Topic ikea’s global supply chain management and business strategy

NATIONAL ECONOMICS UNIVERSITY ADVANCED EDUCATIONAL PROGRAM *** Subject: Supply Chain Management GROUP PROJECT Topic: IKEA’S GLOBAL SUPPLY CHAIN MANAGEMENT AND BUSINESS STRATEGY Instructor: Group: Class: Dr Nguyen Bich Ngoc Advanced International Business Management 60A Hanoi, 2021 MEMBER PARTICIPATION No Name Student ID Tô Thúy Lan - Leader 11186124 Phạm Phương Anh 11180435 Nguyễn Quỳnh Chi 11180777 Hà Tấn Dũng 11181066 Lê Thanh Hà 11181311 Contribution  Leader  Outline  Operations and analysis  Report editing  Sourcing and analysis  Reference editing Market channels and analysis  Firm’s introduction  Logistics and analysis  Business strategy  Planning and analysis  Presentation slides TABLE OF CONTENTS I INTRODUCTION 1 Overview Products and services II IKEA’S GLOBAL BUSINESS STRATEGY Business strategy International strategy Sustainable strategy III IKEA’S GLOBAL SUPPLY CHAIN 10 Planning 10 Procurement 12 Operations 15 Market channels 19 Logistics 22 IV IKEA’S GLOBAL SUPPLY CHAIN ACTIVITIES’ CONTRIBUTIONS TO THE IMPLEMENTATION OF ITS GLOBAL BUSINESS STRATEGY 26 Planning 26 Procurement 26 Operations 28 Market channels 35 Logistics 37 REFERENCE 40 TABLE OF FIGURE Figure 1: Map of countries with IKEA stores Figure 2: FY20 IKEA retail sales per type Figure 3: Generic strategies Figure 4: Four types of international strategy Figure 5: IKEA’s global supply chain planning process .10 Figure 6: IKEA IWAY principles 13 Figure 7: IKEA supplier selection and evaluation process 14 Figure 8: IKEA Circular Product Design Principles 16 Figure 9: types of waste within the operation 18 Figure 10: IKEA distribution locations 21 Figure 11: Logistics process 23 Figure 12: Sustainable process of IKEA 24 Figure 13: Four phases for IKEA's circular transformation .31 Figure 14: IKEA Circular loops .32 Figure 15: IKEA High-flow & Low-flow facilities management process 34 I INTRODUCTION Overview 1.1 History IKEA was founded by Ingvar Kampard in 1953, and it started as a mail order catalogue business in Sweden IKEA is named after the initials of founder Ingvar Kamprad, Elmtaryd the farm on which he grew up, and Agunnaryd, the nearby village Today, it’s a global home furnishing bringing quality, affordability, and beauty to everyone around the world Although IKEA is founded in Sweden, its headquarters are based in the Netherlands The blue and yellow IKEA logo is the symbol for immediate recognition of the brand As we can see, the logo enhances both the uniqueness and Swedish heritage The IKEA Brand blue color creates attention to the offer, which makes it stand out On the other hand, the IKEA Brand yellow is an optimistic color giving the customer a positive impression when they see the IKEA brand In 1943, Ingvar Kamprad founded IKEA as a mail-order sales business, and he started to sell furniture five years later The first IKEA store opened in Älmhult, Småland, in 1958 as Möbel-IKÉA (Möbel means "furniture" in Swedish) The first stores outside Sweden were opened in Norway (1963) and Denmark (1969) The stores spread to other parts of Europe in the 1970s Figure 1: Map of countries with IKEA stores (Source: Wikipedia) Document continues below Discover more from: International Supply chain management Đại học Kinh tế Quốc dân 119 documents Go to course Supply chain International Supply chain management 100% (3) TỔNG-HỢP - Hiệp định EVFTA 16 International Supply chain management 100% (2) Tata-Motors-SC2122 - Very good 28 International Supply chain management 100% (2) chuoi-cung-ung-dich-vu-thuc-an-nhanh-tai-viet-nam supply chain International Supply chain management 100% (1) Zara Supply chain International Supply chain management 100% (1) EMQI-K61 Group Trần Hoàng Thành Midtemr SCM International Supply chain management 100% (1) 1.2 Market In 2019, IKEA was Europe’s leading furniture retailer by sales and among the world’s most valuable retail brands It is estimated that the brand is worth almost 48.1 billion dollars in 2020 In 2020, Europe accounted for nearly 73% of IKEA’s sales, while Asia accounted for almost 11% The company generated a global revenue of nearly 40 billion Euros in the 2020 fiscal year The main market of IKEA is Germany with 53 stores, and followed by the United States with 51 stores In 2020, the leading selling country of IKEA products was Germany which accounts for 15.6% of IKEA’s total sales The second most profitable market of IKEA is the United States with 12.2% percent of the share One of the key competitive advantages IKEA has is that they understand the customers The purchasing factors which influence customers to buy furniture have been discovered by IKEA The company offers good prices and a huge range of products IKEA has continuously introduced new product designs that appeal to the customer’s taste Moreover, the company offers unique, positive shopping experiences to the customers All of these factors combined together to create higher sales 1.3 Main competitors IKEA’s products are affordable and of good quality, so it is considered as the world’s largest furniture designer Nevertheless, IKEA is also having to compete with many big and key players in the retailer business First of all is Walmart, headquartered in San Francisco Walmart provides a wide range of products with good quality, and furniture is also one of the categories provided by Walmart The company is a popular retail corporation, so they can be considered as a top IKEA competitor Amazon was founded by Jeff Bezos in 1994, it is the largest retailer in the world which provides the service through the Internet Nowadays, Amazon has expanded its services to a huge range of products under one company, so Amazon Home offers a wide range of furniture for the customers The company provides various services to their customers with no cost EMI (no additional interest), easy installation, free scheduled delivery and 100% authentic products 1.4 IKEA’s vision and mission The culture of IKEA is built upon enthusiasm, togetherness, and a “get-it-done” attitude The vision of IKEA is to create a better everyday life for the many people – for customers, but also for the employees of IKEA IKEA's manifesto is for a better night's sleep The vision of IKEA goes beyond home furniture The business of IKEA remains a positive image of the world – from the communities where they find materials, to the way IKEA’s products help customers to live a sustainable life at home The IKEA business idea is to offer a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them Consequently, IKEA’s product has a beautiful design, good function, and offers a low price 1.5 IKEA’s scale As of September 16th 2021, there are 460 IKEA stores operating in more than 50 markets with around 220,000 employees The revenue of the company in 2019 was 41.3 billion euro Fiscal year 20 was a challenging year for the IKEA franchise system Retail stores were strong until February, and then the pandemic hit, 75% of IKEA stores closed for seven weeks on average Despite the closure, many stores continued to take online orders By August 31st IKEA websites had taken billion visitors, and online sales grew 45% E-commerce accounted for more than 16% of total retail sales compared to 10% in 2019 Figure 2: FY20 IKEA retail sales per type (Source: IKEA.com) Products and services 2.1 Products IKEA designs and sells ready-to-assemble furniture, kitchen appliances and home accessories, among other goods and home services Furniture of IKEA is designed to be assembled by the customer By doing this, the company can cut costs, and customers can easily carry the product For IKEA, that could be a win because they think that we are more likely to feel connected to our purchase if we assemble it ourselves This is called the IKEA effect by Daniel Mochon, a researcher and associate professor of marketing at Tulane University’s business school On the other hand, some people feel the struggle to assemble the product on their own, such as single mothers As a result, IKEA acquired TaskRabbit in Sept 2017 for an undisclosed sum TaskRabbit is an assembly service that has your items assembled at the time the customer wants Since the acquisition, TaskRabbit furniture assembling tasks has gone up from 2% to 10% 2.2 Line of products Some famous items of IKEA furniture are the Poäng armchair, the Billy bookcase and the Klippan sofa, which is the best seller since the late 1970s IKEA products are identified by one-word names, and most of them are Scandinavian in origin Although there are some expectations, most product names are based on a special naming system developed by IKEA The founder of IKEA – Kampard found that naming the furniture with proper names made the customer more easy to remember 2.3 Services IKEA stores are usually blue combined with yellow, which is Sweden’s national colors They designed in a one-way layout encouraging the customer to see the store in its entirety Since 1958, every IKEA store has had a café More and more specialist foods are being added into the menu of IKEA’ café IKEA is known for its Swedish meatballs Mostly Swedish foods and products are sold in the café, but it also varies depending on the culture and location of each store In many locations, the IKEA restaurants open daily before the rest of the store and serve breakfast Food accounts for 5% of IKEA’s sales Ingvar – the founder of IKEA was known for saying, ‘You can’t business with someone on an empty stomach!’ Every store has a kids play area named Småland which means small lands in Swedish Parents drop off their children at the gate to the playground In some stores, parents are given free pagers by the staff, so that they can use it to call for the parent The parent can focus on buying the product of IKEA without the children disruption 2.3 IWAY - IKEA’s Supplier Code of Conduct IKEA, like all other organizations that have adopted sustainability practice, aims to be responsible in its undertakings That’s why the company created IWAY IKEA’s Supplier Code of Conduct as a way to develop their sustainability strategy IWAY is mandatory standards for environmental, social and working conditions, as well as labour and animal welfare, for all suppliers and service providers that work with It contains guidelines that help manufacturers reduce the impact of business activities on the environment and develop sustainable activities in which the suppliers operate Also, by making the suppliers adhere to the IWAY code, the company ensures that the quality of the materials conform to the appropriate standards As a result, IKEA’s products become more sustainable By implementing IWAY, IKEA can raise the supplier’s awareness about the environment Suppliers are able to apply standards learned from IWAY further down the supply chain to their sub-suppliers, and maybe even within other delivery contracts they have with other procurement organizations Besides, IWAY inspires their sustainable goals and changes the way the industry works It can be seen that IWAY is an important contributing factor to the sustainability strategy of IKEA 2.4 Building Relationships with Suppliers Supplier relationships are a significant component in increasing efficiency and profitability for businesses IKEA’s success can be attributed in part to its ability to communicate and manage relationships in order to obtain good prices on the items it purchases To begin with, they prefer to deal with a few important, high-volume suppliers rather than a large number of small ones Because of the huge number of orders, suppliers are not only eager to please them, but they are also able to decrease costs much lower than rivals Second, they have long-term connections with their suppliers The firm can receive attractive offers from the market by negotiating longterm contractual agreements that outline the duties and obligations of each party Operations The major source of value in IKEA operations derives from cost optimization and customer satisfaction, as well as sustainability practices 3.1 Global operation system 29 IKEA subsidiaries are given strategic roles to play by the parent company and help determine what the customer wants ● Franchises system IKEA’s unique wide franchise system plays a vital role in the success of the brand in expanding internationally The company operates its stores under franchise agreements in 30 countries worldwide There are 11 franchisees operating IKEA stores in more than 50 markets The Inter IKEA Group is the owner of the IKEA concept The franchisees that operate the IKEA stores around the world include INGKA, Dairy farm, Sarton, Mapa, Al Sulaiman, Al Homaizi, Al Futtaim, House Market, Miklatorg, Ikano, and Northern Berc Ingka Group, formerly IKEA Group, is the largest IKEA franchisee and it operates 367 IKEA stores The total number of IKEA stores worldwide reached 433 in 2019 Moreover, the company is reaching its customers through e-commerce in 50 markets Diversifying approaches, including e-commerce “ and smaller stores, is another tactic that brings the IKEA name to international customers ” ● Mass production By locating the massive chunk of its manufacturing units in Eastern Europe and China, the company saves on the cost of human resources to a significant extent “ The quality standard of each product is guaranteed since all the manufacturing procedures take place in one country only – this helps the company easily monitor the quality Aside from that, when making its products in a country which are suitably economical but relatively dynamic, IKEA can easily attract suppliers and manufacturers to implement its design specifications and price objectives ” ● Acquiring technology expertise The technological integration in production, distribution, marketing and human resource activities helps IKEA maximize cost-effectiveness and operational efficiency At IKEA, digital technology has played a central role in helping the company tackle its production, supply chain and sales, and marketing-related challenges The company is investing in digitalization to improve its manufacturing capabilities which is necessary to meet the ever-changing needs of its customers The home improvement and furnishing chain takes the opportunity of acquiring technology know-how from their franchises and stores around the world “ 30 It uses the latest and sophisticated technologies in manufacturing processes in each of its stores with positive implications on operational efficiency IKEA has also accelerated the efforts to automate production and to leverage the benefits of data-driven manufacturing Apart from higher operational and cost efficiency as well as improved product quality, digitalization will also help the company workers with more ergonomic workplaces Moreover, with digitalization, IKEA aims to have a seamless end-to-end supply chain, improving traceability and circularity Automation systems are also used for real-time adjustments in supply chain activities, which minimizes the bullwhip effect ” 3.2 Sustainability in IKEA operations One of IKEA’s goals is to transform from the linear to circular business The circular philosophy seems to appear in every aspect of the company IKEA is on the journey of making more from less – designing all products to be 100% circular, and aiming to use only renewable or recycled materials by 2030 At the same time, the company aims to become climate positive by 2030, reducing more greenhouse gas emissions in absolute terms than the IKEA value chain emits while growing the IKEA business Figure 13: Four phases for IKEA's circular transformation 31 (Source: IKEA website) IKEA designs have long been the premise for the company’s huge success Staying close to the suppliers and understanding the production capabilities, IKEA aims to continue using design to find new innovative and sustainable product solutions at affordable prices to meet the high ambitions the company has set IKEA's circular economy approach prioritizes the creation of long-lasting goods, and the firm is introducing plans and products with this goal in mind Quality and sustainability are two foundations of democratic architecture that address sustainability concerns IKEA products are manufactured in ways that are beneficial to both people and the environment in order to be sustainable The wishes and desires of IKEA's consumers are always the starting point IKEA aims to keep products in use for as long as possible by providing customer-centric, quick options for product maintenance, upgrades, and moving on The four loops of the Circular Product Design - reuse, refurbishment, remanufacturing, and recycling - allow it The company also has options to patch IKEA products, allowing them to last longer Customers are encouraged to use their goods for extended periods of time, and the manufacturer assists them by providing maintenance options IKEA provides spare parts repair as part of its scheme This service is becoming more popular; in the fiscal year 2015, 155,000 repair kits were shipped to customers (Inter IKEA Holding, 2016) Figure 14: IKEA Circular loops (Source: IKEA website) 32 Through strategy that shifts the focus to longer product lifespan, IKEA benefits in lowering manufacturing costs thanks to efficient reuse and recycling of materials In addition, their team really cares about the customer’s decision to design the suitable product to meet customer expectations In terms of packaging, by adopting flat packs, IKEA drastically reduces its transportation and warehousing costs and can pass the savings to their customers (30% lower costs) Do-It-Yourself assembly tactics also significantly lower packaging costs Those strategies also effectively reduce waste and pollution caused by household product transportation As people's awareness of CSR (corporate social responsibility) has been increasing, these strategies also meet the environmental protection needs of the customers 3.3 Innovative and efficient inventory management tactics ● Cost-per-touch inventory tactic Having customers select the furniture and retrieve the packages themselves is a unique inventory management tactic successfully adopted by IKEA The philosophy is that as a rule of thumb, companies find that the more hands touch the product, the more costs are associated with it IKEA saves costs with this guiding principle to minimize touches because it doesn’t have to pay the customer to retrieve the furniture and take it home This tactic helps reduce the need for delivery as the customers will be responsible for the delivery of their own purchases Other competitors may have to load, transport, and deliver the product IKEA on the other hand, does none of this Customers select their items, pick them up in the warehouse, and go home This is what helps IKEA maintain the low prices they are known for Cost-per-touch encourages customers to choose products and check by themselves instead of asking the help or advice from the staff Thus, this strategy also accounts for labor-saving and reducing the cost of warehouse management ● Maximum/minimum settings as a proprietary system 33 The in-store logistics managers use an inventory replenishment management process developed by IKEA called ‘minimum/maximum settings’ to respond to storelevel inventory reorder points and reorder products “ - Minimum settings: The minimum amount of products available before reordering Maximum settings: The maximum amount of a particular product to order at one time Since all IKEA inventory is only stocked at night after opening hours, the logic of its min/max settings is based on the number of products that will be sold from the reserve stack of the bin in a single day or two-day period Using IKEA’s proprietary inventory system, logistics managers know what is sold through point-of-sale (POS) data and how much inventory comes into the store through direct shipping, and from distribution centers through warehouse management system data Using this data, they can forecast sales for the next couple of days and order a suitable amount of products to meet that demand If the sales data doesn’t match the projected number of items that should have been sold that day, the logistics manager goes directly to the pallet and bin to a manual stocktake ” The process meets customer demand while minimizing ordering too few or too many products This strategy also ensures that IKEA has inventory ready to meet customers’ demands, lowering the cost of lost sales IKEA believes its process and system allow for the right goods to be in the store with greater certainty, and at a lower cost, than the traditional retail forecasting and replenishment process ● Effective usage of high-flow & low-flow warehouse facilities In order for the company to stay competitive and grow, there is a need for a flexible and responsive supply chain Therefore IKEA has realized potentials in implementing a postponement strategy in the distribution network to achieve this 34 IKEA has implemented a strategy of separated high-flow and low-flow facilities in its operations to support the postponement strategy High-flow facilities account for 20 % of the stock keeping units that make 80 % of the store’s volume and the low-flow facilities for the rest High-flow facilities are highly automatized and run by software to diminish the cost On the other hand, the low-flow facilities are run manually since the products are not as frequently moved, manual manipulation is cheaper Figure 15: IKEA High-flow & Low-flow facilities management process (Source: businesslogisticssite, 2017) This high/low strategy of warehouse facilities utilization not only optimizes the company’s resources but also leads to lean warehouse management Those operation practices provide IKEA with advanced methods to streamline supply chain management They have made IKEA the world’s most successful furniture retailer by lowering operating costs and meeting high product demand, characterized by sustainable approaches These characteristics provide the company with competitive advantages that are difficult to duplicate by competitors Market channels 4.1 Distribution When distribution acts as wholesalers for IKEA, as I mentioned above, products are transported from suppliers to distribution centers, where they are 35 unloaded, stored in shelves, and then loaded onto trucking vehicles when ordered by stores That ensures local storage for stores and purchasing products from suppliers worldwide That also helps the company know exactly the number of products the customer needs that also help them to meet enough products for the customers Furthermore, IKEA also catches the customers' insight and their requirements, thereby they also innovate their products to satisfy the customers Furthermore, the location of distribution centers and stores in convenient traffic locations such as Doncaster (England) or Bakersfield (USA) and find the nearest route there and deliver the goods to their distribution centers by container ship and rail freight The goods can then be further shipped to individual stores All IKEA distribution activities are carried out by containers, trailers, trailers, not using air transport because the costs are too high That is one of the best ways to help them to lower their cost of transportation 4.2 Marketing The success of Ikea using a variety of promotions is to stimulate customer purchasing competences which increases sales of Ikea Company Ikea uses a variety of promotions, as one would expect from a consumer durables company Ikea's most effective promotions, however, are sales and trade promotions, due to its well-known brand name and pricing structure As a result, here is where Ikea places the most emphasis Ikea ensures that customers take advantage of a variety of deals from the large-scale manufacturer on a regular basis by bringing coupons, price discounts, festival promotions, and other marketing gimmicks with them This is also the best strategy to encourage customers to buy Furthermore, Ikea Company also makes use of many marketing channels such as Newspaper, Television as well as Digital media Ikea's print advertisements are known for being sharp and to-the-point, capturing the attention of customers Their communication varies according to their presence in various regions Ikea, on the other hand, is a savvy marketer whose product speaks for itself They prioritize localized communication in their advertisements to engage with the local audience They also focus on advertisements on social media The customer's interaction with the brand is closer Customers feel free to rate, comment, give opinions about IKEA products/services on each post of IKEA company about the new products For the company part, they can easily monitor closely, control the information flow and promptly respond to the needs of customers on social networks 36 Another philosophy that the company pursuits is that IKEA communicates with its customers without spending extra money to educate them It spreads its commitment to “inspiring and enabling people to live healthier, more sustainable lives” by making its products to be recycle, designing them to be energy-efficient, and tells consumers innovative activities it has contributed to sustainability through its website, its “People and Planet Policy”, its IKEA stores, and annual reports Also, many of its moves toward sustainability were also published in newspapers This helps IKEA to attract consumers’ attention and motivate them to be part of its sustainable efforts by buying sustainable products, returning unwanted products to IKEA 4.3 Low-priced, sustainable sales tactics ● Buy-back service In order to increase consumers’ returning activities, IKEA offers a buy-back service to capture values from previously discarded products Target customers of IKEA are young people wanting to buy functional, fashionable and quality products at cheap price, therefore, selling like-new secondhand IKEA products for 50% of original price can still be attractive to many of IKEA’s existing customers ● Usership Model Service Usership models is a service in which IKEA offers furniture to customers for use rather than purchase for a certain length of time based on leasing contract IKEA will take care of the product's maintenance during the use time When a contract expires, customers will be offered the option to extend the contract, buy the ownership, or return the items to IKEA When consumers extend their contracts or buy ownership of the goods, the product remains in the customer's possession Otherwise, they are returned to IKEA and will be collected, examined, and sorted based on their condition Returned product will move onto its new cycle of ownership or be sold in “AsIs” area in IKEA This furniture leasing service contributes to the reversed supply chain by creating opportunities for products to be constantly reconditioned, therefore, extending the life of products 4.4 Customer service 37 IKEA monitors customer satisfaction on a regular basis based on input gathered from direct interactions with consumers, customer care services, and websites As a result, in order to assess customer happiness, the corporation examines factors such as the amount of complaints, returned products, and consumer suggestions Importantly, the corporation keeps track of demand for products at various price points to ensure that pricing is set in a way that attracts a larger number of clients The Ikea Place app increases the satisfaction and experience, loyalty of the customers that also help the company not only to draw new customers but also maintain the existing customer As we mentioned above, Ikea Place allows the customer to virtually arrange rooms in their homes using Ikea goods and accessories before they buy the products from IKEA That also helps the customers to easily choose the furniture which is suitable for their house and their budget Besides, have a team of customer service staff to answer customers' questions about the product through the app or they can also help customers choose the right product for the design of their home or their pocket That also helps the customers to reach wise decisions or understand more about the IKEA products Logistics 5.1 In-house logistics The design of IKEA products fit into an efficient packaging cube for low cost transport, which benefits both the customer and IKEA because the company is a very high volume retailer, so it gets good prices on what it procures Operations related to the logistics also affect operation processes IKEA widely uses its outbound logistics, when consumers buy and assemble products of their own Moreover, self-assembly furniture lets this process be more convenient, and packaging is comfortable which is no wasted space Furniture designers create product design in a very logistical way This method is useful for IKEA in terms of warehousing because the design gives the possibility to save space and optimize the stock Everyday, IKEA keeps track of thousands of products, so they can control the movement of goods in order to be available for consumers in store About one fourth of each store's employees work in logistics, but their impact is direct to operations IKEA is focused on controlling its space and a number of products in order to maintain uninterrupted operational processes The main advantage of having logistics in charge of store inventory fulfillment is that IKEA can set up a Key Performance Indicator (KPI) for logistics connected with the frequency of time a store shelf is in stock Through this key metric, a store 38 can gain more profit IKEA manufacturing and transportation costs are quite low because its products are made of recycled materials Consequently, IKEA uses fewer materials, requires fewer resources in order to produce and transport new components The most noticeable feature of IKEA furniture is do-it-yourself (DIY) The product is bought in pieces, which are placed into flat packages As a result, IKEA saves on shipment because the pieces require less room in delivery trucks They can ship more items at a lower cost The self-assemble feature allows IKEA to optimize the storage area more economically, so they can save money on inventory management Many products are transported directly from suppliers to the stores, which significantly reduces warehousing and storage costs IKEA warehouses are divided into two facilities Automated facilities for fast-selling products and manual facilities for slow-selling items By dividing into two facilities, IKEA saves money by reducing handling costs for low-demand products and stabilizing the flow of high demand items within the IKEA supply chain As mentioned earlier in the global supply chain of IKEA, they are using the IKEA inventory tracking system so that the staff can set up a number of products to reorder These settings help IKEA pinpoint the perfect reorder point, so they can prevent understocking and overstocking problems The tracking system helps logistics managers be aware of what is sold and how much inventory in the store through direct shipping and from distribution centers The logistics managers can use this information to predict sales for the next day and order products to fulfill the prediction Unless the sales data matches the expected number of products which should have been bought that day, then the logistics manager will manual stock management In terms of warehouse management, IKEA has built two types of warehouses including intermediate warehouses via UPS/Fedex and a warehouse facility in Elk Grove, California What is the most noticeable factor about these warehouses is the world-class technologies By teaming up with founders of Amazon, IKEA has taken a closer look at how tech incubated in show-business can transform a global supply chain With assistance from the system of automatic warehouse inventory checks, penand-paper works in IKEA have disappeared Instead, the process of data collection occurs through cameras and other sensors The entire process will be finished during shifts at night As an outcome, the accuracy in inventory checks is guaranteed and the availability checking process for the customers can be done quickly 5.2 Reverse logistics 39 IKEA’s long term goal is to pursue the circular economy, so reverse logistics plays a significant part to implement sustainable goals IKEA has recognized an opportunity from old, broken, and unwanted products By following reverse logistics, IKEA is acting in a more sustainable manner and reducing the company’s environmental footprint Moreover, IKEA is also advancing relationship with customers, and they are creating more economic opportunities for the company One of the largest benefits of an effective reverse logistics is valuable product data IKEA can have more value information, and this is vital for the answer of existing problems which are causing the return of products Thanks to reverse logistics, IKEA developed a deep understanding of the customer They understand the reason for customer returns, while IKEA is collecting useful data about product defaults and life-cycle By using proper and streamlined management of goods and materials traveling backward the supply chain, IKEA reduces losses while adding revenue The additional revenue from reverse logistics of IKEA comes from refurbishing, repairing, recycling goods, or they can sell off returned products or materials from them IKEA is cutting costs in various areas by streamlined reverse logistics processes They don’t have to worry about storage costs for returned products IKEA combines replacement shipping with return shipping to reduce transportation while enhancing customer satisfaction By developing an effective reverse logistics process, IKEA not only reduces costs but also they can accurately track and analyze them IKEA’s reverse logistics department and its activities will be able to rebound disappointed customers with a superior level of service by solving the return of their items In competitive markets, the relationship between brand and customer in returning processing is becoming more vital than ever The brand image of IKEA is becoming positive among consumers because brands that offer recycling for end-oflife goods are being recognized for efficiency and good practices Another highly valuable benefit of effective reverse logistics is increased customer retention As mentioned above, IKEA creates good relationships with customers because they are continuously solving the return request from the user Besides the above companyspecific benefits that arise when using reverse logistics, it provides the opportunity for waste reduction and environmentally sustainable practices 40 REFERENCE Abdalla, E (n.d) IKEA’s Supply Chain Strategies and Practices Academia Available at: https://www.academia.edu/41838274/IKEAS_Supply_Chain_Strategies_and_Practices About IKEA (n.d) IKEA Available at: https://about.ikea.com/ Anjoran, R (2016) A Look Into The Ikea Procurement Policy & Production Model In China CMC, Manufacturing Improvement Blog Available at: https://www.cmcconsultants.com/blog/a-look-into-the-ikea-procurement-policy-and-production-model-inchina Ayodele, A., Pasquel E., Taniesha,K., Sowah, E (2014) A critical evaluation of the application of Total Quality Management at IKEA Research Gate Available at: https://www.researchgate.net/publication/262874977_A_critical_evaluation_of_the_appli cation_of_Total_Quality_Management_at_IKEA_AUTHORS_Anthony_Ayodele_Erika_ Pasquel_Kimara_Taniesha_and_Erica_Sowah Bartlett, C.A & Ghoshal, S (1989) Managing Across Borders The Transnational Solution Boston: Harvard Business School Press Bhasin, H (2020) Marketing mix of IKEA https://www.marketing91.com/marketing-mix-of-ikea/ Marketing91 Available at: Buy Back 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