IKEA is a world-class business leader in furniture products serving over 35 countries the world over. Such accomplishment doesn’t come easily and IKEA has time and again proven that its supply chain is the key to its success.
When IKEA first started expanding out of Sweden, it supplied its furniture from Sweden only. However this move was becoming more and more expensive as IKEA move further away from European markets. Eventually, IKEA revamped its strategy to supply its material from various suppliers all over the world depending on the cost and quality that a supplier could provide. For example the IKEA store in Dubai receives its supply from Asian countries at the same quality standards a person would expect to get from a European IKEA store.
IKEA has been able to maximize its supply chain efficiency by making optimal location decisions all over the world. “IKEA has more than 1,300 suppliers in 53 countries with the majority of its products coming from Europe (64%), followed by Asia (33%) and North America (3%)” (IKEA, 2009).
Definitely, in the light of the fact that the modern market demands a fast reaction to the innovations, IKEA tried to maximize the efficiency of its supply chain. One of the latest attempts to maximize the supply chain efficiency and to simultaneously minimize the costs connected with the supply of the goods was the idea of IKEA to focus on the suppliers located in underdeveloped countries with low prices and favorable tax climates. This example of locating in Middle Eastern regions like UAE, Saudi Arabia, and Asian regions like Malaysia, China, and Singapore clearly shows that IKEA has been locating where procurement costs and transportation costs are cheaper.
The supply chain for regions like US and Europe are costlier and hence IKEA tries to streamline these regions as well. For example a product made in India is available in stores in Europe however the process to do this is complex. IKEA first approves the supplier from a list of suppliers that cater to the region to which the supplier belongs. In this case, the Asian region will forward the Indian supplier to the base in Europe where after contracts and deals, the supplier will be chosen. This supplier will send its product directly to the stores in Europe rather than sending them to regional hubs and then forwarding it to other locations.
Regional locations matter most when the products have to reach in time for delivery to the customers. For example, IKEA’s concept is to purchase large pieces of land outside of the city to get cheaper costs. This way traffic and city issues do not hinder the flow of operations to the IKEA outlet and its processes run smoothly.
To conclude, the performance of every business company that deals with production of goods from raw materials is greatly dependent upon the supply chain, i.e. the cycle of getting the raw materials, their processing, and production of goods, storage and distribution of the latter. The supply chain of IKEA, one of the world’s largest furniture manufacturers, is currently rather developed but the company always looks for the ways to maximize its efficiency. There are currently the areas in IKEA’s supply chain that demand improvement, but the committed work of the company’s staff is sure to make these improvements.
Works Cited
IKEA. “Quick Answers” Ikea.com. 2009.