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Mario Kwok
Consultant
The Chinese New Year’s approaching. And despite this event taking place every year, it’s a period of upheaval many businesses get caught out by.
This article’s your workaround to making sure you’re not one of them.
Take the steps in this piece on board and you’ll hop into the year of the rabbit with all the spring and poise you need to start the year off right.
So, why’s the Chinese New Year such a potential issue?
Well, there’s no doubting China’s importance in the global supply chain. Some factories close for up to 3 weeks. And a withdrawal of such importance impacts businesses all over the world.
The closures also mean there’s a mad dash to get orders and deliveries in, ahead of time. As your competitors scramble to place their own orders, the chances of getting your own orders fulfilled can only be decreased.
Equally, there can be further disruptions post Chinese New Year as factories reopen and slowly resume business as usual.
This metaphorical (or literal) hangover can affect you just as much.
And so, as with many supply chain disruptions, planning is absolutely essential. Afterall, you need to work out what inventory you need to cover demand. You also need to determine what inventory you need to avert any possible disruption & delay.
There’s little room for error here. If your business hasn’t planned your inventory requirements with absolute precision, well in advance, you could be left high and dry and offering apologies to your customers in lieu of products.
But that is why we are here!
Through out this article, we will reveal how you can avoid the common planning pitfalls during this Chinese New Year holiday period.
As if the Chinese New Year wasn’t enough of a disruption to business, there’s so much else going in the world right now, your problems could well be amplified.
There’s already a huge amount of supply side disruption around the world.
Many factories already have capacity challenges. The limited supply of containers means many suppliers simply can’t dispatch orders on time.
To add further heartache, many major ports are severely congested. With little sign of the shipping traffic easing, you should expect further delays.
Delivery and shipping timescales have been pushed back and continue to elongate for many.
The challenge is to make sure you have enough inventory to keep your customers happy during the CNY period. And at the same time not over investing in too much stock it hurts your cash flow and working capital.
Fail to prepare, prepare to fail.
There’s something to be said for pre-preparation in getting your affairs in order, prior to disruption. Especially when what we’re dealing with is a known entity.
Nothing about the Chinese New Year should come as a shock. It’s like planned engineering works on your morning commute. Rather than a sudden derailing.
But you need to understand the scale of your Chinese New Year planning challenge.
Have you determined a Chinese New Year project kick off?
The earlier you begin, the better off your supply chain will be.
Do you know if your suppliers are still accepting orders over the shutdown or will they be fully closed?
Communication with suppliers is essential to understanding how much your own business will be disrupted.
Without seamless communication, you’re whistling in the wind.
Are the manufacturing lead times longer in the run up to shutdown because of increased orders?
And if so, what kind of delay can you expect? How early should you be working ahead to make sure your orders are completed? Will the associated costs rise? And if so, how will this hit your profit margins?
The purchasing & supply chain team that deal directly with suppliers in Asia will be well aware of the disruption caused by the Chinese New Year.
But the disruption will hit every department. Are they aware of this? Is Finance aware? What about Sales? If they’re fielding calls from customers asking where their orders are, or threatening to take business elsewhere, you won’t be popular.
Especially when your response will be “Oh, didn’t we tell you?”
It’s therefore important for your sanity, and internal harmony that everyone‘s included in your planning process.
Are you planning on launching any new products during the affected period?
Launching new products is hard enough at the best of times. Now, you also have weeks of potential supplier delays to contend with. Do you have a sensible forecast in place? If not, you might need to re-think your launch plans.
Its highly likely that your Chinese New Year preparations may mean that your own capacity is stretched to its limit.
Does your warehouse and operations team have the personnel resource to handle the additional volume once the inventory lands at your warehouse?
Demand & supply go hand in hand. You already know that.
And with several weeks of disruption on the horizon, it’s important that every effort’s taken to plan for demand as robustly as possible.
Are your forecasts based on facts?
The world looked very different this time last year. So, if you’re basing your calculations on historical data, have you altered the forecasts for COVID related surges or troughs?
Have you considered product lifecycles?
If a product’s being withdrawn from the range or is becoming obsolete, it’s important you take different MOQs into account to prevent product write-off problems in the future.
Don’t forget about promotions!
Promotions typically bring a boom in sales. Therefore, your plans must reflect this uplift in demand. What promotions have your sales team got in the pipeline? Any what impact will this have on your inventory requirements.
“The best laid schemes of mice and men.”
Plans, when all’s said and done, are just that. They’re often best case scenarios and fail to take mild or heavy disruptions into account.
And even with the most robust contingencies in the world, without communication, you’re more likely to fail than succeed.
The final step in averting Chinese New Year disaster then is all about sharing your inventory requirements with supply chain partners.
Underestimate this stage at your peril. It might be the most important part of the puzzle.
Have you shared your plans with your suppliers to ensure they’re feasible?
A great advantage of providing a forecast to your suppliers is the factory will be able to see your demand after Chinese New Year so the factory can prepare for what lies ahead. If they don’t know, you can’t blame them for not preparing.
I know reading through this can be a lot to take on board.
It’s natural to panic when you’re alerted of a potential hazard up ahead. But don’t run for the stationery cupboard just yet.
We have a couple of handy tools to help you get through this tricky time.
