IKEA’s Self Learning Supply Chain

Tom Bosschaert case

The Birth of IKEA’s Self-Learning Paper & Print Supply Chain

Speeding up sustainability across the industry with systemic tools
Tim Horsten, Tom Bosschaert, Ronald Hazelzet

Rotterdam, March 8 2017

“I never fully realized IKEA’s true power until we did this project,” says Matthieu Leroy, Sustainability Specialist at IKEA Media Production. To improve the green procurement of paper and print for its 200-million-copy catalogue, Media Production of the furniture giant from Sweden teamed up with sustainability innovator Except Integrated Sustainability. Together they worked with suppliers, Trade Extensions, and Deloitte on creating a sustainability-driven Self-Learning Supply Chain that’s transforming the paper and print industries around the world.

The largest annual print run on the planet, the IKEA catalogue, achieved 100% Forest Stewardship Council (FSCTM) mix credit certification for more sustainable paper sourcing worldwide in 2014. But that was just the start. Leroy: “We were looking for a game changer to make the entire lifecycle of the catalogue much leaner and greener.”

So, in spring 2014, a half dozen specialists from Except Integrated Sustainability locked themselves up with IKEA staff for a three-day innovation session at Except’s headquarters in Rotterdam to find that game changer. Fast-forward eight months, and IKEA’s purchasing managers have a brand-new purchasing interface at their fingertips that helps push the catalogue’s sustainability footprint down.

As a result of the significant contributions from all collaborating partners CO2 emissions per catalogue copy dropped 28% between FY14 and FY16. Energy consumption per copy went down 5% in that same period. The use of renewable energy increased 30% and water consumption diminished 35% in the last year alone, by selecting suppliers with lower environmental footprints.

System thinking identifies break-through point

Tom Bosschaert, founder and director of Except, explains: “We always look for the smartest lever to effect maximum change within a system, be it a company, a large city, or a global supply chain in this case.” To find these levers, Except used its Symbiosis in Development (SiD) framework that combines systems thinking, network theory, and life-cycle understanding in a co-creation process. It doesn’t just take into account direct material effects such as energy, water, waste and biodiversity, but also how these are connected to aspects such as economy and health. By visualizing these networks the team discovered how the system can be changed most effectively at the root.

In the execution phase, Except empowers these with concrete action plans and designs, working closely with partners to execute them. Executing this approach on the global supply chain of the IKEA catalogue was a particularly interesting challenge. What hidden levers would be exposed to effectuate maximum positive change? Tom Bosschaert continues: “We’ve done this process hundreds of times. We know it works, but each time is equally thrilling, because you simply don’t know what will come to light. Where do the hidden gems lie hidden this time?”

Discovery: Up-cycling information

IKEA had already collected a significant amount of sustainability data from 130 paper mills and printing factories across the globe that may participate in IKEA’s catalogue production. But these data had become simply too much for any human mind to process.

In the first SiD co-creation session the team of IKEA and Except worked for three days non-stop on creating the strategy for the development process to come. Using systems-mapping they created insight into the data that describes the life cycle of the catalogue from forest logging and paper manufacturing to print. They also mapped which people in the decision making chain of the catalogue had the biggest influence on its sustainability performance. From this systemic analysis the team could pinpoint where the biggest sustainability gains could be achieved with the least amount of effort and time. In this case, improving the use of already-available information was the key. By visualizing data in a different way, more insight could be derived, leading to better decision making on what supplier to pick at critical points in the life cycle of the catalogue, boosting its performance. They also saw data sharing with and within the supply chain would enable suppliers to compete and cooperate to create the best performance for themselves and the supply chain as a whole. They then set out to build the tools that did this.

Human Scale Data

After validating the data and calculations in the database, a team of IKEA, Except, and Deloitte clustered the existing data into 18 Key Performance Indicators (KPIs) summarizing numerous sustainability, quality and operational metrics of IKEA’s 130 potential supplier locations worldwide. Next, Except designed a visual interface that intuitively displays all of this data in a single glance. It uses an infographics driven overview that ties into the existing Trade Extensions platform used by IKEA for its data collection and sourcing optimization process.

Before, purchasers had to delve through pages of data in an excel sheet to evaluate a supplier’s performance. The visualization tool completely changed this with a screen of color-coded visual graphs that gives the purchasers an instant overview of a supplier’s entire performance, quality, and sustainability KPIs. Mouse-overs reveal more granular data as needed. The design gives the user control over how they view and mentally process the data, which leads to better decisions in a shorter timeframe.

Supplier relationship

Now that the internal decisionmaking process was improved with the visualization tool, the next step in the strategy was to focus on the performance of the suppliers themselves, effectively the global print and paper industry. Before, suppliers delivered data about their operating performance to IKEA, and IKEA would use it to make its purchasing decisions. Through the process, the team realized that the catalogue performance could be boosted from the side of the suppliers by feeding back critical information on IKEA’s decisionmaking. In effect, this generates a ‘supplier race’, where suppliers start competing with each other through greater intelligence on their position relative to others, IKEA’s green goals, and helping them see what they can do to improve. It helps them prioritize their corrective actions, improve performance and as a result to be considered by IKEA for business increase. The feedback also improves the value of the data process for the suppliers themselves, incentivizing participation. The intent of this is to boost the performance of the entire industry, not just those suppliers picked for the catalogue production. It’s an example of IKEA taking responsible action within the entire supply chain. As one of the IKEA purchasers discovered: “Suppliers started using it to make the case for investment with their management or Board”, showing how the increased insight of decisionmaking is already starting to influence companies up the supply chain.

Internal impact

IKEA applies a similar logic to its relations with internal stakeholders outside of the supply chain. It wants to build transparency and dialogue on the sustainability aspects of its catalogue production process. Enter the Data Dashboard, a compact version of the Purchaser Dashboard, minus the granular data and functionalities. The Data Dashboard serves internal stakeholders such as store co-workers and catalogue responsibles. The Data Dashboard shows the history, current status, and targets for 13 aspects such as input materials, energy, CO2 emissions, and waste, aligned with the Global Reporting Initiative (GRI G4).

Significant results in a short timeframe

“These dashboards are strengthening the interactive, collaborative dynamic with all of our stakeholders, from suppliers to the general public,” notes Leroy. “I knew that, as a big player, IKEA had the leverage to drive a transition toward greater sustainability in our own paper and print supply chain. We have the potential to create positive impacts at the industry level that extend beyond our catalogue production. That’s far beyond what we originally expected or imagined.” For a project with a start to end time of less than a year, it makes an exemplary case for the systemic approach to performance improvements in sustainability, efficiency and financial performance. The team is now looking at ways to implement the same thinking elsewhere in the system for further performance increases.