Ikea’s Cost Efficient Supply Chain-Case Study

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Case Study

IKEA’s Cost Efficient Supply Chain

Block Assignment Course: E-Supply Chain Management Name: İbrahim Fazıl Çelik ID: i6063844


IKEA founded in 1943 in Sweden, company’s purpose is producing well-designed, good quality and functional furniture at an affordable price for everyone. IKEA gives a great deal of attention to keep its cost down, to do so they are focusing to increase efficiency in their supply chain processes like packaging, warehousing and transportation. IKEA is one of the biggest companies in the world with achieving €27 billion in 2012.(Guardian, 2013) IKEA owes much to its efficient supply chain management system for this success. IKEA makes their product design considering carriers and pallets used in transportation according to lower their transportation and inventory costs. It is also working closely with their suppliers and assisting them in every manner that is possible. Thus, IKEA manages to produce its product 30% cheaper from their competitors, and this allows IKEA to holding the competitive advantage in the cost edge.

Company History

IKEA founded as a small shop in Agunnaryd, Sweden. Company becomes successful in a very

short time thanks to its lower prices than other sellers. Company used product catalogues very effectively to attract new customers. First furniture showroom of IKEA opened in 1953. After

suppliers boycotted IKEA because of its low prices, it began to design and engineer its products and outsource manufacturing process to low cost Eastern European countries like Poland. Year 1956 was one of the milestones for the company, flat packaging system tested

that year. This new system enabled IKEA to make substantial cost savings in transportation and storage. In 1963, IKEA opened first store outside of Sweden in Oslo, Norway. After that it opened the its biggest store in Stockholm. Self-serve concept introduced in the store, there were no sales stuff, customer provided with information...