I recently interviewed Magnus Carlsson, the author of Strategic Sourcing and Category Management: Lessons Learned at IKEA. You can listen to our conversation on demand on BMP Radio.
Although the book centers around the how and why of IKEA’s approach to procurement and supply chain, its content is not limited to large multi-national corporations or companies in the furniture and home goods industries. IKEA is a company that competes on brand and low costs, which makes its approaches to spend and supplier management absolutely critical to its ability to operate.
IKEA has been able to accomplish many things that other companies have not because it is necessary for them to remain competitive. As a result, their team members – and former team members, for the sake of including Carlsson – approach complex and strategic procurement with a striking clarity of purpose. There is no other way for IKEA to work, and therefore there is no reason to resist or bemoan the uphill strategic path.
I hadn’t intended to focus solely on the ‘difficult things’ in my interview with Carlsson, but those are the things that IKEA does so well and which most of the rest of us struggle with. There was a matter of fact-ness to his tone and explanations that questioned any approach that would lead to sub-optimal results, regardless of how difficult it might be.
- Categories of spend should be segments of the total demand defined by the sourcing location, material, suppliers rather than by product to maximize value created and spend managed.
- You must be willing to stop a process and adjust your plan or change direction – at any point - if new information comes to light that suggests a better alternative end goal is within reach.
- Don’t make enemies in the organization by telling people how you could make a situation better. Instead, create heroes by showing people that they have an opportunity to improve the business.
Another topic that came up in the conversation is the need for market diagnostics. As Carlsson put it, if cost is an issue, you need to figure out whether you have a cost problem or a price problem. Cost problems will require you to re-engineer the product or use an alternate material, and no amount of competitive bidding or supplier harassment will improve the situation. Price problems, on the other hand, live entirely within the supply chain. Maybe you are working with the wrong supplier or the wrong location and it is causing you to bear the burden of additional cost. The product is fine as is, but the sources of materials and logistics investment are suboptimal.
I really liked Lessons Learned at IKEA when I reviewed it, but having the opportunity to speak to Carlsson added a new perspective on what they are capable of and what it requires of each individual. I highly recommend the book as well as spending a few minutes to listen to our conversation about it. I suspect that you will be as won over by Carlsson as I was.