Inventory Management & Warehousing

Cost-per-touch inventory tacticHaving customers select the furniture and retrieve the packages themselves is an inventory management tactic called ‘cost-per-touch’. As a rule of thumb, companies find that the more hands touch the product, the more costs are associated with it.

Maximum/minimum settings as a proprietary systemThe in-store logistics managers use an inventory replenishment management process developed by IKEA called ‘minimum/maximum settings’ to respond to store-level inventory reorder points and reorder products.

Minimum settings: The minimum amount of products available before reordering.Maximum settings: The maximum amount of a particular product to order at one time.Since all IKEA inventory is only stocked at night after opening hours, the logic of its min/max settings is based on the number of products that will be sold from the reserve stack of the bin in a single day or two-day period. The process meets customer demand while minimizing ordering too few or too many products.

Usage of high-flow & low-flow warehouse facilitiesIKEA’s store operations are supported by high-flow facilities (focused on the 20% of SKUs that account for 80% of the volume) and low-flow warehouses that are more manual. In its high-flow warehouses, IKEA employs automatic storage and retrieval systems to drive down its costs-per-touch. Products stocked in a low-flow facility are not in high demand, and operations rely on manual processes since workers will not be shifting and moving inventory around too much.