essay

1. IKEA SUPPLY CHAIN PERFOMANCE METRICS
Introduction.
The study investigate how Swedish company (IKEA) in different sectors of economy defines
an excellent. It highlights that IKEA Company derives its excellence majorly by supply chain
management, performance measurement and customer satisfaction. The most common supply
chain metrics include inventory, working capital, time, cost reduction, quality, flexibility and
innovativeness.
Inventory
The world biggest home furnishing retailer has 298 stores in more than 30 countries. It is
ranked at number 41 in Forbes esteemed world most valuable brand list. It took in 35.5
billion sales in 2013. IKEA has enjoyed tremendous business in 60 years since its
establishment in 1943 in Sweden.
Each IKEA warehouse is huge and hold over 9,500 products. The company offer at such low
prices and at the same time being able to stock items has been guided by some factors. To
start off IKEA has clear vision of provision of well-designed, functional home furnishing
items at constantly lower prices so as many consumers as possible can purchase it. There is
great deal of cooperation between supply chain operators and inventory management in
supporting distinctive value proposition.
IKEA also relies on in-store logistics, something unique and seldom concerning its logistical
approach of reordering products. The logistic personnel is tasked with handling inventory
management at it stores. According to Steve Banker, ARC advisory group and logistic
viewpoint, there is an in-store logistic manager responsible for material handling logistics in
all IKEA warehouses.
The activities of logistic personnel is to supervise and record deliveries, accurately check
delivery notices, sort and separate good and get them to off to correct sales areas. Generally
there ensure smooth flow of goods within IKEA stores, which is significant in keeping high
capacity of sales thus boosting consumers loyalty.
Working capital
According to Divya Kumar, Deputy CEO IKEA Company India, working capital approach
has unchained itself from controller’s desk and landed to the CEO’S office after financial
crisis. This trend is attributed to both the internal and external factors. With revenue in most
industrial sectors harder to be realised post global downturn, institution have begun sourcing
internal ways of generating cash. Working capital has become a significant tool for releasing
money to fund growth and expansion. In addition, as globalisation set in, the outcomes of
each of this working capital is being keenly felt. Working capital management, planning and
analytics have become continuous activity with visibility at its peak.
According to CEO, business unit reviews are largely including levers of working capital as
metrics. This is pulling down to many arms of the enterprise-operation, sales, supply chain,
procurement, IT and quality control which are being briefed on implications of their
processes and action on the cash flow of the enterprise.

2. Cost reduction.
IKEA Company have embraced cost-per touch methodology. This is whereby the customers
select the furniture and retrieve the packages for themselves. As a rule of thumb, companies
find out that the more the hands touching the product the greater its price.
For example, when a customer select a set of furniture to buy, the item is then ordered,
moved from manufacture, shipped from a delivery truck and moved into storage warehouse,
moved from warehouse to consumer’s vehicle or delivered to consumers home. Every time
an item is displaced, it incur cost. The fewer times someone touches or moved an item is
directly proportional to the cost associated with it. IKEA save on cost with this guiding
philosophy to minimize touches because it doesn’t have to pay customer to retrieve the
furniture and take it away.
The company aimed at the consumers who want value of goods at relatively lower prices but
are willing to do a bit of work. This is achieve through;
 In place of sales agents attending consumers, IKEA uses self- services technique cited
on clear in store displays
 Rather than relying on third party manufacturers, IKEA modelled it on cheap ,ready
to assemble furniture
 Products are availed to consumers in a flat-packed form, which results in wide range
of supply chain contribution. The flat-package minimizes on shipping cost, storing,
construction and assembling. Furthermore, it facilitate maximum transportation index
and storage.
Innovative designs
IKEA concentrates on promoting design simulation through internal competition and a huge
network platforms forums of freelancers and 9 staff aesthetic designers. Freelance designing
enables a huge degree of flexibility and important source of creativity. The platforms of
freelance designers and the wide scope of professional’s expertise provides utmost greater
design creativity which IKEA illustrates in its furniture. IKEA designers established
innovative designs and numerous functionalities to the consumer. They also focus on using
materials effectively without impairing its structure and quality.
Similarly, analyst Warren Shoulberg, wrote on industry website The Robin Report.
‘There is perhaps no other retailer on the planet that has moved it basic model into so
many places with so much success,’ Shoulberg writes.
According to Shoulberg IKE`s resonates with young people, the products are clean, with
usual aesthetics. With an elaborate showroom and cafeteria, IKEA has become one of its kind
destination to shoppers. It is a standalone premise that consumers seek out with specific goal
in mind. No human congestion. “There is no mistaking why you are there” Shoulberg
concludes.

3. Quality
At the IKEA there exist Quality Compliance Standard (GO/NOGO). The Quality Compliance
Standard must be put into practise in order to become a IKEA supplier. It secures that all
IKEA suppliers are in harmony and qualify all the IKEA blueprints, work adequately to curb
the quality and secures compliance of IKEA articles.
In GO/NOGO requirements, the IKEA supplier shall produce a documented guideline
including how the rules are secured for each GO/NOGO obligation it include;
a) The IKEA supplier should secure that all items are produced accordingly, and meet
documentation as advanced by IKEA or otherwise agrees with IKEA by writing.
b) The supplier shall register, structure and maintain all verification documents and
information required by IKEA product documentation
c) IKEA supplier shall secure that special process control is implemented at its
production unit as well as special process appendices
d) IKEA supplier shall perform final inspection as agreed in writing between the
concerns. The detailed contents of final inspection as well as IKEA quality key
performance indicators. Among are;
 Inspection method
 Sampling plan
 Acceptance criteria
Conclusion
Undoubtedly, IKEA supply chain performance metrics has seen the company scaling to
greater heights in global market and in the overall success of IKEA as a home of furnishing
Retail Company.

4. References
1. Kelly, S, (2010). Written Examination Stimulus Material Case Study- IKEA.
2. Ocika, B, & Wieteska, G. (2017) Sharing Economy in Logistic and Supply Chain
Management.
3.