SUPPLY CHAIN A study of the processes

followed by the organization in

MANAGEMENT AT IKEA managing its massive global

operations
A BRIEF HISTORY
•Founded in 1943 in Sweden by Ingvar Kamprad, this is one of the most renowned furniture-
producing powerhouse
•Started as a mail-order sales and stationery business, started selling furniture in 1953
•Currently most well-known for its ready-to-assemble furniture, kitchen appliances and home
accessories
•Opened its first store in Hyderabad, India on 9th August, 2018
•Challenge faced in Indian market: lack of an online presence
•DIY-products not perceived convenient by Indian customers
SUPPLYCHAIN MANAGEMENT
AT IKEA
1. Cost Savings in Furniture design
2. Sustainable relationship with its supplier
3. Do-It-Yourself Assembly Lowers Packaging Costs
4. Combining Retail And Warehouse Processes
5. Cost-Per-Touch Inventory Tactic
6. Maximum/Minimum Settings As Proprietary System
7. Usage Of High-Flow & Low-Flow Warehouse Facilities
OPERATIONS MANAGEMENT
AT IKEA
Major OM Decisions:
1. Purchasing of wood, fabric and cutting tools
2. Hiring and training of workers
3. Planning location and layout
4. Produce affordable, functional and attractive products
5. Cost vs. Quality decision
6. Additional services (e.g. Food-court) for customer-satisfaction
SALIENT FEATURES OF THE
OM-MODEL AT IKEA
•Self-service model instead of customer-attendants
•Focus on low-cost, modular, ready-to assemble furniture
•Products offered in ‘flat-packs’ to increase the supply-chain as they are convenient to
carry, thus reducing transportation cost
•Tertiary-leveled Global SCM: at raw material, product distribution and retail-stores
levels
• Total Quality Management: best quality products at low price
•Customer Experienced Product Quality(CEPQ): renewable material, customer
safety, easy to assemble, durable, functional
PROCESS MANAGEMENT AT
IKEA
• IKEA process analysis is broadly divided into the following sectors:

1. Primary: IKEA designs it commodities in Sweden while ensuring that the product meets the functional, qualitative
and effective distribution requirements. They also ensures that the cost involved in the production of home
furnishing should be minimum. Effective communication between IKEA and its suppliers is a critical factor in the
success of it.
2. Secondary: IKEA designs its commodities in such a manner that the least amount of resources are involved in the
manufacturing of the best quality products.
• IKEA uses several inventory management strategies employed that help it in growing and developing its business:

1.  IKEA signs long-term agreements with its suppliers, which assures the presence of a sufficient number of
suppliers. This helps the company in long to save inventory management cost as the suppliers provide services at
regular prices. 
2. Cost-per-touch inventory strategy which promotes the customers to select the products that they want to buy
instead of appointing staff members to do that work. KEA applies this approach quite effective in reducing the
overall cost involved in inventory management.
PROCESS MANAGEMENT AT
IKEA
3. The third approach used by IKEA is the do-it-yourself assembly approach, which helps the company in
reducing the packaging and management costs.
4. Fourth is the sustainable design of products to reduce the maximum amount of costs. Inventory
management of IKEA is one of the best, which helps it in achieving operational excellence as a wide
variety of products are available to please the customers, and the prices are low as compared to other
companies in the market.
•The scheduling process of IKEA is mainly divided into three phases. 
1. Product design process: affordability, sustainability, good design and functionality. IKEA selects only
limited raw materials for manufacturing different products, which results in lower rates of defects, which
in turn, reduces waste and cost.
2. Production and distribution: IKEA applies the strategy of packing the products into flat packets, which
helps the company in optimizing warehousing and transportation costs.
3. Retail phase:  IKEA does not need to hire any labor as the customers are responsible for picking up the
products themselves. The customers also transport the furniture out of the store, and this saves labor,
overhead and shipping cost, which is associated with assembly and delivery.
LEAN MANAGEMENT AT IKEA
By adopting lean management, IKEA has the ability to reduce the manufacturing waste that includes
processing time, etc.
The benefits that IKEA includes with the involvement of lean management are as follows:
1. Reduction in cost
2. Increase in efficiency
3. Reduction of manpower
4. Total involvement of the company
5. Improvement in the morale of the employees
6. Increase in productivity
7. Increase in customer satisfaction
8. Environmentally friendly
LEAN MANAGEMENT AT IKEA
•The production method involved under the lean manufacturing includes the concept of 5s.
1. Sort(Seiri):This method involves the elimination of unwanted items that are found in the workspace
of the manufacturing industries.
2. Sustain(Shitsuke): In order to sustain in the global market it is very important to maintain the
products and services that have been accomplished successfully in the market.
3. Standardize(Seiketsu): This is the basic method by which the manufacturing process is required to
be done in a consistent and standardized manner that help in achieving the growth in the production of
the company.
4. Shine(Seiso): This method of lean manufacturing includes proper maintenance and cleanliness in the
working place of the company. The better maintenance of the workplace contributes to the increase in
production rate as well as the working motivation of the employees.
5. Set in order(Seiton): The tools and equipment that are required in the manufacturing process are to
keep in an ordered manner and within reach of every individual working in the company. The proper
availability of tools prevents the delay in the manufacturing process.
CAPACITY MANAGEMENT
•Managing organization’s resources, such as labor force, manufacturing and office infrastructure,
raw material, technology and IT resources, and inventory
•Crucial factor for effective management; characterized by uncertainty
•Highly vulnerable to sudden changes in demand patterns, causing issues with SCM processes
•Direct implications on:
1. Quality of product manufactured
2. SCM of the organization
3. HR considerations
4. Maintenance
CAPACITY MANAGEMENT
Considerations for effective capacity management:
1. Accurate demand forecasts
2. Understanding technology and capacity increments
3. Finding optimum level
Process:
1. Anticipating demands critically to manage raw material, infrastructure and resources
2. Analyse the market and sales patterns for individual products
3. Ordering and storing raw materials and products as per analysed demand, along with required
workforce and machines
4. Manage capacity and sub-processes as per anticipated demand
CAPACITY MANAGEMENT AT
IKEA
•Capacity management is not related to demand pattern for a product; not carried out in accordance
with the uncertain situations
•Has adequate infrastructure for storing manufactured products that include warehouses and stores; does
not face storage issues
•Layout of IKEA stores is like a warehouse, which provides the company with the benefit of having
retail stores as warehouses; saves capital of the company
•Known to keep an adequate amount of manufactured and delivery-ready products as stock in
warehouses, and yet it sells products at a low price; Company philosophy: products should be
affordable to people of every category in the society
•Availability of the product is maintained every time, irrespective of high or low demands for the
products
•Increases customer satisfaction and loyalty towards the brand
SUMMARY AND
CONCLUSIONS
•OM is essential: provide services and the products according to the needs and the demands of the customers
•Current IKEA Supply Chain Management System is designed in order to control and handle its designing,
manufacturing and warehousing
•Quality Management: Maintaining the quality of the product is the primary focus of the organization in order to
satisfy the needs of the customers and provide benefits to the working staff of the organization
•Process Management: Process analysis and improvement, customer service strategies, inventory management,
scheduling operations and supply management
•Scheduling operations are the process of managing, arranging, optimizing work and workloads in a manufacturing
process
•Purchasing management optimizes the total IKEA value chain, which contributes to the goal of providing better
products at lower prices
•Benefits of Lean management at IKEA: reduction in cost, increase in efficiency, reduction of manpower, the total
involvement of the company, improvement in the morale of the employees, increase in productivity, increase in
customer satisfaction and environmentally friendly
•Capacity Management in IKEA is not related to the demand pattern of the product and is also not carried out in
accordance with the uncertain situations
SUGGESTIONS: IKEA INDIA
•Sourcing of raw materials locally; promoting smaller business in production
•Managing capacity according to the anticipated and known demand patterns for a specific
product and sales forecast
•Providing delivery and assembling services at the end of the chain, as Indian households are
not inclined towards DIY furniture and fixtures
•Having more in-store employees to help customers understand certain products as the Indian
market is not familiar with their product types and varieties. Indian customers also easy to
convert in terms of sales if approached by a well trained sales person.
THANK YOU
Prepared and Presented by:
Harishankar C.N. - 19021141044
Ashmita Baidya – 19021141026
Manishi Divya – 19021141063
Rohit Rastogi- 19021141091