The Supply Chain Functions Of Ikea

In general, there are five key limitations to this case study of IKEA and Walmart. Firstly, this report was conducted by looking at historical information available over the internet in United States, Germany and in China, where it might not be up-to-date and the financial information shown might not truly reflect the business strategies and sales data of the firms. For example, there is no information available as to the inventory costs, earnings before interest and taxes, sales figures of each stores in each months in each country in details, or a retailer’s relationship with suppliers and local government, therefore it is relatively hard to tell if the order system, supply chain management strategies and the business plans directly affect the customer’s purchase intention and sales results (Isbery & Pittam 2013). As this case study was written from an outsider perspective, there might be bias due to

IKEA to maintain their leading position will keep diversifying their products offerings always based on the “democratic aesthetic”. They will continue offering aesthetic, quality and low-priced products. Moreover, they will expand IKEA concept by opening new to stores to make their furniture available for everyone. For instance, from now to two years IKEA planned to make available to 80% of French population a store at less one hour of road. They will focus at developing its online activities to compete with the pure players. Now, most of their products are available on the IKEA website. The group has developed the “click and collect”, which is available in mostly stores. To accelerate the e-commerce transition IKEA planned to integrate external operators

IKEA is the world’s largest furniture retailer, specialising in selling stylish, inexpensive, self assembly Scandinavian design furniture, home accessories, kitchens and bathrooms in their retail stores around the world. Delivering good quality contemporary design furniture to the middle class consumer is not the only focus of the IKEA group; it also sells a lifestyle that customers around the world recognise and embrace. IKEA is a global company that has invested and is present in many countries; it promotes its products and services using the same brand in all markets coordinated from its one main corporate office in Sweden which is responsible

IKEA stores have been present in five big areas in the world which are North America, South America, Europe, Russia, Asia and Australia as of 31 December, 2014. IKEA group have stores located in 42 countries which include Australia, China, Taiwan, Malaysia, Singapore, Denmark, France, Germany and etc. IKEA group sell their products in to these 42 countries with their domestic currencies such as Australian Dollar (AUD), Yuan (RMB), Taiwan New Dollar (TWD), Malaysian Ringgit (MYR), Singapore Dollar (SGD), Danish Krone (DKK), Euro (EUR) and etc. The reason of using domestic currency is because this is easier for the customers to buy IKEA products in their country.

In order to assess and give recommendations to IKEA, it is important to fully understand the operations and the values that drive the company, ant its philosophy. Since was founded in 1954 by Ingvar Kamprad the Swedish company’s vision of “creating a better life for the many people” inspired them to develop high quality and lower cost products in the furniture business, and almost a decade later, after they consolidate in the Swedish market, they made the decision to expand abroad opening stores in Northway and Denmark respectively (Exhibit 1). With a relatively rapid expansion the company needed to transmit their unique philosophy and created the testament of a furniture Dealer and trained ambassadors to help spread and secure the firm’s values (Exhibit 3). Furthermore, IKEA’s adopted another principle, the company preferred to focus on establish close ties with business partners and supporting their suppliers in a long-term relationship rather than just

Strategic alliances could reduce the complexity of logistics if IKEA is able to find a reliable partner in this field.

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.

IKEA is using a different operation strategy from their competitors. The operation of IKEA has to cope with large volume because their products are highly repeatability and specialised. The variety of products the operation needs to create is low to medium as they offer

IKEA’s supply chain has a global spread with growing sales and purchasing in all major regions of the world. It operates 31 distribution centers and 16 customer distribution centers which supply goods to IKEA retail-stores.1 The company also has 31 trading service offices in 26 countries and 1220 suppliers in 55 different nations.1 The widespread of its stores makes its supply chain really complex.

The high level of customer involvement is one of the key features of the IKEA concept. With their unique self-serviced warehouses, customers are required to collect their flat-packed items before proceeding to checkout. Customers are also involved in the assembly of their purchases after transporting them home in their private car. Because the company’s furniture are designed to be shipped disassembled and sold to the customer flat-packaged boxes IKEA saves a lot on shipping costs. As one of the company’s mantras said; “We don’t want to pay to ship air”.

IKEA is a non-profit organization which differentiates its business structure compared to other furnishing companies. This structure gives IKEA two main advantages:

Both of them are important to operate a business. The next one will be the process. The first process is the shop floor set up which is extremely important for IKEA. It can show the customers the advantage of the products and to let customer enjoy the process of buying furniture. Another process is the staff training. IKEA have to train the staff to have some professional skill and knowledge because the staffs are representing the company. Then, we can go to another action – outbound logistics. It means the good and service that IKEA provide. They provide the goods delivery service and installation service. This is important for customers because most customers do not know how to install the furniture. Sales and marketing is another primary action. For IKEA, it will be the TV advertisement, annual catalog, internet and the showroom with live demonstration. In fact, this marketing channel is the reason why IKEA is so successful in selling furniture. The last action is the service. They are now providing hotline service. They also have design consultant to help the customers. And disposal of old furniture is also a very important service.

IKEA’s strategy towards its suppliers is that of a low production costs strategy. IKEA wants to sell its products at the lowest possible price therefore their

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