Ikea Supply Chain Analysis

879 Words4 Pages
“IKEA suffered from severe problems in its supply chain planning in past. The old planning concept, which had resulted in a fragmented supply chain built around local decision making, was sometimes counterproductive to corporate objectives, thereby jeopardizing corporate growth plans. A substantial growth in sales would make it even harder for management to make the fragmented supply chain work efficiently. Hence, a change was needed, and based on its goal of having low-cost products and an efficient supply chain; IKEA developed a new concept for centralized supply chain planning. In this article it is discussed how IKEA has developed and implemented a centralized supply chain planning approach – a concept that has taken them from a fragmented…show more content…
Local optimization resulted in global inefficiency. Because IKEA’s products would be classified as functional, it would be recommended that the company should strive for a physically efficient supply chain and vertical integration. One could argue that the IKEA supply chain is not fully vertically integrated and that the supply chain includes many different organizations. Yet, the supply chain is fully integrated downstream and many IKEA suppliers have IKEA as their sole or major customer or, in some instances, are owned, in part or in full, by IKEA. Hence, from a planning perspective, IKEA can treat the supply chain as being vertically integrated, which gives it the power to determine the rules and procedures for supply chain…show more content…
The new planning processes’ bi-directional integration has in turn created a supply chain in which supply better matches demand. An important benefit of this is improved supply chain visibility, even though data quality deficiencies sometimes limit its effect. The new planning processes have also created a higher degree of standardization through the establishment of standardized working methods and improved planning functionality, which in turn led to the possibility of implementing a higher degree of automated planning activities through the implementation of new planning systems. Researchers have identified the links between information system standardization and performance. This study further shows that increased standardization in planning processes systems may lead to improved performance. The new planning organization further facilitated standardization, which led to reduced number of planners and faster planning. Having the planning specialists (demand and need planners) work together in a co-located centralized organization created a higher degree of specialization and established an environment based on learning .The standardization of working methods, work flows and processes also enhanced the possibilities of
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