Challenges Faced by IKEA in Supply Chain Management

Running head: SUPPLY CHAIN MANAGEMENT
Supply Chain Management
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Name of the University
Author’s note

1SUPPLY CHAIN MANAGEMENT
IKEA is a multinational company that has its base of operation in several places and
distribution n several more. There are 403 IKEA stores spread across 49 markets, and the
company has accomplished this achievement in 59 years of operation with the help of an
effective supply chain as the stores are always packed with products and the website also draws
significant number of traffic("IKEA facts and figures - IKEA", 2018). The organisation has been
facing some serious challenges in the Supply chain that has been discussed in the previous
assignment. The supply chain of the company is created to suite the vision of providing the
customers with high quality polished design furniture at a very reasonable price. The supply
chain and the inventory management functions of the company help in upholding the value
proposition (Chrisopher & Holweg, 2017).
In order to understand the challenges that the company is facing in the supply chain in the
recent times it is important to understand the product line of the company: it ranges
fromfurniture appliance, bookcase ranges, curtain accessories, children’s products in terms of
furniture, bathrooms accessories and fittings,home accessories, kitchen articles, upholstered
furniture etc. As the materials used for each of these products are different form one another
they impact the decisions taken in the supply chain as well. The design process of the furniture
take place in Sweden but the manufacturing is outsourced form china and other Asian countries
where the cost of labour is comparatively cheaper than European countries (Chrisopher &
Holweg, 2017).The technical know-how of the product design teams of IKEA and the innovative
furniture that the Company sell make the life at home comfortable for all the global customers of
the organization. The resources that the companies have in order to cater to the wide spread
operation and distribution are:
 27 trading service offices in 23 countries

2SUPPLY CHAIN MANAGEMENT
 33 distribution centers and 15 Customer distribution centers in 17 countries
 43 industry production units in 11 countries("IKEA facts and figures - IKEA", 2018)
Briefly, the supply chain of IKEA has the following steps procuring, storing, manufacturing,
and delivery processes. Following is a diagrammatic representation of the supply chain process
of IKEA (Christopher, 2016).
Figure: IKEA Supply Chain
(Source: Jonsson et al., 2013)
As IKEA’s mission is to provide the customers with ergonomically designed, purposeful,
low priced and sustainable furniture. With the help of the supply chain have over the years
successfully achieved the goal. Yet in the process of business function, there are
severalchallenges due to various reasons internal or external. The dynamics of the business
keep changing thus, the company has to renew policies and decisions to fit in the new

3SUPPLY CHAIN MANAGEMENT
dynamics. The new centralized approach of IKEA’s supply chain includes planning
processes and organizations, helped IKEA detect issues and challenges, as well as address
them so that the company can achieve the objectives. However some of the challenges that
still persist are discussed bellow.
Key supply chain challenges of IKEA are as follows:
Sustainability: the concept of sustainability is important to recognize and implement by the
company in order to leave the future generate with better opportunities. Sustainability is a
concept which is explained in the triple bottom line concept which is becoming more and more
popular among the business environment. The business community identifies the responsibility
they have towards the society and the planet (Jonsson et al., 2013). This is one of the most
important challenges that the company is facing in the process of the supply chain. As a
multinational company there are number of distribution channel and several transportations
which are used in order to make the process direct and reduce the cost of the product, both the
objective of making the products available in low cost and maintaining a sustainable supply
chain are two aligned concept. Truck, boat or train is used to transport products in the supply
chain. The company aims at reduction of C02in the process of supply chain(Inter.ikea.com,
2018). But the challenge here is to maintain the quality of the product, keep up with the time of
delivery and also maintain sustainability in the process.Managing waste from packing material is
another challenge that the company is facing. In order to maintain the quality of the product that
is being shipped from one place to another the packing material that is used has to be very well
structured. But the utility of the materials after the product is delivered to the customer is waste
(Jonsson et al., 2013).