Ikea - Logistic and Supply Chain Management

Logistic and Supply Chain Management

IKEA

Mr. Ono Supriadi

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Created by:

Safira Khoirunnisa (015201500136)

HTB 2015

Supply Chain Management at IKEA

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1. Supply Chain

1. Raw Materials & Manufacturing

1. Metal Parts

1. Baoshan Iron & Steel Co., Ltd. (Baosteel Co., Ltd.) → specializes in producing a full range of carbon steel, stainless steel and specially alloyed steel products represented by auto sheets, steel sheets for home electrical appliances, ship plates, steel for the energy industry, electrical steel and other high-grade products. In 2012, Baosteel stainless started to supply stainless steel for export only for IKEA's suppliers. Today, Baosteel not only supplies IKEA with stainless steel required for beds or couches in furniture, but even products ranging from basic cutlery such as knives and forks.

1. Baosteel Australia Mining Company Pty.Ltd., → is mainly engaged in development and production of iron ore and other minerals. It serves as a primary platform for Baosteel in investment and supply of iron ore outside China territory.
2. Rio Tinto → is a British-Australian multinational metals and mining corporation to supply quality coking coal to Baosteel for three years, starting in 2011. According to a source at Baosteel's raw materials department, the company has been importing about 300,000- 500,000 mt/year of coal from Rio Tinto over the past few years to Baosteel Co.

1. Steel Stone Co. Ltd → primarily deal with the production of nuts, bolts and screws for all kinds of furniture for IKEA.

1. Timber Products

1. Swedwood & Swedpan → since IKEA is likely the world’s largest single consumer of wood, Swedwood, a subsidiary company, handles production of all wood-based furniture.

1. Forestry work in Karelia and Vietnam → Karelia is an area with high nature values and the decision to source wood in this area brings on great responsibility. IKEA takes this responsibility very seriously. They source on a long term basis and source in a way that helps protect biodiversity.

1. Textiles & Leather

1. Royal Leather Industries Limited → is a vertical unit producing finished leather for shoes, garments, hand bags and furniture. IKEA approved Royal Leather Limited as its supplier of finished leather, especially for its environmental and social compliance capacity. The skins used by Royal Leather Industries Ltd are a by-product of the meat industry, regardless of whether they were sourced nationally or overseas. Around 200 shipping containers arrive every year from Australia, each holding 6,000 goat skins, complete with hair. In addition, there are the occasional shipments of cow skins from Argentina, and the skins of buffalo, cows, goats and sheep brought in from local markets. The smell emanating off them is putrid and sickly sweet, and the process to convert them into top quality leathers is long and complex.

1. Chemical Industry

1. Solrac Coatings (Jiaxing) Co. Ltd. → IKEA recently added Solrac Co. to its stable of liquid coatings suppliers, of which there are only ten worldwide. The company manufactures high technology waterborne coatings. Their latest deal with IKEA helps to establish Solrac Coatings (Jiaxing) Co., Ltd. as being technologically on par with the major international coatings companies that dominate the industrial coatings sector.

1. Distributions & Retailer

1. Erfurt, Germany (BLG Retail Logistics) → The BLG Retail Logistics distribution center in Erfurt works in three warehouse complexes, which were built successively during the period of growth. Here, the most diverse of items are consolidated and regularly shipped to furniture IKEA stores around the country. Perfect organization is required for the enormous quantities of goods which pass through the distribution center. All goods deliveries (whether by truck, rail or container) are electronically collected and compared with the data already saved in the IT system. If the delivery is complete and undamaged, the IT system automatically allocates bin locations to the goods. BLG’s tasks also include quality controls.

1. Reverse Logistics → Dissatisfied customers of IKEA can return their purchases through a collection center located at every city that has an IKEA store, which in turn checks and sends it to the distribution center that provided this product. The product is further sent to the focal firm in Sweden which recycles the product and re-distributes it again through the supply chain. There is another method that IKEA uses for its reverse logistics, which is consumers can return the product to the IKEA store they purchased it from. The IKEA store in turn tracks the distribution center from which the product was provided, and transports it to the center. This distribution center then sends it to the focal firm to be recycles or disposes the product.

1. IKEA

IKEA is defined as a lifestyle furniture store. It is known for selling disassembled furniture. Since January 20th 2014, IKEA owns and operates 349 stores, in 43 countries (with the majority being in Europe, the U.S., Asia, Canada, & Australia). The supply chain at IKEA involves a flow of production and processes through each of the three industrial sectors.