IKEA's Cost Efficient Supply Chain


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Case Details:

Case Code : OPER084
Case Length : 14 Pages
Period : 1990-2009
Organization : IKEA
Pub Date : 2009
Teaching Note :Not Available
Countries : US, Europe
Industry : Furniture Retail

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts

Background Note

IKEA was founded by Ingvar Kamprad (Kamprad) in 1943 in Agunnaryd, Sweden, when he was 17 years old. Kamprad started by selling goods like pencils, wallets, jewelry, picture frames, and watches...

Managing Supply Chain

IKEA first established a target price before designing a product. This practice was in contrast to the generally followed method of designing the product first and then pricing it according to the cost and markup by other furniture manufacturers. Designers at IKEA had to accommodate all the costs like raw material, manufacturing, and transportation till the product reached the stores within the given target price...

Supply Chain Planning
IoS played a key role in decision making at IKEA. Most of the supply chain planning process happened at IoS (Refer to Exhibit II for Supply Chain Planning Process at IKEA)...

Supplier Relationship Management
After the design of the product and material to be used was decided, trading offices across the world were instructed to find the suppliers in their respective regions and invite bids from them...

Warehouse Management
IKEA's DCs were highly automated, using systems like automated storage and retrieval system (AS/RS) and conveyor belts. Using AS/RS improved the efficiency of IKEA's warehousing operations significantly...

Store Design
IKEA chose its store location on the city outskirts as the company's stores were large and required huge parking spaces. IKEA realized that its customers were visiting stores in their cars and that resulted in higher carbon emissions...

The Road Ahead

Industry experts felt that IKEA could further improve its supply chain efficiency by using Radio Frequency Identification (RFID) technology. They felt that the visibility of the supply chain could improve drastically with the use of RFID...

Exhibits

Exhibit I: Note on IKEA Way of Purchasing Home Furnishings (IWAY)
Exhibit II: Supply Chain Planning Process at IKEA
Exhibit III: Pictures of AS/RS in IKEA's Warehouse
Exhibit IV: Flat Trolley Used in IKEA Stores



 

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