by Ashish Monga
In the first part of this series we looked at what the “Chinese New Year” is all about & what happens in China during this time.
In this part on the “Chinese New Year” series, we look at the impact of Chinese New Year on “Production Timings” as well as “Product quality”. We also briefly discussed the criteria factories often used to prioritize which orders hit the production lines first.
Production Time during the Chinese New Year
“Production Timings” are often longer during the Chinese New Year period, especially “after” the holiday due to the pile up of orders during the holidays. However, even before the holiday, the time taken to produce the goods if often longer, as most importers, especially experienced importers tend to buy more in order to “Stock Up”. Some of the factors that may influence how much longer your production timings may be from the norm, include:
Experience & Production Planning Skills of the factory:
This is one of the most important factors that differentiates well organised factories from the average ones. Through good production planning & raw material procurement planning the delays during this period can be substantially minimised.
Factory’s order Book:
This one is difficult to gauge for an importer but the delays also depend on the size of the factory’s order book during this period.
Number of components/Raw Materials:
Complex products which have a large number of components or raw materials tend to have longer delays especially after the Chinese New Year holiday as component suppliers have their own orders piled up. The complexity of the production process is also a factor.
Defect Rate & Factory’s Attitude towards Defects:
The “defect rate” as well as the factory’s attitude towards fixing of defects can impact the production time. Factories with good Quality Control & a longer term commitment towards quality would take the extra time to rework the defects. Defect rate naturally tends to be higher during this time.
Financial Strength/Cash Flow of the factory:
Factories with good “Cash Flow” are often in a position to purchase their key raw materials before the holiday starts so that they are not only able to get on with production for orders that have been paid for prior to the holiday but also for orders received during the holiday period. This means the delays caused by the raw material suppliers can be skipped.
Size of the factory/Warehouse:
In the “Just in Time” manufacturing world, large warehouses are not really deemed a necessity. However, factories that do have large warehouses & “standardised products” have a much easier time dealing with this period, as they can store raw materials & to a lesser extent even goods (in case of standardised products) where they are certain of expected demand for their products.
Prioritization of orders
Starting from 2 months before the Chinese New year holiday, factories are often under pressure from buyers to ensure that their goods leave China before the holiday. Sometimes this is not realistically possible, however factories may be reluctant to refuse new orders and hence may promise delivery before the holiday.
Majority of the good factories are upfront about whether or not they can deliver the goods on time but there are always exceptions. Also, some factories may intend to deliver the goods on time at the time of accepting your order but then may have to push back production of your order as they may get a large urgent order from one of their “higher priority” buyers.
In an ideal fair world, the factories would put the goods on production line on “first come first served” basis, however this is the least important factor. Some of the factors that influence the factory’s prioritization of orders include:
New Buyer Vs. Repeat Buyer
Factories would often prioritize “repeat buyers” over “new buyers”. This is where it helps if you have an existing relationship with the factory.
Buying power of the buyer may influence when their goods get on the production line where deadlines are tight. Large buyers always get preference.
On the ground presence
If a buyer has local presence on the ground, either through the company’s buying office or through a third-party company representing their interests, it helps in moving their goods on the production line earlier by ensuring pressure can be maintained on the supplier through regular follow-ups.
Relationship with factory
While not as important as some of the factors above, the relationship with the factory can often be a defining factor when a factory has to choose between two similar orders in terms of other factors. Chinese business culture is very much a relationship-driven culture & all those dinners & KTV sessions with the factory bosses do pay off at this time of the year.
Factors affecting Product Quality
The period just before & after the Chinese New Year is when the most quality issues arise. Some of the reasons leading to this include:
Lax Internal Quality Control:
During this time the factories are under pressure from buyers to meet production deadlines while the workers are trying to maximise the income they can take back home. This is a dangerous combination as it often leads to lax internal quality control.
As discussed in Part 1 of this series, a large proportion of the factory workers may not return to the original factories they worked for, post the Chinese New Year holiday. The factory workers in China regularly float across industries. This means many of these workers will not be fully trained yet to manufacture the products, leading to quality issues.
Some of the larger factories, in order to meet the peak demand subcontract manufacturing to smaller factories. This can lead to serious quality problems as the smaller factories normally do not have the same quality assurance systems & processes in place to match the quality of the larger factory.
Detected Quality Issues left unfixed:
Due to the issues mentioned above, problems are often found during the “pre-shipment inspection”. However, there is not enough time to fix quality issues, as this would mean delaying the shipping to well after the Chinese New Year holiday. In such cases the client has to make the difficult decision of accepting “quality issues” or being without stock for a very long period of time. From my experience, almost always the buyers chose the former option, unless there are major quality issues.
I would love to know your thoughts about any kind of quality or other issues you may have faced when importing from China during the Chinese New Year period in the comments section. In the next part on the Chinese New Year series, we look at the logistics situation in China during the holiday & how to avoid delays due to logistical issues.
Ashish Monga is the founder of IMEX Sourcing Services, a sourcing & Quality Control company helping people importing from China manage their costs & risks as well as develop new products. Ashish also does consultancy work in the field of international trade & import risk management. He is also the author of The Sourcing Blog, a blog focused on sourcing advice for importing from China.