Operations and Supply Chain Management of IKEA Malaysia

IKEA Malaysia
IKEA Malaysia
Student Name
Unit Name
Unit Code
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IKEA Malaysia
Contents
Introduction......................................................................................................................................3
Gap analysis.....................................................................................................................................4
Proposed operations and supply chain decisions to resolve critical gaps........................................6
A set of key performance indicators for the organization to control the performance of
operations...................................................................................................................................10
Conclusion.....................................................................................................................................11
References......................................................................................................................................12
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IKEA Malaysia
Introduction
IKEA Malaysia designs and sells household appliances, furniture, and household accessories.
According to a survey conducted in the year 2008, IKEA is the world's largest furniture retailers.
The innovative architectural design adopted by the company is a major competitive advantage
for the company over other firms in the domestic moreover in local markets. The company also
focuses more on the interior designs work and is always striving to stay green. IKEA operates in
Malaysia at a low price so that most people can afford it. In order to meet the company's vision
of providing better quality and cheaper services for everyone in the world, the company works
very hard to achieve quality for its customers at a reasonable price. This is done by orderly
following many business functions. The organization not only provides consumers with high-
quality furniture at an affordable price but also impresses its competitors around the world
especially with its strong inventory management technology and supply chain. KUALA
LUMPUR - IKEA, a Dutch-based furniture retailer, will invest 890 million ringgit ($211.2
million) to establish one of its largest regional distributions and in supply chain centers in
Malaysia. The Supply Chain Centre will manage inventory of RM6.6 billion yearly to meet
IKEA's growth in Asian regions. The 100,000 square meters long warehouse will supply 12
existing retailing stores in the area. IKEA also plans to increase its number of retailing stores in
Malaysia by 2026. But despite all this, there are several gaps in IKEA Malaysia operations and
supply chain management. The company is facing issues in manufacturing operations,
purchasing, warehousing, inventory management. This study includes a case study on the
optimization of IKEA Malaysia operations and supply chain in Malaysia, as well as also
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IKEA Malaysia
illustrates how the senior management in IKEA Malaysia can implement the improvements
proposed.
Gap analysis
Malaysia has been encouraging large local business groups and multinational companies to use
the country as a gateway to the region through various initiatives, including a major hub program
that allows companies to focus on global activities such as procurement and distribution. The
company network that makes up IKEA has recently focused on the retail business of the IKEA
Group, including shopping centres and food retail. In IKEA Malaysia, there is a huge gap in
benchmarking knowledge that can easily lead to the wrong approach, which leads to errors that
not only limit manufacturing, operations, procurement, warehousing, inventory management,
retail, and restaurant improvements, but can actually be harmful and also leading to higher than
necessary supply chain costs and erroneous improvement efforts.
Logistics issues, such as customer satisfaction, forecasting systems and the like are some of the
issues IKEA Malaysia face. Also IKEA‟s distribution centre has to serve more markets in
coming 5 years which means that they need their own big warehouses in Malaysia and a very
effective warehouse management system which is missing in IKEA. Second issue IKEA faces
are low inventory management because IKEA has a very large volume of goods and products.
There is a need of extremely high inventory level in order to provide the products and items with
high demand. Otherwise IKEA is probably out of stock (Rohsto Hou and Liu, 2011).
IKEA Malaysia lacks sufficient benchmark knowledge in its manufacturing operations,
warehousing, inventory management, and retail stores; benchmarking can really do more harm
than good. Errors include:
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