Every year on October 1st, China celebrates its National Day to commemorate the founding of the People's Republic of China.
This is the start of a seven-day public holiday (October 1st to 7th) called “Golden Week”, during which the whole country goes on vacation with businesses closing and production coming to a standstill.
So, what impact does China closing for a week have on the global supply Chain?
The logistics of planning for Golden Week
As the golden week approaches, manufacturers are running at full capacity to satisfy orders on time, if not early, so that they can ship them out of China before the holidays. As a result, the capacities of the freight forwarders are also overstretched in the weeks leading up to the "Golden Week" which leads to higher prices for sea and air freight as well as more ‘rollovers’ into alternate container ships and modes of transport.
This year though may be even more challenging due to the already existing capacity shortages, lack of ground staff and congestion at some of China’s largest harbours and airports. According to Reuters a study from the Royal Bank of Canada (RBC) has found out that one-fifth of the global container ship fleet was stuck in congestion at various major ports. The data also shows that the number of ships waiting at the Port of Shanghai is now at 344, which is an increase of 34% over the past month. And shipping from China to the U.S. will take 74 days longer than usual. The same situation can be seen in Europe with ships from China arriving approximately four days later.
This extra surge in logistics demand will inevitably lead to longer delivery times, which could well continue until the upcoming Chinese New Year, especially as Christmas approaches.
Therefore, it is recommended that companies should be planning now to ensure shipments are delivered on time to have the goods ready for the Christmas season.
Getting the supply chain logistic ready
With the increased risk of delays top of mind, many companies are now switching from the well-known “just-in-time” principle to a ”just-in-case” approach in order to be prepared for potential delays and disruptions. This means leveraging inventory optimization strategies to position the right inventory across the different nodes of the supply chain, and often keeping products closer to the actual demand, which requires good and flexible warehouse planning.
Plan ahead and optimize transportation
The Golden Week always heralds the peak shipping season with rising prices for sea and air freight space. And with demand for shipping space high and space and equipment capacity low at Chinese ports, coupled with bottlenecks at many US and European ports, early booking is essential.
With the usage of an advanced planning coupled with an optimal transport route, transportation costs, as well as the CO2 emissions, can be minimized.
As for the Golden Week, a pre-booking of three to four weeks for sea freight and at least one week for air freight is recommended. Hence, an accurate forecast is necessary for booking the right capacity on the carriers. Missing this shipment window means that the goods may not arrive in time for the winter and holiday season.
As always, it is important to stay up to date with the latest market news to quickly adapt to changes. Having visibility across the network to sense and respond to market dynamics can make the difference between shipping on time or disappointing a customer. Therefore, building relationships and working closely with business partners is a key step. And a good start is to wish your Chinese business partner a happy golden week.
If you want to learn more about how to minimize supply chain risk as well as maximize opportunities with resilient, sustainable, and customer-centric supply chains, download the latest IDC Analyst Connection.