Supply chain in the Year of the Rooster
By Radu Palamariu, deputy MD of Morgan Philips Executive Search.
February 2, 2017
By Lee Kok Leong
Chinese New Year, also known as the Lunar New Year or the Spring Festival is the most important of the traditional Chinese holidays. We know that the logistics and transportation field will be impacted and all global supply chains originating in China will grind to a halt.
Moreover, during the week long holiday no payments can be processed to and from China or Hong Kong. I hope most of us were careful enough to settle all payments beforehand to avoid any potential problems with late payment fees.
One important challenge to have in mind is the final, pre-CNY sailing schedules.
Even though the Chinese New Year starts on Friday January 28th, cutoffs in the sailing operations will likely begin today (Friday) before the holiday week begins. Keep in mind that it might take 2-3 weeks for shipping activities to start.
It is a good idea to communicate with your forwarders and make sure that your product will make it to those ships. If your shipment gets the green light, it could potentially sit, accruing storage fees, for weeks on end in port. Making to take in consideration the balance between booking capacity to cover your assets and booking more than you need.
Uncertainty is the main theme for the year of the rooster
Economic stability and strong growth are expected from the emerging markets of the Asian economy.
But in the same time, some interesting threats are lurking about. Divergent strategies to monetary policy among advanced economies will have an important impact on global trade and capital flows. Opec’s recent decision on cutting oil production has lead to raised inflation expectations. There is a risk of a market instability in China. Continued over-investment in the public markets, over-borrowing by corporates and over-capacity in the manufacturing sector are just a few factors that lead to uncertainty.
We have to factor in how the new US economic policies will influence global trade, and that could have an impact, particularly on a lot of the trade-dependent Asian markets. We know that there are a lot of plans around making sure America’s economic interests are put first.
This could be accelerated by a shortening of the supply chain for Chinese manufacturing. In turn, leading to lower demand for intermediate goods from countries such as Malaysia and Thailand.
There is always a silver lining to the story. If we look at purchasing indices, manufacturing looks to be on a growth track in many advanced economies, as well as in China. Global growth will be accelerated by the major emerging markets outside Asia, like Brazil, Russia and South Africa, who are recovering from recessions. Therefore, it should be an interesting year ahead.
Gong Xi Fa Cai and may all people in supply chain and logistics have a good year ahead!