IKEA’S global sourcing challenge: Indian rugs and child labor

Published: 2021-06-14 00:45:04
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Category: Child Labor

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How should Marianne Barner respond to the invitation for IKEA to have a representative appear on the upcoming broadcast of the German video program? Marianne Barner is the business area manager for carpets in IKEA faced with the decision of cutting off one of the company’s major suppliers of Indian Rugs. According to Barner, “German-produced program planned to take a confrontational and aggressive approach aimed directly at IKEA and one of its suppliers.” So they may ask IKEA representative some questions about the child labor issue. If a representative goes, there would be some questions created by the German produced program that made this video in attempt to affect IKEA’s brand on camera.
The film maker just provides IKEA some shots taken from the movie, the rest of them are not allowed to be watched by IKEA, which leaves many unpredictable factor. The film may contains some images that would not give any chance for IKEA to explain. They refuse IKEA watching the movie implies that their intention is not to hear about IKEA’s explanation but having someone to blame. In my opinion, Marianne Barner could thank the German Video production company for the invitation. However, she could response politely that she might not able to attend the event and say that IKEA is currently dealing with the child labor issue of its suppliers to ensure their performance is accord with IKEA’s policies. She could also send them a short agenda of IKEA’s engagement in India, which includes website address with further information concerning their plans and engagement in India. 2. What actions should she take regarding the IKEA supply contract with Rangan Exports?
In a short-term perspective, it is a good way to discontinue the supply contract with Rangan Exports. Because it is immediately removes IKEA from complain of child labor. Public will realize IKEA makes efforts to avoid child labor practices, it would help IKEA rebuild customer loyalty. Furthermore, it can save additional compliance costs to remove suppliers that use child labor. However, Rangan Exports has been one of IKEA’s major suppliers of rugs and carpets for many years in India. IKEA has to consider the negative effects that terminate the supply contract with Rangan Exports brings. Since Rugs is not the only product that IKEA imports from India, so the decision affects other products. Also IKEA cannot maintain a low price of carpets after terminating the supply contract with Rangan Exports in India.
So, IKEA should consider the issue in a long term perspective. In order for IKEA to maintain the strongest brand image and to maintain a good relationship with consumers, IKEA should monitor Rangan Exports and other suppliers who in violation of their contracts from now on. It is a good way to renew supplier relation with Rangan Exports with IKEA’s own monitoring program. IKEA should investigate all of IKEA’s suppliers to make sure that all of them are in accord with IKEA’s policies and the terms of their contract agreements. Meanwhile, fire all of child labor and hire adults even if for an easy job position. Also IKEA can give suppliers a warning regarding to the child labor issue. By doing this, it would not hurt the relationship between IKEA and those suppliers, also give them the chance to correct their fault. 3. What long-term strategy would you suggest she take regarding IKEA’s continued operation in India? Should the company stay or should it exit? (be prepared to describe the impact of such a decision and how you would manage it) IKEA should consider the issue in a long term perspective as mentioned in question two to rebuild brand image and save supply cost. IKEA already realized the damaging and negative effects that child labor brought. I think they could continue to operate outsourcing in India.
However, IKEA should monitor their suppliers to make sure that they are not in violation of their contract. Also IKEA could set up much stricter and more effective polices to monitor and restrict suppliers. Moreover, IKEA may check all of the supplies periodically to make sure that they observe the contract. It would be expensive to have such an operation, however it saves cost compared to terminate contract with Rangan Export in a long term perspective. Furthermore, IKEA could make a proposal about how to prevent such thing happen again in the future and gain experience from learning the lesson. Finally, I think IKEA could solve the issue and minimize the lost, however they need to make sure suppliers follow the contract signed between both parties. 4. Only for those recommending that IKEA continue to source carpets in India, would you suggest that she:
1) Continue IKEA’s own monitoring and control process or sign-up to Rugmark?
2) Continue to focus only on eliminating the use of child labor in IKEA’s supply chain or engage in broader action to address the root causes of child labor as save the children in urging? It is important for IKEA to not only focus on eliminating the use of child labor in their supply chain, but to also engage in broader action to address the root causes of the child labor issue as save the Children in urging. I think it is important that IKEA has a strong standpoint against child labor to maintain a strong brand image in the market. Again, IKEA could set up much stricter and more effective rules to monitor and restrict suppliers. Moreover, IKEA may check all of the supplies periodically to make sure that they observe the contract. Speaking of the root causes of child labor, I think it because of the severe poverty. Their parents have no choice and have to let children work to pay off the debt.
They become parts of labor force and miss the opportunity of go to school. In my opinion, to solve the child labor issue permanently, it is a good way to provide some educational funds for children who relate to the IKEA’s child labor issues. After solving the child labor issues, the better outcome would match “Rugmark”, Kamprad’s view of “create a better everyday life for many people” and Barner’s view of “you always do what is in the best interests of child”. It is necessary to continue prove IKEA’s engagement in India, since child labor is deeply implemented in India’s culture. I think if IKEA solve the child labor issue and use effective and ethical supply chain, they would still maintain a strong brand image in future.

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