IKEA's Supply Chain: Issues, Guidelines, and Recommendations Report

This report examines the supply chain management of IKEA, a global furniture retailer, focusing on challenges and potential solutions. It identifies issues such as supplier selection, coordination, maintaining product quality at low prices, and environmental concerns. The report also details IKEA's supply chain guidelines and strategies. Key aspects include the need for effective supplier relationships, timely delivery of goods, and the importance of addressing sustainability. Recommendations include implementing quality function deployment, conducting a house of quality analysis, and improving communication to enhance customer relationships and sustainability efforts. The report emphasizes that while IKEA has a well-established supply chain, there's room for improvement in monitoring environmental impacts and adapting to changing customer demands.

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Supply Chain

Contents
Supply Chain management issues of IKEA: Recommendations.............................................................2
Introduction...........................................................................................................................................2
Supply chain management issues faced by IKEA...................................................................................2
Supply Chain guidelines of IKEA.............................................................................................................4
Conclusion.............................................................................................................................................5
Recommendations.................................................................................................................................5
References.............................................................................................................................................7

Supply Chain management issues of IKEA: Recommendations
Introduction
In every organisation, supply chain is significant because it ensures the production of goods
as well as services. It is said to be the process through which the material move from different
people to the customer. Several activities are attached with the supply chain including
purchasing, manufacturing, transportation, customer service, supply planning, and supply
management. due to this, companies are required to use the effective practices that ensures
that product as well as services meet the commercial standard. IKEA is seen as one of the
best company that has to face several supply chain management issues in relation to its
products. In the global competitive environment, need for customer orientation and
operational efficiency has also grown (Brunninge and Fridriksson, 2017). Due to this,
retailers are also looking beyond the boundaries of the organisation for developing their
resources of the supply chain [partners for creating the competitive advantage and superior
value.
IKEA is well-known furniture producing company based in Sweden. It was founded in the
year 1943. It has gradually increased its business globally with the help of effective supply
chain strategy. IKEA has the clear vision to provide the best, well designed home furnishing
at the lower price so that each person can afford it. The key success of IKEA is also given to
its strong relationship with the manufacturer and material suppliers. IKEA also has code of
conduct names IKEA way of purchasing home furnishing products. It contains the entire
guidelines and rules that helps the manufacturers in reducing the impact of their activities on
the environment. In the recent time, it is found to be the biggest manufacturer of wood that
specialises in manufacture, design, as well as supply of the household fixed furniture. Due to
its expansion of business globally, it is also required by the company to manage the supply
chain issues (Stadtler, 2015).
Supply chain management issues faced by IKEA
 The first supply chain issue faced by IKEA is the selection of supplier. It is found that
it does not supply the goods in proper manner due to lack of coordination and collaboration.
However, it is wrongly interprets because IKEA follows the effective supply chain strategy

for ensuring the smooth production. It directly affects the productivity of the organisation
because when supplier will not supply goods on time, it will not be possible for the
organisation to satisfy the demand of customers. At the same time, it will hinder the growth
of the company by stopping timely delivery of the goods. In future, competition will rise to
the next level that will require the companies to ensure the timely delivery of their products.
in lack of timely delivery, customers might shift to the other company due to availability of
huge substitutes. After some time, more companies will enter into the market with their
innovative approaches. Due to this, any hindrance in the timely delivery of products of the
suppliers will stop the company from growing (Larsson, 2016). However, it is required by the
IKEA to give emphasis on the selection of competent and skilled suppliers. It is because
future trend will demand the timely delivery of the products to the customers.
 Coordination in the traditional businesses within the business means that business is
required to coordinate outside the company before initiating any work for the organisation.
besides this, coordination inside the traditional function of logistics, human resource, sales as
well as production department of the company because without any coordination, it is not
possible for the company to create a chain within each function. In the recent time,
coordination is the most significant element because without coordination, it is not possible to
complete the targets on time (Christopher, 2016). when work will not be done on time or
coordination will lack, it will not possible for the organisation to continue its process. Due to
the every changing demand of customers, it is compulsory for the organisation to ensure the
effective coordination with the different department. However, the increasing staff in the
future time will also increase the level of conflict. This element might affect the innovative
capabilities of those staff who are thinking of such innovation and creativity or the
organisation (Milovanović, Milovanović & Radisavljević, 2017).
 The major challenge with the IKEA supply chain is the maintenance of high quality
product by offering them at the low price. The entire raw material used by the IKEA is of the
high quality but making of the end product is also required to be of high quality. However,
high quality of raw material is also expensive. It has been the biggest challenge for the
organisation because it is required to attain the break even. Due to this, company is required
to reduce its other cost in order to cover the cost of raw material. In the future time, it is true
that several trends will come into the market with new entrant. Due to the every changing
demand of customers, companies will try to provide them better quality of products in the
low price. Therefore, it might be possible that IKEA else will fall if it will not be able to
provide the best quality products in lower quality (Laurin and Fantazy, 2017).

 Another issue faced by Ikea is the criticism from the bodies that are due to the
changing associated with the aspects of the environment (Wang, Gunasekaran, Ngai and
Papadopoulos, 2016). It is seen that IKEA works on the model that has the objective to
enhance the environmental and social sustainability. Several people come to this criticism by
claiming that few of the products are not environmental friendly. The example of this issues
in the formaldehyde scandal that organisation has experienced. It is said to be the organic
compound that tends to affect the health of human. Due to this, company was required to
reduce the use of formaldehyde in its manufacturing. However, it has increased the cost on
the supply chain of company (Sebastiani, Corsaro, Montagnini & Tzannis, 2015). However,
government is also giving continuous focus on the sustainability by ensuring the timely
supply chain procurement. The increasing consideration of government as well as society
toward sustainability might affect the growth of the company if it fails in taking sustainability
measures.
 Elimination of the obsolete and excess inventory is also one such priority for the
several manufacturers. IKEA also sometimes faces several challenges to align the supply
capacity with the changing demand at the time of meeting corporate goals. Besides this,
IKEA has also faced the aspect of getting low quality of products from the suppliers related
to the raw material. Moreover, company is dealing with more than around 50 suppliers in the
supply chain. Each supplier has different goals and objective. It directly means that the action
of company is directly influenced by their motives. Due to this, supply of low quality raw
material has been occurred that has returned back by the company. It has delayed the
production process, which negatively affected the other processes too.in future, customers
will rapidly shift to the other products feature due to the increasing innovation and creativity
(Mangan & Lalwani, 2016). Therefore, if IKEA will keep the excess inventory of one
product, it might be possible that its excess inventory get wasted if customer demand changes
suddenly (Cosmo and Yang, 2017).
Supply Chain guidelines of IKEA
IKEA tends to follow the effective guidelines in order to ensure the proper supply chain.
Every store of IKEA has different warehouse in its premises. The stock of IKEA is let down
by its in the night. The supply chain management of IKEA is quite simple. For example- if

any customer wants to buy the furniture of it, IKEA follow the certain procedure. Firstly, it
shipped the product from manufacturer. After this, it move the product into the storage with
the help of its delivery vehicle. Afterwards, it is moved from the warehouse to the vehicle of
customer and at the end given to the customer with the help of furniture retailer. It believes in
ensuring the right system and process for the right goods with the greater certainty and at the
lower cost. These strategies have helped the IKEA in great way to become the most
successful furniture retailer with the higher demand and lower operations cost. Moreover, it is
seen that IKEA tends to choose its supplier by taking into consideration the production
capacities as well as prices for earning the higher profitability.
Conclusion
In the limelight of above discussion, it can be concluded that IKEA is dealing with the largest
supply chain due to its biggest business at the global level related to the furniture appliance. It
is seen that some of the points are significant for the IKEA because without effective
coordination, it is not possible to link the function. It is true that IKEA follows the wide range
of well designed products at low price. In spite of this, IKEA has several weaknesses related
to the supply chain. The weaknesses can be improved by talking several significant steps of
the supply chain management. IN future, it is true several changes will be occurred in the
market such as rapid change in customer demand or shift of customers toward any new
product. Therefore, it will significant for the companies to give its consideration on the
management of inventory, In case of excess inventory, it might be possible that the products
of company get wasted.
Recommendations
IKEA can bring several changes in its supply chain management in order to overcome from
the issues. It can effectively use the quality function deployment. This concept give emphasis
on the quality designing into the product for meeting the needs of the customers effectively.
This concept tends to bring the customers into the designing process and ensures the
continuous improvement. Therefore, IKEA can adopt this concept in order to deliver the
proper value to the customers. Besides this, IKEA should also do the house of quality on
different home furnishing products such as sofas, cupboards as well as cabinets to gain the
customers need. An effective training programme can also be initiated by the Ikea or training
the suppliers and designers to make different style.

After analysing the supply chain management of IKEA, it is seen that every small as well as
big issue can be improve by further monitoring and maintenance. By taking into
consideration IKEA, it is seen that this company is most successful in implementing the
strategies by taking care of the relationship with manufacturers, suppliers, retailers. From the
fast few years, IKEA is effective taking care of the sustainability in its each step of the supply
chain. In spite of this, IKEA has the room for improvement in terms of monitoring its
environment friendly efforts. It will also prove to be beneficial for the company to improve
its communication. Customer relationship can also be improved by revealing more
information about its environmental and sustainability efforts. IN this way, IKEA can work
on its several supply chain measures that will further help it in bringing the improvement in
its supply chain issues. At the same time, it will also improve its profitability and growth by
satisfying the customers.

References
Brunninge, O. and Fridriksson, H.V., 2017. “We have always been responsible” A social
memory approach to responsibility in supply chains. European Business Review, 29(3),
pp.372-383.
Christopher, M., 2016. Logistics & supply chain management. Pearson UK.
Cosmo, D.E. and Yang, K., 2017. A Further Strategic Move to Sustainability—A Case Study
on IKEA. Journal of Strategic Innovation and Sustainability, 12(2).
Fuchs, C. and Otto, A., 2015. Value of IT in supply chain planning. Journal of Enterprise
Information Management, 28(1), pp.77-92.
Jiang, Y., Jia, F., & Gong, Y. (2018) IKEA: global sourcing and the sustainable leather
initiative. International Food and Agribusiness Management Review, 21(5), 627-640.
Larsson, R. G. (2016) Ikea's Almost Fabless Global Supply Chain—A Rightsourcing
Strategy for Profit, Planet, and People. In Lean Management Of Global Supply Chain (pp. 65-
82).
Laurin, F. and Fantazy, K. (2017) Sustainable supply chain management: a case study at
IKEA. Transnational Corporations Review, 9(4), pp.309-318.
Mangan, J., & Lalwani, C. L. (2016). Global logistics and supply chain management. John
Wiley & Sons.
Milovanović, G., Milovanović, S., & Radisavljević, G. (2017) Globalization: The key
challenge of modern supply chains. Ekonomika, 63(1), 31-40.
Sebastiani, R., Corsaro, D., Montagnini, F., & Tzannis, A. (2015). Sustainability in the
Supply Chain: The Retailers’ Perspective. In Marketing in Transition: Scarcity, Globalism, &
Sustainability (pp. 8-12). Springer, Cham.
Stadtler, H. (2015) Supply chain management: An overview. In Supply chain management
and advanced planning (pp. 3-28). Springer, Berlin, Heidelberg.

Wang, G., Gunasekaran, A., Ngai, E.W. and Papadopoulos, T., 2016. Big data analytics in
logistics and supply chain management: Certain investigations for research and
applications. International Journal of Production Economics, 176, pp.98-110.