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Global Logistics: Ikea’s global supply chain model

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17 pages
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  1. Executive summary.
  2. Product characterstics and its impact on a global logistics model.
    1. Customer needs and requirements.
    2. Value proposition.
    3. Supply chain strategy.
    4. Product and service factors.
  3. IKEA's Global Logistics analysis.
    1. Traditional furniture business.
    2. IKEA: Company background.
    3. IKEA's business model.
    4. IKEA's global supply chain model.
  4. Improvements for IKEA's global logistics model.
    1. Short term improvements.
    2. Improving performance of a global supply chain: Long term perspective.

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. [...]


[...] A company supported by a global supply chain (or even local/domestic supply chain) will not, rather should not strive to meet the best practice norms in all metrics, but should pick the ones which aligns with its value propositions. As mentioned before in the paper, given the strategy, the management needs to decide what the supply chain needs to excel at doing, and based on this need, it needs to pick matrices designed to measure that capability. Moreover, performance metrics should include the things which a company is willing to change. [...]

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