Spring Festival: The Timing and Planning

How things move before the holiday depend on factors such as, the size of the clients and factories, production process complexity, raw materials and the professionalism of both the factory and the client.

Large factories (and clients) tend to plan early, producing large numbers of “spare” components earlier planning–i.e. build up their inventory. Some small and medium sized factories and importers do the same, but often they are under-managed and ill equipped for this shock. Some large factories make costly mistakes during this period, however: there are stories of large retail stores losing millions of dollars in lost sales due insufficient inventory.

A Typical Process before the Chinese New Year

Well organized factories normally send a notice to their large clients in the early fall, typically after before the national holiday which falls October 1 which asks them to make their final orders which will be dispatched before the Chinese New Year, normally with a warning that orders placed after this time would most likely be dispatched after the holiday.Beware, two main quality pitfalls arise:

  1. Throughout this time, factories are under pressure to make sure that their goods are sent out before the holiday.
  2. At the same time, floor workers are working over-time so they can earn the maximum amount of money possible.

During this time, the factory and the client must put strong quality assurance in place to ensure their quality inspection procedures are tighter than usual. Even repeat order encounter quality issues.

During the New Year

Most of your contacts at the factory should remain reachable (if you are important). Getting quotes and placing orders are still possible. Production for orders will start after the floor workers return. Salespeople often give unrealistic delivery times in order to get your orders. Sometimes, however, it may be because of a lack of coordination with the production planning. Don’t be surprised if you do not get those orders on time.

Most factories spend their time developing new samples,to be promoted next season. Good factories also use this time to put a production plan in place as well as plan their raw material purchasing so that once their workers are back, they can get straight down to business.

During this time, factories pay debtors and creditors so that they can start the New Year on a fresh slate. So when payment requests arrive, you know why.

After the New Year

This time is often most worrisome for management as they must hope a majority of their workers return. Many workers that had worked in the factory do not return. Several factors influence their decision:

  1. Workers are finding more opportunities closer to home and prefer these due to the proximity to their family and friends.
  2. Workers often meet their friends who introduce them to new and more lucrative opportunities which they often take.

Each year factories lose roughly 30% of their blue-collar workforce:  A human resources fiasco. It is a workers market in China now and therefore factories who offer good working conditions, treat their workers fairly, and have higher salaries retain their workers at higher levels and attract new workers easily.

Delays

As was noted in the first piece, some workers return after the Lantern festival which means production resumes with a partial workforce. Slow returners, with non-returners means production is not in full swing. The worker problem coupled with the fact that factories have orders piled up during the holiday means delays are expected. (so don’t trust that Salesperson above!)

Factories also need to place their raw material orders with their suppliers, but these suppliers have their own order log and factories dependent on the raw materials cannot start production until they get these materials.

About the author

David writes about economic activity throughout Southeast Asia and specializes on international trade relating to China. In addition, he holds a Masters Degree in Economics from Peking University.
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