Democratic design: Low price with Meaning

Introduction
• The IKEA story began in 1943 in the small
village of Agunnaryd in Sweden
• Founded by Ingvar Kamprad at age of 17
• “We think creatively to make innovative,
affordable products”
• IKEA offers a wide range of well-designed,
functional home furnishing products at prices so
low that many people can afford them
 Timeline
1920’s Founder of IKEA, Ingvar Kamprad is born

1940’s Ingvar Kamprad, founded IKEA at age of 17 in Sweden

1950’s Production of first IKEA Catalogue in 1951

1960’s First IKEA store outside Sweden in Norway and Denmark

1970’s First IKEA store outside Scandavian country in Switzerland

1980’s USA & UK stores opened. IKEA won best Swedish Design Award

1990’s Stores opened in Hungary,Poland,UAE,Spain and China

Stores opened in Russia,Japan.By reducing its large size trucks IKEA

2000’s has reduced Carbon dioxide emissions
 IKEA Facts
• 127,800 employees
• 296 IKEA stores in 36 countries/ territories.
• 27 distribution centers and 11 customer
distribution centers in 16 countries.
• 41 trading service offices in 30 countries
• 1,380 suppliers in 54 countries.
• Purchases most of its supplies
from Europe
• 90-99% availability
• 9,500 products
 Statistics

Revenues in billion EURO

Top five purchasing countries Top five sales countries

China 21% Germany 15%
Poland 17% USA 10%
Italy 8% France 10%
Sweden 6% United Kingdom 7%
Germany 6% Sweden 6%
 Business Idea

• Design the price tag first

• See things differently
• Flat packing saves shipping cost
• Responsibility
 IKEA Innovation
• Warehouse attached to their retail stores
• Flat pack transportation
• DIY concept
– The customers pick up most items in the
warehouse by themselves.
– Customers transport the items back to their
home.
– Customers self assemble the furniture.
 IKEA Structure

IKEA of Sweden
Headquarters, design
& marketing

Trading Areas
Retail Distribution Purchasing, logistics &
supplier support
 Purchasing & Logistics

• The Trading Areas will cooperate with

manufacturers to supply products at the best
possible price.
• Lowest ‘landed price’ at IKEA stores (cost of
materials, processing and logistics)
• Suppliers are located in low cost regions.
• IKEA logistics experts assist suppliers
with advice on packaging, transportation,
IT etc to make continuous improvement to
reduce prices and decrease lead time
Supplier Support
 Inventory Flow
Supplier
Manufacturer
Supplier
Manufacturer
Supplier

VMI
Distribution Centers

Customers Retail Outlets

 Success Factors
• Packaging and Designing- Smaller packaging allows the customer
to transport purchased product in their own vehicle.
• Strategic Manufacturing- IKEA manufactures product all over the
world with 31% of their products manufactured in low cost
environments in Asia.

• Collaboration with Suppliers- IKEA works in close partnership

with its suppliers and has helped suppliers to understand how and
why creating a sustainable production is important

• Cargo transportation- Packaging is designed to maximize the

cube of ocean containers and domestic over-the-road trailers. This
allows IKEA to ship more units at a time which has direct impact in
the reduction of their overall landed costs
 Advantages
• You do half, we do half… together we
save money - self service & self assemble
• Layout and service in the stores is
outward, customer-facing.
• Shorter lead time from the suppliers
• Provides catalogue and home delivery
• Cost savings accrued from long-term
supplier relationships
• Vendor Managed Inventory (VMI)
 Advantages
• Good quality of products - match up to the
customer’s expectations
• Sells the same furniture all over the world
-economies of scale
• Educated suppliers understand that
sustainable production is vital
• Being considered a responsible
company by both suppliers and
consumers.
 Disadvantages
• Supply chain is heavily dependent on forecast.
• Some regions purposely overestimate demand
to ensure delivery, which creates an imbalance
in terms of demand coverage
• Occasional incoherence among different entities
of the supply chain
• Hard to change mindsets among users
 References

• http://www.3plwire.com/2005/09/30/ikea-logistics/
• http://www.thetimes100.co.uk/case-study--building-sustainabl

• www.ikea.com/
 Thank You

• Nitin Nagpal GAPR09IT184

• Rashmi Reddy GAPR09IT194
• Saurav Agarwal GAPR09IBWM168
• Subrat Nanda GAPR09IBWM153