Explain how each sector of industry is linked together within a supply chain? In today’s world, supply chain management (SCM) is a key strategic factor for increasing organizational effectiveness and for better realization of organizational goals such as enhanced competitiveness, better customer care and increased profitability. Today, most of the enterprises of a supply chain operate independently. For example, marketing, distribution, production planning, manufacturing, and the purchasing organizations have their own objectives and these objectives are often conflicting.
This way of functioning prevents the enterprises from providing the right products to the right customers at the right time. All these organizations are individually efficient enterprises, but they lack coordination to produce required end results. A supply chain can be described as a network of retailers, distributors, transporters, storage facilities, and suppliers that participate in the production, delivery, and sale of a product to the consumer.
The supply chain is typically made up of multiple companies who coordinate activities to set themselves apart from the competition. Supply chains are all about linkages. A supply chain is only as strong as its weakest link. Whenever a chain breaks, it usually does at the weakest link. In a supply chain there are many interfaces (links), and problems develop at these interfaces. The best way to overcome these problems is to, manage the supply chain efficiently. This helps the organizations to act and not react to the unexpected changes in the market situations.
In the case of IKEA, the supply chain involves a flow of production and processes through each of the three industrial sectors: primary, secondary and tertiary. Specifically, the various stages of the process are raw materials in the primary stage, manufacturing in the secondary stage, distribution and retailing services in the tertiary stage. In the primary stage, IKEA works closely with its primary sector suppliers to ensure that it is receiving sustainable and environmentally friendly raw materials.
IKEA designs its own products and throughout this process makes sure that the impact on the environment is minimised. The firm uses a tool called the “e-wheel” to measure the environmental impact of products. This looks at resources, production, use and recycling for each product. Around half of IKEA? s products are made of wood. This is a good source of material as it is recyclable and renewable. Other production processes which help support sustainability include tables made from recycled plastic, rugs made from off-cuts, products made to stack for more efficient transportation.
IKEA works with suppliers to reduce waste or use waste products in further manufacture. To help it has a Code of Conduct called the IKEA Way (IWAY). In the secondary stage, IKEA creates its products from raw materials. During this stage, IKEA also created added value for its products with the utilization of the smallest amount of resources. The IWAY Code also helps manufacturers by making sure that they apply sustainable principles. It also insists that they follow laws, health and safety requirements and do not employ child labour.
It states that materials from non-sustainable sources should not be used. The Code raises standards for all concerned. IKEA also works with other organisations to support the Code. These include children’s charity UNICEF and the World Wildlife Fund. In the tertiary stage, IKEA does not use raw materials nor create its products. IKEA’s retail stores add value to manufactured goods by providing a form of shopping different to the usual high-street experience. IKEA has more than 260 shops in 36 countries set up to provide a retail experience that meets consumer needs.
Stores are large and customers can pick their own purchases. Further services are provided through the IKEA catalogue and home delivery. IKEA also has set up initiatives to support sustainability within the company by aiming to recycle up to 90% of its waste, removing carrier bags from its stores, subsidising public transport and encouraging cycling (with a new bike given to each employee), giving low-energy light bulbs for employees, using only hybrid vehicles as company cars.
Within a supply chain, every sector must be well connected. It means that the upstream and the downstream can not be separated in order to meet the market demand in any situation. The three sectors mentioned earlier within IKEA supply chain are well connected. IKEA uses excellent supply chain concepts, reducing and eliminating wastes at every stage and hence can offer good value to customers. The IKEA’s supply chain is a complete process that can match together the suppliers, the manufacturer and the customers.
With the support of the primary sector, IKEA can sustainably produce high quality products and sufficient quantities to meet the market demand at the lowest cost. The tertiary sector helps IKEA go further to create added value for customers, bringing about a close and sustainable relationship with the customers. IKEA’s supply chain strategy to connect the three sectors closely proves that it aims to act out and become a global giant in the industry.