INTERNATIONAL SUPPLY CHAIN MANAGEMENT – BSB20123-7 Written Examination Stimulus Material Case Study – IKEA
About IKEA Since its 1943 founding in Sweden, IKEA has offered home furnishings and accessories of good design and function at low prices so the majority of the people can afford them. IKEA’s vision is to: “Create a better everyday life for the many people” Its business idea is "To offer a wide range of well designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them" The IKEA concept is based on their market positioning statement “Your partner in better living. We do our part, you do yours. Together we save money” and focuses on a commitment to product design, consumer value and clever solutions. By using inexpensive materials in a novel way and minimising production, distribution and retail costs, their customers benefit from low prices. IKEA has more than 590 million visitors per year to its stores all over the world. In addition to the visitors in the stores, some 450 million visitors are tracked entering the IKEA website. IKEA’s main marketing channel is its catalogue that is distributed world-wide as 191 million copies (in 56 different editions and 27 different languages) displaying some of IKEA’s 9,500 different products. Sales for the IKEA Group for the financial year 2009 increased by 1.4 per cent to a total of 21.5 billion Euros. At the end of the 2009 financial year, there were 267 IKEA Group stores in 25 countries stocking everything for home furnishing under one roof. In 2007 the European market constituted 82% of sales, followed by North America with 15% and Asia/Australia with 3%. The IKEA Group has 123,000 co-workers spread across functions such as purchasing, distribution, whole-sale, range, retail, support functions and the Swedwood Group (see below for further details).
Today IKEA’s product range consists of 9,500 home furnishing articles, designed to be functional and good looking but at a low price. Each item is developed by IKEA of Sweden, which is also responsible for giving each product its unique name, such as BILLY and KLIPPAN. The company designs its own furniture, which is made by about 1,220 suppliers in more than 55 countries. IKEA has 31 trading service offices in 26 countries so production can be monitored, new ideas tested, prices negotiated and quality checked while an eye is kept on social and working conditions. Furniture is also sourced through Swedwood, an IKEA-owned manufacturer of wood-based furniture and components. However, third party suppliers provide the bulk of the company’s inventory, in line with its beliefs in flexibility and its strategy of limiting investment in productive capacity. IKEA incorporates environmentally friendly efforts into day-to-day business and continuously supports initiatives that benefit causes such as children and the environment. To cut transportation costs, IKEA uses flat packaging; customers assemble the products at home. IKEA’s supply chain has a global spread with growing sales and purchasing in all major regions of the world. What makes its supply chain really complex is that its stores are spread across many countries, that it has 1220 suppliers in 55 different countries making its furniture and that the stores are supplied from 31 central distribution centres in 16 different countries or directly from suppliers. In some cases, an IKEA store opening is a national event, with people sometimes travelling hundreds of kilometres to shop there
IKEA products are manufactured all over the world When IKEA sources suppliers to manufacture IKEA products, the aim is to find those who can produce products of good function and design at the lowest possible price (although not at any price). Some of these, in the Swedish forests around the birthplace of IKEA, have been working with IKEA since its earliest days. Others have their production plants in China, Poland or Germany. But no...
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