Two Korean-owned, Indonesia-based factories, PT Dong Joe Indonesia and PT Spotec, which produced footwear for adidas and Reebok, closed last year following financial difficulties and the owners leaving the country, according to sources at adidas. Both suppliers were in a precarious financial state and were unable to obtain further credit with the banks, resulting in the ultimate closure of the factories. In addition, PT Tong Yang Indonesia will be closing shortly.
Due to the closure of the factories, adidas had a short term impact on its ability to deliver Reebok footwear product, according to the sources. Some orders were already dual sourced and the other orders were switched to the second source. All remaining products were reallocated to other suppliers in Indonesia, Thailand, Vietnam and China.
According to a source at Reebok, the three factories were forced to close due to financial difficulties and poor management. “They over extended their borrowings and could no longer finance the purchasing of materials, payment of wages and therefore were unable to continue production.” Prices paid to all three suppliers were said to be competitive with industry standards by the source.
