Supply Chain Analysis of IKEA

This report provides a detailed analysis of the supply chain of IKEA, including its operational analysis, sustainability analysis, and integration analysis. It discusses IKEA's vision, mission, and strategic goals, as well as its findings in supply analysis, operations analysis, information analysis, and sustainability analysis. The report also highlights IKEA's procurement policy and improvement programs.

Running head: SUPPLY CHAIN ANALY
SUPPLY CHAIN ANALYSIS
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SUPPLY CHAIN ANALYSIS
Executive summary:
IKEA is a very popular business organization, which deals with home furnishing products. Their
all products are available at affordable price. To sustain in a competitive market, they follow
several strategies and, in this purpose, their vision along with the mission and strategic goals help
them. Through this report, the supply chain findings along with its operational analysis,
sustainability analysis of IKEA Company is described in a short way. To develop its business
IKEA Company, utilize dynamic SC alignment. On the other hand, they follow several
improvement programs to expand their business in different locations.
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Vision of IKEA
In Sweden, IKEA is known as the largest furniture retail where it deals with home furnishing
products along with different products. It can be said that the vision mission and strategic goals
of a company help to determine its business strategies for its successfulness. IKEA is a globally
famous brand, so its vision is always ready to serve the people, which provides better products.
As per the vision statement of the IKEA brand, it creates a better life for their potential
customers every day. This vision helps the business of IKEA because of their growing
productivity. In addition to this IKEA, the brand explains that their vision is supported through
their business idea through their different functional home furnishing products, which are well
designed and available at a low price. Therefore, it is affordable to all kind of people.
On the other hand, the mission of the IKEA brand continually changed which explains that with
the help of proper business strategies it can communicate with the stakeholders along with their
potential customers that helps to fulfil all the vision statement of their business (Blackhurst et al.,
2018). In accordance with they have definite strategic values, which help to achieve their targets
through togetherness, simplicity, and cost consciousness along with daily basis improvement. All
these factors help in the expansion of their business.
Findings of supply analysis:
IKEA is known as a famous retail organization which produce assemble furniture. Hence, with
the help of their strong product base, they have earned the largest amount of revenue at the
international level from their quality products. From all the activities of this company, it can be
stated that their all activities run through the chain system, which is mainly known as the supply
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chain process (Mishra et al., 2018). In this context after observing all the information, it can be
depicted that supply chain process of IKEA brand is regarded as the mixture of both science and
arts subjects. Therefore, with the help of applying scientific methods in this supply chain
procedure, IKEA gains advantages, disadvantages along with the quality of the products. These
results are calculated by those methods, which show the network of this concerning the business.
In accordance with through the analyzing of these supply chain procedures of IKEA brand, the
demand of the market can be evaluated in terms of their quality-based products which is offered
to their end user. IKEA starts to develop its activities of production to satisfy the demand of the
customers (Prajogo et al., 2018). The supply chain process of IKEA is established based
ontwoideas, which are as follows:
1. Their best qualities of the products are introduced in the market depending on the demand
of the market.
2. On the other hand, supply chain is considered a long-term process, which is maintained
through the links between the products.
Findings of operations analysis:
Based on the quality of the products, IKEA has negative feedbacks as their experience, which are
given by their valuable customers. After these feedbacks, Ikea decided to analyses their
operational activities with the help of a lean management system (Peng et al., 2018). Therefore,
because of the lean management system, to fulfil the demand of the customers, it leads times.
Along with decreasing, the number of resources, which are, defined mainly human and financial
elements that help in the productivities of this company. In accordance with as per the lean
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management process, the basic elements are considered as Pull philosophy, Waste elimination,
and corresponding flow without interruptions. Warehouse logistics are considered as related
issues of these components that requires long waiting times.
On the other hand, according to the requirement of the operational analysis process waste is
known as anything that means it considered as the minimum amount of equipment, materials,
parts, space, and time of employees, which are essential to developing the values of the products,
produced by this company (Suryanto et al., 2018). In addition to this IKEA is consist of
avoidable motions, which is dependent on the fact of paying for the items in various locations.
In addition to this operation management of the IKEA, the organization is mapping through two
delays, which helps to describe the sales point of this organization. As per this analysis process,
first delay is based on the moment when a user can collect their furniture from the several stores
of this organization through main checkouts. Another delay is considered as logistic issues of
this company due to which customers are suffered and they have gone through the entire system
while staying in long queues(Babu et al., 2018). Therefore, it can be assumed that misuse time of
the user is affecting through the shopping experience from the IKEA brand.
Findings of information analysis:
On the basis of overall information of IKEA company, it is described mainly the history of this
company along with its work culture, strength weakness, values, competitors, locations etc.
therefore according to the overview of this brand, it is basically Swedish company which is
established in the year of 1958. The main dealing product of this organization is different types
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of furniture in the world along with home furnishing products that are available at an affordable
price.
After the establishment of this company, it opens its showroom in various location within six
decades including Philadelphia (Jabbarzadeh et al., 2018). To expand their business, they
maintain four values, which are based on the economic, social, environmental, and
communicational aspect. In addition to this, the biggest strength of this company is known as its
clear vision, which helps to add more values to the service to their user. Key Performance
Indicators of this organization helps them to assess the relationship between suppliers and
customers with them. On the other hand, the weakness of this company mainly focused on the
cost leadership and environmental issues of this company.
Findings of integration analysis
Dynamic alignment model can be used for the integration analysis of the IKEA supply chain
management as demonstrated below:
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Figure 1: Dynamic Alignment Model
(Source: )
The supply chain strategies being adopted by the IKEA company uses the reward
structure for achieving the sustainable competitive advantage as the definition for the supply
chain strategies. There is alignment between the structure of the company and the strategies
being adopted by the company. In furniture sector, the IKEA has the largest supply chain
management preferring the collaboration and coordination between the partners for delivering
certain work. Thus, there is the need of the alignment between the company structure and the
adopted supply chain and that should have been considered. Preference to each of the employees
are being provided, however the flat structure is not allowing the company in managing their
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supplies. Senior managers and experienced players are established at the different locations
however, there is the need of the dynamic alignment that can allow the small supply chains to
integrate with each other and deliver the expected outcome. Any business can improve its
business-related decisions with the help of such analysis. Similarly, IKEA also improves their
business decisions on the basis of analysis related to their social, financial, economic along with
environmental issues (Song and Gao, 2018).
The dynamic alignmernt as mintroduced by John Gattorna in his book can ber highly
effective in understanding the need of this dynamic alignment for IKEA cnsidering the smooth
and effective supply chain management (Gattorna, 2016). It can alternatively introduce the best
strategies those could deploy the different small supply chain alignments to bemade and
delivered throughout the business process and manage the deliverables accordingly.
Findings of sustainability analysis:
To sustain in the competitive business market, IKEA is always concern about their business
policies along with the environmental issues and the demand of their customers(Chan et al.,
2018). In this aspect, the vision and mission statement of this company is considered as a very
helpful factor. In addition to this IKEA is also worry about sustainability through their wide
range of products variety suppliers, stores and communication. Hence, to provide sustainable
solutions with this business is responsible for the better utilization of the raw materials and
energy. This solution helps this business to sustain in the competitive environment.
On the other hand, IKEA promotes itself as a role model of CSR because it is known as the
leading organization in the furniture world (Reuß et al., 2018). In accordance with to reduce the
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negative impact on the environment, IKEA follows the environmental activists and decrease
their waste eliminates. To sustain in the market IKEA also maintains all types of business
regulations that helps then to follow the ethical agreement with their partners.
In accordance with for the purpose of sustainability, IKEA increases its profit amount in
maximum number. In this aspect, they introduce short-term impacts on public health. IKEA also
introduced several sustainability programs to develop their business. They also maintain a low
price while emphasizing on sustainable product design.
Ikea’s procurement policy and analysis of supply chain
Ikeais turned out as a fascinating brand in order to study for all the manufacturers who are keenly
interested in upgrading the way that their department of procurement interacts with their
suppliers because they have already made an elaborate art of supplier cooperation in multiple
ways (Jia et al., 2018). The organization is turned out to be an only retailer that are driven by
much production as well as sales. It is a part of their whole business strategy. They always focus
on manufacturing cost. The whole organization and its various departments like purchasing,
engineering, design etc., take the realities of production into their account. They have only long-
term suppliers. Moreover, they mainly make a partnership with major suppliers and justifies the
effort of supplier development as well as joint ventures in new products. The purchasing price of
Ikea has been dropped by 36% from 1995 to 2005. It was one of the best accomplishments of the
organization so far. They took an innovative strategy in order to achieve this. The IkeaCompany
concentrate all the buying strength with the aims of minimizing the purchasing price. They work
with high-volume and few key suppliers rather than small suppliers. In addition to this, they have
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a process-oriented corporation like planning, supply chain, warehousing, purchasing and
transport (Tseng et al., 2018). There are five levels of maturity are existed when the purchasing
department contacts with the suppliers. Ikea has taken this model to their heart and reached only
5 levels in a few high-tech and most industrialized categories. The four and five levels are suited
to the core items with high volume, whereas all the items which are subjected to market
fluctuations and have lower volumes are dealt at level 2 and level 3. Therefore, less coordination
and planning is required as well as the purchasers have greater flexibility.
Ike has a clear mission and vision, to give functional and well-designed home furnishing at
minimum prices so that every individual can be able to afford it. The various function of the
organization as if the operations of supply chain and inventory management are working together
in order to support its distinctive value(Soheilirad et al., 2018). The stocks of Ikea sustain the
low cost of manufacturing while meeting demands for efficient distribution, function, quality and
effect on the environment. Ikea is totally determined by utilizing less raw materials to design the
furniture without compromising on durability or quality. Therefore, by utilizing fewer raw
materials, the organization cuts down the cost of transportation because it uses less work force
and fuel to receive ship products and materials. The whole credit of Ikea’s success goes to its
relationship management with manufacturers and material suppliers as well as its communication
system because it always gets a good price on what it produces. As a high-volume retailer and
big supply chain management, the organization buy items and products from more than 2000
suppliers in 60 nations and uses 45 offices of trading service around the world in order to
manage the relationship of suppliers. They negotiate costs with suppliers, verify and assess the
product's quality and keep an eye on working and social conditions (Fang and Zhang, 2018).
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Although the company promotes competition among its suppliers to ensure it gains the best
materials and prices, Ikea also makes long-lasting commitments to its suppliers by making long-
term contracts, which lower the product's price further.
Discussion of the improvement program
Ikea proposes many upgraded programs in recent days. They even unveiled a plan to utilize 100
per cent clean and fresh energy by 2020. In addition to this, Ikea is testing a subscription model
for its furniture in an effort to appeal to the desires of the consumers and to grow repeated
revenue. The trial will roll out in Switzerland this month. The model is very similar to rent the
runway for hose fittings. Customer can able to lease furniture with any specific period of time
and after ending the leasing time, the organization will refurbish the house fitting for re-
utilization. The retailer probably hopes that the current experiment will turn out as a "services of
scalable subscription", though the program cost is very unclear. The purposes are to make repeat
businesses, drive traffic to unit stores and appeal to young generations (Leidner et al., 2018). In
addition to this, Ikea is roaring up for expansion in the United Kingdom with the concept of a
five-year marketing plan, which includes a loyalty scheme and some new advertisements.
Nowadays, their challenge is to make a culture around the brand as they are shifting towards the
next stage of innovation.
How improvement program can help the organization to achieve its mission, vision and
strategic goals
The strategy of Ikea has always been to develop and design innovative products based on the
needs of the customer, keeping lower prices and providing attractive, functional and reliable
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furnishing as well as solutions. Sustainability has been on the roof of Ikea’s strategic plan
throughout its evolution(Batista et al., 2018). The probation unveils a plan to utilize 100 per cent
clean and fresh energy by 2020. It sets out the approach of the company to achieve positive
environmental and social impacts. This strategy in terms of sustainability brings all the elements
of mission, vision and values together to drive innovation and transform the business of IKEA. It
will strengthen the competitiveness of IKEA by securing long-term access to buy energy
supplies and raw materials, developing and maintaining its supplier base, making strong
relationships with customer and co-workers and increasing the value of the market share.
Moreover, Ikea is testing a subscription model for its furniture in an effort to appeal to the
desires of the consumers and to grow repeated revenue. The trial will roll out in Switzerland this
month. Customers will slowly become more comfortable by signing on to the subscription retail
service. If they adopt the subscription model, then they can become familiar with many things
like razors, recurring meal kits and some fashion items such as Rent the Runway (Roberts,
2018). Therefore, such improvement programs of Ikea can assist the firm to attain its mission,
vision and long-term objectives.
Conclusion:
Therefore, according to the criteria of this organization, it described the all information of this
organization including its values, missions, strategic goals etc. as per the requirement; it
described the findings, which are based on the operational activities, supply chain process along
with sustainability analysis. Hence, from this report learners get an idea about the business
sustainability of this IKEA brand, which depends on the procurement, and supply chain analysis.
After calculating its weak points through this analysis process IKEA wants to improve
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themselves through the various process. Therefore, this assignment describes all about the IKEA
organization regarding their business.
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