January 28th is rapidly approaching and that means that 1.4 billion people are about to go on holiday. Chinese New Year, or the ‘Spring Festival’ as it’s known in China, is a forty-day festival that spurs the world’s largest human migration.
According to the Daily Telegraph, the Chinese spend a whopping $135 billion (AUD) on food and drink during the week-long Lunar New Year. As a result of the festivities, Chinese New Year often has a substantial impact on the supply chain of many businesses the world over.
So what can you do to minimise the impact of CNY shutdowns on your import/export business?
- Confirm shut down schedules. Contact your manufacturers and shipping companies well in advance to determine cut-off dates for new orders.
- Order early. East West Manufacturing, a global contract manufacturing company, suggests that businesses should expect that no production or shipments will leave China during the end of January and businesses should also plan for reduced output until mid-March 2017.
- Keep a close eye on quality. According to China Importal, many workers simply never return to their job after the CNY festivities wrap up. That means manufacturers have to fill seats with new, often untrained, workers while trying to ramp up operations to work through the backlog of orders. Such circumstances may adversely affect the quality of the output, so be sure to maintain your brand’s standards.
- Move forward with non-production related concerns. You can still negotiate, conduct due diligence and compare prices during Chinese New Year. However, you may not want to place large deposits before or during CNY due to the unpredictability of staffing and shut-downs mentioned above.
Preparing for the CNY shutdowns is the best way to protect your business from adverse outcomes during Chinese New Year. Don’t forget, you can also use OFX to lock in an exchange rate, so at least your cash flow stays predictable during this tumultuous time.
IMPORTANT: The contents of this blog do not constitute financial advice and are provided for general information purposes only without taking into account the investment objectives, financial situation and particular needs of any particular person. OzForex Limited (trading as OFX) and its affiliated entities make no recommendation as to the merits of any financial strategy or product referred to in the blog. OFX makes no warranty, express or implied, concerning the suitability, completeness, quality or exactness of the information and models provided in this blog.