IKEA: Comprehensive Analysis of Supply Chain and Logistics Management

This report provides a comprehensive analysis of IKEA's supply chain and logistics management. It begins with an executive summary and an introduction outlining the company's history, market scope, and operational characteristics. The report delves into the features of IKEA's supply chain, emphasizing its cost-minimization strategies, focus on vertical excellence, and supplier relationships. It also examines the characteristics of IKEA's logistical operations, highlighting their impact on product cost, speed, quality, and flexibility. The analysis identifies three key activities that ensure an effective and sustainable supply chain: mapping the supply chain, baseline supplier performance, and strategic planning. The report also explores how IKEA influences its supply chain to adopt sustainable practices through the E-Wheel tool and the IWAY code of conduct. Finally, it examines IKEA's collaboration with suppliers and logistics partners to ensure customer satisfaction. The report concludes with recommendations for product differentiation, packaging, and promotional strategies, emphasizing the importance of strong supply chain and logistics management for business growth.

Running head: Logistics and Supply chain management
Logistics and Supply chain management

Logistics and Supply chain management
Executive summary
IKEA is an MNC which is incorporated in 1943, which produces and sells furniture products in
the world. It is stated that the company is one of the biggest furniture retailers across the world.
The paper explains that how the company initiates the supply chain management within the
organization to stay in the competitive market. The paper also shows that how IKEA uses
various activities to ensure the sustainable supply chain and logistics management. It describes
that how the company provides customer satisfaction by using strong supply chain management.
2

Logistics and Supply chain management
Table of Contents
Executive summary.....................................................................................................................................2
Introduction.................................................................................................................................................4
1. History of the enterprise..........................................................................................................................4
2. Market and scope of its operation...........................................................................................................4
3. Characteristics of IKEA supply chain and logistical operational activity...................................................5
4Three activities that are used to ensure effective and sustainable supply chain.......................................7
How Ikea influences all elements of its supply chain to adopt sustainable practices..................................8
5. How does IKEA collaborate with its suppliers and logistics partners to ensure customer satisfaction....8
Conclusion and recommendations..............................................................................................................8
References...................................................................................................................................................9
Appendices................................................................................................................................................10
3

Logistics and Supply chain management
Introduction
The main aim of this task is to outline and analyze the supply chain management of IKEA. It is a
renowned and popular furnishing company in the world. The company employs approx 149,000
employees in the organization to run the business operations in a hassle-free manner. The paper
also explains the characteristics of supply chain and logistics management. Also, it describes that
how IKEA uses unique and dynamic supply chain management to increase the sale of the
products and services. Further detail of the task has been detailed below.
1. History of the enterprise
IKEA is a Swedish founded dutch based multinational group established in 1943 in Sweden. It
designs and sells kitchen appliances, home garnishing and furniture. It is revealed that the
company is the biggest retailer in the world since atleast 2008. The firm is well known and
popular for its modernist design for several kinds of furniture and appliances. The vision of
IKEA is to create a better life for people. The team members work hard to attain quality at
affordable prices for the customers through utilizing the supply chain (Ikea, 2018).
2. Market and scope of its operation
The company operates and manages its operations in Europe, Australia, Asia and the United
States. Furthermore, middle class people are most effective and potential customers of IKEA.
The company has opened 12new stores in 7 countries which provide them an overall record of
318 stores in over 38 countries. It shall be noted that IKEA is one of biggest top retailers in the
world. It cores features include quality, functionality and affordably. The firm has more than
1300 suppliers in 55 countries across the world. The scope of the company is wider that affect
the growth and sustainability in the marketplace (Johansson, 2013). Apart from this, IKEA uses
latest and unique technology to design the various products in the global market. The
organization uses leadership strategy and low price strategy to attract and retain more consumers
globally. The main financial principle of the company is to grow and flourish by initiating and
using own resources and capability. It shall be stated that large number of companies are
operated under the name of IKEA trademarks. Along with this, a large group of franchisees are
operated and managed by IKEA group. The inter IKEA group is launched to improve and
4

Logistics and Supply chain management
enhance the IKEA franchise organism. The inter IKEA group is composed of three core
businesses such as industry, franchising and supply. In addition, the entities work together to
build and develop a stronger franchise system. The main aim of inter group IKEA is to create a
strong and unique platform for future growth and expansion. In this way, the scope and market of
IKEA for doing business operations and activities is wider and larger (Ikea, 2018). The large
market of the company includes China and Poland.
3. Features of IKEA supply chain and logistical operational activity
The supply chain management may be defined as the management of the flow of goods and
services, includes the movement and storage of raw materials, inventory and finished goods from
point of origin to point of consumption. Ikea had approx 1400 global suppliers, 60% its suppliers
are from European countries (Johnsen, Howard and Miemczyk, 2014). Along with this, the
company had around 42 distribution centers with the large inventory. The characteristics of Ikea
supply chain include the following:
 The company minimizes the logistics costs to gain competitive advantages in the
marketplace. It is one of the significant characteristics of supply chain management.
 In addition, the organization serves the areas without long waits and it assembles the
furniture themselves.
5

Logistics and Supply chain management
 IKEA has improved and enhanced the safety and ergonomic aspects of its design by
using steel in its products. By using strong supply chain, the company has been able to
reduce the weight of commodities.
 The company advises the suppliers to find the right and appropriate way through which
the prices of the raw materials and equipment can be reduced. Furthermore, IKEA supply
chain focuses on the vertical excellence to attain desired goals and objectives.
 By using unique and sustainable supply chain, the organization has been able to make a
reciprocal relationship with suppliers (Jonsson, Rudberg and Holmberg, 2013).
IKEA supply chain management
On the other hand, the company uses unique and strong logistics management to handle and
operate daily business activities. The logistics management is significant for the company to
align their activities and generate more revenue in the marketplace (Rouquet, Goudarzi and
Henriquez, 2017). The characteristics of logistical operational activity of Ikea are discussed
below.
 The logistics operational activity helps in producing a large number of goods and services
with minimum wastage of time and resources.
 By initiating the logistics management, IKEA has been able to focus on the product cost,
speed, quality and flexibility. Along with this, the company maintains control on the
inventory by initiating the effective and dynamic logistics management.
6

Logistics and Supply chain management
(Source: https://www.fungglobalretailtech.com/wp-content/uploads/2017/01/17_Trends_25.jpg)
4Three activities that are used to ensure effective and sustainable supply chain
The three activities that are used by IKEA to ensure the effective and sustainable supply chain
have been stated below.
Map supply chain: Ikea uses and initiates the supply chain map to understand the impacts of
sustainable supply chain management within the organization. Along with this, it focuses on the
positive and strong partnerships with its suppliers.
Baseline supplier performance: To ensure the effective supply chain, the company focuses on
the performance of the suppliers. It will help to maintain a unique and dynamic supply chain
management in the organization. It also increases profitability and revenue of IKEA.
Strategic planning: One of the significant activities initiated by the company is strategic
planning. This planning ensures the sustainable and dynamic supply chain management. This
planning also helps in the effective decision-making process. It also creates a network of reliable
transporters, suppliers and logistics handlers (Mangan, Lalwani and Lalwani, 2016).
7

Logistics and Supply chain management
How Ikea influences all elements of its supply chain to adopt sustainable practices
The company uses E-Wheel tool to adopt sustainable practices in the organization. Apart from
this, the firm created a code of conduct called IWAY(way of purchasing home furnishing
products), which includes guidelines, rules and direction that helps the partners and suppliers to
eliminate the negative environmental impacts The code of the conduct influences the partners to
follow international and national laws (Ashby, Leat and Hudson-Smith, 2012). It also helps in
reducing the waste and emissions. Furthermore, this code of conduct influences the partners to
contribute in recycling activities. They follow health and safety requirements to adopt
sustainable supply chain practices. In addition, code of conducts take care the rights and interest
of the employees. Apart from this, the company does not use wood and child labor in the
workplace. In this way, IKEA influences all factors of its supply chain management within the
organization (Waters and Rinsler, 2014).
5. How does IKEA collaborate with its suppliers and logistics partners to ensure customer
satisfaction
The good and strong relationship with suppliers ensures the success and growth of the firm. It
helps to provide good quality of products to the customers all over the world. To ensure the
customer satisfaction, IKEA maintains strong and dynamic communication with suppliers and
logistics partners in the global market (Cetinkaya et al, 2011). The firm builds and boosts trust,
loyalty and confidence among these partners. It will help to attract and retain wide range of
customers across the world. On other hand, a solid agreement is made with partners to ensure the
end to end customers satisfaction. The suppliers and logistics partners help to increase the sale of
the organization by providing good quality of products and services to the consumers.
Furthermore, it shall be noted that IKEA conducts supplier relationship management programs
and sessions to provide satisfaction to the consumers. The firm understands and analyzes the
issues, grievances and complaints of the partners and suppliers handle the orders of the
customers (Edvardsson and Enquist, 2011). There are approx 50,000 people working for the
companies that directly supply IKEA across the world. The firm launched supplier code of
conduct in 2000 to protect the interest of the suppliers and partners. The IKEA supplier code of
conduct plays a major role in positive growth and development. It minimizes the requirements
and needs related to the society, environment and working conditions. In today’s era, the
8

Logistics and Supply chain management
organization is improving the lives of farmers to run the business actions and operations
effectively (Ikea, 2018).
Conclusion and recommendations
On the above mentioned analysis, it has been concluded the company uses effective and unique
supply chain and logistics management within the organization to fulfill the needs and
requirements of the customers. It shall be stated that the firm maintain reciprocal relationship
with partners and suppliers to enhance and increase customer satisfaction. The supply chain and
logistics management helps the company to explore and flourish the growth and business. Now it
is recommended that product differentiation strategies shall be used by IKEA to make a strong
image in the minds of the consumers. Apart from this, packaging and promotional strategies are
should be used by the company to promote the products and services.
9

Logistics and Supply chain management
References
Ashby, A., Leat, M. and Hudson-Smith, M., 2012. Making connections: a review of supply chain
management and sustainability literature. Supply Chain Management: An International
Journal, 17(5), pp.497-516.
Cetinkaya, B., Cuthbertson, R., Ewer, G., Klaas-Wissing, T., Piotrowicz, W. and Tyssen, C.,
2011. Sustainable supply chain management: practical ideas for moving towards best practice.
Springer Science & Business Media.
Edvardsson, B. and Enquist, B., 2011. The service excellence and innovation model: lessons
from IKEA and other service frontiers. Total Quality Management & Business Excellence, 22(5),
pp.535-551.
Ikea.2018. About IKEA [Online].Available from
https://www.ikea.com/ms/en_ID/this-is-ikea/about-the-ikea-group/index.html, [Accessed on 30th
April 2018].
Ikea.2018. Suppliers [online]. Available from https://www.ikea.com/gb/en/this-is-ikea/people-
planet/people-communities/suppliers/, [Accessed on 30th April 2018].
Ikea.2018.Our business in brief[Online]. Available from
http://inter.ikea.com/en/about-us/business-in-brief/, [Accessed on 30th April 2018].
Johansson, U., 2013. IKEA: the making of a global giant. In Global Strategies in Retailing (pp.
155-169). Routledge.
Johnsen, T., Howard, M. and Miemczyk, J., 2014. Purchasing and supply chain management: A
sustainability perspective. Routledge.
Jonsson, P., Rudberg, M. and Holmberg, S., 2013. Centralised supply chain planning at
IKEA. Supply Chain Management: An International Journal, 18(3), pp.337-350.
10

Logistics and Supply chain management
Mangan, J., Lalwani, C. and Lalwani, C.L., 2016. Global logistics and supply chain
management. John Wiley & Sons.
Rouquet, A., Goudarzi, K. and Henriquez, T., 2017. The company-customer transfer of logistics
activities. International Journal of Operations & Production Management, 37(3), pp.321-342.
Waters, D. and Rinsler, S., 2014. Global logistics: New directions in supply chain management.
Kogan Page Publishers.
11

Logistics and Supply chain management
Appendices
12