Global Logistics: Ikea's global supply chain model

Résumé du document

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.

Extraits

[...] External Environment Industry competition: “Companies no longer compete--supply chains do. It's supply chains that create competitive differentiation by how fast, how cheaply, and how well they deliver on customers' demands for products or services.”[7] A competitive industry adds pressure to the supply chain by lowering costs in all of its activities and setting it up in a way that the value proposition is achieved consistently, accurately and within the promised time. Government regulations and taxes: Companies are greatly influenced by regulations imposed by its markets' governments. [...]

[...] Although the Ikea model proved to be efficient in the last decades, the 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). [...]

[...] Some experts say that companies compete on supply chain basis. It is how a company manages the flow of information, products, knowledge and cash what can support the value proposition.[2] Logistics plays an important role in defining and executing a supply chain strategy. It's important because it gives the backbone and nervous system for a supply chain. It is the backbone because it gives the support needed with warehouses, information systems, containers, trucks, etc. that allow flow of goods and information from supplier to end customer. [...]

[...] 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. [...]

[...] 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. [...]