Once again, global supply chains are on the move. This time, however, it is not because of natural disasters or political unrest, but because the trade conflict between the economic powers of China and the US threatens to escalate. What does this mean for the global footwear industry? Which locations are affected, and which are not? Where can brands find state-of-the-art production and low-risk environments? We’ve asked shoe manufacturer Shoe Premier from Cambodia.
Once again, global supply chains are on the move. This time, however, it is not because of natural disasters or political unrest, but because the trade conflict between the economic powers of China and the US threatens to escalate. What does this mean for the global footwear industry? Which locations are affected, and which are not? Where can brands find state-of-the-art production and low-risk environments? We’ve asked shoe manufacturer Shoe Premier from Cambodia.
Tariffs imposed by the Trump administration could also affect Vietnam
In recent years, flexible supply chain management and the right choice of production locations have become essential to the economic success of many footwear companies. While disrupted supply chains were a marginal phenomenon five years ago, they are now almost a part of everyday business. And with the current trade dispute between China and the US, the disturbance shows no signs of abating any time soon. “Brands are consolidating their supplier base and trying to spread their risk by not producing in just one country,” says Chris Ngai. Together with his brother, Ngai runs Shoe Premier, which was founded in Hong Kong in 1990 and operates three shoe factories in Cambodia and a tannery in Bangkok.
Many manufacturing companies have left China in recent months to avoid potential trade restrictions and have set up shop in, for example, Vietnam. Those that have stayed in China are now producing mainly for the local market. “But many in Vietnam are also worried that tariffs could be imposed,” says Ngai, “because a very high percentage of the companies there are from China.” He fears that this could happen very quickly if restrictions are imposed here too. “It makes perfect sense to diversify the supply chain now.”
Cambodia as a safe production location
The situation in neighboring Cambodia is completely different. “Cambodia is still flying under the radar,” says Ngai. Brands can deliver products from there to the US and Europe without having to worry about problems. “The country has undergone massive economic and structural change and development in the last ten years,” says Ngai. Cambodia does not have all the components needed to manufacture shoes, but it doesn’t need to, thanks to its proximity to Vietnam. “Most of the raw materials can arrive from Vietnam within two days,” he explains.
Modern, digitalized shoe production
Ngai knows what he’s talking about. He’s been running the company in Cambodia for 15 years and is only 40 years old himself. He represents a young generation of entrepreneurs who are no strangers to digitalization and sustainability. The company has just invested a lot of money to raise the factory in Cambodia to a new level. The shoe factory in Phnom Penh, which was built in 1998, has been extensively renovated, modernized and, above all, digitized in several phases since last year. “The digital transformation and the renewal of the entire infrastructure were our main concerns,” says Ngai.
Now that such key systems as PLM, ERP, WMS, MES, HRIS and SCM have been integrated, the aim is to create a fully networked ecosystem that optimizes quality management internally and offers brand partners full transparency of production externally. In collaboration with the third-party organization LABS, a fully dimensional safety risk assessment was also carried out, focusing on fire, electricity and structural risks. A total budget of $3 million is to be used for this alone.
Sustainable production processes
Shoe Premier is also one of the pioneers in Cambodia, if not the world, when it comes to sustainability. “We were the first footwear factory to have an Approved Science Based Target (SBT),” says Ngai, explaining that the company aims to reduce its CO2 emissions by 47 percent by 2030, on the basis of SBT targets. In addition, the company is one of the top performers on the HIGG FEM Index in Cambodia, with a verified score of 84 percent. It has also demonstrated sustainable success in chemical management. For example, Shoe Premier has committed to switching to 100 percent ZDHC Level 3 chemicals by 2026, so as to minimize harmful substances in its manufacturing processes.
Focus on casual and outdoor shoes made from leather
Around 7,000 employees work at the three production sites in Cambodia and produce up to 7 million pairs of leather shoes every year, around half of which are shipped to the US and Europe. Its biggest customers include the VF Group, Deckers and Clarks, with a focus on casual and outdoor shoes, boots and sandals. It can produce specialty items, such as waterproof, warm-lined and Gore-Tex -certified products, as well.
Shoe Premier has a clear vision for the future, seeking out continuous innovation, sustainability and digitalization in order to continue to play a pioneering role in the responsible production of shoes.
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