SUPPLIER EVALUATION From an IKEA perspective

Abstract

A cost reducing company such as IKEA, want to produce their products at the lowest possible price. The process of looking for the best alternative supplier when starting to produce a new product is time consuming. Sometimes it is impossible to find a supplier that matches their criteria, that doesn’t need to be modified. If the supplier doesn’t have the capital to invest in the alteration of the production plant, and if no external capital is found for the whole investment, IKEA needs to finance the loan to the supplier. IKEA intention is not to earn money on the interest of the loan; instead they want to gain value from an overall lower purchase price from the supplier. Before supplying the loan agreement some evaluation have to be made of potential suppliers that are of interest for IKEA.

Our task with this thesis is to form a model, which should include the most important factors to look upon when evaluating the best supplier alternative to invest in. We got this mission from the supplier financing division at IKEA.

The conclusion is that country analysis that represents a macro economic aspect is the first most important factor when analyzing suppliers in our model; closely followed by the micro economic aspects of the supplier, which include a financial analysis, production capacity etc. The final part of our model represents reliability, limitations and recommendations.