Swedish retailer IKEA to up outsourcing from Bangladesh

[allrounder]

Committed to PEOPLE'S RIGHT TO KNOW
Vol. 5 Num 315 Sat. April 16, 2005

Business


Swedish retailer IKEA to up outsourcing from Bangladesh
M Abdur Rahim

IKEA, the world's largest home furnishings company, has decided to increase outsourcing from Bangladesh and add new products to its existing purchase inventory.

The Swedish retailer this year will engage Bangladeshi suppliers to produce items using the country's natural fibres, banana fibre, rattan and bamboo resources to serve home furnishings needs of its millions of European and American customers, says Peter Wisbeck, deputy regional manager of IKEA's South Asia office, in an interview with The Daily Star.

The Scandinavian company, which has an unnoticed purchasing operations of 20 years in Bangladesh, will add plastic and light engineering items to its current purchase list dominated by home-made textile products such as quilt cover, curtain, terry towel, rug and handloom carpet.

It is a matter of pride for the country that out of the retailer's 10,000 articles available in its 202 stores in 32 countries, 300 come from Bangladesh's small and medium enterprises. The company imports 1,000 forty equivalent unit (FEU) containers carrying home furnishings cargo from Bangladesh a year.

Having started purchasing in early 1980s, the company opened a liaison office in Dhaka to facilitate local suppliers' capacity building, standardising quality, IKEA designs and ensure timely delivery.

With the improvement of product quality, the company continues to look for new items from Bangladesh, as Peter Wisbeck said, "We find interest in Bangladesh's natural fibres, bamboo and plastic items. We will increase volume of terry towel from here. So, we think the total purchasing will increase by 30 to 50 percent this year."

He said Bangladesh needs more entrepreneurs to produce quality products for customers in European and other developed markets. "The suppliers need to focus more on capacity improvement to meet standard requirement of IKEA," the official of IKEA's New Delhi office said.

Europe is IKEA's priority market with 81 percent sales while North America offers 16 percent and Asia and Australia three percent together. Malaysia and Singapore stores are the nearest IKEA stores for Bangladesh. The company does not even have a retailing store in India.

Even though the Asian customers, presumably, are on low priority of the company, the suppliers mainly come from Asia. The official said the company plans to further increase its purchase volume from Asia. Presently outsourcing 31 percent of the total products from Asia, the share will easily top 50 percent in the next five years, he said. "Bangladesh will be benefited from the new company policy."

However, there are no retail plans yet for the region.

With the vision 'to create a better everyday life for many people', IKEA stores stock everything under roof including sofas, beds, tables, chairs, textiles, kitchen utensils, floorings, rugs, fittings for kitchen and bathroom, lamps and bedroom plants. The rapidly expanding company witnessed a 13 percent turnover growth last year and targeted over a 20 percent growth in 2005.

IKEA sales totalled $15.5 billion in financial year 2004. It employs about 84,000 co-workers in 44 countries and maintains around 1,500 suppliers in 55 countries. IKEA stores welcomed around 365 million visitors in 2004.

The name IKEA comes from the initials of the founder Ingvar Kamprad, the farm Elmtaryd, and the village Agunnaryd, where the Swedish entrepreneur grew up.


-- daily star

my thought is who gets all the money? Do the workers get a decent earning or they are used as bodyshop for ever.

[deshibhai]

Yeah, I was encouraged to see this piece in the Daily Star today. If IKEA's purchases from Bangladesh grow at anywhere near the rate at which its business in the US has become popular, then furniture exports from Bangladesh have a bright future. And anything that diversifies our export base has to be promising for our growth potential.

With regard to who gets the money and whether workers get "a fair deal", one needs to realize that workers will get whatever the labor market in the country enables them to get. If given a choice between A--where IKEA suppliers employ x workers at the wage and labor conditions available to all other workers in the country and B--where IKEA suppliers are forced to employ only x/2 workers at premium wages and premium labor conditions (while the remaining x/2 workers have access to even worse employment), fairness would dictate that we chooise A, no?

Edited on, April 15, 2005, 10:44 PM GMT, by deshibhai.

[oracle]

The Scandinavian company, which has an unnoticed purchasing operations of 20 years in Bangladesh, will add plastic and light engineering items to its current purchase list dominated by home-made textile products such as quilt cover, curtain, terry towel, rug and handloom carpet.

Alternative news media reporting : 20 years of toil by my BD sisters!

[Akib]

This is very good for BD's economy...

[couger]

I actually found some ceramic (porceline) stuff in IKEA that is made in Bangladesh. Coffee mugs, tea cups etc. Very well made, made me very pround.