German discounter Takko on handling supply chains in times of crisis

Unlike many other fashion companies, German discounter Takko Fashion shows model behaviour in the current Corona crisis when it comes to its suppliers. At least that's what Takko's denim supplier in Bangladesh says.

The Corona crisis has brought to light many facts that one would not have expected. For example, that many fashion brands are now not paying their suppliers, despite the fact that they have been trying in recent years to ensure that social standards in garment producing countries must be observed. German fashion discounter Takko proves that things can be done differently. Even in times of crisis, the company tries to establish business relationships that are based on partnerships and helps its suppliers instead of bleeding them dry.

The information about this reached FashionUnited not via Takko itself but came from Takko's denim supplier Mostafiz Uddin of Denim Expert from Bangladesh, who has been committed to a more sustainable fashion industry for years. In the wake of the pandemic, he has repeatedly referred to the humanitarian catastrophe in his country, caused by fashion companies not paying suppliers and thus driving many textile companies into ruin. Takko is a positive example, says Uddin. Why is it that of all things, Takko is fairer than others? We asked Birthe Mattschull, senior executive director sourcing and wife of Takko CEO Alexander Mattschull, what makes Takko different and why she acts the way she does.

Ms. Mattschull, what does the situation in your supply chain look like at the moment?

Birthe Mattschull: The situation is definitely challenging for us. We had losses ourselves because of the lockdown and the closure of our stores but we still try to help our suppliers wherever we can. These are suppliers that we have worked with for 25 years, which shows the importance that partnership has for us.

How have you been able to help your suppliers in the current situation?

By shortening payment terms instead of extending them, for example, opening letters of credit earlier so that suppliers can take out loans from their banks earlier. We have also ordered larger volumes from suppliers where we know that other customers may have cancelled a lot. We have tried to find many creative solutions. Fortunately, there have been no bankruptcies in our supplier base so far. The supply chain is stable.

One of your suppliers has drawn attention to your exemplary partnership: Denim Expert from Bangladesh, who is very well networked in the fashion industry. His praise was ultimately the reason for this interview. Was his gesture a surprise for you?

Yes, that was a positive surprise! Takko works in such a way that we don't make a big deal out of things. We are currently receiving positive feedback from a number of suppliers because we always act in a fair way. Eighty percent of our suppliers have been working with us for more than eleven years and we have been working with Denim Expert for seven years.

Even though the scale of the pandemic can hardly be compared to other events, of course, in fashion, we have to deal with crises again and again, sometimes with extremely high cotton prices, sometimes with floods in Bangladesh or hot summers in Germany with poor sales etc. Many retailers have cancelled orders then too. But we don't do that, we try to find creative solutions. It requires putting in more work, every time, but for me, it is always worth the effort.

What kind of creative solutions are those? What measures have you implemented in the supply chain?

It was necessary to move summer goods. We looked at all the stages of production and then decided which goods could be postponed to fall/winter. In some cases we were able to store goods in Germany, in others at the suppliers’. We also placed the spring/summer 21 season very early to show that we are continuing despite the crisis. This means that we have found individual solutions together with the suppliers. Currently, we are working with 178 suppliers and 300 factories. I know many of them personally and can roughly estimate the possibilities there. Only the new suppliers, I don't know all of them personally, but we order only small volumes from them, otherwise the risk would be too great for both sides. I would never order large volumes from suppliers that I don’t know well. We grow together with our suppliers in a healthy way and don’t overwhelm them right away with a million pieces.

In your opinion, will the corona pandemic affect sourcing?

I hope it will impact the behaviour on both sides. We often see erratic behaviour on the supplier side as well. When someone offers slightly higher prices, suppliers quickly change their partners. Not everyone sees an advantage in long-term partnerships. The pandemic has now shown that this is one way to overcome the crisis.

The consensus so far in assessing CSR in the fashion industry has been that discounters and fast fashion companies are the bad guys. Does that annoy you?

Yes, because that is not a fair assessment of the situation. Especially since we have initiated a lot - the membership with the Fair Wear Foundation (FWF) since 2011, for example. That made a big difference, but social responsibility was on our agenda even before that. The aim has always been to develop relationships with suppliers, also in the area of social responsibility. This is also how the FWF proceeds: It is not a question of eliminating suppliers who still have deficits in the area of social standards, but to help them improve. It is the same with employees - we do not say immediately ‘we will exchange this person,’ but we see the potential and develop it. The approach is the same.

What has the FWF changed in your supply chain? For example, the FWF requires the payment of living wages in the supply chain.

The topic of living wages might sound trivial, but it is not. It is very complex. We therefore work primarily on productivity and thus increasing the profit of the suppliers so that they can pay higher wages. We put much emphasis on product engineering, i.e. we try to develop products in such a way that they are different and attractive for customers - e.g. through colouring or prints - but they remain the same in terms of production. This makes production much more efficient. We optimize all processes, so that the output is increased and waste, for example when cutting, is minimized. This is a very big opportunity for the company. This is where the future lies for me.

Denim Expert is a supplier who has invested in sustainability for many years. Nevertheless, reasonably priced Takko products have to be cheap to produce as well. Compared to other brands, where can you cut costs?

Different measures come together here. As mentioned earlier, on the one hand we create optimal products for a supplier’s productivity in terms of cutting, trimming, finishing etc. The effort should always be as low as possible, without the product being boring in the end, because then the customer will not buy it. Without customer, no turnover, and without turnover, no Takko. We also keep the entire supply chain in our own hands; we work completely without service providers and have a very effective PLM system, which enables us to digitally map the entire supply chain. This saves us a lot of time and resources.

In addition, our quality control is located in Asia directly, which is much more efficient than doing it in Germany. We also accumulate the packaging on the largest possible unit and therefore have little packaging, little waste and lower costs. As far as avoiding waste is concerned, we are continuously working on improving ourselves. Of course we also save in terms of materials, but we see our jeans produced next to 200 euro jeans; our t-shirts next to 70 euro t-shirts. The difference is hopefully in the material! And of course our marketing expenses are not as high as those of other fashion brands. All this lowers the overall cost.

As a result of the crisis, many manufacturers are now demanding more securities or the establishment of relief funds to cover revenue losses in times of crisis. Do you think this makes sense?

We have only limited faith in relief funds. The question is, who should fill these funds? Our credo is to live and let live. At the end of the day, it is a neverending give and take. In my opinion, such a measure does not promote a sense of responsibility. Those who behave in an unfair way can rely on relief funds. This is anything but fair in my opinion.

The German government also wants to achieve more fairness, security and transparency in the supply chain with the Supply Chain Act. Is that the right way?

I would distinguish different things here. I am convinced that we can only continue to grow in the long term if the partnership with our suppliers works - on both sides. More transparency and fairness is certainly good. But I believe that companies can be able to implement this themselves, even without legal regulations. Since Rana Plaza, we have come a long way. Ninety percent of the companies I meet already pay much more attention to compliance with standards. Even in terms of structural standards, which are outside our area of competence. Many do and do not make a big deal about it. With all the individual regulations, textile production has become incredibly complex in recent years. If regulations become stricter and stricter, I see a risk that suppliers will go to customers whose requirements are not as high as those of companies from Germany. From my point of view, it is better to solve it ourselves, we don't need a new law to do it. After all, we are also depending on the suppliers, we can't act like brutes.

Photos: Takko

This article was originally published on Fashionunited.de. Edited and translated by Simone Preuss.