Do business in China? Here's what you need to know to plan ahead, avoid delays, and prevent other unanticipated holiday hiccups.
It is almost Chinese New Year. For any company that manufactures or purchases items made overseas, that’s a big deal—though not necessarily a celebratory one. It is a time of year that I'm reminded of the importance of cultural awareness and sensitivities, but also a business event that must be planned for far, far in advance. Understanding the nuances of Chinese New Year is essential to how my wholesale jewelry business runs. Here's what I mean:
When is Chinese New Year?
Chinese New Year usually falls sometime between January and March, but the exact dates change each year. This year, it starts on Monday, January 23rd, which means that most of the factories in China will send us emails stating they are closing from January 20th to January 30th for a well-earned vacation.
American businesses also sometimes close for holidays—but when we announce it, the dates are set in stone. We close on the designated date, and reopen when we say we will. This is not always the case with Chinese companies, many of which will close early, come back late, or even both—with no warning. At Metal Mafia, we learned this lesson a few years ago, when even the most communicative of our factory contacts wrote that he would resume working on a certain Monday, and yet our emails went unanswered for an additional four days. Whether he decided to vacation longer, or just may not have been able to get space on the crowded trains back to the factory from wherever he was, I will never know. And even if a factory we order from respects the dates they give for their closure, their suppliers may not, therefore causing additional delays.
As a business owner who manufactures overseas, it is my job to understand this and prepare for it. Thus, contrary to the official calendars, Chinese New Year always lasts a month on mine. By extending the dates, I make sure to get everything answered and into production before the factories close.
Even after the holiday, expect production to get backed up.
There is also the problem of on-time deliveries after the factories reopen. Just mastering the calendar is not enough to combat this phenomenon. Most Chinese factory workers are originally from towns very far away from the factories for which they work—sometimes several days' travel by train. During the year, the workers live near the factories. When the New Year rolls around, they return to their family homes much as Americans do at holidays like Thanksgiving and Christmas, but with one big difference: At many factories, close to 50 percent never return to the factory from vacation. This means factory managers re-open after the New Year with seriously depleted staff, and twice the amount of work as usual to catch up on from the break. To importers waiting for goods, this means one thing: DELAYS.
Forecast your needs and buy early.
In order to minimize the disruption to our business, we have learned to order a three-month supply to be delivered before the start of Chinese New Year. While difficult in terms of our cash flow, and also in terms of warehousing space, the alternative is being out of stock for weeks on the products customers need. That is out of the question. Through careful forecasting and early buying, we are able to bypass the problems caused by the build-up of orders during the holiday, as well as the slow start faced by the factories when large numbers of employees do not return after the break. We plan Chinese factories will be closed for a month, retooling and catching up for a month, and then producing and delivering newly-placed orders for a month after that.
By making these simple preparations, we are able to safeguard the stability of our inventory, help our factory partners deal with their pre- and post- holiday production woes, and thus, welcome in the Chinese New Year as a celebration instead of a frustration.
Read more recent articles by Vanessa Merit Nornberg:
Vanessa Merit Nornberg: In 2004, Vanessa opened Metal Mafia, a wholesale body and costume jewelry company that sells to more than 5,000 specialty shops and retail chains in 23 countries. Metal Mafia was an Inc. 500 company in 2009. @vanessanornberg