Happy Chinese New Year! Sorry, the Item You Want Is Back-Ordered

Chinese New YearChinese New Year kicked off on Monday, and the celebration of the new lunar cycle is having a bigger effect on you stateside than you might think.

For one thing, that "made in China" item you purchased online has a higher likelihood of be back-ordered. Manufacturing plants across China typically shut down for 15 days as people celebrate the festival. Tens of millions make long trips back to their home towns from the industrial cities where their jobs are.

And even after the celebration, it's not always back to business as usual.

How U.S. Retailers Handle the Holiday

Major retailers and the National Retail Federation say they plan ahead to accommodate for the manufacturing shutdown in China during the Chinese New Year. Companies like Macy's (M) and The Container Store make changes to their production and shipping schedules to ensure they have enough goods to get them through the trough caused by the factory closures.

Throughout most of the year, retailers prefer to keep inventories as low as possible, an efficient system with modern just-in-time ordering. But at this period, adjustments have to be made.

"Retailers expect the shutdown every year and my impression is they time their orders and deliveries, so no disruption happens to their supply chain," says Erik Autor, vice president of the National Retail Federation's international trade council. "They have to put things in inventory until the factories are up and running again."

The New Year Production Hangover

While retailers are ready to handle the factory shutdowns in China during the New Year celebration, the post-Chinese New Year can be a bit of a crapshoot.

"One of the biggest challenges for us is when the workers go home during Chinese New Year's, sometimes they choose not to come back to the factories," says Brooke Minteer, senior buying director for The Container Store. "The factories wait a couple weeks after Chinese New Year's to see who comes back."

This problem has increased over the years as China moves from an industrial base to one more focused on technology, and its young people are eager to switch from blue-collar to white-collar jobs.

"It's making it harder for our vendors," Minteer says, noting the company last year found it didn't have shipments coming in for four to six weeks, representing millions of dollars in lost sales.

China is among the top five sources of The Container Stores products, and the Chinese New Year is by far the longest holiday period, so its financial impact is greater than that of other countries' holidays, Minteer notes. Among The Container Store's top-selling products from China are an array of hanging shoe racks and sweater bags.

The Container Store mitigates problems by staying in constant contact with its vendors in the months before Chinese New Year, and especially in the days after the celebration to see how well their workforces are returning. "We're on the phone with all our vendors to see if our spring orders are still on target," Minteer says.

In one extreme case, a longtime vendor moved his manufacturing back to the U.S. from China. But after finding it was not cost-effective based on the labor costs and the price charged for the product, the vendor returned the manufacturing to China last year.

China's Loss, America's Gain

Stepping back and looking at the bigger picture, this time of year gives the U.S. economy a boost in its battle to narrow the trade deficit with China. According to statistics from the Department of Commerce, the first quarter has consistently posted the narrowest gap of the year going back to at least 2007, with fewer Chinese goods and services (roughly one-third fewer) imported into the U.S. than during the third quarter.

Last year, for example, the trade deficit stood at $56.6 billion in the first quarter, compared with $80 billion during the third quarter. The third quarter tends to mark the widest trade deficit gap, as U.S. companies prepare for the busy fourth-quarter selling season.

While the size of the first-quarter trade deficit had been largely trending down from 2007 to 2010, it bounced back up last year to slightly surpass 2007 figures.

Motley Fool contributor Dawn Kawamoto does not own any stock in the companies she mentioned. She is, however, invested in the idea of celebrating Chinese New Year with red envelopes.


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LL

Paragraph is a total mess. Words are missing and you used the wrong "affect". You wrote "effect" not "affect". Your English usage and grammar are so frequently wrong - you should be ashamed of yourselves. And - millions of people read it every day!!!

January 30 2012 at 1:14 PM Report abuse rate up rate down Reply
Mike

It’s been said the US goes to war to protect its oil supplies, but doesn't it really go to war to ensure the continuation of the petrodollar system?

The Iraq war provides a good example. Until November 2000, no OPEC country had dared to violate the US dollar-pricing rule, and while the US dollar remained the strongest currency in the world there was also little reason to challenge the system. But in late 2000, France and a few other EU members convinced Saddam Hussein to defy the petrodollar process and sell Iraq's oil for food in euros, not dollars. In the time between then and the March 2003 American invasion of Iraq, several other nations hinted at their interest in non-US dollar oil trading, including Russia, Iran, Indonesia, and even Venezuela. In April 2002, Iranian OPEC representative Javad Yarjani was invited to Spain by the EU to deliver a detailed analysis of how OPEC might at some point sell its oil to the EU for euros, not dollars.

This movement, founded in Iraq, was starting to threaten the dominance of the US dollar as the global reserve currency and petro currency. In March 2003, the US invaded Iraq, ending the oil-for-food program and its euro payment program.
There are many other historic examples of the US stepping in to halt a movement away from the petrodollar system, often in covert ways. In February 2011 Dominique Strauss-Kahn, managing director of the International Monetary Fund (IMF), called for a new world currency to challenge the dominance of the US dollar. Three months later a maid at the Sofitel New York Hotel alleged that Strauss-Kahn sexually assaulted her. Strauss-Kahn was forced out of his role at the IMF within weeks; he has since been cleared of any wrongdoing.

War and insidious interventions of this sort may be costly, but the costs of not protecting the petrodollar system would be far higher. If euros, yen, renminbi, rubles, or for that matter straight gold, were generally accepted for oil, the US dollar would quickly become irrelevant, rendering the currency almost worthless. As the rest of the world realizes that there are other options besides the US dollar for global transactions, the US is facing a very significant - and very messy - transition in the global oil machine.
got gold?

January 30 2012 at 10:56 AM Report abuse rate up rate down Reply
Mike

Tehran Pushes to Ditch the US Dollar

India and Iran are negotiating deal to trade oil for gold. Does this matter, you ask? It strikes at both the value of the US dollar and today's high-tension standoff with Iran.

Officially the US & EU is Tehran must be punished for efforts to develop a nuclear weapon. Sanctions on Iran's oil exports meant to isolate Iran and depress the value of its currency to a point that the country crumbles.

Sanctions will not achieve their goals. Iran is far from isolated and its friends - like India - will stand by the oil-producing nation until the US backs down or acknowledges the real matter the American dollar as the global reserve currency.

In the 1970s a deal cemented the US dollar as the only currency to buy and sell crude oil, and from that monopoly on oil trade with the US dollar as the reserve currency for global trades in most commodities and goods. Massive demand for US dollars ensued, pushing the dollar's value up. Countries stored their excess US dollars savings in US Treasuries, giving the US government a vast pool of credit.

If the US dollar loses its position as the global reserve currency, the consequences for America are dire. The dollar's valuation stems from its lock on the oil industry - if that monopoly fades, so too will the value of the dollar. Global fiat currency relationships will change. Gold will rise. Uncertainty around paper money always bodes well for gold, and these are uncertain days indeed.

GOT GOLD?

January 29 2012 at 5:41 PM Report abuse rate up rate down Reply
mscellanus

I always forget when the exact New Year begins. I have a very nice friend and would like to send her a card but it's impossible to find any that I can mail to her. I just email my good wishes for a great and healthy New Year.

January 28 2012 at 11:31 PM Report abuse rate up rate down Reply
wetwille007

Where my dogs at?

January 28 2012 at 7:53 PM Report abuse rate up rate down Reply
1 reply to wetwille007's comment
mail4warding

licking you where the sun don't shine... !-(

January 29 2012 at 1:46 AM Report abuse rate up rate down Reply
1 reply to mail4warding's comment
wetwille007

Awesome! Hopefully they give me a wet smootch later. OR is that you licking me? I'm confused!

January 29 2012 at 11:07 AM Report abuse rate up rate down
M2nov

not only chinese new year's day was last monday, but most of the chinese restaurants in my neihborhood, are closed on mondays.

January 28 2012 at 7:46 PM Report abuse rate up rate down Reply
KATHI AND JOHN

Hey that story is wrong.........Obama took credit for the decrease in trade deficet .........you mean he lied...oh no

January 28 2012 at 5:05 PM Report abuse +1 rate up rate down Reply
mitch

dang even the chinese masseuses are on vacation : (

January 28 2012 at 3:03 PM Report abuse +1 rate up rate down Reply
robsearay

WAKE UP AMERICA..IT IS TIME TO BUY AMERICAN...I DID FOR CHRISTMAS AND IT WORKED VERY WELL..UNLESS YOU WANT TO SPEAK MANDARIN YOU HAD BETTER TAKE NOTICE..NOW

January 28 2012 at 12:16 PM Report abuse +3 rate up rate down Reply
2 replies to robsearay's comment
mitch

whats being made in america for us to buy?

January 28 2012 at 3:06 PM Report abuse rate up rate down Reply
4 replies to mitch's comment
mail4warding

nincompoop, Chinese money is what is keeping US economy afloat... try blaming the Greeks on the crumbling US dollar.

January 29 2012 at 1:47 AM Report abuse rate up rate down Reply
rkeeeballs

Now is a good time for americans to try as much as possible to find goods made in america.....please !

January 28 2012 at 11:12 AM Report abuse -1 rate up rate down Reply
1 reply to rkeeeballs's comment
mail4warding

what is made in USA that is good?

January 29 2012 at 1:49 AM Report abuse rate up rate down Reply