INVENTORY are categorized into two. They are high-flow


IKEA is the world’s largest home
furnishing retailer was founded in 1943 in Sweden and has 410 stores
in 49 countries. It ranks Number 41 on Forbes’ esteemed World’s Most Valuable
Brands list, and took in 36.4 billion in sales in 2016. It has smooth running
backend operations and efficient supply chain practices.

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Separating Products Into High-Flow
and Low-Flow Facilities

IKEA’s operations
are categorized into two. They are high-flow facilities whose  focus is on the 20 percent of SKUs, that are
sold in high volumes, that amount to 80 percent of the store’s volume or
low-flow facilities that are sold in low volumes and require manual processes. The
high-flow facilities has automatic storage and has an automated software which tracks each
product so that accuracy is maintained. The employees don’t shift or move the slower-selling
products around too much which drives down cost-per-touch.

Maximum and Minimum Settings:

Barcode scanners are used to update the inventory. IKEA developed
 an inventory replenishment process called
“minimum/maximum settings.” The process was created to avoid ordering either
too few products or too many products, which can lead to the company losing customers
or having too many products in its inventory, while meeting customer demands. IKEA’s
“minimum settings” and “maximum settings” maintain the minimum / maximum amount
of products available before reordering is needed. The restocking and inventory
is done only after store hours and so the minimum and maximum settings are
based on the number of products that are available in the store’s reserve stack
. IKEA uses a software that collects and tracks everything along the supply


Do-it-Yourself Assembly and Flat Packaging:

IKEA uses a Do-It-Yourself approach to product assembly, which
the customers themselves can easily assemble at home, to lower packaging and
inventory management costs. Most IKEA products have flat packaging, which makes
handling easier, so that it occupies less space both in the trucks during
transportation to stores as well as in the warehouse..

Cost-per-Touch Inventory Strategy:

believes that the inventory management costs increase when more hands touch a
product. So IKEA uses a cost-per-touch inventory
strategy that encourages the customers to select and retrieve
the products and take them to checkout themselves. This strategy will decrease
their staffing costs.

Combining Retail And Warehouse Processes:

IKEA’s warehouse is on the
same premises as the main retail or showroom floor. Customers browse for items
which are available in the lower racks and they obtain the products themselves.
The additional products or reserve stock are stored in higher racks. Inventory
is moved to the lower slots only at night due to safety reasons. The bulky
products, which require the help of staff to be loaded are placed in the middle
racks. IKEA is working to reduce the number of these bulky items since they
encourage self-service.


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