What is Chinese New Year?
Chinese New Year 2021 falls on February 12 (Friday), and the festival lasts until February 26 (Lantern Festival), a total of about 15 days. 2021 is a Year of the Ox according to the Chinese zodiac. The dates of the Chinese New Year vary slightly between years, but usually fall in the period from January 21 to February 20 of the Gregorian calendar. Dates change annually because the festival is based on the Chinese lunar calendar.
Also known as the Spring Festival, this holiday can be described as the combination of Thanksgiving, Christmas and even New Year. It's the beginning of spring, and it's usually the time when families gather to celebrate.
As Chinese New Year is probably the most anticipated holiday in this region, it has a substantial impact not only locally but also abroad. Therefore, this celebration impacts the stock market, factory production as well as the economy itself.
The particular case of Shenzhen is that it’s a “new city”, and happens to be the tech. Capital of the world. This means most workers in Shenzhen come from around mainland China and have long commutes back to their families.
Impact of CNY on local businesses
Although CNY officially starts on February 12th, 2021, it’s important to understand the social and cultural aspects around the festival and how each manufacturer is impacted. Below is a brief explanation of how CNY impacts a business, specifically, a manufacturing business.
December 2020 to mid-January 2021
Some employees let their managers know that they’ll won’t be going back after CNY. Managers and executives need to start planning. Manufacturing businesses typically start building a rolodex of potential hires and replacements for employees, from the production worker all the way to engineers and senior executives. Manufacturers also fierce-fully compete for raw materials as they all try to put in orders before CNY, driving an increase in material prices.
Mid-January 2021 to February 12th, 2021
Manufacturers lose up to 30% or their workforce in the weeks before CNY. Employees either decide to leave earlier or their families need help for the preparations. This is basically when the capacity of manufacturers is the lowest and often when delays happen more often.
February 12th, 2021 to February 26th, 2021
Larger manufacturers allow their employees to take the full 2 weeks between CNY and Lantern Festival. This is a given in Shenzhen and, more importantly, with cannabis vaping device manufacturers. Basically, during those 2 weeks. We have been able, with substantial orders, to get some production done during this time by offering some “red envelopes” to our manufacturer's employees. Essentially, this comes down to doubling wages or bonuses but keep in mind the entire country is shut down: this means we can only produce if the raw materials are already purchased and received.
March 1st to March 31st 2021
This last phase surrounding CNY is probably the most overlooked by “western” businesses. Businesses seem to think that returning from CNY is like flipping a switch in the factory and that everything is back to normal immediately. This is far from being the case, as another potential 20%-30% or employees don’t come back or extend their family time. Not to mention that all the recruits (remember, from December and January) need to be brought up to speed and trained. Our experience has shown that manufacturing only comes back online at 100% by the end of March.
Logistical impact due to COVID-19
In addition to the regular course of business involving CNY, the current COVID 19 pandemic will certainly not make things better. The main impact on your cannabis vaping hardware supply chain of COVID will be on logistics: air and sea shipping.
Manufacturing and shipping internal to mainland China is almost back to its full potential/output, but the cost of international shipping has soared. This is due to the travel restrictions in place. Most air freight is handled by commercial airlines who allocate freight space in their planes. As of the writing of this article, amounts of commercial flights are down by 65% to 66%: space is rare.
For the freight-dedicated air and sea routes, due to quarantine issues, lanes have been reduced and crews aren’t able to disembark and/or embark. A lot or ports have ships at a standstill from potential positive cases onboard.
The combination of CNY and COVID-19 is essentially the perfect storm to disturb your supply chain. Without proper demand planning, resources and redundancies in place, your cannabis vaping business will be impacted.
Adapting your supply chain for CNY
The key to leveraging your suppliers, is understanding demand planning. It is the process of forecasting or predicting the demand for products to ensure that they can be delivered and satisfy customers. The aim is to strike a balance between sufficient inventory to meet customer needs without generating a surplus. Countless factors can influence demand, including labor force changes (hint: CNY), economic shifts, severe weather, natural disasters or global crisis events (hint: COVID).
For bigger organizations, there are specific roles and software out there that can help you work on demand planning. This is especially important when you need to make sure to have enough products for the holidays, for 4/20 or for 7/10. When you factor in CNY and COVID-19, you can easily imagine how this can be a daunting exercise.
At Blinc, we’ve been providing vaping hardware for over 10 years and have the experience to help you with forecasting your needs. Our team is aligned with the latest trends and stays up-to-date on which and how products move. Through analysis of your current or historical sales, and by monitoring geographic and/or industry data, we can help you plan ahead and make sure you’ll have products on the shelf for your customers.
To mitigate CNY, we usually start speaking to our clients about placing orders as early as August or September. By the end of October, you should be placing orders, or ensuring that you have at least a reliable supplier, for the next 6 months. As explained above, production runs would probably not be done until March 2021, therefore delivered in April 2021, just before 4/20.