ikea, building a sustainable supply chain

IKEA, Building a Sustainable Supply ChainSupply Chain Management

01/05/2023 Radu Acalfoaie

A SUSTAINABLE SUPPLY CHAINThe Green Team

Radu Acalfoaie, Siobhan Flynn, Bob Ibeh, Paul McMahon

SCM & SUSTAINABILITY DEVELOPMENT DISTRIBUTION RETAIL

TAKING RESPONSIBILITY FOR PEOPLE & THE ENVIRONMENTRAW MATERIALS

MANUFACTURING

DEMOCRATIC DESIGN CENTRE

OPTIONALLOGO HERE

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• IKEA offers customers inspiring solutions for their homes at accessible prices. The customer is the creator – self assembled furniture generates value for the customer.

• Energy efficient stores, from solar panels used to power many IKEA stores around the world to ensuring that more than half of the energy used in stores comes from renewable sources, IKEA are striving towards total energy efficiency.

• IKEA offers an Innovative retail & warehousing solution. By consolidating these two functions under one roof, IKEA has cleverly reduced or removed activities, costs, & waste associated with assembly, raw materials, storage, & shipping helping to shrink their environmental footprint.

• Waste management is vital across all of IKEA stores, where up to 15 categories of waste are sorted and 90% of all waste is recycled or used for energy production.

• IKEA wants to make recycling & waste disposal easier for their customers as well by providing customers with the opportunity to return & sort waste, such as batteries & fluorescent lights.

• A sustainable life at home - offering customers smart products & services to help customers live more sustainably is key. Energy consuming products, such as white goods & lights are 50% more energy efficient than the average product on the market.

• Room settings offer customers a visual understanding of how their products work, their features & benefits, and help to demonstrate how they can help the customer live a more sustainable life.

Why choose between sustainability, style, function, & price?At IKEA, you don’t have to!

▪ 1.1 million square meters of selling space being used sustainably

▪ 884 million store visits annually▪ 375 stores worldwide

▪ IKEA’s unique retailing model means that their customers become a part of their supply chain as they journey through any IKEA store.

From 3D printed chairs to evolved kitchens, the world’s biggest furniture retailer is reassembling the future.

● Sophisticated and efficient supply chain. F.W.Taylors Time and Motion Dream Company seamless transition of efficiency into profit . This is how IKEAS manufacturing process was described in Wired magazine.(Bell 2015)

● The main challenge with manufacturing is simple. Can it be flat packed, transported, assembled, and disassembled again

● Marcus Engman This is where the magic happens, The Democratic Design Centre is located at Älmhult and co-ordinates with design centres in India and China.

● 2000 New Products Every Year, 59% Made in Europe.● Imagine having a 3D printer with the space and capacity to reproduce a chair.

IKEA have this. Actually nearly half of all products are 3D printed before going to manufacturing process. This combined with the latest advances in material and manufacturing/ assembly techniques is all focused towards the customer!

● 200 - 300 New Ideas Every Week. Narrowed down to 35.● IKEA want very Production Line Running at Full Efficiency.

BEFORE AFTER BEFORE AFTER

• Supplier selection based on environmental profile such as ISO 14000 & Energy consumption ISO 50001

• Cooperation with suppliers to reduce pollution & waste

• Increased focus on ecological transport mode selection

• Sustainable acquisition of raw materials

• Invest in renewable energy• Reducing of packaging • Sharing information• Innovation

MANUFACTURING WASTE – WHAT WASTE?

ENVIRONMENTAL MEASURES PEOPLE & PLANET POSITIVE

At IKEA, the idea of sustainability is engrained in to its corporate identity, not only in their supply chain practices but across the entire organization. Sustainability does not end at production but follows through to logistics, retail, and even the end user. People & Planet Positive is IKEA’s ethos and their sustainability directive.

Manufacturing at IKEA doesn’t stop at the finished product, it is a 360 degree process. Raw material is used, products are produced, then any waste becomes the raw materials and produces more products. Ikea also supply drop off areas at stores for waste which they recycle. Damaged products are used to repair other products or repaired and sold off cheap. Here are some examples made from waste, including used baby dippers and saw dust

A triple-bottom-line approach has increased economic profit while reducing social and environmental loses.IKEA triple-bottom-line approach consists from:Economy/Profit -3.5 billion profitEcology/Planet-100% renewable energy by 2020Equity/People- 155.000 employees, 48% of the managers are females

“sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” (UCLA, 2016)

• 1500 (978, furniture) suppliers in 50 countries, has trading agreements such as IWAY and industry standard

• Get the most of every tree , wood is harvested sustainable and suppliers audited-16.1 million m3 of wood used in 2015

• 1997 new particle material, the use of raw material was reduced by 85,816 tons, 2,800 less trucks for transportation due to lower cargo weight, easier handling of the merchandise for the customers and reduced costs and prices.

• Cotton - grown in a more sustainable way, less pesticides by 50%, fertilizer's by 30% and less water

• 87% of palm oil was from certified, segregated sources• 5.1 million m2 of leather, and 88% of this was chromium-

free• 1992-banned the use of Freon's to preserve the ozone • Partners with WWF - increase the certified forest areas in

Russia from 3.3 million to 20 million hectares• 9,500 hectares of forest have been replanted with native

tree species • Water reductions plans-micro watersheds in India

HOW IKEA DISTRIBUTION CHANNELS WORKSThe process of distribution in IKEA is carefully design and coordinated through division of labor. For example:Store distribution manager: The store distribution manager examines the supply chain, ensuring distribution centres can house the volume of goods required by stores.Customer distribution manager: The customer distribution manager is responsible for working and developing the order distribution business, from warehouse to customer.Transport operational coordinator: The transport operational coordinator is the fulcrum between IKEA and its carriers, guaranteeing an effective flow of goodsWarehouse operations manager: The warehouse operations manager ensures proficiency within the distribution centres and reacts to the needs of the supply chain. The quality manager is responsible for quality control in the warehouse and efficiency of supply to the customer.Transport business developer: The transport business developer builds and maintains relationships between IKEA and its carriers whilst negotiating mutually beneficial transport scenarios.Goods flow coordinator: The goods flow coordinator secures the maximum product availability to the customer with the lowest possible supply chain costs.

IKEA strive to see a huge percentage of all freight within Europe moved by rail.For some years now, all the freight companies working with IKEA have been mandated to provide statistics for a so called “Environmental Performance Sheet “a detailed document explaining how their operations impact on the environment. This allows IKEA to keep a check on these companies’ environmental work and to monitor what measures they are introducing to cut down on the use of fuel to minimize C02 emission.

IKEA is considering another ways it can provide end-to-end supply chain solutions and one idea is to take returned products and recycle them into other products that means consumers can now return plastics, batteries, furniture, compact fluorescent light bulbs, mattress, and textiles to the store. Better efficiency and maximum space utilizationLarge volumes; Flat packages; Low costs; Low CO2 emissions.Efficiency is crucial to the IKEA business strategy, and this is reflected in the way the design their product range and shipments to minimize the number of journeys and distances travelled. Packaging and the way products are packed into vehicles can have a big impact on the efficiency of transport because the more products they can fit into a container, the fewer journeys they need to make. Thereby lowering distribution costs and CO2 emissions. The rationale behind this, is to minimize the impact this part of their business has on the environment.Renewable EnergyIKEA 768,972-square-foot PV array comprises of a 2,674.9-kW system, constructed with 18,576 panels, and is the state’s largest rooftop array. The IKEA distribution center will generate roughly 3,397,178 kWh of clean electricity yearly, the equivalent of reducing 2,397 tons of carbon dioxide (CO2), eradicating the emissions of 499 cars or powering 359 homes yearly. These will be consistent with the company’s objective of being energy independent by 2020, IKEA has installed more than 250,000 solar panels on buildings across the world and owns/operates approximately 110 wind turbines in Europe.Charging stationAs part of IKEA’s commitment to renewable energy, the company are presently installing electric vehicle rapid charging points across all of their UK stores to complement the existing

IKEA REVERSE LOGISTICS

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01/05/2023 Radu Acalfoaie3

About IKEA 1943 by Ingvar Kamprad in the Swedish town of Almhult selling wallets, picture frames, pens and even ladies’ stockings.• 1950 stopped selling other items focusing more on furniture items and in 1951 Ikea has produced is first

catalogue also started working on the flack pack concept• First major furniture store was opened in 1958 and by 1960 stores were opened outside Sweden in; Norway

and Denmark

1970 the business has been expanding outside Scandinavia, first in Switzerland followed by Germany, Australia, Canada, Austria and Netherlands in the following years• 1980 first stores were opened in USA and UK also winning the Excellent Design prize in the same period.• after 1990 in Hungry, Poland, Czech Republic, United Arab Emirates, Spain and China focusing also on

introducing the children range in the same period followed by expansion to Russia and Canada in 2000

2000 launched its environmental program called IWAY and reduced the use of their transport with a focus on environmental friendly transport and managed to reduce its CO2.• It specifies the requirements that are placed on suppliers of products and services and details what they can expect in

return from IKEA• It covers working conditions, the prevention of child labour, the environment, responsible forestry management and

more (IKEA, 2016)2015 following a vertical integration strategy of the company and with a specific environmental purpose IKEA has acquired large surfaces of forestry for its raw materials in the Baltic countries and Romania.2015-100% sustainable cotton sources, 50% sustainable wood sources


Sustainability & SCM at IKEA

A triple-bottom-line approach has increased economic profit while reducing social and environmental loses.IKEA triple-bottom-line approach consists from:• Economy/Profit -3.5 billion profit• Ecology/Planet-100% renewable

energy by 2020• Equity/People- 155.000 employees,

48% of the managers are females



Environmental Measures• Supplier selection based on environmental profile

such as ISO 14000, Energy consumption ISO 50001• Selection of logistics service based on

environmental profile e.g. ISO 14000• Consolidation of shipments• Sharing information• Increased focus on ecological transport mode

selection• Reducing of packaging • Sustainable acquisition of raw materials• Cooperation with suppliers to reduce pollution and

waste• Invest in renewable energy• Innovation






MANUFACTURING


OPTIONALLOGO HERE

OPTIONALLOGO HERE




























Manufacturing at IKEA doesn’t stop at the finished product, it is a 360 degree process. Raw material is used, products are produced, then any waste becomes the raw materials and produces more products. Ikea also supply drop off areas at stores for waste which they recycle. Damaged products are used to repair other products or repaired and sold off cheap. Here are some examples made from waste, including used baby dipers and saw dust















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Sustainable Acquisition Of Raw Materials• 1500 (978, furniture) suppliers in 50 countries, has trading agreements such as IWAY and

industry standard • Get the most of every tree , wood is harvested sustainable and suppliers audited-16.1

million m3 of round wood used in 2015 • 1997 new particle material, the use of raw material was reduced by 85,816 tons, 2,800

less trucks for transportation due to lower cargo weight, easier handling of the merchandise for the customers and reduced costs and prices.

• Cotton - grown in a more sustainable way, less pesticides by 50%, fertilisers by 30% and less water

• 87% of palm oil was from certified, segregated sources• 5.1 million m2 of leather, and 88% of this was chromium-free• 1992-banned the use of Freon's to preserve the ozone • Partners with WWF - increase the certified forest areas in Russia from 3.3 million to

about 20 million hectares• 9,500 hectares of forest have been replanted with native tree species • Forestry project in China FSC certified (Forest Stewardship Council)• Water reductions plans-micro watersheds in India






MANUFACTURING


OPTIONALLOGO HERE

OPTIONALLOGO HERE







































HOW IKEA DISTRIBUTION CHANNELS WORKSThe process of distribution in IKEA is carefully design and coordinated through division of labor. For example:Store distribution manager: The store distribution manager examines the supply chain, ensuring distribution centres can house the volume of goods required by stores.Customer distribution manager: The customer distribution manager is responsible for working and developing the order distribution business, from warehouse to customer.Transport operational coordinator: The transport operational coordinator is the fulcrum between IKEA and its carriers, guaranteeing an effective flow of goodsWarehouse operations manager: The warehouse operations manager ensures proficiency within the distribution centres and reacts to the needs of the supply chain.The quality manager is responsible for quality control in the warehouse and efficiency of supply to the customer.Transport business developer: The transport business developer builds and maintains relationships between IKEA and its carriers whilst negotiating mutually beneficial transport scenarios.Goods flow coordinator: The goods flow coordinator secures the maximum product availability to the customer with the lowest possible supply chain costs.




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Manufacturing at IkeaAn object with great form and function that ages beautifully and is sustainable - then top that off with a low price.


IKEA is A Making Machine

• 44 Production Plants in 11 Countries• 2500 new Products Yearly, 9,500 Catalogue Products • Design for manufacture assisted by Home Visits• Grow by using own resources. Earn money first.• Manufacturing is Customer Focused, Home Visits.• Elimination of waste, reduction of materials & energy

consumption

The main challenge for IKEA can it be packed flat, transported, assembled, used and potentially dissembled again?


Democratic Design Centre• “Moving ideas forward into physical

samples“• 20 Designers collaborate with India &

China• Also freelance and specialists.• Array of tools and processes. F.W. Taylors

Dream Company come true.• ½ products are first produced by 3D

Printer.• Fortus 900MC -- has a build space that

allows whole chairs to be prototyped


Manufacturing Waste- What Waste?VÅLLÖ water can isstackable, an optimalamount of water cans ineach truck load.

Made of recyclablepolypropylene andwood fibres from sawmill waste.

IKEA 365+ RISP uses lyocell, an environmentally-friendly alternativeto cotton.

IKEA PS JORDBRO is made of recycled milk packages and baby dippers.






MANUFACTURING


OPTIONALLOGO HERE

OPTIONALLOGO HERE







































HOW IKEA DISTRIBUTION CHANNELS WORKSThe process of distribution in IKEA is carefully design and coordinated through division of labor. The store distribution manager examines the supply chain, ensuring distribution centres can house the volume of goods required by stores.The customer distribution manager is responsible for working and developing the order distribution business, from warehouse to customer.Transport operational coordinator: The transport operational coordinator is the fulcrum between IKEA and its carriers, guaranteeing an effective flow of goods The warehouse operations manager ensures proficiency within the distribution centres and reacts to the needs of the supply chain.The quality manager is responsible for quality control in the warehouse and efficiency of supply to the customer.The transport business developer builds and maintains relationships between IKEA and its carriers whilst negotiating mutually beneficial transport scenarios.The goods flow coordinator secures the maximum product availability to the customer with the lowest possible supply chain costs.




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Focus On The Environmentally Friendly

• For some years now, all the freight companies working with IKEA have been mandated to provide statistics for a so called “Environmental Performance Sheet “a detailed document explaining how their operations impact on the environment.

• IKEA similarly reduces logistics cost by having customers as part of their supply chain.

• IKEA is considering other ways to provide end-to-end supply chain solutions and one idea is to take returned products and recycle them into other products that means consumers can now return plastics, batteries, furniture, compact fluorescent light bulbs, mattress, and textiles to the store.

• Customers gather their furniture from self-serve area without long waits, including an option for renting free cycle + trailer and assemble the furniture themselves when they get home.


How IKEA Distribution Channels Work

The process of distribution in IKEA is carefully design and coordinated through division of labour:• The store distribution manager examines the supply chain, ensuring distribution centres can house the volume of goods

required by stores.

• The customer distribution manager is responsible for working and developing the order distribution business, from warehouse to customer.

• Transport operational coordinator: The transport operational coordinator is the fulcrum between IKEA and its carriers, guaranteeing an effective flow of goods

• The warehouse operations manager ensures proficiency within the distribution centres and reacts to the needs of the supply chain.

• The quality manager is responsible for quality control in the warehouse and efficiency of supply to the customer.

• The transport business developer builds and maintains relationships between IKEA and its carriers whilst negotiating mutually beneficial transport scenarios.

• The goods flow coordinator secures the maximum product availability to the customer with the lowest possible supply chain costs.


Better Efficiency And Maximum Space Utilization

1. Packaging and the way products are packed into vehicles can have a big impact on the efficiency of transport because the more products they can fit into a container, the fewer journeys they need to make.

2. The fewer journeys they make, the lower distribution costs and CO2 emissions.

3. IKEA strive to see a huge percentage of all freight within Europe moved by rail.

4. Efficiency is crucial to the IKEA sustainable business strategy:

• Large volumes

• Flat packages

• Low costs.

• Low CO2 emissions


Renewable Energy

• The IKEA distribution center will produce approximately 3,397,178 kWh of clean electricity annually, the equivalent of reducing 2,397 tons of carbon dioxide (CO2), eliminating the emissions of 499 cars or powering 359 homes yearly.

• The company’s goal is to be energy independent by 2020.

• IKEA has installed more than 250,000 solar panels on buildings across the world and owns/operates approximately 110 wind turbines in Europe.

• Charging point for Electric Cars






MANUFACTURING


OPTIONALLOGO HERE

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18


Retail & The Sustainable

Supply Chain

01/05/2023 Radu Acalfoaie 20

IKEA

375 Stores Globally

884 Million

store visits

€33.8 billion

retail sales

1.1 million sq meters of retail space

172,000 IKEA

employees

Retail Data 2015


• Innovating Sustainable Retailing & Logistics Models

• Customers do not have to choose between sustainability, quality, style, function, or price

The Sustainable Store Journey


inspiring solutions, low prices

sustainable life at home

waste management

innovative retail &

warehousing solution

energy efficient stores

People & Planet Positive






MANUFACTURING


OPTIONALLOGO HERE

OPTIONALLOGO HERE








































IKEA strive to see a huge percentage of all freight within Europe moved by rail.For some years now, all the freight companies working with IKEA have been mandated to provide statistics for a so called “Environmental Performance Sheet “a detailed document explaining how their operations impact on the environment. This allows IKEA to keep a check on these companies’ environmental work and to. monitor what measures they are introducing to cut down on the use of fuel to minimize C02 emissions.



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Conclusion• Renewable energy 53.4% of 2015

consumption.• Carbon emissions from transport

were 27.2% lower than in 2011. • 88.9% of waste was recycled or

energy recovered.• By promoting sustainability, make

more for less and do it yourself concepts IKEA, improved SCM and reduced their overall CO2 and the benefits are transmitted back to the customer.

Thank you for watching!

ikea, building a sustainable supply chain

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