Furniture maker bullish on biz in China, pins growth hopes on innovation, stronger local ties

Furniture producer Inter Ikea Group's supply chain unit is sharpening its focus on automation and innovation in China, the global company's biggest sourcing market, a senior executive said.

About 25 percent of what Ikea sells globally comes from China. Around 80 percent of what Ikea sells in China comes from China. Such aspects are strategically important for the company, said Susanne Waidzunas, global supply manager of the company.

During a recent visit to China, Waidzunas said innovation is key for Ikea's supply chain, ranging from artificial intelligence-driven planning capabilities to technological advancements in manufacturing and distribution.

The company has projects in China that leverage AI, collaborative partnerships for renewable energy and intelligent warehouse solutions.

The newly established distribution center in Foshan, Guangdong province, which is designed to provide replenishment services to nine Ikea stores in South China, reflects the company's ongoing investment in the Chinese supply chain, Waidzunas said.

Ikea has prioritized its commitment to build a circular supply chain by 2030, including the use of recycled or recyclable materials in product development.

It is crucial to have the entire value chain in the Chinese market as Ikea strives for a deeper connection with local consumers, efficient product development and sustainability, she said.

Waidzunas said China's industry clusters related to supply chains are concentrated and supported by a resilient and strong industrial base, forming a highly capable comprehensive supply chain.

The goal is to tap into and leverage these advantages to enhance purchasing processes, boosting the quality and efficiency of the company's entire supply chain, she said.

Ikea has more than 460 suppliers and service providers in China, and 40 percent of them have had collaboration with Ikea for more than 15 years, Waidzunas said.

Zhou Mi, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation in Beijing, said the scale and resources of supply chains in China have offered ample and consistent choices for multinational enterprises.

The innovation and skill updates are often conducted in alignment with parties involved in the supply chains, improving efficiency significantly, Zhou said. "Many domestic companies and international enterprises have grown rapidly through learning from each other."

The ability to develop a product range close to where it is produced and where raw materials come from gives the company a chance to make a "democratic design", where the company designs for the "lowest "cost, sustainability, quality, form and function, Waidzunas said. "That is a kind of magic how we develop the products."

The competence of Ikea's complete value chain, and its human resources imbued with a "can do" spirit and skills, give the company a competitive advantage, she said.

In China, Ikea has a local design team working on product development, influencing and designing throughout the value chain. "The skills in the labor force and the competence that we have here in China are a big competitive advantage."

Despite global challenges, Ikea remains optimistic about its market position in China.

Waidzunas said that while the overall consumer demand might weaken, there is an opportunity to offer affordable products that resonate with consumers.

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