IKEA - A lesson in sustainable supply chain leadership

 IKEA -A lesson in sustainable supply chain leadership

I ,Gayathri Nair pursuing MBA at Amrita school of business, find it distressing to see the lack of environmental awareness and concern business houses show towards our planet . So sustainability as a concern was on top of my yardstick for assessing the culture of businesses.  It's here that IKEA stands as a beacon of hope

Introduction : 

The awareness that we are not the owner of the earth ,water ,air and sky but mere custodians for the gen next has seen the birth of "sustainability " in all walks of life .sustainability reads as avoiding the depletion or rape of natural resources so that the fragile ecological apple cart is not overturned 

Sustainability as a way of life has permeated most businesses and the global furniture giant IKEA is the best example of sustainable supply chain management .

IKEA : An introduction 

With a vision " to create a better everyday life for the many people " IKEA ,the Swedish multinational company with its parent company in the Netherlands has firmly entrenched itself in the market for ready to assemble furniture ,kitchen accessory and home accessories . Born in the creative mind of a 17 year old, Ingvar kampard in 1943 , IKEA has grown into a global brand name to be reckoned with in the field of furniture retailing 

Modernist furniture which requires minimalistic effort in assembling and adhering to environmental friendly guidelines is the USP of IKEA 

 

There are around 433 IKEA stores in 52 countries making them undoubtedly the king .

 

 

The ownership Hierarchy : 

IKEA ownership is a maze of intricate web of not for profit and for profit corporations .the corporate structure is bi bifurcated into operations and franchising 

Commitment to environment : A legacy 

 minimizing the use of formaldehyde ,replacing polyvinyl chloride in wall papers ,home textiles ,furniture etc , do away with acid curing lacquers, reducing the use of chromium for metal surfaces are some of the epic changes put in place 

Sustainable supply chain leadership : Commitment for life

Leading the sustainability way and being a shining beacon of hope for sustainability ,IKEA has pulled out all their stops while drafting their sustainable supply chain planning . They have been the flag bearers in the arena of investing in renewable and efficiency and have addressed the elephant in the room by making all their 12,000 deliverables from renewable ,recycled and environment friendly resources 

IKEA has an IWay code of conduct in place . This is the yardstick that has to be met while sourcing and distributing their resources .they have pumped in 1.1 billion dollars in sustainable supply chain that covers companies developing renewable energy , re-forestry and bio materials . A small step for a business but a giant leap for the safety of the planet 

Sustainable sourcing : Foundation of green living 

The main resources that IKEA makes use of is cotton and wood . They have been trying to use organic , those which limit the use of pesticides , fertilizers and minimize the wastage of water .

IKEA is pumping in sizeable investment in sustainable forestry and works in association with organizations like the Global Forest Watch . They aim to make 100 percent of their wood from sustainable sources 

This is a promise to keep the forests intact as well as finding a continuous and inexhaustible flow of raw materials to keep their operations intact 

Reforestation : Ensuring replenishing of the forest cover 

Depleted forest cover is not just an environmental concern but also a hazardous business bottleneck 

IKEA will not source wood from diminishing tropical forests , sensitive mangroves and ecologically fragile areas as it will sound the death-knell for the planet .IKEA is an active participation in a whole lot of viable reforestation drives . IKEA is the leader in the wood furniture scorecard ,an assessment body on wood sourcing policies determined by the National Wildlife Federation and the Sustainable Furnishings Council 

Reduce ,recycle and reuse .... The three R's of packaging 

Single use plastics are no longer welcome in IKEA and it's in-house restaurants . Continuous research aimed at developing alternative forms of fully biodegradable packaging from mushrooms is in place .the " fungi packaging " is funky and Eco friendly . This will stop the reels of Styrofoam , polystyrene from slowly choking earth to death .

IKEA has put in place a strong policy to measure and mitigate risk . They are constantly innovating measures to reduce the carbon footprints .

IKEA is a beacon in the arena of sustainable retail space .

 

Handling Supply chain disruptions

Welcome back Readers I’m Sivakami - A final year MBA student from Amrita School Of Business majoring in Marketing and operations. I have found my space to explore on the various verticals in the area of  Logistics and supply chain and of course not limited to theories and  empirical studies 😅. So come lets discover on our never ending territory 😇 

    Everytime, I reach out to the supermarket nearby to get some goodies, I have always seen the shelves neatly stacked. Infact I always got what I needed with plenty of options and brands. I have wondered how retail stores maintain their stock despite the over hiking footfalls. But once the pandemic hit us hard I was able to figure out the answer to this. The supply chain disruptions actually draw our attention towards supply chain dependencies that we are otherwise not aware of.

    Sometimes these supply chain disruptions are small and localized which may affect only a few businesses. Other times it is globally felt.For instance when the asian markets are hit, it is felt by global economies since Asia is the main source for a diverse range of suppliers. One of the recently seen supply chain disruptions is COVID -19 Pandemic. We are witnessing the effect of global pandemic which has a massive supply chain impact because the number of people, regions, and global companies affected can upend normal operations at every stage of the production line.

    So in these circumstances, we probably won’t get much advance notice about disruptions to the supply chain, so it’s a good idea to make sure we plan ahead for any eventuality. So here we will be discussing the strategies for managing supply chain disruptions.

• Create a supply chain emergency plan.
• Build up inventory
• Conduct a supply chain vulnerability audit
• Identify backup suppliers
• Diversify supply base
• Partner with a logistics expert
• Adopt risk evaluation tools

  

  Firstly it is important for us to create a supply chain emergency plan or a backup plan, especially when it comes to supplies. Secondly, building up inventory. Stockpiles of essential supplies will help us in withstanding disruption. In other words, this might mean having a store of finished goods, components or even raw materials to maintain business if supply chains are temporarily cut off. Thirdly conducting a supply chain vulnerability audit will help us in analyzing the risk and see where the weakest links in the supply chains are and also develop alternatives for such areas. It can also be helpful to assess potential environmental, social, and political conditions that may impact the supply routes. 

    Identifying suppliers in other geographic locations and building a relationship with them can give us an edge over others. We can also diversify our supply base by setting up supply chains in different places. This will make us ensure that we'll always be able to get at least some goods amidst any disruption. Sometimes the risk evaluation tools help us in sensing the potential threats in the market. AI-enabled mapping and environmental analysis solutions, aggregate apps that provide geopolitical overviews, and systems that can evaluate cyber threats. Even social media can be used as a predictive tool to identify potential shortages and disruptions

    In times of trouble, having a good long-term plan in place or a strong crisis management strategy is essential.Supply disruptions are inevitable, but by planning your response carefully, evaluating potential supply chain risks, and diversifying your suppliers, you can help prepare for even the most unprecedented of circumstances.

Happy reading from Sivakami :)

Benefits of supply chain analysis - UPS

 

Hello ladies and gentlemen!

After 2 weeks of break, I am back with another concept that is quite familiar to many of you.

We all have heard about UPS and how they saved millions of dollars by improving their supply chain process. So how did it happen? Generally, be it small or medium-sized business, a small change in the day to day operations can have huge impacts on the revenue. A small/medium business may have limited time & resources, so in order to use them effectively, one needs to analyze and use its supply chain effectively. More importantly, effective utilization may not just pave way for more revenue but also helps the environment and CSR activities. 

The example for the above is what UPS did or doing even now, which inspired a lot of other companies to follow the same. In 2005 UPS decided to optimize its supply chain process, after having several discussions they decided to launch a particular idea wherein they decided that most of their delivery trucks in the US will minimize left turns. Soon after they did this, they saved a lot of fuel and also distance covered. Amazed by this, UPS decided to work further on this and still optimized it much more. What's the magic behind this?

Well, the magic is ORION, not the star in the universe created by Zeus, rather an intelligent telemetry and data analysis system. ORION stands for On-Road Integrated Optimisation & Navigation, provides the drivers with optimal organization of which stops they had to make. The sensors in the vehicle gather information from the road and then sends it to the server, which is then analyzed and guides the driver to ensure that an optimized route is provided by not needing to take a left turn. 

In certain cases, the drivers might have to travel longer than the usual routes, but the advantage is that, when they don't take left turns, they avoid traffic signals because when a truck waits in the signal for few mins, the ignition is on and the engine is idle which tends to consume more fuel. By keeping the truck on the go, fuel consumption is reduced. This is the key highlight of this system, as this type of optimization helped UPS shave 28.5 million miles of its delivery routes which resulted in saving close to 3 million gallons of fuel and reduced CO2 emissions by 31,000 metric tons.

So this supply chain analysis not just brought monetary benefits but also benefits to the environment. Even the US government after noticing the change UPS brought in, advised the entire nation saying be like UPS. 

Adios, Amigo!

- Varadharaju R