Chinese New Year is just around the corner (January 31st) and companies worldwide are already starting to feel it. The Chinese New Year, or Spring Festival as it’s called, is a time for workers to migrate home and spend quality time with their families. During this time China shuts down for two to four weeks. Many workers decide to stay home or find employment with different factories upon the end of the New Year. Factories start back up slowly while they recruit new employees and replenish materials. A proactive approach to handling the Chinese New Year can get your company through it stress free.
Who does the Chinese New Year affect?
Any company with a product or portion of that product being made in China will be affected by the Chinese New Year and should plan accordingly. For example, materials will be impacted by the New Year, which will impact the manufacturer of the product, which ultimately results in the product being delivered late or not delivered at all. Many companies will forecast their Chinese New Year demand ahead of time, however others learn the hard way and get stuck waiting for the factories to turn on again. While tying up cash on safety stock may not sound ideal, mismanaging the New Year and running out of stock could result in thousands or millions of dollars in lost sales.
Navigating Through the Chinese New Year
Being in the business for 25 years has taught us a thing or two about managing the supply chain and getting through the Chinese New Year. We don’t always have the luxury of knowing who will be placing orders at what time, so we have to plan ahead and be ready. There are some simple ways to get your company through the Chinese New Year. Diversify your supply chain. Having a diverse supply chain allows you to procure materials and/or receive product from one factory when another is down. If you are single sourced, then building up safety stock is another option. Place your orders at least a month in advance and order anywhere from one to three months of goods to fulfill upcoming orders. Many factories deplete materials going into the New Year and must replenish them once they open again. Remembering the Chinese New Year and preparing for it can go a long way in helping out your business.
Plan, Plan, Plan
Although many companies experience inventory issues during this time, proper planning can help mitigate these problems. Make the best of the Chinese New Year by keeping a diverse supply chain, holding safety stock, and placing orders far in advance.
We are happy to announce that that RelianceCM will be sponsoring the San Francisco Hardware Workshop, which is put on by Marc Barros. The workshop is a two day event (11/22-11/23) for founders of hardware startups who want to learn how to take an idea to market fit. There will be a variety of topics covered that address everything from prototyping and manufacturing to creating the ideal road map for your company.
There will be a diverse group of speakers that all have a common interest- hardware startups. Our own David Schroeder will be presenting about manufacturing on Saturday. He will be discussing the benefits of manufacturing in the USA and how to decide whether or not to stay onshore.
There will be another Hardware Workshop in New York on December 6-7 and in Seattle on December 13-14. Visit http://hardwareworkshop.com/ for more information.
Here are just a few excerpts from the chapter “The Power of We” in Getting to We (released August 13, 2013), featuring Scott Schroeder.
“Getting to We is not just for large companies. Small and midsized companies have also benefitted from the WIIFWe mindset.”
“Several years ago Scott Schroeder, president of contract manufacturing at RelianceCM, couldn’t believe what he was reading. Here was a book describing the very philosophy that he himself embraced. That book, Vested Outsourcing: Five Rules That Will Transform Outsourcing, spoke to him at a deep level, yet his company was not even in the outsourcing business. His company was at the other end of the contracting spectrum… He wondered how he could leverage the Vested mindset, methodology, and business model to meet RelianceCM’s needs and the needs of his customers. Ultimately, Schroeder decided that the best fit for his company was to select a couple of customers and get to We.”
“It took time for Schroeder to find the right kind of current and new customers to negotiate We relationships. Schroeder described one of the first tests for selecting a customer for a WIIFWe relationship, quipping, “We take them out to dinner. And if they are not someone we would take home to our family, we are not going to have a collaborative relationship with them.”
“This is a fundamental part of RelianceCM’s success. Schroeder and his team work together with suppliers for the benefit of the relationship with their customers. Once he understands the supplier’s thinking, he looks at the total picture to reduce costs. He might change the scope of the project or eliminate an unneeded step in the process to reduce the price without taking advantage of the supplier.”
If you’re interested in reading more, head over to the Vested website. You can snag a copy of the book there.
Two years ago, Scott Schroeder discussed vested outsourcing with Oregon Business magazine contributors. Vested outsourcing is a guiding principal at RelianceCM, and it is no surprise that because of this, Scott was asked to contribute to the lasted book in the series Vested®, Getting to We, by Kate Vitasek, Jeanette Nyden and David Frudlinger.
What is Vested? A hybrid business model, methodology, mindset and movement based on research conducted by the University of Tennessee Center for Executive Education and funded by the U.S. Air Force. What started out as a simple research project aimed at finding a better way to outsource evolved into a groundbreaking and award-winning methodology and business model we coined as “Vested.” What it boiled down to is taking a “What’s-in-it-for-WE” approach, rather than the traditional, “What’s-in-it-for-ME” way of doing business that so many organizations are accustomed to.
If you’re interested in learning more about Vested, head over to their website. They’ve got a ton of tools and resources and links to purchase the book series. Enjoy!
As with any new business decision or partnership, careful consideration must be given to be sure that the best interests of your company are taken into account. Whether you are a new startup or an established OEM, you will be hard pressed to find a business relationship more important that the one with your contract manufacturer.
Here are just a few points to consider when selecting a contract manufacturing partner:
Explore your options - Be sure that your selected partner is able to not only meet your development and production needs but is able to be flexible and recommend the best production profile for your business. The right partner should also take into account cash-flow considerations that may be detrimental to your business.
Supply chain network - Often times your CM will be able to negotiate better pricing on your behalf as they often times will have existing supplier relationships that allows them to leverage all of the business they bring that supplier.
Location, location, location - The geograption location of your CM can also be a big factor in your decision as shipping costs are directly proportionate to the distance between you and your CM; a partner overseas may not always be the best option.
Future-proof your product - Your CM should be well ahead of compliance issues and potential part obsolescence and have clear back-up plans in place to avoid the sole sourcing of components.