Supplier Capacity at IKEA – Capacity planning from an outside-in perspective

Abstract: Background:IKEA has, during a long time, experienced problems with incorrect capacities registered in their system. There is no standardized way of working with registering and updating the information regarding capacity today. Therefore, the information regarding the suppliers’ capacities does not reflect the reality. Furthermore, the company does not have a clear picture of how the capacities are allocated. They have an insufficient overview of their capacities since they often are registered in different units which make them difficult to compare. If IKEA has enough capacity available but have allocated it wrongly, there is a possibility to utilize the capacities better and improve the planning process. Therefore One Supplier Capacity Process has been created in order to standardize the way of working regarding supplier capacity planning. Purpose: The purpose of this Master’s thesis is to contribute to and support the global roll-out of One Supplier Capacity Process in the Lighting Category in Trading Area Greater China as well as to evaluate and suggest improvements to the project. The thesis will contribute to the field of research in capacity planning from an outside-in perspective. The deliverables can be divided into four parts: 1. Map and analyse how IKEA is working with capacity planning today (As-Is) 2. Implement the common way of working with One Supplier Capacity Process (To-Be) 3. Evaluate and prove savings 4. Contribute to improve One Supplier Capacity Process Method: This thesis will have some similarities with action research methodology since analysis and research has been conducted during implementation and used as a basis for decisions. Interviews have been done with the personnel at IKEA to map the current way of working with capacity planning. Embedded case studies have been used when implementing the process in terms of supplier visits. This means that both quantitative and qualitative data has been used in the project. Delimitations: This Master’s thesis will be connected to the global roll-out of One Supplier Capacity Process in the Lighting category in Trading Area Greater China. During the project, all 23 lighting suppliers will be introduced to the concept but this thesis will only concern seven selected suppliers. The thesis will focus on operational and tactical capacity planning. The limited amount of time will affect the extent of the analysis and it will mainly be based on soft measurements. Conclusion: The implementation of One Supplier Capacity Process has worked well, followed the original time plan and the objectives with the Master’s thesis have been fulfilled. Several savings have been found with the new way of working such as a global overview, transparency and steps toward a common way of working. Furthermore, the utilization of the capacities has been analysed and it can be concluded that IKEA’s utilization of their capacity is around 70-75%. To further improve the process it has been suggested to for example create explicit guidelines, develop the allocation tool and improve the handling of extra capacity.