A Smart Move
Privately held IKEA, a global retail player with some 300 stores in dozens of countries, treats its sustainability efforts seriously. From buying and building wind farms to adding rooftop solar arrays on its stores, IKEA’s goal is to use 100 percent renewable energy in its operations.
Maintaining inventory levels translates to low prices, which helped propel the retailer to its status as a home furnishings world leader. More than 1,000 suppliers in 55 countries create proprietary products for IKEA, which has been working to reduce shipping costs and emissions in its complex supply chain.
The majority of IKEA products require assembly, allowing them to be packaged as flat packs, which can be transported in larger quantities. More goods on the truck means fewer shipments, thereby reducing IKEA’s carbon footprint — another stated sustainability goal.
IKEA has six regional distribution centers that service 50 stores across the North America, as well as a store in the Dominican Republic.
IKEA’s Distribution Services division has hubs in North America, Asia Pacific, North Europe, South Europe and Central Europe to secure local storage capacity for stores and transport capacity from suppliers to retail locations. IKEA also operates 33 distribution centers and 11 customer distribution centers globally.
When products are shipped from suppliers to distribution centers, they are unloaded, stored and then re-loaded onto transport vehicles when ordered by stores. The fundamental goal is to handle goods as efficiently as possible. When possible, items are shipped directly from suppliers to stores, or held at the distribution center for just a short time.
Such efficiency is a key component of IKEA’s goals that, beyond running on 100 percent renewable energy, include reducing energy consumption by 25 percent and reusing or recycling 90 percent of waste.
The road to environmental responsibility
In 2004, IKEA became a charter member of the U.S. Environmental Protection Agency’s SmartWay Transport Partnership, a voluntary program for improving fuel efficiency and reducing greenhouse gases and air pollution generated by the freight industry.
SmartWay gives retailers the tools to pre-check carriers to ensure they are meeting environmental standards. Participating carriers characterize their operations using EPA metrics and methodologies.
“SmartWay then ranks carriers relative to other carriers with similar operations and equipment,” says Karl Simon, division director of the EPA’s transportation and climate group. The rankings are for emissions that affect air quality, but also serve as a measure of efficiency. The EPA revises the SmartWay ranking as partners improve.
“Shipper partners like IKEA can improve operational and financial performance by identifying greener choices to reduce their carbon footprint and improve supply chain efficiency through carrier/mode selection,” he says.
Carrier, shipper and logistic partners each have unique tools for measuring, benchmarking and improving carbon efficiency performance. The carrier tools use information about fuel consumption, miles traveled, type of operation, amount of freight hauled and truck age and type.
The ranking also allows carriers to benchmark their performance year over year and relative to their peers. SmartWay also provides carriers with information about fuel-saving technologies and practices to help them improve their performance.
The tools also let shipper partners project additional emission reductions from improved operational strategies, like reducing shipment miles through improved routing.
A lot of our strategies are tied back already to the … phase where our products are designed for shipping,” says Angela Billings-Soini, IKEA North America Distribution Services sustainability manager. “We are constantly working to fit more product into each shipping container or truck.”
IKEA has “moved away from wooden pallets to cardboard pallets to minimize the need for shipping pallets back to our distribution centers, as well as to improve fill rate.”
IKEA relies on third-party carriers, and “We require all of our carriers to be members of SmartWay,” Billings-Soini says. Program membership “helps them with the technology side with such variables as aerodynamics, low-resistance tires [and] lightweight equipment. [SmartWay] gives them a way to measure their performance and see improvements over time.”
The retailer has other ways to help keep carriers fleet-footed, such as its truck age rule. “We do not want any trucks older than 10 years [emissions equivalent] moving our loads, as we know that older equipment has higher emissions than the newer tractors,” Billings-Soini says.
IKEA also requires carriers “to have a CO2 reduction plan in place covering 36 months with clear actions and measurable goals.” While Billings-Soini could not provide a figure specifically for North America, “Our global result as reported in our sustainability report for 2012 was: Reduced CO2 emissions by 7.3 percent per cubic meter of products shipped, exceeding our 4 percent goal.”
IKEA received an Environmental Excellence Award from EPA in 2006 for its participation in the SmartWay program and was again honored in 2012 as one of SmartWay’s Mid-sized Shipper Company awardees.
Since launching in 2004, SmartWay partners have benefited from $8.1 billion in fuel savings while strengthening U.S. energy independence by saving 65 million barrels of oil, according to EPA. SmartWay’s clean air achievements include reducing 28 million metric tons of carbon dioxide, 478,000 tons of nitrogen oxides and 22,000 tons of particulate matter from the air.
“As IKEA’s partner carriers improve their performance, so does IKEA,” Billings-Soini says.