Moving Production Out of China To Cambodia
Many brands are nervous about moving their production out of China to Cambodia or other countries. I have put this list together to cover the basic differences to be aware of when moving production from China to Cambodia.
Raw Materials: Materials and hardware (raw materials) need to be purchased from mainland China and then shipped by container to Cambodia. This shipping cost is amortized over the value of the bags by the unit.
Bringing raw materials from China to Cambodia adds up to 30 days to production lead time. Production lead time is 90 days plus as instead of 60 days like China.
Payment Terms: for customers are usually shorter when producing in Cambodia. It is due to long lead for material handling, factory ties up cash on the material in the warehouse and new Cap X. The factory will usually ask customers to help with cash flow by having shorter payment terms.
Efficiency: It takes a longer time to set up the production line in Cambodia because the workers are less experienced than Chinese workers. It will take a longer time to ramp up efficiency to match China. Also, the production line in Cambodia is typically longer than the production line in China. Cambodia production is geared for more high-volume production, not small orders.
Production: Demand for production is higher than supply in Cambodia. Therefore, it is essential for customers to book production capacity early on. Some factories are already at maximum capacity 4-6 months out. The culture of production requires a stable/steady production order year-round. The Cambodia factories generally do not use subcontractors like China
MOQ: is for PU handbags is going to be 2,000-3,000 on up per style for PU bags depending on the bag size and design. It will vary case by case. Leather bags vary by factory. (due to raw materials being brought in from China)
Price: The price will be average 7% more than China, but can vary from 5-10%, although labor wages are lower in Cambodia. The extra cost is due to the inefficiency of the workers and to cover the logistics of bringing in the raw materials out of the country.
Local workers: are very stable, they go home each night, and do not live in dorms on site - it is good for quality and rarely do factories run overtime like it China – this is ideal for passing a Social Responsibility audit.
GSP Trade Program: Under the GSP (Generalized System of Preferences) program, the USA can import goods from Cambodia duty-free. For more information: https://kh.usembassy.gov/duty-free-access-travel-goods-made-cambodia/
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