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SCM cross pollination: Ikea and the Indian bi-cycle manufacturers

Supply Chain is a horizontal function”, says the voice aloud. “Big deal”, I say, smirking. “This essentially means that it is agnostic to industry sectors”, continues the voice. “Natural”, I say still smirking. “It is thus fair to expect that concepts and best practices applicable in one industry sector can be leveraged for another sector”, the rich baritone voice states. “Fair enough”, I say, continuing to play ball not knowing where we were headed. “As a supply chain consultant, do you think you have lived up to that expectation?” No longer in the dark and no longer smirking, I turn diplomatic and deflect this query to the readers.

While each industry has its peculiarities which prevent adoption of some SCM best practices, the potential for cross-pollination is immense. It was with such a thought that I had penned a blog on the similarity between Dell and the Indian cement manufactures here. Continuing on the theme of postponement, I write today on how Ikea, the closely guarded Swedish furniture giant, and the Indian bi-cycle manufacturers have adopted this strategy to rich gains.  


Usually, postponement of an operation is carried out for shifting the point of differentiation to a later stage so as to reap the benefits of reduced inventory and improved customer service. But the two entities in question here have adopted this approach in their supply chains to drastically reduce transportation cost. Both the firms faced the same issue in transportation – high product variety and the bulky nature of their products meant transportation cost were a drain on their margins. Ikea responded by re-designing its supply chain to have its furniture transported in kits and shifted the final assembly to the end-user (who gladly did so for the benefit they derived from reduced pricing besides the ‘constructive experience’). The Indian bi-cycle manufacturers limited their activities to production of frames, handle bars and transmission parts and transported these in a cost-effective manner to the dealer/retailer who did the final assembly based on consumer order. Thus, by postponing the final assembly, both the entities were able to utilize the carrier’s space much more effectively so as to reduce their transportation expense. 

Postponement strategy has been adopted in diverse sectors – automobile, consumer appliances, food, apparel and airlines to name a few – but the thread common to firms in these diverse sectors has been high forecast uncertainty and high product customization which led them to modularize their design (Design for Transportation). Though I deflected the query on whether I have lived up to the expectations of best practices’ cross-pollination, I invite readers to share their obvious and not-so-obvious experiences of SCM best practices across unrelated industry sectors.

Comments

Interesting Blog Amit. Hallmark is another retailer that I know reorganized its business process to gain a similar visibility into its supplychain. We may think it is all cards, but then think of the photographers, artists, the content of the card, dimensions and other properties. They just had a bar code for a particular type of card. For example - mother's day. It was hard to determine which particular Mother'ss Day card was sold the most in which region. Southerners might like emotional ones, while urban people would like slightly humorous ones. Well, you know what I mean. After this change they knew exactly which type of cards would sell the best in the next season.

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