Ikea Supply Chain Management
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Transcript of Ikea Supply Chain Management
ABOUT IKEA
IKEA is a privately-held, international home products retailer .
It sells low-price products, including furniture, bathrooms and kitchen accessories.
The customer has to assemble many of the products.
265 stores in 36 countries (mostly Europe) only 30 stores are run by franchisees outside of the Ingka Holding.
Ikea website contains about 12000 products.
IKEA
Largest furniture retailer in the
world
Global supply chain with
worldwide sales
42 distribution centers located
worldwide
Controls every aspect of the supply chain
PRODUCT OFFERING• Storage furniture
• TV solutions
• Small storage & Clothes storage
• Sofas & armchairs
• Tables & desks
• Chairs
• Lighting Decoration & mirrors
• Floors
• Textiles & rugs & Beds & mattresses
• Furniture care & hardware
• Kitchen cabinets & appliances
• Bathroom furniture
• Children's IKEA
IKEA DISTRIBUTION
A global distribution network Large volumes
Flat packages Low costs
Hallmarks of Ikea Distribution
STORES
IKEA STORES
265 IKEA stores in 36 countries/territories:
30 stores in 15 countries/territories run by franchisees outside the IKEA Group
RAW MATERIAL PROCUREMENT
Raw materials are secured considering the following things:
1• Plantation are identified which are more then
4000 hec.
2• FSC is a certification which is must in consumer
markets.
3• give active support to farmers.
4• They still support supplying from small scale
plantations and farmers.
SOURCING• Efficient sourcing is an important part of the IKEA’s supply
chain strategy.
• Poland takes 2nd place among IKEA’s sourcing markets (according to volume).
• IKEA cooperates with many Polish producers
THE SUPPLIER
IKEA tries to keep product life cycles as long as possible.
IKEA assists its manufacturers by providing credit if there is an opportunity for producing greater
capacity.
The supplier is linked to ECIS, IKEA’s own system. This allows total transparency of the supply chain so
that he can see IKEA sales forecasts and view inventory levels in distribution centres and stores.
IKEA staff gives technical assistance to the suppliers
IKEA buys production capacity rather than product quantities. In other words, they order 10,000 hours of production from their suppliers rather than 10,000 bookcases.
PURCHASINGThe operative purchasing work is divided up among four trading agents, supported by 31 trading service offices in 26 countries.
Allows for close proximity to suppliers - about 1,220 in 55 countries.
1.• China 20%,
2.• Poland 18%
3.• Italy 8%
4.• Germany 6%
5.• Sweden 5%.
Top five purchasing countries
CO-WORKERS
The IKEA Group has 123,000 co-workers spread across functions such as purchasing, distribution, whole-sale, range, retail, support functions and the Swedwood Group.
DISTRIBUTION• 28 distribution centers and 11 customer distribution
centers in 16 countries.
• Using flat packs, transporting goods where possible by rail and sea, and utilizing fuel-saving techniques allows IKEA to be cost-effective and environmentally friendly.
WOOD BASED FURNITURE• IKEA uses furniture grade MDF (Medium Density Fiber board)
for its furniture for 80% of its furniture. The manufacturing for tis furniture is done in countries such a s Poland, Germany, China etc.
• However, for wood based furniture, the furniture is manufactured by Swedwood which is a subsidiary of IKEA. The wood is obtained from IKEA 4WOOD Forest Standard forests. 80 suppliers obtain wood from the forests of Sweden. Suppliers are also based in Russia, Romania, Bulgaria and China.
IKEA SUPPLY CHAIN MODEL
IKEA of Sweden Head
Office
Distribution Centers
Store
SupplierTrading
Service Office
Store
Store
31 TSOs in 26 countries 1220 suppliers in 55 countries
MaterialComponent
28 DCs in 16 countries
FROM THE TREE TO THE LIVING ROOM
IKEA Design
MANUFACTURINGSWEDWOOD
(IKEA subsidiary)
2/3rd in Europe
1/3rd in Asia
Self assembled by customer
MDF Furniture
Wood Furniture
TSO-Poland (Profim)
Supplier-Poland (Priorzerk)
TIMELINEIf customer places an online order in Sweden
Customer orders in Sweden
Supplier(Swedwood)
Distribution Centre
Nearest Store
17 stores in Sweden Torsvik
TSO- Poland
(Conshocken)
1 DAY
4DAYS
TIMELINE FOR WOOD BASED FURNITURE• IKEA allows customers to order from a large variety of products.
However, every season it produces a catalogue of products that takes 10 months from conception to execution.
• Products are delivered in flat packs and furniture is assembled by customers themselves
Parcel Delivery
TruckDelivery
If package <100 lbs, 4 hours – 5 days
If package >100 lbs, 7 days
THE STAIRCASE MODEL FOR WOODEN MERCHANDISE
Supplier entry level and Compliance with the IKEA Way of IKEA standard Official standard action plan to achieve Purchasing home furnishing level 2 requirements Products and quality assurance Level 4
Well-managed forests Level 3 Verified by compliance with official
standard recognised by IKEA
4Wood
Forest management in
Level 2 Transition towards level 4
Approved according to
Acceptable wood sources IKEA’s Forest Standard “4Wood”
Level 1 - Compliance with forest legislation
- Not from protected areas unless certified - Known origin – region within country according to “level 4 standard” or felled in - No wood from intact natural accordance with management prescriptions forests or high conservation value - Not from plantations established after Nov.
forests unless certified according to 1994 by replacing intact natural forests
a “level 4 standard” recognised by IKEA