IKEA is very relevant to study in this case. This is because it is a fascinating brand for manufacturers interested in improving their purchase department on how it interacts with suppliers since they have already perfected the art of supplier corporation in many key ways. The company regularly appears in the literature which mentions it as one of the leading firms with efficient purchasing practices. In addition, the company's unique business system is recognized on a global scale. This paper will cover IKEA's activities on how it manages its purchasing department. Also, the paper will explore the business strategies that the company employs in its purchasing process. The paper will also mention the importance of creating an efficient purchasing strategy for the success of a company.
According to Hultman et al., as things stand today, IKEA is the largest home furnishing retailer in the world with about 355 stores in over 37 nations (9). The company is 75 years old, and it is this age that has brought considerable experience and hence proper purchasing supply chain. This admirable purchasing supply chain model is guided by IKEA's vision to provide cheap products so that as many folks as possible can afford them. One thing that is stunning is how the company achieves this without breaking the bank, compromising the quality, or causing harm to the environment. Baraldi points out that the success in achievement of IKEA's vision can be attributed to how the company manages its purchasing department. Specifically, this is IKEA establishment of several trading offices in various countries to ensure that the company can come close to its suppliers (96). By doing so, IKEA ensures that it can monitor all production processes, explore new ideas, check quality, and negotiate prices and manage the social working conditions. The top nations where the company makes purchases are China, Poland, Germany, Sweden, and Italy.
The other strategy IKEA employs in its purchasing and supply is massive internationalization. The approach stems from two critical dates, and that is in 1961 when the company ordered 20000 chairs from a Swedish firm and the other year is in 1991 with the acquisition Swedwood, a foreign supplier (Jonsson, Martin and Stefan 340). Since then, the corporation has extended its network, and today it purchases around the world and work with suppliers from various nations. Despite the massive internationalization, IKEA has a strong commitment to it suppliers and upholds the ethics of environmental sustainability that applies from the design phase of each of its commodities. To ensure this, Andersen and Tage assert that the company uses its own tool called the e-wheel to access the environmental impacts of all products and ensure that it meets the stringiest of quality and social impact (80). IKEA sources recycled products as textile clippings and plastic to make some of their goods and design them in a manner that they can stack easily for maximum shipping loads and fuel efficiency.
On the same note, IKEA has strict criteria in choosing the clients that it operates with and does specialize in a long-term relationship with the choice of supplier. The supplier must equally share the company's commitment towards the environment. IKEA sums this commitment in a manifesto that details how manufacturers can maintain environmentally friendly operations. Environmental consideration is of utmost importance when you produce so much furniture.
While IKEA values sustainability in its production as a way of cutting costs in its sales process, the firm ensures this by a strategy known as cost per touch inventory. While other furniture retailers rely on the attending salesperson to match clients with high-end products, IKEA uses its own model where customers are free to browse the house for products that need to be assembled at home. Cost per touch is the notion that the more hands that touch a commodity, the costlier it becomes. In the light of this concept, the company chooses to specialize in a form of micro logistic to ensure optimal flow of goods and people in the store (Ivarsson and Claes 740). Every commodity that comes into the store is monitored to ensure that deliveries are directed to the right section of the store where customers can access them quickly. Easy shopping experience boosts customers loyalty and sales numbers.
Perhaps the most ingenious part of IKEA's purchasing supply model is the final stage of assembling its products. Visiting an IKEA shop is the same way as going to a grocery store, you pick a product and put it on the trolley. This does it yourself mentality is best summed up with the company's slogan which states that "do your part and we do our part, and together we save money." The store is stocked up with commodities in a way that ensures customers can easily transport their purchase home. This is an added benefit in that it allows each store to stock up more substantial inventory and eventually reduce shipping cost.
In summary, purchasing is a critical function for a business as it affects performance at all levels. As in the case of IKEA, the supplies purchased for manufacturing or resale must be of acceptable quality at a competitive price. A company ought to develop appropriate purchasing procedures and closely monitor them. By doing so, they can enjoy low rates, quality products for consumers, efficient delivery as well as uninterrupted supply.
Andersen, Mette and Skjoett-Larsen. Tage. "Corporate social responsibility in global supply chains." Supply chain management: an international journal 14.2 (2009): 75-86.
Baraldi, Enrico. "Strategy in industrial networks: experiences from IKEA." California management review 50.4 (2008): 99-126.
Hultman, J., et al. "An interaction approach to global sourcing: A case study of IKEA." Journal of purchasing and supply management, 18(1) (2012): 9-21.
Ivarsson, Inge and Goran Alvstam Claes. "Upgrading in global value-chains: a case study of technology-learning among IKEA-suppliers in China and Southeast Asia." Journal of Economic Geography 11.4 (2010): 731-752.
Jonsson, Patrik, Rudberg Martin and Holmberg Stefan. "Centralised supply chain planning at IKEA." Supply chain management: an international journal 18.3 (2013): 337-350.
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