...The global sourcing challenges of IKEA Who does not know IKEA? Famous for its design and very affordable house furniture, IKEA is the leader on its market. Founded in 1943 by Ingvar Kamprad this business grew tremendous fast that it has become the reference in term of low-cost self assemble furniture in the world. The sourcing strategy of IKEA follows a manufacturing Code of Conduct towards its suppliers named “The IKEA Way in Purchasing Home Furnishing Products” (IWAY) . Besides this code, the strategy is rather well established especially regarding the relationships between the company and its suppliers from the economically developing countries. But the question is; are Ikea’s international procurements processes efficient? Can they be improved? This essay will focus on Ikea’s global sourcing’s tradeoffs and will highlight the way they can be enhanced. The first part of this essay will describe the regular sourcing process of IKEA including the strategy, the second part will emphasize how the sourcing should be done to be successful and the last part will provide recommendations about the processes according to the analysis. For a company, global sourcing is basically choosing different suppliers all around the world in order to use worldwide efficiencies and reduce costs. Global sourcing offers various advantages such as low cost materials and skilled labour, diminution of lead times, and also economical advantages like low taxes or low trade tariffs. These benefits...
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...Purchasing The Low-cost Learning curve t might not be the best habit, but people have a tendency to categorize everything. The same often happens with low-cost country sourcing, which lumps totally diverse countries scattered all over the world into the same category of inexpensive procurement opportunities. Many still debate whether the process itself actually varies that much from country to country. Is the strategy for sourcing from China really any different than it is from India, Turkey or Brazil? For David Hoover, vice president of strategic procurement for HNI Corp., the answer is, “No, it’s not.” Of course, there’s a little more to it than that. “In the end, human beings are always the ones doing the business. And everyone has an interest,” notes Hoover. “The challenge, in any supplier relationship, is to understand what the other party’s interests are, so that you can help satisfy them. When you do that, they will be compelled to help satisfy yours.” A few years ago when HNI, a global office furniture manufacturer, started evaluating the potential cost benefits of sourcing in China, the company took an approach that utilized its decentralized business model called “split and focus.” However, while the model proved very effective on the customer side of the business to accommodate different product markets and consumer bases, the company quickly learned that the approach needed a few minor adjustments to be as successful on the supply side. “[Initially] we were sending...
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...GLOBAL SOURCING Strategic Soucing at Whirpool China Finding the ideal supplier CASE ANALYSIS Assignment 1 STRATEGIC SOURCING AT WHIRLPOOL CHINA FINDING THE IDEAL SUPPLIER CASE ANALYSIS 1. What are the key problem areas for Whirlpool? Finding the right supplier. 2. What is the importance of strategic sourcing? Sourcing the right components is the first step in launching the new product. 3. What are the pros and cons of Whirlpool’s global sourcing strategies? Cons: Payment terms. Pros: To avoid delays in launching the new product. 4. How are suppliers identified, evaluated and selected? It was necessary to define the commodity and allocate responsibilities and resources through co-ordination of global and regional activities. Using the Sourcing Strategy Development (SSD) process in 4 steps: Step 1: internal analysis, identified and prioritized the process –partner requirements, then evaluated the performance of the existing supply base and reviewed the existing supply base, it also identify the switching costs. Step 2: external analysis, which includes analysing the supplier industry and competitors and evaluating competitor performance and strategies. The evaluation process makes use of SWOT (Strength, Weakness, Opportunities, Threat). Step 3: strategy development, is to analyse the competitiveness and their financial impact. Preliminary negotiations could be carried out, a suitable strategy and suppliers should be selected and...
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...rP os t Sw W12079 STRATEGIC SOURCING AT WHIRLPOOL CHINA: FINDING THE IDEAL SUPPLIER op yo Dr. Martin Lockstrom, Thomas E. Callarman and Shengrong Zhang wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Richard Ivey School of Business Foundation prohibits any form of reproduction, storage or transmission without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Richard Ivey School of Business Foundation, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca. Copyright © 2012, CEIBS Version: 2012-06-19 tC It was April 10, 2011, when Gianluca Castelletti, head of Whirlpool’s Asia International Procurement Office in Shanghai, was informed by his colleagues that the company was about to launch a new refrigerator model in just six months. With the current worldwide focus on energy saving, and as one of the biggest home appliances producers, Whirlpool China planned to introduce a new energy-efficient refrigerator. No Castelletti immediately spotted a challenge in Whirlpool...
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...Global Production and Sourcing. Introduction: For this project I will be looking into the specific requirements TU at Sainsbury’s require around specific product types. I will be looking into Sainsbury’s TU toddler boy’s jersey wear. Researching into two countries of origin I will be looking into what management conditions, technological and economic issues that surround the choice from where Sainsbury’s choose to and how they are sourced and manufactured. Sainsbury’s was founded in England, London in 1869 by John James Sainsbury, and grew rapidly during the Victorian era. Sainsbury’s grew to become the largest grocery retailer in 1922, pioneered self-service retailing in the UK, and had its peak of success during the 1980s. However in 1995 Tesco overtook Sainsbury’s to become the market leader, and Asda became the second largest in 2003, putting Sainsbury’s into third place. (Museum of London. Unknown. The Sainsbury’s archive [Online] 22.03.2012) Sainsbury’s launched its TU fashion range in 2004, and is now housed in over 300 stores nationwide. Over the past six years, the retailer has seen its share of the £9.9bn value fashion market more than treble. The TU clothing range remains the UK’s seventh largest clothing brand by volume, TU kidswear however has gone from seventh place in 2011 to the UK’s sixth largest in 2012. (Drappers online, 2012, Sainsbury’s expected to reveal further gains in clothing market share. [Online] 22.03.2012) The Sainsbury’s TU clothing...
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...Practicum Strategic Sourcing at Whirlpool China Q1. Whirlpool’s Global Sourcing Strategy (GSS) in China had many advantages as well as disadvantages. As the case explains, China had become one of the world’s largest household appliance makers, and relocation of Whirlpool’s Asian HQ to Shanghai helped the company’s products gain acceptance within the market. Furthermore, setting up an international procurement office in Shanghai helped to eliminate various factors that could make global sourcing a difficult process. Whirlpools Shanghai HQ decreased transportation delays and cultural and language differences and supported the company’s own manufacturing operations in Asia. Other advantages to global sourcing in China include: reducing capital investments, gaining market share, focusing on core competencies, and increasing flexibility in production. Although China may provide a cost advantage in regards to raw materials, disadvantages occurred in areas such as quality, reliability, a lack of capable service providers, and inadequacies in transportation and IT infrastructures. Q2. When it came to potential suppliers, Whirlpool set their standards high. In order to be considered a supplier of Whirlpool, quality requirements set forth by the Whirlpool Supplier Quality System had to be met. Most suppliers in China, however, found difficulty in reaching the minimum required score of 60/100 during the first round of audits. Whirlpool used the Sourcing Strategy Development (SSD)...
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...Home Depot has convenient locations throughout the United States. Stores average 105,000 square feet with approximately 23,000 additional square feet of outside garden area” (The Home Depot U.S.A., Inc., 2003-2006, Our Company, Stores and Product section). A possible solution for addressing and fulfilling the organization’s expectations is to examine policies and procedure requirements for an additional customer service. Home retail improvement products and services in the future will gain efficiencies from departments such as services that are policy written and business procedures through development of more new products demanding customizations from business partners to fit in within the company structure both in a domestic and global arena. Home Depot offers deepening commitment to develop every resource to create an effective competitive advantage and manage logistics within the supply chain. A solid foundation within the brand of home improvement establishes the expectations influence and creates effects on procurement strategies, policies...
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...Global Sourcing What are some of the risks of buying overseas that one can avoid by buying from domestic sources? Some risks of buying overseas that can be avoided through buying from domestic sources include: Conducting business with immature suppliers causes risk as you do not have the same relationship and history with them that you do with suppliers you have worked with for years. You are unable to have regular ‘in person’ meetings and make assumptions that can taint your potential to have a great relationship. Unreliable delivery is also a risk which can be avoided (or reduced) by procuring from domestic sources. When a supplier is closer, or domestic, your timelines are shorter and more predictable. Quality can be a risk as you might not get the same quality you expected or ordered. It is more difficult to return and/or exchange the product. There is risk with foreign currency due to the fluctuations in the rate of foreign currency Transaction costs and the other costs related to communication and monitoring the network of suppliers, intermediaries and logistic providers can be reduced by buying domestically. 2. Purchase contracts issued by Barbara’s firm provide for the goods to be produced, shipped, and received within five months of the date the contract is issued. Should the monetary amounts specified in the contract be in U.S. dollars or in the currency of the nation where the manufacturer is located? Why? When your business transacts in foreign...
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...classifying and analyzing expenditure data with the purpose of reducing procurement costs, improving efficiency and monitoring compliance. It can also be leveraged in other areas of business such as inventory management, budgeting and planning, and product development. There are three core areas of spend analysis - visibility, analysis and process. By leveraging all three, companies can generate answers to the crucial questions affecting their spending, including: ▪ What am I really spending? ▪ With whom am I spending it? ▪ Am I getting what’s been promised for that spend? Spend analysis is often viewed as part of a larger domain known as spend management which incorporates spend analysis, commodity management and strategic sourcing. Companies perform spend analysis for several reasons. The core business driver for most organizations is profitability. In addition to improving compliance and reducing cycle times, performing detailed spend analysis helps companies find new areas of savings that previously went untapped, and hold onto past areas of savings that they have already negotiated. Benefits of Spend Data Management: [pic] 2. Goods Spend Analysis: How is it conducted? 3 major components of a spend analysis: |Component |Activity |Typical deliverable | |(a)Opportunity assessment |Collect and validate category spend data/diagnose...
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...MRO sourcing goes global Harold Montilla Instructor Lori Deere INF 336 Project Procurement Management May 14, 2012 MRO sourcing goes global It is critical for any organization or business to seriously analyze and implement maintenance, repair and operations (MRO) goods and services that will help the company achieve it organizational goals. Johnson, Leenders, & Flynn (2010) explain "Identifying and streamlining key business processes to reduce costs, grow revenues, and manage assets represents an opportunity in most organizations" (p. 77). This is important when applying the concept to maintenance, repair and operations (MRO) goods and services for any company or organization . Scott Singer (as cited in Avery, 2009) tells us "You want a superior unit price, a fair and reasonable mark up and a fulfillment model that provides the service you need" (line 3). With the advent of the globalization of world markets, companies have been forced to transform their strategic plan to accommodate these new emerging markets and competitors around the globe. This has forced companies to direct their efforts to create a strategic plan for taking care of their maintenance, repair and operations (MRO) goods and services associated to the sourcing strategy. In efforts to alleviate much of the challenges to maintenance, repair and operations (MRO) goods and services of The Department of Defense (DoD), the Defense Logistic Agency (DLA) was created to serve as a government entity...
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...MRO Sourcing goes global Tammy Johnson Project Procurement Management: INF336 Professor Lori Deere April 09, 2012 MRO Sourcing goes global The three practices that I found to talk about from this article are; make and buy, outsourcing, and subcontracting. The best way that I could describe these steps and practices that in the company that I work are to improve using the make and buy practice. The first thing that is some of the materials and things that have there at the scooter store, like other power chairs and scooters parts to fix another scooter or power chair and then only buy new stuff when it is absolutely necessary. Most of the power wheel chairs and scooters have a lot of similar parts therefore we should not buy new parts every time we should make some of the old parts fit other chairs. Outsourcing according to the textbook “when they decide to buy something they had been making in-house previously. The outsourcing that comes to mind for the company that I am currently employed is the same thing that I spoke of in the weekly discussion. That outsourcing is the payroll being done by an outside source that is a certified public accountant (CPA) does and not anybody that works right in the company with all of us. Then nobody has to worry about friends taking care of their friend and messing over somebody else with their time and their payroll. The subcontracting that I found in the article is sort of like power wheel chairs and scooters...
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...– Apr 2015 IMS People is an Offshore Recruitment Services firm whose customized services help companies and staffing firms source talent for opportunities at home and abroad. We tailor our services to each client’s needs by providing traditional recruitment services and creative, one-time solutions that help companies gain advantage in their market and drive their recruitment value chain. Achievement: Awarded Performer of the month for May-2014, Sep-2014. Awarded New Comer of the Year 2014. Duties: As a Recruitment consultant I am responsible for building and maintaining relationships with clients, colleagues and candidates. This enables me to research and generate new business opportunities. Duties Included; * Headhunting and sourcing candidates dependant on employer requirements * Regular business development calls with new and existing clients * Interviewing and screening candidates to create a strong pipeline * Marketing...
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...Background: IKEA was founded by Ingvar Kamprad who embedded his strongly held values and beliefs in IKEA’s culture. IKEA was created out of Kamprad’s family kitchen selling goods such as fountain pens, cigarette lighters and binders that later turned into a catalog business operations selling furniture. In developing IKEA’s furniture retailing business model, Kamprad was confronted with a cartel of furniture manufacturers that kept prices high by controlling the Swedish industry. This issue later became the vision of the company “creating a better life for the many people”. IKEA also introduced their key feature of self-assembled furniture where customers bought furniture in flat packages and put them together at home. This was known as the “knockdown” concept that allowed IKEA to save on transportation and storage costs. Conflict with the cartel of furniture manufacturers in Sweden forced IKEA to source materials from abroad. To maintain IKEA’s quality and delivery, IKEA taught their processes and provided machinery to their suppliers in Poland. After expanding their suppliers globally, IKEA created a general procurement principle that that stated IKEA should develop close ties by supporting its suppliers with a long-term relationship. By the mid-1990s IKEA worked with 2,300 suppliers in 70 countries. IKEA has 24 trading service offices in 19 countries that monitor production, test new product ideas, negotiate prices, and check quality. Since 1980’s IKEA has been looked upon...
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...Case Study: The Global Sourcing Wire Harness Decision Calvin Smith Westwood College Professor Rivers MGMT 350 2/8/15 The Global Sourcing Wire Harness Decision 1. Quote 1 Original Wire Quote: Unit price = $30 * Packing costs = $.75 per unit * Tooling = $6,000 onetime fixed charge * Freight cost = $5.20 per hundred pounds Yearly Unit Cost = ((monthly demand*12) * (unit cost + packaging cost)) + tooling charge Yearly Unit Cost = ((60000)*(30+.75)) + 6000 Yearly Unit Cost = (60000*30.75) + 6000 = $1,851,000 Yearly Unit Cost = $1,851,000 Unit Cost = Yearly Unit Cost / Yearly Demand Unit Cost = $1,851,000 / 60,000 Unit Cost = $30.85 Yearly Freight Cost = # of units * unit weight * freight cost Yearly Freight Cost = 60,000 * 10 * .0520 Yearly Freight Cost = $31,200 Unit Freight Cost = $31,200/60,000 = .52 Total Unit Cost = Unit Cost + Freight Cost Total Unit Cost = $30.85 + $0.52 Total Unit Cost = $31.87 2. Quote 2 2. Happy Lucky Assemblies Quote: * Unit Price = $19.50 * Shipping Lead Time = Eight Weeks * Tooling: $3,000 Yearly Unit Cost = ((monthly demand*12) * (unit cost + packaging cost)) + tooling charge Yearly Unit Cost = ((60000)*($19.50+.00)) + 3,000 Yearly Unit Cost = (60000*19.50) + 3000 Yearly Unit Cost = $1,173,000 Unit Cost = Yearly Unit Cost / Yearly Demand Unit Cost = $1,173,000 / 60,000 Unit Cost = $19.55 Monthly Freight Cost = $41,366 Unit Freight Cost = $41,366/5000 = 8.28 Total...
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...IKEA’s Global Sourcing Challenge IKEA, one of the world’s largest specialized furniture retailers, has been presented with a large issue within their operations. In 1995, a German TV station released an investigative report which exposed one of the suppliers for IKEA rugs for exploiting child labor in their factory. A recent addendum was signed by all IKEA suppliers which forbid the use of child labor (Bartlett & Sjoman, p. 1, 2006), so this incident has called the company to make an action based on the accusations at hand. The amount of turnover that is accounted from Indian rugs for IKEA is small on the full scale, and made the company question whether or not the product line was worth the profit potential. The following will be an analysis of the history of IKEA’s manufacturing, external forces related to the presented issue, rising issues, and recommendations for the company’s future moves. History of IKEA’s Manufacturing Though IKEA is one of the largest brands in the furniture industry, the company has been involved with some environmental issues related to their manufacturing. In the 1980s, IKEA’s products were subject to investigation as they were observed to emit more than allowed levels of formaldehyde (Bartlett & Sjoman, p. 5, 2006). The issue occurred from suppliers buying materials from sub suppliers, which resulted in the product not passing the regulations placed by legislation. The company began to change the way they worked with their suppliers...
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