Ikea is contemplating moving more of its production closer to the U.S. amid disruptions to global trade, namely the ongoing Houthi attacks on commercial vessels in the Red Sea.
According to a report from the Financial Times, Inter Ikea’s global supply manager Susanne Waidzunas noted that the home furnishings company has less production presence in North America—something the company may be looking to change as the global tensions remain high.
“[In North America], we do have extra efforts put into reviewing how we could increase our footprint,” Waidzunas told FT. “We see a lot of opportunities in South and Central America. But we also see opportunities in the U.S.”
Sourcing Journal reached out to Ikea.
Moving goods production continues to be a priority for more businesses as brands remain concerned about the geopolitical landscape, and more recently, customs violations. According to Qima’s 2024 Sourcing Survey, 54 percent of businesses in the U.S. and 50 percent in the E.U. say nearshoring and reshoring are a part of their 2024 supply chain strategy.
While any shift wouldn’t be considered “nearshoring” for the Sweden-based home retailer, it would still represent a movement toward a larger swath of its customers. After all, North America is home to 73 Ikea stores, the second most of any region behind 282 in Europe.
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Ikea has more than 1,200 furniture suppliers around the world, with most products and services originating from China, Poland, Italy, Germany and Sweden. The company sources products from 55 countries.
The home giant closed its only U.S. factory, located in Danville, Va. in 2019. That manufacturing hub mainly produced wood-based furniture such as shelves and storage units for stores in the U.S. and Canada.
Inter Ikea, which is responsible for supplying products to Ikea’s franchise stores globally, said roughly 10 percent of goods Ikea sells in the Americas is currently produced locally, with 51 home furnishings suppliers embedded across the region.
When the Red Sea crisis started to rear its ugly head and the major container shipping lines began to divert their ships away from the waterway around southern Africa, Ikea warned of product delays and shortages.
In the FT interview, Waidzunas gave an update of sorts to situation, indicating that the 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 said, in the wake of the delays.
Given the uncertainty related to the Red Sea, and the seemingly pessimistic viewpoints from ocean carriers about the future of the trade lanes impacted, Ikea will likely have a lengthy time to mull this over.
Hapag-Lloyd has said an Israel-Hamas ceasefire is unlikely to stop the Houthi attacks, with Maersk saying any Red Sea-related disruptions are likely to continue into the second half of 2024.
The Red Sea crisis isn’t the only major area of concern for many seeking to shift production, particularly as Russia’s war in Ukraine still roils in Europe and trade tensions between the U.S. and China escalate amid a new series of tariffs. By and large, global supply chains have been under a constant series of strains since the Covid-19 pandemic, when ports reached peak congestion.
“There is a permanent shift,” Waidzunas said. “We need to get used to a more volatile and, I would say, dynamic world.”
According to Waidzunas, most Ikea goods sold in Europe and China were already produced locally, unlike in the Americas. With that in mind, she said the company is seeking to “reduce unhealthy dependencies” on particular countries or trade lanes.
She added that many of the company’s peers were ordering early for the holiday season, stressing the recent warnings of an increasing number of retailers and suppliers stockpiling for the peak shopping period months in advance.
The global supply chain concerns don’t appear to be scaring the retailer out of China though. In August, Ikea committed to investing 6.3 billion yuan ($870 million) in the country over the next three years to, bolster more investments in omnichannel retail and demand-sensing technologies, open more stores and accelerate more automation initiatives.
Ikea has more than 460 suppliers and service providers in China, and 40 percent of them have worked with Ikea for more than 15 years, according to Waidzunas. Last September, the company opened a distribution center in Foshan in China’s Guangdong province, which serves 15 stores across southern China, Hong Kong and Macao.