IKEA's Cost Efficient Supply Chain

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Case Details:

Case Code : OPER084
Case Length : 14 Pages
Period : 1990-2009
Organization : IKEA
Pub Date : 2009
Teaching Note :Not Available
Countries : US, Europe
Industry : Furniture Retail

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction Contd...

Its most differentiating factor was its flat packaging system which had significantly improved its operational efficacy.

IKEA was ranked 35th in the list of the top 100 brands by Business Week⁶ for the year 2008-09. The company's brand value was estimated to be US$ 10.9 billion in 2008. For the financial year 2008, IKEA registered sales of US$ 28.8 billion. According to industry experts, IKEA's supply chain management was the key factor for the success of the company. The company considered factors like carriers used for transportation and pallets used in warehouses to base its decisions like furniture design and packaging.

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As a result, IKEA was managing its costs better than its competitors and was able to offer products at 30% lower costs.

IKEA maintained a long-term relationship with its suppliers and assisted them in improving their processes so that it would help in cutting costs further. The company did not offer free home delivery as other furniture retailers did and expected its customers carry the products with them in their vehicles and assemble the products themselves. This helped IKEA cut down on a part of its transportation costs and pass on the benefit to its customers in the form of low priced goods...

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6] BusinessWeek is a business magazine published by New York based McGraw-Hill Publishing Company.

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