The Incorporation of Sustainable Strategies in the Supply Chain of Walmart and IKEA

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Table of Contents

Introduction
How sustainable strategies in supply chains are implemented in both companies
Sustainable logistics
Conservation of forests
Ikea strategies
Competitive advantage
Works Cited

Introduction

IKEA is a multinational furniture manufacturer and retailer whose origin is a small village in Sweden. IKEA offers a wide range of furniture and household goods produced with innovative and original designs at low prices. The Group owns and operates 301 stores in 37 countries in Europe, North America, Asia, and Australia as of August 2009. It is an unlisted family business that is run under a Dutch Foundation, Ingka Foundation, which is a holding with several units all owned by the same family. These are Ikea group which runs the stores worldwide; Ikea Ikano Group which owns the habitat stores; and Inter-Ikea Systems BV that takes care of the copyright and trademark (IKEA History: Where it All Began). The company has a range of 12,000 products. Textiles, rugs and chairs are made in India, Vietnam and Bulgaria. For the rest of the products 31% are made in Asia, 66% in Europe and 3% in North America. The company also works with around 1600 suppliers from around the world (Zwart and Tulder 2008).

Walmart on the other hand is one of the largest discount retail stores in the world operating 8,416 stores and clubs in 14 countries and serving 176 million customers per year to date. The company started in 1962 in Arkansas, USA with a single store and has grown phenomenally to operate three business segments, which are, Walmart U. S., Walmart international and Uncle Sam’s clubs. It operates in different formats: retail stores, restraints, discount stores, supercenters, supermarkets and Sam’s clubs (The New York Times business; Walmart Press Room).

Walmart as a business has committed to being a good steward of the environment through formulation of three environmental sustainability goals which, go together with their business strategies. These are; to be supplied with 100% by renewable energy, creation of zero waste and selling products that sustain people and the environment. Through this the company has outlined several green strategies (Drori, Meyer and Hwang 2006; Walmart Press Room). Ikea is also committed to providing sustainable, well-designed and functional products to its customers at low prices. It aims at serving people in ways that not only benefit them but also the environment (The Moscow Times).

How sustainable strategies in supply chains are implemented in both companies

Walmart announced plans to develop a worldwide sustainable product index on July 16, 2009. This is a three phases’ strategy that is designed to create a transparent supply chain, encourage product improvement and provision of information about products sustainability to customers in order to help them choose sustainable living. The first phase is Supplier Sustainability Assessment that will supply 100,000 global suppliers with a survey designed to analyze their sustainability in areas of energy and climate change, material efficiency, natural resources and the community and its people. The second phase is lifecycle Analysis Database that will be done with the help of suppliers and other stakeholders to create a database of information on products’ lifecycle. The last phases will involve creation of a Simple Tool for customers to use in making choices on what to consume and what not to (Sustainability Index; Franck 2008).

Ikea also has a broad strategy on how it relates with its suppliers called IKEA Way on Purchasing Home Furnishing Products (IWAY) code of conduct. This was developed and introduced in 2000 based on the ILO declaration of 1998 and the Rio Declaration on Sustainable Development of 1992. This covers area of environmental, social and working conditions. This sets minimum requirements for suppliers. In 2006 this was revised to include the requirement that suppliers carry out their own health and safety audits with a committee for doing this in which half the members are employees. IKEA carries out unannounced audits on its suppliers to check the implementation of their part in IWAY (Franck 2008; IKEA Press Room).

Sustainable logistics

Walmart operates a large fleet for delivering its products to various destinations in areas they operate; in fact they operate the largest fleet in US and UK. They have committed to employing clean technologies that will see them not only save money but also ease air pollutants and help communities they serve live better. Therefore their Logistics Sustainable Value Network (SVN) outlined goals of increasing by 25% fleet efficiency in U.S by October 2008 and double that by 2015 taking their 2005 statistics as their baseline. This was achieved by attaining 38% increased efficiency in 2008 while covering 7 % fewer miles and increasing by 3% more cases to their stores. This reduced their carbon emissions into the atmosphere by 200,000 metric tons (Connolly 2008; Walmart News Release, “Wal-Mart’s Increasing Efficiency”).

Ikea also has a policy of transporting its products and people efficiently though not as well defined and developed as in Walmart. In this policy, they use flat-pacts so as to transport as many goods as possible in each load. This has seen reduced journeys as well as savings on fuel consumption. Transport service providers for Ikea also have adhered to their IKEA Way code of conduct which has a requirement for use of modern vehicles with cleaner fuels and emission targets (Efficient Transport of products).

Conservation of forests

Through this strategy, Walmart is committed to sourcing paper and wood products from sustainable forests and encouraging suppliers to make products that meet sustainability goals. Initiatives include working with toilet paper and paper towels suppliers to develop “Extended Roll Live” products. This technology compresses several rolls of paper into one thus, reducing the need for extra packaging, cardboard centers and space on their trucks and shelves (Mongabay News; Walmart News Release, “Wal-Mart Looks at Sustainability”). The second initiative is a partnership with various organizations and suppliers to eliminate wood from unsustainable forests from the supply chain. One of these is World Wide Fund’s Global Forest and trade network (GFTN) where Walmart is committed to eliminating illegal logging and supporting efforts to manage threatened and valuable forests worldwide (Carufel 2008).

Ikea strategies

Ikea provides a lot of wood products in the market. It therefore has a long-term goal of sourcing all wood certified by an organization it recognizes as it outlined in January 2003. In regard to this a staircase representation with four-level strategy is applied to all suppliers bringing or producing Ikea items that have solid wood, veneer, plywood or layer glued wood. Level 1 in the model contains the requirements that a new wood products supplier must meet such as the origin of the wood which must not be from an intact natural forest or high conservation forests. Level 2 is the minimum requirement the existing suppliers were to meet as of January 2003 and failure to this they were to produce an action plan on how to meet them within three months. Level 3 or the 4Wood is a standard Ikea developed and were to govern and revise accordingly this was meant to provide a transition from minimum standards in level 2 to well-managed and certified forests. Level 4 is the top on the stair model and represents a well-managed and certified forest. In addition, Forest Tracing Systems Document (FTS) are provided by IKEA to its suppliers where they fill all the necessary information about the origin of wood in the products (IKEAS’ Position on Forestry). IKEA also partnered with WWF in 2002 on a three-year program to promote responsible forestry. This partnership was extended on a second phase in 2005 and included projects in forest, cotton and climate change in most countries where business. This partnership is meant to implement the IKEA forestry action plan (WWF News; Forest Management in Romania and Bulgaria-IKEA).

Competitive advantage

Walmart derives competitive advantage in the management of supply chain in the retail industry in that it has reduced operating costs. In the “Extended Roll Life” products mentioned above the company intends to save 53,966 gallons of diesel consumption, 89.5 million cardboard roll cores and 360,087 pounds of plastic wrapping. In logistics, Walmart Sustainable Value Network (SVN) has been able to operate its fleet of trucks efficiently saving not only the environment but also money in fuel from reduced trips and more space utilization in the trucks. Such strategies will save the company lot of money in operating costs which in turn will translate into reduced prices for their customers. Sustainability strategies such as saving threatened forests around the world will make Walmart different from the rest of its competitors (Mcgraw-Hill Education Europe).

Through sustainable strategies, these two companies have helped suppliers to produce quality goods and at a lower cost which translates to more sales and customer satisfaction which will give them an edge over their competitors (Zwart and Tulder 2006). IKEA’s IWAY strategy provides a set standard for its suppliers on the production of goods. This ensures that high-quality goods are supplied to the company and which the customers will enjoy. The customers of Walmart on the other hand have come to appreciate the “Extended Roll Life” products introduced by the company as they save them money, space for storing, and convenience is guaranteed.

Also, their environment and sustainability focus is appealing to their customers and sets them aside as not only profit-oriented like their competitors but also stewards of the environment and welfare of the communities they serve. IKEA attributes their increased sales on IWAY in 2006 when the turnover rose to nearly 18 billion euros (Walmart Press Room; IKEAS’ Position on Forestry).

Works Cited

Carufel, Amanda. Wal-Mart Joins WWF’s Global Forest and Trade Network: Commitment to

Improve the Management of Valuable and Threatened Forests.WWF.org, 2008. Web.

Connolly, Kate. Wal-Mart Scorecard Drives Sustainable Packaging: The Retail Giant is Beginning to Scrutinize Suppliers Based on the Scorecard and Package Modeling Software. Food Processing.com, 2008. Web.

Drori, Gili, Meyer John and Hwang Hokyu. Globalization and Organization: World Society and Organizational Change. London: Oxford University press, 2006. Print.

“Efficient Transport of products.” IKEA.com. IKEA.com, n.d. Web. 2010.

“Forest Management in Romania and Bulgaria-IKEA.” WWF.org. WWF.org, 2009. Web.

Franck, Axel. A Sustainable Supply Chain Management: A Tool for Reinforcing Shareholder Value. Google docs, 2008. Web.

“IKEA History: Where it All Began.” IKEA.com. IKEA.com. n.d. Web. 2010.

“IKEAS’ Position on Forestry.” IKEA.com. IKEA.com, January 2003.Web.

IKEA Press Room. IWAY, Our Code of Conduct. IKEA.com, 2010. Web.

Mcgraw-Hill Education Europe. Discussion Notes: Strategy: Analysis and Practice. Google docs,2005. Web.

Mongabay News. Wal-Mart protects California Forest. Mongabay.com, 2006.

“Sustainability Index.” Walmart.com. Walmart.com, n.d. Web. 2010.

The Moscow Times. IKEA to Open a Mall in Mytishchi. The Moscow Times Online, 2010. Web.

The New York Times business. Wal-Mart Stores Inc. New York Times business Online, 2010. Web.

Walmart News Release. Wal-Mart Looks at Sustainability of Wood Products: Wal-Mart is Working with Suppliers to Source Paper and Wood Products from Sustainable Forests. Walmart.com, 2009. Web.

Walmart News Release. Wal-Mart’s Increasing Efficiency of its Fleet and Distribution Centers. Walmart.com, 2009. Web.

Walmart Press Room. Wal-Mart Announces Goal to Eliminate 20 Million Metric Tons of Green House Gas Emissions from Global Supply Chain. Walmat.com. 2010. Web.

WWF News. WWF and IKEA Conservation Partnership: A Global Partnership. WWF.org, n.d. Web.

Zwart, Alex and Tulder Rob. Case Study: IKEA Family: Old Enough to Work? Socialist Party Versus IKEA. Google Docs, 2008. Web.

Zwart, Alex, and Tulder Rob. International Business-Society Management: Linking Corporate Responsibility and Globalization. New York: Routledge, 2006. Print.

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