Jan 14, 2025 // Stephan Algie
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When the lights go out in China, almost the whole world feels it: every year at Chinese New Year, working life in China comes to an almost complete standstill for several weeks. For many companies worldwide, this means delays, overburdened Chinese suppliers and difficult-to-plan inventories – because even German labels are largely produced in China these days. What impact does this festival have on our supply chains and how can we respond to it more proactively in the future? These and other questions about the Chinese New Year will be addressed in this blog post.
The Chinese New Year, also known as the Lunar New Year, is the most important festival in China and takes place annually between the end of January and mid-February. During the 15-day celebrations, public and economic life comes to a virtual standstill: Offices, production plants, airports and transshipment centres are largely closed. Many employees make their way to their families even before the official holidays, which means that business processes are significantly restricted in advance.
Since a large proportion of the goods and raw materials needed worldwide come from China, the Chinese New Year poses significant challenges for supply chain management.
The production-related risks are particularly serious: many factories close for two to four weeks during the holidays, which not only leads to production interruptions but also to a significant backlog. Larger orders are prioritized, while smaller orders are often put on hold. The logistical risks are equally significant. High demand before the holidays causes transport bottlenecks and drives up freight rates. After the holidays, transit times are often extended as backlogs at ports and with logistics service providers must be worked off.
Inventory and demand-related risks should not be underestimated either: inadequate supply planning can lead to product shortages during and after the holidays, while inaccurate demand forecasts can result in overproduction and rising storage costs. Finally, there are supplier-related risks that can affect the stability of supply chains. A lack of communication with business partners can lead to delays, especially if companies do not know how their suppliers prioritize orders. This increases the risk that orders will not be processed in time. Forward planning and close coordination with partners are crucial to minimize these risks and mitigate the impact of the Chinese New Year on supply chains. Common recommendations, such as building up (excess) inventory in December or January to ensure timely delivery, have long been considered expensive and inefficient. Manual planning methods also offer no solution, as the processes and their interactions are often too complex to be effectively managed with traditional tools. This raises the following question: How can planners optimally consider international closing times, such as the Chinese New Year, in their supply chain management? One possible solution is AI-based planning software, which comes into play when human capacities reach their limits. With the help of decision-intelligent algorithms, significantly more parameters – such as production, transport and transit times – can be analysed and integrated into the planning faster and more efficiently than would be possible manually.
In addition, AI-supported optimization software offers several other advantages. One key aspect is automated optimization, in which complex processes are dynamically adjusted – without any manual intervention. Capacity-based order planning is particularly noteworthy: intelligent algorithms forecast demand daily and identify impending bottlenecks months in advance. This means that production stoppages can be compensated for at an early stage and suppliers can be supported by realistically plannable orders. To do this, the software analyses in detail which factors influence delivery times for each item – from production, transport and transit times to the supplier's production capacities. This enables the software to automatically order larger quantities in good time before Chinese New Year that the supplier can still handle, avoiding bottlenecks while keeping inventories efficient.
Recurring replenishment decisions can also be automated, alerts set up for bottlenecks, and alternative delivery options quickly identified from a pool of plan B options. Another key advantage is the precise analysis of delivery routes: production and transit times are planned accurately, including ongoing shipments, such as ships that are already on their way, as well as production shutdowns during holidays. Thanks to the integration into daily planning, data from ERP systems can also be seamlessly incorporated. This makes it possible, for example, to calculate demand up to 20 weeks in advance to effectively cushion the impact of production stoppages. This planning methodology is not limited to the Chinese New Year but can also be applied to other regional shutdown periods, such as the summer holidays in Italy or France. This enables holistic, flexible and reliable planning that is tailored to the specific requirements of international supply chains.
The Chinese New Year, which in 2025 ushers in the Year of the Wooden Snake, poses a particular challenge for supply chain management worldwide. The snake, a symbol of wisdom, intuition and elegance, coupled with the characteristics of the element wood – growth, creativity and flexibility – provides an inspiring analogy for modern planning approaches: In supply chain planning, too, clever decisions, foresight and a flexible approach are crucial to mastering the challenges of international closing times. AI-supported planning software provides companies with a tool that incorporates these principles. It not only enables accurate demand forecasting and automated optimization, but also provides the flexibility needed to effectively manage risks such as production shutdowns, transport delays and supply bottlenecks. Whether it's the Chinese New Year, the summer break or other regional shutdowns, AI-based solutions help keep supply chains stable and exploit growth potential. Like the snake in the Chinese zodiac, supply chain management should be well thought out, flexible and innovative – a lesson that the Year of the Wooden Snake elegantly exemplifies.
How are you preparing your supply chains for international shutdowns?
Feel free to email me.
About our Expert
Stephan Algie
Expert for Supply Chain Optimization
Dr Stephan Algie has been part of the Inventory & Supply Chain division at INFORM GmbH since 2016. He has extensive experience in supply chain optimisation and, as a dedicated sales specialist, is on hand to assist interested parties. He supports them in the decision-making process and helps them select the appropriate AI solutions to transform their supply chain.
