Lunar New Year usually meant factory slowdowns. The pandemic changed that.
Lunar New Year usually meant factory slowdowns. The pandemic changed that.
Lunar New Year begins Sunday. Depending on where you live, 2023 could be celebrated as the Year of the Rabbit or the Year of the Cat. The holiday is a huge event across East Asia, and, as a result, factory production in many countries there tends to halt as workers spend time with their families at home.
Usually, this halt has big implications for global supply chains. But over the last three years, the supply chain has been anything but typical.
Businesses importing goods from East Asia understand that factory production tends to stall during this time of year, so they plan ahead.
“If I know that I’m going to need some inventory in the beginning of the year, I try to make sure that I order that by the end of October,” said Brandelyn Green, owner of Voice of Hair. She gets a lot of her packaging supplies from China and said that if she waits too long to place an order, she may be out of luck.
“If you haven’t gotten what you needed by the end of the year, you’re probably not going to get it until the second week of February,” Green said.
During the pandemic, that started to change.
“Factories really didn’t shut down as much, just because there was this almost insatiable demand from the U.S. consumer,” said Jason Miller, a professor of supply chain management at Michigan State University.
As a result? “We had very high imports in the United States in February and March of 2021 and 2022, which is a very nonseasonal pattern,” Miller said.
China’s strict zero-COVID policy also prevented many workers from celebrating in their own homes, said Phil Levy, chief economist at Flexport.
“Horrible they didn’t get to see their families and return, but it did mean that factories were operational when they often hadn’t been in the past.”
China has been loosening up its travel restrictions recently, and as a result, Levy said factory production will slow down. Ahead of this Lunar New Year, importers haven’t been ordering as much.
“I think the real culprit is that you’ve got companies with lots of stuff in inventory, and warehouses in many places are pretty full,” Levy said.
Some experts say companies have also been relying less on China.
“Due to the Trump-era tariffs, and then also COVID shut down many of those manufacturing centers, and the zero-COVID policies made it almost impossible to get them to open back up in a timely manner,” said Weston LaBar, chief strategy officer at freight broker Cargomatic. “And that forced even more shippers to look elsewhere.”
This included places like South America and West Africa. LaBar said if shippers continue to look elsewhere, the disruptions surrounding Lunar New Year might not be as big of a deal.
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