Case Study – Building a sustainable supply chain in IKEA
Table of Contents
1 Answer 1 2
1.1 Sustainable Activities 2
2 Answer 2 3
2.1 Sectors of Industry with Sustainable Supply Chain 3
2.1.1 The Primary Sector 3
2.1.2 The Secondary Sector 4
2.1.3 The Tertiary Sector 4
3 Answer 3 4
3.1 Influences of Supply Chain Elements to Sustainable Practices 4
4 Answer 4 6
1 Answer 1
1.1 Sustainable Activities
Sustainability refers to maintain something or progress at a certain level with a vision of long-term maintenance. Similar way, in the business world, sustainability means the development and growth to be maintained at a certain level and rate so that it can become a competitive challenge for other organizations in the industry. In this, context, supply chain management in an organization becomes the basis to provide a platform for accompanying other management departments to work in line for achieving the sustainable edge over other entities in the industry. Hence this can be achieved by employing some strategies and activities such as transforming corporate policies, improving the concept of social responsibility, addressing the changes occurring in the external environment, etc. According to the given case, IKEA also focused to employ the sustainable activities in order to achieve its vision and mission for a longer period of time. They create a sense of primary responsibility to maintain the environment stable with the production of its products. Also the implementation of low pricing model making their products reachable and settling their business in the affordability to all the levels of income customers. In addition to this, IKEA was clearly with its vision of sustainability from the beginning that helps them to be a successful business entity in the industry. Since the key determinant of IKEA is offering the goods on the lowest possible prices therefore in this way, they assured their sustainability in the long run which will be competent to other rivalries in the industry.
2 Answer 2
2.1 Sectors of Industry with Sustainable Supply Chain
Now in the modern era, organizations are striving to conduct their business operations in a suitable environment. In the case of IKEA, it also has practised the sustainability operations in order to grow at a better rate becoming the pioneers in the maintaining its supply chain as well. Some of the following linkages of the IKEA sectors with supply chain as:
2.1.1 The Primary Sector
The primary sector is mainly responsible to dig out the raw material needed to manufacture the semi-finished and finished goods. So IKEA does by using the e-wheel approach evaluating the impact of different phases of product lifecycle on the environment. Additionally, it approaches more than 1300 suppliers across the world to have the best quality of raw material analyzing the effects under supply chain head. Moreover, it operated to achieve the aim of well designed and luxurious products that everyone could afford it.
2.1.2 The Secondary Sector
This sector is also called the production sector as it involves the whole of human effort to convert raw material into finished goods. In the given case, IKEA uses the value addition strategy to the products. The main aim behind this was to manufacture the best quality product within the availability of using the lowest quantity of raw material. However, IKEA designs its products itself, therefore, the user of available raw material smartly helped them to gain the sustainable edge in the industry.
2.1.3 The Tertiary Sector
In this sector, services are been provided by professionals and experts. These include retailing stores or company outlets that secured finished goods from the secondary house and made them available to consumers. Just like IKEA, they linked their supply chain in the form of open house room stores that convey a message to the customers that what type of product will look like in their homes and which one will be suitable for their lifestyle.
3 Answer 3
3.1 Influences of Supply Chain Elements to Sustainable Practices
The supply chain elements like channelization of communication from management to employees of all levels, good relations with vendors and suppliers, multiple distributors, low cost strategy, a family touch in manufacturing goods, efficient response to the quality customer service, etc. influences the IKEA to promote and maintain their company goodwill by practicing sustainability for a longer period of time.
Employing E-Wheel tool is one of the smartest tools of the supply chain that if it is applied in the company policies, it will create a former relationship among all the activities, from the raw material buying to the finished goods available to the end users. It creates a better sense of responsibility and performing of duties on the production and distribution side.
IKEA also designed IWAY (IKEA WAY of purchasing home furnishing products) which interpreted the rules, regulations, policies, guidelines, and conditions to all its associated partners as well its stakeholders so that it can help t reduce environmental instability and lead to growing the company in line with its vision. This code of conduct helps IKEA to clarify:
1. National and international regulations.
2. Avoid using child labour.
3. Not using an unhealthy raw material such as woods, glues, furnishing oils, etc.
4. The decrease in wasteful left over.
5. The recycling of wastes.
6. Provision of safety environment to labour.
7. Healthy work practices.
8. Punctuality in salary distribution.
9. Taking care of employees’ problems.
10. Distribution of incentives and bonuses among employees.
Hence these elements enable IKEA to operate in an effective environment and go in line with its vision of sustainable practices.
4 Answer 4
IKEA’s main strength is its low cost but not any price strategy with no compromise on quality. In this context, to achieve full power over this, IKEA looked for maintain healthy relations with its suppliers to have raw material at most possible lowest prices and of good quality. More than 1300 suppliers were approached across the world to work under these terms, also they designed such terms and conditions that can benefit both the parties and cause no loss to them. Even suppliers follow the IWAY principle to be consistent partners with IKEA and IKEA itself followed this principle to be connected with its consumers all the time.
The long-term mission to be one of the leading home furnishing companies around the globe. IKEA not only focused to develop a profitable market share in the industry but put all the hard work to reach as many customers as they can and being in the top priorities in peoples’ mind whenever they think to buy any home product for their homes. They also took over the responsibility of playing a lead character in practising the sustainable practices which develops a positive image and reputation am9ong the region and hence all other entities also wished to shake hands with IKEA to enjoy that leadership profitability in the industry.
The longer-term sustainability of IKEA is dependent on its differentiation strategy by educating and training their suppliers and employees realizing them the importance of working in such efficient way that will help them to opt the business and production operations for the long run achieving their vision. Hence IKEA sets an example of trust and sincerity in practising the worth activities that add a positive association to the company.