DSV warns of Chinese New Year supply chain pressure

Freight forwarder DSV is telling its customers to plan early for next year’s Chinese New Year holiday as several “extraordinary factors” are expected to put transport operations under extra pressure.

The Denmark-based forwarder said that the Chinese New Year holiday, which this year will start on January 31, typically puts extra pressure on supply chains as factories close for the week while people celebrate the holidays at home with their families.

But DSV said this year that “several extraordinary factors cause a great deal of uncertainty about what the impact of the upcoming Chinese New Year will be” while the company also expects to see “exceptional demand” for transportation of goods in a market “characterised by limited capacity”.

The company pointed out that as well as the usual pre-holiday rush, there are also Covid-19 restrictions, global supply chain congestion, power curbs and the Beijing Winter Olympics.

“The Chinese power curbs – i.e. the electricity rationing which was recently introduced in many parts of China to reduce carbon emissions – are also likely to have a significant impact on production in the coming months,” DSV told customers.

“The extent of the policy varies from province to province, but in some places, the power curbs have resulted in factories cutting output or halting production entirely.

“Although we have seen the situation improving recently, it is not possible to say how things will look in the future.”

On the Winter Olympics, it is currently uncertain what the implications of the event will be as no official Control Policy has been published yet.

“We expect that the security inspection level and road control will be increased in certain areas,” DSV said.

To deal with the issues, DSV said customers should prepare a forecast for a longer period of time than usual and work closely with suppliers.

“In this forecast, it is important to not only make a plan for the time before the Chinese New Year, but also for the time that comes after the celebration, as the repercussions of the Chinese New Year might be felt well into the spring,” the forwarder said.

“For this reason, you might also benefit from considering a deeper inventory than normal to support an easier end user delivery in your supply chain in the time after the Chinese New Year.”