Avoiding a Chinese New Year chaos: A small guide for Swiss companies
China celebrates seven public, nationwide holidays throughout the year. While most of them are single days, China does have a few specific, somewhat confusing rules for the holidays. In general, if a holiday falls on a weekend, the day(s) will be reimbursed after the weekend. However, if it is a longer holiday, for example the 7 days long National Day, the weekend before or after the celebration are counted as weekdays and employees are expected to work. Holidays in China are to some degree unpredictable as the government will usually announce the exact timeline a few weeks before the start of the year.
A gift for young and old
For Swiss companies producing or sourcing in China, the holidays to pay attention to are the National Day and the Chinese New Year. While both the National Day and the Chinese New Year celebrations grant the public 7 days off, the latter is much more impactful for a variety of reasons.
Chinese New Year, also known as the Spring Festival, is the most important holiday in China and is celebrated by virtually everyone across the country. It is held between the 21st of January and the 20th of February, with the exact date moving every year according to the Chinese Lunar Calendar. The official public holiday only lasts for seven days, but most factories in China shut down for between two and four weeks to allow workers to travel back to their hometowns to spend time with their families. Especially the highly industrialized areas along the coasts are remarkably less bustling during this time and life in the outskirts comes to a, for Chinese standards, halt.
Mandarin Trees are a popular decoration in Southern China during Spring Festival
This extended closure time, combined with the fact that many factory workers take extra time off before and after the holiday, can have significant implications for logistics and supply chain management. Next to prolonged holidays, a lot of employees decide on their professional future during this time and the employee turnover increases, especially in manufacturing companies.
One of the main challenges for logistics and supply chain management during Chinese New Year is the increased cost of shipping. With the lengthy factory closures and the rush to get orders out the door before the holiday, manufacturers typically charge more for shipping close to Chinese New Year. In addition to the factories taking time off, shipping companies also take time off, leading to heavy volumes at ports and higher shipping rates.
As factories rush to get orders out the door before the holiday, there is a higher likelihood of things being missed and quality issues occurring. While this alone would already lead to quality fluctuations, the increased employee turnover further enhances the effect the Spring Festival has on manufacturing quality control.
It is also important to note that it can take factories at least a month to ramp back up to full production levels after the holiday. Many workers do not return immediately after the holiday, and some may not return at all. This means that factories must hire new workers and get them up to speed, which can take time. As such, companies need to forecast far in advance and adjust their production times accordingly.
DALL-E Prompt: a chinese new year family dinner, 8 people around a table, table full of chinese food, cartoon style
To mitigate these challenges, it is essential for companies to plan ahead. We recommend talking to suppliers as early as possible but at least 3 to 6 months ahead of the festivities, depending on the production time of the requested goods. Next to the longer lead times, it is also worthwhile taking the increased shipping costs into account. If possible, we recommend avoiding placing orders shortly before or after the Chinese New Year.
In conclusion, Chinese New Year can have significant implications for logistics and supply chain management. The extended factory closures, increased travel, and higher shipping rates can all impact production and lead to quality issues.