Wednesday, September 4, 2013

Ikea Supply Chain: Sustainability

This week, we read about Ikea's "sexy" price tags and the way they are developed. First a product matrix is used to identify missing products, then a price-point is determined, a design is made, and a supplier is selected. Often times products don't become a whole until their parts are purchased in a store (i.e. a chair and it's cushion, etc). However, this article did not mention sustainable initiatives within the supply chain, which is a core concern of the company as evidenced by this case.

Ikea uses an "e-wheel" to assess the environmental impact of their products by identifying what stage of life the resources for a particular product may be in. For instance, some products require raw materials like wood, while others may be shards of fabric used for rugs, recycled plastics, etc. Additionally, Ikea holds it's suppliers to an environmental code of conduct called "IWAY". IWAY complies with international regulations and implements minimum environmental regulations for all suppliers who work with Ikea.

Internally, Ikea designs it's products to use as little materials as possible. Thus chair legs are often  hollow and tables are often filled with a honeycomb texture instead of being completely wood. Additionally, Ikea has created partnerships with several organizations including UNICEF (in an effort to prevent child labor) and the World Wildlife Fund (to promote sustainable forestry and procurement).

In the end, Ikea's supply chain is more sustainable than what meets the eye. Sustainability starts with raw material procurement, supplier standards, internal design, and shipping (as mentioned in the course reading).

Does Ikeas' sustainable supply chain change who their potential customers are? What about its sustainable design, which some consumers may regard as low quality (hollow legs, tables, etc.)? Is Ikea doing enough to promote sustainability as one of it's core concepts to the public?

Case/Article link:

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