Ikea debuted a new kitchen cabinet system -- METOD -- in Scandanavian countries this past Spring, and is slowly working on a global release with a launch in the UK rumored for Spring 2014. A one-year rollout may seem like a long time, but it's pretty quick compared to the time it took to develop the new kitchen system. According to a Quartz.com article, the company spent five years engineering the new kitchen cabinets, with the majority of that time spent bringing the cost down.
How did they bring the costs down? There's not much from the company in that respect, especially since the new system has not crossed the Atlantic yet, but a bit of web research shows a lot of changes in the redesign:
- Images of the METOD system suggest a loosening of IKEA engineering tolerances. Edges don't fit as snugly on METOD cabinets as they do in the current AKURUM systems.
- Both the new METOD cabinets and existing AKURUM cabinets are constructed from particle board wrapped in melamine foil. However, the AKURUM cabinets are built from 3/4", or 19mm, particle board, while the METOD cabinets are constructed from 18mm, or 7/10" particle board. A subtle difference, but akin to American Airlines saving $40,000/year by removing a single olive from salads.
- The new METOD cabinets come with a variety of door options, as do the existing AKURUM ones. AKURUM choices include wood, particle board in wood veneers, and particle board wrapped in melamine foil. All the new METOD doors are particle board with foil wrappings.
In addition to product and process redesigns, a quick combing of IKEA's job boards shows a heavy corporate focus on placing procurement personnel in LCC hotbeds. The company has a dedicated team of textile sourcing experts in Indonesia, for example. By purchasing in the areas where costs are lowest, and putting sourcing staff in the area to ensure best price, IKEA is able to save in the raw materials stage. This certainly contributes to the METOD's lower cost.
Quartz notes that the need to redevelop the company's kitchen systems and lower prices stems from IKEA's increased business in China and other emerging markets like India, as well as cash-strapped European countries like France.
Takeaways from all this?
- Cost saving initiatives can take time. They won't always be quick hits for the next quarter/year.
- There are cost savings to be had in product redesigns, even small ones. Like, 1mm of particle board small.
- Sourcing experts with market intelligence are ideal when negotiating best price, even in traditional LCCs.