IKEA’s Business Logistics Management
Supply chain management involves managing the circulation of products and services, starting with acquiring raw materials and ending with delivering the final product to the client. IKEA is a furniture store located in 29 different states around the world. The company’s business logistics management processes include preserving sustainability with suppliers, incorporating the general merchandise and storage facility processes, using cost-per-touch stock control techniques, and using high and low-flow distribution centers. IKEA’s supply chain procedure is distinctive in handling the distribution staff while restocking merchandise.
IKEA’s Strategic Alliances and the Purpose
The IKEA organization integrates and works with trade partners, non-governmental organizations, and corporations to grow or strengthen the impact of its efforts to promote social and environmental issues. IKEA develops a joint social viewpoint by forming strategic connections with organizations such as Worldwide Fund for Nature, United Nations Development Programme, Save the Children International, and the United Nations Children’s Fund (Gong et al., 2021). The alliances help IKEA concentrate on advancing children’s rights and acting responsibly toward the ecosystem by reducing carbon dioxide outflow. The respective organizations can create long-term goals with the aid of practical ideas with the assistance of the affiliates to persuade the authorities to bring about significant improvements in the lives of the kids that would eventually also assist in the enhancement of the nation.
Strategies Applied to Procurement and Outsourcing
IKEA’s purchasing and outsourcing tactics aid in streamlining the production system from unprocessed goods to the delivery of completed goods to the consumers. In 1995, IKEA initiated an organizational transformation in procurement and sourcing practices to increase output and boost global competitiveness (Gong et al., 2021). After that, the company established the IWAY strategy that revolved around diverting attention from an explicit focus to procuring a set of items. The legal implementation of IWAY (IKEA’s Supplier Code of Conduct) demonstrated the company’s obligations to customers and the surroundings.
IKEA was originally a discount store, but it adopted flywheel, a technique bought from Amazon and Lidl, which changed the organization and helped it reach greater heights of achievements. The company’s deliberate emphasis on cost production and a healthy relationship with the suppliers improved the organization’s effectiveness in generating new items through the validation of the activities of the suppliers (Gong et al., 2021). The organization has placed a strong emphasis on the purchasing power of the items by setting a goal of lower purchase prices, collaborating with large suppliers, and joining forces with process-oriented businesses. IKEA’s business strategy is cohesive and can bind various projects while emphasizing the value of planning and organization in fostering adaptability within the firm.
Challenges and Risks Faced Internationally and Solutions
IKEA’s most significant issue was item pricing, which was relatively low in Europe and North America but was very expensive in China. The furniture cost was lower due to their structure, and the regional furniture warehouses could acquire cheap labor and input supplies. With an emphasis on China, the organization ran into several issues, including a low-price approach that confused Chinese customers (Gong et al., 2021). However, the company needed to follow local rules and establish a partnership for IKEA to retail in China since the strategy could work. Since residences in China are typically reasonably small, buyers want practical yet modular options. Therefore, the organization concentrated on elements such as modifying the furniture to suit the local clients’ requirements.
American consumers, as opposed to Chinese consumers, wanted furniture with more space and opulent appearance, more extensive beds, and enormous closets. The organization initially tried to replicate the established business strategy and its items there but ultimately had to concentrate on tailoring its items to suit the needs and tastes of its clients (Gong et al., 2021). In contrast to Asian markets, IKEA’s global marketing promised inexpensive items, but the assurances were not kept in China, and the company’s items also lacked significant appeal. Therefore, IKEA decided to focus on the middle-income and those with slightly higher incomes because they were more likely to be informed and committed to possessing a Western perspective on the furniture they wish to buy for their homes.
How IKEA Incorporate Social and Environmental Objective
The IKEA team is fully incorporated and devoted to being an environmental champion. Additionally, IKEA utilizes IWAY to accomplish social and environmental criteria. The corporation invested roughly $1.1 billion in an environmentally friendly supply chain. The firm also strongly emphasized recycling technology, inexhaustible energy, and bioresources (Gong et al., 2021). Its commitment to environmental protection also influences IKEA’s branding advantages. IKEA primarily employs timber and wool as its primary input materials, which has led to a significant investment by the corporation in organizations, including Global Forest Watch. Furthermore, wood from tropical forests is essential for the ecosystem, and IKEA does not utilize it as a raw resource. To attain its objectives, IKEA intends to switch entirely to 100% biodegradable and regenerated goods.
Technologies Employed by the IKEA
IKEA uses augmented reality, which overlays a digital picture over the physical world to give customers a perspective. Augmented reality has enabled the business to grasp its customers viewpoints and construct a complete image. To ensure that clients have quality time along in life, the company also employs virtual reality to enhance virtual experiences for the clients (Gong et al., 2021). The technology helps to maximize sales and boost sales potential, provide clients with a 3-D encounter, and improve the conceptual design, supplier involvement, production, delivery, and other relevant processes. VR is also accountable for motivating creativity inside the supply chain management.
Reference
Gong, Y., Jiang, Y., & Jia, F. (2021). Multiple multi-tier sustainable supply chain management: a social system theory perspective. International Journal of Production Research, 1-18.