The world of logistics can become complex as some events can affect the normal flow or process of raw material procurement.

One of these events is the celebration of the Chinese New Year - also known as Spring Festival or Lunar New Year, held this year 2023 on January 21, and where shortages of raw materials can become quite common if not managed in advance. This event not only has an impact on shortages but also has a domino effect as it also causes prices to rise globally and freight rates to rise due to the lack of space in containers and delays in the delivery of materials.

In addition to this, there are the consequences derived from the COVID-19 outbreaks in China that generate uncertainty among importers worldwide. At Chem Fluid, we want to tell you more about this interesting topic, so be sure to read on!

What is Chinese New Year?

Chinese New Year is not only celebrated in China but also in several Southeast Asian countries and, of course, is celebrated by their communities around the world. This celebration marks the beginning of the traditional Chinese calendar and is extremely big and important for oriental cultures.

The date of its celebration varies from year to year and the official holiday period usually lasts 7 days. However, depending on the country, the festivities may extend to the Lantern Festival, which takes place on the fifteenth day of the first lunar month.

Impact on International Logistics and Supply Chains

This celebration is of such magnitude that, year after year, production in the region's factories practically comes to a standstill and the capacity of means of transportation is significantly reduced.

Taking into account the aforementioned celebration days, the time that factories remain idle can reach almost a full month, as it is common for their collaborators to take vacation days prior to the holidays to take a long period of rest.

Companies working in the logistics industry and importing materials from China must anticipate these shutdowns through early order placement and load planning.

In addition to the Chinese New Year, which in itself causes delays in inventory replenishment, other factors such as container shortages, international logistics congestion, and the current energy crisis in China can also cause production shortages and have a significant impact on markets worldwide.

Is it Possible to Avoid Logistics Delays During the Chinese New Year?

It is common that approximately 2 weeks before the festivities, processes start to slow down as many offices and companies start to slow down their operations and therefore orders start to accumulate.

To answer the question, the answer is yes. It is possible to avoid logistical delays during the Chinese New Year, but this requires that companies importing Chinese products anticipate and prepare to work with their suppliers and logistics agents during this period.

Planning is vital. Remember that certain pandemic-related restrictions and protocols are still in place, which may further complicate the process. Manufacturers, for their part, must prioritize the orders they receive and therefore which orders are filled first, and it also depends on the number of personnel they have available. Additionally, it should be noted that any backlog can extend well past the end of the Chinese New Year and this means higher warehousing costs.

How to Avoid Backlogs and Plan Your Purchases?

• It is advisable to place the last orders in advance in the month of November or early December at the latest.
• Do not place last-minute orders.
• Maintain constant communication with suppliers to track orders and shipments.
• Create a diversified supplier base.
• Seek alternative means of transportation.
• Do not make advance payments to suppliers until the shipment date is confirmed.

Without advance planning, expect a chain of complications that cannot be resolved until mid to late February. This can be critical for many importers and their customers.

Freight Transportation During the Chinese New Year

During this holiday season, delays and cancellations are to be expected on major trade routes for a few weeks.

Although ports are operational during Chinese New Year, it is the warehouses of factories that remain closed. All operations that are not related to loading ships continue although perhaps at a lower level than they usually handle. No cargo ships leave the ports until after the holidays, so if the supplier was able to ship the order but it remained at the port of loading, it will not leave or arrive at the destination in the expected time.

Conclusions

The Chinese New Year is an event that has an impact on the local and international economy and not only on the logistics industry but on practically everything.

Faced with this event, buyers and companies must have adequate and anticipated planning to be able to face it in the best and most organized way possible.

However, in recent years there has been a trend for manufacturers to increasingly shorten their downtime due to fierce competition. Today we know that time is a very valuable resource and is key to good relationships between suppliers and buyers.

What measures does your company take in the face of such events? Let us know what you think!

Our innovative spirit, mission and vision encourage us to participate in these international events to raise awareness not only of our industry but also of our country. APLA, is a non-profit entity founded in 1980 with the purpose of representing the Petrochemical and Chemical Industry of Latin America. And it fills us with pride and motivation to have been present together with the main companies, chambers and associations of countries in the region.

The generation of strategic alliances and new businesses, as well as networking, the exchange of new knowledge and new learning, were some things that our team took with them and that will definitely help us to continue improving our business model and continue to grow locally and internationally. international.