Ikea Value Chain Analysis

2.12 GENERAL ANALYSIS AND EVALUATION

The IKEA inventory management includes a flow of production. It comprises of raw materials, manufacturing, distribution, retailer and consumer. These classified under three broad categories of primary, secondary and tertiary sector. The development of the raw materials occurs in the primary sector where, IKEA designs its commodities in Sweden. During the designing, IKEA verifies that the products do meet the requirements for function, quality, and efficient distribution. The main factor that IKEA considers during the production of home furnishing is low prices. As they source their raw materials, they bargain the prices with their providers, verify the condition and value of the materials, check on the

Communication between IKEA and its materials manufacturers and suppliers. Manufacturing takes place in the secondary sector where the value-added process occurs. To achieve this, IKEA designs its commodities in a manner that the least quantity of resources makes up the best products. Examples include the use of hollow legs in their furniture and the use of filling material made from honeycomb paper for the tabletops interior in the place of solid wood. IKEA retail shops also add value to the manufactured goods in the tertiary sector through the provision of a way of shopping that differs from the usual high street practice. In this way, the needs of customers met in several ways. A choice presented to customers where each IKEA store is huge enough to hold over 9500 products. IKEA also provides home delivery and catalogues. It goes a long way in saving the time for

Initially, it installed three SRMs. Due to the dynamic development at IKEA, in two years, seven more SRMs developed. LTW has operated with IKEA and installed over 200 retrieval and storage machines in 11 countries. Con safe Logistics collaborated with IKEA in the year 1997 and have ever since set up a majority of the new distribution centers opened up globally by IKEA. IKEA with Con safe Logistics help has also established the Astro warehouse management system. The system being used in 15 of their distribution centers. IKEA chose to collaborate with them due to their reputation and expertise in high-quality integration, combining automated and manual warehouse management. SINO logistics, on the other hand, offers IKEA a total solution in the logistic industry. Clearing and forwarding, insurance arrangement, warehousing, transportation and offering logistic advice that assists IKEA in the efficient movement of trade and better management of the supply