Ikea nearly burned by supplier fire

Dec 04, 2001 10:30 PM  By

It’s every cataloger’s nightmare: A warehouse full of product is destroyed, disrupting the mailer’s supply chain and its ability to fulfill orders. For Swedish furniture cataloger/retailer Ikea, the nightmare became a reality this past spring when the warehouse of one of its key vendors was destroyed by fire. The incident resulted in some backorders for the company and threatened to cause inventory shortfalls for the rest of the year.

The vendor, one of about 2,000 that Ikea uses, is a Finland-based wood manufacturer that supplies much of the cataloger’s bedroom furniture. Fortunately no one at the warehouse was injured, but the fire did affect Ikea’s inventory, says spokesperson Clive Cashman, although he would not disclose the percentage of inventory that was backordered as a result. “For this type of merchandise, there is a long lead time to ramp up to production, which usually takes about 12 weeks.” The company explored other fulfillment options while the supplier recovered from the fire. “We looked at other [vendor[ possibilities, I’m sure,” Cashman says. “But when you have a large supplier completely out of business, there is a long lead time just in trying to find capacity replacement.”

Luckily, Ikea expects to have everything back to normal this month, Cashman says. “We’re getting back to a good service level on all of our items.” And despite the severity of the situation, Ikea’s backorder problem was not as serious as it could have been. “We expected it would have more of an effect than it did on our business,” he says. “We did have a backlog of orders, but it cleared itself quite well overall.”