Importance of Strategic Supply Chain Management and Logistics: A Case Study of IKEA

This paper discusses the importance of strategic supply chain management and logistics in the manufacturing industry, with a case study of IKEA. It examines the relationship between supply chain management and business objectives, the role of information technology, and the key drivers for achieving an integrated supply chain strategy. It also provides recommendations for improving logistics and procurement practices.

Running head: STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
Assignment Cover Sheet
Course/Unit Information
Course Pearson (Edexcel) BTEC Level 7 – Diploma / Extended
Diploma in Strategic Management & Leadership
Unit No. Unit 14
Unit Name Strategic Supply Chain Management and Logistics
Unit code D/602/2357
Batch OME6-SCML-PaulGulston-1806
Instructor Information
Name Paul Gulston
Phone [phone]
Email [e-mail]
Assignment Information
Full/ Part
Assignment
Full Assignment
Date Assignment
Issued
03rd June 2018
Date Assignment
Due
14th July 2018

1STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
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ID
18215230
Turnitin
Enrollment key
1806
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(To be filled by the student prior submitting the assignment)
Name
Email
Date of
Submission

2STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
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and not copied or plagiarized. It has not previously been submitted as part of any assessment
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have read and understood the Westford School of Management rules and regulations about
plagiarism and copying and agree to be bound by them.
Students Signature : _____________________
Student Name : _____________________
Date : _____________________

3STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
Executive summary
The purpose of this paper is to understand and discuss the importance of strategic supply
chain management considering the advance technological intervention within the
manufacturing and other associated business operation. The topic has been discussed by
analysing the strategic logistics operation of the multinational furniture manufacturing and
sales company IKEA. Supply chain management is one of the most important part of the
business operation of IKEA that requires a group of specific products as a resource of the
output products. In this paper the relationship between supply chain management and core
business objectives, the intervention of information technology in logistic operations has been
discussed. A Supply Chain Management Improvement Plan has been developed for IKEA
while making some recommendations have been made.

4STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
Table of Content
Introduction:...............................................................................................................................5
Background:...............................................................................................................................5
Organisation details: (IKEA).....................................................................................................5
Purpose and structure:................................................................................................................6
Relationship between supply chain management and business objectives:...............................7
Importance of effective supply chain management...................................................................7
Link between supply chain management and business function...............................................8
Key drivers for achieving an integrated supply chain strategy................................................10
Information Technology to optimize supplier relationships in an organization:.....................11
Effectiveness of Strategies used by an organization to maintain supplier relationships.........11
Information technology to create strategies to develop relationship with suppliers...............13
Systems to maintain and relationship with suppliers...............................................................14
Role of Information Technology in supply chain management:..............................................15
Information technology can assist integration of different parts of the supply chain.............15
Contribution of Information technology to the management of the supply chain...................16
Effectiveness of information technology in managing the supply chain.................................17
Role of logistics and Procurement in supply chain management:...........................................18
Role of logistics in supply chain management........................................................................18
Procurement practices..............................................................................................................19
Considerable factors while improving logistics and procurement practices...........................21
Planning strategy to improve the organisation’s supply chain.................................................23
Strategy planning to improve the supply chain.......................................................................23
Benefit of supply chain improvement strategy in business performance................................24
Overcoming barriers while implementing supply chain improvement strategy......................25
Conclusion and recommendation:............................................................................................26
Conclusion...............................................................................................................................26
Recommendation.....................................................................................................................27
Reference:................................................................................................................................28

5STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS

6STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
Introduction:
Background:
Supply chain management is one of the most important parts of any manufacturing
business operation that requires a group of specific products as a resource of the output
products. The quality of the output products and the profitability depend on the supply chain
management. In Business operation and manufacturing process this input resources are called
inbound logistics where the parent organisation implement many strategic tool to make the
process more time and cost efficient without compromising the quality of the product (Cohen
and Roussel 2013). In this era of modernisation, Information Technology and other
technological interventions have made the strategic supply chain management more complex
as well as advanced. Therefore, in order to develop an effective supply chain management
strategy an organisation should study the available technological advancement and other
associated facilities to ensure the quality and profitability of their existing and further level
inbound and outbound logistics management. The further content will discuss about the
background information of the chosen company and the structure and purpose of the paper.
Organisation details: (IKEA)
IKEA was founded in Sweden in 1943 by a 17 years old boy name Ingvar Kamprad as
a furniture company that manufactures wooden residential furniture. Now IKEA is a
multinational group that designs and sells ready-to-assemble furniture, kitchen appliances and
home accessories (IKEA 2018). IKEA has proudly become the world's largest furniture
retailer since 2008operating their business in America, Australia, Europe, China, Middle East
and other part of the world. At the very beginning of 2000, the company spread across
Middle East including the countries like Saudi Arabia, Kuwait, UAE, Qatar, Jordon and
Turkey. This successful business operation let them develop and operate 4 stores in Saudi

7STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
Arabia from 1983, 2 stores in Kuwait from 1984, 1 super store in Qatar from 2013, 1 in
Jordon from 2014 and 6 stores in Turkey from 2005. In UAE, IKEA has 3 stores from 1991
at Abu Dhabi, Yas Island and Dubai respectively (IKEA 2018). As per the report of
November 2017, IKEA owns and operates 415 stores in 49 countries. In 2016, IKEA sold
goods worth of 42.4 USD worldwide, which was increased by 7.6 percent from 2015. Apart
from that, IKEA website contains about 12,000 products that is the brief representation of the
entire collection of the IKEA (IKEA Foundation 2018). Within September 2015 to August
2016, the official website of IKEA perceived 2.1 billion online visitors form entire globe. The
company is the largest user of wood in retail sector and responsible for approximately 1%
wood consumption of total world commercial-product (Sandybayev 2017).
Purpose and structure:
The purpose of this paper is to understand and discuss the importance of strategic
supply chain management considering the advance technological intervention within the
manufacturing and other associated business operation. The topic has been discussed by
analysing the strategic logistics operation of the multinational furniture manufacturing and
sales company IKEA. The relationship between supply chain management and core business
objectives has been discussed. The intervention of information technology to optimise the
logistic operations has been discussed along with its influence on the organisation and vender
relationships. The roles of logistics and procurement in supply chain management have been
also examined to develop the recommendations for the company IKEA as well as other
business organisations.

8STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
Relationship between supply chain management and business objectives:
Importance of effective supply chain management
The term supply chain can be defined as the management of the flow of products as
well as services of an organization from the starting point to the end point. Like any other
organization, the whole process of supply chain management in IKEA starts from the supplier
stores to the manufacturing factories to the wholesalers to the retailers and finally to the
consumers through various distributors. Being a furniture manufacturing organization, supply
chain can be considered as the integral part of IKEA’s business and is a highly essential
factor the success of the company and consumer satisfaction (Green et al. 2012). Two of the
major benefits of the supply chain management are as follows:
1. Boost consumer service
In this era of high competition, it is highly important for the management of IKEA to
satisfy the consumers by their services in order to gain competitive advantages. Effective
supply chain management enables the company to supply the products to the consumer
within the stipulated time or even before that and thus gains loyalty of the consumers
(Wisner, Tan and Leong 2014). Moreover, by implementing an effective supply chain, IKEA
can also reduce the cost of delivery and thus improve profitability by selecting the right
approaches, systems as well as partners involved in the supply chain.
2. Reduction in the operational costs
 Decreases Purchasing costs: In order to reduce purchasing costs several furniture
manufacturing organization quickly delivers expensive products and thus avoid
holding costly inventories in stores and costs associated with this. IKEA can
follow these tactic as well to reduce its purchasing costs.

9STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
 Decreases production cost: An effective supply chain prevents sudden shutdown
of production by delivering materials on time for assembly plants to avoid
material shortage.
 Decreases total supply chain cost: Retailers as well as manufacturers depends on
supply chain managers in order to design networks that meets the goal of the
organization at minimum costs (Rushton, Croucher and Baker 2014). Effective
supply chain develops the potential of a firm to be more competitive in the market
place.
3. Improvement in the financial position of the company
Reduction in supply chain costs result in drastic enhancement in the profit.
Considering the fact that furniture of cost 30 billion dollars are purchased by consumers
globally, reduction in supply chain cost will result in savings of approximately 13 million
dollars by the company (Green et al. 2012). Moreover effective supply chain management
reduces the costs of the company decreasing the usage of large fixed assets. For instance,
with effective redesigning of network IKEA can prevent building unnecessary warehouses
and thus will be able to save a commendable amount of money.
Link between supply chain management and business function
Like other industrial organizations, business providers and manufactures, supply
chains plays a crucial role in leading large and complex system delivery in the furniture
manufacturing industry. Supply chain in IKEA mainly consists of flow of production and
processes through each of the three following industrial sectors. The primary sector involves
development of raw materials. The company develops its own product in Sweden and
delivering high quality product at a low price is the chief motto of the company. In order to
maintain the quality, IKEA manufactures raw materials from more than 1300 suppliers from

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50 countries and here the supply chain plays key role in reducing the cost of importation
(Rushton, Croucher and Baker 2014).
Figure 1: Supply chain activity of IKEA
Source: (Ikea.com. 2018)
Apart from manufacturing function, there prevails a link between supply chain
management and HRM practices. Like several other furniture manufacturing organizations,
IKEA can introduce HRM practices in its supply chain function. Considering the fact that
supply chain can be defined as a set of organizations that work together to deliver a finished
product to the consumers, managing the individual involved in it can enhance the
effectiveness of the supply chain management. In spite of the fact that IKEA generally
involves managing its supply chain strategically, according to researchers successful supply

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chain management rests on the performance of the people in the supply chain (Beske, Land
and Seuring 2014).
Key drivers for achieving an integrated supply chain strategy
Supply chain management of IKEA is highly connected to the other part of the
business operation including Human Resource, Consumer demand, Marketing, Finance,
Accounting and others. Therefore, in order achieve an integrated supply chain management
IKEA needs to consider the major drivers like consumer satisfaction, resource availability,
inventory management and other sequential operations (Cohen and Roussel 2013). The
utilisation of technology quality enhancement, altering the product life cycle and legal
policies are the other key drivers for achieving the integrated supply chain management
strategy. In following section, these key drivers have been described with details:
Achieving high level of customer satisfaction: To improve the logistics system access
to with scheduling, IKEA has set KPI for consumer relation and sales department to fulfil the
demand of the customers. Establishing hot services counters and help desk is another factor,
where any consumer or potential buyers can approach and request for service speed up.
Utilization of technology: IKEA strive to use the latest developed technology across
the world, to enhance different systems integrations and processes developments. The
development in technology utilization is a leading factor in manufacturing the furniture
(IKEA Foundation2018). Technology is influencing the future progress of furniture industry
and supply chain while a multinational company like IKEA is in need for technical team to
operate advance machines and electronic communication.
Quality enhancement and globalization: The quality of the products influences the
prosperity of the manufacturer while increasing the market reputation and consumer loyalty.

12STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
IKEA always tries to retain their existing consumer loyalty while capturing new consumer
segment that requires the assurance of quality improvement.
Political and Legal Factors: Changes in lows and regulation of the selected supplier
region can hinder the supply chain management operation of IKEA. It will lead to ultimate
failure of the manufacturing and other associated operation of the company. In order to
overcome these situations, IKEA should always keep them updated about the national and
international trading laws and regulations while aligning their supply chain and logistics
management operation with these external alterations (Christopher 2016).
Information Technology to optimize supplier relationships in an
organization:
Effectiveness of Strategies used by an organization to maintain supplier relationships
Supplier relationship is one of the major parts of any manufacturing business that
regulates the overall profitability, quality and efficiency of the business operation. Proper
selection suppliers influence the quality of the resources as well as the output products where
the efficiency and integrity are also considered. Another part of the supply chain management
is the time, cost value model that allows an organisation to regulate their inbound logistics
operation aiming to be most optimised and efficient (Green et al. 2012). The relationship with
suppliers or vendor companies also implies the shared information, shared business value,
ethics as well as the overall market share. In this part of the business, negotiation plays a
strong role that builds the base of the supplier relationship of any business. Collaboration,
shared information, operational integrity and value sharing are the major tools of the supplier
relationship strategies.
One of the major strategy that IKEA uses to maintain their supply relationships
worldwide is Push Back Strategy (PBS). The PBS is also very effective for choosing partner

13STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
and targeting consumers wile gauging their existing and potential demand. IKEA values the
expectations of their suppliers in order to sustain the healthy relationship with their supplier
that makes them the world’s largest consumers of wood for commercial purposes. To
maintain relationship with suppliers IKEA uses both online and offline communication tool,
which is also a part of their strategic choice for making the operation, cost and time efficient.
IKEA had more than 50 trading offices in 35 countries to keep their vendor relationship
strong; amongst them China, Poland, Sweden, Italy and Germany are the major sources
(Sandybayev 2017).
Supplier country Percentage of supply
China 18%
Poland 12%
Sweden 8%
Italy 7%
Germany 6%
Table 1: Top five supplier countries of IKEA
Source: (Sandybayev 2017)
The rationale of the supplier relationship of IKEA lies in the core business idea which
is producing low price products in a socially responsible and environment friendly way. At
the same time, the supplier relationship of IKEA also highly comply the national and
international business regulations as well as their own codes of conduct.
Information technology to create strategies to develop relationship with suppliers
The Information technology plays several major roles in the organizational supply
chain management and supplier relationship in several purposes. Communicating with

14STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
potential and existing suppliers, interacting with the supplier market, keeping update bout the
new possible supply chain management are the major purpose of utilizing the Information
Technology as the major tool. Mailing, Cloud storing, online peer-to-peer connection, virtual
networking are some of the examples of utilizing IT in supplier relationship making
(Sheppard 2012). The major operations of IT in supplier relationship handling are connecting
the stakeholders with suppliers, enhancing knowledge and awareness, Access Enterprise
Resource Planning (ERP), Communication with professionals and maintaining business
transparency aligned with the strategic objectives (Seuring 2013). Along with these, the
intervention of artificial intelligence in file handling, big data, cloud computing are the other
major tools to develop supply chain management and supplier relationship strategy.
The noticeable feature of the supplier relationship management of IKEA is the
intervention of advanced online storage system. The cloud storage system allows IKEA to
store large amount of market data, supplier demand documents in a virtual platform without
warring about data loss and other physical technical fault. Apart from that, IKEA uses
Artificial Intelligence to measure the efficiency of the suppliers using the Service Level
Agreement of the contract and associated parameters. At the same time, using the advance
data monitoring and feedback management allow the company to monitor the operation of
suppliers in real-time environment (Youn et al. 2013). Apart from that, the intervention of
efficient software the procurement operation can be controlled real-time with high time and
cost efficiency. IKEA also uses the social media based monitoring system to keep updated
information about the supplier market globally. In order to utilize this large amount of data
IKEA also uses the Big Data technology where they can securely store large amount of data
ensuring the fast-paced data fetching process.

15STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
Systems to maintain and relationship with suppliers
An organisation can follow several policies and procedures to maintain healthy
relationship with their suppliers. Communication plays a very important role in the
relationship management that eliminates the possibilities of misinterpretation of
organisational ethics and business values. Along with the communication motoring is another
essential part of the relationship making process where the parent company constantly
monitors the operation and service providing strategy of the vendor company or supplier that
is also known as the vender management (Barney 2012). The vendor management is also a
major part of inventory management that highly associated with the inbound resource
management in manufacturing cycle.
IKEA maintains a consistent communication with their major and minor supplier
irrespective of their geographical position around the globe. IKEA communicates multiple
times before the due date of the delivery ensuring the quality and timeliness of the product
delivery. At the same time IKEA values the position of the representatives of the vender
companies by avoiding the rush order or shot time emergency delivery (Ikea.com. 2018).
IKEA also makes them prepared to review and renegotiate the terms of the trade with the
suppliers from time to time. Apart from that, IKEA prompt the suppliers immediately in case
of any identification of damage product before storing them into inventory keeping the
financial factors of transportation time and cost in mind.

16STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
Figure 2: Logistics of IKEA
Source: (Ikea.com. 2018)
Role of Information Technology in supply chain management:
Information technology can assist integration of different parts of the supply chain
Integration of different parts of the supply chain is chiefly essential for a multinational
company that deals with the supplier for multiple purpose including, raw material, facility,
technology, Human resource and others. At the same time, each and every supply chain has 3
major parts namely the inbound logistics, the inventory and the resourcing of manufacturing
cycle. Therefore, integration of all these parts holds the wok process of the supply chain
management practices as well as logistical flow. In integration era, the Electronic Data
Interchange or EDI has become one of the most essential tools in logistics and supply chain
management practice. Connecting the global market information with the core business
operation is the major functionality of EDI system (Dekker et al. 2013). Apart from these,

17STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
ERP or Enterprise Resource Planning allows the company to develop and control effective
supply chain management system while comparing its attributes and cardinality to achieve
the optimum setup for the particular supply market. SAP or System Application Products and
Oracle are the two major examples of ERP supporting tools.
SAP or System Application and Products are group of operational software and
hardware that enables the parent organization to control the supply chain management
operation. SAP connects the parent organization to the vendor organization with the help of
virtual server that allow both the parties to share real time data and information without
spending high cost or time for it. SAP is the major part of the Supply Chain Execution or
SCE in order to plan the effective network among the supplier and client companies
(Rushton, Croucher and Baker 2014). On the other hand, Oracle provides a group of server
oriented software that allows both client and suppliers to handle data under a particular Data
Base Management System (DBMS) while sharing the required data through network with
high level of data protection and data transaction security.
Contribution of Information technology to the management of the supply chain
The Information Technology allows IKEA to operate their supply chain management
with higher level of accuracy without spending additional resources for it. The attributes of
Key Performance Indicators of IKEA are connected with the main database system that
automatically insert, store, process, sort, read alter the data as per the administration
requirement. It also enables the management of the business to store previous performance
report and supply chain quality while comparing them with other potential suppliers in a real
time data-handling platform (Sandybayev 2017).
When it comes to information management in supply chain management IT provides
many possibilities to operate and customize the business operation. IKEA uses AI within

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their existing DBMS that allows them to short the data and information as per their priority
considering the regulator of the supplier availability and resource handling. At the same time,
IKEA also keep their supply chain operation balance with the market demand by conducting
automatic demand analysis by monitoring the inbound network traffic of the official website
as well as the social network promotional pages and forums (Wisner, Tan and Leong 2014).
The intervention of advance Information Technology also allows IKEA to track the supply
procedure and the condition of the resource in real-time tracking system utilizing the
multithreaded processing systems like infrared product detection and GPS tracking.
Effectiveness of information technology in managing the supply chain
Although the Information Technology increases the efficiencies of the supply chain
management operation of the organization, some significant setbacks can be identified of this
intervention. One of the major drawback of the implementation of IT based Electronic Data
Interchange is that, the structure and framework of the operation is changing constantly that
hinders the stability of the implementation of a particular Supply Chain Execution of any
business operation. At the same time the complexity of the IT structure and implementation
procedure is getting complicating after each technological invention that increases the
efficiency of the business operation as well as increases the requirement of negotiation
procedure with the IT vendor companies and operating workforce (Grabara, Kolcun and Kot
2014). Considering the modernized networking system of client-supplier servers the high
traffic and space time complexity delay are causing some major business issues including late
information update, extended procurement time and others.
The implementation of IT in supply chain management changes the financial planning
of the company IKEA altering the cost for training and induction period in recruitment

19STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
procure. Therefore, other associated business operations such as accounting, Human
Resource, Manufacturing and others are also affected because of the ever-changing operation
of IT systems. IKEA had to update the information processing system as per the version of
the suppliers, otherwise it can cause serious discrepancies affecting the overall service quality
and profitability of the company (Prajogo and Olhager 2012). Because of these consequences,
IKEA prepared a real time training environment for their workforce involved in supply chain
management and control in order to provided additional training about upcoming system
development and operation. As a result, IKEA also faced the increased expenditure for the
Human Resource operation after the implementation of WEB 2.0 in Traditional Supply Chain
Network (Wang et al. 2012).
Role of logistics and Procurement in supply chain management:
Role of logistics in supply chain management
The term logistics can be defined as the process that involves planning, executing and
managing the products and services from the time of origin to the time of consumption.
Managing an effective supply chain comprises of efforts for product development and
production, coordination of logistics, managing information flow among parties including
product shipping, transporting and delivering and finally managing the disruptions that are
evidenced using the time of selling products (Christopher 2016). Logistics is generally
considered as the as the critical blue print of the supply chain. The role of logistic is to
manage, coordinate as well as monitor resources that are required for moving products in a
smooth, timely, reliable and cost effective manner.
One of the mention worthy advantages gained by IKEA by implementing logistics in
their supply chain management is the enhancement of efficiency and reduction in the cost of
the company. With the help of an effective logistic system, IKEA is able to built efficient

20STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
partnership with the suppliers, shipping services and warehouses and connecting the services
with the help of automated system. Moreover, with the implementation of logistic in the
supply chain management it has become easier for the company to reach the consumers
within a much shorter period of time and enjoy reduced overhead delivery costs at the same
time (Rushton, Croucher and Baker 2014). In IKEA, implementation of logistics in the
supply chain management has also simplified the communication as well as services between
multiple numbers of departments. This in turn has helped the company in creating a
workflow blueprint that enable reduction in costs by enhancing transparency and visibility
along with improving the overall understanding of the fundamental requirements of the
company. Reduction of the warehouse costs, purchasing of materials on the basis of supply
forecasts, consumer satisfaction resulting from reliable shipping as well as timely delivery
thus can be considered as the major benefits of logistics in supply chain management enjoyed
by the IKEA Company (Mangan, Lalwani and Lalwani 2016).
Procurement practices
The procurement cycle can be described as a cyclical process that includes the key
steps of procuring the goods and the services. A procurement cycle is an interactive tool that
helps and guides in the procurement process and it acts as a relevant knowledge to go through
the procurement journey. In the procurement process, the e-commerce systems include the e-
sourcing and the e-procurement that is widely used by the organization in order to buy as well
as sell products (Jonsson, Rudberg and Holmberg 2013). The e-procurement technology takes
into account the automated data collection systems, inventory management systems,
electronic data interchange, online transaction processing, internet marketing, supply chain
management, electronic fund transfer, mobile commerce and IKEA implements all these
technologies in its procurement processes. Stakeholder engagement is one of the vital section

21STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
of the procurement process and IKEA undertakes the tactical, operational and strategic
activity depending on the support of the key stakeholders (IKEA Foundation2018). The items
like the environmental factors, economic and the social factors are considered in order to
ensure the sustainable solution and also in the procurement of the services and the products.
This process helps IKEA to reduce waste, save energy and save money as well. Corporate
social responsibility is also one of the commitments of IKEA so that they can maintain a
compliance with the law and the industry standards. IKEA also takes into the account the
various risk that is associated with the procurement cycle and also implement strategies to
manage the risks effectively. Continuous improvement process can be described as change
for the better and it encompasses all the processes, services, products and people in IKEA.
IKEA implements small improvements that are capable of bringing the big changes at the
regular intervals and this requires the close monitoring and control. People and skills are the
vital assets of IKEA and thus add value. IKEA also ensures that it has the right person with
the right skills set in order to achieve the organizational objectives (Hultman et al. 2012).
The procurement cycle has the 13 major steps
 The first major step is to understand and develop a high-level specification.
 The second step is the commodity and market option and this includes the buy or
makes an assessment.
 The third step is the development of a plan or a strategy.
 The fourth step is the market test and market engagement and the pre-procurement,
Development of documentation and detailed specifications.
 Participate in the invitation to tender and request for quotation and negotiation.
 Issuing the invitation for tender and request for quotation
 Tender or bid for the validation (Cips.org 2018).
 Implementation and contract award

22STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
 Receipt and warehousing logistics
 Continuous improvement and contract performance review.
 Supplier chain management and supplier relationship management and development
 End of life or asset management (Cips.org 2018)
Figure: Procurement and Supply Cycle
Source: (Cips.org 2018)
Considerable factors while improving logistics and procurement practices
These factors will play a major role in both the procurement and the logistical
practices and the strategies are as follows:
 IKEA must concentrate on the buying power for a category and the main objective will be
to reduce the purchasing price.

23STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
 IKEA must be a process-orientated organisation, which will include the transport,
warehousing, purchasing, planning and supply chain.
 IKEA must work with the few and key high volume suppliers that might include the small
suppliers.
 IKEA must consolidate the relationship with the long-term suppliers and the key partners
that will justify the IKEA intent of joint investment, supplier development and also
investments in the new products.
 IKEA must focus on the cost of manufacturing of products and this must include the
modifications to the purchasing, engineering and design of the same (Grant, Wong and
Trautrims2017).
 IKEA can take advantage of the cloud-based analytics and the better warehouse
forecasting and management. If IKEA uses the cloud technology, then this will enhance
the supply chain and improve the visibility of the supply management and will look into
the unforeseen issues (Gupta, Gupta and Mohania, 2012).
 The big data analytics provide a major scope for the real-time management of the whole
supply chain. This involves transportation management system and the benefits arising
from the future benefits of the supply chain (Kwon, Lee and Shin 2014).
 Addressing the cybersecurity concerns is one of the best ways to remove and negate the
threats that are arising from the cyber threats. It is important to note that the cybersecurity
breaches will lead to loss and diversion of the resources (Knowles et al. 2015).
 Usage of the benchmarking tools is the most efficient way to enhance and check the
progress of the works and ways to enhance it. The several internal and the external tools
are the best tools for the benchmarking process (Dewan et al. 2013).

24STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
Planning strategy to improve the organisation’s supply chain
Strategy planning to improve the supply chain
Objectives: The major objective is to provide the quality of wood as the row material
of the furniture in order to increase the competency as well as the brand value. Another
objective is to centralised the existing supply chain management in way that can reduce the
overall time and cost of supply chain management operation (Hazen and Byrd 2012).
Stakeholder: The major stakeholders are the board members of the IKEA who are
directly involved in the planning and shaping the organisational business strategy. Apart from
them, the workforce, existing suppliers, consumers are associated stakeholder of improving
supply chain plan.
Change management: In order to initiate the centralised supply chain model IKEA
needs to introduce the entire strategic concept and the benefits to all stakeholders while
ensuring the agreement of them. Appropriate change management plan can help the changing
force to reduce the resisting obstacle in the organisational operation and structure (Yu et al.
2016).
Motivation and Reword: IKEA can implement direct and indirect monitoring system
with the interventions of scorecard and feedback collection in order to recognise the potential
employees. Rewording these workers will make them motivate to serve the company with
their best while making other workers competitive to achieve the recognition.
Implementation of strategy: As per the globalized business strategy, IKEA depends on
the Horizontal integration strategy for supply chain management. Therefore, to implement the
plan IKEA has to make the suppliers aware of the altered policies and procedures of trading
operation (Sheppard 2012).

25STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
Monitoring and lessons: For ensuring the quality of implementation of supply chain
management plan IKEA needs to develop and maintain effective monitoring system that will
allow them to control the system while gather new lessons to make required changes.
Benefit of supply chain improvement strategy in business performance
Improvement of supply chain management can change the entire procedure of
production and marketing operation of the company IKEA while enhancing the employee
engagement procedure. The improved supply chain management ensured the quality of the
suppliers as well as the efficiency of inventory management that can cause additional benefit
in financial aspect. The enhanced information integrity among the vendor companies and the
parent company enables the opportunity reduce the operational cost significantly without
increasing the intervention of complex Information Technologies (Grabara, Kolcun and Kot
2014). The improved supply chain management will also allow IKEA to select appropriate
supplier for a particular resource without investing additional time and money. It can also
increase the overall product quality influencing the existing and potential consumers. Apart
from that the upgraded supply chain management allows the workforce to execute their
respective operation more efficiently while making the operations simpler for them (Yu et al.
2016).
When it comes to the profitability of the business, the workforce performance plays a
crucial role considering the affectivity of the existing workflow structure. The employee
motivation, rewarding and appraisals enable the workforce to give their best in the
manufacturing and other business operation of IKEA. It will also add value to the supply
chain process by improving the overall quality of the suppliers as well as the quality of their
products that are purchased by the IKEA and their procurement team (Mangan, Lalwani and

26STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
Lalwani 2016). As a result, the quality portfolio of IKEA as a furniture manufacturing
company also increases.
Overcoming barriers while implementing supply chain improvement strategy
Several barriers can cause unexpected resistance against the process of implementing
supply chain improvement strategy. In the case of IKEA, the centralisation of their
horizontal supply chain management will require some significant changes in the work
process and supply chain operation internally as well as externally. At the same time, in order
to sustain the integrated process with the client named IKEA the supplier company will also
require to change their distribution system. Apart from this, the distribution management of
the IKEA will also be affected as a part of total logistics management and operation. As an
example purchasing good quality wood can be more difficult due to the inflation of
international and national trading low that are independent from the considered attributes of
the change management plan (Meixell and Luoma 2015).
IKEA is the largest multinational furniture manufacturing and merchandising
organisation. As a result the company needs to abide by the all the national and international
trading rules including importing and exporting legislation and legal influences. Changes in
lows and regulation of the selected supplier region can hinder the supply chain management
operation of IKEA. It will lead to ultimate failure of the manufacturing and other associated
operation of the company (Boström et al. 2015). In order to overcome these situations, IKEA
should always keep them updated about the national and international trading laws and
regulations while aligning their supply chain and logistics management operation with these
external alterations.

27STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
Conclusion and recommendation:
Conclusion
From the above discussion, it can be said that Supply chain management is one of the
most important part of any manufacturing business operation that requires a group of specific
products as a resource of the output products. The quality of the output products and the
profitability depend on the supply chain management. Information Technology and other
technological interventions have made the strategic supply chain management more complex
as well as advanced. The entire process of supply chain management in IKEA starts from the
supplier stores to the manufacturing factories to the wholesalers to the retailers and finally to
the consumers through various distributors. Effective supply chain management enables the
company to supply the products to the consumer within the stipulated time or even before
that and thus gains loyalty of the consumers. From the above analysis, it is clear that the
supply chain in IKEA mainly consists of flow of production and processes through each of
the three following industrial sectors.
Supply chain management of IKEA is highly connected to the other part of the
business operation including Human Resource, Consumer demand, Marketing, Finance,
Accounting and others. Therefore, in order achieve an integrated supply chain management
IKEA needs to consider the major drivers like consumer satisfaction, resource availability,
inventory management and other sequential operations. IKEA uses Push Back Strategy to
maintain their supply relationships worldwide. To maintain relationship with suppliers IKEA
uses both online and offline communication tools. Apart from that, IKEA uses Artificial
Intelligence to measure the efficiency of the suppliers using the Service Level Agreement of
the contract and associated parameters. IKEA implements e-procurement technologies
including automated data collection systems, inventory management systems, electronic data

28STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
interchange, online transaction processing, internet marketing, supply chain management,
electronic fund transfer, mobile commerce
Recommendation
In order to develop an effective supply chain management strategy:
 IKEA should study the available technological advancement and other associated
facilities to ensure the quality and profitability of their existing and further level inbound
and outbound logistics management.
 It is highly important for the management of IKEA to satisfy the consumers by their
services in order to gain competitive advantages. IKEA should update the information
processing system as per the version of the suppliers.
 IKEA can improve their exiting supply chain management strategy by implementing the
centralization of suppliers along with the associated logistic operations.
 IKEA should focus on the buying power for a category and the main objective will be to
reduce the purchasing price.
 IKEA should take advantage of the cloud-based analytics and the better warehouse
forecasting and management.
 IKEA must focus on the cost of manufacturing of products and this must include the
modifications to the purchasing, engineering and design of the same.
 IKEA should also take care of their employee motivation, rewarding and appraisals that
enable the workforce to give their best in the manufacturing, logistics and other business
operation.
 IKEA should also address the Cyber-security concerns to remove and negate the threats
that are arising from the cyber threats while developing their improved supply chain
management.

29STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
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