The Impact Of Chinese New Year On Importers & Tips To Prepare For CNY 2021

11/25/20 • 32 min

In This Episode...

Sofeast's CEO, Renaud, and Adrian from the team discuss the forthcoming Chinese New Year holiday which is officially between Feb. 11th to 17th 2021 (CNY day is Feb 12th). We'll look into how and why this holiday has a serious impact on lead times, quality, supply chain risk, and managing suppliers; greater than at any other time of the year.

Renaud also shares some tips and strategies that importers can implement to plan and prepare for CNY, as well as mitigating risks that may arise from your suppliers.

Show Notes

00:00 - Introduction.

02:18 - Discussing what the Chinese New Year holiday, or Spring Festival, is and some of its unique features.

05:28 - What staff turnover around CNY tells you about the factory. A high turnover is indicative of an employer who has work to do with treating and/or paying staff well.

06:40 - Some problems which typically occur after Chinese New Year. If staff have left, new staff aren't as efficient which may lead to quality issues. Even new quality inspectors may not pick up problems as well until they're familiar with your requirements.

07:17 - Points of stress for importers before CNY. The pressure to clear a backlog of orders and staff starting to leave early for the holiday makes the pre-CNY period quite treacherous for importers. Orders may be delayed, quality may be affected, there is no time to rework defective batches, suppliers may not focus on future orders urgently, etc.

11:00 - The length of time that different factories may be closed for. Assembly factories will typically be closed for 12-15 days, a relatively short time. The problem is with component and material factories. These guys can be closed for up to a whole month.

12:32 - Summarising the problems and risks at CNY. Also includes shipping backlogs, where demand drives up shipping costs and there is enormous demand for quality inspections just before CNY, too, when everyone is (rightly) worried about poor quality.

13:42 - The dates for Chinese New Year 2021 and pre-CNY wind-down.

14:36 - An additional risk for importers: Supplier bankruptcy. It's at this time, the end of the year in China, that suppliers who have been struggling financially may decide to file for bankruptcy and shut down. They may or may not pay off outstanding wages and debts, but either way, it's going to leave you in the lurch. Due to the financial stresses of 2020, this could be a larger problem in 2021 than usual. Big tip: DON'T wire any advance payments for the period after CNY to a supplier just before the new year holiday.

16:31 - Preventive measures that importers should follow to navigate the CNY period securely. Plan ahead diligently, get inventory made Oct/Nov, avoid production too close to CNY due to quality issues, if things may be in a rush, negotiate with suppliers to have smaller orders made better (if possible) to release some pressure on them, arrange post-CNY orders with your supplier so they can coordinate with sub-suppliers in advance in order to get things running faster after the holiday, increase inspection work on products and components/materials pre and post CNY.

21:27 - Will CNY 2021 be any different to usual due to COVID19? At the moment, due to the very low cases of the coronavirus in China, it looks that it won't be particularly affected, unlike in 2020. However, importers should be aware that if the virus spreads due to the holiday, factories could be hampered or shut down in the new year if cases are found.

25:24 - Contingencies to deal with supply chain risks (such as viral outbreaks). Keeping some extra inventory if possible, having more than one supplier per product gives a safety net and this even better if they're located in different areas of China or even different countries (such as one in China, one in Thailand), suppliers can hold some stock or components, etc.

27:48 - Risks other than a pandemic to be aware of. This could be a fire in the factory that puts them out of action, financial problems causing them to go out of business, having IP stolen, disastrous manufacturing and quality issues, and more. Importers would be wise to consider arranging a backup supplier. Plan ahead and have a risk-based approach to cope with risks that you rank from worst to least if they should happen.

Extra information you may find helpful

Renaud wrote about how to manage issues caused by the holiday here: Chinese New Year: how to manage the disruption?
You can learn more about the CNY festival itself, dates, etc, from this handy page: Chinese New Year – China's Grandest Festival & Longest Public Holiday
There are a number of really great posts from Renaud about supply chain r...

In This Episode...

Renaud also shares some tips and strategies that importers can implement to plan and prepare for CNY, as well as mitigating risks that may arise from your suppliers.

Show Notes

00:00 - Introduction.

02:18 - Discussing what the Chinese New Year holiday, or Spring Festival, is and some of its unique features.

05:28 - What staff turnover around CNY tells you about the factory. A high turnover is indicative of an employer who has work to do with treating and/or paying staff well.

13:42 - The dates for Chinese New Year 2021 and pre-CNY wind-down.

Extra information you may find helpful

Renaud wrote about how to manage issues caused by the holiday here: Chinese New Year: how to manage the disruption?
You can learn more about the CNY festival itself, dates, etc, from this handy page: Chinese New Year – China's Grandest Festival & Longest Public Holiday
There are a number of really great posts from Renaud about supply chain r...

Previous Episode

3 Types Of Quality Control Plans & Why They're Needed BEFORE Production

In This Episode...

Sofeast's CEO, Renaud, and Adrian from the team discuss everything buyers should know about quality control plans. A QC plan lists all the quality-related checkpoints to be passed during/after a production run. Depending on the buyer's situation (which include factors like order size and value), it can include process, product, or legal checkpoints. Approving QC plans is an essential step before production is allowed to start as you'll see as we go through the topic.

There are three types of quality control plans we'll be discussing:

The product quality control plan to include in a contract with a Chinese supplier which demonstrates the buyer’s expectations for the supplier regarding quality, inspection, and production activities.
The process control plan that decomposes production in each process step (often called control plan).
The QC plan for a new product being brought to market which outlines in black and white the manufacturer needs to know in order to produce goods at the right quality.

You'll learn when these plans are appropriate, or, conversely, if there are buyers who don't require them.

Show Notes

00:00 - Introduction.

00:56 - What are QC plans and why are they important to agree on before production starts? A summary of QC plans and for which kind of orders they'd be most appropriate.

03:09 - Discussing the 3 types of QC plan and the different contexts they're used in.

03:48 - 1. The product quality control plan that makes up a part of the manufacturing contract. Defines legalities around access to the facility, testing, product compliance expectations, who pays for testing, what happens if products fail quality tests and don't reach the quality standard, and more.

07:18 - 2. The process control plan. This is a core tool for the automotive industry but can be used by any buyer if their orders are large or expensive enough to warrant a deep investigation into planned production processes in order to ensure quality throughout. Plan what is expected at each production step, how it can be checked, and what to do if an issue is found, and document all of this in the plan. This also applies to upstream suppliers if you're taking quality very seriously. (Read this blog post for more info on setting up your process control plan: 11 Steps To Set Up a Process Control Plan)

13:13 - How to identify suppliers who are capable of adhering to a stringent process control plan? 2 ways, process audits and a tip from Renaud to do it in a simpler way.

15:02 - 3. The QC plan for when developing a new product. This clarifies your needs and takes the form of a number of questions, which we list and discuss in this section, about quality in a type of checklist that the manufacturer really needs answers to have answers to (or be able to answer) before proceeding. It forces both buyer and supplier to think deeply on how to assure the best quality possible when manufacturing a product which is new on the market. (You can see an example QC plan for a new product in this blog post which this episode is based on).

22:46 - How Chinese suppliers' culture can be to disregard planning ahead for quality and instead focus on fixing issues later as they occur. Hint - this flexible approach isn't a good thing, especially for new, complex products.

25:01 - The dangers of not going through the QC planning process with Chinese/Asian suppliers. They will be very encouraging which can lead some buyers to trust in their expertise, but this can be a trap because it's on YOU to define a quality standard and expectations for the supplier to follow, not to be led by them as their ultimate interests may not align with yours as less specific requirements give them more opportunity to cover themselves should they do something wrong.

27:35 - Are all 3 QC plan types appropriate for all kinds of buyers? The product quality control plan (1) should usually be implemented for any size of order if possible, as it's good to have quality expectations in your contract with the supplier. The process control plan (2) is usually more appropriate for buyers with high quality requirements who place large orders (in the tens of thousands of pieces at least). The QC plan for new products (3) is appropriate for buyers developing and launching new products onto the market.

30:55 - Why buyers with large order MUST have a quality standard. For instance, POs in the hundreds of thousands of dollars.

31:12 - What should buyers of existing products (such as off-the-shelf items to be rebranded) be focusing on when it comes to quality? QC plan 1 for the manufacturing contract's terms is still helpful, as is creating a quality standard and documenting...

Next Episode

Why The Bill Of Materials (BOM) Is A Key Document For Importers

In This Episode...

Sofeast's CEO, Renaud, and Adrian from the team discuss the 'Bill Of Materials.' Why is this document SO important for importers, what does it contain, how does it help the development and manufacture of products, and why and how must it be kept confidential where possible? These questions, and more, are all answered in this episode!

Show Notes

00:00 - Introduction.

01:22 - What is the BOM? A rough introduction to the document and its purpose. A list of the components/materials/accessories/packaging/markings/fasteners/etc that make up a product, each with its own row in the BOM. A lot of information about each individual part is included per row. Why it's a confidential document that some suppliers don't want to share (as it includes their sources and product development info) and how this can leave importers in the dark about what goes into their products and if changes have been made if they're not granted access.

06:39 - Problems that can occur if you don't have the BOM. OEMs and ODMs may make changes without telling you, this causes trouble with quality and compliance. It can also cause compliance issues because if they change the makeup of the product between batches, you could unwittingly be importing non-compliant products (we discuss product compliance here). If they commit to a BOM you're aware of these issues are less likely.

10:46 - How the BOM evolves throughout the product development process & what's included. The BOM follows the new product development phases, going from concept BOM which is simple and gives a rough idea of what's included, through to a prototyping and manufacturing BOM which is complete and is continually updated with quantity, component status, price, testing results, issues, new requirements from the customer, product engineering info, CAD drawings, colour, texture, finishing, and more.

17:02 - The need for a review process on the BOM to make sure any mistakes are found. Mistakes with the BOM could lead to incorrect parts, quantities, or wrongly specified parts being purchased. Checking and updating the BOM accurately is also connected to traceability for if issues are found later on with products.

18:51 - What does a Bill Of Materials look like? A good resource here is Renaud's video walkthrough where he explains an example BOM row by row. A few words on BOM format.

19:50 - How and why do we protect the BOM's confidentiality? The BOM includes pricing and it is not ideal for everyone to get an idea of how much components or full products truly cost. No company wants to make their margin that obvious. Components may have their markings removed or obscured to stop competitors finding out your suppliers and being able to more easily replicates products and features, but if a BOM was to get into their hands this would allow them to skip many months of development immediately. So, anyone receiving the BOM must be contractually bound by the same kind of manufacturing contract covering the final products, too.

26:57 - If a Chinese supplier doesn't want to provide the BOM, what can you do? This is a matter of leverage and negotiation. If the supplier is afraid you will leave they may relent and provide the BOM or at least a partial BOM which will give you a lot of the key information you require.

28:21 - Other reasons why a BOM is important to both buyers and manufacturers. A buyer will also find a BOM from the supplier helpful in order to track down quality issues coming from a sub-supplier which allows you to send an inspector to the sub-supplier to check on how they're working and push them to improve if problems are found. Without the BOM, of course, this isn't possible and improvements can't be driven. A manufacturer will find an ERP useful in order to manage purchasers' practices (assuming they don't already use an ERP which most don't), as this will force purchasers to use a specific BOM per product instead of a collection of spreadsheets, contacts, and documents that only they have access to, and then management can check that they haven't overpaid, skimmed, etc, occasionally.

33:33 - Closing recap about the importance of the BOM, its function, and contents.

Extra information you may find helpful

A number of blog posts and resources about the Bill Of Materials here for you to digest: