Ingvar Kamprad, Ikea Founder and Supply Chain Pioneer, 1926-2018

Last week, a man who has had more impact on more people than almost anyone else in the world over the past 60 years died, aged 91. Ingvar Kamprad was the founder of legendary furniture company Ikea, which he started back in 1943 as a 17-year old. Now, the firm has revenues of over 38 billion euros from 411 stores in 49 countries. By the way, Ikea stands for Ingvar Kamprad and Elmtaryd, Agunnaryd, after the farm and village in the southern Swedish region of Småland where he grew up.

He had issues with drink and there were stories about tax evasion and a Nazi-sympathizing youth, and he was a notorious skinflint. Depending on your own predilections you will see that as either a character flaw or an admirable trait; personally I’m probably closer to the second view. But there are suggestions that his attitude led to the group under-investing in areas such as technology, and online channels are still not a strong point for the firm.

There are also different views as to his legacy. Making generally well-designed goods available at very affordable prices to the masses is a positive, but the semi-disposal nature of much Ikea furniture has perhaps encouraged the “throw-away” mentality that pervades society today. Having said that, Ikea and Kamprad brought good, affordable design concepts to the masses, and were pursuing philanthropic and environmental causes before they were fashionable. He was revolutionary in making customers not just drive to the stores but assemble the furniture themselves – another example of his thinking that was seriously ahead of the curve.

There are other reasons to praise him. This FT article has a senior colleague saying this.  “He wanted to know who had made the biggest mistakes in Ikea. Sometimes there were prizes for those who had made the biggest. Just imagine that,” he says. Again, he was ahead of his time in recognising the benefits of learning from failure.

A couple of years ago, we reviewed this fascinating book by Magnus Carlsson, titled "Strategic Sourcing and Category Management - Lessons Learned at Ikea”. Carlsson was an Ikea supply chain executive for many years, and we heard him speak at the Trade Extensions event in Stockholm in late 2016 too. He explains in the book some of the key Ikea principles in terms of supply chain and supplier management, and we would recommend that anyone with an interest in those topics should get hold of the book.

Ikea pursued both very strong collaborative partnerships with suppliers, yet was also determined that no supplier would hold too much power over the firm. Ikea constantly looks to supply markets for innovation – yet will also work very closely with suppliers, being quite prescriptive at times over even the tiniest details when they feel that is the right thing to do. As we said in our 2015 review:

“But it is not all raw power; the firm was a trailblazer in reducing supplier numbers, low-cost country sourcing, and aspects of ethical behaviour too, appointing a “supplier ombudsman” some time ago for example. The aim is always to create situations where price reductions “naturally follow” – although those situations are based heavily on power and the strength of Ikea’s BATNA* (although that term is not used, that’s what it is all about!)”

They were also pioneers (perhaps without knowing it) in “engineering to price” – starting with the view that a lamp should be sold for 10 euros perhaps, or indeed a hot-dog for five Swedish crowns, then working out how the supply chain could produce it profitably to sell at that price. (Although this article suggests that maybe the hotdogs are a “loss-leader” in truth!)

Anyway, Kamprad was a pioneer and a supply chain pioneer in particular in many ways, and one of the truly great business people of the 20th century - may he rest in peace.

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Voices (2)

  1. Sophie:

    Peter I highly recommend watching Flatpack Empire which aired yesterday on BBC2 (the first of three episodes). A strangely interesting fly on the wall on IKEA’s head office, and almost like a parody in parts with some very interesting characters! It looks as though next week’s episode focuses on the supply chain and manufacturing side of things, which should be worth a watch too. What really came across though was just how passionate the staff are about the company, no doubt thanks to the culture Kamprad developed.

    1. Peter Smith:

      Thanks, i have this week’s recorded and I’ll make sure I watch it given your recommendation. The culture and passion comes through in the book I mentioned too.

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