Ikea are well known as innovators. From their original DIY business model, to their sleek Scandinavian designs, to their ‘family day out’ customer experience. In fact, even the way they recruit is Innovative (they've been known to put job descriptions inside their furniture packaging). So it's hardly surprising that their latest act of Innovation was to buy a forest.
Ok, so the purchase of a forest might not be what you were expecting from the 21st century’s allen key experts, but it’s true. Ikea recently acquired a Romanian forest and in doing so have demonstrated Innovation in yet another key business area- the supply chain.
Some believe that Innovation starts and ends with products and services, but to be truly disruptive, businesses need to be continuously improving every business area. From products & services, to customer experience, to processes, business models, marketing and supply chains. Of all these, it is often the latter that businesses fail to include in their Innovation Strategy or at best only consider simply for cost-saving reasons.
However, the decisions you make regarding your supply chain are more than just weighing up quality v. cost, and that’s exactly what Ikea has demonstrated. Ikea currently uses 1% of the world’s wood supply, and in recent times they have faced significant backlash for massive deforestation of old growth forests in Russia and Sweden. As a result of this, they set a long-term goal of sourcing all of their materials from forests that have been sustainably managed and harvested. The purchase of a Romanian Forest, not only provides them with direct access to their key raw materials, it allows them to create a renewable source for their operations and gain themselves some important brownie points for sustainability. In addition, by using local Romanian manufacturers they’ll be supporting the local economy. Value in PR, value in $, value in sustainability.
Of course not every business will be interested in or have the means to purchase a forest, mine or cotton farm etc. However, what Ikea’s acquisition demonstrates is that by viewing your supply chain differently and looking for alternative opportunities, the value of your business and the value you deliver to your customer can be dramatically increased.
And it it needn’t cost the earth.
One economical form of supply chain management that’s gaining popularity is Distributed Manufacturing. Technological advances are making localised production simpler than ever before. The ease with which information technology allows global relationships to be born, designs to be downloaded and even manufacturing software for machinery or 3D printers to be transferred is already disrupting conventional manufacturing processes, and bringing about networks of geographically dispersed manufacturing facilities.
We’ve seen how companies like Air BnB and Fiver have successfully cut out their industries' middle players, and it may not be long before other industries join the bandwagon. In the future, companies may no longer have to ship products across the ocean to serve a client on the other side of the world. They’ll just need to find a local manufacturer who is situated close to the intended market, email across the designs and enjoy the massive reductions in shipping costs. We could see locally based seamstresses making and delivering custom-made clothes and soft furnishings for global brands, furniture that we’ve purchased from Italy being built and delivered from an industrial unit in our own town, and when the 3D printing phenomenon explodes we could be downloading product designs from kitchenware to spectacles to print in the luxury of our own homes.
With such opportunities come uncertainties such as quality control and intellectual property, but hurdles like these have rarely stopped progress in the past. Manufacturers need to be considering a world that will one day operate beyond traditional factories and distribution centres. Ultimately it won’t matter how state of the art a manufacturing facility is, if the same product can be despatched quicker and more cost effectively through another supply chain, then the consumer is most likely to choose the alternative.
The supply chain is rarely at the top of the Innovation to-do list. However, if you’re looking to make progress that surprises your competition and disrupts your market, then why not put it on the top of yours?