ikea - OPER/084 IBS Center for Management Research IKEAs...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
OPER/084 IBS Center for Management Research IKEA’s Cost Efficient Supply Chain This case was written by A. Harish, under the direction of Vivek Gupta , IBS Center for Management Research. It was compiled from published sources, and is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. 2009, IBS Center for Management Research. All rights reserved. To order copies, call +91-8417-236667/68 or write to IBS Center for Management Research (ICMR), IFHE Campus, Donthanapally, Sankarapally Road, Hyderabad 501 504, Andhra Pradesh, India or email: info@icmrindia.org www.icmrindia.org
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
IKEA’s Cost Efficient Supply Chain “Assembled furniture is expensive to transport and store because you end up paying for a lot of air. By flat packing unassembled furniture and getting customers to pick their own products in store, Ikea dramatically reduced its transportation and warehousing costs and passed the savings to their customers” 1 - Carter McNabb, Partner, GRA , November 2008 . 2 INTRODUCTIO N On January 01, 2009, Modern Material Handling announced that IKEA Group (IKEA), world s 3 largest furniture retailer , had won the Modern s Productivity Achievement Award for the 4 5 Warehousing/Distribution segment for the year 2008-09. Founded in 1943, in Sweden, IKEA focused on offering a wide range of good quality, stylish, well-designed, and functional furniture at a low cost so that more people could afford it. IKEA kept cost reduction at the center of any decision making. It made efforts to improve its internal supply chain processes like packaging, warehousing, and transportation which contributed to its cost cutting objective. Its most differentiating factor was its flat packaging system which had significantly improved its operational efficacy. IKEA was ranked 35 in the list of the top 100 brands by Business Week for the year 2008-09. t h 6 The company s brand value was estimated to be US$ 10.9 billion in 2008. For the financial year 2008, IKEA registered sales of US$ 28.8 billion. According to industry experts, IKEA s supply chain management was the key factor for the success of the company. The company considered factors like carriers used for transportation and pallets used in warehouses to base its decisions like furniture design and packaging. As a result, IKEA was managing its costs better than its competitors and was able to offer products at 30% lower costs. IKEA maintained a long-term relationship with its suppliers and assisted them in improving their processes so that it would help in cutting costs further. The company did not offer free home delivery as other furniture retailers did and expected its customers carry the products with them in Jasmine Smith, “Achieving Supply Chain Efficiency,” Insid e Retailing, No vember 17, 2008. 1
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 15

ikea - OPER/084 IBS Center for Management Research IKEAs...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online