The decisions regarding the supply chain design highly depends of the kind of products or services a company is dealing with. Issues such as the sourcing location or the distribution method will be affected by a whole range of requirements given by the nature of the products. In the first part of the study, we developed the following criteria to be considered in order to design the supply chain: customer needs and requirements, value proposition, supply chain strategy, product and service factors (that includes demand and production factors, product composition and external environment). The following pages are proposing a case study of the Ikea's global supply chain design. We first explained the process of the traditional furniture industry, a relatively labor-intense industry. As Ikea started operated, it proposed a dramatically different approach, based on a low-cost strategy. Therefore, the requirements for the supply chain became different from a traditional furniture company. Ikea's revolutionary strategy resulted in significant differences in the trades-off to be done regarding the supply chain. The suppliers' location, the inventory level, the supplier relationship, the issue of localization, the in-store services and the store ownership structure were area in which Ikea decided to act differently.
Tags: Ikea SCM, Ikea supply chain, Ikea logistics, Ikea global supply chain management, Ikea supply chain strategy
[...] Improving performance of a global supply chain: Long term perspective For a global company, which is manufacturing and selling products across the globe, supply chain performance improvement should be a very well coordinated and ongoing process. The fact that a supply chain provides the critical bridge between different functionalities and business units across the firm means that every performance improvement initiative should look at the systemic results. Otherwise, it might shift inefficiencies in the system from one stakeholder to another. [...]
[...] Costs: Store ownership structure Improvements for IKEA's Global Logistics Model Short Term Improvements Short term goals for designing an efficient supply chain should be based on the product characteristics and market outlook. IKEA focuses on making its product cheap, readily available and trendy. This requires increased monitoring and control over the entire value chain as the product lifecycle is short. The following issues should be considered for short term efficiencies: Time to Market: This mandates product design teams to take into account local tastes while maintaining a core product which can be modified easily. [...]
[...] Ikea's business Model Ikea's business model can be summarized in the diagram on the next page: IKEA's Global Supply Chain Model Figure 5 IKEA's Global Supply Chain Model Ikea's current global supply chain has been modeled after some trade-offs between its elements and relationships. This has resulted in a competitive advantage and uniqueness of its business. There is still some room for improvement, a topic that will be discussed later on. Suppliers' Location Sourcing in low-cost countries would allow Ikea to enjoy significant cost reduction in labor, and according to which countries it sources, potential raw material lower costs. [...]
[...] study tried to propose area of improvement of the global supply chain design. In the short run, it has been identified that time to market could be improved, some alternate capacities could be used, the logistics services may be more efficient, and the store opening location should focus on high density areas. In the long run, some elements of the supply chain could be improved (Procurement/sourcing, logistics, demand forecasting and production planning and technology), some processes could be implemented (performance measurement, process standardization and CPRF, collaborative planning forecasting and replenishment). [...]
[...] These factors have to be considered when setting up a global supply chain and complying with the standards imposed. Benefits can be achieved by certain government regulations such as free trade zones and favorable tax conditions for establishing operations. On the other hand, regulations on specific product labeling, composition and trade barriers add complexity and transactions costs for organizations. IKEA's Global Logistics analysis In order to understand the difference of IKEA's strategy and the traditional furniture business, a brief overview of the latter is presented along with its value chain. [...]
APA Style reference
For your bibliographyOnline reading
with our online readerContent validated
by our reading committee
