The Impact of Chinese New Year on Electronic Component Lead Times

Posted by Bill Dull | October 16, 2020 0 Comments

In China, one of the most important national events is the Spring Festival. This annual event—also often referred to as Chinese New Year—falls somewhere between the end of January and the middle of February. In 2021, it is set to begin on February 12th.

chinese-new-yearThis holiday period is generally considered a time of fun and celebration for the people of China. However, for manufacturers who rely on China’s manufacturing supply chain, it often serves as a time of stress and frustration. For the entire event, most of the country is shut down. Additionally, many Chinese workers take the holiday as an opportunity to explore new job options. As a result, Chinese manufacturing facilities are left with unfulfilled production jobs and unfilled job positions, both of which lead to longer lead times for manufactured parts and products. 

Even if your company is not based in China, if any part of your business processes are (e.g., material or component source), you could still be impacted by Chinese New Year. For this reason, it is important to understand how the holiday disrupts manufacturing and how to avoid these disruptions.   

How Does the Chinese New Year Disrupt Manufacturing?

While Chinese New Year officially runs for seven days—February 11th to February 17th—the Spring Festival celebrating it runs for two weeks, and the effects on factories typically run for three to four weeks. Despite Chinese factories being closed during this holiday period, worldwide demand for parts and products made in China does not slow or stop. As a result, new orders for materials and components join the backlog waiting to be manufactured and shipped. 

In addition to extended lead times in overseas factories, the Chinese New Year can lead to extended lead times in domestic factories. Some U.S. businesses seek to avoid the backlog of orders in Chinese shops by turning to domestic shops. However, since most manufacturers in the United States follow lean manufacturing principles, there is little room to accommodate a significant increase in orders. As a result, peak capacity is met very quickly and, consequently, domestic lead times must also be extended. 

Once the holiday is over, it may still take Chinese factories one to two months to return to normal operations. This is due to an increasing trend of employees unexpectedly not returning to work. Following the Chinese New Year holiday, workers explore alternative job options, making this period traditionally the peak season for job-hopping in China. Historically, more than 25% of manufacturing employees do not return to work after the Chinese New Year. The vacant positions result in slower post-holiday production operations. 

The above effects on manufacturing operations can lead to quality issues as factories seek to fulfill a larger number of jobs with a smaller number of employees, many of them newly-trained. For this reason, it is particularly important to maintain strict quality assurance and inspection protocols after the Chinese New Year.  

Tips to Avoid Business Disruptions During the Chinese New Year

While the effects of Chinese New Year on Chinese manufacturing operations are unavoidable, you can avoid disruptions to your business operations by following these four tips: 

1. Place orders on time. Many manufacturers stop accepting new orders far before the start of Chinese New Year (e.g., Triad Magnetics’ cutoff for receiving orders before the holiday is the first week of November). It is essential to place your order with ample buffer time between the end of the production and the cut-off date.

2. Avoid last-minute orders. While some companies continue to accept new orders in the weeks leading up to Chinese New Year, there is a greater risk of shipping delays or quality issues for parts and products made in January as manufacturers rush to complete last-minute jobs. If a last-minute order is absolutely necessary, it is critical to maintain a stringent quality assurance and inspection program to ensure the materials/components you receive meet your specifications and standards. 

3. Keep things moving forward. While production operations may have stopped, you can continue to work on other aspects of business, such as sales, engineering, and administrative work, as you await the arrival of materials and components. 

4. Plan ahead. Since manufacturing is significantly impacted before and after the holiday period, you should forecast your needs far in advance to ensure you have the materials and products you need before and after the holiday. 

Preparing for the 2021 Chinese New Year With Triad Magnetics

chinese-new-year-2021At Triad Magnetics, our business continuity management system makes us well-prepared to handle any business disruption thrown our way, whether it’s a holiday or a pandemic. As a result, we fully support our hardworking manufacturing partners in China in using the Chinese New Year to enjoy some well-deserved time off with family and friends. 

While we’ll do our best to inform our customers on how their supply chains may be impacted before, during, and after the holiday, we recommend planning ahead to avoid disruptions to business operations. By purchasing early and having the materials and products on hand before production slows down/shuts down, you can minimize or eliminate the impact of the holiday on your company. For this reason, we’ve ramped up our inventory to support increased demand throughout the holiday season. Whether you need power transformers, inductors, or power supplies, we’ve got you covered. 

To learn more about how we’re preparing for the Chinese New Year and how we can help you avoid extended electronic component lead times, contact us today. 

Contact Triad Magnetics >

Topics: manufacturing, Chinese New Year