Ikea Supplier Selection

Building a sustainable supply chain An IKEA case study Page 1 Introduction pic It is easy to guess about the present without considering the future. Consumers want to a greater extent goods and services to improve their standard of living. The problem is they educate choices about goods and services that have long-term consequences for the environment. In our contemporary world, organisations need to show responsibility. This means that they accustom resources efficiently, do not harm the environment and consider how what they do affects the ability of future generations to meet their involve. pic IKEA aims to be a responsible organisation.It sells impoverished- legal injury home furnishing products around the world. These include furniture and accessories for kitchens, bedrooms, living rooms, bathrooms and childrens rooms. IKEA now has stores in 36 countries around the world. It has come a long personal manner in its 60 years of occupancy. IKEA pile The direction for the or ganisation is provided by its vision. This acts as a guide for everybody within and outside the organisation about what IKEA wants to achieve. IKEAs vision is To create a better everyday life for the many the great unwashed. To meet its vision IKEA provides many well-designed, functional products for the home.It prices its products low so that as many people as possible can afford to buy them. pic However, in creating low prices IKEA is not willing to sacrifice its principles. Low price but not at any price is what IKEA says. This means it wants its business to be sustainable. IKEA supplies goods and services to individuals in a panache that has an everyplaceall beneficial effect on people and the environment. Customers all over the world have responded positively to IKEAs approach. This is evident in its increasing sales. In 2006 IKEA had a group turnover of nearly 18 billion euros.Page 2 Sectors of sedulousness and sustainable supply chains When consumers go to a retailer like IKEA, they will be looking at the different ranges of products and how they be presented. They may in tallyition look for quality customer service. However, consumers may not be aware that before products reach them, they must move from being raw materials through a variety of stages to become finished products suitable for sale. This is known as the supply chain. picThe supply chain involves a flow of production and servees through each of the iii industrial sectors picIKEA takes its responsibilities seriously and organises its operations in order to have a positive effect upon the environment pic It aims that all the products and materials it takes from the primary sector do not harm the environment. Its products are manufactured in a responsible way. The case study looks in detail how IKEA has achieved its aim to be a responsible business in each of the three sectors of the supply chain. Page 3 The primary sector pic IKEA is not a primary sector organisation but it needs raw materials to develop its products.It therefore works closely with primary sector suppliers to ensure a sustainable tinge on the people and the environment in which it operates. The primary sector involves the festering of the raw materials. IKEA designs its own products. At the design stage, IKEA checks that products meet strict requirements for function, efficient distribution, quality and impact on the environment. Low price is one of the main factors that IKEA considers in producing well designed, functional home furnishings available to everyone. IKEA buys products from more than 1,300 suppliers in 50 countries.It habituates a number of trading service offices across the world. They negotiate prices with suppliers, check the quality of materials and analyse the environmental impacts that occur through the supply chain. They likewise keep an eye on social and working conditions at suppliers. Environmental impact pic IKEA uses a tool the e-Wheel to evaluate the environm ental impact of its products. The e-Wheel helps IKEA to analyse the four stages within the life of a product. This also helps suppliers improve their sagaciousness of the environmental impact of the products they are supplying.Approximately 50% of IKEAs 9,500 products are made from wood or wood fibres. This is a good resource as long as it comes from sustainable sources. It can be recycled and is a renewable resource. pic IKEA creates many design solutions to minimise the use of materials. For utilisation some tables are made out of recycled tensile some rugs are made of material clippings that would otherwise be wasted products such as water cans are designed to be stacked. This means that more can be transported in each load, reducing the number of lorry journeys and therefore lowering fuel costs. distributively of these ideas helps IKEAs products to be more sustainable and reduce the impact on the environment. Supplier enciphers of conduct A key part of IKEAs success is d ue to its communications with materials suppliers and manufacturers. During manufacturing IKEA specifies to its producers that waste should be avoided. Where waste does occur IKEA encourages suppliers to try to use it in the manufacture of other products. IKEA has a code of conduct called the IKEA Way of Purchasing Home Furnishing Products (IWAY). This contains minimum rules and guidelines that help manufacturers to reduce the impact of their activities on the environment.The IWAY code complies with international legislation. A product in use should not have a harmful effect upon consumers or their environment. For example, it should not cause allergies. If it uses energy, it should do so efficiently. When a product comes to the end of its useful life, it should be possible to reclaim or recycle the materials that make up the product. Such materials can then be re-used for making other products. Page 4 The secondary sector Manufacturers within the secondary sector create IKEA produc ts from raw materials.As products move through the supply chain, the process of value-added takes place. pic pic IKEA designs many of its products so that the smallest amount of resources can make the best products. For example, IKEA hand overs on resources by using hollow legs in furniture (e. g. the OGLA dining chair). Another example is by using a honeycomb-paper filling material instead of solid wood for the inside of table tops (e. g. the LACK series). As manufacturers or suppliers add value to products, the IWAY code of practice identifies IKEAs minimum requirements.The IWAY code of practice expects suppliers to follow national and international laws not use child labour not use woods and glues from non-sustainable forests reduce their waste and emissions contribute to recycling follow health and safety requirements care for the environment take care of their employees The application of the code raises standards. Each of the requirements within the code of conduct he lps to develop sustainable business activities. They have a positive impact on the business environment in which the suppliers operate.They also improve the experience of people working for those businesses. To monitor suppliers, IKEA regularly carries out an IWAY audit. This involves talking to employees and inspecting documents and records. IKEA visits suppliers on-site on a number of occasions to ensure that they are following the code of conduct. The code of conduct for suppliers and the work with other organisations underlines IKEAs commitment to low price but not at any price. Although IKEA wants its customers to enjoy low prices, this should not happen at the expense of its business principles. picSustainable partnerships In 2000 IKEA formed a partnership with UNICEF to work on a community programme in Northern India. The aim of the work was to prevent child labour by raising awareness and addressing the root causes. IKEA has also formed a partnership with the earth Wildlife Fund (WWF). IKEA and WWF have committed themselves to promoting the sustainable use of natural resources. This helps to ensure that forests can be used both now and in the future. To support sustainable partnerships with suppliers, IKEA works with other organisations. For example, IKEA and WWF actions have led to a series of training courses for people in Russia, Bulgaria, Romania and China on responsible forest management the development of forestry plans in China demonstrations to managers in Latvia on the benefits of responsible forestry All these projects show IKEAs commitment to supporting sustainable practices. Page 5 The tertiary sector pic Businesses in the tertiary sector provide a service, such as banking, transportation or retailing. They do not extract the raw materials or make products themselves. 11% of businesses within the UK are retailers.In the tertiary sector, IKEAs retail stores add value to manufactured goods by providing a form of shopping different to the u sual high-street experience. IKEA has more than 260 stores in over 36 countries. These meet the needs of consumers in a number of different ways Retailing turnover in the UK was more than ? 250 billion in 2006. Each IKEA store is large and holds more than 9,500 products giving lots of choice. Within each store, there are a number of realistic room settings that alter customers to see what the products would look like in their own homes. The IKEA store is built on a concept of you do half, we do half together we save money. This refers to, for example, the customer assembling furniture at home. Customers handpick products themselves using trolleys. IKEA provides catalogues and home delivery to save customers time. IKEA stores have restaurants that provide Swedish dishes alongside local food choices. To make its activities more sustainable, IKEA has set up many local UK initiatives pic In 2006 IKEA UK recycled more than 70% of its waste products. Its goal is to recycle 90% of m aterials. To reduce environmental impact, in 2006 IKEA UK started to charge for carrier bags. This reduced the use of carrier bags by 95%. In June 2007 IKEA UK removed carrier bags from its stores completely. In December 2006 IKEA UK gave a brand-new plica bike to each of its 9,000 employees. It also gave subsidised travel tickets to encourage them to travel to and from work on public transport. IKEA UK has provided low-energy light bulbs to its entire UK workforce and switched its fleet of society cars to low-emission hybrid models. Page 6 Conclusion pic IKEAs long-term ambition is to become the leading home furnishing company.However, for IKEA, getting there is not simply about growth profitability and market share. As a global organisation IKEA has chosen to undertake a leadership role in creating a sustainable way of working. It has educated suppliers to understand how and why sustainable production is vital. This has helped IKEA differentiate itself from its competitors. C onsumers are made aware of IKEAs commitment to sustainability through its involvement with many other organisations such as the WWF and UNICEF. IKEA is now considered by both suppliers and consumers to be a responsible company that they can trust.