IKEA's Supply Chain Management Strategies

This assignment delves into IKEA's innovative supply chain management practices. It examines how IKEA leverages strategies like 'cost per touch' and combining warehouses with retail stores to minimize transportation costs and involve customers in the process. The analysis also highlights the importance of communication between logistics and inventory management for efficient product availability. The role of the store logistics manager in ensuring customer satisfaction is further discussed.

Running head: SCM 0
SUPPLY CHAIN MANAGEMENT

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Table of Contents
Section 1:.....................................................................................................................................................1
Section 2:.....................................................................................................................................................4
Section 3:.....................................................................................................................................................5
References:..................................................................................................................................................6

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Section 1:
Answer 1:
a. Forecasting is the process of assuming things for future. It is the techniques that are used
by the businesses to analyse the current situation to make future prediction about
different things. As far as the supply chain management is concerned, it has been
analysed that forecasting is the process that is used by the managers of supply chain
system of the company in order to have make predictions about the demand of the
products so that they can make decision of their production (Chaabane, Ramudhin and
Paquet, 2011). It is very necessary to forecast the demand of the products because it is the
basis of setting the production target for the manufacturer (Christopher, 2016). It not
only helps in predicting the demands but indirectly enhances the customer satisfaction
because the availability of the products in the market area as per the demands of the
customers. For instance, most of the companies like IKEA analyse the market and make
the target so that they can deliver the products on time.
b. Following are three types of forecasting that are commonly observed in supply chain
management of the company:
 Demand
 Supply
 Price
Demand forecasting deals with making assumptions about the demand of the products as
per the market situations (Mangan and Lalwani, 2016). Supply forecasting is about
making the prediction about the amount of supply and the last is about price forecasting
that is used in order to choose the providing strategy of the product.
c. There are various requirements for making the forecasting decisions. The first and the
foremost requirement is effective and skilled manager at the supply chain division of the
company. Skilled manager can enhance the capability of the firm to forecast as he has the
knowledge about the market (Rushton, Croucher, and Baker, 2014). Another requirement
or the factors that can hence the forecasting capability of the company are financial
capability of the company and the tools used to analyse the market. This is because if

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these tools are effective enough, the data collected or analysed will give better and
accurate results and the prediction or the forecasting decisions is made efficiently.
Answer 2:
a. 3PL refers to third party logistics. This is technique through which the company
outsource their logistic function. The following diagram suggests that 3PL is the service
that falls under the third level of the supply chain that involves logistic services (Fernie
and Sparks, 2014). The company used to outsource this service so that they can focus on
their core activities of manufacturing.
b. When any of the company needs to make the decisions about associating with 3PL firm,
it is required by the company to assess the background information of the company. The
financial capability of the firm and its stability in the target is the first thing about which
the company needs to take information. It is required by the company closely relate with
the 3PL firm in order to see that whether the company is using sustainable practices or
not (Stadtler, 2015).

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Answer 3:
a. Humanitarian logistic refers to the logistic that deals with providing services during
calamities and natural disasters to help the people affected by the same.
b. Various players that are involved in the humanitarian logistics are as follows:
 NGO’s
 Private organizations
 Donars
 Government
 Aid agencies
 Military
All these players have their important role in humanitarian logistic functions. NGO’s ate
the non-profit or non-governmental organization that act as the mediator between the
government and the affected people as the government supports these organisations to
help the functions (Stadtler, H., 2015). Private organizations can provide funds to the
parties that are involved for the case. Donars are the one who donates some amount of
money or other things for this cause. Military is also linked with the humanitarian logistic
functions in because the soldiers are the one who are being called at the time of any
requirements. Aid agencies are the parties that support the various activities of the
functions. Last is government who has all the authorities to pass the policies and the
activities to be conducted (Tsoulfas and Pappis, 2012).
Answer 4:
a. Information technology is the tools that enhances the efficiency to the processes,
including the tools of IT helps the supply chain management in many ways. One of the
importance of including IT tools is that it reduces the cost of the supply chain and
logistics (Linton, Klassen and Jayaraman, 2007). This is because the IT software helps
the company to make efficient data analysis that results in reducing the human efforts and
thus the cost. It also helps in giving accurate results because most of human errors can be
eliminated.

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Section 2:
a. Some of the activities that are practices by IKEA in order to ensure the sustainability of
the supply chain are:
1. The company use the IWAY technique or the code of conduct in order to conduct all
the activities of supply chain management. This provides the code of conduct to the
company to be followed in order to sustainable.
2. Recycling is the process that has been used by the company in order to reduce the
cost and waste. The company itself design its products and give to the suppliers so
that the suppliers have to use the waste generated to produce the products.
3. Assessing the environmental impact of the supplier’s activities is also one of the
methods to ensure the sustainability in the supply chain management of the company.
Ways in which IKEA influence:
1. Making effective communication is the most important strategy of the company that deals
with developing the relationship with the suppliers. This helps the company to educate
the suppliers with the sustainable practices.
2. E-wheel is the strategy that helps the company to assess practices if the suppliers and the
level of sustainability the suppliers deal with. It is the strategy that also helps the
company to know about the impact of the products on the environment. This assessment
allows the company to take measures that support the company to make the changes in
the process accordingly.
b. As far as the sustainability and sourcing practices of the company is considered, it has
been analysed that the company is making so much efforts in order to be sustainable and

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also to take their suppliers sustainable. Suppliers are the key element of the company’s
supply chain management. IKEA make collaborations with the different companies such
as UNICEF and WWF that proves that the efforts and the sustainability practices of the
company is affecting the other companies also to make efforts in this way. After
analysing the company’s practices it has been analysed that the company is not only
using the sustainable practices but also making its suppliers to use the same so that the
environmental impact of the business practices can be reduced. It has been analysed that
the whole furniture industry is getting influenced by the practices that are conducted by
IKEA. This is because the company is making large profits and large customer market
share by practicing sustainable activities at the supply chain system. This is because the
company is giving back their part to the society and the customers get attracted by this.
Other companies in this industry should also use these states I order to be sustainable as
well as to support the society.
In future, it will be observed that most of the companies will be using the resources
optimally to become most sustainable. This is because sustainability is the need of hour
for the world to save the resources that the companies are using.
Section 3:
a. IKEA is very well known company for its sustainability and its techniques for selecting
the sustainable suppliers. It has been analysed that the company also focuses on involving
the customers in its supply chain as well. some of the evidence that show the company
involves it customers in its supply chain are:
Collaboration of retiling and warehousing: It is the technique that helps the company to
serve the products to the customers through warehouse as well along with the retail store.
This is because the company has made both the stores together so that they can reduce the
cost of transportation from warehouse to retail shops and the customers can select the
product from warehouse and retrieve it themselves.
Cost per touch: It is the strategy by which the hands that touch the products can be
reduced to reduce its cost the middle activities such as transportation of the products to
the retailer and then to the customer’s house is eliminated and the customers have to take

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their products themselves. This also helps in reducing the cost and involving the
customers in the supply chain.
Both the above discussed practices are used by IKEA because the company wants to
involve the customers in their supply chain. These results in the win-win situation
because the company can reduce the cost of operation by eliminating some of the
activities of step in the supply chain and the customers get better opportunities to choose
for the products from the warehouse. This also helps in customer engagement.
b. IKEA is the company in which the inventory management and the logistics movement of
the company work closely with each other. This is because the company has to make
some decision regarding the stock that needs to be maintained at the retailer store. Having
better communication between the logistics and the inventory results in proper
availability of the products for the customers. Logistic manager has the access to the data
of sale at the point of purchase so that he can deliver the required stock to the store as per
the sale. Any deviation in the data or f the data is not matched the logistic manager of the
company himself make efforts to count the products or the stock manually. IKEA
believes in di it yourself service. The company suggests that the customers should take up
their products themselves so that they need not the pay the extra price for transportation.
Along with all these things the efficient working of the logistics manager at the store is
also required to maintain the customer’s loyalty. There are several duties that have been
fulfilled by the logistics manager at the store in IKEA such as monitoring and keeping the
records of the deliveries, managing the records of the inventory and the stock, sort and
separate the good etc. these duties done by the logistic manager helps the company to get
better customers reviews and thus the customers remains satisfied with the services of the
company.
References:

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Chaabane, A., Ramudhin, A. and Paquet, M., 2011. Designing supply chains with sustainability
considerations. Production Planning & Control, 22(8), pp.727-741.
Christopher, M., 2016. Logistics & supply chain management. Pearson UK.
Fernie, J. and Sparks, L., 2014. Logistics and retail management: emerging issues and new
challenges in the retail supply chain. Kogan page publishers.
Linton, J.D., Klassen, R. and Jayaraman, V., 2007. Sustainable supply chains: An
introduction. Journal of operations management, 25(6), pp.1075-1082.
Mangan, J. and Lalwani, C., 2016. Global logistics and supply chain management. John Wiley &
Sons.
Rushton, A., Croucher, P. and Baker, P., 2014. The handbook of logistics and distribution
management: Understanding the supply chain. Kogan Page Publishers.
Stadtler, H., 2015. Supply chain management: An overview. In Supply chain management and
advanced planning (pp. 3-28). Springer Berlin Heidelberg.
Tsoulfas, G.T. and Pappis, C.P., 2012. Supply chains and sustainability. Handbook of
sustainability management, pp.335-352.