Damco, the Denmark-based freight forwarding arm of A.P. Moller-Maersk Group, officially announced the opening of its office in Chengdu, Sichuan province on Wednesday.
Damco, one of the world’s largest logistics and supply chain management companies, employs over 1,000 staff in the new customer service center, which will be located in the same facility as Maersk Global Service Centers, which provides the back office functions for companies owned by the group.
The soft opening of the office took place late last year.
Apart from centralizing customer service and better tapping into the domestic market, the move is also expected to reduce costs for the company, said Steffen Christensen, Damco’s North Asia CEO.
“The pressure on logistics companies to continuously become more cost effective has never been greater. The companies best able to improve on service levels without further increasing their cost base will be the winners in our industry,” he said.
According to Christensen, Damco’s revenue in China dropped 20 percent in 2009 as exports slumped and cargo volume shrank after the global recession took hold. But China is still the biggest market for the company.
“In China we did relatively better than we did globally, based on the fact that the domestic market, including domestic distribution and domestic warehousing, did a bit better than our other global units. That really helped us to perform relatively better,” he told China Daily.
In 2009, the group’s global forwarding and supply chain management divisions were merged under the name of Damco, formerly Maersk Logistics and Damco. Last year, Damco suffered a 7 percent drop in sea freight, a 4 percent drop in airfreight and a 17 percent slide in supply chain management.
Reduced volume and pressure on rates cut 2009 revenue to $2 billion, down from $2.8 billion in 2008.
Christensen said Damco’s business in China showed signs of growth over the past few months, and he is putting a priority on the Chinese market.
Though Damco’s export business makes up 65 percent of its China revenue, he expects growth in both the company’s domestic and import business this year.
“We definitely would like to extend our footprint with the big Chinese companies,” he said.
The company is considering mergers and acquisitions with some Chinese players to extend its domestic network into other cities and more remote regions.
“Damco has been doing advanced supply chain management in order to improve the health of the business over the long term. But for most of our competitors, forwarding is our biggest market,” said Christensen.
Supply chain management makes up 50 percent of Damco’s business in China, while forwarding makes up 30 percent.
Foreign freight forwarders may find there is still room for growth in China.
“In the long run, supply chain management will be a key area between players as Chinese companies get more mature and gradually accept the idea,” said Liu Kai, director of Modern logistics Institute of Beijing Jiaotong University.
The company entered China in 1978 and currently has 14 offices and 950,000 square meters of warehousing across the country.