IKEA - Cost-effective supply chain

 IKEA - Cost-effective supply chain

One of the most unique factors about IKEA’s supply chain is sustainability, they believe strongly in the concept of minimal wastage and reusing the products. For example: - To cut down on CO2 emissions what IKEA does is that they package the goods in such a way that leads to minimal wastage such as the DIY (do it yourself) furniture. This helps in decreasing truck loads and fewer trips.

By having an effective supply chain model of selling the components of the goods individually and giving customers a chance to build their own furniture they not only ensure less shipping charges by selling goods this way but what they also can focus on is decreasing costs of the end product to the consumer creating a competitive advantage. This is why they are extremely cost-efficient.

IKEA also has a unique method of storage and selling to the customers as their warehouses and stores are one entity. Again, not only does this lead to a cost advantage but also it leads in the replenishment of goods which are not sold. A warehouse manager can easily forecast the demand and the cost of goods what he will require on a daily basis as they are one entity and this leads to increased effectiveness and rising sales volumes.

The most productive part of IKEA’S storage is a fully automated computer called “Cylo” which can maintain density storage for high frequency. This is a system that will be implemented in most IKEA stores soon.

 IKEA also is very innovative in making the customer journey in the store more of an experience rather than just a mundane shopping day. The layout of the building is such that it feels like a puzzle as you go through different sections. The placement and the mapping of the store is such that the customer is forced to walk through all the sections of the store before he/she exits it but the customer is already engrossed in the store that they spend a considerable amount of time at the store.