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Chinese New Year Disruptions and Solutions

Published: 22 May 2015 01:36:29 PST

Chinese New Year disruptionsChina’s most significant public holiday has many importers asking themselves, how will my suppliers recover from Chinese New Year disruptions? Much to the bane of any importer’s existence, most factories in China close anywhere from 1 to 3 weeks for Chinese New Year. In rare cases, factories will work through it to keep customers happy or may take an even longer break. But the real frustration that importers face as a result of this holiday comes not from the factory being closed for a specific period of time. The real problem is the longer-lasting and more disruptive effects of employee turnover.

Turnover at the factory creates two primary negative consequences of which you need to be mindful when placing orders:

Failure to Meet Shipping Deadlines

If the factory is understaffed, then your lead times go out the window. In many cases, suppliers will not inform you of this problem until it is too late. If orders are starting to be delayed in the couple of months leading up to Chinese New Year, then your supplier might be in bad shape and at risk for larger delays immediately before or after the holiday.

As an importer, your risk increases significantly if your supplier is not totally self-sufficient. A silicone factory can easily purchase extra raw silicone or accessory parts that can be used for many clients to ensure its production capacity is not negatively affected by the holiday. But what if your supplier outsources key or custom components that cannot be easily obtained elsewhere or that require a lot of manual labor to produce? You are now at the mercy of the subcontractor, and this can be quite frightening and surprising for any importer that has not delved deeply into its supply chain.

Failure to Maintain an Acceptable Level of Quality

This is the second primary concern, and its effects are generally noticed after you’ve received the shipment. Inspecting each order prior to shipment will certainly detect most issues before they arrive in your or your customer’s warehouse, but the effects of employee turnover can actually run much deeper than a wrong part of incorrect color. Your materials could change.

How is it possible that quality can change so drastically? Unsophisticated factories generally lack procedures that are clearly documented in writing, and even fewer factories Chinese New Year Disruptionsactually? provide sufficient training to make them useful in the first place. It is very common for Chinese suppliers to rely on the skill and experience of individual workers. This means you may actually see quality improve as workers gain experience and specific knowledge about your quality expectations. Consequently, you may see a sudden drop in quality after those same workers are replaced with new and unskilled workers. These new workers will be motivated more by the amount of money they will make per piece produced, rather than maintaining the same level of quality as previous shipments, a quality level which may not have been effectively communicated to them at the start.

Suppliers face the potential of losing up to 30% of their workforce as a result of the Chinese New Year holiday. A supplier with an independent quality department that has clear procedures and an effective training program will fare much better than a factory that blindly relies solely on the experience of its workers.

The same is true for managing its sub-suppliers. If the primary supplier doesn’t adequately regulate and check up on its supply chain, then there is significant risk that it will receive, and maybe use, inferior or incorrect components for your orders. While importers generally employ 3rd-party QC companies because their suppliers cannot be trusted to adequately control quality, most primary suppliers do not regularly go to sub-suppliers to perform inspection or conduct lab testing. Everyone is relying on everyone else to do things, but there isn’t actually a clear system in place that defines standards, frequency, and accountability. It’s always somebody else’s problem.

The Solution to Chinese New Year Disruptions

Although no supply chain is completely risk-free, there are a few ways you can help put yourself in a position of strength to mitigate Chinese New Year disruptions.

Chinese New Year Disruptions

  1. Work with suppliers that take quality seriously, appear stable, and have management that you can trust. Then verify these aspects of each supplier every step of the way and throughout the entire relationship.
  2. Conduct independent and regular lab testing to make sure that materials are safe and as specified. Do not rely solely on reports from suppliers and, especially, not sub-suppliers. Hold suppliers financially accountable for unauthorized changes in materials.
  3. Inspect every order prior to shipment and hold the factory financially accountable for poor quality.

In terms of recovering from Chinese New Year disruptions, the first point is the most important because it emphasizes the sophistication and responsibilities of the supplier. That’s where recovery starts. The second and third points have more to do with you double checking to verify that your supplier is consistently meeting agreed-upon standards and not adversely affected by the holiday. By implementing these three suggestions over time, you will gain a clear understanding of which suppliers will falter and which suppliers will bounce back after the greatest holiday in Chinese culture.

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