Each year Genimex reminds Westerners doing business in China and other Eastern Asian countries that they must plan for the Lunar New Year or suffer supply chain consequences. This warning seems especially important this year because The Dragon is coming! Yes, that mythical beast with the fiery breath—the bane of St. George and countless knights errant—approaches to claim the New Year. However, in Chinese mythology, the Dragon is not a ruthless villain, but a transformative force that could bring luck, abundance, and achievement. Thus, Asian cultures welcome the Dragon in ways medieval European villages could not imagine. Still, the Dragon is only fortuitous for those who are ready for the creative destruction it might bring. Those who lag will get scorched, while those sprinting ahead of the curve can be propelled to ever greater success. Will you be roused to action or roasted on the spit? Prudent planning in the coming months can make all the difference.
This is a Wood Dragon, but what does mean for business?
In the Chinese zodiac, there are twelve animal symbols in annual rotation, but each is paired with one of the five elements—air, water, fire, metal, and wood—on a rotating basis as well. The Dragon for 2024 happens to be a Wood-Dragon. So, what does that mean?
The Dragon is a symbol that embodies fiery energy and the kind of creative destruction that fuels innovation. The Dragon’s fire can be associated with electricity; hence electronics and technology could be favored this year. Thus, 2024 might be a good year for computer-animated design and electronics industry sectors that disrupt the status quo, such as artificial intelligence.
The Wood element tied to the Dragon can be interpreted as greater fuel for the fire, and therefore greater potential for innovation, disruption, and ultimately achievement. Businesses that are “ready for takeoff” could get the boost they need to ignite and accelerate. But, on the flip side, businesses that haven’t prepared for the Dragon will have to contend with the type of conflagration that is hard to extinguish.
What the Lunar New Year means in practical business terms
The Lunar New Year is a significant festival in many Asian countries, during which most of the workforce takes an extended break, so national economies are at a virtual standstill. This is often hard for Western businesspeople to understand, but for about four weeks surrounding the festival, virtually no work gets done in the factories throughout the Far East.
In 2024, the Lunar New Year comes a bit late, so you have an extra week or two to plan. The festival begins on Friday, February 9, and festivities conclude with the Lantern Festival on Saturday, February 24. At first glance, that appears to be a two-week stoppage, but that’s not the whole story. Many industrial workers in China and elsewhere are from the rural provinces, and they will travel back home to celebrate the festival with family. That means they stop working as much as a week ahead of time. Then, after the festival, these workers must return to the factory towns to resume working. That can take another week, leading to a full month of inactivity. But wait, there’s more! Many workers who return home decide not to go back to their urban factory jobs, which leads to temporary labor shortages. Suppliers hurry to train new workers, but it can take an extra week to 10 days to ramp back up to full production. Ultimately, you could be looking at a 50-day doughnut hole in your production calendar.
Now, let’s talk about shipping. If you’re lucky enough to have your order produced before the holiday, you still run the risk of having your products stranded at a port that has ceased operation. That’s because every company that is outsourcing to China et al. has called for increased production to hold them over during the holiday stoppage. Those goods arrive at the port and suddenly the shipping companies are slammed beyond their capacity. Working at full capacity—and charging a premium for service during this peak season—they ship what they can before the festival shuts them down. Unfortunately, many finished goods are stuck in port until shipping resumes in the New Year.
How NOT to get burned in the Year of the Dragon
The risks you run around the Lunar New Year include:
- Suppliers being unable to complete your orders
- Having to pay extra for overtime production
- Being unable to ship your goods
- Paying vastly higher “peak season” shipping costs
As a result, you could be without inventory or taking losses due to increased costs.
To avoid these risks, you must:
- Place orders early and lock in production prices
- Order far enough in advance to guarantee shipping at a reasonable price
- Explore shipping alternatives at less congested ports
At this time of year, the calendar is in your favor, but it won’t be for long. More Western producers have adjusted their schedules to the realities of the Lunar New Year. So, what used to be adequate lead time no longer guarantees inventory delivery. Therefore, the time to secure inventory for February is now. By taking decisive steps today, you can ride the Dragon to greater heights in 2024.