Elaborate on IKEA’s inventory management policy

QUESTIONS AND ANSWERS 1
QUESTIONS AND ANSWERS
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QUESTIONS AND ANSWERS 2
Case Study Answers
1. Elaborate on IKEA’s inventory management policy with reference to three pillars of
inventory management plan.
IKEA inventory Management policy is inclined on the three pillars, which are planning,
controlling and balancing.The components made the company become the most successful
furniture corporate globally. On planning IKEA possess six warehouses in North America which
provide several functions. They include high-flow warehouses, low-flow facilities which use
mounted vehicles for pick-ups. And warehouses for direct- to –consumer interaction. Within four
of its distribution centres, there are storage facilities and retrieval systems. IKEA also possesses
standardized Consafe Logistics.
Additionally, IKEA's products are manufactured from recycled products. Therefore they are
focused on using few materials in making furniture, without assuming durability and quality
(IKEA inventory report). IKEA has also initiated the pillar of balancing, the company has an
inventory replenishment management process established by IKEA, which is the minimum or
maximum setting used to control the orders made by customers. This criterion helps IKEA in
meeting the demands of customers as well as managing the ordering of too many or too few
products, since the inventory of IKEA is stocked at night after opening hours. For instance,
IKEA has a proprietary inventory system which holds the data that assist in forecasting sales for
the next couple of days — and arranging for specified number of goods to meet the demands of
consumers.

QUESTIONS AND ANSWERS 3
Control- under this pillar IKEA has applied the tactic of cost-per touch which minimizes the
amounts of contacts on an object. They also have warehouse logistics managers who are in
charge of handling and ordering supplies at IKEA stores. Their primary duties are to record and
monitor deliveries and to ensure efficiency in the flow of goods within IKEA stores, which helps
in sustaining high sales and improving customers loyalty.
One of the models used by IKEA is the economic order quantity, which is a control model that
determines the size of orders, therefore assisting in reducing the cost of ordering and expenses of
carrying. All the other costs are kept constant. The model is applied because an order is only
placed after a fixed timeline
EOQ Model
Secondly, IKEA has used safety stock model by possessing several warehouses and having the
low-flow facilities and high flow warehouses, which keep the additional stock to avoid stock-
outs. Because they help in decreasing losses caused by stock-outs. This has helped IKEA meet
the consumer demands: for example, the maximum and minimum setting proprietary system
used by IKEA.