DELAYS are one of the biggest nightmares that we deal with in sourcing. Any time your order is late, you not only lose time but also money and sales.
In China, there is a huge upcoming economic event that hasn’t gotten much coverage from the Western press that has potential to cause delays and disruption to your upcoming shipments. This event is the 2016 G-20 Summit in Hangzhou from Sept 4-5. As usual, China is not a very transparent place and they haven’t officially announced how the surrounding areas will be impacted in terms of factory closures, traffic control on the roads, and increased security at the ports. But I’ve done research tapping into my network in the areas of manufacturing and supply chain. So I’d like to share some findings with you so you can minimize the chances of delays to your shipments.
What is the G-20?
The G-20 is a major economic summit where many world leaders including Chinese President Xi Jinping, US President Obama, and many others will meet to discuss global economic growth. They will meet in Hangzhou, which is located in Zhejiang province a few hours west of Shanghai.
To give you some background into what happens when China hosts a major event seen around the world, let’s look at the 2008 Olympics in Beijing. This was a huge event for China since it was put under the global spotlight. Some even called it a “coming out party” for China. It’s a matter of culture as well since it’s a major “face” issue for China as the host to ensure that the event is a success. So China pulled no punches in making sure that everything went smoothly. As you may know Beijing’s big problem is it’s horrible air pollution – in fact it’s one of the most polluted cities in the world.
So what did China do to clean up the skies during the event? Well first it shut down many of the heaviest polluting factories around the surroundings areas. This reduced a lot of pollution and emissions. Then they banned many cars from the roads. This reduced emissions from tailpipes. As a result attendees were treated to miraculously blue skies during the Olympic Games. It was glorious! However less than 24 hours after the event, as factories reopened and cars were let back on the roads, the skies turned smoggy gray again! So expect similar measures as China prepares for the G-20 – factory closures to reduce pollution.
Another important factor is safety. There are terrorist threats in China as is the case elsewhere in the world. So security measures will be on high alert in the next few weeks. This will impact transportation. For example trucks delivering goods to factories and finished products to ports for shipment may encounter increased rates of inspection, which lead to delays.
Will all factories close down? What industries will be impacted?
No, based on my research only certain factories will be closed. In fact the most impacted industries are fabric dyeing mills, printing factories, and chemical product suppliers and manufacturers. The common theme here is that they all deal with heavy polluting or potentially hazardous materials. These pose both pollution risks as well as security risks.
Where are the impacted areas?
The government has already ordered factory closures in the following cities in and around Hangzhou. More areas may be affected going forward.
Impact on logistics: roads and ports
During this period there will be tremendous traffic control. Not only have many fabric dyeing mills and printing mills in the affected areas been ordered closed, these type of liquids and chemicals are currently being forbidden from being transported to factories in and around Hangzhou as well. So this may cause additional delays.
Trucks near Hangzhou are reportedly required to have security licenses and will need to pass through additional security checks. Based on past experiences, some chemicals and hazardous products may not be allowed to enter these areas until after this sensitive period. Relatively mundane sounding products like batteries may turn into contraband during the next month.
Moreover the Ports of Ningbo and Shanghai will be affected as goods passing through will be under close scrutiny. So if you have orders shipping during this period, don’t be surprised if they get flagged for inspection leading to delays.
Take a look at this warning about the upcoming G-20 meetings from FedEx’s website. Even they seem unsure of the impact of road closures!
Because of dyeing factory closures and as production is consolidated into fewer factories, expect costs to rise. The remaining factories have increased demand and limited supply so classic economic theory dictates that prices will rise.
Furthermore some dyeing work has been outsourced further out to Suzhou so this may affect delivery times as well as increase shipping costs.
How long will the impact last?
Though the actual meeting will only be held over a few days in early September, the actual footprint will be much larger. We have learned that dyeing and printing factories suspected of being heavy polluters or dealing with potentially dangerous chemicals had been ordered to begin closing down from late July. And this period has been apparently been extended through mid-September well after the conclusion of the G-20 meetings.
So what can you do?
Since China is not a transparent place and traditionally suppliers will not proactively share this type of information with you until it’s too late, it’s your responsibility to talk to your supplier and freight forwarders.
First, ask and find out the impact on your production and shipments (if any). Also you may want to work around these dates to minimize your chances of being disrupted by the G-20 meetings.
Finally learn to anticipate these types of major events in the future so you can plan ahead.
Lesson learned! Have any of your orders been delayed by the G-20 or other external factors? Please reply or leave me a comment.