Global Sourcing Process:

Case IKEA
Dr Thomas Johnsen
Professor of Purchasing & Supply Management
Let’s go Shopping!
 IKEA:
Integrated Global Supply Chain
• Ikea does not have its own manufacturing
facilities: uses global supply chain
• Ikea shoppers are Pro-sumers: half producers -
half consumers (Normann, 1993).
• Customer are suppliers of time, labour,
information, knowledge and transportation: create
value rather than consume it.
• Suppliers are customers, receiving technical
assistance from Ikea's corporate technical
headquarters.
• Ikea provides catalogs, tape measures, shopping
lists and pencils for writing notes and
measurements. Car roof racks are available for
purchase at cost and Ikea pick-up vans/mini
trucks are available for rental.
• Supply (chain) strategy aligned with corporate
strategy
Standardisation!
 Facts and figures

• Annual turnover: €38.3 billion (2017)

• The number of IKEA stores worldwide,
including those run by franchisees: 403
across 49 countries
• IKEA co-workers: 194.000 (2017)
A complex governance structure
 IKEA Supply AG

• IKEA Components
• Regional Supply teams
• Purchasing Development
• Logistic Development
• Sales & Supply Planning
• Transport
• Purchasing operations
• Quality Support Centres
• IKEA Communications AB
• Product Development Centre (China)
 How did Global Sourcing Start?
It was our first contacts with the Poles. We knew
that [Poland] had a big furniture industry. But
back then, focus was on quantity rather than
quality. […] I often wonder if IKEA would exist
today without all those difficulties. The reason we
turned to Denmark and to Poland, and abroad at
all, was the enormous blockade that we faced.
Ingvar Kamprad, founder of IKEA
 Sourcing Developments at IKEA 1950s
- 2000
1950s 1960s 1970s 1980s 1990s 2000s

Mainly domestic Establishment of Establishment of

supply but with supplier network supplier relations
increasing supply throughout Europe in North America
problems in Sweden and sourcing from and increasing
Far East degree of sourcing
from China

Increasing degree of Establishment of Increasing degree of

supply from Eastern trading offices, regionalization and
European countries, initially with two categorization
first Poland and later offices in Europe and
others one in Asia

Source: Hertz, S and J Hultman (2008), "On global supply chain development," in Northern lights in logistics and supply chain management,
J Arlbjørn,, A Halldorsson, M Jahre and K Spens, Eds. Copenhagen: Copenhagen Business School Press.
 Global Sourcing Problems
• Quality control
• Accused of unethical sourcing practices e.g. on BBC Hardtalk
May 2007: www.youtube.com/watch?v=9eov-jr5tVo
• IKEA Way on Purchasing Home Furnishing Products (IWAY)
sets out minimum requirements for e.g. minimum wages,
working conditions and overtime payments – but in China only
4% of suppliers adhere to IWAY (2007)
• March 2009: IKEA signs up to new Global Social Compliance
Programme in attempt to take a more collaborative approach to
ethical sourcing
• Increased local sourcing: “It makes sense from both a business
and environmental perspective. For example, for our stores in
North America we’re looking to areas such as Mexico as much
as possible” Greg Priest, Head of Supply Chain and
Procurement Compliance
 IKEA Case Discussion Questions

• Which stage of global sourcing is IKEA at (1-5)?

• How does IKEA manage its global supply base?
• What sustainability challenges have IKEA
encountered in global sourcing and how do they
address these?

• http://www.inter.ikea.com/
• http://supplierportal.ikea.com/
 Five Stages of Global Sourcing

International Purchasing Global Sourcing

Level 1 Level 2 Level 3 Level 4 Level 5

Domestic International International Global Sourcing Global Sourcing

Purchasing Purchasing Purchasing as Strategies Strategies
Only Only as Part of Sourcing Integrated Integrated
Needed Strategy Across Across
Worldwide Worldwide
Locations Locations and
Functional
Groups

Source: Trent, R.J and R.M Monczka (2003) Understanding integrated global sourcing,
International Journal of Physical Distribution & Logistics Management, 33 (7), 607-29.
 Global Sourcing Process:
Sustainability Perspective
Domestic International Purchasing Global Sourcing
Purchasing

Level 1 Level 2 Level 3 Level 4 Level 5

International International Global Sourcing Global Sourcing

Purchasing as Purchasing as Strategies Strategies
needed Part of Integrated Integrated
Sourcing Across Across
Strategy Worldwide Worldwide
Locations Locations &
Functional
Groups

Implications for firm capabilities on sustainable sourcing:

• Little or no • Understanding of the • Knowledge of the global
knowledge of implications of sourcing environment
international international sourcing • Global infrastructure
opportunities & • Some overseas • Worldwide
threats infrastructure in place communications
• No international (e.g. administration) • Coherent sustainability
infrastructure or • International strategy & policy
communications communications • Consistent contracts &
codes of conduct

Source:Johnsen, T.E., Howard, M. and Miemczyk, J. (2018) Purchasing and Supply

Chain Management: a Sustainability Perspective. Routledge.