In addition to Sweden, China is the only country with a complete IKEA value chain.

Editor’s note: This article is from Economic Observer, author Zheng Xinxin.

On the assembly line, pillows and mattresses are being intensively produced, and they are transported to IKEA in different laboratories through pressing, metal testing, and burning tests.

This scene occurred at Shengnuo Group (1418.HK) in Jiashan County, Jiaxing City, Zhejiang Province. On September 17, the reporter entered the Shengnuo Group factory.

This 19-year-old company is a manufacturer of IKEA memory cotton bedding and comfort products. Since cooperating with IKEA in 2015, it has not only gradually developed into an innovative supplier of IKEA, but also developed a gel cool mattress with IKEA. It also completed the re-planning of the workshop and greatly increased its production capacity.

In FY 2018, IKEA’s purchases in China accounted for 28% of IKEA’s global purchases. Its supply chain system guarantees the supply of goods in IKEA stores, and the malls will reflect the needs of consumers on the supply chain to produce goods that are more in line with market demand.

The retail sales of IKEA China in FY 2018 (September 1, 2017 to August 31, 2018) was RMB 15.5 billion. This company is paying more and more attention to the Chinese market and continues to increase investment.

Suppliers and IKEA

Sino Group is a Hong Kong-listed company with a total revenue of nearly 3.8 billion yuan in 2018. The Group is principally engaged in the manufacture and sale of household products and polyurethane foam.

IKEA has a strict set of screening criteria for suppliers, including a detailed set of quality control and evaluation criteria for suppliers’ products and production processes, which is referred to as the “I-WAY” Code of Conduct within IKEA. This is the Code of Conduct for IKEA procurement of goods, materials and services. IWAY examines the status of suppliers in terms of social, environmental and working conditions. It is a prerequisite for suppliers and IKEA to conduct business.

In FY2015, Shenguo Group officially became its supplier through IKEA’s evaluation of new suppliers, and began to supply IKEA in May.

Chen Zhifan, chairman of Shengnuo Group, told reporters that in the process of cooperation with IKEA, he encountered many difficulties. After all, he cooperated with world-class top companies such as IKEA, which required world-class things. At the time, there was a lot of controversy within our board of directors. The point of controversy is whether we should cooperate with IKEA because the relative profit is very low. What can we get through cooperation?”

Lin Zhifan believes that if enterprises want to grow and develop, they can’t just look at the short-term. If the group cooperates with the world’s top manufacturers, it means that internal management optimization must be promoted. This action is spontaneously promoted from within the enterprise, and the process is slow. throughDuring the discussion, the Shengnuo Group made a major decision, that is, no matter how much investment, this matter must be done and done well.

IKEA said that when it first cooperated with Shengnuo Group, it found that the factory area of ​​Shengnuo Group was much wider, and the different parts of mattress production were distributed in different areas, directly increasing the production process of mattresses. Internal transportation logistics costs.

IKEA began to communicate with the Shengnuo Group on these issues.

The Shengnuo Group is also beginning to realize that there are many factory turnover areas and the production process is relatively scattered. IKEA decided to provide the talents with the help of the Shengnuo Group, and the IKEA lean production experts guide the process.

The guidance includes the cutting of the sponge and the final packaging. It aims to shorten the entire production process of the Shengnuo Group, integrate the resources of the Shengnuo Group, and optimize the production process.

Data statistics show that after the renovation, the production capacity of Shenguo Group mattress covers has increased by about 50%.

IKEA also brought a production management system to Shengnuo Group, which automatically collects data on the production line through the system and monitors the non-performing rate, so that the improvement of production can be relied upon.

Through the listing project, the two-shift production system of the Shengnuo Group factory was successfully changed into a production system, and the work efficiency of workers was improved.

Sino Group said that it can obtain long-term stable orders with IKEA to promote profit and business growth. The key point is that knowledge transfer and supply chain re-integration optimization can be realized. IKEA will also be in the process. Share customer needs, industry references for new technology practices, and explore some of the leading concepts to find innovative solutions in production and products.

Lin Zhifan said, “After long-term efforts, through the cooperation with IKEA, step by step to simplify the transformation of this factory process efficiently, and also update the concept of factory management, I think this is the most valuable cooperation with IKEA. Place.”

In addition to helping suppliers lean in production and guiding corporate strategy, IKEA is also actively promoting suppliers to improve product quality. Zhang Dan, manager of the IKEA China Testing and Training Center, said in her sharing that the center she worked for was the first self-owned product testing and supplier and employee training set up by IKEA outside the headquarters in Amherst, Sweden. laboratory. In addition to providing testing services in many areas such as cardboard packaging materials, furniture, textiles, toys, curtains, leather, food contact materials, the center is also responsible for monitoring product quality and cost control. In addition, it will provide advice for supplier quality control.

How does the IKEA China Testing and Training Center ensure product quality? For example, Zhang Dan, only a common spring mattress product, needs to accept more than 200 tests before reaching the consumer terminal, including physical and mechanical properties, combustion performance, formaldehyde, volatile organic compounds, odor and other multi-dimensional tests. .

The IKEA China Testing and Training Center has issued more than 60,000 test reports per year.It reached 200,000 times. Today, the test business is global, with 95% of its business coming from the Asia Pacific region and 5% from Europe and the Americas, providing testing services to about 1,600 suppliers each year, 68% of which are Chinese suppliers.

IKEA’s Supply Chain Logic

IKEA is divided into two major groups, the Inter IKEA Group and the Ingka Group. The IKEA Group is responsible for product design, procurement, production and logistics; the Inka IKEA Group is responsible for retail and shopping centres. The benefit of this segmentation is that the Ingerka Group can focus on serving consumers more.

This architecture has only changed in recent years.

Ikea Home (IKEA) was founded in Sweden in 1943, and IKEA founder Ingvar Kamprad donated IKEA to the StichtingINGKA Foundation in the Netherlands in 1982. A complex system of funds, trust funds and holding companies was established.

The IKEA system is mainly operated by two companies with different management and owners and relatively independent companies. One is the “Ingka Group” (which includes INGKA Holdings B.V. and its controlled entities), which is owned by the Stitling Ingka Foundation and the other is responsible for providing franchise licenses. The InterIKEA Group (including InterIKEAHolding B.V. and its controlled entities) is owned by the Interogo Foundation in Liechtenstein.

The Ingka Group, as the largest franchisee of the IKEA Group, is responsible for operating the global IKEA stores, but it is required to pay the franchise fee to the IKEA brand owner, the IKEA Group, for the entire IKEA store. 3% of the amount.

Since September 1, 2016, IKEA brand owner “Integrity IKEA Group” took over the functions of “IKEA” product development and value chain management, and “Ingka Group” has become a pure retailer. Its business is based on a franchise agreement with the “Ent IKEA Group”.

The internal synergy of IKEA has become more efficient. IKEA’s supply chain system protector supplies goods to IKEA stores, while the mall reflects consumer demand on the supply chain to produce products that better meet consumer needs.

The Ingka Group’s fiscal year 2018 (September 1, 2017 to August 31, 2018) opened 367 IKEA stores in 30 countries or regions around the world. The sales revenue of IKEA stores was 34.8 billion euros, and net profit was 15 100 million euros, received a total of 838 million visitors. Among them, IKEA China’s retail sales in FY 2018 was 15.5 billion yuan, and it received more than 100 million visitors.

Opened the first in Shanghai since 1998Since the mall, IKEA has opened 28 shopping malls, 2 experience centers and 3 gathering malls in Shanghai, Beijing, Chengdu, Guangzhou, Shenzhen, Nanjing and Dalian.

Besides Sweden, China is the only country with a complete IKEA value chain. In FY18, IKEA’s purchases in China accounted for 28% of IKEA’s global purchases, and suppliers exceeded 300. This is precisely because IKEA The more we pay attention to the Chinese market.

On August 22nd, An-na Pawlak-Kuliga (Anna), President of IKEA China, introduced that the 2020 fiscal year will be the largest investment year for IKEA in the Chinese market in 20 years, and will reach 10 billion yuan. It will be used in product development, service upgrade, digital exploration and so on. In addition, IKEA is still evaluating and planning more projects, and the investment for the next two years will increase further.

It is understood that in terms of channels, IKEA will develop and integrate new online and offline channels. IKEA said it will fully upgrade its existing stores, and Shanghai Xuhui Mall will become the world’s first. In addition, in expanding the coverage of online and offline channels, in the next four months, IKEA will open four new shopping malls in Guangzhou, Zhengzhou, Guiyang and Changsha, and will further expand e-commerce coverage.

According to IKEA, in its future strategy, third- and fourth-tier cities will also be included. In addition, IKEA will open small shopping malls closer to consumers. The first small shopping mall will open in Shanghai before the Spring Festival in 2020. AnnaPawlak-Kuliga said: “We have done a lot of investigations and believe that we can be more through small shopping malls. Close to the customer. At the same time, in the design of the mall, we will design in a more innovative way to better meet the needs of people’s home.”

In addition, IKEA established the IKEA China Digital Innovation Center on July 8, 2019. As a new business unit, the center will focus on improving IKEA’s overall digital capabilities. Since the launch of e-commerce in October 2018, its business scope has covered 227 cities. “We are relatively cautious in making omni-channel strategic planning, and we must do all kinds of market research. At the same time, we believe that we must maintain a flexible and flexible attitude in terms of strategic setting, depending on the development and evolution of the market. How to expand, and then adjust the strategy strategy in real time,” said AnnaPawlak-Kuliga.

(Note: The cover image is from pexels.com)