January 19/26, 2015; Volume 28/Number 15
By Julian Dossche
(Editor’s note: Julian Dossche is the senior manager, Global Business Development, at USFloors. Dossche relocated to the Jing’an District in Shanghai, China, to run the company’s Asian business. He has agreed to pen a quarterly column for FCNews on his perspective of doing business in China, his experiences and where opportunities may lie.)
In the United States most businesses slow down or are closed during the Christmas season, usually for a period of one to two days. In China, the country practically shuts down for two to three weeks during Chinese New Year, also known as Spring Festival. Traditionally China follows the lunar calendar, so Chinese New Year starts on the last day of the last month of the Chinese Lunar Calendar and ends on the 15th day of the first month of the new Chinese Lunar Calendar. This year, Chinese New Year officially starts Feb. 19 and ends March 5.
Chinese New Year is an important holiday for many Chinese people as this is the only time when most can leave work and travel home to visit with family. Because non-locals inhabit most major cities in China, this creates a lot of logistical issues for the cities and for China as a whole. A city like Shanghai, with a population of roughly 30 million, will feel unusually empty.
If you can remember the videos and images that National Geographic showed of the great animal migrations in the African Serengeti, where hundreds of thousands of wildebeest are migrating for better grasslands and for water, Chinese New Year portrays the same images but instead you are looking at Chinese bus stations, airports and train stations. On Feb. 19 millions of Chinese people will be “migrating” from their places of employment back home to spend time with their families and loved ones. Train, bus and airline tickets are all sold out by the beginning of January. Inevitably this holiday also creates logistical and inventory issues for any company that does business in or with China.
For most companies that rely on a steady flow of goods, a day without production can be a costly nightmare. Chinese New Year is a two-to-three-week shutdown that can disrupt the flow of goods, delay new product launches and can cause a large number of back orders. Most businesses that rely on goods coming from China will need to work closely with the factories on timing of production and collaborate with shippers as most truckers in China will also be on holiday. One important thing to note is that Chinese New Year is two weeks but most factories slow down a week before the actual holiday, ramping back up to 100% capacity a week after the last day of the holiday. In reality one has to expect that Chinese New Year is a month-long endeavor.
For the building industry, the Chinese New Year Festival comes at a rather interesting time, right in the middle of spring selling season where most people come out of hibernation and renovate their homes and, in our industry’s case, redo their floors. For those who do business with factories in China, it is imperative to work with them closely to make sure you understand the downtime of production and the logistics traffic jam caused by everyone placing last-minute orders. There is one important business term that comes to mind every year for Chinese New Year: safety stock. Chinese New Year is a long-standing tradition that creates a challenge for those working with China. So, with that being said, I wish everyone a Happy Year of the Sheep.