IKEA Supply Chain Issue

IKEA Supply Chain Issue

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IKEA Supply Chain Issue

Historical Background

For any business organization, the supply chain is important as it ensures the production of goods and services offered. This management can be defined as the process through which supply materials moves from the source to the customers and the control measures that are implemented to ensure that this is achieved (Arrigo, 2005). Several activities are synonymous with this management. They include manufacturing, transportation, purchasing, supply planning, customer service and supply management. Companies are expected to comply with the proper practices that are conducted in the supply chain management in order to assure the products and services meet the commercial standards as well as other related activities that follow. IKEA is one of the companies that have been unfortunate to encounter a supply chain issues regarding its products.

IKEA is a world-renowned furniture-producing powerhouse based in Sweden. 17-year-old Ingvar Kamprand founded it in 1943 (Yoo-Nah Hahn, 2015). Its locality at that time was in Agunnaryd. The capital for establishing this company was from money that Ingvard has been give by his father for performing well in school. He started the company with sales of small stationery items such as wallets, watches, and pens at affordable prices (Arrigo, 2005). There was a mail ordering service, which was incorporated in the company sales stock. It began selling furniture in 1953 after the first showroom event was conducted. In the past, the company has maintained a reputable customer service with no issues cropping up concerning supply chain management until recently, in 2013, when the company was involved in a meatball scandal whereby traces of horsemeat were discovered.

Origin of the Issue

The issue concerning the meatball originated from the suppliers known as Gunnar Dafgard AB Company, which is a frozen food company, located in Sweden. The meat was tested the Czech authorities who discovered that it contained horsemeat yet the ingredients indicated the meatballs were processed from pork and beef (Arrigo, 2005). The Czech State Veterinary Administration stated that the horsemeat was found in one of the 1 kg packs of meatballs labeled Kottbullar. One further investigation, it was discovered that an approximated 760kg of meatballs were contaminated with horsemeat.

According to the supplier, Gunnar Dafgard AB, the meat was contaminated from the slaughterhouses located in Poland where they sourced their meat before processing it. The credibility of the source was questioned because the Poland slaughterhouse provided Dafgard with meat supplies that were approximated to be 5% of all the meat supplies the company orders (Jonsson, Rudberg & Holmberg, 2013). In a press conference, a Dafgard spokesperson expressed that the company failed to understand where the crime was committed along the supply chain and it has taken the matter to the authorities for further investigation to be conducted. He also stated that the company has taken precautionary measures that will prevent any similar occurrences in the future.

Measures to Solve the Problem

Dropping Suppliers

Several procedures and measures have been implemented as an action plan developed by IKEA’s supply management team in dealing with the scandal. Firstly, simplification of the supply chain has been achieved (Michael Sayeau, 2009). This was done to ensure that there was reduction of incidences of complicated flows and the company could achieve more control flows. To validate this, the company dropped an approximated 19 suppliers that failed to meet the standards in IWAY supplier code of conduct. The main reason that facilitated with action was the fact that the suppliers were non-compliant.

Quality Control

In terms of quality control, the company has implemented product audits for its suppliers to control the raw material processing and quality of the finished product. Regular audits have been increased for subcontractors and sub-suppliers (Jae-Woong Byun, 2011). With this routine auditing, the company reasons that the employees and suppliers will adhere to the standards and regulations outlined in the supplier code of conduct manuscript. There has also been improvement in terms of traceability standards. The company has placed measures which will guarantee that all the raw material provided by the suppliers undergo thorough traceability tests that ascertain their quality and compliance of the supplier to the standards of the company.

Phasing out Vendors

IKEA has focused its efforts in ensuring that all the standards outlined in the IWAY are complied to. This translates to its determination to ensure all the involved parties in the supply chain conduct sustainable practices that will further ensure product quality is achieved (Jae-Woong Byun, 2011). As of September 2012, more than 711 vendors were dropped after 993 audits were carried out by the company. Through this action, IKEA has experienced as easier process in implementation of IWAY, which has been instrumental in evaluating the compliance of all its food vendors.

Partnership with Other Organizations

The company has taken steps into developing partnerships with other organizations. The sole aim for this step is to guarantee that the suppliers are keen on the compliance of the standards in IWAY (Hultman, Johnsen, Johnsen & Hertz, 2012). One of the organizations that have collaborated with IKEA is UNICEF to work on community programmes all over the world with special focus being directed to India. The main aim of the program is increasing awareness sustainable practice and prevention of unacceptable practices such as child labor.

References

Arrigo, E. (2005). Corporate Responsibility and Hypercompetition. The Ikea Case. Symphonya. Emerging Issues In Management, (2). http://dx.doi.org/10.4468/2005.2.04arrigo

Hultman, J., Johnsen, T., Johnsen, R., & Hertz, S. (2012). An interaction approach to global sourcing: A case study of IKEA. Journal Of Purchasing And Supply Management, 18(1), 9-21. http://dx.doi.org/10.1016/j.pursup.2011.11.001

Jae-Woong Byun,. (2011). Value-based Services for Sustainable Business: A Case Study of IKEA. Journalofdistributionandmanagementresearch, 14(3), 147-166. http://dx.doi.org/10.17961/jdmr.14.3.201108.147

Jonsson, P., Rudberg, M., & Holmberg, S. (2013). Centralised supply chain planning at IKEA. Supply Chain Management: An International Journal, 18(3), 337-350. http://dx.doi.org/10.1108/scm-05-2012-0158

Michael Sayeau,. (2009). IKEA Modernism and the Perils of Innovation. Modernism/Modernity, 16(3), 493-495. http://dx.doi.org/10.1353/mod.0.0130

Yoo-Nah Hahn,. (2015). IKEA and Corporate Social Responsibility: A Case Study. Journalofdistributionscience, 13(10), 45-50. http://dx.doi.org/10.15722/jds.13.10.201510.45