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Lunar New Year is on the Horizon, Along With Potential Delivery Woes

If importers haven’t already planned for Lunar New year, they’re probably going to be in trouble.

Next month, factories in China and Vietnam, the two largest U.S. apparel suppliers, will close for up to four weeks in celebration of the Lunar New Year that begins on Feb. 16, potentially posing major shipping and delivery woes for brands and retailers, as it does annually. There have even been some cases over the years where factories never reopened, though that was during a period of major consolidation of production resources and is not expected this year, at least on any significant scale.

Daniel Hackett, founder of Hackett Associates, said, “The impact of the Lunar New Year celebrations will vary by year as the date changes, but the pattern we see is fairly predictable–an increase in imports in the weeks leading up to the two-to-four-week factory closures and then a surge in the weeks that follow.”

Hackett said in 2017, for example, the Ports of Los Angeles and Long Beach combined saw a 7.3% increase in January over December, then a 23.2% drop in February and a 13.5% gain in March.

This year, the Lunar New Year falls more than two weeks later than in 2017 and Hackett Associates projects that the decrease will show up in March’s import volumes.

According to the Global Port Tracker produced by the National Retail Federation and Hackett Associates, cargo container imports are forecast to reach 1.68 million Twenty-Foot Equivalent Units (TEU) this month, up 0.2% from January 2017. February’s imports are projected to increase 12.6% to 1.62 million TEU year-over-year, while March is forecast to be down 2.3% at 1.5 million TEU. The February and March percentages are skewed because of Lunar New Year calendar shifts.

The pace of shipments is expected to pick up in April, when 1.66 million TEU are forecast to be handled at the ports, a 3.3% increase.

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“In terms of the overall impact on the apparel and textile industry, this is something that retailers are aware of and account for in their supply chain plans, as shown by the buildup prior to the holidays,” Hackett said. “In other words, the Lunar celebrations do not lead to lost sales in the U.S.”

[Read more about logistics: The Top Six Logistics Issues Companies Will Face in 2018]

Freight forwarder Flexport said the best strategy is to plan ahead and book transportation, especially ocean, at least three weeks prior to Lunar New Year.

Flexport also recommends that importers follow up closely with suppliers on the “cargo ready date,” since these can shift frequently in advance of Chinese New Year, with factories are running on maximum capacity in advance of the closings.

The company also suggests splitting shipments among several bills of lading.

Another option is to consider shipping by air, especially if facing a strict deadline from a retailer or are running out of stock.

Some companies relay on trade finance to deal with having goods come in early to avoid in-season delays.

“We recognize the potential issues that the Chinese New Year factory shutdown can pose for small and mid-sized businesses,” Robert Grbic, president and chief executive officer of White Oak Commercial Finance (WOCF), told just-style. “Seasonally accelerated payments to vendors can strain an importer’s liquidity. We understand these needs and have the products and staff to provide flexibility and creative solutions for those companies that buy goods directly from Chinese suppliers.”