Logistics and Supply Chain Management at Ikea, UK

This report analyzes the management of logistics and supply chain operations at Ikea, UK. It discusses the relationship between supply chain management and logistics management, the significance of ERP, and best practices to reduce logistics costs.

Running head: LOGISTICS AND SUPPLY CHAIN MANAGEMENT
Logistics and Supply chain management
Name of student
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Author note
Table of Contents

1LOGISTICS AND SUPPLY CHAIN MANAGEMENT
Introduction......................................................................................................................................3
Organization’s overview..............................................................................................................3
Task 1...............................................................................................................................................3
Relationship between Supply chain management and logistics management.............................3
Significance of an effective logistics management function in achieving customer satisfaction 5
Task 2...............................................................................................................................................7
Significance of Enterprise resource planning (ERP)...................................................................7
Task 3.............................................................................................................................................10
Best practices to reduce the costs of logistics operations..........................................................10
Conclusion.....................................................................................................................................11
References......................................................................................................................................12

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Introduction
The topic revolves around the concepts of logistics and supply chain management
considering the business organization Ikea in United Kingdom. The management of supply
chains means the proper flow and exchange of products and services along with the storage of
raw materials, resources and work –in-process inventories to ensure that the finished goods reach
from the point of origin to the consumption efficiently. The logistics operations are part of the
supply chain management, where the processes are effective to manage proper flow and storage
of goods. It also includes the acquisition of information related to the supply chains and
movement of products from the point of origin to consumption (Christopher 2016). The report is
prepared to discuss the relationship between supply chain management and logistics operations
and the importance of ERP at Ikea, UK. Lastly, the best practices to reduce the operational costs
and supply chain costs will also be included here.
Organization’s overview
IKEA, UK is one of the most reputed furniture manufacturers in United Kingdom that
has been designing and selling ready to assemble furniture items, kitchen appliances and home
accessories to fulfill the various needs and requirements of the customers. The ready to assemble
products are made available at different market segments, which creates ease for the customers
in setting up good furniture and create beautiful designs within the homes (IKEA.com 2018).

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Task 1
Relationship between Supply chain management and logistics management
Supply chain management is the process of managing the flow or movement of goods
and services along with the storage of raw materials and resources. Supply chain management
basically refers to the process of interconnected activities that enables transformation and
movement of the raw materials and resources to the finished goods and services until it reaches
the end users. The management of supply chains also includes management of the work-in-
process inventories and making sure that the finished products of Ikea are properly moved from
the point of origin to the point of consumption. Ikea, being one of the largest home-furnishing
retailers in UK has nearly 300 stores all over the place (Islam et al. 2013). Due to this, there is
more focus on managing unique supply chain and inventory management techniques for keeping
products’ prices under control and distributing those goods in the market properly to ensure ease
accessibility for the customers as a whole. The stores of Ikea hold more than 9500 products and
so the items should be kept in stocks properly, which should be possible b managing the supply
chain operations and managing the inventories with convenience.

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Figure: Supply chain management (Dekker et al. 2013)
Logistics management is an effective process included during the management of supply
chains and it enables the organization to make sure that competitive advantage is achieved by the
company. It can guarantee high level of satisfaction among the customers as well as keep the
stocks filled in the warehouses so that the products are manufactured and delivered to the
customers with convenience. Logistics management also involves the various activities
associated with the transportation of foods, managing inventories and other warehousing
activities (Dekker et al. 2013). It would facilitate the planning, control, coordination and
management of supply chains to ensure successful handling and packaging of the materials along
with relevant forecasting techniques too. The logistics operations during the supply chain

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management has helped in identifying the customers’ needs properly as well as defined the
service related objectives by designing the logistics system properly. It has allowed Ikea to
develop knowledge of the consumer market and even identified the various components of the
market to market the products accordingly. Customers’ services were delivered and the supply
chain management enabled to create a logistics network design for managing the inventories and
transportation costs with much ease and efficiency (Mangan, Lalwani and Lalwani 2016). The
packaging decisions and behaviors are also responsible for influencing the cost and productivity
of the organization to fulfill the needs of material disposal in various logistical areas of the
company too (IKEA.com 2018).
Significance of an effective logistics management function in achieving customer
satisfaction
It could be seen that the logistics operations management have the potential for allowing
the organization to achieve higher levels of satisfaction and cost advantage too. The management
of logistics also involves the governance of supply chain functions, which include both inbound
and outbound transportation management through fleet and road networks. Other functions
included warehousing activities, handling of materials, planning for supply and demand and
management of third party logistics’ service providers (IKEA.com 2018). It would result in
providing better customers’ services along with proper sourcing and procurement through the
integration of functions including the manufacturing of sales, marketing, finance and use of
information technology. The logistics operations start from the accumulation of raw materials
and resources until the final stage where the goods are transferred to the consumers. By adhering
to the needs and preferences of the customers, Ikea has managed proper planning and
implementation, which has further facilitated the development of strategies to address the

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complex issues faced by the customers (Jacobs, Chase and Lummus 2014). With the
management of supply chains and ensuring keeping enough stocks in the warehouses, the
expectations of the consumers were met and they had been provided with good quality products
too that made them loyal customers of Ikea, United Kingdom.
The logistics operations’ management includes various parties including the marketers,
suppliers, retailers, warehouses and even few of the customers. The logistics functions have
enhanced the business performance and even ensured higher level of customer satisfaction
through the better customers’ services delivery. The costs of products and services act as
effective indicator that is responsible for the management of relationship between the supply
chain management and logistics operations. The logistics operations’ management has aimed to
decrease the costs from suppliers to the end users, without making any compromises on the
quality of products and time taken to prepare those. Thus, the customer satisfaction indicators are
included in the logistics operations’ management, which has resulted in delivering products at a
much lower price to keep the customers satisfied (Rushton, Croucher and Baker 2014). The
prices of the products are kept lower through lower labor and production cost along with lesser
cost of storage and transportation facilities.
Task 2
Significance of Enterprise resource planning (ERP)
Enterprise Resource Planning or ERP is the integrated management of the major business
processes that have been influenced with the use of various software and information
technologies. ERP is an effective software used at Ikea to collect, store, analyze, interpret and

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manage the data and information obtained to ensure successful business operations and
processes. The ERP software provides an updated view of the business processes with the use of
databases containing all the necessary data and information to rack the business resources such
as raw materials, resources and capacity of production and cash flow too. It is useful for sharing
data and information across various departments and ensures proper manufacturing, production,
sales, accounting and profit achieved by the company (Peck and Jüttner 2013).
Figure: ERP (Peck and Jüttner 2013)
By using the ERP software, it has become easy for Ikea to manage accurate provision of
delivery rates and even developed strong relationships with both the new and existing customers.
It has enhanced the rates of delivery and ensured providing the products t the customers on time.
The ERP implementation ensured accurate provision of order rates and even tracked the returns
and repairs done for the products and services. It has helped in gaining complete set of

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information about the transactions made with proven automated reports. The accurate provision
for discount would be possible by implementing ERP, which could enable deduction of discount
rates according to the backend systems. The products offered at discounts could easily make the
customers delighted and influence their buying behaviors too (Wang et al. 2016). The invoices
would be issued and a lot of time would be saved as well while taking any action. This is how,
the customers’ services would improve and this could lead to the satisfaction of the customers
with ease and effectiveness.
The electronic business encompasses use of communication processes and managing
business with internet. It has developed communication networks for enhancing the process of
sharing, exchange and flow of data and information, furthermore strengthened the link between
the value chain between the business and its customers. It has not only improved the
effectiveness of selling marketing and purchasing made by the customers, but also has improved
the customers’ services, reduced the operational costs and streamlined business operations and
processes with much convenience. The e-business has also created strategic and customer
centered business environment, where mutual benefits have been gained by the businesses and an
enhanced customer relationship management of CRM system has been developed. This has also
improved the supply chain activities’ effectiveness and seamlessly streamlining the business
operations (Ahi and Searcy 2013).
Ikea has used ERP to ensure coordination with the various business aspects like sales,
manufacturing, service and accounting services managed at various departments of the
organization. Smooth flow of information has been possible, which has further helped in
understanding the different consumer market segments with ease and effectiveness. The

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company has maintained a good record in terms of profitability and even managed to implement
ERP with the use of Lawson software (Golicic and Smith 2013). It has not only made the
company to deal with various business uncertainties but also has improved the accounting
efficacy by resolving the issues alongside the management issues too. The use of ERP has also
benefited the organization to understand the various production processes and even monitor the
progress of manufacturing and production processes consistently (Dyckhoff, Lackes and Reese
2013). This has not only allowed Ikea, UK to achieve the highest quality standards, but has
helped in gaining sustainability and competitive advantage in business. The adoption of ERP
further assisted in integrating the costs, revenues and enabled transparency and accountability in
an appropriate way too. Thus, the costs of production have been reduced and the products and
services are made available at lower prices too, which is considered as one of the major benefits
obtained by using ERP (Waller and Fawcett 2013).
Task 3
Best practices to reduce the costs of logistics operations
There are various approaches by which the costs of logistics and supply chain
management operations can be reduced largely. It is important for Ikea, UK to understand the
process of supply chain management properly and then ensure proper movement of goods and
services from the manufacturing department to the customers. It should be done through the
accumulation of raw materials and resources to present the best quality finished products that
would be delivered to the customers. It is recommended for Ikea to ship the goods in full
container loads rather than in less than a container load or LCL, because it is much more safe and
cost effective. The goods must be loaded according to the specifications and should not be shared

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with other vendor goods (Monczka et al. 2015). This would reduce the custom delays and thus
could be a preferably economical option for Ikea, UK. Bt, while transporting smaller freights, the
more economical option us by using LCL, which can reduce the costs of logistics operations and
at the same time, reach those to the end users on time.
Cargo insurance is a new approach followed by Ikea in UK to reduce the costs of
logistics operations management. The insurance would cover the value of products and ensure
that money could be obtained in case of any discrepancies (Winter and Knemeyer 2013). The
outsourcing could also enhance the effectiveness of supply chain management operations along
with better storage and reduced costs of transportation facilities. Maintaining the visibility of the
supply chain could also improve the planning and control the logistics operations, furthermore
manage the safety stocks. This would overcome the supply and demand processes uncertainties
as well as manage standardization of service levels with appropriateness. The optimization of
resources could also be a suitable option for Ikea to manage the assets properly as well as
improve the business efficiency (Ross 2013).
Conclusion
The report was prepared to analyze the different aspects considering the management of
logistic and supply chain operations at Ikea in United Kingdom. The company was considered as
one of the major furniture retailers, which had managed the supply chain and logistic operations
properly to keep the production process successful and ensured delivering the products and
services to the customers on time as well. From this topic, it could be understood that a positive
relationship had been maintained between the supply chain management and logistics operations,

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which had enhanced the inventory management efficiency and even improved the customers’
services to achieve their satisfaction.

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References
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sustainable supply chain management. Journal of cleaner production, 52, pp.329-341.
Christopher, M., 2016. Logistics & supply chain management. Pearson UK.
Dekker, R., Fleischmann, M., Inderfurth, K. and van Wassenhove, L.N. eds., 2013. Reverse
logistics: quantitative models for closed-loop supply chains. Springer Science & Business Media.
Dyckhoff, H., Lackes, R. and Reese, J. eds., 2013. Supply chain management and reverse
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