Analysis of IKEA's Supply Chain Management Strategies and Processes

This report provides a comprehensive analysis of IKEA's supply chain management. It begins with an overview of IKEA's background, product offerings, and global presence. The report then delves into IKEA's supply chain management strategies, including product diversification and cost leadership, and how these strategies contribute to its competitive advantage. It examines the elements used in IKEA's strategic view, including environment, resources, objectives, and feedback decisions. The report further explores IKEA's supply chain processes, including the creation of customer value, environmental scanning (SWOT analysis), and the forces of change influencing its strategies. The report also analyzes IKEA's order fulfillment processes using the SCOR model, and concludes with an overview of its sourcing processes and overall business model. The analysis highlights IKEA's commitment to customer satisfaction, cost efficiency, and global expansion.

Running head: SUPPLY CHAIN MANAGEMENT OF IKEA
Supply Chain Management of IKEA
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1SUPPLY CHAIN MANAGEMENT OF IKEA
Table of Contents
1. Introduction........................................................................................................................2
2. Discussion..........................................................................................................................2
2.1. Company Background.................................................................................................2
2.2. Supply Chain Management and Competitive Strategy...............................................3
2.2.1. Elements used in strategic view...........................................................................3
2.2.2. Supply Chain........................................................................................................4
2.3. Supply Chain strategies of IKEA................................................................................5
2.4. The process of Creating Value for the customers (through Supply Chain)................6
2.4.1. Environmental Scanning (SWOT analysis).........................................................6
2.5. Forces of Change that influence the supply chain strategies of the company.............7
2.6. Order Fulfilment processes..........................................................................................8
2.6.1. Order fulfilment processes as per SCOR model..................................................8
2.6.2. Sourcing processes of the company.....................................................................8
3. Conclusion..........................................................................................................................9
4. References:.......................................................................................................................10

2SUPPLY CHAIN MANAGEMENT OF IKEA
1. Introduction
Supply Chain Management (SCM) refers to the process of management of an
interconnected business network that provides services and goods to the customers. It
includes all the processes that transform the raw materials into the final products and involves
active streamlining of the supply side activities of the business for increasing customer value
and gaining competitive edge over the others in the marketplace (Brandenburg et al., 2014).
In this context, this paper shall shed light on the way in which the SCM processes in IKEA,
the largest retailer company that deals with furniture appliances, takes place. It shall critically
analyse the supply chain management of IKEA and how it engaged in the distribution of its
furniture products and other household items, by means of focusing on the business purpose
of the company. It would shed light on SCM and its competitive strategy, the customer
fulfilment, supply chain processes thinking and order fulfilment.
2. Discussion
2.1. Company Background
IKEA is one of the international renowned furniture retailing company that was
established in the year 1943 by Ingvar Kamprad in Sweden (Helmefalk, 2015). The product
line of the company include furniture appliances, children items, bathrooms articles,
bookcase range, home accessories, upholstered furniture, curtain accessories and kitchen
articles. On the basis of these products, IKEA earns the greatest revenue and has become
famous at international level because of the quality of the product. At present, IKEA has
about 338 stores in 43 different nations, majority of which are present in Europe and the rest,
in United States, Australia, Asia, Romania and Canada. All its products and services respond
to the different tastes and needs while retaining the accessibility and functionality feature.

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2.2. Supply Chain Management and Competitive Strategy
2.2.1. Elements used in strategic view
a) Environment- The furniture industry and market of about a billion euros, is
rapidly increasing by 10% and this is supported by the booming construction and
the processes of imports and exports (Grzegorzewska, Nizialek & Olkowicz,
2014). The main competitors of IKEA in this market comprise of both the online
and retail furniture stores. Home Deopt, Pottery Barn and The One are the major
retail competitors of IKEA. On the other hand, Alibaba Group and Amazon are its
major online competitors. It is also to mention that despite of the fact that majority
of the designs of IKEA’s goods are designed and produced by Sweden and the
manufacturing has been outsourced in China and other different Asian nations.
b) Resources- The outlets of IKEA all around the globe have different features that
allow both the customers and the company benefitting by means of different
shopping activities. With the same, the company has about 27 trading service
offices in about 23 different nations and 33 distribution centres with 15 customer
distribution centres in 17 nations. Also, there are 43 industry production units in
11 different nations (Sandybayev, 2017). IKEA provides its staffs with high
training to make sure that they maintain the quality in overall SCM processes and
keep up the reputation of the firm (i.e., the processes of procuring, storing,
delivery processes and manufacturing). Also, IKEA always hire competent and
experienced professionals.
c) Objectives- As most of the IKEA stores are located in the developed European,
Asian, Middle Eastern and American nations and this is why, it focuses on the
operation of highly lucrative markets. The key objectives of IKEA are- ensuring

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high quality products and business operations, increasing customer attention
towards the company and its products, developing a sustainable stakeholder
relationships, maintaining maximum efficiency in managing the resources and
providing quality services to the customers, improving brand image among the
potential customers and accomplishing the annual or quarterly financial goals
(Gaiardelli et al., 2014).
d) Feedback Decisions Used in Strategic view- It is to note that IKEA follows a
customer centric strategy that entails obtaining feedbacks from the customers on a
continuous basis. It helps the firm in identifying its strengths and the other
deficiencies and thereby, satisfy the requirements and needs of the different
customer segments and ensure that the customers are satisfied with the company
products and services (De Los Rios & Charnley, 2017). With the same, IKEA
engaged in continuous development and research for obtaining the perceptions of
the employees and identifying the areas that it needs to improve in the processes
of operational.
2.2.2. Supply Chain
The below mentioned figure depicts the process of supply chain of IKEA. This figure
depicts that the operations are performed by several stages and it comprises of all the
primary, secondary and the tertiary sectors that comprise of the procurement of the raw
material, distribution, retail sales and manufacturing to the end customers.

5SUPPLY CHAIN MANAGEMENT OF IKEA
Figure 1: Process of supply chain of IKEA
2.3. Supply Chain strategies of IKEA
According to Ayers and Odegaard (2017), supply chain refers to a network of the related
activities that involves transforming the raw materials into the finished goods and services,
which are further distributed to the end users. This term is used for describing the
management of the flow of funds, information and materials through the entire supply chain,
right from suppliers to the manufactures to warehouses and the retailers, and finally, to the
customers. It is to note that IKEA has a mature management system (Chae, 2015). The main
strategies used by the company as a part of its supply chain management are product
diversification and cost leadership. It is to note that product diversification has been ensured
by means of focusing on the process of innovation and yearly introducing new services and
goods. With the same, the firm has entered into the food industry that in turn has helped it
towards expanding its operations, increasing its service and product offerings and adding new
avenues for developing in terms of financial factor. With the same, according to Gosling et al.

6SUPPLY CHAIN MANAGEMENT OF IKEA
(2015), it lays focus on decreasing its costs of production through different measures and they
are as follows:
a) Decreasing the generation of wastage as a part of its processing and manufacturing,
b) Minimising the level of operational errors by means of maximising employee
efficiency.
c) Lowering down the costs borne on the procurement of raw materials.
d) Commitment towards products and services quality and stakeholder integration by
means of complying to the IKEA “Way of Purchasing Home Furnishing Products”,
also known as “IWAY” (Laurin & Fantazy, 2017).
2.4. The process of Creating Value for the customers (through Supply
Chain)
IKEA emphasises on ensuring satisfaction among its customers by means of the provision
of high convince and value at the time of overall experience of shopping. It ensures that it
provide goods and services that meet the needs of the customers and that help them in easily
identifying, purchasing, transporting and using the products (Jiang, Jia & Gong, 2018). For
this purpose, a huge range of products are available for the customers at the stores in order to
choose their desired products and also, these stores are designed in a way to help the
customers in browsing the products easily. Staffs of the company are placed in all the
sections within the outlets for helping every customers. With the same, packaging are also
facilitated through self-assembly flat packs that contain all the required instruments and
instructions (Hildeman & Carlsson, 2014). Furthermore, it is also to note that IKEA has
developed several new facilities like that of parking, supervised play area for children, food
court, mini cinema etc. to increase customer satisfaction. All these are done for providing
them higher convenience during their shopping and for adding value to the brand.

7SUPPLY CHAIN MANAGEMENT OF IKEA
2.4.1. Environmental Scanning (SWOT analysis)
a) Strengths- IKEA is a recognised global brand that has large assortment of products
and services. The company occupies some major global position in the market of
furniture and at the same time, it services and delivers furniture to customers,
packaging in way that it is easy to transport from one place to other. With the same,
according to Fuchs, Schreier and Van Osselaer (2015), IKEA sells its high quality
goods and products at attractive prices. The company has a very innovative promotion
system with a specialised system of promotion. All its products are considered to be
easy accessible and easy-to-assemble.
b) Weaknesses- The annual price reducing strategy of the company influence the
company profitability (Edbring, Lehner & Mont, 2015). Also, there are significant
differences in the quality standards of the company products in different markets.
Furthermore, it is also to mention that the customisation of IKEA’s products is low
because of the process of standardisation of products.
c) Opportunities- There are many opportunities for IKEA in the contemporary furniture
market. The company can expand its operations in the existing markets and also, the
emerging South American and Asian can also be tapped into by IKEA. It could
enhance its presence in the food industry as well. Lastly, IKEA can focus on entering
into the new industries that are competent enough to increase the present product
portfolio.
d) Threats- The major threat for the company prevails in the high level of competition in
the international markets. There has been a significant growth in the competitive
substitutes and there is global economic downturns. With the same, there in an
increased regulatory barriers in diverse markets.

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2.5. Forces of Change that influence the supply chain strategies of the
company
The SCM strategies of IKEA are all influenced by its potential of maintaining proper
quality standards, effectively satisfying the customer needs, decreasing environmental
influence and generating higher level of returns in the long run.
2.6. Order Fulfilment processes
2.6.1. Order fulfilment processes as per SCOR model
a) Plan- Identification of the requirements of production as per the consumer demands
and determination of the relevant costs and required logistics.
b) Source- Order of the required raw materials from the respective suppliers.
c) Make- This comprise of the process of effective allocation of the resources for the
activities of production and product manufacturing in terms of quantity and quality
requirements.
d) Deliver- The processes of distribution are used for delivering the products to the units
of storage, sales outlets as well as the end customers.
e) Return- IKEA gives its customers warranty card for every products and goods that
they buy from IKEA (Cavallo & Rigobon, 2015). In case if any of the products fail to
meet the stated standards, the customers are given the facility of returning the
products and obtaining a replacement.
f) Enable- Integration of all the members in the process of supply chain management by
means of making them conforming to IWAY code and standards, conducting research
identify and remedy any of the limitations and involving the staffs during innovation.
2.6.2. Sourcing processes of the company

9SUPPLY CHAIN MANAGEMENT OF IKEA
According to Alenius, Lind and Stromsten (2015), IKEA sources its raw materials from
its suppliers. The company has a large array of suppliers that help it in creating a strong
competition among its suppliers. This further allows IKEA to procure its product raw
materials at lowest possible prices.
3. Conclusion
Hence, from the above analysis it is to conclude that the business model of IKEA empire
expansion and growth on an international level. The analysis of the supply chain of IKEA
showcase that the company offers a huge range of goods to the end users. With the same, it is
also to conclude that IKEA gives utmost priority to customer satisfaction. It focuses on
ensuring satisfaction among its customers through the provision of high convince and value
at the time of the experience of shopping. Product diversification is ensured by means of
emphasising on the process of innovation and yearly introducing a wide range of new
services and goods. The market position of the company in the international market is all
because of its strong brand image, global presence, effective financial management,
continuous innovation and the customer centric policies with its partners and suppliers. The
prudent and effective policies that are involved in the process of supply chain management of
the company has enabled it to derive some financial benefits and at the same time, improve
its competitive capabilities. This further has helped IKEA to fulfil its organisational
objectives while ensuring that its position in the global market remains at the top.

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4. References:
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