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Preparing For The Olympic Shutdown

By Amy Radishofski, Features Editor, China is making strides to free up roads and clean the air ahead of the Olympic Games, but it could have a negative effect on the manufacturers and suppliers there.

This summer, Beijing will host the Olympic Games. In preparation for the event, the government has taken steps to curb pollution and ease the flood of traffic.

Companies have been told to temporarily shutdown or to close their doors and move to other regions within the country. There are odd/even days where cars with odd or even license plates can only be driven on their designated day.

Moreover, if a company isn’t idled or closed, shipping may be impacted due to the traffic restrictions. You may be able to make your products, but unable to get them to port.

“If a supplier must move or close, companies are forced to build a stockpile in case of production delays, or they may not have any products on the shelves at all,” according to Bryan Larkin, Director of Marketing for Retail, Consumer Products and High Tech Industries, GXS.

He adds that while the Olympics are in the summer, the impact of the shutdown may not be felt immediately. Due to shipping times, it could take a month or more, which would put it in the middle of the holiday season.

“Losses could be all over the board,” Larkin noted. “It depends on how prepared you and your suppliers are and if you can find a carrier. Companies have been renting as many trucks as they can with alternating license plates. The whole logistics infrastructure will be disrupted.”

In this case, preparation is vital.

“Companies should do an analysis so they know what to expect,” Larkin advised. “See how you will be impacted and plan to put something else on the shelf or to do maintenance.”

Waiting for the good news? In this case, there isn’t any for companies that aren’t ready.

“If companies haven’t done anything to prepare for a potential shutdown, there isn’t really anything they can do at this point,” Larkin said. “However, there is a lesson to be learned here.”

Larkin suggests companies look at the bigger picture. The region has recently seen a massive earthquake and snowstorms that brought much of the country to a standstill. The Olympics are just another roadblock.

“All or nothing isn’t a good idea,” Larkin added. “If you’re going to work in China, you need to have operations somewhere else as well to help offset problems like these.”

While it may be difficult for any companies to benefit, the problems China is facing could prove to be a benefit for other nations. Countries in Eastern Europe, as well as the other Asian nations, should be stepping up to the plate to entice the companies that have run into trouble in China, Larkin said.

“Those countries should be saying ‘Let us be your second site,’ and companies shouldn’t be keeping all their eggs in one basket,” he added. “Eastern Europe is closer to home for the West and companies can have a backup in case something goes wrong.”

Looking at the situation on the macro level, an Olympic Shutdown could put inflationary pressure on existing products.

“If a product sells out and it or its components are made in China, is there going to be a gap with no product? Is there an alternative? Will people who have it resell it at a higher price? Do the prices go up on any available stock? Those are all possibilities,” Larkin said.

The exact consequences will depend on how prepared the company is.

“Manufacturers and their suppliers and distributors will definitely notice a problem here,” Larkin said. “However, consumers will notice least if brand owners can work to put alternative brands or products on the shelves.”

Maybe you planned ahead. Maybe you have multiple sites and can handle any potential slowdown or shutdown. Think you’re safe and can sit back and relax? It’s in your best interest to look at your product offerings and keep an eye on the situation in China.

“Even if your company isn’t going to be affected, you should still analyze your product lines and get your shipments ready,” Larkin said. “This is a perfect time to try and take business away from your competitors.”