One of the leading global retailers of home furnishings: IKEA Corporation
One of the leading global retailers of home furnishings is the IKEA Corporation. It was established in Sweden in 1943, and it has expanded throughout the years by offering products of the highest caliber. With 298 outlets opened across all of the countries, it has grown into 37 new nations. As one of the biggest organizations on the planet, the corporation is ranked 41st by Forbes magazine. Its goal is to offer practical and attractive home goods at reasonable rates so that a wide range of consumers can purchase them. The company has one of the best and unique supply chain and inventory management methods which have aided it in attracting and retaining more customers across the globe. Besides, it has also gained a competitive edge over its competitors due to its provision of high quality and affordable furniture. The purpose of this analysis is to explain into detail based on the IKEA Company case study on logistics and supply, how it has always used its employees in achieving efficiency and maintains a stable performance in the supplies and logistics.
How IKEA Uses Employees to Attain Effectiveness and Efficient Operation
IKEA uses it employees’ competency in the in-store logistics in its supply and management processes. Unlike many companies whose visions comprises of empty wordings, the IKEA has a clear vision in its functions and has always taken part in the distinctive value of its proposition. The logistic process of the company involves three stages. The first phase is the designing of the unique products for cost minimisation (Walker et al. 28). And as a result of its high volume of retail, it has always maintained good prices at as to what it procures. The operations of the store at IKEA are supported by the high-flow facilities and the low-flow manual warehouses. Other than designing and purchasing, the IKEA Store also involves warehousing. Therefore, the company has always managed to maintain the comfort of its customers by keeping a flexible and very reliable logistics services.
What IKEA Looks for in Logistics Co-Workers
IKEA Company hires co-workers who are hardworking and willing to learn professionals and have a good team spirit. Since most of its operations are both international and national, co-workers are required to demonstrate upon themselves a personal initiative to make progress in the field (Walker et al. 28). Additionally, the co-workers should be able to understand the activities of the stores are to find new solutions and be able to run the stores efficiently.
Work Areas in Logistics by the Workers
Receiving and Replenishment
It involves monitoring and recording deliveries, checking for delivery notices, sorting and separation of the goods and later taking the goods to the right sales areas. This is an activity that is carried out by the co-workers in the company. The co-workers are expected to be physically fit and energetic to carry out this task. Under this process, the customers are well served without delays. The company has ensured a competent and very flexible team in the department that makes sure that all the good ordered are delivered according to the time they are received and according to the said deadline in each product. The customer has therefore do not need to follow up on their deliveries once the orders have been made. The staff in the department also ensures that the stock needed by various customers is available at any time of order placement. In the records, the department heads are kept in touch with the flow of products according to how they enter and leave the stores. As a result, it makes it possible to organize for more stock and keep the store at its required capacity for the betterment of customers. This has not only promoted customer satisfaction but also build trust in the organization.
Managing Logistics
IKEA stores receive the large volume of goods daily making it a challenge to manage the stores. The manager in the stores is tasked to supervise the ordering of products and making sure that the right quantities of goods are obtained. Certain qualities are set for one to be a manager. Such qualities are an ability to lead teams, coordinate tasks, set goals and be able to communicate well. Therefore, in the logistics management, the staff involved keeps with the company’s and customer related requirements. The department assess that the good received by the company are as per the requirement and that they meet the required standards of the customers. The department also control the movement of good in the store. Therefore, they ensure that the methods of handling and movement of goods are safe to keep the perfect standards of goods.
Stock Controlling
Many goods move in and out of the warehouse and the stores. It is, therefore, necessary to keep an eye on them. IKEA has employed a stock controller who is in charge of establishing the routines and procedures to help lower down logistic costs. The qualifications to work as a stock controller include being analytical and best at solving mathematical problems. Besides, one should be able to communicate clearly with other colleagues. In the stock control department, the staff responsible works with the receiver and replenishment team to take records of day to day movement on good in and out of the store. The function of this department is therefore to make sure that the company does not run out of stock. In IKEA, the customers have never missed what they want. This has therefore made the company more reliable by its potential customers. The high competency in the stock control department has made the service of the company more effective and efficient since customers are served immediately they place orders for the goods without going past due dates. This has helped in avoiding traffics in the stores and confusions in deliveries.
IKEA Collaboration with Suppliers and Logistics to Achieve Satisfaction
Inventory Management at IKEA
IKEA Company uses a hybrid inventory management to outstand its competitors. It targets the mostly the middle-class members of the society through the provision of affordable products to its clients. Additionally, it makes differentiated products for customers who have diverse preferences for the products hence their most taste and most preferred items. Besides, the company makes simple products with low prices making their customers believe that the products are very cheap. Through inventory control, the company has maintained stability in the market with a constant supply and deliver of products.
Ethical and Sustainable Relationship with Suppliers
According to (Jacobs et al. 571), IKEA Company continuously communicates with its manufacturers and material suppliers thus maintaining a good management relationship with them. Therefore the enterprise can get a better price from its supplies hence reducing the cost of materials. The company produces a high volume of its products it, therefore, purchases its materials from very many suppliers close to 2000. It also has many trading offices in various countries which helps in the management of supplier relationships.
Several employees have been assigned to run the offices by checking the quality of materials, keeping an eye on working and social conditions, and also negotiating on the prices of the materials with the suppliers. IKEA Company also maintains a good relationship with its suppliers through the signing of long-term contracts which in the long run would lower the prices of the materials. Also, it is worth noting that through keeping close contact with the suppliers, the company has been able to carry out a supplier assessment to ensure the best choice of the supplier. Also, IKEA has been able to learn new trends in the market by close contact with suppliers from various parts of the region. This has helped the company in introducing new models of furniture to customers every time in the stores. The customers have, therefore, had a wide choice making the company have constant sales.
Combination of both Warehouse and Retail Processes
Within the premises of IKEA Company, all the stores have a separate storage where the products are kept. There is also the main showroom floor where the products are displayed for the view of the customers (Jacobs et al. 571). The clients can quickly obtain the furniture from the floor using a racking. Besides, there are reserve racks where more of the furniture is stored. The company uses pallet jacks and forklifts to lower the inventory, which is usually done at night for safety purposes. Additionally, there is also the warehouse off-limits available to customers which have heavy products that cannot be easily loaded without the assistance of the employees. In addition, every store has a warehouse on its premises in the company. The rack storages have made it possible in the company to let down freely the high levels stored inventory to the lower slot during the night. During store hours, the forklifts and the jacks are normally out of use for the purposes of safety. The huge number of employees in the company cannot allow for a free movement of the forklifts within the premises. In the warehouse, about the third lower levels are comprised of off-limits to the company’s customers. This is because, the lower space contains too bulky items that cannot be easily loaded by the customers without the help of the staff. But since the company wants as much self-service as possible, the management has always worked on reducing the number of items in the area. This has improved the services of the company with the customers having free and fair interaction with the products without interference from others.
Cost per Touch Inventory Technique
Jacobs et al. (571) argue that this is a technique in which the customers are allowed to select products and later retrieve them themselves. IKEA Company uses the tactic of cost per touch inventory reduce the cost of operations within the company. It does by not paying the customers for retrieval of the packages of the products they select. The touches on the furniture by the customers are thus minimized using the technique. The customers are allowed to select their own design of the furniture that they need and retrieve the packages themselves in an inventory management tactic "cost per touch". The company uses the strategy of the rule of the thumb. In that, the more the hand that gets into contact with the products, then the more cost is associated with it in return. The tactic has been best applied by the company in their everyday operation and has helped them to improve the levels in inventory management. For instance, in a case where a customer makes a choice on the type of furniture to buy, The Item is always ordered, and the shipments are made from the manufacturer. The item is also offloaded and moved from the delivery truck to the storage facility and lastly, the product is moved from the warehouse to the customer’s car or transported to the customer's premises. In some cases, the products can also be shipped from one point to the other or moved and loaded to a carrier. The resulting cost is always in the form of money. On the other hand, the fewer times an individual moves or touches an item, the lesser the cost associated with it. Therefore, IKEA saves cost with the guiding principles that it has made to minimize the touches because it the company does not have to pay the customers the cost of retrieving and taking the furniture home.
Maximum or Minimum Setting as a Proprietary System
Maximum/minimum settings system is a system usually used by the logistics managers in response to store level inventory reorder products and reorder points in the company. Under the minimum settings, the manager in charge ensures that a minimum amount of products is made available just before reordering again for more. On the other hand, maximum settings a maximum amount of product is set for order at one particular time (Hilletofth et al. 281). The system ensures that customers' demands are fully met at the appropriate time by making sure that not too few or many products are ordered at one particular time. Therefore the company ensures that there is a constant supply and availability of its products to its clients thus lowering the cost of sales and even meeting customers demand every time.
Using this strategy, the logistic managers can know how much of the inventory goes into the store from distribution centers and by direct shipping using warehouse management system data (Slack et al. 39). Additionally, the logistic managers get to know how much of the products have been sold using point of sale data. The information gained from the two data are used in forecasting for sales for the next coming days and order for more products to meet demands by customers. The maximum/minimum setting system ensures that there are right goods within the store of the company hence lowering costs of operations.
In-store Logistics
IKEA Company has employed logistic personnel who are tasked with handling inventory management in several of its stores. In the stores, there is store goods manager who manages the materials within the store. Besides, there is also the in-store logistic personnel responsible for ordering processes. The logistic staff has a responsibility to check delivery notices, record and monitor all the deliveries, sort, and separate goods, and later carry them to the right sales areas (Halldórsson and Martin 73). Therefore, they assist the company by ensuring that there is an efficient and effective flow of the goods in the stores thus improving customer loyalty and continually maintaining high sales. Through the help of these staffs, the company has maintained a constant flow of activities in and outside the stores. Also, it has been able to keep up with the pace of its competitors in the entire market.
High Flow and Low Flow Warehouse Facilities
The operations of IKEA are usually supported by low flow warehouses, which are manual based, and a high flow facility. The high flow warehouses use an automatic retrieval system and storage system (Hilletofth et al. 281). The high flow facility helps lower the cost per touch within the company. On the other hand, the low flow facility is mainly used for products with low demand, and it relies on manual processes. High flow and low flow facilities help reduce the cost of operations in the IKEA company, a factor which enables it to have a competitive edge over most of its customers.
Do it Yourself Assembly
Under this technique, the furniture is normally designed and sold to the clients without fully assembling them. The customers are, therefore, left to gather them by themselves. Too many costs of transportation are reduced in the process (Halldórsson et al. 73). Additionally, a large number of products are shipped to various destinations since non-assembled products occupy fewer spaces within the trucks thus creating more spaces for carrying more products. More rooms are therefore created within the reserve racks and warehouse bins. Thus more of the products are stored within the stores to meet customer demands since the packaging system takes less space. Also, this has promoted sales even to the remote areas that cannot be reached by huge trucks as the products can be carried by small vans to their intended destinations. Based on this strategy, the company has made its sales with the long distant customers having not to give an excuse of heavy loads.
Furniture Design
IKEA Company designs its furniture in a unique way such that the manufacturing costs are reduced in the process of designing. The requirements for quality, efficient distribution, and function are hence met by the company. The company also uses recycled products to make some of its products (Cetin et al. 317). This helps in lowering pollution within the environment, thus maintaining social responsibility within the society. The company is also looking towards using a few materials in making its products without lowering the durability and quality of the products made in the company. The few materials used also help in cutting down the costs of transportation since fewer workforces and fuel are employed when receiving the materials.
Outsourcing
Outsourcing involves subcontracting production processes to another company depending on the capacity of production and available resources. According to (Cetin et al. 318), IKEA Company uses outsourcing as a means to lower various costs such as the cost of shipping goods to different distribution centers where their clients can easily obtain them. Outsourcing has made the company improve its management to better levels. It has also made it possible to maintain the time and place utility of its customers. IKEA does not have to worry about the goods' delivery. The outsourced company takes the responsibility of timely delivery. This has made IKEA very reliable.
Material Handling at IKEA
IKEA Company produces a number of products that are handled daily. The goods are made available to the customers for purchase by ensuring that the goods move efficiently under all circumstances (Yang 34). Besides, the company has employed many co-workers to help in the operations of the stores. The main goal of the co-workers is to provide full control of the volume of goods and space to ensure that the sales are not interfered with. The handling process has always made and designed with the highest level of efficiency to minimize damages and wastage of products. The handling has also ensured products are arranged strategically for easy allocation by customers. This has promoted sales of the company over the years.
Conclusion
In summary, the IKEA Company has one of the best supply chain management with diverse strategies which have enabled it to have a competitive edge over its competitors. The organization has a well-organized supply chain management with the most qualified and competent logistic managers. The organization has employed many techniques to achieve some of these demands by their clients to meet the fluctuating needs of the customers. A typical example is the maximum or minimum setting system which helps in setting the maximum and minimum stock level which ensures the availability of the products for the customers at any given time. The organization also has over the years used the touch per cost technique during the distribution of its products. The touch per cost technique aids in reducing the costs involved in the operation and distribution of the product. IKEA company designs its furniture in a unique way to lower the costs of manufacturing of the products. Besides, it uses recycled products to make more of its products. It is, therefore, an environmentally friendly organization.
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