Logistics
Final exam logistics
1.) Ikea case: (the 3 main topics) a. Competition between suppliers The structure of Ikeas logistic creates a high competition between their suppliers. It is because Ikea is subdivided into (many) Trading Areas, which compete for the commissions the headquarters of Ikea (Ikea of Sweden) gives. Each Trading Area tries to find the best thus cheapest solution for producing and delivering a product, so each of them negotiate with their suppliers and make an offer to the headquater of Ikea. Of course the headquarters (IOS) pick the cheapest combination of producing and delivering (logistics). That is the way the headquarters of Ikea find the cheapest manufacture for their products, including transport and all the other logistic costs. This fits into Ikeas cost leadership strategy. As a second result the Trading Areas plus the suppliers are in a competition, which makes them very efficient. b. Long term orientation Ikea tries to have long contracts with their suppliers. They grant their suppliers a lot of advantages. Ikea shares their knowledge and experience in logistics with them. If a supplier could not deliver a product as cheap as Ikea wants, Ikea helps the supplier to reduce costs. They prefer doing that instead of changing the supplier, it shows the long term orientation of Ikeas supply chain. Ikea is very connected to their suppliers. From the prospective of the suppliers it is a good thing because they can also make long term plans or investments. Ikea helps their suppliers with Investments as well, if they could not make the investment. Ikea gives them financial security for the future. This leads the suppliers to accept a lower price for the products paid by Ikea, than they could get from another customer. So Ikea is again able to lower the cost, which matches again Ikeas cost leadership strategy. c. Bypassing distribution Centers The last logistic issue that explains Ikeas cost leadership is that they mostly skip the distribution
1.) Ikea case: (the 3 main topics) a. Competition between suppliers The structure of Ikeas logistic creates a high competition between their suppliers. It is because Ikea is subdivided into (many) Trading Areas, which compete for the commissions the headquarters of Ikea (Ikea of Sweden) gives. Each Trading Area tries to find the best thus cheapest solution for producing and delivering a product, so each of them negotiate with their suppliers and make an offer to the headquater of Ikea. Of course the headquarters (IOS) pick the cheapest combination of producing and delivering (logistics). That is the way the headquarters of Ikea find the cheapest manufacture for their products, including transport and all the other logistic costs. This fits into Ikeas cost leadership strategy. As a second result the Trading Areas plus the suppliers are in a competition, which makes them very efficient. b. Long term orientation Ikea tries to have long contracts with their suppliers. They grant their suppliers a lot of advantages. Ikea shares their knowledge and experience in logistics with them. If a supplier could not deliver a product as cheap as Ikea wants, Ikea helps the supplier to reduce costs. They prefer doing that instead of changing the supplier, it shows the long term orientation of Ikeas supply chain. Ikea is very connected to their suppliers. From the prospective of the suppliers it is a good thing because they can also make long term plans or investments. Ikea helps their suppliers with Investments as well, if they could not make the investment. Ikea gives them financial security for the future. This leads the suppliers to accept a lower price for the products paid by Ikea, than they could get from another customer. So Ikea is again able to lower the cost, which matches again Ikeas cost leadership strategy. c. Bypassing distribution Centers The last logistic issue that explains Ikeas cost leadership is that they mostly skip the distribution