When Chinese New Year rolls around, it’s pretty much always the same story: Other than train traffic and fireworks sales, the world’s second largest economy grinds to a halt as hundreds of millions migrate home to be with family.
It may be predictable, but it’s never uncomplicated for businesses managing global supply chains. And companies new to China may be unprepared to have their factories paralyzed and their goods frozen in the ports, says John Fox, the Atlanta-based general manager for the Southeast U.S. for DHL Express.
The air cargo delivery provider urged customers for weeks to prepare for the shutdown this Spring Festival, which started Feb. 8 and officially lasted through Feb. 14, though most Chinese take a few weeks off. DHL’s cargo operations chartered flights to accommodate a surge in demand in the run-up to the holiday.
But even if flights were running and companies were able to continue with production throughout the new year celebrations, it wouldn’t mean they’d be getting products in or out, Mr. Fox said.
“The key constraint is customs. Production stops, but both import and export clearance capability is essentially shut off,” says Mr. Fox.
It’s also good to build up buffer inventory for after the holiday, given the inevitable backlog at customs and the annual upheaval in the labor force that occurs when China goes back to work, Mr. Fox said.
“When it is over, typically there are production challenges to their existing suppliers due to the labor turnover,” he said.
On multiple daily cargo flights from three Chinese hubs to the U.S., DHL hasn’t seen signs of the much-vaunted Chinese slowdown.
“This year we’re still up over prior year in the same period, and we’re not seeing a slump at this point,” Mr. Fox said.
In fact, there’s evidence of that shipments of finished goods from Chinese factories directly to American consumers are on the rise, a sign that Chinese manfacturers may be moving up the value chain, Mr. Fox said — or at least availing themselves of new tools like e-commerce sites like eBay and Alibaba, along with the ability to ship directly to consumers worldwide.
Some products like e-cigarettes are in a certain logistical sweet spot: valuable enough to make sense to ship by air, but cheap enough that they don’t hit the “de minimus value”, the regulated amount at which they’re subject to inspections. But pretty much every consumer product made in China and sold online shows up in DHL’s business-to-consumer deliveries, from cosmetics to custom clothing.
The Southeast U.S. has DHL’s highest volumes of B2C shipments from Asia. China is still a manufacturing juggernaut, despite its growth curve not being as steep, and while they’re not necessarily displacing China, other Asian countries are also coming on strong.
“We see a significant uptick in Vietnam. Vietnam is a big growth market, and DHL has been in Vietnam for a number of years.” he said. “With all the standard bearers, we see consistent growth year on year — Korea, Taiwan, Vietnam. India is a major growth area for import to the U.S., and India is very significant in textiles and ready-to-wear, finished-good clothing.”
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