Supply Chain Principles in IKEA | Assignment
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Added on 2020-02-05
Supply Chain Principles in IKEA | Assignment
Added on 2020-02-05
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Supply Chain Management
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1TASK 2............................................................................................................................................5TASK 3............................................................................................................................................8CONCLUSION .............................................................................................................................10
INTRODUCTIONSupply chain is considered as the most dynamic aspects of systems and operationsmanagement to create effective supply chain within the firm. Further, it often creates a goodsource of considerable competitive advantage and so different businesses owe their success tothe specific use of supply chain management strategies. This particular assignment focuses onsupply chain principles in relation to IKEA. It is a multinational group of companies that designsand sells ready to assemble furniture such as beds, chairs and desks (Mackey and Gass, 2013).However, company owns an effective supply chain management which attracts customers topurchase goods from the firm. Report focuses on critically analyzing the supply chain principleswork with other aspects of systems and operations management to create competitive advantage. TASK 1Material management is considered as an effective scientific technique which isconcerned with planning, organizing and control of flow of materials from firm's initial purchaseto the final destination. As per the view of Pickard (2012), main focus of organization is towardsmaterial management in order to obtain right quality raw material so that best products can bemanufactured for satisfying the customers. Managing material helps in designing the movementof material or logistics that deal with the tangible components of supply chain. In regard toIKEA, covers the acquisition of material required to make furniture and home appliances,quality control of purchasing and ordering such parts and also maintain certain standardsinvolved in ordering, shipping and warehousing the identified parts. It is essential for the citedfirm to undertake supplier evaluation which is one of the fundamental steps to evaluate thesupplier on adaptability towards one's organization (Pickard, 2012). Further, Supplier evaluationframework is considered as a generic approach to attain objective of clients and satisfy theirneeds as per Schroeder, Goldstein and Rungtusanatham (2013). Further, procurement is alsoconsidered as an integral part of the firm's overall business strategy. Through understanding thesignificance of this core business discipline, purchasing executives needs to attain lower costs,high quality, improved safety and an enhanced reputation for their supplier agencies (Schroeder,Goldstein and Rungtusanatham, 2013). Moreover, IKEA procurement management function has always been a major concern forthe top management of any firm and thus possesses high inventory and an inefficient1
procurement process that affects profitability up to a great extent. According to the view point ofStadtler (2015), there are different problems which are faced by businesses in relation to poor orinefficient procurement process. Thus, it is essential for management of mentioned firm to planproper material planning and procurement processes and inventory management systems inrespect to changing business environment. However, material costs involve approximately 60%of the total working capital of IKEA. Also, because of inefficient procurement practices it createsa great deal of evidence of loss of productivity (Stadtler, 2015). Also, the material managementfunction within IKEA requires obtaining best price by involving buying the material at best valuesuch as-Right quantity and qualityAppropriate priceSuppliers who are reliable and provide best serviceAs per the view of Waters and Rinsler (2014), material planning and procurementprocess, it helps in designing effective system so that it assist in reducing the cycle time ofreceipt so that order can be maintained in an effective way. Further, it also reduces the lead timei.e. time between placement of order and receiving materials. Also, establishing long termrelationship with suppliers to create a reliable vendor base and thus minimize current inventoryso that IKEA can maintain its material management system to achieve desired results (Watersand Rinsler, 2014).Wisner, Tan and Leong (2015), examined that IKEA possess an amazing consumers basewith its affordable, high quality furniture and yet it is successful global home furnishing retailerthat impresses and assists the cited firm to develop its operations around the globe and maintaineffective material management system. In order to maintain material cost low, IKEA usesdistinct product design and thus provide the best quality goods to customers to satisfy theirneeds. Main aim of the firm is to keep the prices low and thus maintain control overmanufacturing costs. IKEA also focuses on something unique that concerns its logisticalmanagement of reordering products. Therefore, company possess in-store logistics personnelhandling inventory management so that material can be managed appropriately to attain desiredsatisfaction (Wisner, Tan and Leong, 2015). It can be assessed that IKEA's innovative inventory management helps in providing thebest solutions which relies upon two basic factors such as cost per touch aspects and in store2
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