Massive Delays in Chinese Production

[Walter Hay]

One member has asked me about a notice he had received warning of serious production delays, so I decided that I should warn all who are buying from Chinese suppliers.

The China's National People's Congress will be held in Beijing in Fall this year. Since as early as February, the Chinese Government has been cracking down heavily on polluting industries nationwide, but with particular emphasis on 28 cities in the Beijing-Hebei-Tianjin region.

They have gone so far as to cut off power supplies to some areas, but I have not been able to ascertain whether that is for short periods or long term.

This issue could affect factories right across the country, as orders are shuffled around from place to place to try to keep customers happy.

There are considerable family ties in the Chinese business world, so if one owner has the problem and a relative is able to help out in another area they will do so.

This could result in delays to orders in regions outside those most severely affected.

I suggest that all who have orders awaiting production should check with their suppliers to see if there is any risk of delays. Try to work with them, and don't be angry. Patience and a cooperative approach will mean a lot more during such a time when they are under stress.

Remember the importance of Quanxi.

Walter

 

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[biophase]

One member has asked me about a notice he had received warning of serious production delays, so I decided that I should warn all who are buying from Chinese suppliers.

The China's National People's Congress will be held in Beijing in Fall this year. Since as early as February, the Chinese Government has been cracking down heavily on polluting industries nationwide, but with particular emphasis on 28 cities in the Beijing-Hebei-Tianjin region.

They have gone so far as to cut off power supplies to some areas, but I have not been able to ascertain whether that is for short periods or long term.

This issue could affect factories right across the country, as orders are shuffled around from place to place to try to keep customers happy.

There are considerable family ties in the Chinese business world, so if one owner has the problem and a relative is able to help out in another area they will do so.

This could result in delays to orders in regions outside those most severely affected.

I suggest that all who have orders awaiting production should check with their suppliers to see if there is any risk of delays. Try to work with them, and don't be angry. Patience and a cooperative approach will mean a lot more during such a time when they are under stress.

Remember the importance of Quanxi.

Walter

I've had two suppliers with delays due to pollution inspections so far.

 

[amp0193]

Thanks for posting @Walter Hay

I had 3 factories shut down this week, I found out on Thursday. A friend had more (and has been dealing with small shutdowns/inspections all year long) and he tipped me off on Monday that this was coming and that it was related to the Communist congress.

Word on the street from the EPA agents for this round of shutdowns is "a couple weeks" or "September 11th". Not sure how reliable that information is, but it's all I've got at the moment.


Total bummer, as I was scheduled to ship my first order of product this week, and half of my container has been pre-sold to customers already. My customers were pretty understanding, but they won't be understanding forever...


I really hope things get moving soon.

 

[amp0193]

Also, here was an article written this week that's worth reading on the situation:

China Fights Smog as Communist Party Congress Nears

 

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[ddzc]

One member has asked me about a notice he had received warning of serious production delays, so I decided that I should warn all who are buying from Chinese suppliers.

The China's National People's Congress will be held in Beijing in Fall this year. Since as early as February, the Chinese Government has been cracking down heavily on polluting industries nationwide, but with particular emphasis on 28 cities in the Beijing-Hebei-Tianjin region.

They have gone so far as to cut off power supplies to some areas, but I have not been able to ascertain whether that is for short periods or long term.

This issue could affect factories right across the country, as orders are shuffled around from place to place to try to keep customers happy.

There are considerable family ties in the Chinese business world, so if one owner has the problem and a relative is able to help out in another area they will do so.

This could result in delays to orders in regions outside those most severely affected.

I suggest that all who have orders awaiting production should check with their suppliers to see if there is any risk of delays. Try to work with them, and don't be angry. Patience and a cooperative approach will mean a lot more during such a time when they are under stress.

Remember the importance of Quanxi.

Walter

Good to know Walter, thanks. I've been experiencing small delays with a couple of factories since last week due to the typhoon. I feel some have used it as an excuse for their shipment delays. One factory has mentioned the typhoon for one week already. Another was delayed only 1 day due to the typhoon.

 

[AgainstAllOdds]

If any of your production inputs are pollution correlated, then expect increased costs.

The price of aluminum jumped over 10% the past couple weeks. That's a result of the government shutting down 9% of the smelting capacity in all of China. Same for steel, brass, etc.

In my limited opinion, this isn't just related to the People's Congress. The government is shifting production capacity from China to other countries. They have offered incentives to top factories and are pushing that they set up in Southeast Asia, etc.

The cost of labor in China is too high and the factories can't stay competitive forever. The people have money now and want clean air. Factories are going to leave China, and the government will push for it in a way that allows to keep control.

 

[AgainstAllOdds]

Total bummer, as I was scheduled to ship my first order of product this week, and half of my container has been pre-sold to customers already. My customers were pretty understanding, but they won't be understanding forever...


I really hope things get moving soon.

You need to start inventorying.

Anytime there's a delay, you're not getting paid. That's an inefficiency and one that's easy to solve.

Run a calculation on cash flow and the present value of holding inventory vs what you're currently doing (likely just in time production).

If you lose a month in sales, how much money do you lose? If you lose a customer from a delay, how much in long term value do you lose?

Once you have those numbers, calculate how much a warehouse costs, and how much in capital outlay there would be for more inventory. Then figure out if it's worth it.

If you want to warehouse overseas then that's also an option. Reputable freight forwarding companies will warehouse your inventory for a fraction of what you'd warehouse in America.

 

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[amp0193]

You need to start inventorying.

Anytime there's a delay, you're not getting paid. That's an inefficiency and one that's easy to solve.

Run a calculation on cash flow and the present value of holding inventory vs what you're currently doing (likely just in time production).

If you lose a month in sales, how much money do you lose? If you lose a customer from a delay, how much in long term value do you lose?

Once you have those numbers, calculate how much a warehouse costs, and how much in capital outlay there would be for more inventory. Then figure out if it's worth it.

If you want to warehouse overseas then that's also an option. Reputable freight forwarding companies will warehouse your inventory for a fraction of what you'd warehouse in America.

Thanks for the tips.

I've got a warehouse, so storing isn't a problem. This is my first order for this company, so this is all a bit of a test run. I should re-order now to stay in stock, but am not going to, because I want to see what the quality of the first container is going to be first.

Hope to have my other business sold soon (close date of 9/22), so the capital should be there to roll out in a big way in 2018.

2018 I will do the projections to stay in stock, and will factor in a 4-6 weeks of delays into the timeline.