Ikea Case Study

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Question 2:

a) Ikea´s network of suppliers increases the chance that some of their suppliers may operate unethical over the society, or the surrounding environment. If one of IKEA’s suppliers doesn’t face the minimum requirement of sustainability, this could potentially harm IKEA’s reputation. Thus, will argue that partners and corporations of IKEA may oppose a threat for sustainability. Low price, and focus on cost efficiency, may be a driver for taking shortcuts in the production process. This might give the incentive to not meet the IWAY requirements, or make it harder for IKEA to monitor their operations. The use of chemicals in the products or during production may also oppose a threat to sustainability. If chemical waste is not handled with importance this may be a threat to surrounding environment. A common material used by IKEA is wood. A threat for sustainability is Illegal logging, or lack of good forest stewardship. Expansion could be a sustainability threat. E.g. IKEA needs a lot of space for their warehouses. Thus, implies that the space taken to build an IKEA warehouse must not be of importance to wildlife or surroundings.

b) IKEA focus on high filling rates when transporting their goods to distribution centers and stores. This is to minimize wasted space in containers, which affect how many trucks they need to transport their goods. What transportation methods IKEA choose to use is of significant importance to CO2 emotions. IKEA are moving from using 20% train today, to 40% train transport by 2020. A bigger share of train transport aligned with development of new electrical trains can lower IKEA’s carbon footprint.

IKEA have 31 trading service offices, which makes sure IKEA is always close to the suppliers. The trading office’s employees can frequently visit the suppliers. Control and follow up, train and support supplier’s staff.

Collaborators with IKEA are required to provide statistics with details of how the company impacts the environment. This is to follow up the IWAY code of conduct, which is a minimum requirement suppliers must meet to do business with IKEA.

IKEA have partnership with World wildlife foundation (WWF) and Rainforest Alliance, Forest stewardship council (FSC) to better tackle threats of sustainability.

c) Control and supervision of suppliers and especially training suppliers staff can be additional cost. Also the IWAY code of conduct may be costly to follow up, if the requirements are difficult to monitor, this might contribute to more bureaucracy and additional work to maintain the relationship with suppliers. The resources used in trading offices and control of the IWAY code of conduct can be a costly trade off with economic objectives.

d) IKEA is taking a strong and demanding position over their suppliers, by setting high requirements to sustainability within the supply chain. IKEA wants to take a leading role when it comes to optimizing filling rates of transportation and by coming up with new ways of transporting their goods in an environmentally friendly way as possible.

However, IKEA is a giant producer of furniture and homeware, with a business model that promotes high consumption of goods. Minimum quality and short lifetime of their products, is making consumers around the world to purchase perhaps more then they need. IKEA is a mass producer of furniture, and this brings out fundamental challenges of sustainability. IKEA have been both accused of not being sustainable enough, and have been taken out as a good example of a business that strives to do as less bad to the environment as possible. Thus, they focus heavily on sustainability, many of the actions they are taking, especially collaboration with non-profits and NGOs, can also be perceived as a cover up of the fact that their business model in nature may not be sustainable.

References:

Chopra, S., & Meindl, P. (2007). Supply chain management. Strategy, planning & operation. In Das Summa Summarum des Management (pp. 265-275). Gabler.

Lee, H. L. (2002). Aligning supply chain strategies with product uncertainties.California management review, 44(3), 105-119.

Fisher, M. L. (1997). What Is the Right Supply i Chain for Your Product?.HARVARD BUSINESS REVIEW.