This year’s Pre-Lunar New Year Peak promises to be unlike one we have ever experienced. With the enormity of the scope and scale of disruptions impacting almost every global supply chain it can be challenging to determine what to do. Fortunately, there are 11 simple steps you can follow help successfully manage through the chaos.
Don’t Wait! 11 Things You Can Do Now to Help Get Through the Upcoming Pre-Lunar New Year Peak
Start with your calendar - Lunar New Year begins Friday February 12, 2021
Expect and build in delays to your planning.
Forecasts! Forecasts are worth more than their weight in gold.
1. Start with your calendar. Make sure you and all your stakeholders know Lunar New Year begins Friday February 12, 2021, and they all know what this means for your supply chain. Factory closures typically start the week before and will last through mid-March. Truckers have fewer drivers starting about 10 days before the New Year as many of them have started their migration to their hometown by then. So from December 1, 2020 that only leaves a departure window ex-China (and elsewhere in Asia) of 11 weeks before everything shuts down.
2. Expect and build in delays to your planning. Plan to add at least 2 weeks to your forecasts from areas with direct vessel services (Shanghai, Ningbo, Yantian) and at least 3 weeks for non-direct services (for example: Indonesia, Malaysia, Xingang, Dalian and Haiphong). We are seeing vessel departure delays of 3-5 days in Asia due to congestion at origin, arrival delays in US ports because the terminals are so full vessels have to wait to berth. Equipment availability in Asia (especially High Cubes) is limited and changes weekly, role-overs across Asia are the worst we have seen in years (The JOC published an article last week stating that over 30% of cargo now in Asia is being rolled at least one week, especially at trans-shipment ports). In addition, as carriers fine-tune their capacity mix through Chinese New Year based on forecasts (with some blanked sailings as well as extra loaders mixed in), there will continue to be a lack of certainty and schedule integrity until well after Chinese New Year.
3. Forecasts! Forecasts are worth more than their weight in gold as they help your logistics partners prepare allocations accordingly on the ocean side. It's not fail-proof but it helps tremendously. This is especially true if you have projects that require a surge of containers - these will require advanced coordination. In typical years many importers from Asia will have a mini-peak before Chinese New Year (Garden Supplies, Patio Furniture, Spring Fashion, Home Décor, Auto Parts, Furniture). We expect this year will be far worse so start planning if you haven’t already done so. Provide forecasts to your supply chain partners especially including your dray carriers so they have an idea of what's coming, and if there are issues with that dray carrier, pivot quickly to your Plan B and C - even if that comes at a premium.
4. Drayage Plan B and Plan C: Drayage is already challenged across the country, but especially in Southern California. Much of it is structural (port congestion, disjointed appointment applications at terminals, chassis unavailability, chassis hording) and some of it is simply a result in the surge of import volumes at a time when stakeholders in the supply chain are challenged with COVID restrictions and limitations. So have a Plan B. Have a Plan C. Even if those back-ups cost more it is worth having a plan to immediately react to any disruption. It is not going to get better any time soon.
5. Have an internal process to make decisions fast, or “Green Light” them: What do you do when it’s 11:00 am on a Friday, it’s the last free day for your container at the Kansas City ramp, and your vendor has 3 hours to pre-pull your import load out to avoid demurrage on Saturday, Sunday and Monday and your warehouse can’t receive it until Wednesday? Don’t wait till Friday to have to figure out who makes that decision. If possible, green light those solutions with your vendors in advance so they can act quickly in your best interest.
6. Communicate to your internal stakeholders: Costs will increase substantially. Demurrage, detention, chassis fees, pre-pulls, waiting time, dry-runs will all increase in frequency and cost. This is in addition to peaking market costs for ocean transportation and drayage. Much of this is out of your control or your vendors control, and in fact, some are a necessary function of reducing cost and exposure (like pre-pulling containers out of rail ramps to avoid more expensive demurrage). Budget for this if you haven’t already. Make sure every stakeholder, from your CEO to your traffic team understands the situation.
7. Single Container Bookings are Better! If your supplier is making bookings for 6 x HQ on a single shipment, coordinate with them in advance to make 6 bookings of 1 x HQ each, or at most 3 bookings of 2 x HQ each. It will cost them more in local fees, and you will have to coordinate additional Customs entries, but it is easier to obtain space and equipment for smaller volume shipments, and your logistics partner can shuffle them among different carriers and services in order to keep your shipments moving. It works!
8. Keep your payables clean and current to your transportation vendors: The last thing you need is delays in releases due to credit holds, or delays in getting payments to your vendors with whom you do not have credit (like an ocean carrier for example). If you expect a surge in payables because of an upcoming volume spike and cost increases, communicate that with your partner vendors to make sure they are aware and that there is a strategy and understanding moving forward on how to work through that surge. All stakeholders, especially your CFO, need to understand the rise in costs and payables, and if this should exceed your available credit from your vendor, proactively engage that vendor and create a plan together on how you’ll get through this season.
9. Have a plan for express services from Asia: As reported in one of our recent blogs, some carriers are offering limited express services from Asia to the US West Coast. Some are offering a premium surcharge for guaranteed space, some are offering an express product (Matson, Zim, CMA, APL for example) and some are offering guarantees on container availability and pick up in Long Beach for example (Yangming, COSCO). Make sure you are aware of these and if necessary, have a plan in advance when and where you will utilize these services. Whatever those conditions are that might cause you to use them, make sure your vendor understands this in advance. These services are full week to week, so advance planning and quick decision making is a MUST.
10. Book in advance: While this is assumed, many bookings from Asian suppliers are happening about 5-7 days before they can confirm product availability. There are challenges for them as well (supply, manufacturing delays, parts and supply chain issues locally, inspections, quality control, export Customs), so often suppliers are reluctant to place bookings too far in advance. If those bookings can be made 21-28days prior to anticipated ready date it would help. It’s no guarantee, but it does help.
11. Mindset shift: This is one of the most difficult times we have seen in most of our careers. So, consider all that is happening in the market and the disruption in your supply chain, and then add COVID to the mix. Your teams are working remotely, your vendors are operating in some limited remote capacity, you have disruption in staffing at warehouses all across the US, we are all Zoomed out, we have carriers experiencing cyber-attacks that shuts down their networks globally – nothing is working. On top of that demand for a lot of your product is increasing because of a shift in retail and ecommerce spending patterns from us all. Work with your vendors as partners; get rid of the blame mindset and work together as a trusted team of partners to get through this. As soon as you think you’ve figured it out, something else will happen that will set us back (just think about CMA’s cyber-attack).
In today’s market it is truly impossible to go it alone. Communicate and collaborate with your supply chain partners so that we can all successfully navigate the challenges that lie ahead, both known and unknown. At Laufer we are honored to be your partner on this journey. It doesn’t promise to be easy, but we will truly all get through this together. If you have questions or would like help implementing any of the recommendation above contact Michael Van Hagen, VP, Sales and Marketing or your Laufer sales representative today.