Inventory and Ikea

Only available on StudyMode
  • Download(s) : 80
  • Published : April 17, 2012
Open Document
Text Preview
Lund 2009-11-05

Department of Industrial Management & Logistics Production Management

Coordinated inventory control
- A case study on its performance compared to the current system at IKEA Master’s Thesis project 1002

Silvia Rasmusson and Björn Sunesson

Acknowledgement This master’s thesis is written as a final part of the Master of Science program in Industrial Engineering and Management at Lund University, Lund Institute of Technology. The project corresponds to 30 ECT credits and was performed during a period of 20 weeks in the summer and fall of 2009. The idea to perform a study on inventory control on IKEA came from Paul Björnsson, Process Leader for “Plan and Secure Capacity” at IKEA of Sweden. The suggestion to investigate the coordinated inventory control approach on IKEA’s articles was developed together with Associate Professor Johan Marklund at the division of Production Management. These two have also been 0the supervisors during this thesis project. Our aim with this master’s thesis is to apply the knowledge acquired during the four previous years of study at the Master of Science program. It is our hope that the work done during the project will be valuable and used by IKEA to improve their supply chain. We would like to thank our supervisors, the comments and feedback provided by these two mentors have been invaluable. We would also like to thank Birgitta Elmqvist for taking the time to answer all the questions we had, and providing us with the data needed to complete the project. We are also grateful to all those who took the time to give us introductory lectures on the supply chain, process mapping and culture of IKEA.

II

Abstract Coordinated inventory management is not widely used among companies today. Not even modern companies, which should have resources and ability to always be in the forefront of technological developments, prioritizes models that in theory can provide substantial savings. This report illustrates that a slightly more advanced method to calculate the safety stock can increase the service accuracy and significantly reduce inventory costs. The basic idea behind a coordinated inventory approach is to avoid sub optimization by optimizing jointly inventory locations that are dependent of each other, as opposed to optimizing each inventory alone. If information from one inventory is allowed to affect decisions in another, this can be used to together satisfy customers and reducing the total inventory. The study started with locating a simple goods flow within IKEA. This goods flow contains only one distribution center and a number of retail stores. Representative articles that pass through both levels were then chosen. No consideration has been given to these articles flow prior to the shipping to the distribution center. For the selected articles, new coordinated reorder points have been calculated using an analytical multi echelon inventory model. This coordinated solution has been compared to IKEA’s current solution (reorder points) by use of discrete event simulation. The model used to optimize the system in the project has been previously tested on real case scenarios but only on low demand spare articles. This is thus the first time it has been used on end consumer pattern with high demand. This project has resulted in evidence that the use of a coordinated inventory approach reduces inventory without decreasing service level. The largest relative reductions appear at the distribution center, while the mean inventory levels at the retail stores only decrease slightly. III

Table of Contents
1 Company background ...................................................................................... 1 1.1 1.2 1.3 2 History ....................................................................................................... 2 Organization .............................................................................................. 3 Supply chain...
tracking img