Business

Ikea considers new factories in the US as movement of goods becomes costly and complex

Swedish retailer’s move comes as it battles the fallout from the Houthi militant group’s attacks on ships in the Red Sea

The exterior of an Ikea store in Maryland, United States. The Swedish retailer wants to boost production across the US and the Americas.

Oliver Telling
Sun Jun 16 2024 - 14:25

Ikea wants to boost production across the US and the Americas, as it responds to escalating shipping disruption and a “permanent shift” away from seamless global trade.

Susanne Waidzunas, global supply manager at Inter Ikea, said the company that oversees the Swedish retail brand’s international strategy was considering the move as it also battles with the fallout from the Houthi militant group’s attacks on ships in the Red Sea.

“One of the markets where we have less regional presence when it comes to production footprint is North America,” she said in an interview. “There we do have extra efforts put into reviewing how we could increase our footprint ... We see a lot of opportunities in South and Central America. But we also see opportunities in the US.”

Around a tenth of the goods Ikea sells in the Americas is currently produced locally, with 51 home furnishings suppliers across the region, Inter Ikea said.

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Inter Ikea, which is responsible for supplying products to Ikea’s franchise stores globally, is the latest international group to consider bringing production closer to the US, a leading consumer market, as a string of recent disruptions prompt businesses to rethink the future of globalisation and their decades-long dependence on factories in Asia.

Many businesses have recently set out plans for new factories within the US or across the border in Mexico as continuing tensions between the US and China are expected to make historically seamless trade between the countries increasingly expensive and complex.

Waidzunas added that the American market was “very dependent on ocean flows”, at a time when global shipping capacity was once again coming under strain amid the Red Sea attacks by the Houthis in show of support of Gaza’s Palestinians during Israel’s war with Hamas.

There is growing consensus that the Houthi attacks will continue to disrupt shipping networks for months to come, risking yet another global supply chain crisis for businesses that have weathered the shocks of the Covid-19 pandemic and Russia’s war with Ukraine.

“There is a permanent shift,” Waidzunas said. “We need to get used to a more volatile and, I would say, dynamic world.”

Unlike in the Americas, she said that most Ikea goods sold in Europe and China were already produced locally. But “we are strengthening even further now to reduce unhealthy dependencies” on particular countries or trade lanes.

Shortly after the Houthis began targeting ships in November, Ikea warned the disruption “will result in delays and may cause availability constraints for certain Ikea products”.

Waidzunas said that the retail brand was now seeing “high pressure” across the supply chain. “We quite quickly adapted safety stock levels [but] we are not immune to the impact.”

She added that many of the company’s peers were ordering early for autumn and Christmas sales and Black Friday, underscoring recent warnings of an increasing number of retailers and suppliers stockpiling for the peak shopping period months in advance.

Earlier this month the chief executive of Danish container shipping group AP Møller-Maersk said that customers were already shipping goods for later in the year. Vincent Clerc warned that a rush to order ahead would clog up the supply chain. – Copyright The Financial Times Limited 2024

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