The road towards the newer millennium has been devised by IKEA based in Singapore. IKEA is working to improve the lives of people residing all around the world. The target that has been set by IKEA for the year of 2010 is to be the world renowned home furnishing company. This is the target that has been set by the company by having some main strategies in mind and these are related to the logistics as well as the supply chain costs.
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The main strategic intention that has been kept in mind by IKEA while designing all the targets is an increase in the sales volume and a decrease in the sales prices. For this main purpose the main item that should be under consideration is the supply chain logistics and the efficiency related to it. By the IKEA strategic decision makers it has been realized that the main target to focus on is the costs that are related to the logistics. It has been realized that the importance lies in the fact that the logistical costs should be reduced to a pragmatic level. The pragmatic way to reduce the logistical cost is to reduce the stock present in the supply chain (Müller, p. 15).
In this case it has been seen that the strategic decision makers have devised a decision that can be helpful in achieving these targets that have been set by IKEA.
One of the main strategies has been named as Vendor Inventory Management. Vendor Inventory Management is the strategy that will help the firm give access to the supplier for the inventory level of a respective customer as well as the customer’s demands. In this case it has been seen that the inventory levels of the customers are properly managed and maintained by the supplier as it is one of the main responsibilities of the supplier. Moreover it has been devised by the strategic decision makers at IKEA, that the supplier can be given the full rights and the authorities to replenish the customer’s inventory.
The inventory relationships have been improved by increasing the number of inventory relationships that the company has. It has been seen that IKEA has a total of 19 vendor inventory management relationships. It has been realized by the company that by increasing the inventory management relationships, the service level for the customer can be increased and the supply chain inventories can be decreased (Toomey, p. 55).
The logistical staircase that has been designed by IKEA can be included here. This is the staircase that shows the strategies that are to be implemented by IKEA so as to achieve the goals that are set by IKEA for the future. If the theoretical perspective is taken into account then it has been realized that the best way to cut the cost related to the logistics is to use different kinds of distribution systems. These are inclusive of direct delivery, vendor inventory management, transit, call off, as well as order point distribution centre (Müller, p. 50).
It has been believed by IKEA that the supplier is the most important authority in the inventory management and the supplier is the one factor who has the ability to manage as well as administer all the purchases. Employers in IKEA are not able to manage all the purchases as there are so many products of IKEA in the market and therefore here an importance related to the supplier has been recognized by the firm (Toomey, p. 88).
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The competitive bidding process is increased as this involves the purchase of the IKEA products. Trading areas are the ones considered to be the suppliers in the inventory management levels and it has been seen that whenever a newer product is launched in the market , trading areas are the ones that maintain the lowest customer price.
- Müller, Max. Essentials of inventory management. AMACOM Div American Mgmt Assn, 2003.
- Toomey, W. John. Inventory management: principles, concepts and techniques; Volume 12 of Materials management/logistics series. Springer, 2000.