Introduction:
Chinese New Year (CNY) 2024 is ongoing, and engineering and manufacturing companies are once again faced with the challenge of navigating the significant disruptions this festive season brings to production schedules, supply chains, and workforce availability. The CNY holiday, while officially lasting one week, typically exerts a much greater impact on production due to a variety of factors. Here, we delve into strategies and considerations for mitigating these challenges, drawing insights from industry experiences and proactive planning approaches.
Background: Understanding the Impact of Chinese New Year
The Chinese New Year holiday is a time of significant disruption for manufacturing and engineering firms operating in or with China. Employees often leave work several weeks early, enabled by accruing overtime for year-end paid time off. This exodus strains transportation systems and complicates logistics, as importers rush to build inventories for the holiday period.
Factories, wary of accumulating inventories due to the custom of settling trade accounts before the holiday, close for up to four weeks. This closure is not just a logistical headache but a cultural necessity, as it may be the only opportunity for many workers to visit their families, including children raised by grandparents in rural areas.
Post-holiday, companies face the challenge of heavy worker turnover and slow startups, as production cannot resume at full pace until raw material inventories are replenished. These disruptions ripple through all levels of the supply chain, especially affecting complex products that rely on multiple components.
Approach: Strategic Planning for CNY Disruptions
1. Develop a Tentative Material Plan: Start by outlining a material plan extending through to 1st May 2024, considering both sales forecasts and additional safety stock (30 - 45 days more than usual) to cover the extended holiday period.
2. Issue Timely Orders: Place orders for critical materials by mid-December to ensure production and shipment before the CNY shutdown. In mid-January, review inventory and sales status to prepare an updated order plan, prioritizing high-priority materials for immediate post-holiday production.
3. Enhance Quality Surveillance: Increase quality checks for suppliers, including more frequent receiving inspections and possibly third-party pre-shipment inspections, to mitigate risks associated with new employees and rushed pre-holiday productions.
4. Place order in Week 1 or Week 2 March 2024: Customers should acknowledge that there is a new inflow of workers who need training. You don't want your products to be the "training" products, so delaying orders until Week 1 or Week 2 March will keep your QC levels at the same level. Any holiday times result in higher QC issues as workers are still training and making simple mistakes.
Conclusion: Flexibility and Preparedness
The disruptions brought by CNY are a recurring challenge for businesses engaged with Chinese manufacturing. However, with careful planning and strategic stockpiling, companies can maintain supply continuity. Adopting a flexible approach is crucial, recognizing that the period is fraught with uncertainties, including logistical bottlenecks, workforce turnover, and supply chain delays. The experience of past years underscores the importance of being prepared for a range of contingencies, embodying the essence of Murphy's Law during this period.
In essence, navigating the Chinese New Year's challenges in the manufacturing and engineering sectors requires a blend of strategic foresight, operational flexibility, and an understanding of the cultural and logistical complexities involved. By taking proactive steps and adapting to the unique demands of this period, businesses can ensure continuity and stability in their supply chains, even in the face of significant disruptions.
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