:

What are the specific disruptions I can expect, and why?

Now that you're aware of the expected timelines for impact, let's explore the specific disruptions that may arise during Chinese New Year.

Operational Disruptions 

Chinese New Year puts a halt on production as warehouses, factories and ports are either closed or running at reduced capacity. In summary, this means:

  • Extended Lead Times: The combination of factory closures and labor shortages results in longer lead times for production and manufacturing processes.
  • Congestion and Delays: As businesses rush to fulfill orders before Chinese New Year, a spike in demand causes congestion resulting in delayed shipments, prolonged lead times, and added costs.
  • Potential container shortage: As part of the domino effect, the increased demand may also result to a shortage of empty containers, which will cause disruption to operations

Financial Impact

The combination of production downtime, increased labor costs, and disruptions in the supply chain, stemming from factory closures and heightened demand, causes an acute financial burden.

  • Increased Shipping Costs: Due to the high demand, an increase in cost for freight is expected
  • Quality Control Expenses: Rushed production schedules before the holiday, and new staff onboarding after the holiday, may compromise quality control, resulting in additional expenses for rectifying defects.
  • Inventory Holding Costs: Extended lead times and disruptions may necessitate holding larger inventories, leading to increased storage and carrying costs.
  • Increased Raw Material Costs: Due to heightened demand and supply chain disruptions, especially with the additional Red Sea Conflict,  raw material prices may increase, impacting overall production costs.
  • Air Freight Costs: In some cases, businesses resort to air freight to expedite shipments post-CNY, incurring higher transportation costs.

Customer and Market Impact

Beyond the balance sheets, the ripple effect of Chinese New Year can ultimately flow through to your customers.

  • Customer Satisfaction Costs: Delays and disruptions can impact customer satisfaction, leading to potential costs associated with addressing customer complaints.
  • Loss of Sales Revenue: Disruptions in the supply chain during and after CNY can lead to the loss of potential sales revenue.

Minimizing Flow-On Effects: A Proactive Approach

Now for the part you’ve been waiting for. What can you do now to fortify your business for these disruptions? 

Plan

Audit your inventory now to prepare for factory closures. Ship orders early to dodge delays and costly surges. Also, don't be caught off guard by the post-CNY delays caused by the gradual return of workers and the onboarding of new staff. 

  • For sea freight, it is recommended to book 4 to 6 weeks before the start of holiday
  • For air freight, it is recommended to book 1 to 2 weeks before the start of holiday

When planning, break down your internal silos. When different teams in a business work together, they can achieve more. Align your internal teams like marketing, sales and customer experience by sharing supplier details for nimble planning and communication in the face of delays or stockouts. By breaking down your internal silos, you can minimise the impact of the above delays. 

Communicate

Get in touch with your Chinese suppliers to understand their individual holiday timelines and manage expectations. This crucial information will guide necessary adjustments to your production and shipping schedules.

Collaborate with your freight forwarders to set your expectations and understand how they're working to mitigate disruption. This ensures we can tailor the most suitable solution that aligns with your budget and schedule.  This is always a good idea, no matter what season.

Budget

Expect a spike in shipping rates and extra costs during this time. Safeguard your budget with a contingency plan in case disruption does impact your supply chain. Rushed pre-holiday production may heighten the risk of defects. Investing in third-party quality control services can help ensure quality control issues don’t end up impacting your bottom line. 

Optimise

Well, that's easier said than done. Where to start?

Start by using a digital freight forwarding platform to access tracking of shipments, document management and PO management. This enables you to track the whereabouts of your shipments and keep your freight admin in order.

Missing supply chain insights impede the alignment of sales, marketing, and finance strategies, ultimately impacting your bottom line.

Knowing and navigating logistics peak seasons and known delays is essential for a stock strategy that hits sales targets without breaking the bank.  Syncing freight seasons with your sales campaigns isn’t just a game-changer; it's a game-winner.

That’s why we’ve made a resource that does exactly that, so you can plan ahead for peak seasons, dodge delays, and keep customers happy. 

Logistics management is never one size fits all. But staying one step ahead, acquainted with the risks that permeate the logistics landscape, is how you can fortify your business.  

In times of crisis, whether it's a shipping delay, customs issue, or unexpected disruption, a strong relationship with your freight forwarder can make all the difference. So if you’re not feeling confident in your brand's ability to face Chinese New Year in 2024, get in touch with our team.

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