The Chinese Zodiac is a cycle of 12 years, each with its own animal symbol and characteristic element. This year, 2020, was The Year of the Metal Rat, a year reputed to be challenging health-wise and financially, full of obstacles and unpredictable situations. Need we say more? Fortunately, nothing lasts forever — even the seemingly endless 2020 — and so, on February 12, we usher in The Year of the Metal Ox, which the Chinese regard as favorable for steady progress. The ox, after all, is a methodical beast, used to carrying heavy burdens. This makes 2021 a year to manage weighty responsibilities. But since there should be no disruptions or catastrophic events, The Year of the Metal Ox is a year favorable to financial recovery and long-term investments. American businesspeople might see parallels in the bronze statue of the Charging Bull on Wall Street, but progress is likely to be more measured and more dependent on strategic planning.
How the Lunar New Year affects contract manufacturing in Asia
If your business is doing its manufacturing in Eastern Asia, your planning for success must include contingencies for The Lunar New Year. This annual festival shuts down China completely for seven days, but business interruptions can last for a month or more. Briefly, here’s why:
- No work will be done for a full week beginning February 12, 2021.
- Some factories will close up to 10 days ahead of time to allow workers to travel to their home provinces to be with their extended families.
- Some workers will not return on time or at all, causing delays in resumption of work, as factories hire and train new workers.
- Factories that were struggling prior to the Lunar New Year may not reopen.
The result is an annual work-stoppage of about 30 days. If you’re counting on production during this time, you could find yourself without inventory for late February and all of March. If you are desperate to fill your inventory, you could face extreme price gouging or inflated minimum order quantities from suppliers who know you are in a tight spot. If your regular supplier cannot produce your order, you might have to go with an untested partner, where you risk a drop-off in quality that could destroy your brand. Then there’s the problem with shipping, as the ports get backed up.
Fortunately, with advanced planning, you can avoid these issues. By increasing your orders in the fall and early winter months, you can have enough product on hand to ride out the Lunar New Year shutdown. Many suppliers ramp up production in anticipation of closures, but you have to place your orders in a timely manner, or you won’t be able to find a supplier with capacity to fill your order.
Lunar New Year in the Age of COVID
But this year there’s an additional complication: COVID-19 is still a wildcard, and no one can be certain what effect a “second wave” of the virus might have on production. Millions of East Asian workers will travel in tight quarters on trains, buses and planes, coming into close contact with innumerable people from all over China, the ASEAN states, and the globe. The potential of the Lunar New Year becoming a super-spreader event is real, and so far, the governments involved have been largely silent on the matter.
Additional Asian holidays you might want to keep in mind
Although no other observance causes the prolonged interruption of work you’ll find during the Lunar New Year, you should keep in mind other holidays that might interfere with operations in China. These include:
- New Year — Yes, the Chinese do observe what we would call the regular New Year with time off from January 1 to January 3 in 2021.
- Tomb Sweeping Day — The Qingming festival, a centuries old holiday, is a time to commemorate and show reverence towards one’s ancestors. Tomb-Sweeping Day is observed in mainland China, Taiwan, Hong Kong, Macau, Malaysia, Singapore, and Indonesia. In 2021, the festival goes from April 3 to April 5.
- Labor Day — First celebrated in China in 1919, this national holiday, commonly known as May Day, celebrates workers and gives them a break from their toil. Since the first of May falls on a Saturday in 2021, the long weekend will run from May 1 to May 3.
- Dragon Boat Festival — This commemoration of the life and tragic suicide by drowning of the poet/scholar/stateman Qu Yuan in 278 B.C.E. falls on the 5th day of the 5th month of the traditional Chinese calendar. In 2021, the festival will run from June 12 to June 14.
- Mid-Autumn Festival — This harvest festival dates back 3,000 years. Also known as the Moon Festival or Mooncake Festival, the holiday recalls the time when China’s emperors worshipped the moon which blessed them with bountiful harvests. Regarded as the second-most important holiday after the Lunar New Year, this festival will run from September 19 to 21 in 2021.
- National Holiday — This legal holiday commemorating the founding of the People’ Republic of China lasts for three days in mainland China, two days in Macau and one day in Hong Kong. But in the mainland, the three off days are usually connected with the previous or succeeding weekend, so that people enjoy a seven-day holiday. In 2021 this “Golden Week” will run from October 1 to October 7.
In Taiwan, There will be stoppages for New Year, Lunar New Year, Tomb Sweeping Day the Dragon Boat Festival, and the Mid-Autumn Festival. The Taiwanese also celebrate a National Holiday from October 9 to October 11.
If you are doing business in the ASEAN states, you should note that Vietnam celebrates the Lunar New Year, but Myanmar and Cambodia do not.
So, what can your company do to avoid any pain associated with the Lunar New Year?
The best advice is to be like our friend the ox: manage your responsibilities one measured step at a time:
- Know your suppliers — Close contact and open communication with your Asian suppliers can help you navigate the closures. You can know whether materials and facilities will be available to meet your need for increased production.
- Adjust your forecast — If you know you can’t get product at the end of February, plan to get it in December and January. The lead time will vary depending on your supplier, but many businesses who outsource to Eastern Asia plan for the Lunar New Year as much as six months in advance.
- Get your goods to port early — To avoid being left at the dock or facing a sudden increase in freight rates, make sure your suppliers get your product to the port at least 10 days ahead of the shipping date.
- Explore additional options — If your supplier cannot meet your demand, find someone else who can. But make sure you have enough time to properly vet the new supplier.
Finally, you can seek advice from a company that’s been doing contract manufacturing in Eastern Asia for 50 years. Genimex understands the ebb and flow of activity around each country’s legal holidays, so we can advise you of the steps you must take to stay ahead of the game.