Damco banks on China

With 13 new offices and seven more on the way in the next several months, Damco is rapidly growing its footprint in China. Simple, commercially focused offices in high-growth, ‘smaller’ cities are targeting forwarding business from both established and emerging Chinese companies.

Pop-up sales ofice: Armed with a business plan, every one of the 20 new offices established in North Asia is following an ‘office-in-a-box’ concept where the goal is to open quickly with the lowest possible costs and highest potential for long-term success. Within two weeks, an office is furnished, IT equipped, decorated and branded. Within eight weeks the doors are open and products are being sold. Only five employees occupy each office, including a manager, administrative support person and three sales people. Start-up costs for the entire fully functional office are around USD 30,000-40,000.

One Damco
Key planks of the Damco business strategy

Expansion of geographic footprint in high-growth areas, customer segmentation

Consolidation of 315 customer service and operations offices into 50 with the implementation of lean management techniques

Implementation of single freight-forwarding IT platform

Most people outside China have probably never heard of Zhengzhou. Only a few years ago this ‘small’ city in north-central China was labelled one of China’s ‘ghost towns’, with empty apartments and buildings waiting for occupants.

Today its population is more than nine million, roughly the same as New York, and people and businesses are moving in every month, attracted by lower rent and labour costs than the coastal regions as well as an emerging status as an inland logistics hub. Seeing the opportunity for new business, Damco is joining them.

“Of the 25 fastest-growing cities in Asia, 18 of them are in China and they’re not ones that most people can name, because many of them are ‘small’, with less than ten million people,” says Richard Morgan, Chief Commercial Officer for Damco in Asia. “We looked at the map and started building business cases in the locations where we weren’t already represented and started moving in.”

Seven more will open
In the last 12 months, Morgan has overseen Damco’s expansion into or near 13 of these cities, including Zhengzhou. Seven more will open in North Asia in the coming half-year. It is all part of the company’s One Damco strategy to grow the footprint globally in locations where customers are growing their business.

The first new office to open was in Dongguan, in China’s Pearl River Delta. One of the country’s most famous manufacturing and transportation hubs, the PRD consists of nine cities and is home to thousands of manufacturers and suppliers to global companies like Walmart and Nike, both of whom are Damco customers.

“We opened in Dongguan because we wanted greater penetration in an area where we were already fairly well known,” says Jerry Chen, project manager of the North Asia expansion. “Many of the potential customers we were looking at were suppliers and vendors to some of our biggest customers in retail, lifestyle and technology.”

With the help of Damco’s China-based NTS air freight company, there is now an air freight option from Zhengzhou to Europe.

Damco already had one office in Shenzhen and another in nearby Hong Kong. With the Dongguan office followed later by an office in Zhōngshān, Damco suddenly had all-points coverage in a region that has grown at a 15% annual clip for the past 20 years.

“Customers like access and proximity. We had an element of trust already in place as far as our reputation and capabilities and now we have a physical presence to support our ambitions,” says Chen.

The trans-asian railway
In Zhengzhou, the plan was quite different. Damco knew many companies were not taking advantage of the Trans-Asian Railway and its 117,000 km of rail links between Asia and Europe. Focusing on the time and cost benefit of rail, they targeted companies relying on “sea-air” transportation.

Rail is much faster than sea and marginally faster than sea-air, but considerably cheaper than air freight. Therefore rail makes sense for cost-conscious companies flocking to China’s interior.

“We picked up business pretty quickly with that strategy and today we’re putting, among other products, retail garments on a rail service from central China to Europe more than 10,000 km away. That is a first, and because it’s new business it’s even more rewarding,” says Frank Shao, Damco product manager for the Zhengzhou-Europe rail solution.

With the help of Damco’s China- based NTS air freight company, there is now even an air freight option from Zhengzhou to Europe. For those customers that simply need to get to market fast, there is a weekly air service out of Zhengzhou into Leipzig, Germany. Cheaper than flying from Beijing or Shanghai, Damco expects it will be attractive to customers within a 1,000-mile radius of Zhengzhou.

“What we were able to do in Zhengzhou is exactly what we’re going to do in the other 19 locations – present a strong value proposition to customers,” says Richard Morgan. “The growth in these cities is simply incredible and we are positioning ourselves in these locations to find solutions for our customers and grow our business.”