Essay about Supply Chain System of IKEA

5399 Words Dec 4th, 2010 22 Pages
| Supply chain system of IKEA | SCM TERM PAPER | | Annika Albuquerque | [Pick the date] |

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Contents INTRODUCTION 3 BACKGROUND NOTE 4 MANAGING SUPPLY CHAIN 7 SUPPLY CHAIN PLANNING 8 SUPPLIER RELATIONSHIP MANAGEMENT 9 WAREHOUSE MANAGEMENT 11 STORE DESIGN 12 THE ROAD AHEAD 14 Exhibit I 15 Note on IKEA Way of Purchasing Home Furnishings (IWAY) 15 Social & Working Conditions 15 Environment and Forestry: Suppliers must agree to: 15 IWAY Implementation: 15 Support and Monitoring: 15 Exhibit II 16 HOLISTIC VIEW OF IKEA 17 ORGANIZATION STRUCTURE AT IKEA 17 References and Suggested Readings: 18

IKEA’S COST EFFICIENT SUPPLY CHAIN

On January 01,2009,
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As the scale of business grew, Kamprad found it difficult to make individual sales calls and so started advertising in the newspapers. In 1951, he designed a product catalogue and distributed it to potential customers who lived near his store. IKEA opened its first furniture showroom in Almhult, Sweden, in 1953 where customers could see, touch, and feel IKEA s furniture before they placed orders. As IKEA was selling furniture at very low costs compared to its competitors, the competitors forced their suppliers to boycott supplying to IKEA.

That led IKEA to design and engineer its furniture and then outsource the manufacturing to Eastern European countries, particularly to Poland, from 1955. IKEA designed its furniture to cost less, look stylish and also be functional. In the same year, one of IKEA s co-workers decided to remove the legs of a table so that he could fit it in his car and minimize any damage in transit. That idea led IKEA to test flat packing in 1956. IKEA realized that flat packing could bring down the costs of transportation and storage drastically. The company started designing its furniture to support flat packaging. In 1958, IKEA opened its first store in Almhult. The store, spanning 6,700 square meters, was then the largest furniture retail store in Scandinavia.

IKEA saw an opportunity to cut costs by

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