There are three recommendations made to IKEA in order to improve its

supply chain and business operations. These include offering ready to made
order products to its customers, capturing growing markets of the world, and
involve in horizontal integration strategies as well. Following contents will
help the company to implement the recommendations through its extensive
supply chain network around the world.
1. Ready to Make Orders
Make to Order is sometimes referred to as Lean Manufacturing where the
manufacturing starts when an order receives. Currently IEKA is depending on
its forecasting strategy to forecast the demand of its products around the
world. Ready to make order strategy helps the company to fulfill the
exclusive demands of customers. Fulfilling the customers exclusive demands
helps the company to make a balance between customer satisfaction and
efficiency of its supply chain activities (Heikkil, 2002).
a) Building Customer Relationships
An important step that can be taken in order to offer ready to make order
strategy successful is to make extensive network of customer relationship
(Parvatiyar and Sheth, 2001). There is always a need of home or business
furniture somewhere in the world. Companies can enjoy huge business based
on their relationships with their customers. By providing customized products
according to the demand of customers, IKEA can enjoy increased market
share and sales.

b) Customized Products
Currently IKEA is focusing on forecasting strategy, through which it operates
its manufacturing operations based on the forecast of demand of customers.
It then produces the products which are more in demand and thus supplies
these products to the customers. However there are number of customers
around the world who are seeking of customized furniture products. They
want products according to their own measurements and design. Such
customers can generate a huge amount of sales if targeted.
c) Make to Order for Existing Products
IKEA can offer its customers for changes in its current products according to
customers demand. Customers may ask for a specific product design
according to their own measurements, IKEA can respond to this request by
turning the manufacturing process for that particular customer according to
his/her demanded measurements (Soman, Van Donk and Gaalman, 2004).
d) One Point Make to Order and Make to Stock Solution
For this option of Make to Order strategy, IKEA does not need to make
exclusive and different arrangements, customers with their specific orders
may be dealt on the same floor where make to stock products are available.
Experts should be available on the floor to take the specific order from the
customer and delivering the order on the right time.
e) Lean Manufacturing with Existing Manufacturing Procedures

IKEA can enjoy a better mix of its current manufacturing processes and Lean
Manufacturing. It can start following Lean Manufacturing with some of its
resources if a certain order may arrive.
2. Capturing Growing Markets
There is always a growth potential in growing markets of the world. At a
single point of time there are several growing countries which offer attractive
opportunities for multinationals like IKEA. IKEA is currently enjoying an
increase of over 3% in sales in year 2013 by expanding its operations in
China and Russia. However there are many other growing economies which
offer long lasting growth for multinationals. Such economies include Asian
countries like Bangladesh, India, Sri Lanka, and Philippines. Middle Eastern
countries like Bahrain, Egypt, Iran, and Turkey are also one of good options.
These economies are growing at a very high rate and thus offer attractive
investment opportunities for multinationals.
a) Economy of Asia and Middle East
Asian economy is one of the fastest growing economies of the world. It has
over 60% of total worlds population and has many growing economic
powers in the region. The Asian economys foreign exchange reserves are
over $4 trillion which means that it has a greatest potential of growth and
profitability for multinationals like IKEA.

Due to export of oil products and hydrocarbon, countries in this region are
considered very rich and thus offer a great market to serve. GDP and figure
for import of products in this region has increased dramatically over the last
few years. Countries in this region would be a great opportunity to serve for
IKEA in order to grow and increase its profitability.
b) Online Sales
Like European countries, Asian countries are now also enjoying the
increasing trend in online shopping. In order to keep the cost at minimum,
IKEA may offer its products online to the countries in Asia and Middle East. In
this way it can reduce its cost of outlet, salaries and production points. With
the passage of time and with increase in sales it can turn into owning its own
outlets in the most demanded areas of the regions (HANSEGARD and
ROLANDER, 2014).
c) Franchising
Franchising is also an important element of gaining immediate response from
foreign markets. IKEA may also offer its products from its physical layouts
through franchising its outlets to local product retailers. Initially make to
stock products can be offered at competitive prices but later on customized
options can be offered to regions where the demand of products is high
(Aliouche and Schlentrich, 2005).
d) Research and Development

When going abroad for business, R&D is a very important tool to be used to
get a clear picture of market. Demand and taste of customers may vary from
country to country and region to region (Cooper and Kleinschmidt, 2007).
IKEA need to develop a R&D strategy exclusively for Asian and Middle
Eastern markets to know about the demand of products and taste of
customers of these new markets.
3. Horizontal Integration
IKEA is very much involved in vertical integration strategy. It operates its own
stores, has franchises and also operates its own stores. However IKEA must
also focus on horizontal integration in order to improve its supply chain
network. Although IKEA has very trusted supplier of its raw materials, but
adopting horizontal integration approach it may help the company to reduce
the cost further and make the supply chain activities more effective
(Mababaya, 2003).
a) Raw Materials
For its wooden products or furniture, IKEA buys more than 80% of its raw
material from outside vendors. These vendors are very trustworthy but cost
the company a huge amount as they also earn reasonable profits while
supplying raw materials to IKEA. IKEA may acquire the raw material supply of
its furniture and start producing the little equipments like screws and bolts
for its products itself. This can be done slowly with the passage of time.
Currently IKEA depends more than of 80% on outside vendors for raw

material supplies, with the passage of time this dependence may be reduced
to 70%, then 50% and likewise it can be reduced to less than 10%. In this
way IKEA would be handling its suppliers functions too and would reduce
companys cost by 13%.
b) Transportation
IKEAs products have to be shipped from one place to another, either from
production facility to outlet or from outlet to the customers home. Currently
the transportation service of IKEA has not been fully owned by the company.
For the transportation of its products it has contracts with several different
logistics companies. Company can buy its own trucks and vehicles to ship
the products from one place to another. Initially it would cost the company a
huge amount, but it would affect the costs and profitability in the long run
(Tseng et al., 2005).
Conclusion
Supply chain helps the company in increasing its sales, profits and ultimately
customer satisfaction. Supply chain can only result in the favor of the
company when it is dealt with care and does not ignored at any point. IKEA
has a large market to serve with its extensive supply chain network. Huge
markets are still untouched by IKEA which can generate huge sales for the
company. Some of these markets are in some of the growing economies of
the world.

Supply chain works more effectively if company owns horizontal and vertical
integration strategies. With each of these or both of these strategies,
companies can make its supply chain management functions more effective
and efficient.
Production companies, like IKEA, has a great potential to serve their
customers with make to order products. There are always customers who are
in need of customized products for their home or office. Such customers are
usually ignored by production companies but could be very valuable if
targeted exclusively. IKEAs sophisticated infrastructure makes it enabled to
meet the customized demand of its customers as well. This would further
increase in the number of satisfied customers for the company.
Supply chain management actually works best if all the ingredients are
supporting it in the right way. Whether its transportation, suppliers
assistance or companys production line, all elements of supply chain
management should be working effectively in order to make it possible for
company to get most out of it.

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