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Supply Chain Operation for Ikea Malaysia

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Sabrina Chan

on 24 June 2013

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Transcript of Supply Chain Operation for Ikea Malaysia

IKEA Malaysia's Supply Chain
Primary Sector
IKEA designs products in Sweden
Sources raw materials from over 1,3000 suppliers in 50 countries.
Uses trading services
help negotiate prices with suppliers, carry out quality inspections of materials and analyze the carbon footprint
social networking stage of procurement where organizational boundaries are removed
Food products are source both locally and internationally
Ethical procurement – IWAY
Master-servant relationship

Create a better everyday life for may people
We have provided recommendations for
inventory management
customer service
information sharing
and supplier/manufacturer relationships
which goes in line of IKEA'S vision
we foresee it working well in both the long run
design by Dóri Sirály for Prezi
Global Centralized Supply Chain Planning
evolution of supply chain and logistics
2010, changed from decentralized to a centralized planning of its supply chains.
For better control of supply chain & to enhance delivery service and cost

Center of processes located at IKEA of Sweden
Supervises the IKEA universe & develops long-term plans
influences decisions concerning items being carried, purchasing, suppliers, distribution and store coordination
stands for IKEA Way of Purchasing Home Furnishing Products
requirements that is place for products and services and details what they can expect in return from IKEA.
covers working conditions, the prevention of child labour, the environment, responsible forestry management and more
must be adhered by all IKEA suppliers , manufacturers and third party agencies employed
Secondary Sector
IKEA’s manufacturing is largely offshored
Developing countries like China to keep costs low
IKEA outsources other jobs like the printing of their worldwide catalog to India or the central IT operations to Capgemini, HCL and IBM.
Ikea also outsources to their customers for the final assembly of the product.

IKEA uses the mass-customization production strategy.
Design the price tag first, then develop a product to suit the price
many of IKEA products are very similar in design, color or material
Uses the principle of postponement to differ products from one another

Risk Management
Risk test are carried out during the production.
After approval, will be reviewed for a second time by IKEA of Sweden.
Also, Ikea hires third-party accredited test laboratories
run random tests on their products for any harmful chemicals

Reverse Logistics
Tertiary Sector
IKEA Malaysia’s distribution has the capacity to hold 30 containers
IKEA retail store in Damansara acts as a warehouse as well
High holding cost due to high inventory levels
High inventory to keep up with highly demanded products
Customers part of their supply chain ( a strategy to reduce cost)
In order to reduce holding cost, there is the Flat Pack phenomenon
Benefits: practicing FCL (full container loads), more can be packed in a container.

the wastage from one manufacturing process would be used in the production of another item to form a new product
Example : LUSYBLOM cushions , filled with leftovers from IKEA quilt production
encourage customer to return waste by awarding points . Will then repair such products instead of discarding them
Disposal of light bulbs in ethical way, in secure landfills in Bukit Nanas, Seremban

Suppliers / Manufacturers
large volume of inventory incurs a large amount of holding cost
That space could be used in other , more profitable ways
Reduce inventory level by using multi period inventory system (P-Model)
Recommend for IKEA to reduce ordering time period to weekly
By ordering in a shorter time period, reduce safety stock in stores

Plans for newly available space
More showrooms
Customer Recreation Area
Parking Space
Check-out Counters

Retail Outlet
IKEA Malaysia usually addresses the complaints very generically
reimbursment? closure?
- Employ and screen through employees thoroughly to ensure they are of high caliber
- have regular ‘surprise’ check ups’ or inspections.
- ensuring customers with reimbursements when
- Carry out proper actions against employees (ex: character development training / warning letters)

For IKEA Staff,
recommended use of ERP
Customer Service
Information Flow
For Customers, use resources that are already available
damaged goods, fragile packing, untrained staff
encase their goods in added protective layer when in transport
have soft paddings installed on transport vehicles
Improve the packaging on flimsy products
training on how to maintain and store goods
frequent product recalls
what role does IWAY play?
Is there a need to re-format IWAY?
Run added test on random products on every level of the supply chain, not just production
ensure a local representative for IKEA is hired for suppliers & manufacturers of different countries
- Constant three way communication between IKEA of Sweden, IKE
A Retailers and 3rd party suppliers/manufacturers. (ERP)
Thank you....
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