IKEA Supply Chain Management

This report discusses the supply chain management of IKEA, a furniture company known for its simplistic designs and eco-friendly products. It covers the company's history, supply chain activities, sustainable practices, collaboration with partners, and recommendations.

Running head: IKEA SUPPLY CHAIN MANAGEMENT
IKEA SUPPLY CHAIN MANAGEMENT
Name of the Student
Name of the University
Author Note

1IKEA SUPPLY CHAIN MANAGEMENT
Executive Summary
The given report throws light on the supply chain management of a company called IKEA. IKEA
is a furniture company which is popular for its simplistic designs and eco-friendly products. The
products are made in consideration of the environmental resources. The report follows a
structured format which discusses the concept of Supply Chain management with a brief
overview of the history of the given company. The section was followed by a discussion of the
supply chain activities and operational activities of the firm. The sustainable activities adopted
by the organization were discussed. The latter half of the report discusses the various
collaboration activities of IKEA with its partners along with certain recommendations on the
same.

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Table of Contents
Introduction......................................................................................................................................3
About the organization and history..................................................................................................3
Overview of the supply chain management of IKEA......................................................................4
Market of operation and scope........................................................................................................4
Activities used to ensure the supply chain is sustainable and relate practices................................6
Collaboration with partners.............................................................................................................7
Conclusions and Recommendations................................................................................................8
References........................................................................................................................................9
Appendix........................................................................................................................................11

3IKEA SUPPLY CHAIN MANAGEMENT
Introduction
Supply Chain Management is considered to be an important aspect of any organization
which goes a long way in defining and maintaining its services. If the supply chain function of
the organization is good then the organization will be able to function well and attain a
sustainable competitive advantage (Christopher 2016). The given report will be discussing the
different supply chain aspects of a chosen company named IKEA. The report will discuss the
characteristics of its supply chain and logistic activity, along with the way the organization
ensures that the supply chain is sustainable in its activities. The way IKEA collaborates with its
partners to ensure satisfaction will also be given.
About the organization and history
IKEA is a Swedish founded Dutch Multinational group which designs as well as sells
various ready to assemble furniture, appliances for the kitchen and home products. The company
has been successful in attaining the tag of the best furniture retailer since the year 2008. The
company is popularly known for its modernist designs and interior design work which is often
defined as eco friendly in nature (IKEA. 2018). Furthermore, the company is also known for its
continuous development processes which have permitted the firm to reduce its prices to more
than 2-3% in the last decade. The company operates in more than 50 countries and operates
more than 400 stores. The website of the firm contains about 12000 products and is almost the
whole collection of the products of IKEA. Furthermore, the company is responsible for
producing around 1% of the world commercial woo and thus makes it the largest user of wood in
the retail sector.

4IKEA SUPPLY CHAIN MANAGEMENT
Overview of the supply chain management of IKEA
The product line of IKEA is one of the largest ones and consists of a wide range of
products like the Furniture appliances, Bookcase ranges, Curtain accessories, Children items,
Bathroom accessories and Upholstered furniture.
Supply Chain can be described as a process which helps in contributing to the product
line of the given company and make the goods reach to the actual consumer market. Supply
Chain can be described as both an art as well as a science which helps in calculation of the
disadvantages as well as the advantages of a particular product and the specifically the network
issues which facilitate the flow of the goods (Jacobs et al. 2014). The supply chain of IKEA is
well defined with all the parties to it knowing their respective duties and the laws it needs to look
after if it wants to conduct its operations successfully. The primary purpose of IKEA`s supply
chain is to ensure that the products of the company reach the given consumer market
successfully and that the company is easily able to ensure that it performs well and all products
are of adequate quality.
According to Stadtler (2015), the effective management of the supply chain also ensures
maximum customer value and provides IKEA with a competitive advantage, if the company
becomes successful in attaining competitive advantage, then it will be successful in sustaining
competitive advantage and help the firm in understanding the consumer demands which relate to
innovation and productivity.
Market of operation and scope
IKEA ensures that its low cost aspects in all the operations will ensure that the firm
performs well. It also ensures long term sales in large volumes. These aspects help IKEA to

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ensure profitability for the firm. The company opened several stores n the Scandinavian region in
less than a decade and was able to create its reputation in the European nations. As the furniture
industry at European countries was sluggish, it stated expanding to other regions (Monczka et al.,
2015). The company decided to re-deign its model and indulge in various cost cutting activities
which would ensure that they would be easily able to expand its operations and indulge in rapid
expansion.
IKEA has always concentrated on simplicity and quality. According to Hugos (2018),
simplicity goes a long way in helping the given organization to manage the business and abide
by the complexity of the given market.
At present IKEA operates in more than 50 countries and has presence of offline as well as
online store in many countries. The company is looking out for options where it can implement
Virtual Reality in order to ensure that the unexplored markets are also assessed to.
Figure 1: The supply chain management activities of IKEA
(Source: Jonsson, Rudberg and Holmberg 2013).

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The supply Chain of IKEA is divided into three different components namely the,
Primary sector, Secondary sector ND THE Tertiary sector.
1. The Primary sector of IKEA is involved in the development of the raw materials which
are essentially required for the product (Seuring 2013). The raw materials are sourced
from more than 1000 suppliers and quality stands a conformance.
2. The secondary sector of IKEA makes use of different primary materials which are
sourced from the earlier stage and they are converted to proper products. This is the stage
where the value is added to the various products.
3. The tertiary sector This is the last stage of the supply chain procedure where the products
are modified based on consumer demand.
Activities used to ensure the supply chain is sustainable and relate practices
As stated earlier, the primary sector is primarily involved to ensure that the raw materials
required for the product, is collected and reformed from good quality sources. The company to
ensure sustainability in its practices, engages in an activity primarily known as the e-Wheel
practice which goes a long way in ensuring that the suppliers abide by sustainability rules in all
the stages and this includes an analysis of the four stages of the product which include Resource
Extraction, Production, Recycle and others (Ahi and Searcy 2013). The company ensures that the
resources used make more uses of the renewable sources and recycled materials. In the
production stage it asks the different suppliers to ensure that production waste is re-used and
applied wherever important. The Use aspect looks after the substances that lead to allergy and
ensure that the energy is reduced when materials are being used. In the Recycle aspect it ensures
that the material is recycled and reclaimed (IKEA. 2018).

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Secondly, IKEA engages in a program called the IWAY which are a set of rules and
regulations been stated which guides the different partners like the suppliers, ad helps the
company to look after the raw material quality and guides them in concentrating on development
of human friendly and sustainable resource supply processes.
The IWAY includes methods like Environment condition, Fire Preventing, Freedom of
Association, Work Health and Safety (Brandenburg et al., 2014). Those suppliers who are
successfully able to achieve the IWAY and eWheel goal will be easily able to achieve
commitments from IKEA which helps in formation and sustenance of long term partnerships.
In the tertiary sector of its Supply Chain Management, the firm ensures that the practices
undertaken are equally sustainable and play a leading role in development of innovative
sustainable logistics along with retailing models. These practices include designing a flatter
model and design which helps the firm in delivery the right products in the right manner using
sustainable ways which shall include reduced emissions and lowered transportation costs (Ross
2013). It is presently increasing the use of Railway and Sea transport to decrease fuel costs.
Furthermore, low energy light bulbs are employed in the workforce so as to ensure that company
is engaging in sustainable practices, low emission hybrid models are used in order to save the
environment and lastly, plastic carrier bags are removed and employees are encouraged to use
public transport to commute to work.
Collaboration with partners
IKEA engages in the following to ensure that it collaborates well with its partners to
supply good quality products and goods. Collaboration plays a key role as it helps in the

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determination of sustainable relationships which help an organization to develop long term
success for the firm.
 Benefit sharing model- A right benefit sharing model shall ensure that the company
forms a model with the suppliers where the benefits of engaging in a sustainable
relationship are observed by both the parties (Wisner, Tan and Leong 2014).
 Investing in the right infrastructure and people- The Company needs to make sure that it
invests in sustainable relationships with its partners and takes advantages of the
advancements of technology to make the operations smoother.
Conclusions and Recommendations
It has been recommended that the firm has to invest in long term sustainable relationships
with its partners in order to ensure that it is able to gain a competitive advantage in the given
domain. Supplier relationship is relatively very crucial and even more where the competition is
so intense. In lieu of this, the firm needs to see to it that the suppliers abide by the various rules
and regulations to make the process easier.
The given report discussed the various long term sustainable relationships which the
company aims to engage in and elaborates on the supply chain management activities of IKEA.
Its collaboration and sustainable aspects have been discussed.

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References
Ahi, P. and Searcy, C., 2013. A comparative literature analysis of definitions for green and
sustainable supply chain management. Journal of cleaner production, 52, pp.329-341.
Brandenburg, M., Govindan, K., Sarkis, J. and Seuring, S., 2014. Quantitative models for
sustainable supply chain management: Developments and directions. European Journal of
Operational Research, 233(2), pp.299-312.
Christopher, M., 2016. Logistics & supply chain management. Pearson UK.
Hugos, M.H., 2018. Essentials of supply chain management. John Wiley & Sons.
IKEA. ,2018. IKEA.com - International homepage. [online] Available at: https://www.ikea.com/
[Accessed 26 Apr. 2018].
Jacobs, F.R., Chase, R.B. and Lummus, R.R., 2014. Operations and supply chain
management (pp. 533-535). New York, NY: McGraw-Hill/Irwin.
Jonsson, P., Rudberg, M. and Holmberg, S., 2013. Centralised supply chain planning at
IKEA. Supply Chain Management: An International Journal, 18(3), pp.337-350.
Monczka, R.M., Handfield, R.B., Giunipero, L.C. and Patterson, J.L., 2015. Purchasing and
supply chain management. Cengage Learning.
Ross, D.F., 2013. Competing through supply chain management: creating market-winning
strategies through supply chain partnerships. Springer Science & Business Media.

10IKEA SUPPLY CHAIN MANAGEMENT
Seuring, S., 2013. A review of modeling approaches for sustainable supply chain
management. Decision support systems, 54(4), pp.1513-1520.
Stadtler, H., 2015. Supply chain management: An overview. In Supply chain management and
advanced planning (pp. 3-28). Springer, Berlin, Heidelberg.
Wisner, J.D., Tan, K.C. and Leong, G.K., 2014. Principles of supply chain management: A
balanced approach. Cengage Learning.

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Appendix
The E-wheel initiative at IKEA