New Lunar Year, New Supply Chain Challenges

Today marks the beginning of a holiday celebrated by one sixth of the world: the Lunar New Year. Most widely celebrated in China, this global holiday makes an unprecedented impact on transportation, consumer spending, and manufacturing.

This year’s celebration is slated to be the biggest in scope yet. Here’s a closer look at how the year of the goat (or sheep, or ram depending on who you ask) will impact supply chains across the globe: 


The Mass Migration

Chinese New Year is by far the largest mammalian migration, with a whopping 700 million—twice the population of the US—travelling from cities to their rural hometown. That’s right, no other group of humans (nor any other furry animal for that matter) moves in such great numbers for a single event. Rich or poor, the Chinese go home for the new year. This includes the millions of migrant workers in urban hubs travelling to smaller cities, as seen in this mind-boggling migration map by Chinese internet portal Baidu.

This puts a massive strain on infrastructure in China: trains jammed, highways blocked in bumper-to-bumper traffic, and flights booked up. Metropolitan giants like Beijing and Shanghai become ghost towns. Manufacturers looking to transport goods, or people, around China during this time, beware. Which brings us to our next point.

Manufacturing Slowdown

Manufacturers who haven’t already adjusted their shipment schedules for the New Year are already far behind. Because factories and ports in China shut down in the weeks before, during, and after the New Year, supply chain managers should be shipping orders out of China up to a month in advance, especially those reaching the treacherously jammed US West Coast ports.

When analyzing monthly output, manufacturers should also proceed with caution when looking at numbers for January. Why? Numbers might be artificially low compared to the year previous. In 2014, the New Year fell in late January, so factories were rushing to push products out before the end of the month. This year, as the New Year falls mid-February, January production will show a slower pace.

No matter what plans you already made for the New Year, continue to keep them in place for at least two weeks after the holiday ends, as the hundreds of millions of travelling workers take some time to return to their jobs in manufacturing.

Retail Spending that Blows Black Friday Out of the Water

Traditionally, people celebrate the Lunar New Year by giving each other red envelopes filled with “lai see” or lucky money.

And what do those people do with that money? Spend it, of course. Top purchases include ornate envelopes, restaurant meals, alcohol, and tea.

To give you a basic idea of the magnitude of Chinese New Year Spending, compare it to a shopping holiday Westerners might be more familiar with: Black Friday.

  • 2013 Chinese New Year spending at retail and restaurants in the holiday week totaled 100 billion US dollars in China last year, a 13.3% increase from the year previous.

  • 2013 Thanksgiving/Black Friday spending in the U.S. totaled $50.9 billion over the four-day weekend, according to the National Retail Federation, down 11% from the year previous.


Bottom Line

Most supply chain managers already know the importance of adjusting their shipping schedules for packages leaving Asia during the Lunar New Year. But as China grows increasingly closer to becoming the biggest global consumer, companies should think about how to adjust their manufacturing and shipping for imports coming into China as well.

Consumer products arriving in China will be increasingly delayed in the months of the New Year, and suppliers who make products to be sold as presents for the holiday—from alcohol to household items—should consider expanding production to meet increasing demand.

As always, what’s key here is having a method of monitoring your Asian supply chain in a way that’s anticipatory, making schedule adjustments and increasing production before the seasonal shifts start, not after. In other words, for a happy new year, stay ahead—not behind—your global supply chain.


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