Supply Chain Management And Sustainability: A Case Study Of IKEA Essay.

Background of IKEA

Discuss about the Ikea Supply Chain Management.

Supply Chain Management is considered to be an important aspect of any organization which goes a long way in defining and maintaining its services. If the supply chain function of the organization is good then the organization will be able to function well and attain a sustainable competitive advantage (Christopher 2016). The given report will be discussing the different supply chain aspects of a chosen company named IKEA. The report will discuss the characteristics of its supply chain and logistic activity, along with the way the organization ensures that the supply chain is sustainable in its activities. The way IKEA collaborates with its partners to ensure satisfaction will also be given.

IKEA is a Swedish founded Dutch Multinational group which designs as well as sells various ready to assemble furniture, appliances for the kitchen and home products. The company has been successful in attaining the tag of the best furniture retailer since the year 2008.  The company is popularly known for its modernist designs and interior design work which is often defined as eco friendly in nature (IKEA. 2018). Furthermore, the company is also known for its continuous development processes which have permitted the firm to reduce its prices to more than 2-3% in the last decade.  The company operates in more than 50 countries and operates more than 400 stores. The website of the firm contains about 12000 products and is almost the whole collection of the products of IKEA.  Furthermore, the company is responsible for producing around 1% of the world commercial woo and thus makes it the largest user of wood in the retail sector.

The product line of IKEA is one of the largest ones and consists of a wide range of products like the Furniture appliances, Bookcase ranges, Curtain accessories, Children items, Bathroom accessories and Upholstered furniture.

Supply Chain can be described as a process which helps in contributing to the product line of the given company and make the goods reach to the actual consumer market.  Supply Chain can be described as both an art as well as a science which helps in calculation of the disadvantages as well as the advantages of a particular product and the specifically the network issues which facilitate the flow of the goods (Jacobs et al. 2014). The supply chain of IKEA is well defined with all the parties to it knowing their respective duties and the laws it needs to look after if it wants to conduct its operations successfully. The primary purpose of IKEA`s supply chain is to ensure that the products of the company reach the given consumer market successfully and that the company is easily able to ensure that it performs well and all products are of adequate quality.

Supply Chain Management at IKEA

According to Stadtler (2015), the effective management of the supply chain also ensures maximum customer value and provides IKEA with a competitive advantage, if the company becomes successful in attaining competitive advantage, then it will be successful in sustaining competitive advantage and help the firm in understanding the consumer demands which relate to innovation and productivity.

IKEA ensures that its low cost aspects in all the operations will ensure that the firm performs well. It also ensures long term sales in large volumes. These aspects help IKEA to ensure profitability for the firm. The company opened several stores n the Scandinavian region in less than a decade and was able to create its reputation in the European nations. As the furniture industry at European countries was sluggish, it stated expanding to other regions (Monczka et al., 2015). The company decided to re-deign its model and indulge in various cost cutting activities which would ensure that they would be easily able to expand its operations and indulge in rapid expansion.

IKEA has always concentrated on simplicity and quality. According to Hugos (2018), simplicity goes a long way in helping the given organization to manage the business and abide by the complexity of the given market.

At present IKEA operates in more than 50 countries and has presence of offline as well as online store in many countries. The company is looking out for options where it can implement Virtual Reality in order to ensure that the unexplored markets are also assessed to.

The supply Chain of IKEA is divided into three different components namely the, Primary sector, Secondary sector ND THE Tertiary sector.

1. The Primary sector of IKEA is involved in the development of the raw materials which are essentially required for the product (Seuring 2013). The raw materials are sourced from more than 1000 suppliers and quality stands a conformance.
2. The secondary sector of IKEA makes use of different primary materials which are sourced from the earlier stage and they are converted to proper products. This is the stage where the value is added to the various products.
3. The tertiary sector This is the last stage of the supply chain procedure where the products are modified based on consumer demand.

As stated earlier, the primary sector is primarily involved to ensure that the raw materials required for the product, is collected and reformed from good quality sources. The company to ensure sustainability in its practices, engages in an activity primarily known as the e-Wheel practice which goes a long way in ensuring that the suppliers abide by sustainability rules in all the stages and this includes an analysis of the four stages of the product which include Resource Extraction, Production, Recycle and others (Ahi and Searcy 2013). The company ensures that the resources used make more uses of the renewable sources and recycled materials. In the production stage it asks the different suppliers to ensure that production waste is re-used and applied wherever important.  The Use aspect looks after the substances that lead to allergy and ensure that the energy is reduced when materials are being used. In the Recycle aspect it ensures that the material is recycled and reclaimed (IKEA. 2018).

Sustainability Strategies at IKEA

Secondly, IKEA engages in a program called the IWAY which are a set of rules and regulations been stated which guides the different partners like the suppliers, ad helps the company to look after the raw material quality and guides them in concentrating on development of human friendly and sustainable resource supply processes.

The IWAY includes methods like Environment condition, Fire Preventing, Freedom of Association, Work Health and Safety (Brandenburg et al., 2014). Those suppliers who are successfully able to achieve the IWAY and eWheel goal will be easily able to achieve commitments from IKEA which helps in formation and sustenance of long term partnerships.

In the tertiary sector of its Supply Chain Management, the firm ensures that the practices undertaken are equally sustainable and play a leading role in development of innovative sustainable logistics along with retailing models. These practices include designing a flatter model and design which helps the firm in delivery the right products in the right manner using sustainable ways which shall include reduced emissions and lowered transportation costs (Ross 2013).  It is presently increasing the use of Railway and Sea transport to decrease fuel costs.

Furthermore, low energy light bulbs are employed in the workforce so as to ensure that company is engaging in sustainable practices, low emission hybrid models are used in order to save the environment and lastly, plastic carrier bags are removed and employees are encouraged to use public transport to commute to work.

IKEA engages in the following to ensure that it collaborates well with its partners to supply good quality products and goods. Collaboration plays a key role as it helps in the determination of sustainable relationships which help an organization to develop long term success for the firm.

• Benefit sharing model- A right benefit sharing model shall ensure that the company forms a model with the suppliers where the benefits of engaging in a sustainable relationship are observed by both the parties (Wisner, Tan and Leong 2014).
• Investing in the right infrastructure and people- The Company needs to make sure that it invests in sustainable relationships with its partners and takes advantages of the advancements of technology to make the operations smoother.

Conclusions and Recommendations

It has been recommended that the firm has to invest in long term sustainable relationships with its partners in order to ensure that it is able to gain a competitive advantage in the given domain. Supplier relationship is relatively very crucial and even more where the competition is so intense. In lieu of this, the firm needs to see to it that the suppliers abide by the various rules and regulations to make the process easier.

The given report discussed the various long term sustainable relationships which the company aims to engage in and elaborates on the supply chain management activities of IKEA. Its collaboration and sustainable aspects have been discussed.

References

Ahi, P. and Searcy, C., 2013. A comparative literature analysis of definitions for green and sustainable supply chain management. Journal of cleaner production, 52, pp.329-341.

Brandenburg, M., Govindan, K., Sarkis, J. and Seuring, S., 2014. Quantitative models for sustainable supply chain management: Developments and directions. European Journal of Operational Research, 233(2), pp.299-312.

Christopher, M., 2016. Logistics & supply chain management. Pearson UK.

Hugos, M.H., 2018. Essentials of supply chain management. John Wiley & Sons.

IKEA. ,2018. IKEA.com - International homepage. [online] Available at: https://www.ikea.com/ [Accessed 26 Apr. 2018].

Jacobs, F.R., Chase, R.B. and Lummus, R.R., 2014. Operations and supply chain management (pp. 533-535). New York, NY: McGraw-Hill/Irwin.

Jonsson, P., Rudberg, M. and Holmberg, S., 2013. Centralised supply chain planning at IKEA. Supply Chain Management: An International Journal, 18(3), pp.337-350.

Monczka, R.M., Handfield, R.B., Giunipero, L.C. and Patterson, J.L., 2015. Purchasing and supply chain management. Cengage Learning.

Ross, D.F., 2013. Competing through supply chain management: creating market-winning strategies through supply chain partnerships. Springer Science & Business Media.

Seuring, S., 2013. A review of modeling approaches for sustainable supply chain management. Decision support systems, 54(4), pp.1513-1520.

Stadtler, H., 2015. Supply chain management: An overview. In Supply chain management and advanced planning (pp. 3-28). Springer, Berlin, Heidelberg.

Wisner, J.D., Tan, K.C. and Leong, G.K., 2014. Principles of supply chain management: A balanced approach. Cengage Learning.