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What Did Ikea Do When Suppliers Blockaded Its Supply Chain Business

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What Did Ikea Do When Suppliers Blockaded Its Supply Chain Business

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Imagine if you were a small sized furniture seller, and suddenly your suppliers refused to supply furniture to you because they allege that you are selling at too low a price.

And, when you went to another manufacturer, they refused too.

In fact, it turns out that all manufacturers have decided to boycott your business because you are underselling every one of your competitors. What would you do?

5 things of Supply Chain Business

1. Would you raise the prices to “fit in” with the market?

2. Would you quietly start preparing for “transitioning out” of the furniture business?

3. Would you build your own furniture factory?

4. Would you appeal to the government that such an “organised boycott” was illegal?

5. Would you find “a way” to break the boycott and find a “boycott breaker” supplier?

As you have probably guessed, this is not a hypothetical situation. This is exactly the situation faced by Ingvar Kamprad of IKEA.

The story, related by Malcolm Gladwell in his book ‘David and Goliath’, is illustrative of the power of business networks.

The Forbes of Supply Chain Business

When I researched the story, there is obviously more to it than what is written in the book

This Forbes article gives the following background:

Kamprad started Ikea when he was just 16 (the name was officially registered in 1943) as a general mail-order firm.

In 1952 he moved into mail-order furniture and the following year opened a showroom in lmhult. (The name is a combination of Kamprad’s own initials, plus the first letter of Elmtaryd, the family farm, and Agunnaryd.)

He constantly tinkered with how the furniture was designed, to keep costs low.In 1955 came a brilliant breakthrough:

Trying to figure how to efficiently pack and ship a bulky, long-legged table, Gillis Lundgren, an early employee, later Ikea’s chief designer, hit upon the idea of taking the legs off and mailing them packed flat under the tabletop.

Voil! Self-assembled furniture was born. It has been at the core of Ikea ever since.In 1958 Kamprad began opening retail outlets, first in lmhult, then Norway (1963), Denmark (1969), Switzerland (1973) and Germany (1974, now Ikea’s largest market).

Then came Canada (1976) and the Netherlands (1978). Later came Ikea’s second-and third-ranked markets, the U.K. (1987) and the U.S. (1985).

Kamprad started Ikea when he was just 16 (the name was officially registered in 1943) as a general mail-order firm. In 1952 he moved into mail-order furniture and the following year opened a showroom in lmhult.

(The name is a combination of Kamprad’s own initials, plus the first letter of Elmtaryd, the family farm, and Agunnaryd.) He constantly tinkered with how the furniture was designed, to keep costs low.

In 1955 came a brilliant breakthrough:

Trying to figure how to efficiently pack and ship a bulky, long-legged table, Gillis Lundgren, an early employee, later Ikea’s chief designer, hit upon the idea of taking the legs off and mailing them packed flat under the tabletop

Voil! Self-assembled furniture was born. It has been at the core of Ikea ever since.

In 1958 Kamprad began opening retail outlets, first in lmhult, then Norway (1963), Denmark (1969), Switzerland (1973) and Germany (1974, now Ikea’s largest market).

Then came Canada (1976) and the Netherlands (1978). Later came Ikea’s second-and third-ranked markets, the U.K. (1987) and the U.S. (1985).

The article further goes on to state:

On the late 1950s and early 1960s, Sweden’s National Association of Furniture Dealers boycotted Ikea, threatening the country’s furniture makers that if they sold to Kamprad, they could forget about selling to the association’s membership.

That led Kamprad to emphasize both in-house designs and sourcing production outside Sweden. In the end, the boycott collapsed.

In his book, Malcolm Gladwell gives the details of how Kamprad built an international network of suppliers by going behind the iron curtain to Poland.

While it was not an easy job, it was well worthwhile to start a process which built IKEA into a global powerhouse that it is today.

With 139,000 employees and global revenue of Euros 28 Billions, there is certainly more than meets the eyes.

It will take an article of several pages to trace the development of IKEA from its humble origins stated above, to its current lofty position – perhaps a good case study for another edition of my book “The 5-Star Business Network“.

However, it is quite clear that IKEA and its business network co-developed in lock-step with each other, leaving all those members of boycotting Sweden’s National Association of Furniture Dealers far behind.

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Today, Vivek and his partners are among 20-30 people on the planet earth who have this deep understanding of supply chain systems, practices and tools. CEOs, COOs, executives and Boards call them in most challenging situations once they know the full potential of supply chain based transformations. Following are key milestones in Vivek's journey:

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OUTPERFORM OUTSOURCE OUTPROFIT

The trend of outsourcing continues to grow unabated with the whole gamut of services, from simple to mission-critical tasks. There is not a single company on earth that does not outsource anything. It is not just about cost arbitrage, it is also a finer expression of division of labour at the organisational level. Like all leverage, outsourcing is a double-edged sword too. On one hand, it allows you to do more, faster. On the other hand, if it goes bad, it can easily kill your business. If you do not believe that is possible – you can google the Fox Meyer saga from the 90s and see for yourself.

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Businesses Are Chained By Unseen Chains. If You Are Looking For Ways To “Unchain Your Corporation” A Successful Business Transformation Is Required.

Successful Business Transformations Are Difficult, Yet Rewarding.

Business Transformation Is Fast Becoming A Question Of Survival In The Modern Globalised Era.

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Companies Can Multiply Profits By Progressively Ramping Up Cohesion And Collaboration Of All Moving Parts In B2B Network To Achieve Tighter Integration.

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