Discussion related supply chain of Ikea
Discuss about the Logistics Management Operations And Supply Chain Management.
Ikea Australia is a multinational organization of Swedish origin which operates in the market of designing and selling furniture. The various products that are offered by the organization include, furniture, home accessories and kitchen based appliances. The organization has been regarded as the largest retailer in furniture from the year 2008. Ikea was established in Sweden in the year 1943 by 17 years old Ingvar Kamprad. Ingvar was considered had created a position among the ten richest people in the world by Forbes magazine (Ikea.com. 2018). The net revenues of Ikea Australia in the year 2016 was around 35.074 billion Dollars. The organization also has a huge employee base of 194,000 employees. Ikea also hosts a website which helps in showcasing the various products of the organization. The organization is known in the market for the modern designs of its furniture and the other appliances that are offered. The report will be based on the analysis of supply chain related activities of the company and the ways by which Ikea maintains its relationship with the suppliers (Ikea.com. 2018).
Ikea Australia has its operations in more than 40 countries and is considered to be a global destination for the home based furniture, kitchen products and other home accessories. Ikea is also the largest retailer in the world which has 301 stores and around 30 franchised units. The company has its largest market in Germany where it has 44 stores. The other huge market for Ikea is in the United States where around 37 stores of the company are located. The total volume of sales of Ikea is more 24 billion Dollars. The products of the company are exclusive in nature and reflect the heritage of the organization which is based in Sweden (Stadtler 2015). The five largest stores of Ikea are present in Stockholm in Sweden, Shanghai in China, Shenyang in China and Tianjin in China. The entire operations of the company are controlled from its headquarter which is located in Delft, Holland. The manufacturing related processes of the Ikea are controlled from the headquarter which is run by the trust named Ingka Holdings. The organization aims to communicate with the local people of the area where its operates by accepting their culture and providing them with customised products according to their needs. Ikea Australia is further planning to increase its operations and footprints in the Asian countries like India (Monczka et al. 2015). Ikea is also planning to integrate its operations with the latest technologies by collaborating with organizations like Amazon and Apple. The company is thereby trying to renew the organizational structure and the locations of its stores to adapt to the changes that are occurring in the environment.
Markets in which Ikea operates
The secret behind the huge success of Ikea is related to the efficient process if supply chain and the smooth operations in the backend. The company has more than 250 stores in around 37 countries of the world. Ikea has not only been able to impress the consumers with the help of its affordable products and high quality of furniture. The supply chain of the company is unique in nature and techniques which it uses to manage its inventory are also quite different and innovative in nature (Mangan, Lalwani and Lalwani 2016). The vision of the organization has been to provide functional and well-designed furniture at low prices to the customers. The designs of the furniture are formulated in such a manner which incurs low costs to the company and meets strict requirements which are set for providing the products to customers. The packaging is done in such a manner so that costs related to transport can be reduced and maximum number of products can be transported in a single go. The organization also aims at saving money that is spent in the stocking and fuel related costs (Wisner, Tan and Leong 2014). The amount that is saved by the company in their production and transport related activities is further passed on the customers by providing them with benefits. The processes that take place in the warehouses of the company are linked with the retail based processes. The stores of Ikea have their warehouses within the premises itself. The products are obtained according to the orders that are placed by the consumers and rest are stored in the various reserve racks. The unique inventory management technique that is used by Ikea is known as “cost-per-touch” which is management tactic used to help the consumers to select the products and retrieve their packages all by themselves (Pagell and Shevchenko 2014). Ikea is also known for employing in-store logistics which helps the logistics personnel in the stores to handle the entire inventory management systems all by themselves. The in-store logistics manager is responsible for the entire process of ordering and the manager of the store goods has the responsibility to handle the materials that are required for manufacture of goods. Ikea also employs another process of low-flow and high flow warehouse related facilities (Beske and Seuring 2014). The high-flow facilities support the operations of Ikea stores and the low-flow warehouses on the other hand are more manual in nature. The strategies that have been able to make Ikea the most successful retailer of furniture in the world are the high demand of the products and low costs related to operations. This also helps the company to stay competitive in the market and it further seeks more and more advanced methods so that the supply chain management process can be streamlined (Schönsleben 2016).
Supply chain operations of Ikea
The sustainability in operations in helpful in creating huge advantages for the companies in the industry all over the world. Ikea has taken care of this issue from the start of its operations and has created a supply chain in a such a way so that they are operate in a sustainable manner. The different activities undertaken by Ikea are as follows,
- Activity 1 – Ikea Australia has worked with the suppliers by taking care of a major issue which is related to the sourcing of materials in a responsible manner and increasing energy efficiency.
- Activity 2 – The depletion of natural resources has been a challenge for Ikea and its operations in the market. The company has hired experts in forestry who are able to help them in the procurement of wood for its products in a responsible manner (Touboulic and Walker 2015).
- Activity 3 – Ikea Australia also conducts wider audits related to supply chain to trace the origin of the raw materials that are required for its products. The suppliers of the organization are thereby responsible to provide reports to the management about the origins of their raw materials. The company also provides extensive training to the suppliers regarding the issues that are related to wastes, water and energy.
The process that is undertaken by the management of Ikea Australia to connect and collaborate with the suppliers has become a major reason behind its success in the industry. The relationship of the company is managed in an effective manner so that the manufacturers and the suppliers are able to receive good prices for the raw materials. Ikea Australia is considered to be a high volume retailer and it purchases its products from more than 1800 suppliers in about 50 countries (Schoenherr and Speier?Pero 2015). The company then negotiates the prices with the suppliers and after checking the quality of the materials the social and the working conditions are also kept in check. Ikea Australia fosters high levels of competition between its various suppliers and also aims at maintaining long-term relationships with them. For example, Ikea Australia is known for following a code of conduct with the suppliers which is known as Ikea Way of Purchasing home furnishing products or IWAY (Govindan et al. 2017). The main requirements within IWAY are related to raising the standards by developing business activities which can leave a positive impact on business environment. The company also follows its vision to provide low prices to the consumers without compromising the principles of the company. Ikea takes the different decisions related to operations in the organization by collaborating with the suppliers. Ikea also helps the suppliers in gaining access to the technologies that used for the various manufacturing processes (Martínez-Jurado and Moyano-Fuentes 2014).
Conclusion
The report can be concluded by stating that the management of supply chain in an effective manner is necessary for the successful operations of an organization. The suppliers are a major part of the operations of an organization and the relationships with them act as an important factor in increasing the revenues. Ikea has taken care of this situation and established strong relationships with the suppliers. The organization has also been successful in maintaining sustainability in the operations. The unique strategies formulated by the company have helped in increasing its customer base and providing them with products at low cost. The decrease of costs has been helpful in increasing the revenues further. The logistics related techniques are also quite different and have been providing services to the consumers in an effective manner. The relationship that has been maintained by the organization with the suppliers is also a major reason behind its success.
References
Beske, P. and Seuring, S., 2014. Putting sustainability into supply chain management. Supply Chain Management: an international journal, 19(3), pp.322-331.
Govindan, K., Sarkis, J., Jabbour, C.J.C., Geng, Y. and Trandafir, M., 2017. Eco-ef?ciency based green supply chain management: Current status and opportunities. European Journal of Operational Research, 10, p.57.
Ikea.com. (2018). Other stakeholders – IKEA. [online] Available at: https://www.ikea.com/ms/en_AU/about_ikea/our_responsibility/partnerships/other_stakeholders.html [Accessed 23 Apr. 2018].
Mangan, J., Lalwani, C. and Lalwani, C.L., 2016. Global logistics and supply chain management. John Wiley & Sons.
Martínez-Jurado, P.J. and Moyano-Fuentes, J., 2014. Lean management, supply chain management and sustainability: a literature review. Journal of Cleaner Production, 85, pp.134-150.
Monczka, R.M., Handfield, R.B., Giunipero, L.C. and Patterson, J.L., 2015. Purchasing and supply chain management. Cengage Learning.
Pagell, M. and Shevchenko, A., 2014. Why research in sustainable supply chain management should have no future. Journal of supply chain management, 50(1), pp.44-55.
Schoenherr, T. and Speier?Pero, C., 2015. Data science, predictive analytics, and big data in supply chain management: Current state and future potential. Journal of Business Logistics, 36(1), pp.120-132.
Schönsleben, P., 2016. Integral logistics management: operations and supply chain management within and across companies. CRC Press.
Stadtler, H., 2015. Supply chain management: An overview. In Supply chain management and advanced planning (pp. 3-28). Springer, Berlin, Heidelberg.
Touboulic, A. and Walker, H., 2015. Theories in sustainable supply chain management: a structured literature review. International Journal of Physical Distribution & Logistics Management, 45(1/2), pp.16-42.
Wisner, J.D., Tan, K.C. and Leong, G.K., 2014. Principles of supply chain management: A balanced approach. Cengage Learning.
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