Business Process for IKEA to Manage Supply Chain - Research Paper Example

?Information Systems supporting Business Processes Executive Summary The technological advancement has brought major developments in the business process, and advent of information system has revolutionized business world by offering a platform to bring efficiency in business activities, and it also strives to provide competitive advantage to competing organizations making market more competitive and more matured. IKEA has been dominating furnishing retailing and it present in many major international market. However, it has been trying to increase its business volume within next 5 years by expanding its markets and business process. For any retailer, the supply chain management which includes the functional areas like inventory and distribution is the core and primary activity and hence, it is necessary for IKEA to bring higher efficiency in its supply chain management for the improvement of its inventory management which plays very vital role in customer distribution and in cost reduction. In this regard, implementation of Information Systems (IS) like Transaction Processing Systems (TPS) and Management Information System (MIS) will be very effective ion achieving its next 5 years plan. The primary consideration in the betterment of Supply Chain Management, different levels of planning should properly organized through accurate decision makings. In this respect, daily transaction process and management information systems must be implemented properly. For TPS, IKEA should introduce RDIF technology in its inventory management for enhanced level of dialing activity with assured tracking system. In case of MIS, IKEA should follow ARIS framework that concentrates and related necessary business views. As RDIF and ARIS both are system-based technology, it requires the resources like software, hardware, proper communication, network, skilled labor, IT infrastructure and supporting organizational structure and culture. Table of Contents 1.Introduction 4 2.Importance Prevailing Inventory Management in IKEA 4 3.Business Process for IKEA to Manage Supply Chain 5 4.Information System for Supply Chain Management 7 4.1.Transaction Processing Systems and Management Information System 7 4.2.Requirement for IS for IKEA’s Supply Chain Management 9 5.Conclusion and Recommendation 10 Reference 11 1. Introduction The emergence of international trade that can be termed as major outcome of the globalization has led to increase the complexities of the prevailing business process. However, the prime reason behind such change is the availability of greater opportunities for market expansion and for higher scope of profitability. On the other that, these opportunities for rapid business growth has also caused in intensifying the competition in international level. As a result, in spite of the better scope for business growth, the profitability of the business has been hurting due to such fierce competition. The organizations with higher competitive advantage are the market leaders and they outperform the domestic and international players. Therefore, all the business organization within a specific market strives to gain sustainable competitive advantage by establishing core competencies. In this process, they have identified the use of technologies in their business processes as major tool to gain competitive advantage. Implementation of Information System (IS) in the multiple business process has been proved very effective in gaining competitive advantage in the international market. This paper will attempt to present the necessity and implementation of IS for supply chain management in IKEA’s global business. 2. Importance Prevailing Inventory Management in IKEA IKEA is one of the most popular global retail chains and it is mainly engaged in the retailing business of furniture, durable household items etc. Besides, it has also entered in food and restaurant business recently. However, it has been world famous for its furniture and durable household products’ retailing business. IKEA offers highly innovative furniture and durable households’ products for multiple purposes like for kitchen, decoration, living rooms, for children’s utility, bathroom etc. Basically, the IKEA is a Swedish-based company that was founded by Ingvar Kamprad during 1940s. Soon, it started to expand its business and experienced a rapid growth. With time, it has introduced its innovative products for its target consumers including the children’s furniture by expanding its business entire Europe. During 2000s, it expanded its business other parts of world like Russia, Japan, China etc (IKEA-a, 2011). In order to manage, the global business of IKEA, it has to maintain an effective system for the inventory management. In case of the retailing business, the process of inventory management holds an indispensible activity that strives to bring efficiency in its entire business activities, and it is very helpful in achieving a sustainable competitive advantage. In case of retailing business, the organizational risks like inventory risks are greater threat to the sustainability of the business. In this regard, IKEA has been trying to follow coordinated inventory control management in its organization. The primary aims of IKEA in its inventory managements are to ensure a higher consumer service and to minimize cost of inventory carrying. The present operational and supply chain management process in IKEA has been efficient in reducing cost of its product. This specific functional area in IKEA has made it a market leader in 43 countries in furniture retailing business as its inventory management has a major contribution in this regard (Center for Technology in Learning and Teaching, 2008). 3. Business Process for IKEA to Manage Supply Chain The functional area, inventory management is an integral part of the supply chain business process. The process for supply chain management in retailing is the most critical and the core primary task in the retail value chain process. At present, IKEA has been aiming to double its sales volume within the next five years by serving most of world market. Hence, IKEA is trying to achieve a higher quality of operational, distribution and supply chain management process. In a retailing business, the process of distribution and supply chain is the main operational activities. Hence, major areas in its operational activities include store & customer distribution, transport & warehouse operations, quality & goods flow management etc and these activities revolving around the two objectives i.e. for price reduction, for bring efficiency in high volume transaction (IKEA-b, 2011). The following structure of the IKEA Group of companies indicates the integration of supply chain process as one of the primary business activities. Figure 1: Structure of the IKEA Group of Companies (Source: The IKEA Group of Companies, 2010, p.11) The management of IKEA has realized the necessity of supply chain process for better inventory management & other activities and hence, it has included as its core process. Therefore to bring higher level of efficiency in its inventory related activities, the development of global supply china process is an inevitable criterion. Jonsson, Rudberg and Holmberg have identified that for framing the process of supply chain planning, it is necessary to identify the relationship among the four basic planning processes in IKEA. The following figure represents a basic but comprehensive planning process for its three strategic levels. Figure 2: Relationships between basic planning processes (Source: Jonsson, Rudberg and Holmberg, 2008, p.93) Based on the above planning process IKEA should attempt to manage its supply chain with a systematic function by planning centralized process, and this centralized business process should be supported by software. In this respect, the information technology is the only effective technology that leads to fulfill the above stated requirement (Jonsson, Rudberg and Holmberg, 2008, p.94). 4. Information System for Supply Chain Management The previous section has identified the required business process in IKEA’s supply chain management for bringing improvements in its inventory management which is significant area for its business leading to reduce its costs and better consumer distribution. Generally, there are four types of ISs that strive to bring efficiency in business process and these are executive support system, decision support system, management IS and transaction processing system. In case of IKEA’s attempt to make its supply chain centralized and software system supported for the betterment of its inventory management, the transaction process system (TPS) and management IS (MIS) are very crucial (Parsons and Oja, 2010, p.559). 4.1. Transaction Processing Systems and Management Information System TPS is vital IS that ensures the proper daily transactions in supply chain management. IT is very helpful in maintaining and tracking regular transaction data and assets. The TPS uses the online transaction processing (OLPT) where each products and transactions are registered for better tracking process. In this regard, the Radio-frequency identification (RDIF) system is worth mentioning. Wal-Mart, the retail giant has been successfully implemented the RDIF technology for its inventory management and Wal-Mart’s supply chain process is one of best example of effective retail management supply chain management (Roberti, 2010). RDIF technology is an automated system that helps to “identify, monitor and manage individual objects as they move between physical locations” and hence, it help to ensure high quality daily transaction process (Kamaladevi, 2010). For a sound and accurate inventory and supply chain management system, the decision makers always required updated and relevant information, and in this regard, the MIS is an indispensible IS for establishing the centralized supply chain management. The figure two depicts major planning process that must be framed at considering the global business of IKEA. Shelly, Cashman and Vermaat have described that “Management ISs often are integrated with transaction processing systems” as support to achieve higher accuracy level in daily activities (Shelly, Cashman and Vermaat, 1999). In the process of supply chain management information, the relevant information must be passed to the suppliers as well as to the customers. The following figure basic framework of supply chain management information. Figure 3: Supply Chain Management Information (Source: Radwan and Aarabi, 2011, p.991) For implementing an efficient level of MIS for supply chain management information, Radwan and Aarabi has advocated for using Architecture of Integrated ISs (ARIS) Framework. IKEA can introduce this framework for developing a globalized and centralized supply chain management system. ARIS mainly concentrates on five relevant views of a company i.e. data view, function view, organization view, control view and product/service view. The relevance and relationship of these five views can be identified using the following figure. Figure 4: ARIS House (Source: Scheer, 2001, p.10) 4.2. Requirement for IS for IKEA’s Supply Chain Management In order to integrate IS in business process, a number of resources and other requirement are necessary. TPS and MIS both are entirely system based and hence, there are requirements of specific hardware, software, databases, telecommunications and networks. On the basis of model based testing (MBT), a system based organization must consider for basic requirements and its relation, and this has been represented in the following figure. Figure 5: A System Organization (Source: Universidade Federal de Minas Gerais, n.d, p.2) For implementing TPS tools like OLPT and RDIF and for MIS framework like ARIS, IKEA should avail necessary resources including skilled labor force and proper organizational structure and culture. On the other, the process of implementation should follow systematic approaches including analyzing, planning, executing, controlling, evaluating etc (Natural Resources Management and Environment Department, n.d.). 5. Conclusion and Recommendation This paper has present significant aspects of IS by focusing its usefulness in inventory and supply chain management in respect of global business of IKEA, the most popular furnishing retailer. Inventory and supply chain management are very crucial functional area for IKEA’s retailing business. On the other hand, IKEA is aiming to double its business volume within next 5 years and hence, IKEA should develop a globalized and centralized inventory management backed by supply chain information management system. In this regard, implementation of TPS and MIS will be very helpful. In case of TPS it should introduce RDIF technology for assuring better dialing transaction by proper tracking. For better MIS, IKEA should develop and follow the framework of ARIS that covers very significant business views. However, implementing such ISs, it also needs to acquire necessary resources by inventing in IT infrastructure and by shaping a supporting organizational structure and culture. Reference Center for Technology in Learning and Teaching. 04 October 2008, Introduction to the Field, viewed 11 July, 2011, . IKEA-a, 2011, The IKEA Way. Inter IKEA Systems B.V. 1999 – 2011, viewed 11 July, 2011, . IKEA-b, 2011, Adapting to the future, Inter IKEA Systems B.V. 1999 – 2011, viewed 11 July, 2011, . Jonsson, Rudberg and Holmberg, 11 December, 2008, Global supply chain planning at IKEA, viewed 11 July, 2011, . Kamaladevi, B June 2010, RFID – The Best Technology in Supply Chain Management, Vol 2, NO 2, International Journal of Innovation, Management and Technology, , viewed 11 July, 2011, . Natural Resources Management and Environment Department, No date, Management information systems, FAO, viewed 11 July, 2011, . Parsons, JJ. and Oja, D 2010, New Perspectives on Computer Concepts, 13th ed, Cengage Learning, USA. Radwan, A and Aarabi, M 22-24 January, 2011, Modeling Supply Chain Management Information System Using ARIS Framework, International Conference on Industrial Engineering and Operations Management, Kuala Lumpur, Malaysia, viewed 11 July, 2011, . Roberti, 13 January, 2010, Wal-Mart CIO Still 'Bullish' on RFID, RFID Journal LIVE, viewed 11 July, 2011, . Scheer, AW March 03, 2001, ARIS Framework Concept, IDS SCHEER AG, viewed 11 July, 2011, . Shelly, GB Cashman, TJ and Vermaat, ME 1999, Discovering Computers 2000: Concepts for a Connected World : Complete, Cengage Learning, USA. The IKEA Group of Companies, 2010, Welcome inside Yearly Summary FY09 Comments FY09&FY10 IKEA® Group, Inter IKEA Systems B.V. 1999 – 2011, viewed 11 July, 2011, . Universidade Federal de Minas Gerais, No date, Requirements for Information Systems Model Based Testing, Universidade Federal de Minas Gerais, viewed 11 July, 2011, . Read More