6 Lessons every Procurement Team can learn from Ikea's IWAY

My girlfriend and I have a dog, named Charlie.

He’s only one and a half years old and is already, now, rather well trained. Sure, he has an occasional hiccup and puts his paws on a friend from over excitement, or pulls on the leash a bit too much as we approach the lake. But, all in all, my girlfriend and I (mainly her) have done a pretty solid job raising him.

Then again, we didn’t approach this whole dog ownership business with a ‘wilyl-nilly’ mindset.

We were well prepared. We completed extensive research, watched a lot of how-to clips, purchased some best practices resources, discussed/strategized amongst ourselves at length, developed ground rules, consolidated a plan, and continuously reviewed our methods and performance throughout Charlie’s first 15 months of training.

Looking at him now laying on the cushion in the corner of Kodiak Rating’s office sound asleep, I feel proud that we took the time and effort, to lay the foundation, to help him become the dog he is today.

Looking back on the training process, our research, strategy, implementation and evaluation methods closely mirrored supplier relationship management and procurement management. In fact, it made me think of a specific chapter I read from Magnus Carlsson’s Strategic Sourcing and Category Management: Lessons Learned at IKEA.

Now bear with me here…

In 1995 IKEA faced an organizational shift in purchasing and sourcing methodology. They wanted to expand their production, and become more competitive globally. “For purchasing, this new strategy meant switching perspective from a focus on individual products to the sourcing of product packages. The goal was to break a trend of risiong purchasing prices and instead reduce total costs by using the entike Ikea volume as leverage” (Carlsson, 2015 p.6).

In order to enact the shift that they wanted to see in their procurement, purchasing and sourcing processes, they had to not only rethink internally, but work closely with a consolidation and restructuring categories within their supplier base. Simply, Ikea needed to make a change in order to make an organizational impact.

In the same way that my girlfriend and I were prepared to implement training methods to see the results we wanted to see in Charlie’s behavior, Ikea was ready to take action to ensure their supplier relationships would be leveraged, and show the results they hoped to see.

IWAY, the ‘Ikea way of purchasing’, Ikea’s code of conduct (CoC) for suppliers was introduced to ensure that the drastic changes the organization was experiencing wouldn’t jeopardize key supplier relationships. Furthermore, the guidelines spelled out in IWAY established a new normal for the future of Ikea’s requirements on suppliers.

What is IWAY?

As stated, IWAY is Ikea’s Supplier CoC. It “requires suppliers to act lawfully, and if the laws are inadequate to act responsibly towards people and the environment” (Carlsson, 2016, p. 7).

Ikea’s Supplier Code of Conduct sets a precedent for the importance of supplier governance, and a stronger focus on corporate social responsibility.

As procurement, sourcing and/or purchasing professionals, we could all learn a thing or two from IKEA; an organization that went from a small furniture company in Småland, Sweden started by Ingvar Kamprad, to the major global enterprise it is today.

Some would argue that Ikea’s eye for innovation, focus on cost efficiency, affordability of products and strong focus on quality sourcing have been some of the key role players in the organization’s global success and market domination.

In my eyes, IWAY was at the center of Ikea’s rapid expansion. And, I’d like to today share with you some lessons we could all take away from Ikea’s successful supplier relationship management and supplier CoC.

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