MAN203 - IKEA's Supply Chain: Analysis & Evaluation of Operations

This report provides an analysis of IKEA's supply chain management, focusing on its logistics and operational activities. It examines IKEA's presence in various markets, highlighting its global reach and adaptation to local cultures. The report details the unique characteristics of IKEA's supply chain, emphasizing its cost-effective designs, efficient packaging, and innovative inventory management techniques like "cost-per-touch." Furthermore, it explores IKEA Australia's sustainability initiatives, including responsible sourcing, energy efficiency, and supply chain audits. The analysis also covers IKEA Australia's collaborative relationships with its suppliers, emphasizing fair pricing, quality control, and adherence to the IWAY code of conduct, which promotes environmentally and socially responsible business practices. The report concludes that IKEA's success is attributable to its effective supply chain management, strong supplier relationships, and commitment to sustainability.

Running head: ANALYSIS OF SUPPLY CHAIN MANAGEMENT
ANALYSIS OF SUPPLY CHAIN MANAGEMENT
Name of the Student
Name of the University
Author Note

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Executive Summary
The report is based on the analysis of the organization named Ikea of Swedish origin which
operates in the furniture industry. The relationship of the management with the suppliers of
the company is also analysed in the report in detail. The sustainability related operations of
the company and the ways by which it aims at increasing its revenues is discussed in the
report. The supply chain related operations of Ikea Australia is also analysed in the report in
detail. The ways by which Ikea Australia maintains sustainability in its operations is
discussed and analysed in the report. The collaborative operations of Ikea Australia along
with its suppliers is analysed in the report based on the activities performed by the
organization. The analysis is concluded by stating Ikea Australia has been able to maintain
successful relationships with the suppliers and this has been the major reason behind its
success in the industry.

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Table of Contents
Introduction....................................................................................................................3
Discussion related supply chain of Ikea.........................................................................3
Markets in which Ikea operates..................................................................................3
Supply chain operations of Ikea.................................................................................4
Activities of Ikea Australia to ensure sustainability..................................................6
Collaboration of Ikea Australia with its suppliers......................................................7
Conclusion......................................................................................................................8
References......................................................................................................................9
Appendices...................................................................................................................11
Appendix 1...............................................................................................................11
Appendix 2...............................................................................................................12

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Introduction
Ikea Australia is a multinational organization of Swedish origin which operates in the
market of designing and selling furniture. The various products that are offered by the
organization include, furniture, home accessories and kitchen based appliances. The
organization has been regarded as the largest retailer in furniture from the year 2008. Ikea
was established in Sweden in the year 1943 by 17 years old Ingvar Kamprad. Ingvar was
considered had created a position among the ten richest people in the world by Forbes
magazine (Ikea.com. 2018). The net revenues of Ikea Australia in the year 2016 was around
35.074 billion Dollars. The organization also has a huge employee base of 194,000
employees. Ikea also hosts a website which helps in showcasing the various products of the
organization. The organization is known in the market for the modern designs of its furniture
and the other appliances that are offered. The report will be based on the analysis of supply
chain related activities of the company and the ways by which Ikea maintains its relationship
with the suppliers (Ikea.com. 2018).
Discussion related supply chain of Ikea
Markets in which Ikea operates
Ikea Australia has its operations in more than 40 countries and is considered to be a
global destination for the home based furniture, kitchen products and other home accessories.
Ikea is also the largest retailer in the world which has 301 stores and around 30 franchised
units. The company has its largest market in Germany where it has 44 stores. The other huge
market for Ikea is in the United States where around 37 stores of the company are located.
The total volume of sales of Ikea is more 24 billion Dollars. The products of the company are
exclusive in nature and reflect the heritage of the organization which is based in Sweden

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(Stadtler 2015). The five largest stores of Ikea are present in Stockholm in Sweden, Shanghai
in China, Shenyang in China and Tianjin in China. The entire operations of the company are
controlled from its headquarter which is located in Delft, Holland. The manufacturing related
processes of the Ikea are controlled from the headquarter which is run by the trust named
Ingka Holdings. The organization aims to communicate with the local people of the area
where its operates by accepting their culture and providing them with customised products
according to their needs. Ikea Australia is further planning to increase its operations and
footprints in the Asian countries like India (Monczka et al. 2015). Ikea is also planning to
integrate its operations with the latest technologies by collaborating with organizations like
Amazon and Apple. The company is thereby trying to renew the organizational structure and
the locations of its stores to adapt to the changes that are occurring in the environment.
Supply chain operations of Ikea
The secret behind the huge success of Ikea is related to the efficient process if supply
chain and the smooth operations in the backend. The company has more than 250 stores in
around 37 countries of the world. Ikea has not only been able to impress the consumers with
the help of its affordable products and high quality of furniture. The supply chain of the
company is unique in nature and techniques which it uses to manage its inventory are also
quite different and innovative in nature (Mangan, Lalwani and Lalwani 2016). The vision of
the organization has been to provide functional and well-designed furniture at low prices to
the customers. The designs of the furniture are formulated in such a manner which incurs low
costs to the company and meets strict requirements which are set for providing the products
to customers. The packaging is done in such a manner so that costs related to transport can be
reduced and maximum number of products can be transported in a single go. The
organization also aims at saving money that is spent in the stocking and fuel related costs
(Wisner, Tan and Leong 2014). The amount that is saved by the company in their production

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and transport related activities is further passed on the customers by providing them with
benefits. The processes that take place in the warehouses of the company are linked with the
retail based processes. The stores of Ikea have their warehouses within the premises itself.
The products are obtained according to the orders that are placed by the consumers and rest
are stored in the various reserve racks. The unique inventory management technique that is
used by Ikea is known as “cost-per-touch” which is management tactic used to help the
consumers to select the products and retrieve their packages all by themselves (Pagell and
Shevchenko 2014). Ikea is also known for employing in-store logistics which helps the
logistics personnel in the stores to handle the entire inventory management systems all by
themselves. The in-store logistics manager is responsible for the entire process of ordering
and the manager of the store goods has the responsibility to handle the materials that are
required for manufacture of goods. Ikea also employs another process of low-flow and high
flow warehouse related facilities (Beske and Seuring 2014). The high-flow facilities support
the operations of Ikea stores and the low-flow warehouses on the other hand are more manual
in nature. The strategies that have been able to make Ikea the most successful retailer of
furniture in the world are the high demand of the products and low costs related to operations.
This also helps the company to stay competitive in the market and it further seeks more and
more advanced methods so that the supply chain management process can be streamlined
(Schönsleben 2016).

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Source - (Ikea.com. 2018)
Activities of Ikea Australia to ensure sustainability
The sustainability in operations in helpful in creating huge advantages for the
companies in the industry all over the world. Ikea has taken care of this issue from the start of
its operations and has created a supply chain in a such a way so that they are operate in a
sustainable manner. The different activities undertaken by Ikea are as follows,
Activity 1 - Ikea Australia has worked with the suppliers by taking care of a
major issue which is related to the sourcing of materials in a responsible
manner and increasing energy efficiency.

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Activity 2 - The depletion of natural resources has been a challenge for Ikea
and its operations in the market. The company has hired experts in forestry
who are able to help them in the procurement of wood for its products in a
responsible manner (Touboulic and Walker 2015).
Activity 3 – Ikea Australia also conducts wider audits related to supply chain
to trace the origin of the raw materials that are required for its products. The
suppliers of the organization are thereby responsible to provide reports to the
management about the origins of their raw materials. The company also
provides extensive training to the suppliers regarding the issues that are
related to wastes, water and energy.
Collaboration of Ikea Australia with its suppliers
The process that is undertaken by the management of Ikea Australia to connect and
collaborate with the suppliers has become a major reason behind its success in the industry.
The relationship of the company is managed in an effective manner so that the manufacturers
and the suppliers are able to receive good prices for the raw materials. Ikea Australia is
considered to be a high volume retailer and it purchases its products from more than 1800
suppliers in about 50 countries (Schoenherr and Speier‐Pero 2015). The company then
negotiates the prices with the suppliers and after checking the quality of the materials the
social and the working conditions are also kept in check. Ikea Australia fosters high levels of
competition between its various suppliers and also aims at maintaining long-term
relationships with them. For example, Ikea Australia is known for following a code of
conduct with the suppliers which is known as Ikea Way of Purchasing home furnishing
products or IWAY (Govindan et al. 2017). The main requirements within IWAY are related
to raising the standards by developing business activities which can leave a positive impact
on business environment. The company also follows its vision to provide low prices to the

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consumers without compromising the principles of the company. Ikea takes the different
decisions related to operations in the organization by collaborating with the suppliers. Ikea
also helps the suppliers in gaining access to the technologies that used for the various
manufacturing processes (Martínez-Jurado and Moyano-Fuentes 2014).
Conclusion
The report can be concluded by stating that the management of supply chain in an
effective manner is necessary for the successful operations of an organization. The suppliers
are a major part of the operations of an organization and the relationships with them act as an
important factor in increasing the revenues. Ikea has taken care of this situation and
established strong relationships with the suppliers. The organization has also been successful
in maintaining sustainability in the operations. The unique strategies formulated by the
company have helped in increasing its customer base and providing them with products at
low cost. The decrease of costs has been helpful in increasing the revenues further. The
logistics related techniques are also quite different and have been providing services to the
consumers in an effective manner. The relationship that has been maintained by the
organization with the suppliers is also a major reason behind its success.

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References
Beske, P. and Seuring, S., 2014. Putting sustainability into supply chain management. Supply
Chain Management: an international journal, 19(3), pp.322-331.
Govindan, K., Sarkis, J., Jabbour, C.J.C., Geng, Y. and Trandafir, M., 2017. Eco-efficiency
based green supply chain management: Current status and opportunities. European Journal
of Operational Research, 10, p.57.
Ikea.com. (2018). Other stakeholders - IKEA. [online] Available at:
http://www.ikea.com/ms/en_AU/about_ikea/our_responsibility/partnerships/
other_stakeholders.html [Accessed 23 Apr. 2018].
Mangan, J., Lalwani, C. and Lalwani, C.L., 2016. Global logistics and supply chain
management. John Wiley & Sons.
Martínez-Jurado, P.J. and Moyano-Fuentes, J., 2014. Lean management, supply chain
management and sustainability: a literature review. Journal of Cleaner Production, 85,
pp.134-150.
Monczka, R.M., Handfield, R.B., Giunipero, L.C. and Patterson, J.L., 2015. Purchasing and
supply chain management. Cengage Learning.
Pagell, M. and Shevchenko, A., 2014. Why research in sustainable supply chain management
should have no future. Journal of supply chain management, 50(1), pp.44-55.
Schoenherr, T. and Speier‐Pero, C., 2015. Data science, predictive analytics, and big data in
supply chain management: Current state and future potential. Journal of Business
Logistics, 36(1), pp.120-132.

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Schönsleben, P., 2016. Integral logistics management: operations and supply chain
management within and across companies. CRC Press.
Stadtler, H., 2015. Supply chain management: An overview. In Supply chain management
and advanced planning (pp. 3-28). Springer, Berlin, Heidelberg.
Touboulic, A. and Walker, H., 2015. Theories in sustainable supply chain management: a
structured literature review. International Journal of Physical Distribution & Logistics
Management, 45(1/2), pp.16-42.
Wisner, J.D., Tan, K.C. and Leong, G.K., 2014. Principles of supply chain management: A
balanced approach. Cengage Learning.

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Appendices
Appendix 1

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Appendix 2