Ikea Group – Supply Chain Management
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IntroductionIKEA Group (IKEA) is a global retailer of Scandinavian designed furniture and accessories. According to the Company’s Annual Profile (2015), the parent company of the IKEA Group of companies is Ingka Holding BV, a private Dutch-registered company, which, in turn, is owned by Stichting Ingka Foundation. The Stichting Ingka Foundation was established in 1982 by Ingvar Kamprad and the ownership of this foundation lies with the Kamprad family. The IKEA trademark and concept is owned by InterIKEA Systems, another private Dutch company, but not part of the Ingka Holding group. The parent company of InterIKEA Systems is InterIKEA Holding, which is registered in Luxembourg. IKEA has operations in 43 countries across Europe, North America, Asia and Australia and is headquartered in Delft, Netherlands. It employs 155,000 people where 48% of managers are female. IKEA sells 9,500 home furnishing products in 328 retail-stores worldwide. They have 978 suppliers in 50 countries with an average long-term partnership of 11 years. Their website received 1.9 billion visits, catalog application 54 million visits, and stores 771 million visits in FY2015.[pic 1]Corporate AimsIKEA’s vision statement is: “To create a better everyday life for the many people.”IKEA’s mission statement is: “To offer a wide range of well designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.”IKEA’s market positioning statement is: “Your partner in better living. We do our part, you do yours. Together we save money.”The objectives of IKEA are to: • Produce affordable products for the public/customers • Provide a better life for those who cannot afford expensive products • Ensure the customer finds what they are looking for in the retail-stores • Offer low prices.Corporate StrategiesIKEA’s emphasis on providing home furnishing products at low prices has been the main reason for the widespread customer acceptance of its products which, in turn, has facilitated its growth in various geographies. The company designs, manufactures, transports, sells and assembles its merchandise to minimize cost at each level. To help keep prices low, the group ensures that production equipment and raw materials are used efficiently. Customer involvement also contributes to low prices. IKEA relies on customers to choose, collect, transport and assemble products themselves and offers home delivery services only at an additional cost.
Challenges and Opportunities to Implement Corporate Strategies1980sTesting confirmed high levels formaldehyde emissions in its furniture products. 20% decline of sales in Denmark.Packaging waste, use of PVC plastic, cutting of trees to make catalog, and use of chlorine to bleach the pulp in Germany.1990sSecond incident of excessive formaldehyde presence reported in Germany. There was a $7M loss to the company as well as a tarnished reputation.Environmental task force reported IKEA was not showing any concern for sustainability and environmental conservation.Labeled “Environmental Gangsters” and a threat to the environment which violated possibilities of having a sustainable society.Turning point for the company to work toward better procurement practices.IKEA introduced guidelines for chemicals in wood based materials and opened a test facility to test levels of formaldehyde. (1986)IKEA adopted a wholesome environmental policy and instituted a task force to spread environmental awareness across global operations. Established the Environmental Action Plan, which focused on specific implementation tasks in the areas of management and personnel, products and materials, customers, suppliers, buildings equipment and consumable materials, and transport.Initiated basic environmental training for all employees starting with “training the trainers.”Helped create Forest Stewardship Council (FSC) to explore suitable forestry practicesDeveloped “Small Green Steps” to maintain sustainability.IKEA had its fair share of challenges that would test their ability to address the need to re-evaluate the processes needed in order to fulfill the commitment to its suppliers and customers which is provide low cost quality furniture that all could afford who were willing and able to buy while at the same time being ethically, socially, and environmentally responsible. IKEA’s products were manufactured at the facilities of 1600 suppliers spread across Europe, North America, and Asia. Almost two-thirds of its suppliers were in Europe, one-third in Asia, and about 3% in North America. Having such a vast global supply chain network such as this requires relentless monitoring and evaluation in order to maintain a strong cost value to the end user of their products. The following instances below showed IKEA that they needed to revamp their practices throughout the supply chain in order sustain their competitive advantage.