Renowned Swedish furniture giant, IKEA is planning to relocate more of its production operations to Turkey in response to challenges in global supply chains and rising shipping costs. Kerim Nisel, Chief Financial Officer- Turkey, highlights the brand’s intention to manufacture various products locally, such as armchairs, bookcases, wardrobes, and kitchen cabinets, which are currently shipped over long distances from East Asia to markets in the Middle East and Europe.

Nisel emphasises the lessons learned during the COVID-19 pandemic, stressing the importance of diversification in production locations. He underlines the inefficiency of relying solely on manufacturing in one country and then transporting goods worldwide, particularly in light of shipment disruptions experienced during the pandemic.

IKEA already operates seven stores in Turkey and has a robust export business, with exports exceeding imports threefold. The company currently manufactures textile, glass, ceramic, and metal products in Turkey for global distribution.

The decision to shift more production to Turkey aligns with similar moves by other European brands, such as Benetton, which are increasingly decentralising production by expanding manufacturing in regions closer to their main markets.

Turkey's strategic geographic position straddling Europe and the Middle East makes it an attractive location for manufacturing, particularly amid shifts in global supply chains. 

However, despite the advantages of Turkey's location and manufacturing capabilities, challenges persist, notably currency fluctuations. It is difficult to hedge against fluctuations in the Turkish lira, particularly with interest rates exceeding 20 per cent, says Nisel. To mitigate currency risks, IKEA employs short-term hedging contracts ranging from 3 to 6 months, he adds.