TAILORED LOGISTICS SOLUTIONS IN SOUTH EAST ASIA

In recent years, Cambodia has become an increasingly important manufacturing source for textile, garment and footwear brands who value the relatively low costs and increasingly high quality levels available. As Cambodia’s largest logistics services provider, Damco provides supply chain management services to a growing number of prestigious international brands in the fast-moving retail fashion industry.

Supporting Cambodia’s largest export industry

While agriculture remains the cornerstone of the rural economy, and tourism is an important foreign currency earner, textile, garments and footwear producers form the backbone of Cambodia’s manufacturing industry. Accounting for 80% of the country’s physical exports, the industry is the main driver of growing logistics investment and activity. Although Cambodia is at some comparative disadvantage in terms of infrastructure by comparison with neighbours such as Thailand and Vietnam, the industry continues to perform well, with a record 640 factories operating in 2015 selling into US, EU and Asian retail markets.

While recent increases in the minimum wage, and the impending Trans Pacific Partnership (of which Cambodia is not currently a signatory) may erode the country’s ‘low cost’ advantage, Cambodia’s textile, garment and footwear industries will continue to be of major importance both to the country itself and to retail brand buyers, but only if the export supply chain functions well.

Successful alternatives

Fashion industries are time-critical. Not surprisingly then, air freight is seen as a vital part of the logistics mix. The two main international airports of Siem Reap and Phnom Penh are the only available international airways. With only 5 air-bridge terminals in Phnom Penh Internal Airport and 10 aircraft stands in Siem Reap International Airport, the capacity is limited although the government is putting efforts to modernize airport facilities aiming to expand capacity in anticipation of demand’s increase. Currently most of air-cargo is uplifted via passenger aircrafts hence costs are relatively high. Where slower but cheaper sea freight is appropriate, timely shipment is often the issue. In Cambodia’s Sihanouk Ville Port, container traffic is often held up as there is only one vessel departure per week.

To address these challenges, Damco offices in Cambodia have collaborated with colleagues in Thailand and Vietnam to create innovative land-air solutions. For example, cargo is now trucked to either Bangkok airport or the recently enlarged Ho Chi Minh City airport, giving access to routes that offer greater freight capacity and more frequent flights. This alternative has seen strong volume growth in 2016, offering Damco’s customers a timely and more reliable service at acceptable overall cost.

Looking to the future, there is also potential to create land-sea links to exploit capacity at the developing Cai Mep container terminal in Vietnam. Cambodia’s new transport minister is committed to addressing logistics constraints on growth. There are active plans for capacity investment at the airports and, further ahead, improvements to the road network (and, just possibly, rail links) in Thailand – Cambodia – Vietnam corridor. As Cambodia’s largest logistics service provider – with 270 employees in the country – Damco will be actively encouraging and be at the forefront of these developments.

Find out more

If you are a fashion brand sourcing in Cambodia and would like to know how Damco can help you, please get in touch with your local Damco office here.