Emerging competition in the corporate setting

POST MODULE ASSIGNMENT: SUPPLY CHAIN MANAGEMENT IN IKEA
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Table of Contents TOC \o "1-3" \h \z \u Introduction PAGEREF _Toc48395501 \h 31.IKEA’s Case Study PAGEREF _Toc48395502 \h 41.1IKEA’s SCM Conceptual Model PAGEREF _Toc48395503 \h 41.1.1Supply Chain Strategy PAGEREF _Toc48395504 \h 61.1.2Supply Chain Structure PAGEREF _Toc48395505 \h 61.1.3Supply Chain Operations PAGEREF _Toc48395506 \h 61.2IKEA’s Conceptual Model and SCM Case PAGEREF _Toc48395507 \h 71.2.1SCM Configuration PAGEREF _Toc48395508 \h 71.2.2SCM Collaborations PAGEREF _Toc48395509 \h 71.2.3SCM Coordination PAGEREF _Toc48395510 \h 81.3Literature Review and Conceptual Model PAGEREF _Toc48395511 \h 92.SCM Practices and Case PAGEREF _Toc48395512 \h 112.1Supply Chain Management Movement PAGEREF _Toc48395513 \h 112.1.1Planning PAGEREF _Toc48395514 \h 112.1.2Transporation PAGEREF _Toc48395515 \h 122.1.3Warehousing Management PAGEREF _Toc48395516 \h 132.1.4Customer Relationship Management PAGEREF _Toc48395517 \h 132.2SCM Practices related to Theories, Strategic Fitness and Operational Feasibility PAGEREF _Toc48395518 \h 142.2.1Sustainable Initiatives PAGEREF _Toc48395519 \h 152.2.2In-Store Logistics PAGEREF _Toc48395520 \h 152.2.3Inventory Management PAGEREF _Toc48395521 \h 152.3Effectiveness and Implication of Managerial Approaches PAGEREF _Toc48395522 \h 162.3.1Bullwhip Effect and SCM in IKEA PAGEREF _Toc48395523 \h 16Conclusion PAGEREF _Toc48395524 \h 17Reference List PAGEREF _Toc48395525 \h 18
“Post Module Assignment: Supply Chain Management in IKEA”
Introduction
Emerging competition in the corporate setting demands sustainability, innovation and consumer value to maintain a competitive reputation in the market. Correspondingly, supply chain management (SCM) assists corporations to maintain the distinctive edge in an aggressive marketplace by managing the flow of operations, improving business efficiency and cost-advantage (Antai and Olson 2013). Consequently, global brands emphasise on improving SCM practices to offer more value to stakeholder in real-time. According to Defee and Fugate (2010), the shifting focus from traditional SCM to digitalised system urges supply-chain managers to adopt learning environment, innovation and diversified product lines to fulfil transforming needs of consumers and manage bullwhip effect appropriately. Along with the implementation of an agile SCM system, customer-centred focus, digitalisation in business operations, and concern for sustainable practices are other crucial tactics to magnify the influence of SCM in a modern setting (Giannakis, Spanaki and Dubey, 2019). Those practices are driven to stabilise growth in the present business culture.
With those considerations in the changing business environment, IKEA performs extraordinarily by setting the great example in the furniture industry with its responsive supply chain system that is customer-centred and digitalised to offer low-priced, high quality and efficient services to end-consumers (Lindgreen et al., 2009). The case by Normann and Ramirez (1993) evaluates that IKEA generates high value for customers by managing the supply and maintaining a good relationship with exciting offers, low cost and high-quality products. However, the changing external parameters such as consumer demand shift, economic variations, political disturbance and ecological concerns can affect the SCM practices adversely (Messina et al., 2020). For this purpose, the research assesses the SCM practices and models of IKEA to determine the most effective approaches for being responsive in future complexities.
IKEA’s Case Study
The case study emphasises on the success of IKEA’s performance in global sourcing, customer and supplier relationship management, low-cost effectiveness and assembling business operations. It further elaborates that IKEA potentially utilises the cost-advantage of 20 to 50% on other competitors with the appropriate execution of advanced technologies to improve the outcomes from its value chain mechanism. With its integrated supply chain, IKEA remarkably designs products, maintain its logistics, warehousing and distribution for delivering value to its customers (Larsson, 2016). The following discussion elaborates the keys of IKEA’s SCM system.
IKEA’s SCM Conceptual Model
The conceptual model dictates the consideration of the business on its key components. Primarily, the supply chain conceptual model focuses on the three major components, including the configuration, coordination and relationship. From the research of Lu (2011), the conceptual model highlights three components of the supply chain process including the strategic framework to make the adequate decision for manufacturing based on the integration approaches, distribution channels of the firm and overall architecture of supply chain mechanism. This phase is associated with the SCM configuration. The second phase is developing relationships with the stakeholders, primarily employees and customers, which supports manager to gather information for substantial performance. The last component emphasises on inter-operational coordination for an efficient flow of material and processes. In the respective phase, the essential components involve manufacturing scheduling, production capacity evaluation, forecasting and managing customer value to add-value in the process.
By emphasising on the mentioned conceptual model of SCM, the figure below indicates the IKEA’s conceptual model that focuses on the organisational configuration, relationship and coordination practices.
Figure 1: Conceptual Model of IKEA’s SCM
Exploring the case illustrates the critical dynamics of IKEA’s supply chain framework based on its strategies, structure and practices.
Supply Chain Strategy
The case magnificently highlights that IKEA adopts the integrated SCM strategy to make effective decisions for managing resource capacity and distribution, resource planning and improving business effectiveness. Moreover, the remarkable execution of logistics management, transportation and vertical integration strategies through digitalisation supports the firm to generate value for customers. IKEA leads the furniture industry because of its advanced technology and automation tools that accelerate the value for stakeholders with the quality products and profitability. Moreover, the case highlights the customer management and supply management strategies to develop high competency in the marketplace (Normann and Ramirez 1993). Henceforth, the conceptual model critically indicates the SCM strategies of IKEA.
Supply Chain Structure
Depending on the vertical integration, central planning system, effective cost-structure, one-planning domain, learning environment, limited outsourcing and maintaining consistent quality and minimised cost highlighted that IKEA adopts the central structure for SCM (Jonsson, Rudberg and Holmberg 2013). According to Hultman et al. (2012), the central planning framework for SCM is significant for IKEA to be appropriate in dealing with the emerging crises and complications with the change in consumer demand and innovation with the agile SCM. Thus, it conclusively indicates in the SCM conceptual model for IKEA.
Supply Chain Operations
The company effectively control its logistical units, transit hubs and consolidation centre to integrate the demand and supply, eliminating excessive production, limiting the cost of SC processes and retailing the produced goods to consumers. Therefore, IKEA magnificently operates its logistics, resource allocation, innovation systems and strategic values units to manage productive relationships with customers and suppliers for achieving the competitive edge in the market (Larsson, 2016). Similarly highlights in the conceptual model above.
IKEA’s Conceptual Model and SCM Case
The illustrated conceptual model in figure 1 appropriately represents the SCM practices of IKEA from the case study. Depending on the three components of the conceptual model, the case presented the supply chain framework of IKEA.
SCM Configuration
By taking effective decisions based on strategic planning, innovation and advanced tools, IKEA organises SCM practices remarkably. The case by Larsson (2016) explores that the evolving technology in the furniture industry allows management to utilise it appropriately for gaining opportunities. Likewise, IKEA adopts such practices to create value in the business. Correspondingly, IKEA creates worth with three strategic practices that include the mobilisation of customers with ATM technology, provide attractive offerings to allies, suppliers, business partners and customers with effective configuration systems and reshuffle employee practices by offering them trained services. By focusing on Bag, Gupta and Luo (2020), logistics 4.0 adds value in the business performance, which triggers the SCM effectiveness of the business to boost the value and efficiency of the service offered. This way, IKEA adopts innovation to advance its operations and make meaningful decisions for growth and credibility.
SCM Collaborations
IKEA exceptionally maintains a strong relationship with its stakeholders, specifically with its customers. The case indicates that the company strategically focuses on managing strong affiliations with customers and offer them low priced offers to gain a competitive advantage in the market. IKEA potentially involved in manufacturing, inventory management and logistics to deliver the best quality products to its consumers. For this purpose, the furniture firm extensively expanded its stores globally to enhance the business reach and consumer’s access to furniture resources. Besides, IKEA adopt impressive marketing and sustainable strategies to maintain an eco-friendly environment within the workplace and in the surrounding as IKEA primarily concerned about the stakeholders of the business (Wilhelmsson and Persson, 2018). For valued customers, IKEA prints 45 million product catalogues in ten different languages and distributes among customers that present the 30% to 40% of company products to aware them about the business processes for inclining business integrity. Customer care with children area, cafes and facilities for wheelchair adds value for families in IKEA’s ambience (Larsson, 2016). With those facilities and customer focus services within the stores, IKEA creates a compelling experience for customers.
SCM Coordination
Supply chain management is the key to any business in the contemporary setting as it manages the operating cost, quality and efficiency to build a strong association with stakeholders in terms of value and profitability. Thus, IKEA extensively develops coordination within the business operations to enhance business outcomes. By overviewing the supplier network of IKEA, the firm has over 500 million customers to which IKEA serves with 300 stores in 36 countries, 46 distribution centres and more than 1000 suppliers. With the evolving preferences of consumers, IKEA is consistently adding on its product line that exceeds over 10,000 product lines. With such a complex network, IKEA effectively maintains its resources and cost for offering the low-priced products with extraordinary services to the customer through the automated and integrated supply chain management process. IKEA elaborates that the prime system that supports the supply chain is its efficient logistics system (Sandybayev, 2017). Other than that, the quality relationship with suppliers over the globe creates an advantage for IKEA to manufacture products in high volume. Thus, both of these approaches are productive for an efficient delivery system. Following are the critical operations for effective coordination.
* Manufacturing and Production. Manufacturing in-house improves IKEA profitability and competency to outperform other brands in a similar industry as it enhances cost-advantage and standard quality maintenance. According to the case of the IKEA supply chain, Larsson (2016) illustrated that IKEA substantially manages the standards of manufacturing and product design development capabilities to attain dynamic opportunities from its value-creating system and partners.
* Warehousing. The other significant practice to manage supply is warehousing strategy. As per Normann and Ramirez (1993), IKEA has more than 14 warehouses to manage the supply of products and storage facilities to manage the product shortage. IKEA potentially generates sales through online ordering, which required information systems in the warehouse to deal with sales analysis and shipping patterns for scheduling the process with expertise. This approach is integral in the supply chain to connect each strategy for meaningful outcomes. Besides, IKEA elaborates suppliers as the other valuable people to the business, which needs to be aware of the changing economic and environmental dimensions to work responsively. With the adoption of sustainable practices in the SCM process, IKEA focuses on the warehouse performance management design and digital warehouses to enhance the efficiency of the logistics (Borisova, Taymashanov and Tasueva, 2019). This connection optimised the supply chain mechanism more competitively.
Literature Review and Conceptual Model
The present era is evolving extensively with modern tactics and changing consumer demands that affect the performance of SCM operations and practices. Therefore, considering a responsive and agile SCM framework is the most appropriate tool to deal with future challenges and opportunities. For this purpose, IKEA expands its network worldwide to take advantage of the global community and creating value in the furniture industry with its agile supply chain model to fix the needs of the consumers. Additionally, IKEA SCM practices are extensively responsive towards market shifts and sensitive to environmental factors for improving the results (Baraldi and Ratajczak-Mrozek, 2019). The idea behind the execution of agile supply chain is to offer a wide variety of products and services to customers due to the attractive demand for dynamic product lines in the furniture industry (Dubey, Gunasekaran and Childe, 2015). Therefore, IKEA develops its supply chain system accordingly to react actively towards the demand characteristics in minimal lead-time due to its efficient logistics and automated system.
From the evaluation of Hilletofth, Reitsma and Eriksson (2018), an agile framework for SCM is worthy in managing high profitability, cost-minimisation and limited lead-time. Hence, all those factors are the key for IKEA to boost its expanded network of quality furniture supply. Depending on the agile SCM, IKEA promotes innovation, responsiveness, performa...