In 2017 it is very rare to find someone whose job isn’t impacted by the Chinese New Year (CNY). Over the course of the last 15 years, the CNY has changed. It was once a complete 2-3 week blackout shutdown, no contact with anyone. It has since evolved into a 2-3 day no-contact window with a 5-10 day manufacturing shutdown.
Suppliers typically only close for the amount of time customs is closed in order to minimize the impact on their business.
The challenges that surround a shut down like Chinese New Year are more than just a window without communication. The biggest areas of concern in electronics are as follows:
- Lead Time: Depending on your product, a full week (or more) shut down impacts how products are released to the manufacturing floor up to a full month before the holiday. Some manufacturing lines will not release product up to 2-3 weeks before the shut down if they cannot complete them for quality reasons.
- Quality: As stated above, there are production risk(s) for letting electronics sit in Work In Progress (WIP). There are also quality issues that come from rushing product through lines to avoid a missed shipment before the shutdown. There are also quality risks from both new equipment installed during a shut down and from turning on equipment that has been idle during a shut down. Chemistries need to be tested, operators need to be trained, and samples need to be confirmed. Often trying to get back to full speed after the shutdown, corners can be cut, leading to quality issues post-holiday.
- Turn Over: It is a well-known secret that the biggest risk to any manufacturing plant post CNY is turnover. Most manufacturers anticipate anywhere from 10-45% of their staff not returning. This leads to having to quickly hire untrained workers to run equipment before they are completely ready, increasing risk to quality. There is a further risk to which a factory loses during this holiday season. Several years ago, Epec had a situation where one of our suppliers “only” lost about 15% of their staff, which was good. The bad side was that 15% was all from a single department, which crippled the facility for an additional 90 days.
Chinese Holiday Schedule Beyond CNY
If the CNY were the only Asian holiday supply chain professionals had to plan for, it would be a relatively easy task. Unfortunately, over the last 5 years, the Chinese holiday schedule has continued to expand, as the CNY has shrunk.
To compensate for the lack of time off, the government has introduced smaller mandatory holidays across the calendar. So now instead of planning for one major holiday per year, we are now facing multiple 2-3 day shut downs.
So What Does The Holiday Calendar Look Like For The Next Year?
Below you will find the upcoming China Holiday schedule including the date and expected shut down times.
- National Day (aka Golden Week)
- 3 working days
- Oct. 1-3, 2017
- Chinese New Year (aka Spring Festival)
- 3 working days
- Min. Feb. 15-21, 2018
- QingMing Festival (aka Tomb Sweeping Day)
- Min. 1 working day
- Apr 5-7, 2018
- May Day
- 1 working day
- Apr 29-May 1, 2018
- Dragon Boat Festival
- Min.1 working day
- Jun. 16-18, 2018
- Mid-Autumn Day
- Min.1 working day
- Sep. 22-24, 2018
- National Day (aka Golden Week)
- 3 working days
- Oct. 1-3, 2018
The Biggest Challenge for Supply Chain Professionals
In my experience the biggest challenge, aside from what is stated above, is that during these shutdowns China customs and border control are typically shut down. So even if you have a facility that is working, or like Epec, have a team of your own employees working locally in China, there is little you can do during the holiday windows. All of the major carriers i.e. UPS and FedEx will post their closures on their websites to help you plan for your shipments.
A new challenge for the balance of the 2017-2018 Asian holiday schedules is going to be the Freight Increases to all level of services around these holidays. While General Rate Increase (GRI) are common place in ocean freight shipping, you don’t typically see them in small package air freight shipping with the major common carriers as your rates are contractual.
This year, UPS and FedEx have announced that they are doing Peak Season rate increases during the upcoming holidays that will add significant costs to all levels of service from Asia. This cost increase is coming with little time to plan and during peak seasons a lot of smaller importers are going to have a lot less options to get their products out of Asia.
Planning Ahead is the Key to Success
There is no way to avoid the holidays. The only thing you can do is plan for it. At Epec in preparation of the CNY, we start our production planning about 120 days before the start of the holiday. We use a cross-functional U.S. based team, as well as our team in China to verify and plan what we will have going through the critical process during that time and what the redundancy plans are for any failures.
We work on having alternative facilities for every product in cases of extreme turnover to reduce impact to our customers. Our sales team works closely with our customers as holidays approach to ensure that we have anything critical during the month of the holiday booked to ship ahead of time, ensuring longer lead time, and ocean shipments are out of China before the start of the holidays.
Summary
As the world continues to flatten, the global holiday schedule is going to continue to get increasingly complex. Effective planning, proactive communication with your customers and your suppliers are the only way to successfully manage your production through the calendar year. We’re very focused on making sure our suppliers and freight forwarders are very clear on our expectations and we are able to meet our customers’ requirements throughout all Asian holidays and shutdowns.
