Understanding Chinese New Years
ASCERA Order Pipeline - Chinese New Year - Year of the Ox - February 12, 2021
We are once again at that time of the year, where we encourage our clients to speed up their ordering process for the upcoming Chinese New Year CNY 2021. One may wonder, what’s the fuss about an event that’s nearly 3 months away, in February 2021? For most of us, the CNY is synonymous with getting together with family, eating dumplings, and the red lanterns. This post goes into behind-the-scenes about what happens when you place your vape or packaging order with FTL Distribution, how the CNY impacts our supply chain, and how you can be best prepared.
CNY, also called the Spring Festival, is the most important holiday in the Chinese culture since time immemorial. The CNY is based on the lunar calendar, which varies every year. This further adds a level of complexity to sourcing and logistics operations, not just for the cannabis industry, but all clients that rely on Chinese factories for their supply chains. Most of the factories in China, are located in the relatively urbanized and well developed coastal regions to the South and East of the country. The workers, most of them migrants, come from far flung interior villages and towns, in the North and West which are relatively underdeveloped and have much fewer employment opportunities. For them, the CNY is the first and only time when they get to go home perhaps in a year. - back to their families and friends, for 2 weeks. Salespeople and shop floor workers get bonuses alike, in red envelopes called ‘HongBao’ with which they buy gifts for their families back home. This event also holds a significant emotional and cultural place amongst the Chinese people and culture. This event also breaks records with every passing year, for the biggest human migration in history, with several billion trips being booked by land, air, or sea.
1 week holiday with a 4 month implication
The legally mandated holiday by the government is just 1 week. However, the reality is far different. Factories will begin to close in early January 2021, and get back to normal in late February 2021. However, the supply chain is affected beginning December 2020 and as late as March 2021. Staff such as accounting and sales are normally off for 2 weeks, but labour responsible for production are off for a minimum of 4 weeks. Most employees also “accumulate” other holidays by working throughout the year, and then utilizing them during this time.
FTLD’s facilities are working overtime at the moment, both planning for raw materials and production scheduling, and packing and logistics scheduling. Our shop floor also prioritizes the workload from the biggest order first in the queue to the smallest order at the end, while ensuring the best and same QA QC for all orders, no matter how big or small. Demand for raw materials starts going up, and so do shipping quotes for sea and air, because most clients want to get in their orders before the CNY. During the holidays, many salespeople and workers also find new lucrative opportunities, through their friends and family, in a city closer to home.
Forecast Sales for your vape tanks and batteries. This may be difficult since it’s a timeline over the next 3-4 months, but the more accurate the forecast, the better it is for you and FTLD. No more selling out, chasing back and forth for design changes, following up for delayed or stuck shipments during the 4 month period.
Place Larger Orders and Early with FTLD. Raw materials and shipping costs fluctuate wildly during this 4 month period, both before and after. By doing this, stocked materials can be maintained at best levels, without firefighting.
Diversify and Have a Plan B with multiple SKUs. During this time, we suggest ordering at least 2 SKUs and test launching new vape products. This can mitigate potential issues with shortages for the specific colour, material, finish et al of the raw materials.
Getting Back to Normal presents a new set of challenges. One of the biggest challenges is that many of the workers do not come back to work due to a closer factory to their hometown, or being offered much more lucrative opportunities. Also not all workers return at the same time, but in batches, making the production scheduling difficult and readjust to the pre-CNY position.
