Centralised supply chain planning at IKEA

Journal article, 2013

Purpose - The purpose is to analyse the prerequisites and effects of centralised supply chain planning at IKEA, and to explore how the planning process, planning system, and planning organization make up a centralised planning approach. Design/methodology/approach - The paper is based on a longitudinal case study of IKEA's implementation of global supply chain planning. The literature review generated a framework which identifies prerequisites for, approaches to, and the effects of and obstacles to centralised supply chain planning. This framework was used to analyse IKEA’s supply chain planning before and after the implementation. Finally, we reflected upon the learning from IKEA and refined the framework. Findings - A number of prerequisites for centralised supply chain planning were identified: functional products, vertical integration, a dominating organization possessing the power and competence to enforce the implementation, and the use of one planning domain possessing all critical planning information. The direct effects of centralised supply chain planning were related to supply chain integration, standardisation, specialisation, and learning effects. Implementing centralised supply chain planning in an appropriate planning context led to several operational performance improvements. Obstacles were mainly related to human and organizational, as well as to software and data issues. Research limitations/implications - This is a first approach towards development of a framework of how to design, use and benefit from centralised supply chain planning. The developed conceptual model, which is refined through the case study, offers some generalizability in researching centralised supply chain planning. Practical implications - The findings show that centralised supply chain planning is a necessity for a large and growing, global supply chain striving for low-cost production and efficiency. Originality/value - IKEA is a unique case with its supply chain characteristics and recently implemented planning concept.