How Does Ikea Inventory Management Supply Chain Strategy works

In the current era, everything has become digital and online shopping has turned out to become quite popular across the world. People often prefer shopping online compared to purchasing the products in outlets. In such an era, IKEA has become one of the biggest furniture firms across the world. How is that possible for IKEA? As of now, IKEA has been offering its services in the form of the best quality products in more than 52 countries in more than 424 stores. It’s actually a Swedish-based company that has specialized in designing and selling furnishings that are quite simple to assemble.

One can find a wide range of furniture that includes home accessories, kitchen goods and more that are essential for a residence. From the year 2008, IKEA has become one of the leading furniture selling company. Originally, a 17-year old carpenter namely Ingvar Kamprad established IKEA in the year 1943 in Sweden. In the year 2015, he secured a top position in the Forbes list as one of the wealthiest persons in the world. In fact, IKEA has a full form i.e., Ingvar Kamprad Elmtaryd Agunnaryd. The actual meaning of this word is the Swedish home furnishings retailer. This word has been derived from the initials of the founder and his hometown.

There are more than 2 lakh people who got employment through IKEA stores across the world. Even, there is an official website for IKEA that has more than 12000 products. How is it possible for offering a wide range of products at a reasonable price? Besides this, they have a massive stock of different items on a frequent basis. Are there any secrets behind the smooth functioning of IKEA stores all over the world? If you are curious to know the efficient supply chain process of this company then, you have landed at the right place. Check how IKEA is managing the Ikea Inventory Management Supply Chain strategy and the working procedure below.

Ikea Inventory Management Supply Chain

What is Inventory Management?

In fact, inventory management is referred to as the ability to manage both the inventory as well as the stock. Inventory Management is an element of Supply Chain Management. it includes different sectors that include controlling, ordering the stock, storing the stock and finally handling the amount of product for sale. It is quite simple to understand the meaning of inventory management. It is all about having precise stock in an accurate quantity at the right place and exact time available at the perfect cost. In order to ensure the best outcomes, IKEA has implemented the best inventory management strategies and tactics.

The code of conduct for Ikea Inventory Management Supply Chain is the way of purchasing home furnishing products. In short, it is referred to as ‘IWAY’. It comprises less number of rules and regulations that aid the makers diminish the influence of their activities on the work environment. The major vision of IKEA is ‘low price but not at any price’. IKEA considers offering products at reasonable prices. They wish customers will enjoy as they get products at low prices. But, it doesn’t give up the rule of exceeding it beyond its business principles.

IKEA’s vision: supported by efficient supply chain management:

As a kickstart, IKEA has a clear cut vision in offering the best quality products that are designed pretty well for the home furnishing purpose. Most of the people globally are able to purchase the products through IKEA as it offers products at affordable prices. Some of the major functions that include inventory management and supply chain operations by the company help the firm to enhance its services across the world. By adding all these functions, the people in the company work together and is compatible with a different value proposition.

IKEA is quite exceptional aiming to offer a chronicle of products that are placed under stock each time at an assured price. IKEA has set up its outlets in different countries that include Asia, Australia, Europe, US, Canada and more. Whenever people visit the stores like IKEA, they definitely look at the price ranges of different products and the presentation of each product. Besides this, people also explore the best quality consumer service. Most of the customers may not have awareness about the products that they purchase.

Those products need to get through numerous stages before getting them in their hands. Ultimately, the finished products are placed for sale in the outlets. This process is referred to as the supply chain. The Inventory management supply chain of IKEA comprises different sectors and includes several processes. There are truly three major industrial sectors in the supply chain that include Primary sector, Secondary sector, and Tertiary sector. In the first sector, it includes raw materials while the next sector includes manufacturing. In the final sector, it comprises of distribution and retailer. Lastly, it reaches the consumer’s hands.

IKEA Inventory Management Supply Chain Strategy?

In the IKEA store, you can find the maximum number of packages are flat. Ikea Inventory Management Supply Chain prefers the materials of different products that are available in a strategic manner. This way, they can diminish the supreme range of prices. In order to make the final products, IKEA utilizes recycled products and endurable goods. IKEA solely makes use of cost-per-touch inventory strategy. Based on the rule of thumb, there is less number of folks who touch the product and as a result, the lower costs will emerge. The products at IKEA are touched only less number of times compared to any other furniture outlet. It’s because the customers of IKEA needs to purchase and assemble the products all by themselves. As a result, they acquire the product at low cost.

IKEA Inventory Management Supply Chain

The main strategy of the company is that the customers need to pick their preferred product and restore the package themselves. This is referred to as the inventory management strategy of IKEA and otherwise known as cost-per-touch. If the number of hands touches a product, increased prices are related to it. For instance, consider a person choosing a piece of furniture to purchase. That product will be ordered, shipped from the maker, delivered into the warehouse, traveled all through the way to the customer’s house and handed it to the customer. Whenever a product is shipped, loaded and delivered, it requires more money. If the product is touched less number of times then, the costs become less eventually.

How to Separate High-Flow & Low-Flow Warehouse Facilities?

The IKEA outlet works are compatible with the high-flow warehouse facilities as well as the low-flow warehouse services which are manual. In the high-glow warehouse, this organization works on the automatic storage and retrieval systems in order to reach the target of ‘costs-per-touch’. In fact, the products that are piled up in a low-flow facility aren’t available at immense demand. However, the operations depend on the manual procedures as the workers may not be able to shift around.

The high-flow warehouses are actually performed with the help of the computers in an automatic manner. The retrieval of the packages is also done automatically. It has the ability to store more than 80 percent of the products. On the other hand, the low-flow warehouses secure the products that have less demand. This sort of operations is performed in a manual way. Whenever you visit the IKEA store, you can witness the repository of it is situated within the store next to the showroom. After finishing their window shopping, they can move into the store warehouse so as to purchase whatever they wish. The logistics manager and the goods manager in the store ensures that every product is available and in stock for the consumers.

This sort of ideas has turned IKEA into the most successful furniture vendor in the world. The main strategies include low operating costs and high product demand. This particular strategy makes every company remain aggressive in the marketing industry. Moreover, the company plans to implement unique and highly advanced ways to simplify supply chain management. IKEA has a picture-perfect vision compatible with the things that are actually cross-functional. It is not the only thing that makes IKEA quite unique but also offers a competitive benefit which is pretty arduous to make a copy of at different rival companies.

Conclusion:

That’s all! This is everything you need to know about IKEA inventory management supply chain process. IKEA has a goal to become the leading furnishing firm globally. It is not that simple for a company to increase profits and the market share. IKEA is a global industry that has selected to play the role of a leader in generating an effective way of working. We presume that this guide has given enough information about the supply chain strategy followed by IKEA.

It has provided enough knowledge for the suppliers in order to contemplate the key role of sustainable production. This way, IKEA has set as an exceptional player from its rivals. IKEA is the most trustworthy company for both the consumers as well as the suppliers. We have included an in-depth guide about the supply chain management of IKEA in this post. For more doubts, don’t hesitate to ask us through the comments section below.

Author: Naveen E

This is E.Naveen Kumar full time Content Writer, SEO, Digital marketing Expert, founder of financesrule.com. Really enjoying playing cricket at free times. Being a Btech Graduation from Computer Science stream Selected full-time blogging as my Profession.

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