Tuesday, January 22, 2013

IKEA’s Green Supply Chain Effort

IKEA has been well known for its efficient logistic system. Recently, IKEA has worked on “greening” its supply chain by initiating a Green Vendor Development Program in India, to encourage IKEA’s vendors to cleaner technologies, processes, raw materials and equipment1. The program is a part of IKEA’s efforts to build a more sustainable and eco-friendly global supply chain while maintaining a low cost.

IKEA has adopted energy audits and environment audits to help reduce carbon emission from its textile vendors, improve waste reuse system, and provide an in-depth assessment to ensure a low carbon growth path.

By such activities as assessing energy consumption patterns and identifying resource conservation opportunities, IKEA expects “a greener supply chain” to be more cost efficient than its already well-shaped logistic system. However, on the other side, the greening efforts require a significant amount of capital investment and may lead to a change to the mature supply chain patterns. Therefore, the question is:

Is “the greening effort” more likely to lower the cost of the supply chain? Or is a green supply chain more economic costly to companies like IKEA and impose a threat to their low-cost logistic system?

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