Procurement and Supply Chain Management Analysis of IKEA's Operations

This report provides a detailed analysis of IKEA's procurement and supply chain management. It examines IKEA's vision, mission, and strategic goals, followed by an in-depth analysis of its supply, operations, information, integration, and sustainability aspects. The report explores the application of key concepts like the Bullwhip effect and the Dynamic Alignment model within IKEA's context. It also discusses the company's suppliers, inventory management, and sustainability practices, offering a comprehensive overview of IKEA's supply chain strategies and challenges. The report highlights IKEA's strengths, weaknesses, and potential areas for improvement, providing recommendations for enhancing its procurement and supply chain management to achieve its goals. The analysis covers various facets, including findings on supply analysis, operations, information, integration, and sustainability, as well as a discussion of improvement programs and their impact on IKEA's overall objectives.

Running head: PROCUREMENT AND SUPPLY CHAIN MANAGEMENT
Procurement and Supply Chain Management
Name of Student
Name of University
Author Note

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Table of contents
Vision, mission and strategic goals of IKEA.............................................................................3
Part A: Findings of supply analysis...........................................................................................3
Part B: Findings of operations analysis......................................................................................4
Part C: Findings of information analysis...................................................................................5
Part D: Findings of integration analysis.....................................................................................6
Part E: Findings of sustainability analysis.................................................................................6
Discussion of IKEA's procurement and supply chain analysis..................................................8
Discussion of improvement programs.....................................................................................10
Improvement programs assisting IKEA to achieve its vision, mission and strategic goals.....11
Conclusion................................................................................................................................12
Reference..................................................................................................................................13

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Executive Summary
The report analyses the effectiveness of procurement and supply chain management in
organisations. The report focuses on IKEA and the ways by which it maintains its supply
chain. A thorough analysis is made of the supply chain strategies that are adopted by the
organisation. IKEA designs and sells ready to assemble furniture that is useful for household
and office purposes. The report analyses the effective application of the Bullwhip effects and
the Dynamic Alignment model so that an understanding of the effectiveness of the strategies
used by IKEA can be made. Recommendations are also provided that can help IKEA in
trying to restore its supply chain management within the organisation.

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Vision, mission and strategic goals of IKEA
The mission of IKEA is to create a better everyday life for most people. It offers a
wide range of functional home products at low prices (Ikea.com, 2018).
The vision statement of IKEA is to ensure that well-designed and functional home
furnishing products are provided to the people at a low cost. Focus is made on improving the
quality of the products along so that it matches its prices (Ikea.com, 2018).
The strategic goal of IKEA is to ensure that it provides a constant and simple quality
of products to its customers. The goal of the company is to maintain its status as the best
furniture selling company in the world (Ikea.com, 2018).
Part A: Findings of supply analysis
The goal of IKEA is to sell quality furniture to its target customers. The duty of the
procurement department is to manage the resources necessary for the classification of the
products and at the same time conduct a proper supply in the competitive business
environment. The ready to assemble furniture can be used for the decoration of houses by
maintaining eco-friendly simplicity.
The main supplier of the company is Intertek that performs its services in China and
the neighbouring Asian countries. The supplier firm helps in providing the best quality of raw
materials as well as resources to the company. According to Myerson (2015), due to the
international reputation of IKEA, the geographical dispersion of the company is spread across
various countries.
Analysis of reports has provided evidence that IKEA recently has suffered huge loss
in the market share (Ikea.com, 2018). In the current scenario, IKEA’s market has lost its grip

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of the furniture manufacturing industry. Reports have claimed that certain furniture lacked
the pocket friendly prices and the raw materials used are of poor quality (Ikea.com, 2018).
Hence, it can be said that IKEA can benefit from sourcing services to maintain a proper cost
structure and improve its reputation in the business market.
The suppliers of IKEA are selected based on the cost of the items marked for selling
the products. The focus of the company is to ensure that the suppliers are reputed and the raw
materials used provide the best quality. This provides an advantage as the final products of
the company help in keeping the reputation of IKEA intact. Therefore, a proper analysis of
the competitors is made by IKEA for the development practices and the programs adopted to
identify the bargaining power of the suppliers.
Hence, after the analysis it can be said that the challenges faced by IKEA may include
maintaining the cost of the products, maintaining the quality of its products and the manner in
which needs of the customers can be met. However, a proper supply chain management
system may help IKEA to gain a competitive advantage in the industry.
Part B: Findings of operations analysis
The international reputation of IKEA helps it to sell its products in a vast market. As
stated by Monczka, Handfield, Giunipero and Patterson (2015) branches in every country
provides companies with a competitive advantage. It provides companies with opportunity to
expand and growth along with the attainment of full global recognition.
In order to forecast a demand strategy, IKEA can adopt the survey method. With the
application of this strategy, the company can analyse the responses of the customers and
formulate strategies for the future. However, IKEA uses a different approach to predict the

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sales in the market (Brindley, 2017). For example, the company uses a method to cross-
examine the responses of the customers while analysing the number of sales.
IKEA has adopted the Just In Time (JIT) approach to manage its inventories. As
observed by Estenson (2016) the JIT approach can help companies to manufacture the
products at the correct time. However, the technique has one limitation. The rate of failure of
the suppliers in this technique can be high which can result in the failure to reach the overall
target set by a company.
As observed by Christopher, Harrison and van Hoek (2016) the important challenge
that IKEA face is the fact that despite its high revenue, the company spends an excess amount
in areas less useful for its development. For example, excess cash on an innovative resource
may hamper IKEA in purchasing materials responsible for maintaining quality.
Part C: Findings of information analysis
According to Padmanabhan, Smith, Steckler and Veiga-Lopez (2009), the bullwhip
effect can be considered as a distribution channel that helps in determining inefficiency
within the supply chain management. In the case of IKEA, the causes and remedial factors of
the effect may help the company to analyse the shift in the demand and supply rate of the
customers. The capabilities possessed by IKEA in its supply chain can help in ensuring that
the remedial factors of the company can help in gaining effectiveness in the market.
It is widely accepted that in the modern world, the role of information technology is
important for the success of an organisation (Stadtler, 2015). Therefore, IKEA can implement
information technology to improve the existing supply chain management to engage in online
conference method. IKEA can improve its supply chain management by analysing the

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strategies undertaken by the competitors and develop its capabilities. It can be said that
information technology can provide IKEA with an opportunity to grow its supply chain.
In order to maintain a competitive advantage it is necessary that collaboration be
made with the suppliers and customers. With a proper foundation with the stakeholders,
IKEA can ensure expansion and growth so that opportunities can be gained in the market. At
the same time, Beske and Seuring (2014) stated that IKEA might face challenges such as
economic fluctuation that can prevent the company from creating a positive impact for the
customers.
Part D: Findings of integration analysis
IKEA possess self-inventory managements that assist the company to maintain
partnerships with the suppliers. As analysed earlier, Intertek is the supplier of raw materials
for IKEA. Along with this, the application of technology can help the company to gain an
advantage in the policy of its supply chain management. The application of Just In Time
approach can provide IKEA with risk of failing to meet its target.
In the opinion of Pagell and Wu (2009), IKEA can use a 9-step framework to analyse
the level of integration present in the supply chain management. After the analysis about its
application, it can be said that IKEA can be placed at the level three. It indicates that IKEA
can validate the base line used in the supply chain model by analysing the possibilities that
the company may gain by developing a competitive advantage in the market. Along with this,
IKEA can implement the Triple-A approach.
Part E: Findings of sustainability analysis
As seen by Diaconu (2014) in the modern world, the role of sustainability is important
for the success of an organisation. Several methods are adopted that can help in developing

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sustainability in an environment. IKEA maintains sustainability by manufacturing eco
friendly furniture so that customers can be attracted and made to trust the company. This
includes identifying an appropriate method that can help in the prevention of any type of
environmental degradation. An example can be made by the fact that excess emission of the
waste generated from curving of wood can be reduced by using rooms build for sustainability
practises. This can help IKEA to maintain a stable position in the market and ensure that the
sale of goods increases.
The application of the model proposed by Triggers can help in determining the
position of IKEA. It can be seen that IKEA is staged at the signal stage. The determining
characteristic of the signal stage include the high ability and high motivation. Thereby, it
indicates the motivational influences and the ability of IKEA to maintain its competitiveness
in the market. IKEA can analyse the internal as well as the external factors for the
development of the competency of the market and the internal strength. According to
Stevenson and Sum (2015), high motivation factor is an indication that the company protects
the interests of the employees in a proper manner.

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Figure 1: Triggers model
(Source: Seuring & Müller, 2008)
Discussion of IKEA's procurement and supply chain analysis
The analysis has shown that IKEA maintains a healthy relationship with its suppliers
and therefore, work towards improving its supply chain management. One of the ways by
which the company can attain competitive advantage and customer satisfaction is by its
location. The products manufactured by IKEA are vast and extra cost for delivering the
products to the customers can be reduced. Mangan, Lalwani and Lalwani (2016) stated that
the distribution place of the products proves as the starting point based on which IKEA can
procure its supplies to the customers.
IKEA maintains an effective relationship with the customers. As stated by Hugos
(2018) customer satisfaction is important for a company as the customers are important
stakeholders. The responses provided by the customers can help IKEA to understand the

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quality of products that it needs to maintain. However, one important concern for IKEA is
that it needs to ensure that dubious situations such as the use of poor quality of wood and
polish of the furniture are not repeated. Therefore, IKEA needs to take certain precautions to
decrease any return of its products and make sure that customer satisfaction is maintained
(Ikea.com, 2018).
In order to be successful in the competitive market, IKEA can implement the dynamic
alignment model. Therefore, it is necessary for IKEA to maintain factors that are important in
the application of the model. Firstly, continuous improvement of the products needs to be
undertaken so that innovation and quality can be maintained. The second point that needs to
be maintained is aligning the interests of the senior executives with the strategies adopted by
the organisation. Therefore, IKEA can use the four-part dynamic alignment model to analyse
the current supply chain of the company. The level of interaction between the partners can
also improve.
The analysis shows that IKEA follows the parts required for maintaining an effective
supply chain. IKEA undertakes a proper strategic planning and establishes clear goals so that
employees can understand the goals of the organisation. The performance of the company is
based on the accountabilities and the responses provided by the customers to the products of
the company. It has been seen that IKEA provides its employees with an opportunity to
participate in every decision-making session undertaken at the company. This justifies the
motivating factor of IKEA as seen from the analysis of Triggers model (Ikea.com, 2018). The
company also possess the ability to recruit talented employees so that effectiveness in the
market can be maintained along with guarantee of providing quality products.
At the same time, the analysis made of the cause and remedy of the bullwhip effect
shows that IKEA promotes a sense of enthusiasm among the employees. This can help the

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leaders and other interested parties of the company to reach the target and elevate the quality
of the products manufactured by the company. It is seen that IKEA is driven by partnership it
endures with the suppliers and the customers. Fernie and Sparks (2014) observed that such
analysis provides evidences that IKEA belongs to mid-level of a hierarchical group with an
emphasis on the supply chain management. Therefore, an improvement of the process can be
made so that IKEA can develop its strategic process in the future.
Figure 2: Dynamic alignment model
(Source: Jabbarzadeh, Fahimnia & Seuring, 2014)
Discussion of improvement programs
It has been seen that IKEA possess a supply chain, which includes taking care of
societies and helping it to develop a strong work culture. It has been seen that the cultural
foundation of IKEA is that to maintain the values set by its founders and to ensure that a
proper sustainable business practice be maintained. The focus of IKEA is on the development
of sustainability that helps in the development and address of the environmental issues of a

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country (Ikea.com, 2018). Therefore, in order to maintain such competence in terms of
sustainability improvement strategies can be considered so that the effectiveness of the
company can be maintained.
Gunn (2015) is of the opinion that the strategies adopted by IKEA can help the
company in developing and maintaining the effectiveness of the market. Therefore, an
improvement programme can be made so that the usefulness in analysing the products
manufactured by the company can be analysed. The manufactured furniture need to maintain
the sustainability so that the eco-friendly nature of business that it conducts can be upheld for
the benefit of the customers. An example can be stated as in the case of curbing wood, the
dust particles may mix with the air and provide problems for people with breathing ache.
Hence, IKEA needs to ensure that raw material manufacturing that can create a hindrance in
the society are not adopted and at the same time the company does not deviate from its
cultural values and goals. Therefore, the company can maintain proper supply chain
management.
Improvement programs assisting IKEA to achieve its vision, mission and strategic goals
IKEA is a leader in the manufacturing of furniture all over the world. However, the
analysis pointed out that significant improvement can get IKEA to continue with its business
in a positive manner. IKEA needs to ensure that major changes are avoided in the
manufacturing department so that quality of the products can be maintained. It is important to
maintain the mission, vision and goals of the company so that competitive advantage and
flow of work can be attained. IKEA can do so by developing a new strategic plan that can
help the company to continue with the sustainable development of its business. Thus, as
stated by Jacobs, Chase and Lummus (2014) the improvement programmes of IKEA need to
be based on the policies followed.

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IKEA can keep the customers aware by using promotional methods through social
media. IKEA can improve its inventory by keeping in mind its mission and vision. With the
application of the benchmarking process, IKEA can ensure that it analyses the strategies
adopted by its competitors in the market. Therefore, as stated by Lee, Padmanabhan and
Whang (2015) IKEA can analyse the strengths of the competitors and develop strategies
based on the strength and capabilities that it possess.
Conclusion
Therefore, it can be concluded that after the analysis observations can be made that
IKEA follows a stable supply chain management system for its effectiveness. The importance
of supply chain management is that its helps in maintaining the business activities of an
organisation. The supply chain management system of IKEA is superior to its competitors
and due to this; IKEA is the most reputed company in its field of product. Therefore,
following the management process the vision of the company can be attained along with the
development of its sustainable practices. The recommendations can help IKEA to maintain its
dominance in the retail market and continue to design attractive products.

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