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Competitive Advantages From Its Implementation Information Technology Essay

IKEA is the worlds major home furnishing dealer with stores located worldwide. Each year IKEA stores welcome 565 million visitors, while more than 450 million sessions have been documented to its website. The implemented low-price strategy in conjunction with an array of functional, smartly designed products that satisfy every lifestyle and life stage of its customers, who come from every generation and type of household, is accountable for its rapid growth and its enormous success.

The company

Company overview

IKEA began to create its own furniture 1955 and opened its first store in Sweden in 1958. IN 1959 it began to produce self-assembly furniture to lower freight chargers and other costs to retail customers, a strategy that proceeds until today. IKEA now has over 200 stores in 30 countries. Each store has about 9500 items on the market. Its 2008 sales were over 20 billion.

The company, as time passes has turned into a head in its area of interest by the choices manufactured in that process. Nevertheless, the IKEA uniqueness presents a formidable barrier to rivals- the one that supply chain planners can look in creating their own business models.

The "IKEA concept" guides the company. This idea is to make "well-designed, useful home furnishing products" at low, affordable prices. In fact, the look process for a new product commences by setting up the retail price. It then proceeds to design production procedures that meet the cost purpose. Finally, the product is designed to IKEA's style standard. This standard omits cost-adding frills that add no value in conditions of functionality.

Each IKEA store carries -on average - an array of 12000 products, while the core rage is the same worldwide and separately of the store size. Taking care of over 200 stores distributed in 30 countries worldwide and having 1, 600 suppliers in 55 countries, requires apart from outstanding support staff, exceptional logistics and the best information systems. IKEA, in order to maintain an intrinsic supply chain at its most effective level, it must include the right people, the high technology and the best information systems.

2. 2 IKEA's timeline

2. 3 IKEA's difficulties and goals

The company needs the best tools available to ensure a seamless transition and has to be able to handle any problems as quickly as possible, especially when it is the world's leading home furnishing dealer. This was the situation with IKEA, that was looking to change its supply string strategy by cutting back on suppliers and concentrating on those situated in low-cost countries. However, to carry out this, it uncovered it would have to go through longer lead times if it wanted to benefit. This would then drive higher demands on the look process and have an effect on the firm's capability to modify quickly to changes as well as put extra strain on the whole procedure of the resource network. Failure to deal with these problems would have made the complete process a costly mistake. To ensure that this didn't happen, IKEA needed to choose solution that may be implemented quickly and easily, yet could be amended to match any developing situations.

> Increased visibility in the sales patterns of IKEA products

> Improved forecast accuracy

> Improved planner experience and efficiency through exception-based management

> Empowered the loan consolidation of supplier foundation with a focus on low-cost countries

> Increased overall supply chain awareness and efficiency

3. IKEA and IT

3. 1Developing IT through time

3. 2 IKEA's major IT systems

IKEA has many company -extensive IT systems. These IT systems are facilities which try to process data and offer significant information to users but each of them can vary in function. IT systems are able to observe data and information to all or any resources internal or external making possible design, production processes, syndication, retailing happen in the most effective and effective way.

IKEA's intranet: bringing people and information together

In 1997 IKEA launched its intranet, IKEA inside. At its first steps it included useful information for coworkers and got a simple although unclear composition: content was static, interactivity inexistent but it improved upon through seeking and learning. Through time the necessity to discuss the intranet's content not just with IKEA's co-workers in the service office but also with the individuals working in IKEA's stores emerged. That which was considered critical to success was what sort of site would be create in order to complement the retail personnel's needs and skills. In the next years IKEA replaced its traditional paperwork system with digital equivalents which resulted in great accomplishments reducing costs and time had a need to complete different kind of duties within company.

The definitive goal of IKEA 's intranet is to be considered by employees their second hand that will immediately provide them whenever and wherever needed with the required tools and information to perform their responsibilities. Intranet offers a variety of applications such as online surveys, details about products, company information, comments from customers, inventory and supply management tools and material related to marketing.

Innovation and effort for improvement through intranet in IKEA never can stop. Recently in May 2008 the Swedish company launched the icoworker which stores information about employees and it is utilized generally as an electronic human learning resource centre. Applications change from managing retirement programs to requesting time-off and being able to access online pay investigations. This latest addition to intranet has saved hundreds of thousands of dollars and also many time of benefit IKEA's HR division.

Through intranet IKEA has managed to reduce costs in working areas other than HR. Toby Ward mentions that IKEA US has managed through intranet to decrease costs more than $500, 000 per year. More precisely it has managed to reduce newspaper costs at some $192, 000, streamlining processes and self-serve process by $4, 590, modernizing communication systems video conf to webex has kept $90, 000 and finally self-service HR possessed consequently lowering costs by $219, 000.

The intranet team has achieved not and then decrease costs but can also increase sales by empowering employees and sales groups. It has been successful this goal through delivering a highly focused on sales content. Staff message boards and provision of information pertaining to sales quantity & metrics are just some of the tools offered on a daily basis to employees working at IKEA.

IKEA inside has were able to bring people and information jointly in the most fruitful way. Others use intranets as well without having to be only as successful. What is the aspect that has made certain IKEA's intranet long term success? Could it be a very complex technology? The response to that question is the fact that the key aspect to success was the provision and potential to complement the technology centered system to the people it was designed to support. Technology was not at all the sole target when expanding IKEA's information systems and especially intranet: The emphasize has been located more to the people somewhat than data or technology. More precisely the IT was designed to enhance the interconnection between employees and data in respect to IKEA's people-based culture. Beth Gleba, Internal Information Administrator for IKEA points out that "We have been a people-based company. Face-to-face time is vital. We've built our intranet to check this. We don't want people to feel technology replaces but enhances our link with one another. Dealing with our culture, not against it, has been key. "

The Intranet within IKEA's information landscape has had the opportunity to decentralize work, impact underneath collection, improve IKEA's financial factors and all that because people building the intranet immediately had in mind that it should be more than its pieces and bytes, it should be able to respond to individuals' needs respecting their work culture.

IKEA's product information assistance (pia)

One of IKEA 's key IT systems is PIA, Product information assistance that was introduced in 1998. This technique has as a primary objective to help administrate product information and it is therefore ideal for product development projects.

PIA will get information by project groups and product designers. Insight data include several kind of information about the merchandise: sales price, expected cost, product structure, goals. PIA is also given with information by other specialists at IKEA who provide information regarding suppliers, materials etc. Product coders are the primary users of output information but most of IKEA's employees also have access to the machine: they can either surf information or create documents such as internal reports.

When we refer to product development at IKEA we ought to have in mind a completely vertical included system: Something that provides resources and coordinates the different stages of design, developing, logistics, warehousing and finally exhibition in shops. So, behind each product there is a great system of inside and exterior resources that interact one with another.

Through PIA, IKEA has had the opportunity to perform miracles: It has been able to create products -like Shortage, a simple table- that got a continuous price for many years although the price of source materials has increased considerably. This achievement was possible by using PIA which has combined resources in various ways to attain the same consequence. PIA is in charge of collection, process and diffusion of the huge amounts of information needed for each and every product, Lack as well, to both exterior and internal models.

Of course PIA is not yet a perfect system. Certain limitations emerge from its immediate and indirect contacts its passive and effective users but PIA is a system which constantly evolves with changing features and patterns getting better each and every time.

Supply Chain Management

IKEA's supply string practices the "beliefs" of make to stock. Which means that products are not build after customer request and that's why there is a large dependency on forecasts. At a regional level there's a great degree of freedom involving stock planning and replenishment. Through time it has led to stock outs, overstocks and outdated inventories. But this is not the only real problem encountered by IKEA's previous supply chain. The fragmented and unreliable information used -coming from manual work- created insufficient trust between the several parts taking part in the supply chain. Moreover problems in data maintenance were spotted as well as insufficient the proper tools to take care of deviations popular.

In order to address these problems IKEA made a decision to attain better control of the resource string and improve performance. The new concept is being currently implemented and an important part of it will be the IT solutions used. IKEA has reformed to a centralized planning firm with involved planning operations and high data quality.

APS (advanced planning systems) are tools used to help make decisions in this complicated environment of global sites. The primary idea is that one central planning engine motor includes all decisions concerning the supply chain: stock replenishment, sourcing, production and syndication decisions.

The following sketch shows the new planning concept where all forecasting activities are centralized and stock levels are in order through out the whole supply string.

In the new global planning process corporate and business sales planning takes place first, its results are used as input in to the global need planning process. The next thing is the capability planning process and finally the look of the syndication supply chain occurs.

Most of the planning processes are recognized by APS and the forecasting procedures have been recognized by JDA. The contribution of the two systems to the improvements described regarding the integration of the resource string has been amazing.

With the use of APS

the range of forecasts has reduced from 120 to around 30

the average forecast correctness has increased from 60% to 80%

Several assignments in IKEA's planning firm have been backed with current information involving stock levels, replenishment needs and safeness stock calculations.

APS has helped improve resource chain planning in the next ways:

It has helped reduce stock levels and improve services

It has provided management of huge amounts of data and run of " what if" scenarios to guarantee the best decisions will be taken

It has present results in an understandable way

It has contributed to the improvement of the amount of automation planning and therefore has save time for decision making.

It has helped balance the supply chain through coordination

It has offered tools to detect and package with problems in early stages.

It has advanced the info quality

The company began dealing with JDA in 2001 and the first thing the solutions provider performed was to use JDA Demand solutions on all IKEA products internationally. IKEA laid out a number of targets for JDA such as developing a sales planning strategy and tools that guaranteed practical forecasts used for planning distributor, warehouse, and travelling capacities. JDA also developed a capacity planning methodology and tool which make it possible to benefit from the cost benefits of long-term commitments while keeping the chance of imbalance between commitments and demand to the very least level. A worldwide and regional supply planning system part would make it possible to truly have a coordinated and consolidated sales, capacity, and syndication planning while having them directly linked to replenishment. The answer would also allow IKEA to consider all inventories in the necessity calculations also to have supply string awareness in the order management process.

"We now have Demand go on all products globally and Fulfilment happens to be being rolled out for DC replenishment, " says Tommy Stjernfeldt, Task Manager for the ongoing fulfilment execution. "Performance has always been a concern for IKEA and benchmarks and performance fine-tuning activities were critical in the success of the task. JDA is important in providing support for IKEA's business needs with this. "

"We have seen a sizeable volume of benefits from the JDA implementation. Planners have been thinking about the solution since it gives them better visibility in to the sales patterns of the IKEA products and has upgraded their global view of the business enterprise. The organizers are happy with the new exception-based working method and we've seen designated improvement in our overall forecast exactness between the original rollout in 2002 now. It has been an effective move for all of us and has managed to get far simpler to begin focusing on low-cost countries and reducing on suppliers, that will over time assist in improving gains and make our management system more efficient, " said Jimmy Biesert, Brain of Supply String Planning at IKEA.

Success is dependant on the idea of keeping the cost between manufacturers and consumers down

Effective use of modern It could be regarded as a requirement to achieve the markets

. . . although IT system is not really a shortcut to success

IT system must be put in place on the needs of business

Improving and using technology in the most effi cient way is important to be able to offer good design at low prices. A smart solution for IKEA was to put into action ReadSoft's data capture software for incoming goods invoices. It certainly helped IKEA to reduce costs and increase efficiency in administration. "Inside our occupation, value for money is an integral success factor. We had to get the most effective way to fully capture the huge fl ow of invoices within the whole organization. We soon discovered that ReadSoft was the natural choice", says Anders Svensson, Invoice Services Administration Administrator at IKEA, Sweden. Envision an Internet software where have the case study at IKEA.

you can experience how different kinds of IT (IT) have been used in various real contexts. Imagine that the instances include information on the design of the IT systems and their effects on use situations, using video recording, sound and hands-on prototypes as well as content material. Suppose there are exciting electronic conversations of the circumstances where associates of the world-wide IT design community give feedback on central issues, question conclusions and point out similarities to circumstances from their own experience. That request is what I call the Qualitheque. I am specifically going to reflect after the result of the design of a deal support system at IKEA. One of the questions being asked during the IKEA circumstance is what sort of computer based information system at IKEA called MHS acronym for M¶bel Hus Systemet, in British Furniture House System) is utilized in its framework. To find out something about the utilization of the MHS, I've chosen to do some participative observations at different departments of the IKEA store, and examined the employees way of managing the daily work with the support of the MHS. The members of the task have taken part in work in a few specific real working situations. This energetic participatory part has been conducted by two associates of the project working in different departments at the IKEA store in Malm¶. We used the products through the store house, starting our review by working some times at the loading ramp and store. Altogether, we spent four weeks working in most of the departments, ending up at the goods delivery office. By requesting the coworkers questions through the work we had the possibility to form an idea of work with the machine in its real context (e. g. the context of a new worker).

I execute a little, you do a little, and alongside one another we execute a lot. That is a concept that's deeply inserted available model for IKEA, the global home furnishing giant with over 270 stores in 36 countries. The strong sense of teamwork, community, and collaboration expressed in this simple theory forms the basis of IKEA's organizational and operational culture. This means as much to people employed in HR, Sales, and Marketing as it can to consumers who buy the company's flat jam-packed furniture that they assemble themselves.

A strong corporate culture, however, doesn't always translate into effective information systems. Actually, when done inadequately, the last mentioned can be considered a detriment to the past. Almost always there is been an regrettable disconnect between technology-based systems and the people they're meant to support. But IKEA's humanistic, people-focused approach to its business normally carried over to the introduction of its intranet.

Rather than forcing its corporate culture to flex to accommodate a technology-based system, IKEA used its firmly founded culture as the foundation for its IT alternatives. It's an approach that garnered IKEA North America's intranet, IKEA Inside, much compliment when it was named one of the world's ten best intranets of 2008 by the user-experience research company Nielsen Norman Group (NNG). It's an approach that enables IKEA to keep all its employees up-to-date with everything happening within the business. And it's a strategy that defines the real purpose and heart of intranet: To create people and information jointly.

Connecting people who have technology

Since their inception, intranets have been used to manage large repositories of content and discuss this centralized information with a company-wide user community. This goal hasn't altered much since intranets first came up onto the organization field, but an intranet will probably be worth more than the sum of the pieces and bytes that define the system. But the technology has become much more elaborate, an obvious shift in target has emerged.

The results of NNG's eighth twelve-monthly intranet design competition shows a development shift in today's top intranets, emphasizing access to people alternatively than data. It's a pattern that corresponds with IKEA's business design: A perfect marriage of commercial culture, business imperatives, and the technology that helps both. For IKEA, the execution of technology-based tools was a natural development of its already strong sense of corporate community and teamwork.

"Before decade, I believe we've seen our American personnel take up technology at an amazing rate in their personal lives, " says Beth Gleba, Internal Information Supervisor for IKEA THE UNITED STATES. "Certainly this has a direct impact how people come to expect similar tools in their office. "

But IKEA's adoption and integration of technology wasn't done at the expense of the individuals experience. Frequently information systems fail within organizations when technology itself becomes the only real focus and reason behind development. This sort of technology-driven development perpetuates and widens the gap between the tool and the user. It's an needless gap that stops users from acknowledging a technology-based solution as a genuine business tool.

"We are a people-based company, " points out Gleba. "Face-to-face time is very important. We've built our intranet to check this. We don't want visitors to feel technology replaces but enhances our link with one another. Dealing with our culture, not against it, has been key. "

Future Challenges

Over the next five years IKEA's strategy has gone to keep broadening in the international markets making them to face new challenges, particularly with the circulation system. Such enormous growth urges the company constantly review its circulation structure and conform it to the required needs. Among the primary moves the company must do is to reallocate its syndication structure in a way that the low-flow range will be stocked centrally for big areas and high-flows near the appropriate market. Meantime, the company should focus on increasing direct deliveries.

The other approaching challenge that the company is dealing with is about managing remote control shopping over phone and Internet. Despite the fact that IKEA customers still prefer to visit the stores as it is a whole experience to them, however internet shopping and mobile requests is on demand and to be able to meet this goals the company should find new and versatile distribution solutions

Coping with the company's expansion presents a massive challenge for distribution. The company is planning more than dual volumes over the next 5 years also to serve more and more markets throughout the world. Growth upon this scale necessitates regular adaptations to the business's distribution structure. For instance, one important step will be to reorganize its circulation centre structure so the low-flow range will be stored centrally for large locations as the high-flow range is stored in centres nearer to the relevant market. At the same time, they should shoot for a rise in immediate deliveries.

Another exemplory case of a future concern because of its experts in circulation is to meet up with the demands produced by remote control shopping over cellphone and Internet. Although IKEA customers will always enjoy an motivating trip to the store, Internet shopping and mobile phone purchases are steeply increasing, demanding new, quick and adaptable distribution solutions based on the customers' expectations. Types of work areas in this business type are:

Store distribution director: The store distribution manager should analyse the resource chain, ensuring syndication centres can allow for the volume of goods required by stores.

Customer distribution manager: The customer distribution director should be responsible for operating and producing the order distribution business, from warehouse to customer.

Transport operational coordinator: The transport operational coordinator should be the lynchpin between IKEA and its carriers, ensuring an efficient move of goods. Warehouse procedures supervisor: The warehouse functions supervisor should ensure efficiency within the distribution centre and respond to the needs of the supply chain. Quality manager: The quality administrator should be in charge of quality control in the warehouse and efficiency of delivery to the client.

Transport business builder: The transport business developer should build and maintain connections between IKEA and its carriers whilst negotiating mutually beneficial carry scenarios.

Goods flow planner: The products flow planner should secure the best product availableness to the customer with the cheapest possible supply chain costs

Evaluation of the impact of computer in IKEA's success

5. 1 IT's impact on IKEA's success

As the globalization is increasing in the retail industry in terms of sales and supplies the significance of It really is rising substantially which is playing a vital role in managing the complexity of retail operations. Major retail industry players are prepared to allocate larger amounts for IT costs as they realize the importance of its request in the business as it generates numerous advantages in the competitors and provides value.

IT has played out a great role in IKEA's success and this is because the business was not basically integrating these systems into its functions but also coinciding them using its strategic goals. At the same time, IKEA was able to maintain successful on the market as it was innovating the IT systems in the company as the business was growing starting from simple and bottom systems to finding complex answers to complex problems.

5. 2 Competitive advantages from IT's implementation

In this dynamically moving business environment this can be a task for companies and organizations to preserve their competitiveness. Today by integrating IT systems in its each day functions, IKEA has empowered its grounds on the market as these systems provide best information that the business must do its task more effectively. They have quick access to information and it reduces the errors running a business transactions. At the same time it provides as a robust competitive tool for IKEA to connect to its customers, company and employees in a powerful manner that contributes to a mutual advantage by causing its stakeholders devoted to the business.

Today, due to its successful Supply Chain Management system IKEA can achieve cost benefits and offer reduced prices to its customers. At the same time the implementation of Supply Chain Management system in its global planning has given IKEA the chance to reduce its stock level and boost the service level. This in its convert contributes to the overall satisfaction of the business clients and company. Contrary to its opponents, IKEA is able to detect and handle problems related to the resource chain at an early level which helps the company to truly have a balanced chain. In addition, it has an accuracy and reliability in its forecasts and better presence and efficiency in its overall source chain.

In summation, the IT execution in a variety of business operations offered amount of competitive advantages and benefits to IKEA. Today the business has improved its overall functions on the market and runs the business with a better and global view. These IT initiatives offered the business long-run significant competitive advantages on the market that will donate to improved gains.

5. 3 Lessons learned from IKEA's IT applications

IT systems became the heart and soul of IKEA procedures and it performs an important role in alleviating pressure points in its business trades. On the other hand, those companies who do not deal with their IT systems effectively it becomes a difficulty somewhat than solution, particularly when a retail industry player must package with advanced planning and arranging systems, merchandizing and inventory management systems. However, these systems play crucial role in retail procedures and when the company uses it effectively, it can improve efficiency and increase revenues.

In IKEA's example we learn that the company matched up its IT systems to its existing culture and found success in its initiatives. Their purpose was not to make a superior systems but systems that can promptly react to the employees', suppliers' and customers' specific needs.

One of the success factors that have to be studied under consideration was that IKEA didn't compromise its commercial culture by using information solutions. The company was aware that these systems exist to support people rather than the technology. They realized that those tools should not have negative impacts on healthy and powerful organizational culture as these tools aren't competent to replace the nuances of the human being experience.

Another essential requirement that has to be taken into account is the change management in IKEA, when putting into action new IT jobs. Most of the IT systems included by IKEA have been put in place successfully as the company spent money and initiatives to support staff to adjust to methods and tools by creating consciousness and interest on the list of employees, trying out the solutions and adapting to the change.

6. Conclusion

Information technology secures the reliable information flow needed to develop and support a growing IKEA. IKEA IT is a global firm aiding IKEA with business solutions and services that continues IKEA operating and develops what sort of company does indeed business by source quick, trim and user-friendly IT services rather than just technology. IT is lively throughout IKEA and offers many opportunities to simplify, streamline and improve every part of IKEA businesses. A lot of the specialized careers and projects are located in the IKEA IT centers, but IT support functions are needed in all parts of the business. Historically, IKEA has developed many of its IT-solutions. In the foreseeable future, more standard solutions from external suppliers will be used, since IKEA IT co-workers are solution-oriented and creative team players with a genuine interest in the entire success of IKEA as a home furnishings company.

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