Ikea

In-Store Logistics at IKEA

by Steve Banker

November 5th, 2009

At many companies, the vision statement is comprised of empty words. Not at IKEA, where the company has a clear vision and its various functions work together to support its distinctive value proposition.

IKEA, the world’s largest home furnishings retailer, has a vision of providing “well designed, functional home furnishings [at] prices so low that as many people as possible will be able to afford them.” But the company also differentiates itself as a retailer. It offers distinctive product designs, and while its stores have a typical warehouse format on the bottom level, the second level provides a comfortable environment where customers can browse home furnishing concepts. From an assortment perspective, IKEA is distinctive by committing to a catalog of products that will be stocked for a year at a guaranteed price.

How IKEA's Vision is Supported Across the Organization (Source: ARC Advisory Group; click to enlarge)

How IKEA's Vision is Supported Across the Organization (Source: ARC Advisory Group; click to enlarge)

At a high level, IKEA designs distinctive products that are also designed for low-cost manufacturing. Most furniture is designed for the customer to assemble, and they are also designed to fit into an efficient packaging cube for low-cost transport, which benefits both the customer and IKEA. Because the company is a very high volume retailer, it gets good prices on what it procures.

IKEA’s store operations are supported by high-flow facilities (focused on the 20 percent of SKUs that account for 80 percent of the volume) and low-flow warehouses that are more manual. In its high-flow warehouses, IKEA employs automatic storage and retrieval systems (AS/RS) to drive down its costs-per-touch.

IKEA stores are also warehouses. On the first floor, the products selected by customers are picked off a floor pallet location racking as high as the typical person could reach....