Wednesday, September 3, 2014

Dad and Ikea: studies in Forecasting

This week was a melding of two of my favorite things: forecasting and Ikea. My father is quite the guy. He works for the New York Independent System Operator (NYISO). (click here to get an overview of his work.) A senior engineer and supervisor in Load Forecasting & Energy Efficiency, this is a guy who deconstructs every sandwich he eats, individually eating each piece of the sandwich one piece at at time (talk about single-piece production flow!) One of the (other) things I've come to learn about my father is how much he *HATES* Ikea.

Which, given their product construction and supply chain system, as outlined in this week's reading, is actually pretty funny. You think he would love it! But no..

After one notorious incident about 10 years ago at the Philadelphia Ikea, we know now not to take dad there. Ever. Ikea is very good about cultivating a particular image that they reinforce with their supply chain practices. But their high-design, low-priced, eco-friendly produced goods come at a cost: You can't get out of the store.

Attempting to put a positive spin on Ikea's notorious store experience, the article stated, "Ikea says its biggest selling point is the price tag, but it can't hurt that getting through one of Ikea's huge stores takes a lot of time. The layout is blatantly manipulative..."

Or, another way of expressing the reaction to this on consumers is the following spoof video:

I shared this video with my father not that long ago, and his reaction:

This trailer captures EXACTLY why I will never again enter an IKEA store without an internal navigation system and a three-day supply of food, water and shelter.

The article this week detailed at length how their founder's hometown and political philosophies continually influences their design and corporate philosophy. 

The good Ad-men (and women) hired by Ikea would like you to believe that, actually, you'll be "Happy Inside." Ikea is home. Or just, cats, I don't know.. (DON"T QUESTION THE CATS! I Can Haz IKEA!)

Okay, so at times, their cost model comes at the expense of the customer experience. No sales staff, no shopping bags, no way out, and the customer experience doesn't end at the store. Nope. You get to go home, transport your goods yourself, oh, and put together your furniture.

I noticed that the article was more than 10 years old, so I searched the internet to read up on a bit more recent corporate history, and found this article detailing their corporate expansion into China.

"Couching Tiger Tames the Dragon" (Wait, Ikea is cats. Ikea is the Tiger? Ikea is a Dragon cat?) Basically, China broke Ikea's supply chain and business model when Ikea attempted to enter the market. 

"In China, however, it faced peculiar problems. Its low-price strategy created confusion among aspirational Chinese consumers while local competitors copied its designs."

Additionally, after Ikea went to great lengths to embrace an eco-friendly design and sourcing process, they found that the Chinese didn't care. They were not interested in paying more money and supporting such efforts, so Ikea did away with those eco-friendly corporate supply chain elements. The politics of doing business in China also required Ikea to locate production facilities directly within China, another major shift from their existing corporate model. This article also talks about the company's desire to expand next to India, where supply chains, shipping logistics and consumer practices (no desire for put-together-yourself furniture) will also be difficult hurdles for the firm to handle.

Clearly, efforts to forecast consumer demand and growth in China and India will continue to be problematic for a firm like Ikea. It's not like forecasting power demand for a hot day in August in New York. System reliability planning is a big deal. Clearly, as my father forecasts the up and down nature of the power industry, Ikea is going to have their hands full in these emerging international markets on both product supply (having to create new factories and shipping systems to overcome local politics) and product demand.

Dad, I'm sure, has many comments on Ikea's forecasting methods. The volatility of Ikea's emerging markets are far from stable or established. But something tells me we won't be discussing Ikea over Swedish meatballs in their cafeteria. No amount of well-designed goods for the masses or cute cat commercials will bring my father back to that place... I hope the Ikea forecasters have taken note.

(Ps. I understand the light attitude written into my post, as this is a class blog, not a research paper. I was so bored by many of my classmates' posts for this week. (Nice pieces on Rent the Runway & Whiskey!) More fun or insightful posts, please! I decided to bring in cat videos. I hope next week more classmates find something fun in our materials. Also, please post more photos/graphics/videos to lighten up text-heavy posts for the reader). 


  1. I very much enjoyed this entry :) I hope you write more equally insightful and fun to read entries!
    - Elena

  2. can't help laughing! i found most of the posts boring too, including mine...having trouble being fun in English...i will spent more time on writing...look forward to your next blog!


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