Impact on the Global Supply Chain
Chinese New Year, also known as the Lunar New Year or the Spring Festival is the most important of the traditional Chinese holidays. 2011 is the year of the Rabbit and Chinese New Year will kick off on Feb. 3rd and last for approximately 3 weeks. You may wonder-what impact can Chinese New Year have on the global supply chain, specifically, the availability of incoming goods from overseas and delivery timelines?
In 2008 various ports worldwide experienced unprecedented growth volumes. The impact of the growth ultimately placed pressure on the ports in various regions in China, India, the US, and Canada, caused vessel delays and put pressure on yard capacity. With the culture of “just in time” logistics and increasing customer demand, it is becoming more of a challenge to move goods around from a logistics standpoint. Container volume is slated to increase globally by an average of 7.2% a year during 2009-2015. Port volumes will rise by 295 million TEU’s, resulting in a 50% increase from 2008, according to an article on Locher Evers Internationals website, Canada’s experts in connecting markets globally since 1976.
That said factories in China are shut down during Chinese New Year-thereby reducing the amount of cargos with goods that are put on the water. Commerce ceases. Government stops and post offices are closed. Some vessels are even cancelled and do not sail during this time period which is the most popular deadline date for production. Port capacity is limited and congestion is increased weeks before and after Chinese New Year that can lead to delays at the ports limiting the availability of goods in the supply chain.
What is being done in the world of logistics to mitigate the impact of the port congestion at anytime of the year but specifically before and after Chinese New Year? A number of initiatives are currently being implemented such as, expanding yard capacity, managing berthing times and production deadlines, and increasing storage container fees. Ultimately, planning and managing production deadlines will help to ensure that your vendors get the products they need when they require them.
I hope this article provides insight as to how Chinese New Year impacts the global supply chain and as logistics experts you can now make more informed decisions if and when you have to produce goods this time of year in China.