IKEA Supply Chain Management Analysis

This assignment delves into the intricacies of IKEA's supply chain management. It requires a critical analysis of their strategies for sustainability, emphasizing their commitment to environmental responsibility and ethical sourcing. The analysis should also explore how IKEA maintains operational efficiency within their global network while addressing challenges associated with meeting ever-increasing consumer demand.

OPERATIONS AND
LOGISTICS MANAGEMENT
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TABLE OF CONTENTS
INTRODUCTION.............................................................................................................................4
Task1 Techniques adopted by IKEA company to compete with in its business area...................4
Task2 Operation strategy processes that apply to IKEA company...............................................5
Task3 Analysis of different competitive strategies that IKEA might use for achieving its
operational objectives....................................................................................................................6
Task4 Contribution of operations management in organization's strategy improvement. ...........7
CONCLUSION.................................................................................................................................9
RECOMMENDATIONS..................................................................................................................9
REFERENCES................................................................................................................................10
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INTRODUCTION
Operations and logistics management is defined as a process of producing services and
goods in the rightt quality and quantity and distributing them at the right place and at the right
time. It is a effective system forof managing supply chain activities of the business by using
quantitative and qualitative tools of management. Present report is based on operation strategies
used by IKEA company for running its functional work processactivities. In addition to this
evaluation of different competitive strategies used by the company is done and recommendations
for improving functional process are given to the organizationscompany.
Task1 Techniques adopted by IKEA company to compete with in its business area
The main objective of IKEA company is to manufacture reasonable and good quality
products for its consumers. It works with a vision “To create a better everyday life for the many
people”. The powerful brand image of the company and wide range of products and styles in the
furniture category makes it different from its competitors. It design and sells ready to assemble
furniture, home accessories and appliances. IKEA is world's largest retailer in thisthat segment
and known for modern architectural designs used for its furniture and other products. Eco friendly
simplicity used in of its interior design of its store iswork is widely appreciated by its consumers
(IKEA design for everyone. 2016.).
Company continuously work for quality improvement by using cost control methods,
product development and by doing transformation in work structure. IKEAIt operates its
functional activities in 48 countries through its 384 stores. The business idea of the enterprise is
“To offer a wide range of well-designed, functional home furnishing products at lower price so
that it will become easier for its consumer to afford them” (IKEA design for everyone. 2016). For
achieving this objective companyit works in a planned and organized manner to develop long-
term supplier relationships and by investing in highly automated production process byand
optimizing entire value chain of the organization. The financial principle of the firm is to grow
economic resources by using its physical and human resource in a effective manner. The
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designers and developers of IKEA company work with a diverse team of manufacturers,
technicians and specialists to develop a superior and high quality product. For IKEA company
distribution is an important part of its operational activities and major objective of this is to create
a short and accessible path between customers to manufacturer. The aim for doing this is to make
a global distributions network for the company to sell large volume of its furniture and home
applianceits products (Christopher, 2016). The firm uses high-flow facilities and low-flow
warehouses transactions methods for operating its stores which provides a efficient method for
utilizing physical resources of the firm in a appropriate manner.
IKEA usesapply automatic storage and retrieval systems in its stores to reduce its cost of
operations. The in-store logistics manager uses an inventory replenishment management process
known as minimum setting to arrange the store in a unique way by utilizing space in best possible
way.respond to store-level inventory reorder points (IKEA design for everyone. 2016). IKEA
cCompany's propriety inventory system assist logistics managers to know about the point-of-sale
data and records of inventory, that comes in store through direct shipping and from distribution
centers. IKEA faces direct threats from competitors firms including Wal-Mart, Home, Depot and
Ppier. The sales of company reached to $36.8 billion in financial year 2016 and. tThe major
countries where it sells its products is Germany and U.S. and both the countriescombinely
represent 15% sales of IKEA group. The firm added 13 stores in 9 markets in the year 2015 by
opening multiple stores in China, France and Germany.
Task2 Operation strategy processes that apply to IKEA company
IKEA company works in the area of offering home furnishing products to its consumers
at a reasonable price. Operational strategies are used by the firm for running its functional
activities in an efficientcost-effective manner. A systematic procedure is used while
implementing these strategies in the companyorganization. A plannedorganized and step by step
method is used which provides guideline for executing the plan of action in a better and effective
mannerway (Waters and Rinsler, 2014). The first stage which is used is Ooperational strategy
formulation in which business strategy is designed by top management after doing analysis of
external and internal business factors. It is the first stage where action plan is developed in the
company regarding its overall functioning. Idea generation and screening is done by top
management to improve working culture and creativity in the firmof the firm. Product feasibility
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check is also done at this stage to know about quality standard of the product and necessary
improvements are done in the product quality if required. Quality control department of the
company is made responsible for checking producy quality. Initial stage is known as operational
strategy formulation where IKEA company works to formulates strategiesschemes to run
operationalfunctional activities in a effective manner.
Operation strategy implementation is done at second stage to execute all the planning
done by the top management. Plan of action formed by the firm is implemented to use resources
in the production of products according to preset manner. All the employees of the firm are
informed about the strategies plan of action that company is going to take for its better
implementation. Overall collaboration of departments of the firm is essential to ensure successful
enforcement of the strategies (Dyckhoff, Lackes and Reese, 2013). The third stage is
Ooperational process monitoring where the strategy formulated by the firm is checked for its
successful implementation. Electronic monitoring system that includes cameras and computer
watching systems are usedadopted by the firm to ensure that its functional activities get
completed without any disturbance and proper monitoring on working process is done.
Employees are also appointed by the firm to monitor and control operation strategy
implementation process. Monitoring helps in removing errors and troubles at manufacturing
process of IKEA company byby providing details about defects. It helps in delivering superior
quality product to its consumers with less defects and errors. Controlling helps in attainment of
goals in desired manner (Fernie and Sparks, 2014). The standard set by the firm and outcomes are
compared which helps in analyzing results of execution of strategies. Performance measures helps
in monitoring the activities and taking necessary actions for reducing defects in the manufacturing
process. The control system helps the operational manager to monitor and evaluate the ongoing
processes in the industry. It ensures that day to day planning and operations are consistent with
program and objectives set by the firm.
Task3 Analysis of different competitive strategies that IKEA might use for achieving its
operational objectives
Strategy is defined as execution of vision and mission of the company by developing them
into a set of actions to give the business a competitive advantage in the market (Jaber, 2016). The
business strategies of IKEA are always developed after identifying requirements of consumers. It
provides reliable furnishings and other home appliances to its consumers at affordable price. The
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company uses inexpensive raw material in a effectivenovel way to design its product in a unique
and innovative mannerway.
Low-cost leadership strategy is used by the company to meet the needs of its consumers in
a better and planned way. The products are developed and designed by keeping overall
investment cost low which in turn helps the firm to provide reasonable price product to its
consumers. Firm tries to reduce cost of its manufacturing low by using innovation in technology
which provides a medium to reduce price of its product. Company focuses on developing quality
of its products and selling big sales volume. Consumers of the firm also helps in achieving this
objective by collecting and assembling products by themselves and company saves cost of
delivery services by using this method. Computerized planning tools are useingd by the firm to
design and develop its product. To keep its product price low engineer of the firm design low-cost
furniture and other kitchen appliances. The targeted segment of IKEA is young customers who
look for stylish and fashionable furniture in their stores.
Innovative designs are used by the firm by taking help from staff designers that provide
design creativity and multiple functionalities to the users (McKinnon, A., and et.al., 2015). The
raw material in the firm are used efficiently to improve quality of the product and reducing
overall investment cost for the firm. Its target consumers are price sensitive people who want
good quality product at lower price. Company uses self-service model in stores displays which
saves cost of appointing sales people, that are required to attend consumers. It is an innovative
idea which attracts consumers and saves distribution cost of the firm. IKEA provides products in
flat-packed form which reduces cost of shipping, storing, assembling and controlling. It increase
transportation capacity of the firm and warehouse space is also utilized in more innovative and
better way. It design its own low-cost ready to assemble furniture rather than relying on third
party manufacturers. This strategy reduces overall operation cost of the firm (Gilmour, 2013)..
Suppliers of the firm are located in areas where close proximity to raw materials is available to
them. It ensures smooth supply of raw material to industry for running its manufacturing process.
Low cost is a priority for the firm and it offers home furnishings that combine good design, easy
availability and low price to its consumers to satisfy their requirement.
Task4 Contribution of operations management in organization's strategy improvement.
Operations management helps a firm to improve its functional activities in a organized
and planned manner. The tools and techniques provided by operations management provide a
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framework for executing the business strategies in a systematic way (Seuring, 2013). Strategy
improvement is defined as set of visions, objectives and policies that help a firm to achieve its
desired aim and business objectives in a successful way. It assist the firm in achieving sustainable
competitive advantage by reducing troubles and inefficiencies in the production process. For
implementing Strategy improvement it is necessary that a framework should be created to define
the sequence of processes that need to be completed in as per the defined in strategy execution
process. (Christopher, Magrill and Wills, 2013). It is a activity which involves step by step
procedure including strategy formulation, execution, measurement and improvement of the
process.
Operations management is a process used by IKEA company to design, execute and
control all the functional processes of the company. Raw material is converted into final goods
and services by using this system. Inputs that goes in the process includes people, technology,
machines, equipment and materials. All the input are converted into outputs by using effective
techniques and methods (Dekker, Bloemhof and Mallidis, 2012). It helps the firm to manage its
productivity and play a strategic role in executing functional activities of the firm. Operations
management helps in transforming inputs into outputs (Winter and Knemeyer, 2013). IKEA
company is involved in the process of making furniture and home-appliances and work at large
scale. Operation manager faces many problems while managing overall organizational process.
Various models of operations management helps in solving problems encounter by the firm.
Linear programming and computer simulation helps the firm in utilizing its resources in a better
way (Seuring, 2013.). The major priorities for operation managerment includes understanding
consumer requirements and developing products of the firm according to their needs. It require
the firm to alter its existing process to meet customers demand. It helps in adopting continuous
improvement process in the manufacturing processes. The five major functions of operations
management includes planning, organizing, controlling,and coordinating. Operation strategy is a
process through which key operations decisions that are consistent with the objectives of the firm
are taken by the management (Galindo, and Batta, 2013).
Operations management is integral part of organizational strategy which helps in
developing a systematic approach do develop organizational structure in a effective way for
executing business strategies. The strategic role playsed by operations managerment helps in
paying attention to those areas of business enterprise that are essential and important for
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implementing plan of actions. IKEA company uses this method for managing its resources for
conducting manufacturing activities of the firm. Corporate level, business level and functional
level strategies can be formed and executed by using tools and techniques of operations
management. It provides right framework for the firm to reduce overall investment cost by
producing goods at low price with error and defects free (Ellram, La Londe and Weber, 2013).
Flexibility can be adopted in the firm which is defined as ability to change the existing process
according to needs and demand of the situation.
CONCLUSION
Operations and logistics management has helped the IKEA company to manage its
functional process in a better and organized way. Manufacturing and distribution of furniture and
home-appliances has become easy for the firm and company has gained success in implementing
low-cost strategy for reducing price of its product. A proper operational planning which involves
monitoring and controlling the existing process has proved beneficial for the firm in ensuring
successful completion of its objectives in a better and planned way.
RECOMMENDATIONS
IKEA company can use tools and techniques of operations management for achieving its
desired goals and objectives. Company can use effectiveness metrics to analyze its overall
performance. It will help in taking price related decisions by inspecting external market
conditions and internal business factors. Quality of the product according to set standards can be
checked by using this system. Time,flexibility and availability are some other areas that are
covered in this metrics for measuring effectiveness of the organizational processes.
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REFERENCES
Books and journals
Christopher, M., 2016. Logistics & supply chain management. Pearson Higher Ed.
Christopher, M., Magrill, L. and Wills, G., 2013. Educational development for marketing
logistics. International Journal of Physical Distribution & Logistics Management.
Dekker, R., Bloemhof, J. and Mallidis, I., 2012. Operations Research for green logistics–An
overview of aspects, issues, contributions and challenges. European Journal of Operational
Research. 219(3). pp.671-679.
Dyckhoff, H., Lackes, R. and Reese, J., 2013. Supply chain management and reverse logistics.
Springer Science & Business Media.
Ellram, L.M., La Londe, B.J. and Weber, M.M., 2013. Retail logistics. International Journal of
Physical Distribution & Logistics Management.
Fernie, J. and Sparks, L., 2014. Logistics and retail management: emerging issues and new
challenges in the retail supply chain. Kogan Page Publishers.
Galindo, G. and Batta, R., 2013. Review of recent developments in OR/MS research in disaster
operations management. European Journal of Operational Research. 230(2). pp.201-211.
Gilmour, P., 2013. Benchmarking supply chain operations. International Journal of Physical
Distribution & Logistics Management.
Jaber, M.Y. ed., 2016. Learning curves: Theory, models, and applications. CRC Press.
McKinnon, A., Browne, M., Whiteing, A. and Piecyk, M. eds., 2015. Green logistics: Improving
the environmental sustainability of logistics. Kogan Page Publishers.
Seuring, S., 2013. A review of modeling approaches for sustainable supply chain management.
Decision support systems. 54(4). pp.1513-1520.
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.
Waters, D. and Rinsler, S., 2014. Global logistics: New directions in supply chain
management.Kogan Page Publishers.
Winter, M. and Knemeyer, A.M., 2013. Exploring the integration of sustainability and supply
chain management: Current state and opportunities for future inquiry. International Journal
of Physical Distribution & Logistics Management. 43(1). pp.18-38.
Online
IKEA design for everyone.2016.[online]. Available through:<http://www.ikea.com/ms/en_JP/this-
is-ikea/democratic-design/>. [Accessed on 16th August 2016]
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INTRODUCTION
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