Ikea Supply Chain Management

IKEA SUPPLY CHAINAPEKSHA GUPTA | RIA GANDHI

MFM 2012-14

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

IKEA SUPPLY CHAIN- SWEDEN

SUPPLY CHAIN-SWEDEN

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.

LOGISTICS AT IKEA

PRODUCT: WOOD BASED FURNITURE

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

Thank You!