The Global Impact Of China’s Golden Week: Is Your Business Ready?
In October, the People’s Republic of China celebrates its annual national holiday, known as Golden Week. Similar to Chinese New Year, the entire country is on holiday, resulting in business closures and a potential 14-day halt in production and transportation of manufactured goods.
According to the Bureau of Economic Analysis, imports from China to the U.S. were worth $563 billion last year, so for many businesses, the disruption of China’s Golden Week on the global supply chain is nothing to cheer about. Let’s take a closer look at how businesses can best navigate this challenging time of year.
Impact of Golden Week on the supply chain
As the Golden Week approaches, manufacturers’ production capacities are also running at full speed in order to fulfill orders in time for the next big sales events such as Black Friday, Cyber Monday or the Christmas shopping season and to be able to ship them from China before the holidays.
This creates an increased surge in demand starting in mid-September which means capacity overload at freight forwarders and customs in the weeks leading up to Golden Week. As a result, we start to see higher prices for sea and air freight, more “rollovers” to alternative container ships and modes of transport as well as a major backlog at the ports.
“Air freight will become more important this year as the reopening of China after the COVID pandemic, tourism is on the rise and so is the demand for air travel,” said Uwe Haizmann, partner at EAC International Consulting. “However, this capacity is still low here, so air freight capacity should also be planned well in advance.”
This additional surge in logistics demand inevitably leads to longer delivery times, which may well extend over several weeks, especially when major sales events such as Black Friday or Christmas are approaching.
Businesses should plan ahead now to ensure that goods are delivered on time and ready for the upcoming major sales events and Christmas shopping season.
Planning ahead is half the battle
To avoid unnecessary supply chain disruptions during China’s Golden Week, a good advance planning strategy is essential, including:
Logistics and transportation
To ensure customer satisfaction during the busy period leading up to Golden Week, it is critical to plan transportationcapacity and work with reliable partners to avoid potential delays and bottlenecks in logistics services.
For example, securing transportation capacity for late September should begin as early as late August or early September. In general, it is advisable to book ocean freight three to four weeks in advance and air freight at least one week in advance. Real-time data can help logistics accurately estimate arrival time and forecast demand, facilitating accurate planning of supply and demand, especially during peak season.
Warehousing and inventory management
Especially in light of the upcoming Black Friday and Cyber Monday promotions, companies should adopt inventory optimization strategies to position the right inventory of the right goods at different nodes in the supply chain to keep products closer to actual demand, which requires, above all, flexible and good warehousing and inventory management.
If there’s one very hard lesson learned from the pandemic, it’s the importance of logistics. Just-in-time is no longer good enough; companies are now building up security stock in the event there’s global supply chain disruption, as discussed in a recent podcast episode of “The Future of Supply Chain: Golden Insights: Navigating the China’s Golden Week and Supply Chain.”
Building and maintaining the network
Networking and relationship-building are crucial in Chinese business practices. Collaborating with Chinese partners helps adapt swiftly to demand changes during Golden Weeks and Chinese New Year. Effective logistics planning is key to success during these holidays.
To learn more about how a stronger and more transparent supplier relationship can help minimize supply chain risks, simply download the Indago Report. And feel free to drop in on “The Future of Supply Chain” podcast.