LB5230 Managing Strategic Resources and Operations Report 3 Sample
Assignment Details
Aim
• Evaluate the role of the global economy in supply chain logistics management
• formulate strategies and tactics that increase firm productivity and performance in a global marketplace
This assessment aims to apply the fundamental principles and practices of operations and supply chain management from all the sessions. Assuming the role of Strategy and Operations Manager, apply the tasks, tools and underlying principles of operations and supply chain management in the chosen manufacturing or service company to improve their organisational performance.
Word Count: 2000 words (+/–10%). (Executive Summary, Introduction, Table of Content, Conclusion/Recommendations, and Reference List are not included in the word count).
Requirements: In a group or Individual develop a report for presentation to the CEO and/or Board of Directors of your chosen company, focusing on related issues in operations and supply chain management aspects, such as relocation and re-shoring, technology, operations and supply chain, inventory, quality, sustainable development and circular economy challenges.
Structure
Title page
Executive summary
Table of Contents
1. Introduction
1.1 Background of chosen Company and Product
1.2 Aims of Report
2. Supply Chain/ Value Chain Activities Map
3. Supply Management and Logistics Issues and Solutions
3.1 Shortage of domestic raw materials, parts and components
4. Quality Issues & Solutions
5. Inventory Issues and solutions
6. Potential Impact and solutions
7. Conclusion and limitations of this report
8. Reference (APA7th style)
9. Appendices (optional)
Solution
Introduction
IKEA is an international organization, which specialises in home furnishing products, furniture, and unique business approach. IKEA was started in Sweden in 1943 and is now one of the largest furniture and home furnishing retailers with over 400 stores in more than 50 countries (IKEA, 2024 IKEA has outlets in many places globally, and among them is Townsville, Australia where the company has established itself as the market progresses. The company follows the cost leadership strategic business model, provides fashionable and ergonomic products at a low cost. The IKEA core products are home furnishing, which are furniture, textiles, kitchens, appliances and room dividers that address the needs of customers from across the world. The key competitive advantage and sources of the company’s brand strength can be identified in the well-developed and integrated supply chain management strategy, customer orientation, and sustainability concerns. IKEA, a leading global furniture retailer, operates in various locations worldwide, including Townsville, Australia, where it has strategically positioned itself to cater to the growing demand in the region
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Figure 1;IKEA Company
Source: (Warehouse Automation, 2021)
This report examines IKEA’s supply chain and operations strategy to determine how factors like supplier, logistics and technology support IKEA to sustain its competitiveness. Any company’s supply chain is indeed one of the most vital strategic components as it addresses the issues of delivering the products to the market at a reasonable cost and maintaining the quality. Thus, studying the efficiency of the company’s activities at the moment, the report also focuses on a number of recommendations for the further development of IKEA’s supply chain to increase the company’s growth rates and achieve sustainable development goals.
Analysis of IKEA’s Supply Chain and Value-Adding Activities
IKEA is one of the biggest and most globalised retailers with a vast and global supply chain system that involves sourcing of raw materials, intermediate goods, and finished products to the final consumers of the furniture (Gong et al., 2021). The company has more than 1800 suppliers across the world and it has a presence in more than 50 countries. The strategies of managing the supply chain in IKEA are focused on cost leadership, supply chain quality, and sustainability (IKEA, 2023). It takes advantage of volume benefits in the procurement of raw materials and strong cooperation with suppliers for a standardized process that minimizes cost.
Main value creating processes in IKEA’s value chain include good design, cost leadership in manufacturing and supply chain management (Zhang & Li, 2020). Looking at the company’s designs of their products, this has adopted the issue of minimisation of cost of transportation, and space for stockpiling. Using flat-pack packaging has other advantages: transportation cost is reduced, inventory cost is lowered, and, therefore, the company can set lower prices for their products.
Practices like lean production and JIT inventory system, is common with IKEA operation management strategies. In lean production system, business removes any waste that is likely to be encountered within the value chain, thus; Just-In-Time (JIT) inventory means that products are manufactured and delivered on demand to minimize storage costs (Zhang & Li, 2020). Furthermore, with a well-developed regional distribution centres and a large number of trucks, IKEA guarantees timely delivery of all the products thus keeping costs at the lowest level and satisfaction rates high. So, IKEA’s different activities involved in supply chain and value addition activities are well coordinated in order to fully support the business model of the firm that is ‘’delivering a wide range of home furnishing products of good design and function at affordable prices.’’
The case of IKEA and its operations in Townsville is a good example of the right global expansion strategy. IKEA shown how to adapt a traditional business model to new operational environments, while staying true to the underlying brand strategy in this regional Australian market. The Townsville operation portrays that IKEA is in a position of ensuring people across the markets gain affordable and good design home furnishing products (Gong et al., 2021). IKEA’s global supply chain strategy has been demonstrated to have effectively entered this regional market through a process of attentive international standardisation and local adaptation. The strategy that has been applied in Townsville involves using the global sources of supply, cost leadership and achieving flat-pack design and logistics, which have been instrumental in realization of success in this local market.
Selection of Suppliers and Global Logistics
Supplier selection is a strategic focal area for IKEA since it involves the identification of suppliers who are to supply IKEA all the materials that it needs to function as a furniture manufacturer. When selecting suppliers, the firm uses specific benchmarks, which are the cost of the suppliers, the quality of the products provided, the sustainability of the suppliers and the reliability of the suppliers (Kankaanpää, 2018). Through the careful selection of the suppliers that can meet these standards then IKEA is assured a constant supply of good quality materials and at the same time at cheaper prices. It engages with its suppliers to make sure that the products like woods and textiles that it uses are procured in a manner that is environmentally friendly as per the IKEA policy.
Global logistics factor is one of the most important factors that would help IKEA to transport products to its stores and customers effectively across the globe. In supply chain management, it is a blend of local and global logistics methods that the company employs. IKEA buys its raw materials from different parts of the globe especially from countries where the cost of production is comparatively low and transport these materials to their regional warehouses. From these centres, products are taken to shops in order to be sold to customers (Laurin & Fantazy, 2017).
IKEA’s transportation systems for its products includes both sea transport, road transport and rail transport to make sure and ensure that goods reach target markets in the most efficient way at the least cost possible. The firm has placed a lot of cash on regional distribution centers in order to get rid of barriers of cost of transportation and to ensure that the products of the company are easily and readily available at the global markets for assignment help IKEA’s supplier and logistics decisions are consistent with the cost leadership objective, and still, guarantee affordable prices and high quality (Laurin & Fantazy, 2017).
Technology Integration and Innovation in IKEA’s Operations
Technology is central to IKEA, as it helps the organisation to manage its activities, as well as increase performance levels and competitive advantage. Another process that has been critical in its operations is the Enterprise Resource Planning or ERP this is an information system that compiles data concerning the various departments in the firm such as procurement, inventory and sales (Zhao & Tu, 2021). This greatly centralized system enables the company to know the inventory status, demand and availability of products and thus plan adequately.
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Figure 2:Enterprise Resource Planning System
Source: (Behura, 2021)
Within its warehouses, the company uses robotics and automated storage and retrieval systems, which helps to make further improvements to efficiency and minimize human mistake. These innovations assist in managing the supply chain starting by receiving goods to selecting and packing goods to be shipped. Through automation, IKEA is in a position to have greater stock control without having to spending a lot of money on labor (Zheng, 2024).
The firm has also enhanced an efficient use of technology in delivering its products with features like click and collect where customers order products online and collect them from the stores (Scotto, 2024). Moreover, IKEA has gone deeper into the online sales where the customers are provided with a proper interface that can be used to shop online bearing in mind that the system is fully integrated with the supply chain so as to display the stock status of the products in real time.
IKEA could use Artificial Intelligence (AI) in the future in demand forecasting, blockchain for supply chain visibility, and data analysis for efficient supply chain management (Scotto, 2024). These technologies could also help IKEA increase operational efficiency, cuts costs and make better decisions regarding customer satisfaction as the information is processed in real time.
Sustainability and Circular Economy in IKEA’s Supply Chain
IKEA has been consistent with its strategy to support sustainability and has made great progress in its supply chain sustainability agenda. The sustainability vision of the company revolves around the five strategic pillars including procurement of sustainable materials, waste management, and carbon footprint. IKEA buys around 50% of its timber from sustainably managed forests and has set goals to make its products completely from renewable or recycled materials by 2030 (IKEA, 2023). Further, energy efficient manufacturing has been adopted and the company has a plan of achieving Zero carbon operations by 2030 in its production plants.
IKEA is also in support of a circular economy in the management of materials and has been pursuing several measures that reduce material waste and lengthen the useful life of its products. It has also put forward numerous programs which it has designed to recycle and even reuse some of its materials. For instance, IKEA offers a “Take Back” program, through which customers return furniture items for recycling or repurposing to assist IKEA in achieving a circular economy. Also, the company has worked on research to ensure that it comes up with new products that are easy to disassemble for recycling (Stewardship Excellence, 2021).
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Figure 3:IKEA offers a “Take Back” program
Source: (Love the Work, 2021)
However, for IKEA, the following are the challenges that make the achieving of sustainability goals quite a challenge. Successful management of environmental issues entails controlling the effects of the firm’s global supply chain and transportation emissions. The distribution that this company uses long distance shipping and road transport as means of distribution make it vulnerable to emitting carbon (Laurin & Fantazy, 2017). In addition, IKEA has made a pledge to using recycled materials; this comes with its own problems regarding availability and quality of materials. However, these challenges can also be knock-on benefits for IKEA to develop and improve its circular economy systems, for example, in developing new recycling technologies, improving the energy efficiency of transport and expanding on its take-back schemes.
Recommendations for Improving Operations and Supply Chain Efficiency
IKEA’s supply chain can be enhanced in the following principles for better operation and sustainability. First, the company should unravel its suppliers’ list to discover more sustainable sources for raw materials necessary for production (Zhao & Tu, 2021). This may necessitate sourcing materials from suppliers that supply environmentally friendly raw materials including biodegradable plastics or eco-friendly fabrics in a bid to lessen IKEA’s footprints on the environment. Moreover, IKEA could always develop more extensive cooperation with its suppliers to increase significance of the company’s transparent and improved quality of its production.
The following is another area that technology can be used to further improve on IKEA’s operations. The firm could embrace Artificial Intelligence (AI) to perform efficient demand forecasting that would result in better stock control and minimal or no stock-outs. Likewise, blockchain can help IKEA to create transparency of the supply chain to trace the products and materials from the raw materials through the store to guarantee that code of sustainability is maintained (Stackpole, 2021).
In relation to sustainability, IKEA should further develop the coverage of its circular economy by extending the range of products that participate in Take Back and by finding other ways of recycling. In addition, IKEA can take further measures to refine its global logistics platform by deploying eco-friendly transport means which include electric brand trucks or environmentally friendly ships with low emission (Stackpole, 2021).
These technologies and sustainability strategies can enhance the supply chain and the firm’s goals of reducing the costs while bolstering its sustainability agenda.
Conclusion
This report has examined IKEA’s supply chain and operation strategy and from this we have seen that IKEA’s major strength includes; logistics and operation at a cheaper price, commitment on sustainability. The story of IKEA and its successful supply chain model with ability to offer low price with quality and sustainable supplies is a perfect test of the models. Still, issues like transport emissions and a need to further diversify the company’s supplier base remain a problem. With the help of the recommendations listed here – including the improvement of the existing supplier relationships, the use of advanced technologies, and the promotion of circular economy solutions – IKEA can continue to strengthen the effectiveness, the environmental footprint, and the company’s competitiveness of the supply chain. In this way, IKEA will align its organisation to the new requirements of international environment and to strengthen its position as the leader of home goods retail industry. The success of IKEA's Townsville operation serves as a testament to the company's adaptability and commitment to catering to diverse regional markets.
References
Behura, A. (2021). ENTERPRISE RESOURCE PLANNING (ERP). Www.linkedin.com. https://www.linkedin.com/pulse/enterprise-resource-planning-erp-arvind-behura
Gong, Y., Jiang, Y., & Jia, F. (2021). Multiple multi-tier sustainable supply chain management: a social system theory perspective. International Journal of Production Research, 61(14), 1–18. https://doi.org/10.1080/00207543.2021.1930238
IKEA. (2023). IKEA sustainability report FY23. https://www.ikea.com/global/en/images/IKEA_SUSTAINABILITY_Report_FY_23_20240125_1b190c008f.pdf
IKEA. (2024, May 27). How we work – IKEA Global. IKEA. https://www.ikea.com/global/en/our-business/how-we-work/
Kankaanpää, E. (2018). Supplier selection and evaluation process for a furniture retailer. Theseus.fi. urn:NBN:fi:amk-201901161314
Laurin, F., & Fantazy, K. (2017). Sustainable supply chain management: A case study at IKEA. Transnational Corporations Review, 9(4), 309–318. https://doi.org/10.1080/19186444.2017.1401208
Love the Work. (2021). #BUYBACKFRIDAY. Lovethework.com. https://www.lovethework.com/work-awards/entries/598053
Scotto, A. (2024, August 8). Ikea unveils giant walking store to promote click-and-collect service. Campaignlive.co.uk; CampaignUK. https://www.campaignlive.co.uk/article/ikea-unveils-giant-walking-store-promote-click-and-collect-service/1883843
Stackpole, T. (2021, June 4). Inside IKEA’s digital transformation. Harvard Business Review. https://hbr.org/2021/06/inside-ikeas-digital-transformation
Stewardship Excellence. (2021). IKEA Australia Buy Back Program. https://stewardshipexcellence.com.au/wp-content/uploads/2021/11/IKEA-Case-Study-November-2021.pdf
Warehouse Automation. (2021, October 21). Ikea’s new automated storage system dramatically improves delivery time. Warehouse Automation. https://www.warehouseautomation.ca/news-notes-1/2021/10/21/ikea-introducing-new-warehouse-automation-system-f3xlr
Zhang, J., & Li, Y. (2020). A study on Logistics Cost Control in Product Design. Journal of Digital Art Engineering and Multimedia, 7(3), 259–268. https://doi.org/10.29056/jdaem.2020.09.07
Zhao, B., & Tu, C. (2021). Research and Development of Inventory Management and Human Resource Management in ERP. Wireless Communications and Mobile Computing, 2021(3132062), e3132062. https://doi.org/10.1155/2021/3132062
Zheng, L. (2024). Analysis of Influencing Factors and Optimisation Strategies of Digital Transformation in the Home Furnishing Industry - Taking IKEA as an Example. 1(9). https://doi.org/10.61173/tkpnxk95
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