Ikea Supply Chain

This paper aims to demonstrate a detailed description of the elements of ‘IKEA’ company based on its famous name in the furniture industry.

The inventory of Kudler’s distribution plan will be entered into manufacturing requirements for estimating input flows and production schedules. As a retailer, Kudler will also link producers to other distributors, buyers, or wholesalers; creating great business relations. These relationships are all crucial with the flow of how their consumers will

IKEA pays much attention to its IHRM management, applies innovative HR practices and tries to benefit from development of each individual within the company. The company is regarded as an attractive employer and has gained several prestigious awards in different countries (e.g. UK's Best Workplaces - Large Category, 2012).

Apply time, money, people and other resource involve in early supply and supplier to assure continuous availability at the lowest cost in strategy spend.

IKEA is a global furniture retailer, which is established on the concept of contributing wide range of well designed, functional, and low cost home furnishing products in 40 countries, with 330 stores and 154,000 workers (The IKEA concept, 2012). IKEA was founded in 1943 by Ingvar Kampar and has turned in an international furniture retailer that specialized in stylish but inexpensive furniture designs.

Figure 12-1 pg. 344 - Know the role that demand planning plays in operations management

IKEA is the world’s largest furniture store that offers well-designed, functional home furnishing products at low prices. The store offers home furnishings to meet the needs of everyone. The company vision is to create a better everyday life for the many people. Ikea is able to back their vision with their products and prices.

Global sourcing is an important sourcing strategy for IKEA Company. According to Hultman, Hertz and Johnsen (2012), in 2008, IKEA has 54 different sourcing countries and 30 purchasing departments which were located all over the world. With the expansion of its market, IKEA was not satisfied with selling its product only in domestic and Nordic market instead it put its higher goal in global market. Therefore the sourcing market also expanded with the growing market. There were 64% of its products were sourced from European countries which were mainly in eastern part like Czechoslovakia, Rumania and Hungary; China with a 22% share of the supply was the largest single supply market, and Poland with a 16% share (IKEA 2007). However, IKEA also trades off the cost of raw materials and cost of transportation, hence IKEA combined the Global sourcing with local sourcing strategy to lower the total cost.

IKEA is rumored to be a very standardized retailer, i.e., a certain set of marketing strategies is used that are the same around the world. This indeed sets IKEA, operating on markets in Europe, US as well as Asia and Australia, apart among international retailers. Often the theoretical conclusions in international

IKEA is one of the largest multinational companies in the world dealing with several products. The company sells and designs furniture appliances and home accessories at an affordable price. Ikea has over three hundred stores worldwide enjoying the good name it has created for itself. While they are one of the most profitable furniture companies in the world there are significant challenges and threats that have been overcome and are still needed to be tackled.

An objective of writing this report is to identity and analyzes operation system applied in IKEA, the well-known low cost yet high quality home of furnishing. Function, process and strategy of IKEA operation system will be accessed to identity the core competency that lead to the successfulness of IKEA in the world. Besides, other purpose in complete this report is to analyze the strength and weakness of operation system in IKEA. Operation management is procedure where processes of production or deliver goods and services is being monitoring and managing. Operations management is the activity of managing the resources which produce and deliver products and services (Slack, Chambers and Johnston, 2010). Operations

The history of the company is very colorful and interesting. IKEA was founded in 1943 in the south of Sweden in Smaland. Its founder was seventeen - Ingvar Kamprad. The boy had a great deal of business, and IKEA was not his first venture. Previously, he was selling matches in his hometown. His capital for the establishment of IKEA comes from his father, who rewarded him for good academic performance. He called his company IKEA from the first letters of his name, and the names of the family farm and the village Agunnaryd Elmtaryd. The company initially dealt with the sale of feathers, frames, wallets, tablecloths, watches, jewelry, stockings and fine furniture. Kamprad to transport their goods, borrowed a truck from the local milkman.

As pointed out in Ikea's mission statement, the company is in business to produce high quality products at a low cost. This would support a

IKEA has adapted to the operations function of a business. This function is the main function of every company. This key function, of which IKEA has adapted to, is the business function responsible for managing the process of creation of goods and services. The operations function is responsible for organising, coordinating, planning, and controlling the resources that are required in the production of goods and services. IKEA has effectively implemented this function by understanding the needs of customers. In particular, this applies to those who have a lower income, and/or, limited space. IKEA’s employees within the product design and product development departments, focus directly on the price and quality, as well as the design and function of products. Elements of the design are typically agreed on within the factory itself, this is where manufacturers and designers work together, to create a product with regard to the greatest use of raw materials and manufacturing opportunities. IKEA’s operations have proved effective as in 2013 it earned $35.5 billion. IKEA has a large amount of suppliers, greater than 1300. IKEA purchases most of their

2. The reason of why distribution is such a key element of IKEA’s value chain.. 2