Time to tame the Chinese Dragon

Every year, China embraces one of the largest human migrations in the world as the nation’s workforce down tools to enjoy the Chinese New Year celebrations. Meanwhile, any business that relies on suppliers based in this region can find themselves exposed to huge disruption as factories close for up to 40 days. As organisations across the UK brace themselves for next year’s closures, Richard Evans, managing director of Slimstock UK, urges businesses to rethink the way they prepare for this turbulent time.

With extensive lead times of up to several months, importing goods from China can be challenging at the best of times. However, during the holiday period, businesses could be left in the dark for over a month and, even then, production may be constrained for a further few weeks until suppliers’ operations return to normal. “During these uncertain times, failure to plan well in advance will result in costly stock outs, missed opportunities and disappointed customers,” warns Evans.

In order to safeguard operations and maintain the levels of availability customers expect, many businesses invest heavily into building sufficient levels of buffer stock to cover for shortages in supply. “While necessary, having to tie up valuable working capital into inventory that may not achieve a ROI for several months is never an easy decision. Consequently, business leaders must be confident that they are investing in the right products.”

Through developing an accurate demand forecast, businesses can begin to anticipate how much inventory is required to mitigate any supply chain shortfalls caused by the factory closures. However, as Richard goes on to stress: “When you consider that everything from volatility in demand to emerging trends and the influence of seasonality have to be accounted for, many businesses simply lack the tools, technologies and knowledge required to make informed decisions at this critical time.”

While the 2018 Chinese New Year celebrations are not due to start for at least another 6 months, businesses must start planning today in order to minimise any disruption. “Given the size and scale of the potential risks associated with supplier factory closures, the level of preparation required to minimise disruption cannot be underestimated. Through meticulous planning and effective decision making, business leaders can not only prevent customer service issues but also minimise their businesses financial exposure,” concludes Evans.