Posted on 13 Dec, 2016 by Neil Sharp
A few weeks after New Year falls on the Gregorian Calendar comes Chinese New Year. In 2017, the latter falls on Saturday, 28 January, heralding the Year of the Rooster. The rooster is the 10th Chinese zodiac in the 12-year cycle of animals; roosters are said to be observant, hardworking and resourceful.
So, what does this have to do with electronics manufacturing? Well, during this period, there is a seven-day long national holiday, from Friday, 27 January until Thursday, 2 February. This means that printed circuit board (PCB) manufacturing factories will be closed.
Therefore, if you source PCBs offshore from China, you need to start planning now. The post-Christmas blues are bad enough, but getting caught out by a PCB supply shortage is likely to cause both you and your contract electronics manufacturing (CEM) partner significant pain.
The impact of Chinese New Year
Most people enjoy time off work and a good celebration but, from a business point of view, it can cause a real headache. Chinese New Year can have a negative impact on deliveries and lead-times – with the period of time affected disproportionate to the length of the holiday. So, you need to have a firm plan in place to deal with the fall-out.
Timing is of the essence. While individual factory closure dates will vary slightly during the holiday period, experience suggests that you should plan for a minimum three-week shutdown. In basic terms, this is due to:
- Employees taking one week to travel home before the holiday
- One week for the holiday itself
- A further one-week travel time for employees to return to the factory after the holiday
Depending on where their hometown is based, it can take employees anywhere between three and seven days to travel each way. The factories, therefore, will start to see their workforce deplete from around Friday, 20 January. From a planning perspective, it's vital that any PCBs you have ordered are clear of Chinese customs for shipment during the week commencing Monday, 16 January (or sooner) – otherwise, there is a fair chance you will miss the boat, quite literally.
While employees are expected to return to work after the seven-day holiday, extended travelling times often mean that factories are not up to full capacity until some days after. And many employees may choose not to return at all, abandoning the large and overcrowded coastal cities for rural and inland settings. This has been an historic problem for China and is referred to as the "tide of return" (huixiangchao).
Keep calm and plan
As significant PCB production delays loom, it can be all too easy to panic – and many companies do. However, it's far better to take a leaf out of the rooster's book: be confident in your organisation and get to work. By assessing both your current and future demand, and then working closely with your PCB suppliers, CEM provider and end users, you can take a number of steps to minimise the risk to your business.
While it is unnecessary to "panic buy", you will need to cast your eyes further into the future when talking with your PCB suppliers. If you accept that there will be a three-week production stop, plus a further two to three-week delay while the supply chain gets back up and running, you really need to be looking to place orders for your April, May and June requirements sometime in the next few weeks.
Placing scheduled orders prior to the start of the holiday allows for a number of tasks to be completed in advance - such as the creation of PCB tooling or the sourcing of raw material - so that production can commence immediately once the holiday has finished. Many PCB suppliers will offer stock holding agreements with the ability to schedule deliveries, which, in many cases, means you shouldn't have to pay upfront for this forward planning activity.
Of course, if your CEM provider procures the circuit boards on your behalf, then make sure you communicate your priorities and future demand to them. If they don't have access to long term forecasts from you and the only visibility they have is of your firm order book, it stands to reason they will continue to work to the same schedule they already have, unless you tell them otherwise.
It is important to recognise that there will be a peak in demand on UK PCB manufacturers leading up to, and during the holiday period as not all customer demands will be met through offshore sourcing. Maintaining strong relationships with your UK PCB manufacturers can help minimise disruption during this time as they should already understand your business and may be more likely to support you as an existing customer, rather than satisfy short term requirements from new ones that are unlikely to repeat.
Chinese New Year doesn't have to send your manufacturing operation into meltdown. With some careful planning and close communication, it's entirely possible to avoid a PCB supply shortage.