BTEC Level 7: Strategic Supply Chain Management and Logistics - IKEA

This report provides an in-depth analysis of IKEA's strategic supply chain management and logistics, emphasizing the importance of an effective supply chain in achieving business objectives. It explores the relationship between supply chain management and core business goals, highlighting the role of information technology in optimizing logistic operations and fostering strong supplier relationships. The report examines key drivers for an integrated supply chain strategy, including customer satisfaction and technology utilization. Furthermore, it discusses the roles of logistics and procurement in supply chain management, offering considerations for improving practices. The study culminates in a proposed Supply Chain Management Improvement Plan for IKEA, complete with actionable recommendations to enhance overall business performance and overcome potential implementation barriers. This document is available on Desklib, where students can find a wealth of similar assignments and study resources.

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
Turnitin Class
ID
18215230
Turnitin
Enrollment key
1806
Student Information
(To be filled by the student prior submitting the assignment)
Name
Email
Date of
Submission

2STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
Student Declaration
I, _________________ (Name) hereby confirm that this assignment is my own work
and not copied or plagiarized. It has not previously been submitted as part of any assessment
for this qualification. All the sources, from which information has been obtained for this
assignment, have been referenced as per Harvard Referencing format. I further confirm that I
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

10STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
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

11STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS
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.