Chinese New Year (CNY) Risk Assessment & Supply Chain Mitigation Plan

I. Introduction of Chinese New Year (CNY)

As the Chinese New Year (CNY) holiday period is approaching, we would like to proactively highlight the potential impacts to manufacturing operations and the supply chain, as well as outline the actions we are taking to minimize disruption to our customers.

Chinese New Year is traditionally associated with temporary factory shutdowns, labor mobility, and logistics constraints across China. These factors may affect production schedules, material availability, and delivery lead times during a defined pre- and post-holiday window.

Through early planning, capacity prioritization, and close coordination with our supply chain partners, we aim to ensure continuity of supply for key products and customers. This document summarizes the potential risks, mitigation measures, and recommended actions required to achieve this objective.

II. CNY Overview & Industry Impact Context

Chinese New Year is the most significant annual holiday in China, during which manufacturing activities typically slow down or stop entirely for a period of time. In addition to the official holiday, the impact usually extends several weeks before and after CNY due to:

• Early employee departures and delayed post-holiday returns

• Reduced factory operating capacity before shutdown

• Ramp-up inefficiencies after production resumes

• Logistics congestion caused by concentrated pre-holiday shipments

Historically, these conditions lead to longer lead times, reduced flexibility for changes, and higher pressure on logistics resources across most manufacturing sectors.

III. Potential Impacts to Customers Due to CNY

1. Manufacturing Impact

During the CNY period, customers may experience:

• Reduced production capacity or temporary production suspension

• Limited ability to accommodate urgent orders or last-minute changes

• Delays in tooling modifications, sampling, or engineering validation

• Longer response time for non-standard production requests

2. Supply Chain Impact

From a supply chain perspective, potential impacts include:

• Extended lead times for raw materials and components

• Temporary material shortages or allocation constraints

• Higher minimum order quantities imposed by upstream suppliers

3. Logistics & Fulfillment Impact

Logistics-related risks may include:

• Limited availability of export booking space prior to CNY

• Increased congestion at ports and inland transportation hubs

• Extended transit times and delayed customs clearance

• Reduced shipment frequency during and immediately after the holiday

IV. Risk Level Assessment for Chinese New Year

Based on our preliminary assessment:

• High-volume or customized products are more sensitive to CNY disruption

• Products with complex supply chains or long material lead times carry higher risk

• Orders confirmed late in the pre-CNY period face increased delivery uncertainty

Risk levels will be managed through prioritization and early execution, as described in the mitigation actions below.

V. CNY Mitigation Actions – Manufacturing

To minimize manufacturing disruption, we are implementing the following measures:

• Pre-CNY Production Pull-In: Advancing production schedules for confirmed orders where feasible

• Capacity Prioritization: Allocating available capacity to key SKUs and strategic customers

• Process Readiness: Completing tooling, sampling, and engineering approvals before the holiday

• Buffer Strategy: Building reasonable safety stock for selected products, subject to demand confirmation

• Operational Alignment: Aligning shutdown and restart plans with factory partners in advance

VI. CNY Mitigation Actions – Supply Chain & Logistics

On the supply chain and logistics side, our actions include:

• Material Pre-Booking: Securing raw materials and critical components ahead of CNY

• Inventory Lock-In: Confirming material availability for priority orders

• Logistics Planning: Reserving shipping capacity with forwarders where possible

• Shipment Cutoff Management: Defining and communicating recommended shipment cutoff dates

• Alternative Planning: Evaluating alternative routes or shipment modes when necessary

VII. Customer Coordination & Required Actions to Prepare CNY

To ensure smooth execution, we kindly request customer support in the following areas:

• Confirm order quantities and forecasts as early as possible

• Place orders before the recommended pre-CNY cutoff dates

• Complete approvals (samples, specifications, artwork, documents) without delay

• Identify priority SKUs or projects that require special attention

• Maintain close communication during the pre- and post-CNY period

Early confirmation will significantly improve production planning accuracy and delivery reliability.

VIII. Key Dates & Timeline for Chinese New Year

• Last recommended order placement: [To be confirmed]

• Pre-CNY final production window: [To be confirmed]

• Factory shutdown period: [To be confirmed]

• Production restart window: [To be confirmed]

• First post-CNY shipment estimate: [To be confirmed]

Specific dates may vary by product and factory and will be communicated separately where applicable.

IX. Conclusion & Commitment From GEMS-MFG

We remain fully committed to supporting our customers throughout the Chinese New Year period. While seasonal disruptions are unavoidable, early planning, transparent communication, and close collaboration allow us to significantly reduce their impact.

We appreciate our customers’ understanding and cooperation and look forward to working together to ensure a stable and reliable supply before, during, and after the CNY holiday.

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