10 OD Decision Analysis S
10 OD Decision Analysis S
KARYA AKHIR
Michelle
0906645432
FAKULTAS EKONOMI
KELAS KHUSUS INTERNASIONAL
MELBOURNE
MARET 2014
KARYA AKHIR
Michelle
0906645432
FAKULTAS EKONOMI
KELAS KHUSUS INTERNASIONAL
MELBOURNE
MARET 2014
Universitas Indonesia
Telah berhasil diselesaikan dan dianggap lulus dengan nilai 78 oleh dosen pembimbing
Vikram Bhakoo dari universitas partner, University of Melbourne. Hak cipta atas karya
ini tetap menjadi milik penulis, pembimbing dan University of Melbourne. Telah juga
diterima sebagai bagian persyaratan yang diperlukan untuk memperoleh gelar Sarjana
Ekonomi pada Program Studi Management Kelas Khusus Internasional Fakultas
Ekonomi Universitas Indonesia (KKI FEUI).
Ditetapkan di : Depok
Universitas Indonesia
Nama : Michelle
NPM : 0906645432
Tanda Tangan :
Tanggal : 5 Maret 2014
Universitas Indonesia
Nama : Michelle
NPM : 0906645432
beserta perangkat yang ada (jika diperlukan). Dengan Hak Bebas Royalti
Nonekslusif ini Universitas Indonesia berhak menyimpan,
mengalihmedia/formatkan, mengelola dalam bentuk pangkalan data (database),
merawat, dan memublikasikan tugas akhir saya selama tetap mencantumkan nama
saya sebagai penulis/pencipta dan sebagai pemilik Hak Cipta.
Dibuat di : Tangerang
Pada tanggal : 5 Maret 2014
Yang menyatakan,
(Michelle)
Universitas Indonesia
Nama : Michelle
NPM : 0906645432 (Universitas Indonesia)
NPM : 550453 (University of Melbourne)
Program : Kelas Khusus Internasional Fakultas Ekonomi, Universitas Indonesia
Faculty of Economics and Business, The University of Melbourne
Judul : Supply Chain Management Practices in Wal-Mart and IKEA
Abstrak
Penelitian ini bertujuan untuk mendalami bagaimana proses supply chain management dijalankan
di Wal-Mart dan IKEA, sebagaimana keduanya dikenal karena praktik supply chain yang
dirancang dengan baik. Penelitian ini juga mengungkapkan tentang teknologi yang digunakan
Wal-Mart dan IKEA dalam praktik supply chain-nya, strategi pengadaan logistik, serta strategi
lingkungan dan Corporate Social Responsibility yang dimiliki keduanya. Wal-Mart menggunakan
sistem cross-docking untuk mencapai strategi Everyday Low Prices mereka, di mana IKEA
menggabungkan Vendor Managed Inventory dan Consignment Stock untuk mencapai efisiensi
tinggi dan skema cost-sharing.
Namun, kami menemukan beberapa masalah yang terjadi dalam usaha mereka untuk memperluas
perusahaan masing masing secara global, contohnya seperti masalah birokrasi dan masalah
perpajakan, serta masalah dengan supplier. Wal-Mart dan IKEA telah berhasil mengatasi beberapa
masalah tersebut melalui praktik - praktik supply chain dan strategi logistik yang inovatif dan
fleksibel.
Kata Kunci:
Cross-docking; IKEA; Supply Chain Management; VMI; Wal-Mart
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Name : Michelle
NPM : 0906645432 (Universitas Indonesia)
NPM : 550453 (University of Melbourne)
Program : Kelas Khusus Internasional Fakultas Ekonomi, Universitas Indonesia
Faculty of Economics and Business, The University of Melbourne
Title : Supply Chain Management Practices in Wal-Mart and IKEA
Abstract
The purpose of this study is to identify how the supply chain management practices performed in
Wal-Mart and IKEA, as both of them is known for their well-designed supply chain practices. It
also reveals Wal-Mart and IKEAs usage in technology, their procurement strategy, as well as their
environmental strategy and Corporate Social Responsibility. Wal-Mart emphasizes on their cross-
docking technology to achieve their Everyday Low Prices strategy, meanwhile IKEA combines
Vendor Managed Inventory and Consignment Stock to attain higher efficiency and cost sharing
scheme.
However, we found several problems occurred in their attempt to expand globally, such as
bureaucracy and taxation problem, as well as problems with the suppliers. It is revealed that they
have managed to overcome these challenges through innovative and flexible supply chain
management practices and logistic strategies.
Keyword:
Cross-docking; IKEA; Supply Chain Management; VMI; Wal-Mart
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Halaman Judul...i
Halaman Pengesahan..iii
Abstrak...vii
Daftar Isi..xi
Daftar Gambarxii
1. Executive Summary.1
2. Introduction......2
3. Analysis....3
3.1. Supply Chain Management at Wal-Mart......3
3.1.1. Network Configuration and Strategic Partnering.........3
3.1.2. Procurement and Outsourcing Decisions..,......5
3.1.3. Technology Application...........7
3.1.3.1. RFID.....7
3.1.3.2. EDIINT AS2.........7
3.1.4. Environmental Strategy for Sustainability.......8
3.2. Supply Chain Management at IKEA..10
3.2.1. The Supply Chain Strategy.10
3.2.2. Integration and Strategic Partnering...11
3.2.3. Sourcing, Procurement, and Inventory Decisions..14
3.2.4. Logistics.17
3.2.5. Information Technology and Decision-Support Systems..18
3.2.6. Green Strategy and Corporate Social Responsibility.19
4. Wal-Mart and IKEA Supply Chain Decisions: Critiques and Solutions20
4.1. Wal-Mart: Conquering the Chinese Market...20
4.2. Criticising IKEA: from the Suppliers Perspectives..21
5. Conclusion..22
6. References..25
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This document also analyses how IKEA is able to provide consumers with
low-price, adequate designs, and functional home furnishings. The cost reduction
is gained from IKEAs extensive network of suppliers and the companys
outsourcing decisions. To manage inventory, IKEA combines Vendor Managed
Inventory and Consignment Stock which provides IKEA with higher efficiency
and cost sharing scheme. Furthermore, this document also explains IKEAs
unique logistics and technology application to ensure supply chain accuracy.
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IKEA and Wal-Mart are two retail giants with their own principles and
business ideals. Both companies were established in two different, competing
continents. IKEA, a Scandinavian retail heritage from Sweden, was first
established in 1943 by a 17 year-old, Swedish teenager, Ingvar Kamprad. The
company started to take shape in 1980s as it expanded dramatically to
international market. IKEAs vision is to offer people with wide range and well
design, functional home furniture at low prices, making them affordable to many
people (IKEA, n.d.). On the other hand, Wal-Mart, an American retail giant, was
established 19 years later, in 1962, by a 44 year-old, middle-aged Arkansas man,
Sam Walton. The Wal-Mart concept has been unchanged since its first
establishment, lowest price anytime, anywhere. Wal-Mart vision, compare to
IKEA, is to help people to save money and live better (Wal-Mart, n.d.).
This paper will evaluate the design of the Supply Chain for Wal-Mart and
IKEA, in regards to industry network, inventory management, and outsourcing
decisions. This paper will also evaluate both companies are able to reach their
current and potential customers all over the world through the supply chains given
the risks and challenges. In addition, this paper will compare the sustainability
strategies adapt by the two companies.
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Wal-Mart is known for its fast and responsive logistic system. Companys
highly-automated distribution centres, which operate 24-hours a day and are
serviced by private companys truck fleets, are the foundation of Wal-Marts
supply network (Alyea, 2012). Each distribution centre supports approximately 75
to 100 retail stores within a 250-mile area. Thus, the fleet trucks do not have to
travel so far to retail stores to make deliveries (shorter distance), which lead to a
decrease in transportation cost, lead time, and safety stock required. If a shortage
occurred, replenishment can be made quickly as retail stores receive daily
deliveries from distribution centres (Alyea, 2012).
According to Supply Chain Digest (as cited in Alyea, 2012), the trucks are
used to pick up goods directly from manufacturers warehouses, which eliminates
intermediaries and increases responsiveness. However, the use of trucks increases
transportation costs, but is justified in terms of reducing inventory costs. Wal-
Mart is also known as a pioneer to adopt cross-docking technology, where the
products are routed from suppliers to Wal-Marts warehouses and then shipped to
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Supply chain ..., Michelle, FIB UI, 2014
addition, Wal-Mart acquired ASDA in 1999, the grocery chain in the UK, and has
been in operation ever since. ASDAs expertise in direct sourcing helps Wal-Mart
to reduce cost of purchasing goods, as well as to improve the companys supply
chain efficiency (Supply Chain Digest, 2010).
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3.1.3.1. RFID
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On October 24, 2005, the president and CEO of Wal-Mart launched the
sustainability program, consists of three main goals: for Wal-Mart to be supplied
by 100% renewable energy, create zero waste, and sell products that sustain
people and the environment (Wal-Mart, 2012). In addition, Wal-Mart has
developed several strategies to actualize an improved environment, such as
Sustainable 360, a strategy developed to engage suppliers, associates, and
customers in their efforts to develop a better environment, and Sustainable Value
Networks (SVNs), utilized to help integrate sustainable practices into all parts of
the business, implemented to all levels of organization inside and outside Wal-
Mart, including leaders of the company, suppliers, academia, government, and
NGOs (Wal-Mart, 2012). For instance, as an implementation of SVNs, Wal-Mart
tries to reduce its greenhouse gas (GHG) emission and they are working with
suppliers to do the same.
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Figure 1. IKEA and its industrial network. Reprinted from Strategy in Industrial Networks:
Experiences from IKEA, by E. Baraldi, 2008, California Management Review, 50(4), p. 100. Copyright
2008 by University of California Berkeley. Reprinted with permission.
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IKEA adapts mostly the direct sourcing model as its supply chain structure
(Belavina & Girotra, 2010). The IKEA industry network contained 550 business
units specialising in different fields and spread over more than 50 countries
(Baraldi, 2008). The organisation has 1,300 direct suppliers and 10,000 sub-
suppliers, spread over 60 countries (see figure 1). The stores are spread over 30
countries, including China and Australia. IKEAs wholesale and logistic
operations are controlled by 26 distribution centres that are located in 12
countries, linked by hundreds of logistic partners that administer the transportation
facilities (Baraldi, 2008).
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One of the advantages that IKEA may gain from building long term
relationships involves the reduction of biased opportunistic behaviour due to
profit-relevant non-contractible actions of sourcing partners, such as capacity and
inventory level (Belavina & Girotra, 2010). Many studies have shown that
building long term relationships can resolve the traditional relegation losses
(Belavina & Girotra, 2010). An example of the mutually beneficial relationship
between IKEA and its suppliers is shown by Hultman et al (2012) in their research
on the production process of PAX wardrobe system.
The sliding doors for the PAX wardrobe system are built of aluminium
profiles and other accessories that are sourced by Sapa, one of IKEA suppliers.
Hultman et al (2012) stated that the PAX wardrobe project was the largest single
contract in Sapas history and the contract has opened a new business and
introduced Sapa with a different way of doing business. Sapa leveraged IKEAs
knowledge to establish relationships with other suppliers (Figure 2), and
according to Hultman et al (2012), Sapa stated that IKEAs supports played as an
important bridging role.
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The Ladder Model is composed of three stages: the Call-Off stage, Order-
Point Distribution Centre, and Vendor-Managed Inventory (see figure 3).
Figure 3. IKEAs Ladder Model for Supplier Interactions and IT/Logistics Capabilities. Reprinted
from Strategy in Industrial Networks: Experiences from IKEA, by E. Baraldi, 2008, California
Management Review, 50(4), p. 109. Copyright 2008 by University of California Berkeley. Reprinted
with permission.
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Wal-Marts operation has been expanding since its first store opened in
China in 1997. However, the company faced several challenges from Chinas
distribution sector, and by overcoming these challenges through innovative and
flexible supply chain management and logistics strategies are vital to Wal-Marts
success in China (Huffman, 2003).
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However, the way IKEA response to the critique is rather simple. From
IKEAs point of view, it is a waste of time to deal with suppliers who do not want
to cooperate well, and IKEA is ready to terminate such relationship (Baraldi,
2008). One advantage of IKEA from its readiness to terminate (and build)
relationships is that the heterogeneous network resulted from the dynamics is one
of the key sources of development (Baraldi, 2008).
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With respect to its policy, Wal-Mart tries to cut its operating costs to
further benefit the customers with lower-priced products. In order to actualize the
policy, Wal-Mart implements highly-automated distribution centres, which
operate 24-hours a day and are serviced by private companys truck fleets. These
distribution centres each supports 75 to 100 retail stores in 250-mile area, so that
each truck fleet will not have to travel so far, which will reduce its transportation
cost, lead time, and safety stock required. Wal-Mart also adopts the cross-docking
method to cut inventory holding costs, which also will benefit the future
customers.
Wal-Mart adopts Retail Link, RFID, and recently EDIINT for its
technology application, aiming to cut operating costs and improve information
sharing with suppliers, which lead to a better forecast results for the suppliers.
Moreover, the company develops a green strategy, consists of three main goals: to
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IKEA, on the other hand, attempt to reduce logistics cost is through Design
for Logistic (DFL) model and the application of innovative unit load carrier in a
form of a loading ledge. This load carrier has proven an increase in space
utilisation in trucks, therefore it helps to increase efficiency. In terms of
technology, IKEA installs mobile computer to increase communication efficiency.
IKEAs sourcing decisions has managed to benefit the company in terms of
eradicating unnecessary cost and maximising profit through various ways of
outsourcing.
Despite the difference in the supply chain strategies, both Wal-Mart and
IKEA have achieved their desired goals in reducing cost, as well as keeping their
principle of providing low-cost products for consumers, while still committed to
their promises to maintain environment sustainability.
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Effective Data. (n.d.). EDIINT - EDI Over the Internet. Schaumburg, Illinois,
United States of America.
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Hultman, J., Johnsen, T., Johnsen, R., & Hertz, S. (2012). An Interaction
Approach to Global Sourcing: A Case Study of IKEA. Journal of
Purchasing & Supply Management, 18(1), 9-21.
IKEA. (2012, October 23). IKEA Group Unveils New Sustainability Strategy:
People & Planet Positive. Business Wire (English).
IKEA. (n.d.). About IKEA. Retrieved February 12, 2013, from IKEA:
http://www.ikea.com/ms/en_GB/about_ikea/index.html
Li, H., Guo, H., Skibniewski, M. J., & Skitmore, M. (2008). Using the IKEA
Model and Virtual Prototyping. Construction Management and Economics,
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Lusch, R. F., Vargo, S. L., & Tanniru, M. (2010). Service, Value Networks, and
Learning. Journal of The Academy of Marketing Science, 38(1), 19-31.
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Mather, H. (1992). Design For Logistics (DFL): The Next Challenge for
Designers. Production and Inventory Management Journal, 33(1), 7-10.
Scheraga, D. (2005, June). Balancing Act at IKEA. Chain Store Age, pp. 45-46.
Supply Chain Digest. (2010, January). Global Supply Chain Focus. Supply Chain
Digest.
Wal-Mart. (n.d.). Our Story. Retrieved February 12, 2013, from Wal-Mart:
http://corporate.walmart.com/our-story/
Wong, C. Y., Lai, K.-H., & Cheng, T. (2011). Value of Information Integration to
Supply Chain Management: Roles of Internal and External Contingencies.
Journal of Management Information System, 28(3), 161-200.
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