Logistics And Supply Chain Management of IKEA

Running Head: MANAGEMENT 0
Managing Strategic resources and operations

MANAGEMENT 1
Table of Contents
Overview of Ikea........................................................................................................................2
Logistics and Supply Chain management..................................................................................2
Linkage between the activities of company and theory.............................................................4
Strategic tangible assets of the firm.......................................................................................4
Sustainability throughout the value chain..............................................................................4
Conclusion..................................................................................................................................8
References..................................................................................................................................9

MANAGEMENT 2
Overview of Ikea
In 1943, IKEA started to design and sells ready-to-assemble furniture and currently,
the company has its presence in more than 25 nations with having 276 stores. In relation with
company 2019 revenue, it stands out nearly, 41.3 billion euros (statista.com, 2019).
Considering Ikea operation strategy, the organisation constantly offering products developed
as good design and functions with greater quality and durability relying upon other factors
too including cost, quality, speed and dependability. IKEA vision is to make a better daily life
for the various individuals – for customers, co-workers and suppliers.
In relation with company culture, a unique clusters of values have been established
from its roots in Sweden and keeping a robust IKEA culture is one of the greatest significant
aspects behind the endless accomplishment of the IKEA model where their aim is to make a
better daily life for the various individuals with presenting an wide range of well-made home
furnishing produces at less prices (ikea.com, 2019). This report outlines company supply
chain and logistics management activities and its sustainability throughout the value chain. It
also discusses strategic tangible assests of the firm that IKEA managed to gain over its long-
term operations.
Logistics and Supply Chain management
Logistics management and supply chain of IKEA is very strong and popular where
the company impresses not just its consumers with rational and superior value furniture,
however also rivals and businesses round the globe – specifically with its exceptional supply
chain and inventory management procedures. Every IKEA provision is big enough to hold
more than 9,500 products and the business also employs in-store logistics employees to
manage inventory management at its stores (ikea.com, 2018). As per ARC Advisory Group,
there is an in-store logistics supervisor accountable for the procedure of ordering and a store
goods manager accountable for material management logistics at all provisions of the
company.
The supply chain at IKEA has a global spread that has led to growing purchasing and
sales in all the main areas of the globe. More specifically, the supply chain activities of IKEA
extents to sourcing of raw materials to supplying the finished goods to the ultimate
customers. IKEA only hold the part of the production capacity in its supply chain, explicitly

MANAGEMENT 3
IKEA sector, which is the leading manufacturer of wooden furniture in the globe and its
stores, which are divided into three geographical regions, are supplied through 28 distribution
centres and by some 1000 suppliers in 40 nations (ikea.com, 2018a). Furthermore, more than
half of the sales volume is distributed straightly from suppliers to stores. To some extent, the
supply chain of the company is vertically integrated and the whole supply chain highly relies
on projections.
Value chain of Ikea starts at the very understanding and design of the product itself
and the company tops at developing products that stays upon low cost of production while
fulfilling firm necessities for quality, function and capable delivery. To manage more
efficiency in cost, the company pursues to use as few materials as likely to develop the
furniture deprived of forgoing quality considering packaging, handling and transport area
(inter.ikea.com, 2019). In addition, this conscious design practices and ready to pull together
product are then offered to consumer in flat-packed procedure which ultimately leads to
decrease in storing, shipping and assembling cost. IKEA operation strategy can be identified
effectively in the below diagram –
Quality  Meeting of
specifications
 Auxiliary
services
Speed  Exclusive
layout of store
 Mechanization
Dependability  Spoke and
Hub Context
so as to make
sure of
product
availability
Flexibility  Global
sourcing to
amend
changes in
volume
 Match and Mix
to receive
great
differences in
offerings
Cost  Constricted
inventory
Capacity Supply Network Technology and
Process
Performance Objectives
Operations Decisions Shape

MANAGEMENT 4
Competencies and Constraints

MANAGEMENT 5
Linkage between the activities of company and theory
The supply chain activities of IKEA are completely linked with the concepts and
theories of supply chain management that are stated in the significant literature and text and a
description of the inter-relation of theoretic cases in supply chain framework of the IKEA is
presented in below divisions. The multi-function system of IKEA offers customer wishes
their own feather product in relation with successful supply chain management approach
within the link of its whole Group.
Strategic tangible assets of the firm
IKEA strategic tangible assests include those physical and financial assets that play an
important role in formulation and execution of strategy in an enterprise and the strategic
tangible assets of IKEA comprises of land, building, equipment and machinery. Inter IKEA
Group keeps various workplaces and delivery centres mostly situated in Europe and most
Inter IKEA Group intangible fixed assets are so known to be registered rights for the
company trademarks, catalogue and intellectual assets. The Inter IKEA Group bought these
rights for EUR 11.8 billion. Hence, Inter IKEA Group tangible fixed assets are largely
comprised of works and delivery centres (about.ikea.com, 2019).
Sustainability throughout the value chain
The value chain of IKEA includes its various activities from the raw materials to the
conversation of final goods and services and it includes key primary and secondary activities.
In today’s competitive market, the sustainability value and supply chain become a vital aspect
of the strategy steering future growth of the company.

MANAGEMENT 6
Primary Activities
In relation to IKEA primary activities, it is outlined below as inbound logistics,
operations, outbound logistics, marketing and sales and services.
 Inbound Logistics – IKEA pursue to buy its raw materials from nearly 1000
suppliers located in 40 nations and its inbound logistics is also recognized as its one
of the competitive edge. In every store of the company, around 9,500 products are
being offered where 20 to 25 per cent of the employees manage its logistics division
(TradeGecko, 2018). In relation with sustainability and value creation, it includes
efficient movement of stocks, considering reorder points and store level stock,
fulfilling consumer needs with fall in lost sales cost.
 Operations – There are nearly 313 IKEA stores in 38 territories and countries. Only
in Europe, the company undertake its 59% of manufacturing activities and company
business is distributed into three extents i.e. property, franchise and finance (ikea.com,
2019a). The company has adopted decentralization strategy as this enables more
flexibility and autonomy to the different regional managers in relation with specific
market behaviour and culture and patterns. In relation to value, it is being developed
by two ways i.e. uniting warehouse and retail process, plan considering cost for every
touch inventory.
 Outbound Logistics – In 16 nations, IKEA controls 28 distribution centers and 11
customer delivery centers and the company presents two different types of transport
services i.e. truck and parcel carriage system. More specifically, the items whose
weight is around 25kg includes in parcel delivery system considering average charge
of $12 depending on particular store or location whereas the other products having
weight above 25 kg are included in truck delivery with near charge of $50 (Pichon,
2010). However, if the customer buys its products online, there is no charge for the
delivery and in terms of sustainability, the company practice Do-it yourself concept
where the customer required assembling the furniture by its own as the company sold
the products in sections. This helps the company to use their warehouse and
transportation system effectively and finally, the benefit is being given to the
consumer in terms of low price of the product.
 Sales and Marketing – IKEA print around 200 million catalogues every year
(Tandon, 2018) and also use their online channel wisely with present its availability of
product sales in 13 out of 27 marketplaces. In relation to promotional activities, IKEA

MANAGEMENT 7
also focuses on media advertising, sales promotion together with integration of digital
marketing. In relation with value creation, it is associated with various innovative
ideas talk about realistic room site enabling shoppers to relate and select the furniture.
 Services – In terms of services, the company practices a standard set of ways as the
management contemplate this area as one of their key aspect of primary activities and
competitive advantage. As IKEA pursue cost leadership strategies, the company able
to offer high quality services to its customers and in relation with value creation,
IKEA presents various services like family loyalty cards, return procedure of up to
100 days and discussions.
Secondary Activities
In relation to IKEA secondary activities, it is outlined below as firm infrastructure, human
resource management, technical development and procurement.
 Organisation Infrastructure – Ikea uses central decision making with using of
informal management style and it has support systems and the functions that allow it
to maintain daily operations. On average, Ikea stores are around 300, 000 square feet
or about five football fields (Edmonds, 2018). Ikea also has adequate infrastructure
and its majority of stores Inter IKEA Systems B.V. by INGKA Holding Group, which
runs provisions all over Australia, Europe and North America.
 Human Resource Management – In 2019, total numbers of IKEA employees stand
around to 211,000 (statista.com, 2019) and the company emphases on evolving their
workers through training so as to attain the organisation objectives that lead them to
success, growth and invention. IKEA organisation culture shows vital roles in how the
HRM functions and company also have a greater level of assurance to HR practices
with effective personnel training and development plans.
 Technological Development – IKEA practices and operations rely upon the
technology that helps in reduction of cost and improving quality. IKEA have its
proprietary technology – OBI – helps in assessing the whole of operations and
identify ways to do things better, more efficiently and in ways that save people
money. All the development and research activities of the company are began in
Sweden with extensive usage of IT technology in many business procedures. Such
practices allow the company to remain competitive in the furniture marketplace via

MANAGEMENT 8
offering low cost and durable products. IKEA also apply RFID technology to explore
info about produces fast in the stores and give distinct perception to its customers.
 Procurement – As stated above, IKEA prefer to buy its raw materials from nearly
1000 suppliers located in 40 nations and have established a longer strategic
association with their suppliers to get the necessary resources it required to operate.
IKEA has attained together differentiation and cost reduction in product via
efficiently managing its supply chain and it also comprises finding right vendors and
negotiating best prices. Such connections offer the company an chance to track the
material and demand stock for deliver and certain definite items request as per the
market necessities.

MANAGEMENT 9
Conclusion
In the lime light of above discussion, a company needs to undertake its supply chain
and logistics activities effectively irrespective of what products or services they are offering
to the market. Globalisation implemented many boundaries to the different sector reinforcing
company to develop its operation and supply chain strategies effectively and emphasizing
more on its manufacturing process. IKEA operates its home furnishing business successfully
with having of different strategies in process and product selection. From future perspective,
IKEA should also focus on developing a product in a more economical way under the
standard principles and guidelines.
Such practices will allow company to achieve economy of scale together with offering
of customised products. This case analysis has shown how IKEA maintains sustainability in
its supply chain and logistics management together with the value chain and drive the
business strategy to create a competitive advantage in the industry with utilization of new
model and strategy in comparison with the competitors. As a well-known and international
corporation, IKEA brings a prospect for a new lifestyle and service for their consumers.
Hence, it can be said that IKEA has a good strategy with keep linking with customers and
suppliers.

MANAGEMENT 10
References
about.ikea.com. (2019). Inter IKEA Group balance sheet. Retrieved from
https://about.ikea.com/en/organisation/ikea-facts-and-figures/inter-ikea-group-
fy19-balance-sheet
Edmonds. M. (2018). How Ikea Works. Retrieved from
https://money.howstuffworks.com/ikea2.htm
ikea.com. (2018). IKEA’s sustainable growth. Retrieved from
https://www.ikea.com/hu/hu/files/pdf/85/31/853138c1/190305_ikea-fy18-
sustainability-report_hu_final.pdf
ikea.com. (2018a). Facts & figures. Retrieved from
https://www.ikea.com/ms/en_AU/about_ikea/facts_and_figures/
ikea.com. (2019). Culture & Values. Retrieved from https://www.ikea.com/in/en/this-is-
ikea/culture-and-values-pubd0e72f31
ikea.com. (2019a). Welcome inside our company. Retrieved from
https://www.ikea.com/ms/en_AU/about-the-ikea-group/company-information/
index.html
inter.ikea.com. (2019). IKEA Range & Supply. Retrieved from
https://inter.ikea.com/en/inter-ikea-group/ikea-range-and-supply/
Pichon, M. (2010). IKEA'S Packaging Ideal. Waste Management and Environment, 21(4),
36.
statista.com. (2019). Number of employees of the IKEA Group worldwide from 2017 to
2019 (in thousands)*. Retrieved from
https://www.statista.com/statistics/241825/number-of-employees-of-the-ikea-
group-worldwide-by-function/
Tandon. S. (2018). IKEA won’t bring its iconic print catalogue. Retrieved from
https://www.msn.com/en-in/money/financenewsitaly/ikea-won%E2%80%99t-
bring-its-iconic-print-catalogue-to-india/ar-BBMh0xu

MANAGEMENT 11
TradeGecko. (2018). IKEA supply chain: How does IKEA manage its inventory?.
Retrieved from https://www.tradegecko.com/blog/ikeas-inventory-management-
strategy-ikea