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Value-Added workflows of Ikea

In my research of Ikea, I found that Ikea uses its supply chain management to drive quality products to the consumer at a low cost. Because each store is both a showroom and a warehouse, they hire logistics managers for each store. They are hired to manage the inventory. The logistics manager is key to making sure all of the Economic Utilities are created and used appropriately.They monitor deliveries, sort goods, and direct items to the correct locations.

Ikea's products use flat packaging, which means the packages take up less space on trucks allowing them to ship more for less. Also, because the items are put together by the consumer, most of what is sold is able to stay in its original packaging, saving time and money on storage and inventory.

Because it is a worldwide operation, it is very important to have a good relationship with its suppliers. Ikea does! They work with suppliers from all over the world and their long-lasting relationships have allowed them to dictate how their suppliers manage their business, by creating the IWAY - The Ikea Way of Purchasing Home Furnishing Products. This helps to ensure high quality standards at a low price.

Benchmarking and copying them.

Ikea implemented JDA supply chain software in 2001 todevelop a sales planning methodology and tools that assured realistic forecasts used for planning supplier, warehouse, and transportation capacities. Because of this software, they were able to benchmark and improve reporting. This helped ensure they were pulling the correct reports to grow their business and keep them competitive, especially in low cost countries. I think there are many businesses out there that are hesitant to go "all in" with using an outside source to assist in developing these planning tools. Implementation of these tools requires training and can be very expensive. But Ikea saw the value of bringing in this new software and using it in their supply chain management.

Moving takeaways to action for others

Obviously, Ikea is a huge brand and company. I think the major learning from my research with them is that they focus on driving the supply chain management from a local vantage point. Having logistics managers that are specifically in charge of their own stores inventory is a win for the store and the consumer. They are able to efficiently order and place items. Also, having those close relationships with their suppliers and ensuring a quality product from them is key to adding value. Although they are a huge world wide company, they operate much like a small business in that they allow these relationships to drive their business all over the world. They also trust their logistics managers to do their job in creating a great shopping experience.