Now that the summer is coming to an end and many companies and their production processes return to normal, some will be surprised when they order an urgently needed product from China and are suddenly told “Sorry, we’re on vacation!”
Welcome to the world of Chinese Golden Week, where hundreds of millions of Chinese go on vacation, often causing the global supply chain to break out in a collective sweat—or come to a standstill.
What is the Golden Week?
Golden Week refers to the days around the National Day, 1 October to 7 October, a seven-day bank holidays, so to speak. And for some Chinese people, this Golden Week can feel as if Christmas, New Year and Super Bowl Sunday are taking place at the same time. In other words, many Chinese use this time to travel to their families who live in other cities or regions in China or to travel within their own country. And the normally hectic harbors and factories suddenly become spookily quiet.
What to do when supply chains take a vacation
But what does this mean for supply chains and the many companies that rely on products “made in China” when the production site goes on vacation?
Although Golden Week should be marked in red in the calendars of many companies that trade with China, for many companies it “suddenly takes place” at the same time every year, just like Christmas “suddenly takes place” at the same time every year.
Therefore, as the “Golden Week” approaches, the production capacities of many Chinese companies and manufacturers should be running at full speed if they are to get their goods delivered in time for the major upcoming sales events such as Black Friday (29 November), Cyber Monday (2 December) and Christmas sales (December).
However, this increased surge in demand in the weeks leading up to Golden Week, and from September onward, often leads to capacity overload for freight forwarders and customs, which is then reflected in higher prices for sea and air freight and leads to more “rollovers” to alternative container ships and modes of transport.
This situation impacts logistics and the revenue opportunity of the Chinese companies, according to Jason Chiu, VP & GC Head of Center of Excellence, SAP Digital Supply Chain.
“Chinese companies must find alternative shippers in the very short time, so mostly could not get the better price performance vendors,” said Chiu. “Higher transportation prices will reduce profits and sales.”
And this additional pressure in logistics inevitably leads to longer delivery times, which can last for several weeks, especially when major sales events such as Black Friday or Christmas are approaching.
However, anyone who believes that normality will immediately return after the Golden Week is way off the mark. After the Golden Week, pent-up demand continues to lead to high demand, which also affects the supply chain, such as longer delivery times.
It is therefore recommended that companies plan ahead now to ensure that goods are ready and delivered in time for the upcoming major sales events and Christmas sales.
The survival strategy is “plan ahead”
Stellar advance planning is essential to ensure that ordered goods arrive during and after the Golden Week without any delays in delivery. The following measures can be taken to stabilize the supply chain during the Golden Week:
- Early planning: production and transport should be planned well in advance of the Golden Week and coordinated with production partners and logistics service providers.
- Secure transport capacity: It is advisable to book logistics and transport capacity early to avoid bottlenecks. Companies should plan several weeks in advance for booking transport capacities. For example, it is advisable to plan around three to four weeks for sea freight and at least one week for air freight. With the help of real-time data, transport arrival times can be determined, and supply and demand can be predicted more accurately. This enables precise planning of supply and demand, which is particularly useful during the peak season.
- Digitalization: Artificial Intelligence (AI) can be used to analyze real-time data, which can then be used to predict potential bottlenecks or disruptions that could occur, particularly during Chinese Golden Week, so that appropriate measures can be taken at an early stage to avoid disruptions and make the supply chain more stable.
Despite all the challenges, Golden Week is also forcing companies to rethink their supply chains, become more flexible and find innovative solutions.
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