Production up and running in sourcing markets – though situation still remains tense


While we in Europe are slowly and cautiously moving towards a new normal, many countries around the world are still struggling with the immediate consequences of the corona lockdown. Suppliers and their employees in sourcing markets are particularly affected by this. Nevertheless, there is a ray of hope: in all the factories producing for the Otto Group, production is running again after isolated closures, albeit with varying levels of utilisation and capacity. Transport routes are also functioning without any problems.

These are particularly challenging times for Otto International, an Otto Group company, that procures products for companies in and beyond the Otto Group on the world's markets. Affected as everyone else by corona virus restrictions, employees have to ensure that the complex supply chains continue to function and that products reach their customers. 

Contrary to a number of media reports about the closures of factories, all of the companies producing for the Otto Group are currently active, even though they do vary in their respective utilisation and capacity. The complete lockdown that led to a blanket shut down in production until recently, especially in India and Bangladesh, has resulted in delays in delivery, so that orders cannot always be served on time. Despite this, however, transport routes from the factory to the customer are functioning without any problems. 

In recent months, changes in customer demand have led to a change in ordering behaviour in supplier countries, and the lockdowns in the countries themselves have also contributed to the fact that suppliers are fundamentally suffering from the effects of the corona crisis. To date, however, we are not aware of any cases in which factories producing for the Otto Group have had to file for insolvency as a result of the crisis. “The Otto Group has so far been very fair during the crisis. Orders were only postponed when necessary and always in consultation with the suppliers, and even during the lockdown phase in our sourcing markets, orders were only cancelled in exceptional cases. This was a great help to the suppliers at a time in which they were confronted with the cancellation of large order volumes from various sides,” explains Michael Dumke, CEO of Otto International. And he stresses: “All goods produced have been paid for, and we are planning similar quantities with our main suppliers for the coming season.”

Fair business practices also have an impact on the situation of workers in factories. Through this collaborative position towards suppliers, factory workers themselves have automatically been helped. In order to get an overview of the situation at the main suppliers, colleagues from the auditing and quality control department have been in regular contact with both the owners and the workers in the factories. For example, they have been able to verify that wages continue to be paid in these challenging times. 

For Michael Dumke, currently the biggest challenge on the ground is the uncertainty of whether and to what extent the virus will continue to spread, especially in countries like Bangladesh and India. “The situation is certainly dispiriting and makes planning difficult.” The second major challenge he sees is the backlog of orders in the markets that had experienced previous lockdowns, now that customers in other parts of the world are waiting for the goods. “And finally, we have to continue to look after the health of our employees, especially those who carry out quality controls on site in the factories.”

The feedback from suppliers is positive though, and they are very grateful for the fair and dialogical way in which the Otto Group deals with them - especially at a time characterised by imponderables and fears.



Corona - Humanitarian disaster hovering over developing countries