“In a transformation, make your good examples in the beginning, where you think you will make a difference.” - Joel Andersson, Process development and digitalization project leader - indirect procurement, IKEA
Building a strategic indirect procurement function doesn't happen overnight, especially for large, complex global enterprises like IKEA. It requires foundational investments, measurable results (the earlier the better), and a balance between continuous improvement and agility while providing what the business needs.
In a recent Art of Procurement podcast episode, Joel Andersson, who has been leading the transformation of IKEA's indirect procurement function over the past five years, shared his insights with me. Joel brings a unique perspective, having worked in both direct and indirect procurement, so he appreciates the distinct challenges that come with each spend area.
Here, in Joel's own words, are some insightful moments from our conversation:
IKEA’s Transformation Journey
"Our direct procurement is of course also developing and changing continuously, but it's much more mature. Our indirect branch was, if we go back seven, eight years, it was rather self-organized... So that transformation began about five years ago."
Creating Visibility Through Technology
"First of all, we needed to have visibility into what we're actually buying. So the first investment we made was a spend analysis tool where we could put our data from different ERP systems into that and get something that we could read out from... And then the second step was the source-to-pay or source-to-goods receipt, in our case."
The Value of Source-to-Pay Technology
"It's definitely foundational. It establishes procurement in a completely different way compared to if we would only have POs through email ... So it's absolutely foundational to transformation ... We get increased visibility, of course. We know more about what is going on ... It doesn't change the prices by itself. It doesn't change the suppliers by itself, but it gives you something to work with."
Building the Business Case for Growth
"We have also in parallel grown a lot when it comes to more tactical strategic category development resources and buyers ... That is not so much driven by the fact that we have a digital platform. It's more driven by the fact that we deliver very good results – measurable, clear results in terms of cost savings and, as well, when it comes to compliance management and risk management. And that is very noticeable. And that, of course, can warrant that it's worth investing in it."
The Difference Between Direct and Indirect
"Everything looks the same from a high level, but when you get into the details, actually there are a lot of differences that need to be considered. And I think the biggest difference is the amount of stakeholders and the amount of suppliers. It's just so many more people, stakeholders in a way, both external and internal, that you need to manage."
Embracing Generative AI
"I'm quite excited about AI. There are many use cases which are very clear and very straightforward, which will save a lot of time ... Working in procurement is like, many times you can have a dream of someone doing, kind of preparing your presentations, and preparing your written document, the pre-read to your presentation, or whatever, or summarizing the meeting minutes ... It's like a little back office, or an assistant, or something like that."
Focusing on What Matters Most
"AI will only enable you to spend more time with your most important suppliers, most important stakeholders, to focus where you really think that your personal expertise, and competence, and where your passion is, where we really can make a difference."
Sustainability Through the IKEA Way
"We have our I-WAY, our IKEA way of purchasing things, services and products, basically. And this is our code of conduct, as it would be called in most other companies ... For indirect, we work with it as well. And especially with our biggest suppliers, we work closer with them around it. But also, of course, depending on the nature of a supplier, like what kind of industry they are in, what kind of country they are in or region, we will work closer also with small suppliers in some cases around it."
Transformation as a Continuous Journey
"It's not the destination like that. It's a big kickoff, and then it's a continuous journey. That's the way we see it ... It's very important to be able to feel a bit proud and happy and to be able to swim in the situation that is at hand, because it will never be perfect. Things are changing all the time. So even if you put up something perfect in one moment, one little bit later there is a reorganization and then it's different again."
