Ikea Supply Chain Management n3555

IKEA SUPPLY CHAIN APEKSHA 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

• Floors

• TV solutions

• Textiles & rugs & Beds & mattresses

• Small storage & Clothes storage • Sofas & armchairs • Tables & desks • Chairs •

Lighting Decoration & mirrors

• Furniture care & hardware •

Kitchen cabinets & appliances

• Bathroom furniture • Children's IKEA

IKEA DISTRIBUTION Hallmarks of Ikea Distribution

A global distribution network

Large volumes

Flat packages

Low costs

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 CHAINSWEDEN

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 4

• give active to farmers. • They still 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.

PURCHASING The operative purchasing work is divided up among four trading agents, ed by 31 trading service offices in 26 countries. Allows for close proximity to suppliers - about 1,220 in 55 countries.

Top five purchasing countries 1.

• China 20%,

2.

• Poland 18%

3.

• Italy 8%

4.

• 6%

5.

• Sweden 5%.

CO-WORKERS The IKEA Group has 123,000 co-workers spread across functions such as purchasing, distribution, whole-sale, range, retail, 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, , 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 31 TSOs in 26 countries

IKEA of Sweden Head Office

Trading Service Office

1220 suppliers in 55 countries

Supplier Component

Material

Store Store

Distribution Centers 28 DCs in 16 countries

Store

FROM THE TREE TO THE LIVING ROOM IKEA

MDF Furniture

MANUFACTURING 2/3rd

in Europe

1/3rd

in Asia

Self assembled by customer

Design

Wood Furniture

SWEDWOOD (IKEA subsidiary) TSO-Poland (Profim) Supplier-Poland (Priorzerk)

TIMELINE If customer places an online order in Sweden 17 stores in Sweden

Customer orders in Sweden

Nearest Store 1 DAY

TSOPoland (Conshocken)

Torsvik

Distribution Centre 4 DAYS

Supplier (Swedwood)

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

If package <100 lbs, 4 hours – 5 days

Truck Delivery

If package >100 lbs, 7 days

THE STAIRCASE MODEL FOR WOODEN MERCHANDISE Supplier entry level and action plan to achieve level 2 requirements

Compliance with the IKEA Way of Purchasing home furnishing Products and quality assurance

IKEA standard

Official standard

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

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 forests unless certified according to a “level 4 standard” recognised by IKEA

- Not from plantations established after Nov. 1994 by replacing intact natural forests

IKEA’s Forest Standard “4Wood”

Thank You!