IKEA

Purchasing
Strategy
FY13-20

Background
Purchasing within IKEA has always been an important contributor to realising the Vision and Business
Idea.
We come from a trading organisation that delivered excellent results based on internal competition and
a strong focus on manufacturing in low cost countries. This generated cost savings when moving
volumes from Western Europe to Eastern Europe and Asia. However, this way of working has also left
room for improvement related to better cooperation and increased transparency within IKEA.
To improve and to take full advantage of the IKEA economies of scale and competence we decided to
develop our sourcing strategies in categories. This led to fact-based strategies and a common agenda
towards our suppliers. Our fact-based approach also resulted in the Supplier Development Process and
a clear way of working when using competition or cooperation. One of the results of using the IKEA
economies of scale has been a concentration of our supplier base, which has been reduced from 2,000
to 1,000 suppliers.
To take the next step towards excellent performance we need to continue building on the strengths
that we have within the categories and our way of developing our suppliers. We need to work together
with our suppliers with a common goal to optimise our value chain, resulting in better products at
lower costs.

Purchasing outlook
From a purchasing perspective the world around us is becoming more and more challenging, putting
new demands on how we work. We see clear trends in increased cost of materials, energy and labour.
Therefore we see that our work with more sustainable use of resources and finding more efficient ways
to produce home furnishing items under good conditions will be more important than ever.
The ambition to double our sales volume by 2020 requires that we build and develop our capacities in
line with the planned expansion. The need for flexibility in the supply chain demands solid scenario
planning. This also sets preconditions for optimising the value chain.
Success factors lie within our ways of working together, based on our values. Our ability to attract,
recruit and develop our co-workers will determine how successful we will be.

Our approach when creating the strategy

The strategy has been developed by the Extended Purchase Management. Stakeholders, co-workers,
suppliers and external companies have contributed through surveys, interviews and benchmarking.
Creating the strategy in this way sets the foundation to secure involvement and strong
implementation.
This strategy sets the direction up to 2020. Through our business we will contribute and deliver to
related strategies such as: Quality, Logistics, Sustainability, Better Products, Communication,
Competence, Home Furnishing Business Plans and of course Growing IKEA Together.

Table of Contents
Background ............................................................................................................................... i
Purchasing outlook ..................................................................................................................... i
Our approach when creating the strategy ...................................................................................... i
Summary ................................................................................................................................. 2
Cornerstone 1: Lower total cost from material to customer............................................................. 3
1.1

Design for total cost ...................................................................................................... 3

1.2

Eliminate cost ............................................................................................................... 3

1.3

Economies of scale ........................................................................................................ 3

Cornerstone 2: IKEA Suppliers Partners for growth ..................................................................... 4

2.1

A strong and diverse supplier base developing IKEA .......................................................... 4

2.2

IKEA, the preferred partner for the best suppliers in the world ............................................ 4

2.3

Performance ownership ................................................................................................. 4

Cornerstone 3: One IKEA Purchasing Simple and professional ...................................................... 5

3.1

Professional purchasing behaviour and competence ........................................................... 5

3.2

Simple and efficient organisation .................................................................................... 5

Goals ....................................................................................................................................... 6
Total cost .............................................................................................................................. 6
Quality .................................................................................................................................. 6
Availability............................................................................................................................. 6
Sustainability ......................................................................................................................... 6
Preferred partner .................................................................................................................... 6

Summary

GOALS

CHANGE
DRIVERS

CORNERSTONES

OBJECTIVES

Wished position
Purchasing for Growth Enabling IKEA to be the Leader in Life at
Home and Sustain Long-Term Profitability.

Better products for the many people

Preferred partner and employer
Deliver excellent results
1

Lower total cost

from material
to customer
Total cost
approach in IKEA

Total cost

Partners
for growth

Quality

IKEA suppliers
partners for growth

One IKEA purchasing

simple and professional

Simplify IKEA
purchasing

Availability

Sustainability

Fact-based
business leadership

Preferred
partner

*Change driver: In the different cornerstones we have identified a number of change drivers. These are the most
important topics that will drive change and have an impact on Purchasing at IKEA in the future. Successful execution of
the change drivers will enable us to reach our wished position: Purchasing for Growth Enabling IKEA to be the Leader in
Life at Home and Sustain Long-Term Profitability.

Cornerstone 1: Lower total cost from material to customer

By working together to optimise our value chain we can make better products and services at lower
total cost. We will develop a total cost approach enabling us to take decisions based on the total
impact on our value chain. This leads to continuous improvements of our value chain and more
vertag*. Our total cost approach will empower our organisation to make decisions closer to reality.
We will always strive to connect our suppliers to our customers needs and expectations.

1.1 Design for total cost

Optimising our value chain from material to customer is only possible by utilising total IKEA and an
end-to-end perspective. It starts with the design of the product, from the choice and use of sustainable
materials and techniques to design for efficient manufacturing (cost and quality), logistics, the buying
process and customer use. By using standard solutions, components and platforms when developing
the offer we will develop better products faster at a lower cost. We will lead and invest in innovation to
exceed customers expectations.
To support the growth of IKEA, we will design and develop capacities in the supply chain that are
aligned with the development of sales and expansion. In the short and mid-term we will use sales and
supply planning to optimise the utilisation of our capacities.

1.2 Eliminate cost

We will use the IKEA volumes to re-engineer the value chain. Introducing standard solutions,
components, platforms, new materials and investing in efficiency in the value chain will lead to
eliminated cost. Changing the level of integration, locating the material supply close to the production
and/or locating production closer to sales market are examples of how we will eliminate cost and
reduce the CO2 impact in the value chain.

1.3 Economies of scale

Volume is our best friend! Volume is the foundation in our shared business model with our suppliers.
Volume makes it possible to take out cost by engaging in suppliers purchase, as well as close
cooperation with suppliers in choice of machinery and technologies. Volume makes it possible to invest
in efficient industrial production set ups and to drive industrialisation of new industries, which will lead
to better quality and lower cost. Volume and our knowledge of indirect purchase will make it possible
to lower indirect cost throughout IKEA.
We will develop material and components strategies focusing on affordability, accessibility and
sustainability. The material strategy will include how to develop the material and how to use it in the
products to optimise the meeting with the customer.

Change driver: Define, develop and implement a total cost approach in IKEA

*vertag The way to create outstanding affordability for key functions in life at home through optimising all parts of the
value chain from raw material to peoples homes.

Cornerstone 2: IKEA Suppliers Partners for growth

To offer better products that are affordable for the many and developing a more vital IKEA calls for a
diverse supplier base that can meet the needs of our businesses and customers. Partnerships are built
on a shared business model and values, which we call strategic fit.

2.1 A strong and diverse supplier base developing IKEA

In the future we will need a more diverse supplier base with different suppliers for different purposes.
Our supplier base will handle more products and services, have higher flexibility and react to
customers needs with speed and accuracy. We will build and develop a strong supplier base with
competitive capacities.
Our supplier base will contribute to better products and services through improved form, function,
quality, sustainability and cost Democratic Design. They will take responsibility for producing the
right quality while complying with our Code of Conduct, IWAY.
Our supplier base will work in an integrated way in our supply chain and contribute to the development
of products, standard solutions, components and platforms. Driven by the future way of developing the
offer we will engage with suppliers in different parts of our value chain. IKEA and suppliers working
together will lead to better products and services at a lower cost and shorter time to market.
Our supplier base will deliver affordable supply to new sales markets where we do not have an
industrial footprint, and through a new business model we will create preconditions for the successful
expansion of IKEA.
In selected businesses, our Industry Group will deliver outstanding customer value and set new
standards within the industry and transfer knowledge to other partners. The Industry Group will create
capacities in markets where it is difficult to find suppliers or in industries with monopoly/oligopoly
situations.
Together with our suppliers we will develop industrial concepts*, delivering reliable and scalable
capacities. The IKEA Industry Group will be the leading example of developing and taking full use of
the production concepts.

2.2 IKEA, the preferred partner for the best suppliers in the world
Our wished position on the supplier market is to be the preferred business partner, both for our
existing and for new potential suppliers. Our partnership is characterised by mutual respect, trust and
transparency.
We will make it easier for suppliers to start to do business with IKEA. We will use the full potential of
the IKEA presence in all markets and on the web, in order to attract potential suppliers. We will
develop a business model that allows for a grace period for cost competitiveness, applicable in areas
where it is difficult to find new suppliers. Long-term competitiveness is a prerequisite for doing
business with IKEA.

2.3 Performance ownership

We will create the right preconditions for our suppliers to take full responsibility for performance, based
on shared business plans and common goals. The increase in responsibility and accountability at our
suppliers will lead to less control and follow-up, and increase the focus on business development. Our
high-performing partners will grow together with IKEA.

Change driver: Develop partners for growth

*Industrial concepts. A standardised production set up including technology, layout, competence need, output,
management systems, investment needs and lead time to build capacities etc.

Cornerstone 3: One IKEA Purchasing Simple and professional

The DNA of IKEA Purchasing will be competent co-workers and professional purchasing behaviour in
everything we do. This means that we build strong supplier relations based on a shared business
model, trust and transparency. The basis for how we interact with our suppliers and make decisions
will be fact-based business leadership*. We are genuinely interested in understanding the markets we
are working in as well as the reality of production. We will always act with the customer, supplier and
total IKEA interests in mind, with a long-term view and a good balance between co-operation and
competition.

3.1 Professional purchasing behaviour and competence

The foundation for how we work within Purchasing will be to deliver results through our own direct
work as well as through supporting and developing others. Working together based on IKEA culture
and values will enable us to optimise the total cost and to always deliver on our promises.
We will develop sourcing strategies for categories and action plans with suppliers using the Purchase
Development and Supplier Development processes. The work is based on and contributes to the IKEA
offer. We will develop a business intelligence platform and have a common framework for defining,
communicating and mitigating risks, leading to one view on trade barriers, market, political and
sustainability risks as well as volatility in currency and raw materials. To deliver results we always take
the required measures to implement the strategies and action plans, with a project approach on key
initiatives.
We want to be the preferred partner and we will always treat our suppliers with a high level of
professionalism and trust. We will actively use suppliers competence to contribute in developing IKEA
and the offer. Our supplier relations will be built with a long-term view and based on trust and
transparency. To create preconditions for suppliers to perform and to always meet needs and
expectations, we will develop and use our supplier classification in order to ensure continuity, as well
as the right competence and seniority.
We will build the competence needed and also build a position as the preferred choice for talent.
Competence for performance will be based on a total view on making a difference and delivering
results, including knowledge, relationships, behaviour and project management. The starting point is
understanding the needs of our customers, our businesses and our suppliers. Competence and
potential will be recognised and we will empower co-workers to perform to the best of their abilities
and to continuously develop in their assignments.

3.2 Simple and efficient organisation

To enable professional purchasing we will have a simple and efficient organisation, with a shorter
distance between customers and suppliers and fewer people involved. This will lead to an agile and
empowered organisation, where we take leadership and give clarity about where and by whom
decisions are made and accountable for. The principle is that we act as One IKEA Purchasing along our
core processes, with all functions and people contributing directly towards our business objectives. The
business needs set the agenda for allocation of resources, regardless of function or location.

Change drivers: Simplify IKEA Purchasing, Define and implement Fact-based Business
Leadership

*Fact-based Business Leadership. Doing business with a holistic view using a combination of analysis and facts, deep
understanding of the industry, entrepreneurship and the ability to build long-term business relations with suppliers that
have a strategic fit with IKEA.

Goals
Total cost
Total Cost better than -2% per year is the overall goal.
x

Purchase Price Development better than -2% per year

We will develop 20 step changes per year. A step change should be seen as an significant
improvement >25 % on part of the range in the area of:
o

Cost

Quality

Sustainability

Quality
CEPQ yearly improvement

>6%

COPQ Purchasing (TA/Cat) yearly improvement

>6%

Availability
FY16: Full customer perceived availability.
From FY14;
x

S1>99, S2>98, S3>97, S4>95. Every day, every market

Sustainability
x

Next step in IWAY implemented end of FY15 (Full IWAY in China).

IWAY must at critical sub-supplier verified by end of FY13 (FY14 for China)

Supplier sustainability index, 20% yearly improvement

Preferred partner
x

Supplier survey: Total >750 by FY16

Supplier survey: Acting professional >750 by FY16

Indirect purchase goal

x

Total value contribution by FY16 > 200 MEUR per year

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