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“Fashion for everyone” could be the motto of the Otto Group. To ensure top quality the subsidiary Hermes-Otto International in Asia and Europe is constantly looking for top producers and the most efficient supply chain.
Millions of Germans have grown up with it: the Otto catalog. Fashion for young and old, for trendsetters and the tradition-conscious, for her and for him. For the Germans, this folio of the economic miracle society is what the Sears Catalog is for the Americans or the Kays Catalogue for the British.
In the Otto Group, however, the weighty publication is no longer state of the art. The Hamburg-based enterprise has moved with the times and now, so to speak, issues a new catalog every day. For e-commerce has replaced classic ordering. In 1993, the group’s head of procurement decided to digitalize the Otto catalog, paving the way for his employer to the future of shopping.
The printed edition still exists today, but it is now more of a public relations instrument for a growing portfolio. The name Otto Group stands for numerous brands: brands for fashion such as bonprix, Lascana and Limango, but also for toys or financial services.
Michael Dumke also moves with the times. He is CEO of the subsidiary Hermes-Otto International (HOI) in Hong Kong. His task: to ensure that textiles or shoes are produced by the best suppliers.
Sourcing service is the name of the business. Procurement is its most important activity, but Dumke emphasizes: “Like our parent company, we had to push ourselves even further. Previously, we looked for one producer and processed the order. Our work was then done.” Today, HOI also offers product development, quality management, audit services and supply chain management. In addition to Otto, the customers include many other brands, such as, for example, Ernsting’s family, QVC, HSE24 and the mail-order company Klingel.
What exactly is classic order processing? “There are two types,” explains Michael Dumke. “In the case of reordering, everything is basically already prepared, as this is a repeat order for exactly the same product. If a customer wishes to place a new product, the task becomes more complex. On the basis of a sample, our employees search through a portfolio of approximately 1,000 suppliers and make the most appropriate choice.”
Finally, the order is placed – and monitored. “Before the customer sees anything, the samples pass through our strict quality control,” says Dumke. Once a sample has been approved, production begins, accompanied by constant quality checks. Right up to the point when the merchandise is delivered to the customers. “We offer customer service right down to the last detail. Take measurement control, for example: we check the measurements and the fitting, primarily on dummies, but also with models.” A further service: audits of the factories.
25 employees from Hermes-Otto International are exclusively responsible for compliance. “It is becoming increasingly important for the consumer to know that his garments come from factories that comply with social standards,” says Dumke. They are mainly produced in China, but the pricing pressure necessitates alternative locations such as Myanmar, Bangladesh and Cambodia. The standards of quality, also including those that relate to social aspects, must, however, be met everywhere.
“Hong Kong has not had its own production for years,” says Queenie Wong, General Manager Global Shipping at HOI. But because customs and airfreight regulations in the Hong Kong-Chinese market are less complex, the metropolis and Special Administrative Region continues to be a hub for the textile industry. Manufacturing is also increasingly moving to the vast country’s central North – also driven by pricing. Yet southern China is still known and valued for its jeans fabrics.
Once a producer has received an order, the avalanche for the company begins: accessories and fabrics are ordered, information on measurements is passed on, sample products are manufactured, and, finally, production begins. 100 employees of a southern Chinese factory can produce up to 80,000 items per month. The goods then make their way from there to the target markets.
This is when HOI again comes into play. “For cost reasons, it is, of course, our desire to avoid airfreight,” says Wong. “Nevertheless, airfreight is very significant in our business.” 10 to 20 percent of the annual tonnage is not sent to Europe by sea but in aircraft: express reorders, important collections, urgently required fabrics. “Our business is decisively shaped by speed,” says Dumke. “The supply rhythm must be planned in such a way that an order does not, under any circumstances, arrive late.” Logistics therefore is a key factor of success.
To ensure top quality at all times Lufthansa Cargo is an important partner. “Germany is often derided for its much-vaunted punctuality,” says Cindy Yu, who was responsible for Business Development at the cargo airline in Hong Kong before taking up her position as Regional Manager for Southern China in Guangzhou at the beginning of the year.
But when it comes to the crunch, says Yu, this virtue pays off: where other airlines keep their aircraft on the ground until capacities are filled, Lufthansa Cargo flies the freight “on time” because of its emphasis on high standards and quality. “Our customers greatly appreciate this reliability.” Hermes-Otto International, for example. For no matter which style currently prevails, classic or trendy fashion: the international company with German roots aims to reliably move with the times.
“We had to push ourselves even further.”
Michael Dumke is CEO of Hermes-Otto International (HOI) – a challenging task.
The portfolio of Hermes-Otto International encompasses 1,000 fashion suppliers. Many are located in China, but Myanmar, Bangladesh, Cambodia and even Europe are becoming increasingly important.
Colors of the season:
For decades Otto has been offering fashion for the trendsetters but also for customers who prefer to dress in a classical style.
An important denim producer and supplier for Hermes-Otto International is the company Kai Yip Industrial. Its Merchandising Manager Angel Lam (l.) is an experienced consultant. “If someone who makes an order is uncertain about where exactly the pockets of a new trouser model should be positioned, I readily give some advice,” she explains.
“Jeans are exciting: everyone wears them, everyone likes them, and they are available in all colors and washes.” With this conviction, Angel and Kai Yip have become an integral part of HOI’s network of manufacturers.
10-20 percents of the annual tonnage reaches Europe as airfreight.
Many clients: Hermes-Otto International works for the parent company, but also for brands such as Ernsting’s family and Klingel.
Down to the last detail: Hermes-Otto International also takes care of quality control and an efficient supply chain.
Sustainability matters: a growing number of consumers want garments from factories that meet social standards.