What's behind IKEA PAX wardrobes? - Management of IKEA's Supplier Network - Mirella Girs, Timo Kiippa, Tiia Kuparinen, Timo Myllymaa
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
What’s behind IKEA PAX wardrobes? Management of IKEA’s Supplier Network Mirella Girs, Timo Kiippa, Tiia Kuparinen, Timo Myllymaa
Components of a PAX 2-door
wardrobe
¤ Total of 18 “wooden” elements, 7 different kind
¤ Frame: Particleboard, fibreboard, polypropylene, melamine
foil, foil
¤ Door frame: Fibreboard, ABS plastic, foil
¤ Door panel: Tempered/safety glass, glass enamel
¤ Total of 177 screws, bolts, angle irons and pins of 15
different kind + standard hinges (steel, nickel plated,
copper-plated) for the frame... Door knobs and handles
are sold separately
¤ Flat-pack materials (6 packages)
¤ corrugated cardboard, staples, glue
…and this is only one of IKEA’s products
PAX’s sliding door sold in Sweden
Tempered Sliding Packaging Rubber Steel Assembly Aluminium
Bristle seals
glass profiles materials components components fittings framesAgenda ¤ IKEA in a nutshell ¤ Closeness with suppliers ¤ Active supply management ¤ Support to suppliers ¤ Examples of supplier management ¤ Challenges in management of supplier network
IKEA in a nutshell
¤ About 9500 products, sold in 303 stores in 26 countries
¤ 1046 suppliers in 52 countries.
¤ About 600,000 people
¤ IWAY -supplier code of conduct for suppliers and sub-suppliers.
¤ 45 own production units, in 12 countries, approximately 60% of
production in Europe
¤ 32 Distribution centres in 16 countries
¤ 28 Trading service offices
¤ Trading service offices supporting the process of buying products from
suppliers.
¤ Two Test Labs in Sweden and China (Shanghai), which are also training
centres for IKEA’s co-workers and suppliers.Closeness with suppliers brings
benefits
¤ Quality at affordable prices à optimising the entire value chain
from range strategy and product development to production,
distribution and retail:
¤ Building long-term supplier relationships
¤ Supporting new entrepreneurs in developing countries, often providing
technical and financial support
¤ Investing in new technologies
¤ Working side by side with individual suppliers at their factories
¤ Designing together with suppliers
¤ Teaching i.e. cotton farmers to grow better cotton with less fertilizers and
water
¤ Diminishing “air” in the packages à shipping more product
¤ Trading/distributing more efficiently à over 50% of IKEA’s products are
delivered directly from suppliers to IKEA stores
¤ Creating efficient production technologies and
¤ Producing large volumes.
¤ In 2013 200 IKEA leaders within Purchasing and Logistics met with 50
Suppliers to share inspiration, create clarity and reaffirm IKEA’s
commitment to IKEA’s direction and new strategiesIKEA’s active supply management
¤ IKEA’s low cost focus strategy à active supply
management and concentration in sourcing operations
¤ Powerful customer exerting its influence over other supply
network actors.
¤ “Waves on water” – IKEA’s sourcing decisions have
network-wide ramifications
¤ Suppliers can leverage IKEA’s knowledge and established
relationships when developing their own sourcing.
¤ Relationships between suppliers identified and set up by
IKEA
¤ Representative attends negotiations of suppliers – active
bridging role.IKEA’s supply management principles
¤ IKEA prefers to locate complete value chains in selected
countries.
¤ Contribution to cost reductions through scale and learning
economies
¤ Supplier selection: attitudes of suppliers’ owners and top
managers as key criterion
¤ Commitment and willing to grow together with IKEA
¤ Continuous adaptation and rationalization of production to
meet IKEA’s expectations
¤ IKEA tries to match its products to suppliers’ capabilities
¤ Rather than buying products, IKEA sources production
capacitiesIKEA’s support to its suppliers
¤ Deliberate strategy
¤ to secure manufacturing base
¤ to gain control over product quality
¤ to influence cost development and performance standards of suppliers
¤ Types of support:
¤ Global and local technological support
¤ Low-cost countries: ”roadmap for development”
¤ Frequent onsite visits
¤ Drawings and technical specifications
¤ Regular feedback on product performance
¤ Training programs for suppliers’ personnel
¤ Long-term, strategic support
¤ Technical consultation to master new product technology
¤ Advice to obtain raw materials and components
¤ Financial assistance: short- and long-term
¤ Help with individual machines as well as complete production linesExamples of IKEA supplier
management: PAX’s doors
Two-way process
¤ “.. Through their experience and presence in
China, IKEA had sourcing market knowledge
we could leverage on. We’re in this together
– and we’ve been quite successful...”
(Purchasing Manager at Sapa)
PAX
DOORS
3rd TIER CHINESE 2nd TIER CHINESE
SUPPLIERS SUPPLIERS
IKEA COMPONENTSExamples of IKEA supplier
management: Metal Coatings
¤ IKEA is signing agreements with
companies that supply materials to its
supplier
AGREEMENT MATERIALS
FURNITURESExamples of IKEA supplier
management: Training of Farmers
¤ IKEA is training cotton farmers ie. in India
¤ India, Pakistan, Mali, Mosambique, China,
Brazil…
¤ 2/3 of cotton comes from more sustainable
sources
¤ By Better Cotton Initiative (BCI) and WWF IKEA
enables more than 100,000 farmers in India and
Pakistan to produce cotton using less chemicals
and water. The aim is that by 2015 100% of the
cotton in IKEA products are produced this way.
¤ Also H&M, Levi’s, Marks & Spencer, Adidas, Nike,
Walmart etc. Have taken part in the BCI and
total of 5 million farmers are involved in the
program COTTON
TRAINING
TEXTILESManagerial challenges of interactions
taking place in IKEA’s supplier network
¤ The interaction approach assumes that the customers and
suppliers are active participants in driving the development
of global sourcing, and in forging the supply network
interactions involved in the global sourcing process.
¤ Requirement for coordination to cascade across all tiers of
the supply network for the effective development of global
sourcing and the sometimes neglected role of suppliers in
the global sourcing process (e.g., Andersen and
Christensen, 2005).
¤ The IKEA Trading Service Offices has the direct responsibility
to support and monitor the suppliers.
¤ “..One person from IKEA has been here extensively. .. taught us how to
set up the production line and to optimize. IKEA also comes here to do
audits.” (Export Manager of Chinese Supplier)Managerial challenges of interactions
taking place in IKEA’s supplier network
¤ Cultural adaptation
¤ E.g. in Russia communication more directive and normative, “pushing”
“Make sure that the product is developed.”
“We demand that manufacturers fulfill the standards.”
¤ Child labor accepted in some cultures, but not acceptable by IKEA’s
standards
¤ Extensive exchange of Norms and standards in accordance with the
IKEA’s Code of Conduct
¤ How to commit suppliers and sub-suppliers to follow Code of Conduct
¤ Effective organization of products flow requires proper information flow
¤ IT-systems, communicational challenges
¤ Best practice development requires continuous development
¤ How to share innovations, resource allocation
¤ Personal relationships and involvement
¤ Long-term and trustworthy relationshipsIKEA’s Role in Supplier Network ¤ IKEA is deciding how to add value to its customers and defines, configures and leads it’s supplier network accordingly ¤ IKEA is clearly kind of a lead company in its supplier network mentioned in the De Meyer and Williamson (2012) article ¤ IKEA stretches its interactions as far upstream as possible in the network, all the way to raw material suppliers ¤ IKEA takes a long-term approach and strives to build lasting relationships based on mutuality, not based only on purchasing power ¤ IKEA’s products and technologies are co-developed with suppliers
IKEA’s Managerial Challenges: Building
Social Ties in Networks
¤ Social network ties among parties at the boundaries of
organizations are important in building trust among
actors that can facilitate information exchange,
cooperation and coordination Galaskiewicz (2012).
¤ How tie network members from different cultures
together in a way that builds trust?
Information
Exchange
Social Ties Trust Cooperation
CoordinationIKEA’s Managerial Challenges: Building Social Ties in Networks According Ghauri (2008): ¤ Managers need to get good understanding of the local conditions under which the suppliers operate ¤ Above can be achieved by establishing good personal relationships built on regular contacts, trust and expertise ¤ Managers need educate their suppliers that they are providing extra value, in comparison to competing offers ¤ Managers need also to decide early in the relationship what model of relationship with a particular supplier is optimal for both parties
IKEA’s Managerial Challenges: How to Maximize Innovativeness ¤ More the one of the companies is successful in its ambition to achieve control in network, the less effective and innovative will be the specific relationship and the whole supplier network over Gadde & Snehota (2000) ¤ More IKEA controls its supplier network more it carries out responsibility of innovativeness and finding new directions for future ¤ Challenge for management is to find balance between control and freedom of suppliers in the net
. Comments & Questions?
.
Thank You!Sources ¤ www.ikea.com ¤ http://www.ikea.com/ms/en_GB/pdf/yearly_summary/ikea-group-yearly- summary-fy13.pdf ¤ De Meyer Arnoud, Williamson Peter James, (2012) Ecosystems Advantage, California Management Review, VOL. 55, NO. 1, pp. 24–46 ¤ Gadde Lars-Erik, Snehota Ivan, Making the Most of Supplier Relationships, (2000), Industrial Marketing Management, 29, pp. 305–316 ¤ Galaskiewicz, Joseph, (2011), Studying Supply Chains From a Social Network Perspective, Journal of Supply Chain Management, Jan; 47, 1 ¤ Ghauri Pervez N, (2008), Market driving multinationals and their global sourcing network, International Marketing Review, Vol. 25 No. 5, pp. 504-51 ¤ Hultman Jens, Johnsen Thomas, Johnsen Rhona & Hertz Susanne (2012). An interaction approach to global sourcing: A case study of IKEA. Journal of Purchasing & Supply Management 18: 9–21. ¤ Ivarsson Inge & Alvstam Claes Göran (2010). Supplier Upgrading in the Home- furnishing Value Chain: An Empirical Study of IKEA’s Sourcing in China and South East Asia. World Development 38(11): 1575–1587. ¤ Ocicka Barbara (2009), Case Study: Reconfiguration of the Supply Chain Structure (www.bestlog.org) ¤ Tarnovskaja Veronika, Ghauri Pervez N., Elg Ulf (2008) Market Driving Supplier Strategy: IKEA’s global sourcing network in two developing markets
You can also read
