IKEA

A Global Sourcing Challenge

EARLY HISTORY OF IKEA Started by Ingvar Kamprad in 1948 Worked out of his family kitchen selling

pens, cigarette lighters, and binders Sent out a newsletter and did

everything by mailing Started a store in 1951and sold furniture Used the idea of self-assembling

furniture and sales skyrocketed By 1955, sales totaled ___?

MANAGING SUPPLIERS Competitors teamed up and made it

difficult for IKEA to survive. They found a supplier in Poland who

became IKEA’s largest source for products

Followed a principle that they should not own its means of production, but have a long term relationship with the supplier

WORLDWIDE EXPANSION Expanded soon to Norway, Switzerland,

and lastly Germany where it became IKEA’s largest market

By 1994, IKEA had 114 stores worldwide

http://www.iamcal.com/games/ikea/

PROBLEMS START TO APPEAR Formaldehyde – used as a binding glue

in materials In the 1980s, Danish authorities passed

a limit on the amount of formaldehyde allowed in products

Tests showed IKEA emitted more than allowed and was fined

Sales dropped __%? in Denmark

THE SAME PROBLEM AGAIN In 1992, a German newspaper came

forth with an article titled “Deadly Poisoned Bookshelves”

The lacquer on the bookshelves now contained too much formaldehyde

Not counting the cost of lost sales and production, it cost IKEA ___?

FOUR ENVIRONMENTAL CHANGES Adapting the product range Working with suppliers Transport and distribution Ensuring environmentally conscious

stores

CHILD LABOR! It was found that a supplier in Pakistan

who made carpets had been using child labor.

IKEA claims to have been caught completely off-guard

IKEA’S RESPONSE If the supplier employed children under

legal working age, the contract would be cancelled

Appointed a third party agent to monitor child labor practices

Rugmark Foundation

CHILD LABOR NUMBERS Human Rights Watch’s estimate in India

was between 60 and 115 million child laborers

Children as young as 5 were working physical jobs

An estimated 200,000 were working in the carpet industry

IT HAPPENED AGAIN! One of their largest suppliers, Rangan

Exports, was found using child labor in 1995.

A documentary focusing on IKEA was going to be placed on TV

IKEA was asked to come talk about the situation at hand