IKEA to move more production to Turkey to shorten supply chain
ISTANBUL, Oct.6 (Reuters) – Swedish kit furniture giant IKEA plans to move more production to Turkey to minimize problems with global supply chains and rising shipping costs, said the financial director of the company for Turkey.
The products it plans to manufacture and then export from Turkey, including armchairs, bookcases, cabinets and kitchen cabinets, are currently being shipped thousands of miles from East Asia to markets in the Middle East or Europe.
“Due to the shipping issues we faced during the pandemic (Covid), we are trying to have more manufacturing in Turkey,” CFO Kerim Nisel told Reuters, declining to estimate the amount of capacity. that could be moved.
“We have all seen in the pandemic that diversification is so important,” Nisel said. “It may not be a good strategy to produce things in one country and then try to transport them all over the world.”
The company has seven stores in Turkey and already exports three times as much as it imports to Turkey, where it currently produces textile, glass, ceramic and metal products for global export.
Nisel said the cost of a container from East Asia jumped to $ 12,000, from $ 2,000 before the COVID-19 outbreak last year. “It makes more sense to have them manufactured closer to where they are sold. This is why we want to have them manufactured in Turkey ”.
IKEA’s move follows similar moves by other European brands such as Benetton, which brings production closer to its country by boosting manufacturing in Serbia, Croatia, Turkey, Tunisia and Egypt with the aim to halve production in Asia. Read more
Straddling Europe and the Middle East, Turkey says it is well positioned to benefit from changes in global supply chains.
“Turkey, with its strategic location, has provided a solid alternative to the pre-Covid-era, single-center, Asia-based production network,” Turkish Vice President Fuat Oktay said on Monday.
While Turkey’s strategic location and strong manufacturing base may be a plus, Nisel said hedging against the pound’s movements – which fell near a record low on Wednesday – remains a major challenge for investors. retailers, while high interest rates have pushed up financing costs for investors.
“It’s really hard to hedge currency positions when interest rates are above 20%,” he said, adding that the company used 3-6 month hedging contracts to offset volatility in currencies.
Reporting by Ceyda Caglayan; Editing by Dominic Evans and Elaine Hardcastle
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