Inside Swedwood: IKEA’s first U.S. plant: IKEA manufacturing subsidiary Swedwood opens the doors to its 930,000-square-foot facility in Danville, VA, part of a four-phase, $281 million plan
Karen M. Koenig
When IKEA announced plans to open a manufacturing facility in the United States, industry pundits said the multi-billion dollar furniture company was “insane.”
“It’s good economics,” counters Jorgen Lindquist, North America vice president of Swedwood, IKEA’s manufacturing subsidiary. Lindquist cites, “reducing sourcing costs, reducing overall lead times, reducing currency exposure, transportation concerns and [developing a] secure supply for IKEA’s growing demand,” as some of the reasons behind the $281 million, four-phase plan.
The company broke ground in early 2007, with the full project expected to be completed over a seven- to 10-year horizon, Lindquist says. When finished, Swedwood will have four manufacturing facilities spread over a 209-acre site in Danville, VA.
A ceremony commemorating the grand opening of the first facility–a 930,000-square-foot plant–is scheduled for late May, but Swedwood already has been rolling out production of the LACK and EXPEDIT storage series, all bearing the label “Made in United States.” BESTA storage systems also will be manufactured at this site. According to Lindquist, as the remaining plants go online, other IKEA product lines will be manufactured domestically.
According to Joseph Roth, director of public affairs for IKEA in North America, having a manufacturing plant in North America will help lower the overall production and transportation costs, “and help us ensure affordable prices for our customers in the United States and Canada.”
It is a swiftly growing customer base. IKEA’s sales in North America reached $4.2 billion for fiscal 2007, accounting for 15 percent of the company’s worldwide sales. The United States alone accounted for $2.9 billion in sales Last year, placing it second on the List of sales countries after Germany. By years end, IKEA will have 35 IKEA stores in the United States and 11 in Canada, with another two Locations, Charlotte, NC, and Tampa, FL, planned for 2009. The majority of the retail stores–two-thirds, says Roth–are located on the East Coast, around major metropolitan areas.
Cost-Effective, Lean Production Flow
The Danville facility has been supplying product Lines to IKEA retail stores in the eastern United States and Canada since April, Lindquist says.
Swedwood utilizes a highly automated, Lean manufacturing system to produce the board frame furniture in a continuous, cost-effective flow. According to Lindquist, the manufacturing layout in the Danville location mimics those in Swedwood’s European plant. “The concept setup is for more automation in production than a traditional [U.S.] setup. The product is designed to be produced efficiently in a line,” he says.
Swedwood uses a board-on-panel sandwich technique to produce the strong, but Lightweight furniture. To make the product, particleboard and high-density fiberboard panels are cut to size on a Schelling panel saw, which has the capability to process up to 20,000 boards per shift on a dairy basis.
Next, the particleboard sides are matched with a honeycomb core and an HDF panel is placed along the top and bottom. After just a few minutes pressing time in the Buerkle press, the constructed panels are cooled before being transferred to an integrated production Line for edge processing and treatment.
Panels for both the LACK and EXPEDIT furniture Lines first are sent through a Homag Profiline double-sided sizing and edge-processing machine before being cut on a Holzma Powerline saw. Next in the production line is a Homag Profiline machine capable of double-sided longitudinal edging, as well as transverse edging and profile trimming. Holes are bored on a Weeke Profiline, after which the panels are cut down the center, turned using a Bargstedt panel turner, then conveyed down the fine to the Homag Optimat sizing and edgebanding machine. At the end of the fine, panels are loaded on a Bargstedt panel loader, before being transferred to the finishing line.
The finishing line is environmentally friendly and also highly automated, with RBO material handling equipment to minimize lifting by employees. The UV finishing line can apply up to nine different layers of finish and is comprised of a series of Costa sanders, Sorbini roll coaters and Cefla UV ovens. Swedwood uses Akzo coatings, with birch, white, black and a black/ brown woodgrain tone designated as the primary colors.
Although initial production began fast month, Swedwood already is installing additional paint, press and edgebanding lines that will add manufacturing capacity to the plant.
Domestic production of the BESTA storage system product line is slated to begin in June. BESTA production will follow a similar manufacturing process, except the products receive a foil finish, using Friz wrapper, instead of the painting, graining or embossing process used on the other Lines.
According to Lindquist, Swedwood is an advocate of environmentally sound and efficient manufacturing methods, while producing furniture on a just-in-time basis. The company has coined the term SWOP (Swedwood Way of Production) “as an umbrella for our production, which includes different known techniques, such as SMED (Single Minute Exchange of Die for the rapid conversion of one product to another), 5S (Sort, Straighten, Shine, Standardize and Sustain) and lean manufacturing,” Lindquist says.
“By using these cost-efficient construction methods, we’re able to produce furniture that lasts a long time, looks good and is affordable,” he adds.
Beyond its efforts to minimize waste in the manufacturing process, as both an IKEA subsidiary and supplier, Swedwood not only follows IKEA’s environmental and social guidelines, termed IWAY (IKEA Way of Purchasing Home Furniture Products), but uses it in relationships with its own suppliers. According to the company’s Web site, IWAY stipulates a “code of conduct” with regards to minimizing environmental impact and working conditions. Topics covered include: emissions, discharges and noise; chemical storage and management; waste management; environmental improvements and impacts; worker safety; adult and child labor laws; and wood procurement.
According to Lindquist, when possible, Swedwood will source products from local suppliers. One of the reasons the company chose Danville as its location was the availability of sustainable raw materials. A large labor pool was another factor in choosing the location, he adds. With the completion of all phases of the project, more than 700 people from the Danville and surrounding areas will be employed by Swedwood.
Vertical Integration Key
As the primary supplier of board furniture for IKEA, Swedwood’s growth rate has followed that of IKEA’s–approximately 15 percent a year, Lindquist says.
Both he and Roth agree that a key factor in IKEA’s success with consumers has been the availability and affordability of its products. “[As we] grow our presence, we want to ensure we have a reliable supply of product,” Roth says.
IKEA is vertically integrated, which helps it to achieve its goat. The company formed Swedwood in 1991 as a safeguard against the possible toss of manufacturing suppliers in Eastern Europe during the period of political and economic unrest. Most recently, IKEA announced it will create another subsidiary–Swedspan–to manufacture particleboard and high-density fiberboard for its board frame furniture. Swedspan will be an affiliate of Swedwood and part of the INGKA Holding group.
Roth says he is unaware of plans to build a Swedspan North American plant in the near future. For now, he says, “We’ll continue to source supplies locally.”
Swedwood was formed in 1991 as a safeguard against the possible loss of IKEA suppliers in Eastern Europe during the economic and political upheaval of the late 1980s/early 1990s. A manufacturing subsidiary of IKEA. Swedwood is based in Angelholm, Sweden, and has 38 production units in 10 countries. 2007 sales for the company were approximately $2 billion. The Danville, VA, location is Swedwood’s first manufacturing site in the United States.
1. The 930,000-square-foot facility is the first of a four-phase, $281 million plan Three additional manufacturing plants are planned for the 209-acre site. When completed, more than 700 people will be employed at the company.
2. An estimated 20,000 panels for the LACK, EXPEDIT and BESTA product segments will be processed daily on the fully automated production lines.
3. Swedwood follows IKEA’s IWAY guidelines for social and environmental responsibility among suppliers.
STATE & LOCAL INCENTIVES PROVIDE IMPETUS
The Virginia Economic Development Partnership worked closely with the City of Danville and Pittsylvania County to bring the Swedwood project to Danville, VA. Among the inducements provided to Swedwood was the availability of a large labor force and more than $12 million in incentives.
According to information from the Virginia Governor’s office, the list of business incentives offered to Swedwood included: a $3 million grant from the Governor’s Opportunity Fund to assist with the project; a $1 million grant by the Virginia Investment Partnership program; and $2.4 million in Tobacco Region Opportunity Funds from the Virginia Tobacco Indemnification and Community Revitalization Commission.
Swedwood also received benefits from the Virginia Enterprise Zone Program, which is administered by the Virginia Department of Housing and Community Development. Swedwood also qualified for up to $1.35 million in rail and economic access grants from the Virginia Department of Rail and Public Transportation and the Virginia Department of Transportation for road access funding. Training assistance has been provided by the Virginia Department of Business Assistance through its Workforce Services Jobs Investment Program.
When completed, Swedwood will bring more than 700 jobs to the Danville area.
For more information about economic development in Virginia, visit www.yesvirginia.org.
IKEA NEWS AND INFORMATION
1943: Founded by Ingvar Kamprad, IKEA’s name is derived from: Ingvar Kamprad Elmtaryd [farm where he grew up) Agunnaryd (parish in southern Sweden). The company sells pens, picture frames, jewelry, etc.
1948: Furniture is added to the mix.
1951: IKEA publishes its first catalog.
1956: Introduction of RTA furniture.
1958: IKEA opens its first furniture store.
1963: The first store outside of Sweden opens in Norway. Today, IKEA has more than 270 stores in 36 countries.
1968: Particleboard is used in PRIVAT sofas, marking its first use in IKEA furniture.
1982: The IKEA Group is formed under the ownership of Stitchting INGKA Foundation.
1986: Anders Moberg is named president and CEO of the IKEA Group. Kamprad becomes an advisor to INGKA Holding B.V.
1990: An environmental policy is developed.
1991: Swedwood is established as a manufacturing subsidiary to produce wood-based furniture and components for IKEA.
1993: IKEA Group becomes a member of the Forest Stewardship Council.
1997: The Web site, www.ikea.com is launched. Also that year, IKEA develops a line of furnishings for children.
1998: IKEA hires a full-time manager for securing sustainable forestry resources.
1999: Anders Dahlvig is named IKEA Group president.
2000: The IKEA Way on Purchasing Home Furniture Products (IWAY) defines the relationship between IKEA and suppliers, including working conditions, prevention of child labor, environment and forestry management. Swedwood also uses IWAY.
2001: The IKEA Group’s office moves to Leiden, The Netherlands.
2004: The IKEA Group publishes its first Social & Environmental Responsibility Report.
2005: IKEA expands its involvement with UNICEF, Save the Children and WWF.
2007: IKEA manufacturing subsidiary Swedwood breaks ground on its first U.S. plant.
2008: IKEA creates Swedspan, a subsidiary to manufacture particleboard and HDF.
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