Inside IKEA’s Supply Chain & Inventory Management (2024)

Founded back in 1943 in Sweden, IKEA is now one of the world’s most well-regarded furniture and household appliance brands.

It is also the largest furniture retailer in the world. For 75 years, the company has been living up to its key goal, which consists in making “well-designed, functional home furnishings available to everyone,” as stated on its website.

But what we’re here to talk about is IKEA’s supply chain and inventory management.

That’s the backbone of the company, and what allowed them to grow at scale and reach these loft numbers:

  • IKEA closes up the Top 40 of the World’s Most Valuable Brands, according to Forbes rating.
  • The company owns over 400 stores in more than 50 countries around the globe.
  • Nearly 200,000 employees work for IKEA Group worldwide.
  • In 2013, IKEA printed 212 million copies of its catalog, translated into 29 different languages.
  • As of 2016, the company sold $42.4 billion in goods.
  • Each year the company launches nearly 2,500 new products. As of 2017, IKEA had 9,500 products in their portfolio.
  • In 2017, IKEA website reached a total of 2.3 billion visitors globally whereas the physical stores reached 936 million visitors.

Inside IKEA’s Supply Chain & Inventory Management (1)

The furniture giant owes a lot of this success to its unique and innovative supply chain strategy. That’s the straw that stirs the drink for IKEA, the thing that gives IKEA its competitive advantage.

In this post, we are going to take a closer look at the key features of IKEA supply chain and see how they have led the company to success.

IKEA Supply Chain: How It Works

Before we dive into the gritty details, let’s give a brief overview of how the supply chain of IKEA works.

It goes roughly like this:

  1. The company identifies the production requirements of each item, and determines the necessary logistics and related costs.
  2. IKEA representatives order the required raw materials from suppliers.
  3. The company distributes the resources for manufacturing and starts the production process while adhering to its quality requirements.
  4. The manufactured products are delivered to storage facilities and distributed to stores, and eventually, customers.
  5. If the customers are not satisfied with the quality, they can return products according to the warranty that they get with the purchase.

That’s the broad overview, but next we’ll get into the finer details about what makes IKEA’s supply chain so effective.

Inside IKEA’s Supply Chain & Inventory Management (2)

IKEA Supply Chain Features

These features allow the company to optimize its supply chain management processes.

  • Costs saved on manufacturing and shipment
    • IKEA manufacturing and shipment costs are quite low because its furniture and home accessories are made of recycled and sustainable materials. In such a way the company uses fewer materials and requires fewer resources to produce and ship new parts.
  • DIY assembly
    • The most remarkable feature of IKEA furniture is that customers assemble it themselves. The furniture is sold in pieces, which are placed into convenient, flat packages. As a result, IKEA saves on transportation and fulfillment because the pieces take up less room in trucks. IKEA can ship more items at a lower cost. The DIY principle also allows the company to use the storage space more economically and thus save IKEA money on inventory management. Finally, many products are shipped directly from suppliers to the stores, a strategy that also significantly reduces warehousing and storage costs.
  • Long-term relationships with IKEA suppliers
    • More than 1,800 suppliers in 50 countries sell raw materials to IKEA. The company uses 42 trading service offices around the world to manage relationships with suppliers. It signs long-term contracts with the most trusted suppliers and thus gets materials at the lowest possible prices. Besides, IKEA encourages its wholesale partners to be environmentally conscious by giving them rules and guidelines called the IKEA Way of Purchasing Home Furnishing Products (IWAY). Such an approach helps to improve quality standards and reduce prices. This is what makes the furniture more affordable for customers.
  • In-store IKEA logistics and warehouse management
    • Unlike other stores, IKEA hires in-store logistics managers who are responsible for all inventory-related processes, such as monitoring deliveries, sorting and separating goods, and directing them to the correct locations. Each IKEA store has a showroom on the upper floor and a warehouse on the ground floor, with more than 9,500 products in stock. In the showroom, shoppers can see and feel the products. Each item has its own article number as well as an aisle and bin number. Customers can use these numbers to locate items in the warehouse. However, shoppers cannot access one-third of the warehouse because this zone is designated for bulky items, which cannot be collected without help from the staff.
  • Cost per touch IKEA inventory management strategies
    • Cost per touch means that the more times somebody touches the product during the shipment, the more costs the company carries, because it needs to pay the procurement and delivery staff. However, IKEA customers collect the most of the items themselves, so fewer “touches,” and fewer costs, are involved.
  • Dedicated warehouse areas for fast movers and slow movers
    • IKEA warehouses are divided into automated facilities for fast-selling items and manual facilities for slow-selling items. This allows the company to reduce handling costs for low-demand products and ensure the smooth flow of high demand products within the IKEA supply chain.
  • Reorder point and order quantity management
    • With the IKEA inventory tracking system, the staff can set up both the minimum number of products available before reordering, and maximum number of a specific product to order at one time. These settings help the company nail down the perfect reorder point, and prevent understocking and overstocking issues. It keeps logistics managers aware of what is sold, and how much inventory enters the store through direct shipping and from distribution centers. They use this information to forecast sales for the next couple of days and order products to meet the forecast demand. If the sales data does not match the expected number of items that should have been sold that day, the logistics manager does a manual stock take.
  • Customer-centric approach
    • IKEA values its customers above all and strives to deliver the best service possible. Constant monitoring of customer satisfaction is an integral part of IKEA’s business strategy. They analyze the number of complaints, returned products, demand for certain products and customer suggestions. Company representatives even visit the homes of their customers to gain feedback and ideas on products that customers might be looking for. The collected ideas are then used as the starting point of a new design process. Finally, IKEA stores provide the visitors with additional facilities, such as play areas for kids as well as food courts and mini shops with traditional Swedish food. This encourages the customers to visit physical stores even in the era of ecommerce and online shopping.

Inside IKEA’s Supply Chain & Inventory Management (3)

Now you know the secrets of IKEA’s supply chain strategy

We talked about a lot of the things that helped the furniture giant become what it is, including:

  • How sustainable manufacturing saves costs on raw materials.
  • How the do it yourself approach, cost per touch strategy, and direct shipping to stores save storage costs.
  • How long-term contracts with suppliers leave room for volume discounts.
  • How warehouse zoning ensures efficient inventory management.
  • How internal inventory management software controls the reorder point and optimal order quantity.

These strategies are definitely worth borrowing. If wisely used and adapted, they can lead a retailer to success. If you’re looking to streamline your supply chain, take a look at Dynamic Inventory’s inventory management system, and see how it can take your business to a new level of efficiency.

Inside IKEA’s Supply Chain & Inventory Management (4)

Adam Shrum

Adam is the Assistant Director of Operations at Dynamic Inventory. He has experience working with retailers in various industries including sporting goods, automotive parts, outdoor equipment, and more. His background is in e-commerce internet marketing and he has helped design the requirements for many features in Dynamic Inventory based on his expertise managing and marketing products online.

Inside IKEA’s Supply Chain & Inventory Management (2024)


What type of supply chain does IKEA have? ›

Raw materials is transported to the factory to start manufacturing. IKEA's lean SC uses make-to-stock (MTS) practices to control its production. Through this technique, IKEA eliminates all types of waste, manufacturing before products are ordered by customers (Slack et al, 2010).

How does IKEA manage its inventory? ›

Reorder point and order quantity management

With the IKEA inventory tracking system, the staff can set up both the minimum number of products available before reordering, and maximum number of a specific product to order at one time.

What are IKEA's best kept secrets behind its smooth backend operations and efficient supply chain process? ›

First of the best secret behind IKEA's inventory management supply chain strategy is cost savings in furniture design. IKEA designs unique products with low manufacturing costs while meet severe requirements for functional, efficient distribution, quality and environmental impact.

What is unique or different about IKEA's supply chain versus other home furnishing companies? ›

IKEA's admirable supply chain model allows the retail giant to slash prices without breaking the bank, sacrificing product quality, or causing irreparable harm to the environment.

Does IKEA have supply chain issues? ›

“Keeping Ikea stores and warehouses stocked has been a challenge,” IKEA said in a statement. “Supply chain disruptions led to a substantial drop in the availability of products that we have yet to recover from.”

Why is IKEA having supply chain issues? ›

The furniture retailer says there are continued global supply-chain disruptions, which were triggered by the pandemic. That's led to some empty store shelves, customer frustration, and order backlogs. But the company says it's “committed to improving” overall stock availability to pre-pandemic levels.

How can IKEA improve supply chain? ›

DIY Assembly Lowers Packaging Costs

Here, IKEA sells the parts of the furniture instead of the whole product. Flat packaging saves space, makes transport more manageable, and reduces transportation costs. This strategy helped IKEA maintain its product costs during global supply chain disruptions.

What is Ikeas management structure? ›

Generally, IKEA organizational structure can be classified as hierarchical, reflecting massive size of the business that integrates 11 franchisees operating in more than 500 locations in 63 countries.

Does IKEA have inventory? ›

YES. IKEA has a cool little feature on their website called Product Stock Availability that lets you look on the product page to see if your local IKEA stocks a particular product.

What are the possible issues and challenges in IKEA operations management? ›

The main problem concerning IKEA is its inventory storage. Warehousing costs are on the high. The organization cannot afford to store thousands of products for each different store. This would not only mean high cost of storage but also wastages in products.

Why IKEA's operations model is so successful? ›

By merging retail locations with warehouse facilities and a self-service model, IKEA is able to reduce distribution and product storage costs to maintain a competitive edge. IKEA's operations management controls in-store logistics to manage these integrated facilities and support an efficient flow of goods.

How does IKEA manage to keep its operations economical? ›

IKEA is also able to cut costs and keep prices low because of the way that it sells its products. In 1956, IKEA founder Ingvar Kamprad introduced "flat packing," the method now synonymous with IKEA that cuts costs by letting consumers purchase their furniture in pieces and assemble it themselves.

Where does IKEA get its supplies from? ›

A majority of this production is non-industrial. We work closely with weavers and craftsmen and women in Vietnam, Indonesia, and China amongst others. Working with skilled artisans from around the world opens up doors for co-creation, inspiration and new production knowledge as well.

How has IKEA sought opportunities for its supply chain improvements through packaging? ›

Inventory Management

By packaging their products compactly, customers can easily take their purchases directly from the warehouse to their homes to assemble themselves. This allows Ikea to maintain a larger inventory, in turn reducing the company's shipping costs.

What is unique about IKEA's strategy to attract customers? ›

Sponsorship and Influencers. IKEA-sponsored comedic series Easy to Assemble. Its innovative content marketing was way different from a furniture product demo. Incorporating sponsored digital marketing campaigns and social media influencers have boosted the Ikea marketing strategy.

What challenges has IKEA faced? ›

The pandemic limited growth in FY21, and IKEA retail sales benefited as the world re-opened. On the other hand, inflation and supply chain issues impacted FY22 sales, and lead to rising costs and higher prices.

How long will IKEA supply chain issues last? ›

Ikea expects shortages due to supply-chain crisis until mid-2022.

How did IKEA succeed to solve their problem? ›

At the heart of Ikea's success is value: You know what you're going to get when you shop at Ikea, and it's going to be affordable. In fact, price is so important to Ikea's strategy that the company first decides on the price of a piece of furniture and then reverse engineers the construction, the company says.

Why is IKEA low on inventory? ›

"The impact from the corona pandemic results in backlogs in production with suppliers and challenges in the world wide transportation capacity overseas. Because of this, there is currently some delay in the supply of certain products. This can influence the availability of products in the (online) stores.

How many suppliers does IKEA have? ›

Log in here. We cooperate with approximately 1,600 suppliers, and about 1,000 of those are home furnishing suppliers.

What is the competitive strategy of IKEA? ›

Offering the lowest prices.

Cost effectiveness is one of the solid bases of IKEA competitive advantage. The global furniture retailer is able to offer low prices thanks to a combination of economies of scale and technological integration into various business processes.

What are different types of inventory? ›

The four types of inventory most commonly used are Raw Materials, Work-In-Process (WIP), Finished Goods, and Maintenance, Repair, and Overhaul (MRO). You can practice better inventory control and smarter inventory management when you know the type of inventory you have.

What is meant by inventory management? ›

Inventory management is the tracking of inventory from manufacturers to warehouses and from these facilities to point of sale. Best practices of inventory management and visibility.

What is inventory management? ›

Inventory refers to all the items, goods, merchandise, and materials held by a business for selling in the market to earn a profit. Example: If a newspaper vendor uses a vehicle to deliver newspapers to the customers, only the newspaper will be considered inventory.

What are the operations characteristics of IKEA? ›

IKEA uses a self-service model instead of appointing salespeople to attend customers. It also focuses on low-cost, modular, and ready-to-assemble furniture. The products are provided to the customers in a flat-packed form.

What are the four key capabilities IKEA needs to make its business model work? ›

In order to reach the shop floor, a product must meet four criteria: affordability, sustainability, good design, and functionality.

What are Ikeas main objectives? ›

To create a better everyday life for the many people.” This vision goes beyond home furnishing. We want to have a positive impact on the world – from the communities where we source our raw materials to the way our products help our customers live a more sustainable life at home.

What software does IKEA use? ›

Using 3ds Max and V-Ray, IKEA creates around 75% of all of their furniture images. They've effectively built a 3D bank of all of their images that they can use in whatever setting they like, allowing them to create affordable marketing initiatives all over the world.

Is IKEA a wholesaler or retailer? ›

The principal activity of the company is that of a wholesaler in the furniture trade.

Can you check IKEA store inventory? ›

The best way to get the latest stock status is to visit the product page of the item you are interested in and check its availability at your local IKEA store.

How does IKEA reduce its overall costs in production and supply chain management? ›

With fewer materials, IKEA's also able to cut down on transportation costs as less fuel, journeys, and manpower are used to ship their products. Additionally, the company builds long-term, sustainable relationships with more than 1,800 suppliers in 50 countries.

How does IKEA ensure quality control? ›

IKEA Test labs – an essential part of our business

In addition to our own labs, we work with several independent accredited test labs across the world. All our products are evaluated and tested throughout their lifetimes to ensure that they continue to live up to our demanding standards.

What are the strengths and weaknesses of IKEA? ›

1. Customer knowledge 2. Constantly using innovations to drive costs down 3. Supply chain integration 4. Brand reputation and market presence 5. Diversified product portfolio1. Negative publicity 2. Decreasing quality 3. Standard products
11 Jul 2022

What is the business strategy used by IKEA Why? ›

IKEA utilizes a great long-term strategy of cost leadership which has shown to be successful on a global scale. They aim to keep prices low for those who can't afford it, allowing the customer to be satisfied with their options. The company puts style at the front of their brand image.

Which factors make IKEA a successful company? ›

Low Cost, High Quality

The brand's signature style is low-cost self-assembling furniture that does not skimp on quality. This is what makes the business envious of its competitors. Materials used in IKEA furniture are thoroughly described to ensure customers know exactly what they're paying for.

What are IKEA's 10 core values? ›

The 8 IKEA Key Values
  • Togetherness. Togetherness is at the heart of the IKEA culture. ...
  • Caring for people and planet. We want to be a force for positive change. ...
  • Cost-consciousness. ...
  • Simplicity. ...
  • Renew and improve. ...
  • Different with a meaning. ...
  • Give and take responsibility. ...
  • Lead by example.

How are IKEA's value chain activities coordinated to achieve efficiency? ›

The major source of value in IKEA operations relates to cost benefits. Specifically, 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.

What is IKEA's sustainable competitive advantage? ›

IKEA will get a great company reputation by being environmentally friendly and it will cause customers to prefer the brand over competitors. By making a product differentiation that focuses on quality, green technology, and customer service, Ikea also builds a sustainable competitive advantage.

Is IKEA having supply chain issues? ›

“Keeping Ikea stores and warehouses stocked has been a challenge,” IKEA said in a statement. “Supply chain disruptions led to a substantial drop in the availability of products that we have yet to recover from.”

What distribution strategy does IKEA use? ›

In the process of distribution, suppliers of IKEA use third party logistics companies to transport their products to various IKEA locations. The role of transportation is important as it provides the critical links between these organizations, allowing goods to flow between their facilities.

Where are most of IKEA's products made? ›

Swedwood, an IKEA subsidiary, handles production of all of the company's wood-based products, with the largest Swedwood factory located in Southern Poland.

How IKEA can improve its supply chain? ›

DIY Assembly Lowers Packaging Costs

Here, IKEA sells the parts of the furniture instead of the whole product. Flat packaging saves space, makes transport more manageable, and reduces transportation costs. This strategy helped IKEA maintain its product costs during global supply chain disruptions.

How IKEA makes its supply chain sustainable? ›

5.2 Minimizing waste through the value chain

All IKEA stores and distribution centers recycle large quantities of material. This helps us to save resources and can result in considerable savings. Waste collected and recycled include cardboard, paper, plastic, wood, metal and glass.

What is IKEA's business model? ›

The IKEA business model provides the framework for how the company runs profitably. IKEA operates as a franchise and earns the majority of its profit from annual franchise fees. Aside from that, they accrue income through the wholesale of products and retail catalogs to franchisees.

What type of strategy does IKEA follow? ›

IKEA furniture has grown into a well-known global brand. They use a price-leadership strategy. The main focus stone of the IKEA vision, business strategy, and concept is low costs.

What type of sector is IKEA? ›

IKEA is an active participant in the EFIC workgroup that aims to promote the vision of a circular economy in the furniture sector.

How many IKEA suppliers are there? ›

Log in here. We cooperate with approximately 1,600 suppliers, and about 1,000 of those are home furnishing suppliers.

Does IKEA manufacture all their products? ›

IKEA has almost 300 stores in 36 countries and 42 distribution centres in 18 countries and over 1000 suppliers. It takes five factories across Europe to manufacture IKEA's 10,000 item product line. IKEA delivers over 250 million cubic metres of products each year.

What are the key success factors of IKEA? ›

The self-service and do-it-yourself approach to selling furniture is one of the critical success factors IKEA uses to save costs and increase profit margins.

What technologies does IKEA use? ›

IKEA has launched a new augmented reality (AR) application that allows users to test IKEA's products in real time through Apple iOS 11's ARKit technology. Dubbed IKEA Place, the iPhone- and iPad-compatible free application features realistically-rendered, true-to-scale 3D products.

What resources does IKEA use? ›

We use recycled materials whenever possible. Wood, plastic, paper, and metal are just a few that we love to work with. We differentiate between scrap and recycled materials - scrap refers to the leftover material from another production, while recycled is when we're able to reuse material from old products.

What are the products and services of IKEA? ›

  • Shop all.
  • Tables & desks.
  • Furniture sets.
  • Beds.
  • Sofas.
  • Bookcases & shelving units.
  • Cabinets & cupboards.
  • TV & media furniture.

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