Strategic Supply Chain Management of IKEA: A Comprehensive Report

This report offers a detailed analysis of IKEA's strategic supply chain management practices. It begins with an overview of the case, highlighting the competitive environment and IKEA's core business. The report then delves into IKEA's competitive strategy, emphasizing product diversification and cost leadership, and how these are supported by their supply chain. Key points of IKEA's supply chain are examined, including purchasing, logistics, and the integration of primary, secondary, and tertiary sectors. The report explores how IKEA delivers value through customer-centric strategies, such as in-store facilities and product packaging. The order processing strategy is broken down into stages, including planning, sourcing, manufacturing, delivery, returns, and enabling. The report concludes with a summary of the case, offering recommendations for improvement, such as increased supply chain flexibility and the adoption of advanced technologies, to ensure IKEA maintains its competitive edge. References are provided to support the analysis.

Strategic Supply Chain Management
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TABLE OF CONTENTS
OVERVIEW OF THE CASE..........................................................................................................1
COMPETITIVE STRATEGY OF IKEA........................................................................................1
KEY POINTS OF IKEA SUPPLY CHAIN....................................................................................2
HOW COMPANY DELIVERS VALUE........................................................................................3
ORDER PROCESSING STRATEGY OF IKEA............................................................................4
SUMMARY OF THE CASE AND RECOMMENDATION.........................................................4
REFERENCES................................................................................................................................6
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OVERVIEW OF THE CASE
Supply chain management is regarded as the process of managing all interrelated
business activities through which flow of goods and services are managed. Further, it is
considered as the chain through which products are purchased for production purpose and
ultimately it reaches to the target markets who are the ultimate buyers (Waters & Rinsler, 2014).
For every type of business operating in the market, it is necessary to manage its supply chain in
an effective manner so that right kind of good can be offered to the customer as per their
expectation. The present report is based on analyzing supply chain management practice of Ikea
where the company has 27 trading offices in 23 countries, 15 customer distribution centers and
33 distribution centers.
The Company is headquartered in Netherlands that is indulged into the practice of
designing and selling ready to assemble furniture, home accessories and kitchen appliances. The
environment where Ikea operates is highly competitive, and its main competitors are online and
retail furniture stores (Sandybayev, 2017). The main focus of the organization is on offering the
wide range of products that are of high quality. Considering the supply chain practice of Ikea, it
undertakes different stages and involves primary, secondary and tertiary sectors that are involved
in procurement of raw material, production, distribution, retail sales, etc.
COMPETITIVE STRATEGY OF IKEA
Considering the supply chain practice of Ikea where operations are carried out with the
help of three different stages that involves primary, secondary and tertiary. Through effective
management of supply chain, the key goal of business is to ensure customer satisfaction and
providing them remarkable purchase experience. In the stores of Ikea different products are
available where they can easily choose the best product that meets with their requirement. The
packaging of the product is also done in the different manner that contains instructions and all
the necessary information regarding products. Along with this additional facilities are provided
to the customers that involve children play area, food court, mini cinema, etc (Jonsson, Rudberg,
& Holmberg, 2013). This strategy allows the company to influence purchase behavior of its
customers.
The key competitive strategy undertaken by Ikea is product diversification and cost
leadership which has been considered with the help of its supply chain practice. The company
strongly focuses on decreasing cost of production with the help of reducing wastage, decreasing
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operational error, integration of stakeholders, etc. Apart from this product diversification as one
of the strategy is also employed where with the help of innovation new furniture items are
developed. So, this competitive strategy has allowed the company to deal with the issue of
competition prevailing in the market (Stadtler, 2015). Supply chain practice of Ikea starts with
sales and demand planning followed by marketing planning and supplier capacity and load
planning. All these activities are undertaken with the motive to provide proper convenience to
the target market, and it has enhanced the overall performance of Ikea in the market.
KEY POINTS OF IKEA SUPPLY CHAIN
Above shown is the supply chain of Ikea that highlights the key activities involving central
planning, distribution services, and retail. The suppliers of the company are present in 50
countries, and Ikea has developed the strong relationship with them through trust, transparency
and another form of aspects (Sezen, 2008). The key points associated with the supply chain
practice of Ikea are as follows:
 Purchasing and logistics activities are integrated within the business
 Segregation of the process into primary, secondary and tertiary sectors that is engaged
into production, distribution, raw material and retail sales to the end customers.
 Emphasize on key aspects such as sustainability and quality, affordability, accessibility
etc. At the time of dealing with partners main stress is on efficient production and
working a lot to reduce logistics cost (Mangan & Lalwani, 2016).
 Raw materials are sourced from the suppliers in the market at lowest price. Suppliers
adhere to the IWAY code through which quality standards are met by the company.
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 Adoption of automated system to manage inventory and this leads to efficient utilization
of the main resources of the business.
 Activities that are associated with the order fulfillment process are carried out by Ikea
range and supply where main tasks are plan, source, make, deliver, return and enable
 Ikea relies on e-wheel tool with the motive to evaluate the environmental impact of its
products.
 Around 50% of Ikea 9,500 products are manufactured with the help of wood or wood
fibers. This is one of the most effective resource form sustainability point of view
(Lockamy III & McCormack, 2004)
 Many designs of the products are developed by the company where the main motive
behind the same is to reduce the use of materials. For instance some tables are
manufactured with the help of recycled plastic etc.
 Stores of the company add value to the produced goods and this allows in providing
remarkable experience to the customers in every possible manner.
So, these are some of the key highlights of the Ikea’s supply chain that makes it different
from other companies operating in the market.
HOW COMPANY DELIVERS VALUE
In order to deliver remarkable value to the customers, various strategies have been
employed by Ikea. For determining the level of customer satisfaction, various aspects are
undertaken by the company such as returned products, number of products and the
recommendations received from the customers (Jacobs, Chase, & Lummus, 2011). The company
delivers value by providing proper assistance to the target market in the form of facilities such as
food court, mini area, supervised children play area, etc. This supports in providing the high
level of experience to the customers in every possible manner and enhances company
performance.
Apart from this, packaging of the products is done conveniently through self-assembly
flat packs that contain necessary instructions. The main strategies of the company involve cost
leadership and product diversification. This is the main reason due to which majority of the
customers are highly satisfied with the product range of Ikea and in turn company is able to gain
the competitive edge through this (Halldórsson, Kotzab, & Skjøtt-Larsen, 2009). The actual
value is delivered to the target market with the help of high-quality product of different designs
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that are manufactured with the help of advanced technology. So, these are some of the key
methods employed by Ikea in order to deliver value to the target market.
ORDER PROCESSING STRATEGY OF IKEA
The order processing strategy of Ikea takes into consideration various tasks that are
carried out by Ikea. The plan is the first stage where Ikea identifies the production requirement as
per demand for its products in the market and determining the relevant cost along with the
logistics required. Next crucial stage is the source where company orders the raw materials
required from different suppliers (Ganesan, George, Jap, Palmatier, & Weitz, 2009). Make is the
next stage where the resources present are allocated in the production process where
manufacturing takes place in line with the quality along with the quantity requirement. Further,
deliver is another stage where large numbers of distribution processes are undertaken with the
motive to deliver products to the sales outlets, storage units to the end customers (Ayers, 2006).
Return is another stage where customers are provided warranty for the products they
purchase. In case if any product has any default then it is possible for them to return the goods
and through this company provides them appropriate convenience. At last is the enable stage
where integration of all the members in the supply chain management process takes place, and it
is ensured whether IWAY code is appropriately followed or not (Chopra & Meindl, 2007). All
the staff members are involved in the innovation process, and this contributes a lot to the success
of the enterprise. These are some of the key stages of the ordering process of Ikea through which
company is able to deliver appropriate products to the target market and has allowed performing
better as compared with other companies operating in the market.
SUMMARY OF THE CASE AND RECOMMENDATION
The entire case has supported in knowing about the supply chain management practices of
Ikea that are quite effective. The key stages such as primary, secondary and tertiary are effective
through which right kind of product is delivered to the target market. Apart from this, for
delivering high value to the target market additional facilities are rendered to the customers such
as mini cinema, children play area etc. Further, company welcomes suggestions from its
customers that are associated with the product development. Moreover, some effective ways are
present through which Ikea can improve its supply chain practice and they are as follows:
 Ikea supply chain strategy must be more flexible so that it is possible to change its supply
chain practices frequently and in lesser period of time.
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 Heavy reliance must be on advanced tools and techniques so that efficient production can
be carried out that can save cost and in turn product of unique design can be developed
easily which is beneficial for the company and customers also.
 A Large number of factors are present that influences supply chain strategy of Ikea and it
is necessary for the company to ensure well in advance that all the influencing factors are
well maintained and satisfied too.
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REFERENCES
Ayers, J. B. (2006). Handbook of supply chain management. Florida: CRC Press.
Chopra, S., & Meindl, P. (2007). Supply chain management. Strategy, planning & operation. Das
summa summarum des management , 265-275.
Ganesan, S., George, M., Jap, S., Palmatier, R. W., & Weitz, B. (2009). Supply chain
management and retailer performance: emerging trends, issues, and implications for
research and practice. Journal of Retailing, , 84-94.
Halldórsson, Á., Kotzab, H., & Skjøtt-Larsen, T. (2009). Supply chain management on the
crossroad to sustainability: a blessing or a curse?. . Logistics Research , 83-94.
Jacobs, F. R., Chase, R. B., & Lummus, R. R. (2011). Operations and supply chain
management . New York: McGraw-Hill Irwin.
Jonsson, P., Rudberg, M., & Holmberg, S. (2013). Centralised supply chain planning at IKEA. .
Supply Chain Management: An International Journal , 337-350.
Lockamy III, A., & McCormack, K. (2004). The development of a supply chain management
process maturity model using the concepts of business process orientation. Supply Chain
Management: An International Journal, , 272-278.
Mangan, J., & Lalwani, C. (2016). Global logistics and supply chain management. New jersey:
John Wiley & Sons.
Sandybayev, A. (2017). Strategic Supply Chain Management Implementation: Case Study of
IKEA. Noble International Journal of Business and Management Research , 5-9.
Sezen, B. (2008). Relative effects of design, integration and information sharing on supply chain
performance. Supply Chain Management: An International Journal , 233-240.
Stadtler, H. (2015). Supply chain management: An overview. In Supply chain management and
advanced planning (pp. 3-28). Berlin: Springer Berlin Heidelberg.
Waters, D., & Rinsler, S. (2014). Global logistics: New directions in supply chain management.
London: Kogan Page Publishers.
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