IKEA and LPP to move production to Turkey as investments pour in
Swedish flatbed furniture giant IKEA and Polish fashion retailer LPP said on Wednesday they plan to move some of their production to Turkey to minimize problems with global supply chains and rising costs. shipping costs, their officials said.
On the other hand, German pharmaceutical giant Boehringer Ingelheim and Belgian packaging company DW Reusables announced new investments in Turkey.
Disruptions to the global economy during the pandemic have disrupted supply chains across continents, leaving the world short of a plethora of goods and services, from auto parts and microchips to container ships that transport of goods across the seas.
IKEA said it plans to move more production to Turkey to shorten the supply chain, the company’s chief financial officer (CFO) for Turkey said.
The products it plans to manufacture and then export from Turkey, including armchairs, bookcases, cabinets and kitchen cabinets, are currently shipped thousands of miles from East Asia to markets in the United States. Middle East or European.
“Due to the shipping issues we faced during the pandemic, we are trying to have more manufacturing in Turkey,” CFO Kerim Nisel told Reuters, declining to estimate how much capacity 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 items in one country and then try to transport them all over the world,” he added.
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 the place where they are sold. This is why we want to have them manufactured in Turkey ”, he declared.
Strategic location, solid manufacturing base
IKEA’s move follows similar moves by other European brands such as Benetton, which is bringing production closer to its country by also boosting manufacturing in Turkey, as well as Serbia, Croatia, Tunisia and Egypt with the aim of halving production in Asia.
Straddling Europe and the Middle East, Turkey says it is well positioned to take advantage of changes in global supply chains. And its strategic location and strong manufacturing base is considered a plus.
“Turkey, with its strategic location, has provided a solid alternative to the pre-COVID-19-era, single-center, Asia-based production network,” Turkish Vice President Fuat Oktay said on Monday.
Supply chain issues, increasing costs
Poland’s LPP is also considering moving some of its production closer to Europe due to supply chain disruptions and rising costs, its chief financial officer said on Wednesday.
“We are already seeing a sharp increase in delays in ocean freight (…) three-week delays in receiving goods from Asian factories to Europe,” CFO Przemyslaw Lutkiewicz said at a conference hurry.
Production costs are up around 10-20%, he added. Lutkiewicz also noted that power cuts at Chinese factories since the end of September could delay production and said LPP was looking to move some of its production closer to Europe, in line with relocation trends in the industry from the fashion.
“We are in serious talks with the Turkish factories to move part of our collections. Such production will of course be more expensive, but in order to have stock to sell we probably have to do it, ”he said.
The company posted a net profit of Zloty 459 million ($ 115.16 million) in the second quarter, compared to a loss of Zloty 30.6 million a year ago, aided by continued growth in online sales and pent-up demand as shoppers returned to stores after restrictions were eased.
Lutkiewicz, however, said demand was on the decline, with September’s sales momentum weaker than August, which was helped by the back-to-school effect. He expects margins next year to be lower.
LPP operates more than 2,000 stores, primarily in Poland and Eastern Europe, and targets emerging markets in southern and southeastern Europe and Asia rather than the highly competitive markets of Europe. the west.
Turkish-German localization project
German Boehringer Ingelheim on Wednesday announced cooperation with prominent Turkish pharmaceutical player Abdi Ibrahim.
The total investment in what they called a “localization project” will reach up to 1 billion Turkish liras ($ 110 million) in the long term, according to regional director general of Boehringer Ingelheim and head of Human Pharma in the Middle East, Turkey and Africa (META) Mohammed al-Tawil.
“Our localization project, which we are carrying out in collaboration with Abdi Ibrahim, also lays the foundations for an important transfer of technology and know-how between Germany and Turkey. Once the localization studies are completed, one in two boxes of drugs in human health portfolios are expected to be produced in Turkey over the next five years, ”al-Tawil said.
“As part of our investment in localization, an investment of around TL 150 million will be made by our company in the medium term, and the investments that will be made gradually over the long term will reach a total level of TL 1 billion,” did he declare. Noted.
Also addressing the meeting to announce the cooperation, the chairman of the Presidency’s investment office, Burak Dağlıoğlu, said the project and the investment will contribute to Turkey’s security in drug supply.
Al-Tawil said Turkey stands out as the most important country in the region with its young and dynamic population, skilled human capital, well-regulated market structure, strong growth momentum and unique location.
Boehringer Ingelheim has been present in Turkey since 1994. Since 2002, the company has conducted over 60 early stage clinical trials in Turkey. These clinical trials have reportedly affected more than 2,500 patients, who benefited from early access to treatment.
In addition to trials and clinical studies, al-Tawil said Boehringer Ingelheim will produce its diabetes, central nervous system and cardiovascular disease products in Turkey as part of the localization program.
The deal will also see the production of products used to treat hypertension in Turkey and at Abdi Ibrahim’s facilities in Algeria, said Abdi Ibrahim CEO Süha Taşpolatoğlu.
“This agreement is particularly important for us because it covers Abdi Ibrahim’s production facilities in Algeria and Turkey,” noted Taşpolatoğlu.
Abdi Ibrahim is Turkey’s largest pharmaceutical company active in the industry for 109 years.
In a separate announcement on Wednesday, a leading Belgian supplier of injection molded returnable packaging, DW Reusables, announced the acquisition of Turkish companies Etap Enjeksiyon and Etap Doğan, a producer of plastic crates, pallets and containers for storage and shipping. logistics.
The agreement is subject to the approval of the Turkish Competition Authority (RK).