Supply chain management - IKEA - Essay Example

Supply Chain Management of IKEA Introduction IKEA is a company that has its origin in Sweden but is based in Holland. The company has specialized in selling home accessories and furniture. The company is known internationally since it is the largest known retailer company that sells furniture. The company has branches all over the world include Japan and China. The company was started by a young Ingvar Kampard in 1943 in Sweden (Inter IKEA Systems, 2012). Kampard started the company with only one shop but over the years the company has extremely grown making him one of the richest people in the world. The IKEA Company has grown into a company that sells various products including food products and other household goods. Internationally the stores are characterized by Blue color with the title IKEA branded in yellow. IKEA is one of the few companies that enjoy customer loyalty since its brand is considered to be known internationally. It is safe to say that the company enjoys a lot of brand equity. This means that a lot of customers by products from the company because they know and trust the brand of the company’s products. For example, someone will buy furniture from IKEA store just because they now that the company is reputed for its wonderful products (Inter IKEA Systems, 2012). The company is known for its diverse business ventures because it has undertaken real estate, food industry, IKEA company faces limited competition from global companies such as \wall mart, which enjoy similar customer loyalty that the IKEA Company enjoys. However, in the changing economic environment the company is facing much more competition from other upcoming companies. Literature review For a company to succeed just like IKEA, there are various supply chain management strategies that must be implemented. This is because; it is through supply that companies realize profits because this is how products reach the consumers. One such aspect is the Total Quality management. This is a theory that stipulates that, products quality greatly depends on the combined efforts in the company. This is one aspect of supply chain management that the IKEA Company has used. In the IKEA Company everyone is involved in ensuring that the company produces the best products available (Inter IKEA Systems, 2012). This means that from management, everyone in the company is motivated to do their best in their department to ensure that the company produces the best products possible. For example, the company makes sure that it employs the best people who will ensure quality in the company’s products. Irrespective of the position being hired, the company ensures that it hires people with the best qualification and credentials. The human resource department ensures that it does back ground checks before hiring any employee to make sure that the credentials and qualifications they use to apply for job vacancies are true, and they possess the skills that they claim they have. This ensures that everyone in the supply chain of the IKEA company is a professional hence they will go about their duties as professionals which results in the success that the company experiences. Another supply chain management strategy that should be used in order for a company to maximize its profits is the Just in Time manufacturing (JIT) supply chain management concept. This is a strategy whereby a business establishment tries to increase their return on investment of the company (Inter IKEA Systems, 2012). The business organization does this by minimizing in processes associated with carrying cost and inventory. Carrying cost is the whole cost a business establishment incurs in its attempt of holding inventory. This cost includes rent salaries and other financial costs such as opportunity cost. Inventory is a term used to refer to any good or service that a company has (Cousins & Lawson, 2008). These goods and services are specifically stored for the purpose of reselling them. When one considers the two definitions and considers the IKEA Company, then one will arrive at the conclusion that the IKEA Company has implemented this strategy in their business operations. When one considers the company, it has various stores in different countries. Hence, the company minimizes all its inventory and carrying cost. The company does this by making sure that it sells all its stock, and if any inventory is left in one branch then it is transferred to a branch that is in need of such inventory. This minimizes the company’s total stock since the company does not buy equipment that is unnecessary since such equipments can be gotten from other branches that the company holds. This ensures that the company has a continuous supply of its products to consumers in the market. Supply Chain Characteristics The supply chain management of IKEA is characterized by various factors. One characteristic is the fact that the IKEA Company uses raw materials that it acquires from different countries globally. The company is organized in such a way that if a branch is in a specific country then it gets its own raw materials from the respective country. This is very beneficial to the company because it reduces transportation cost. For example, if the company gets all its raw materials from one specific location then it means that the company will need to transport the raw materials to the different branches in different countries. This will result in high transportation cost that accompanies international transportation. Another characteristic of the supply chain management of IKEA is that the company has established long term relationships with their suppliers. This means that the company uses the same suppliers every now and then. This is an advantage to the company because their relationship with their suppliers allows them to be supplied with products at discounted rates. It also means that the company can get its products from suppliers which mean that they can pay back at a later date after realizing their profits. Having long term relationship with their suppliers also helps the company in that they are certain that they will always get the best products in the market because their suppliers will ensure that they have products which are of good quality so s to retain the company's loyalty (Voss, Tsikriktsis and Frohlich, 2002). The IKEA company supply chain management is also characterized by the fact that it sources its products globally. This means that the company tries its best to find the best products existing in the market. By doing so, the company is assured that it will always be at the top when it comes to product quality since it gets its products from the best suppliers internationally. This also means that the company is always at par with any technology changes when it comes to the materials they need in their production. Sourcing materials globally ensures that there is competition in the supply market ensuring the best quality materials (Slack et al, 2012). Finally, the supply chain of IKEA is usually market and production driven. This means that every decision made by the management of supply, production and the market are always given the first priority (Cousins & Lawson, 2008). Due to this, every aspect of the company is aimed at making sure that the company attains maximum production and that every product the company sells is accepted in the market overwhelmingly. This is an advantage to the company because when a company realizes total production then it is bound to make a lot of profits. This also depends on the response of the company’s products in the market. For example, if a company produces a lot of goods and services then profits will be realized if consumers in the market but its products. If customers do not buy the company’s product then it means that the company will suffer heavy loses Conclusion For a company to realize profit maximization, it important for it to have a good supply chain management strategy. This is because it is through supply that goods and services reach the customer. If goods and services do not reach consumers in the market, then it means that they will be unable to buy the company’s product. When good supply chain management strategies are combined with other factors such as marketing, then a company will generate the expected revenue from the sale of goods and services Business institutions can a lot from analyzing the supply chain management of the IKEA Company. Good supply chain strategies have made the company expand from a small store in Sweden into a huge internationally recognized company. From the supply chain management of the company, it is evident that managing a company’s supply chain in the right way can result in the realization of a business establishments profits hence it its success. However, it is crucial to understand that supply chain strategies alone can work in realizing the success of the company. It is through the combination of other business factors that accompany will result in success. This means that no company including IKEA can be successful by implementing only one strategy. This is the reason why the company has incorporated the strategies discussed earlier that has resulted in its success. By analyzing the supply chain of IKEA then one establishes the importance of having a good supply chain strategy. References Cousins, L & Lawson S. 2008. Strategic supply management: principles, theories and practice. Prentice Hall/ Financial Times. Easterby-Smith, M., Thorpe, R. and Jackson, P. (2012). Management research. 5th edn. London: Sage Publications. Hackley, C. 2003. Doing research projects in marketing, management and consumer research. Routledge, London. Inter IKEA Systems.2012. About IKEA. Inter IKEA Systems B.V. Accessed {http://www.ikea.com/ms/en_GB/about_ikea/the_ikea_way/our_business_idea/our_low_prices.html} Slack, N., Brandon-Jones, A., Johnston, R. and Betts, A. 2012. Operations and process management. 3rd edn, Prentice Hall/ Financial Times, London. Voss, C., Tsikriktsis, N. and Frohlich, M. 2002. Case research in operations management”, International, Journal of Operations & Production Management,Vol. 22, No.2, pp. 195-219/. Read More