Postponing the decision of final 

destination: A potential way to make IKEA 

more flexible and responsive 
Master’s Thesis in the Master’s Programme Supply Chain Management  

 

DILIP BASAVA 

MALIN VELANDER 
 

 

 

 

 
Department of Technology Management and Economics  

Division of Supply and Operations Management 

CHALMERS UNIVERSITY OF TECHNOLOGY  

Gothenburg, Sweden 2018 

Report No. E2018: 037 

 

 



 

 

MASTER’S THESIS E2018: 037 

  

  

  

  

  

   

  

  

  

Postponing the decision of final destination:  
A potential way to make IKEA more flexible and responsive 

  

  
DILIP BASAVA 

MALIN VELANDER 

  

  

  
Tutor, Chalmers: Ola Hultkrantz 

Tutor, IKEA: Ola Magnusson 

  

  

  

  

  

  

  

  

  

Department of Technology Management and Economics  

Division of Supply and Operations Management 

CHALMERS UNIVERSITY OF TECHNOLOGY 

Gothenburg, Sweden 2018 

 

 

 

 

 

 



 

 

 

 

 

 

 

Logistics postponement in IKEA’s distribution system 

DILIP BASAVA 

MALIN VELANDER 

 

 

© Dilip Basava, Malin Velander, 2018. 

 

 

Master’s Thesis E2018:037 

 

 

Department of Technology Management and Economics 

Division of Supply and Operations Management 

Chalmers University of Technology 

SE-412 96 Gothenburg, Sweden  

Telephone: + 46 (0)31-772 1000 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chalmers Reproservice  

Gothenburg, Sweden 2018 

 

  



 

 

Acknowledgement 

The master thesis study has been conducted during spring of 2018 as a part of the master’s 

programme Supply chain Management at Chalmers University of Technology, Gothenburg. 

 

We would like show gratitude to our supervisor at IKEA, Ola Magnusson, for his guidance, 

knowledge and support during the project. Further, we would like to thank our supervisor at 

Chalmers, Ola Hultkrantz, for his feedback and advices during the research and writing process. 

 

We would also like to thank everyone who have participated in interviews for their shared time, 

knowledge and interest. 

 

Dilip Basava and Malin Velander 

Gothenburg, 2018  



 

 

Abstract 
IKEA is a global retailer in the home furnishing business. The delivery lead time for products 

to reach IKEA stores or IKEA distribution centres from suppliers located across the globe can 

be up to 16 weeks and during this time the actual need will change. As a result the order quantity 

which is based on the forecasted quantity is not always matches the actual need. In addition to 

variation in demand, constraints in supplier capacity and distribution result in stock out, excess 

stock or early deliveries. In order for the company to stay competitive and grow in the e-

commerce business, there is a need for a more flexible and responsive supply chain. Therefore 

IKEA has realised potentials in implementing a postponement strategy in the distribution 

network to achieve this. In order to explore if postponement is feasible for IKEA, the 

distribution network has been mapped. The consequences of deciding destinations early in the 

supply has been discussed for each IKEA stakeholder. Currently, IKEA decides the final 

destination, which can be a store, distribution centre or a customer distribution centre, when 

they place an order to a supplier. Customer distribution centres are used for online customer 

orders. IKEA has three different replenishment solutions from suppliers to stores or selling 

units, Direct Delivery, delivery through distribution centre and Combined Supply, which is a 

combination of the other two solutions. Some of the deliveries that is categorised as Direct 

Deliveries are cross-docked at a distribution centre. These deliveries are called Transit 

Deliveries. 

 

External companies have been interviewed about the use of deciding destination at a later stage. 

Their inputs in terms of benefits and challenges with the postponement concept has been used 

together with interviews with employees at IKEA entities and IKEA suppliers to create and 

analyse three different postponement scenarios. The first scenario is to postpone the destination 

decision until shortly before an order is dispatched from a supplier. This is most valuable for 

make-to-order suppliers who have a long production lead time. The second scenario is to 

postpone the destination decision until shortly before the goods are received at a distribution 

centre. This is only suitable for Transit Deliveries, where goods are cross-docked at distribution 

centres. The third scenario is to postpone the destination decision until shortly before the goods 

arrive at a consolidation point, port of loading or port of discharge. The scenario can be suitable 

for all the replenishment solutions.  

 

The thesis result can be an addition to the existing literature about postponement, which is 

mostly about delaying the production or movement of goods until the customer demand is 

known. However, postponement can be implemented by delaying the decision of final 

destination of products during the production phase or during the distribution.  

 

Key words: postponement, distribution network, replenishment, order fulfilment, lead 

time, planning and execution  



 

 

Table of Content 
1. Introduction 1 

1.1 Purpose and research questions 2 

1.2 Scope 3 

1.3 Reading guidelines 3 

2. Theoretical framework 4 

2.1 Retail business 4 

2.2 Home furnishing retail business 5 

2.3 Planning and control - order fulfilment 6 

2.4 Physical distribution 7 

2.5 Postponement and speculation 8 

2.5.1 Logistics postponement 12 

2.5.2 Implementation of postponement 13 

2.6 Cross-docking 14 

3. Method 15 

3.1 Research approach 15 

3.2 Research strategy 15 

3.3 Research process 16 

3.4 Data collection 16 

3.4.1 Literature review 17 

3.4.2 Interviews 17 

3.4.3 Internal documents 18 

3.4.4 Observations 18 

3.4.5 Survey 18 

3.4.6 External Interviews 20 

3.5 Data analysis - Scenario building 21 

3.6 Reliability of the study 22 

4. About IKEA 23 

5. IKEA’s Supply chain 25 

5.1 Distribution Network 25 

5.1.1 Supplier 25 

5.1.2 Distribution Centre (DC) 26 

5.1.3 Distribution centre group (DCG) 27 



 

 

5.1.4 MRS and MRR 28 

5.1.5 Selling Unit (SU) and Sales channels 28 

5.2 Transport solutions 29 

5.3 Customs 31 

5.5 Packaging & Label 32 

5.6 IKEA’s replenishment solutions 33 

5.6.1 Pricing for different replenishment solutions 34 

5.7 Plan and balance of sales and supply 34 

5.7.1 Sales Planning 35 

5.7.2 Demand Planning 35 

5.7.3 Need Planning 36 

5.7.4 Capacity Planning 36 

5.7.5 Balancing of plans 37 

5.8 Order fulfilment 37 

6. Empirical findings 39 

6.1 Planning & Execution 40 

6.2 Suppliers 41 

6.3 Distribution Centres 42 

6.4 Transport 42 

6.5 Selling units 42 

7. External interviews 45 

7.1 Company A 45 

7.2 Company B 45 

7.3 Company C 46 

7.4 Company D 47 

7.5 Company E 47 

8. Analysis - Scenarios 48 

8.1 Scenario 1: Assigning the destination at the end of production 50 

8.2 Scenario 2: Assigning the destination at DCs for transit flow 52 

8.3 Scenario 3: Assigning the destination at intermediary nodes 56 

8.4 Summary of the scenarios 58 

9. Discussion 60 

10. Conclusion and recommendation 61 



 

 

References 63 

Appendix I - List of Interviews with IKEA Employees 69 

Appendix II - List of interviews with IKEA suppliers 71 

Appendix III - List of interviews with external companies 72 

Appendix IV - Survey Questionnaire for external companies 73 

 

 

  



 

 

List of Figures 
 

Figure 1. Five different types of lead time. Order lead time include the total time from when a 

customer order is received to when it is delivered to the customer (Rajaniemi, 2012). ............ 7 

Figure 2. Four different postponement strategies: logistics postponement, production 

postponement, purchasing postponement and product development postponement. The white 

boxes are activities done before CODP, and the grey boxes are activities done after it (Yang, 

Yang and Wijngaard, 2007). .................................................................................................... 10 

Figure 3. Four supply chain postponement and speculation strategies and the related 

implications of each (Pagh and Cooper, 1998). ....................................................................... 11 

Figure 4. Four supply chain strategies depending on demand and supply characteristics 

(Christopher et al., 2006). ........................................................................................................ 13 

Figure 5. The research process. Green boxes is the data collection methods used and blue boxes 

is the steps and research questions. The grey arrows show the methods used for each step, and 

the black arrows show that step 1 helps to answer research question 2, and both step 1 and 2 

are needed to be able to answer research question 3. .............................................................. 16 

Figure 6. Three categories of scenarios: explorative, goal specific and predictive (Börjeson et 

al. 2006; Farge, 2017). ............................................................................................................. 21 

Figure 7. Triangulation by using five different data collection methods. ............................... 22 

Figure 8. The geographical presence of IKEA stores, distribution centres (DCs) and Customer 

Distribution Centres (CDCs) in FY2017 (IKEA, 2017). ......................................................... 23 

Figure 9. A simplified overview of IKEA’s franchise system (IKEA, 2018c). ...................... 24 

Figure 10. A simplified overview of IKEA’s distribution network: Supplier, MRS/CP, Low 

flow DC, High flow DC, MRR, store and CDC are included. The different replenishment 

solutions, Direct Delivery, Transit Delivery and DCG Delivery are also shown. ................... 25 

Figure 11. IKEA uses On Time Delivery Supply Chain to measure the supply chain’s ability 

to execute orders according to plan. It includes the sub measurements OTD Sender and OTD 

Logistics. .................................................................................................................................. 26 

Figure 12. The geographical locations of IKEA’s DCs. IKEA has in total 41 DCs (IKEA, 

2018c). ..................................................................................................................................... 27 

Figure 13. A simplified view of DCG network (IKEA, 2013). One DCG, which can consist of 

a few DCs, supply several selling units. .................................................................................. 27 



 

 

Figure 14. A simplified supply setup with multiple nodes and combinations (IKEA, 2018e).

.................................................................................................................................................. 29 

Figure 15. A sample label for an IKEA article (IKEA, 2015a). ............................................. 32 

Figure 16. The article BYHOLMA ach grey is taken as an example of a Combined Supply 

article. The green line shows the original plan of Direct Delivery in percentage, and the red line 

represents the actual Direct Delivery sent. .............................................................................. 34 

Figure 17. Five sub processes of plan balance and sales and supply (IKEA, 2018m). Sales 

planning is the driver for rest of the four processes and these four sub processes are executed 

throughout the year. ................................................................................................................. 35 

Figure 18. IKEA Sales plan (IKEA, 2018j). The sales plan is a bottom up plan agreed between 

retail units and IoS and it is aligned with top down sales goal. ............................................... 35 

Figure 19. Overall planning at IKEA (IKEA, 2018i). Need planning is based on utilisation of 

available capacity and setting up optimal replenishment solution. .......................................... 36 

Figure 20. Supplier capacity planning and adjustment to total IKEA need due to imbalance in 

the capacity and demands (IKEA, 2018i). ............................................................................... 37 

Figure 21. The order that IKEA place to the suppliers include quantity, destination and dispatch 

date. For DCG Delivery, DCs are put as destinations and for Direct Delivery and Transit 

Delivery, selling units are put as destination. The figure illustrates the lead time between when 

an order is created and when goods are received at DCs or selling units. ............................... 38 

Figure 22. The need for week 17 for the article BLÅREGN cushion when the need is pulled 

on 4 consecutive weeks. ........................................................................................................... 39 

Figure 23. The scenario implies that the decision of destination is taken at the end of the lead 

time. The lead time is the time between when an order is placed to the supplier and when the 

order is dispatch from the supplier........................................................................................... 50 

Figure 24. The scenario that the decision of final destination is taken at the end of the delivery 

lead time between a supplier and a High flow DC. ................................................................. 52 

Figure 25. The scenario means that the decision of destination is taken in the end of the delivery 

lead time between a supplier and an intermediary node. Intermediary nodes include CPs, POLs 

and PODs. ................................................................................................................................ 56 

 

 

 

 



 

 

List of Tables 
 

Table 1. Response status of the survey. .................................................................................. 20 

Table 2. OTD Logistics measurements. All orders that are received before the “on time” 

measurement are considered as too early, and all orders that are received after are too late. 

Moreover, cancellations are never “on time” (IKEA, 2018f). ................................................. 31 

Table 3. Some of the challenges and benefits with deciding the final destination early in the 

supply, as is done in status quo, are summarised below. ......................................................... 44 

Table 4. The pros and cons with the different scenarios. ........................................................ 59 

 

 

 

  



 

 

List of Abbreviations 

BA Business Area 

CDC Customer Distribution Centre 

CS Combined Supply 

CP Consolidation Point 

CPU Central Parcel Units 

DC Distribution Centre 

DCG DC Group 

DD Direct Delivery 

FCA Free Carrier Agreement 

HFB Home Furnishing Business 

IoS IKEA of Sweden 

MRR Mid Receiving unit close to the Receiver 

MRS Mid Receiving units close to the Sender 

OTD On Time Delivery 

POL Port of Loading 

POD Port of Discharge 

SU Selling units 

SUP Supplier 

  



1 

 

1. Introduction 

With increasing competitiveness in the business environment, balancing between demand and 

supply becomes more and more critical. When a company is in close proximity to its suppliers 

and customers, demand and supply are easily communicated, thereby products can make a 

quick way through the supply chain (Ross, 2015). However, as the distance and time widen, 

the ability to access products and deliver to markets in short time diminishes. Globalization has 

led to increased supply lead times, more unreliable transit times and various consolidation 

possibilities (Bowersox, 2010). Logistics has grown in complexity for global companies, which 

has led to less flexible and consistent supply chains (Bowersox, 2010). In the same time, agile 

supply chains with rapid response to unpredictable changes in demand is increasingly sought-

after (Rushton, Croucher and Baker, 2017). The ability to meet customers’ requirements in 

ever-shorter time has become critical (Christopher, 2011). This is due to today’s multichannel 

and fast-changing business environment (Fernie & Sparks, 2014). Customers demand more 

variety in products and the product availability in all the sales channels is essential to keep 

customers (Christopher, 2011).  

 

In today’s global marketplace, supply chain management is one premier operations 

management strategy for companies that seek competitive advantage. One way to bridge the 

distance gap between demand and supply is through management of logistics in the supply 

chain (Ross, 2015). Logistics concerns planning, controlling and implementing procedures for 

efficient and effective storage and transportation of goods (Hou, Chaudhry, Chen and Hu, 

2015). Furthermore, the role of logistics is to satisfy the day-to-day service and product 

requirements of the supply chains. Postponement is a business strategy that has gotten more 

attention as a way for companies to become more flexible. Most of the prior studies have 

focused on postponement and flexibility within the manufacturing area. However, 

postponement can be applied on logistics and distribution of retail business.  

 

The case company in this study, IKEA, is a multinational leading retailer in the home furnishing 

business. The company’s business idea is to offer a wide range of furnishing products at low 

prices. In order to stay competitive and be able to offer affordable prices, IKEA has to optimize 

their entire supply chain. The company has realised potential improvements in the logistics 

management in order to become more flexible and responsive and meet the customer through 

various sales channels. The supply lead time from IKEA’s suppliers to IKEA stores can be up 

to 16 weeks, and during this time the customer demand can change. Hence, the stores can get 

too much or too little quantities, or too early or late deliveries. Deliveries at the right time, right 

place and right quantity is critical for the stores as they have limited storage space and product 

availability is essential. 

 

Today, IKEA has three different replenishment solutions to deliver goods from suppliers to the 

customers. The main selling point for IKEA is stores. However, with the rise in online sales 

the use of customer distribution centres that are used for online shopping orders has increased. 

Stores and customer distribution centres are together termed selling units. The goods can be 

transported directly from suppliers to the selling units, this replenishment solution is then called 



2 

 

Direct Delivery. Goods can also be cross docked at an IKEA distribution centre without any 

storage, it is called Transit Delivery. Additionally, the goods can be transported from suppliers 

to an IKEA distribution centre where the goods are stored until any selling unit request them, 

this solution is referred to as DCG Delivery. The replenishment solution can be combined for 

certain articles, meaning that stores and customer distribution centres are supplied by both 

Direct delivery or Transit Delivery and DCG Delivery, and it is referred to as Combined 

Supply. 

 

IKEA gives suppliers information about quantity, date of delivery and destination when they 

place orders to them. Destination means stores and customer distribution centres in case of 

Transit Delivery and Direct delivery, and distribution centres for DCG Delivery. Hence, the 

Transit Delivery solution is today considered as a Direct delivery solution in the planning and 

execution although the goods are passing through a distribution centre. IKEA wants to 

investigate the possibility to postpone the decision of destination with the purpose of being 

more flexible and responsive towards changes in customer requirements. The company wants 

to explore if it is possible to send the final destination to suppliers in the end of the production 

lead time or if it is possible to postpone the destination decision after the goods are sent from 

suppliers. 

1.1 Purpose and research questions 

The aim of the study is to map the potential benefits and challenges in the IKEA supply chain 

when postponing the destination decision. The first step is to study the current replenishment 

solution and the key issues with it. The focus is on how IKEA is affected by deciding final 

destinations at the stage of order placement to suppliers. The following research question will 

enquire the concerns and issues with the various stakeholders, including suppliers, IKEA 

distribution centres, IKEA stores, IKEA customer distribution centres, the transport and 

customs. Research question 1 is formulated in order to answer this. 

 

1. What are the key issues within IKEA’s replenishment solutions when the decision of 

destination is made at an early stage? 

 

A market study is performed to get an understanding of the postponement concept. Further on 

taking the IKEA context into consideration, efforts will be made to build scenarios. The 

following research question 2 is therefore created. 

 

2. How could IKEA leverage the concept of postponing the decision of final destination 

with different scenarios? 

 

To conceptualise the benefits and challenges of postponing the destination decision in IKEA’s 

supply chain, research question 3 is formulated.  

 

       3. How would postponing the decision of final destination will affect IKEA’s overall 

supply chain? 



3 

 

1.2 Scope 

This study is limited to the home furnishing retailer IKEA and its distribution network 

including suppliers, consolidation points, transport operations, distribution centres, stores and 

customer distribution centres. Interviews were mostly limited to Swedish market and IKEA 

entities operating in Sweden. 

1.3 Reading guidelines 

Chapter 4 and 5 present an overview of IKEA’s distribution network and replenishment 

solutions. 

 

Chapter 6 gives the readers a critical overview of present situation, when the decision of final 

destination is taken early in the supply lead time. 

 

Chapter 7 presents a summary of interviews held with external companies. Three retail 

companies based in Sweden and USA, one supply chain consulting company based in Sweden 

and one international trade consultant based in India.  

 

Chapter 8 examines different scenarios with postponing the destination decision and how it 

affects the different stakeholders.  

  



4 

 

2. Theoretical framework 
The theoretical framework includes a description of the home furnishing retail business and its 

characteristics. It also includes theories and concepts in planning and control, physical 

distribution, postponement and cross docking. 

2.1 Retail business 

Retail means reselling of goods and services to customers through different sales channels 

where a retailer buys the products or services and sells it to the end consumer. Retailers are the 

final loop in a supply chain. These major sales channels or the customer touch points can be 

traditional brick-and-mortar stores, vending machines, personal selling, online or e-commerce 

and multichannel retail (Pride et al., 2018; Morgan, 2013).  However, many retailers are not 

only acting as intermediaries between the seller and the buyer but they are defining the business 

model (Sorescu et al., 2011). They are involved in product development, developing the supply 

chain network, enhancing the customer experience as well as creating value for all the 

stakeholders. Furthermore, the retailers’ logistic flexibility affect their supply chain members 

as the retailers get an increased scope in supply chains. 

   

The retail business is transforming everyday with the globalisation and new technologies. 

Retailers are entering into new markets, attracting new customer segments with new products 

and are competing to provide customers with better shopping experience (Sorescu et al., 2011). 

More and more companies operate in the global marketplace with global attributes such as 

global sourcing, global production, centralisation of information, centralisation of inventories 

but at the same time they serve for local requirements (Rushton et al., 2017). To increase the 

availability of the product and to avoid uncertainty in the supply chain, retailers are sourcing 

from multiple suppliers and from multiple countries. In this way they are also avoiding the 

dependence on a single supplier (Datamonitor (2012). Global sourcing has become a time-

tested approach for the competitive advantage as a way to reduce the cost of sourcing (Trent 

and Monczka, 2005; Birou and Fawcett, 1993). Global sourcing is an integrated and 

collaborative sourcing strategy with the aim to have comparative advantage in cost and 

competitive advantages in quality, technology and delivery performance (Hultman et al., 2012; 

Alguire et al., 1994; Birou and Fawcett, 1993). 

 

Logistics operations are more complicated in the global environment and to plan and manage 

logistics as an integrated system is difficult (Rushton et al, 2017; Birou and Fawcett, 1993). 

The complexity because of the globalisation provides some implications such as extended 

supply lead times, complicated node management, extended and unreliable transit times and a 

need for greater visibility in the supply chain. It requires huge investments in the physical 

distribution network and communication platforms to make the products available (Birou and 

Fawcett, 1993). 

 

 



5 

 

Optimal use of supplier capacity, warehouse space and transport network is demanded in 

today’s retail business in order to stay competitive. Sorescu et al. (2011) emphasise the 

importance of operational efficiency and operational effectiveness for the innovation in the 

retail business model. According to Sorescu et al. (2011), operational efficiency is about doing 

things right, which can be achieved by streamlining the back end operations, and it includes 

sourcing and optimal inventory turnaround. Operational effectiveness is about doing the right 

things such as matching the demand of the customers with the supply.   

2.2 Home furnishing retail business 

The home furniture industry can be characterised as low technology based manufacturing with 

high volume of trade and the manufactured commodities have low value-to-bulk ratios (Drayse, 

2008). Before industrialisation, furniture were mainly handcrafted but with the industrial 

revolution, mass production has taken the centre stage (Morgan, 2013). Historically, furniture 

have been considered as durable goods with long life and the consumption pattern is mostly 

infrequent with average consumers re-furnishing only 1.5 times in their lifetime (Leslie and 

Reimer, 2003). However, product innovation and introduction of wider range of products allow 

consumers to change the perception of furniture as a commodity to a lifestyle and fashion item 

(ibid), which in turn increases the consumption.  

 

The global home furnishing business generally consists of three segments: Furniture, Floor 

Coverings, and Household Textiles (Datamonitor, 2012; Global Home Furnishing Market, 

2014), however there may be other categories such as electrical and electronics products and 

plants added to the list. According to Datamonitor (2012) and Global Home Furnishing Market 

(2014), the Furniture segment basically consists of all the furniture’s in the bedroom, living, 

dining, outdoor and office space; carpets, rugs and hard covering are part of the Floor 

Coverings segment; and the Household Textile segment consists of beddings, cushions, 

mattresses, bathroom textiles, door mats and all other textile products. The Furniture segment 

accounts for the highest percentage of share in terms of volume and value (Datamonitor, 2012). 

 

With the presence of big retailers, the home furnishing retail sector is very competitive in 

advanced markets like Europe and North America, as well as it is fragmented with local 

manufactures and regional retailers in most of the countries (Datamonitor, 2012). IKEA 

became the first company to introduce ready-to-assemble furniture in flat pack where the 

customer assembles the product, resulting in considerable savings for the business in 

packaging, storage and distribution.  

 

Like any other retail business, home furnishing business is experiencing changes in the sales 

format and it is accommodating multiple sales channels combining with the traditional physical 

stores. The increasing penetration of internet and the popularity of the e-commerce are giving 

the platform to new players to enter the market and it is also providing the consumers with 

wider choice of products (Datamonitor (2012). Furthermore, retailers are opening small format 

stores at city centres which make it convenient to commute for customers. Additionally, these 



6 

 

stores provide customer more personalised shopping experience, where customer can feel the 

product and get it delivered to their homes from local distribution centres.  

2.3 Planning and control - order fulfilment 

Order fulfilment concerns the ability to turn a customer’s requirements into an actual order 

delivery (Rushton et al., 2017). In order fulfilment, information elements such as documenting 

and receiving an order is included to select and deliver the goods. Some companies divide 

between order-taking components, which are information-based, and order-delivery 

components, which are both information-based and physical. Manufacturing companies use 

different approaches for order fulfilment. One production approach is make-to-stock, which 

means matching production and inventory with customer demand forecasts. Hence, products 

can be finished before companies receive customers’ orders (Jonsson and Mattson, 2009). 

Another production approach, make-to-order, means that products are not made until 

confirmed orders are received for the products. Thereby, products can be made after receipt of 

customers’ orders and for make-to-order manufacturing operations, orders have an impact on 

the production itself (Rushton, Croucher and Baker, 2017). 

 

There is a lead time between when a customer order is placed to a supplier, and when different 

processes such as production and delivery is done. Lead time can be described as the time lag 

between supply of products and their requisition or demand (Dasgupta, Mukhopadhyay and 

Ghosh, 2017). Rajaniemi (2012) divides between five different types of lead times, see Figure 

1. Firstly, order lead time, also called supply lead time, is the time between when a customer 

order is received at a supplier to when the order is fulfilled and the customer has received the 

goods (Chopra & Meindl, 2016; Rajaniemi, 2012). Secondly, order handling time is the time 

between when a customer order is received and when the sales order is created. The sales order 

is created when the order is entered into the system. This time include validation of the order 

to ensure its correctness. Thirdly, manufacturing lead time consists of the time between when 

a sales order is created and when the production is finished. The manufacturing lead time tells 

how fast finished goods can be shipped, but do not tell anything about how fast the production 

of goods has been. Hence, the manufacturing lead time is important in make-to-stock 

production. Fourthly, production lead time is the time between when the physical production 

starts and when the production is finished. In contrast with manufacturing lead time which is 

more an external measurement, the production lead time is an internal measurement. The 

production lead time tells how long it takes to produce the order. Lastly, delivery lead time is 

the time between when production is finished and when the customer order is delivered. 



7 

 

 
Figure 1. Five different types of lead time. Order lead time include the total time from when a customer 

order is received to when it is delivered to the customer (Rajaniemi, 2012). 

2.4 Physical distribution 

According to Rushton et al. (2017), the term logistics includes materials management and 

distribution. Major components within logistics include transport, warehousing and inventory. 

Furthermore, distribution represents storage and flow of goods from production to the 

customer. The distribution operation incurs a cost and depending on the product characteristics, 

the relative cost can be high. For low-cost, bulky products such as cement for example, the 

relative distribution cost appears high while for high-value products like spirits, the relative 

cost appears low. 

 

Distribution and logistics are complex, it is not merely about transport goods from one storage 

point to another (Rushton et al., 2017). Operations often need to be dynamic to meet variations 

in customer requirements. Physically distributing products from the point of production to the 

point where they are made available for end customers can be called the physical distribution 

channel. Traditionally, the end point for consumer products has been a retail store, but it may 

also be the customer’s house or pick-up points in case of online shopping. Distribution affects 

both the customer value and the supply chain cost directly, why it is a key driver of the overall 

profitability (Chopra and Meindl, 2016). To be able to achieve high availability of goods at a 

low cost, good distribution design and operations are essential. 

 

There are several possible distribution channel alternatives between suppliers and retail stores 

or customers’ homes. The supplier can deliver direct to retail stores, and generally this channel 

is only used when full truck loads can be delivered from the supplier (Rushton et al., 2017). 

Additionally, the supplier can deliver to their own warehouse and store the goods before they 

are sent to retail stores. Moreover, the supplier can deliver goods via a retailer’s distribution 



8 

 

centre. Further on, goods can be delivered to consolidation centres where goods from various 

suppliers are consolidated and thereafter sent to a distribution centre. This kind of distribution 

channel where the retailer own the distribution centres has grown in importance as a result of 

the increase in large retail organisations. In case of online shopping and catalogue shopping, 

goods can bypass the retail store. The goods are then delivered from the supplier or from 

distribution centres by post or parcels carriers to consumers’ home. Therefore, based on product 

characteristics and customer choice, several different channels are often used to get the 

products to the market. 

 

When distribution centres are used, companies can use central distribution centres, meaning 

that one or a few centres are used to supply retail stores for several countries (Rushton et al., 

2017). National distribution centres can be used to supply retail stores in one country, and 

regional distribution centres generally supply few stores within a country. Centralisation means 

stocking inventory at a central distribution centre, and decentralisation means stocking 

inventory at multiple distribution centres.  

 

The choice of distribution channel can depend on size, spread and density of the market 

(Rushton et al., 2017). In a large market with widely geographic spread, long channels are often 

used. A long channel means that several storage points are used and different movements are 

used for products when they are distributed from the point of production to the final customers. 

In reverse, markets with few buyers and within a limited geographical area, short channels are 

used. Furthermore, the choice of channel can depend on the product itself. For high-value items 

short channels are often used as a high gross profit margin can cover higher distribution costs. 

For time-sensitive products and complex products, short channels may also be most 

appropriate. When it comes to new products, the final demand is unknown, and more flexibility 

may be needed with for example central inventory, hence a long channel is more appropriate. 

2.5 Postponement and speculation 

Postponement and speculation strategies are opportunities to achieve cost-effective and timely 

deliveries of products by rearranging conventional logistics and production structures (Pagh 

and Cooper, 1998). In recent decades, the postponement concept has started to receive more 

attention from academics and executives in companies (Ferreira, Tomas and Alcântara, 2015). 

The concept was introduced in the marketing literature by Alderson (1950) as an approach to 

reduce risk and uncertainty costs tied to the form, place and time differentiation of goods by 

making changes as late as possible.  

 

In 1965, Bucklin extended the postponement concept by introducing the speculation concept 

as the contrary of postponement and applied the concepts on the distribution channel. The 

speculation strategy means that the differentiation of goods should be made at earliest point of 

time to facilitate economies of scale, but the strategy may lead to substantial inventories. 

Bucklin (1965) views postponement as a way to shift the risk associated with owning goods 

from one position to another in the supply chain. Furthermore, Bucklin means that 

postponement cannot be done everywhere as activities cannot be postponed forever, hence 



9 

 

postponement and speculation must always be combined. The postponement concept has 

evolved and is currently seen as an organisational concept (Yeung et al., 2007). The scope of 

postponement has expanded. It has developed beyond only considering marketing to also 

include purchasing, product development, manufacturing, logistics, and promotion processes 

(Yang, Burns and Backhouse, 2005).  

 

Postponement can be defined as a strategy which intentionally delays the differentiating and/or 

value-adding activities until more information about the actual demand becomes available (Van 

Hoek, 1999; Yang, Burns and Backhouse, 2005; Yeung et al., 2007). There is consensus among 

researchers regarding the definition of postponement, however, there are large variance of how 

to make a classification of different postponement types (Mihiotis, 2013; Ferreira, et al., 2015).  

 

Yang, Yang and Wijngaard (2007) formulate four types of postponement strategies based on 

the state of inventories. The first postponement strategy, logistics postponement, is a strategy 

where products have taken their final form before customer orders, but the final movement of 

products are postponed. As virtual inventories do not depend on the physical location of the 

inventories at the time when orders are placed, e-commerce can be facilitated by this strategy. 

The second strategy is production postponement and means that semi-finished products are 

kept undifferentiated for as long as possible. The third strategy is purchasing postponement 

which means that companies postpone the purchase of raw materials or components until 

demand is available. The fourth strategy, product-development postponement, means that low-

risk subprojects are postponed and most resources are assigned to the riskiest and longest lead-

time sub projects. In Figure 2, it could be seen how the Customer Order Decoupling Point 

(CODP) is associated with the different postponement types. The CODP is where the customer 

order penetrates in the supply chain and forecast-driven activities are distinguished from order-

driven activities. 



10 

 

 
Figure 2. Four different postponement strategies: logistics postponement, production postponement, 

purchasing postponement and product development postponement. The white boxes are activities done 

before CODP, and the grey boxes are activities done after it (Yang, Yang and Wijngaard, 2007). 

Pagh and Cooper (1998) introduce four generic supply chain postponement/speculation 

strategies. The strategies consist of full speculation strategy, logistics postponement strategy, 

manufacturing postponement strategy, and full postponement strategy, see Figure 3. The 

speculation strategy means that all manufacturing and logistics operations are based on 

inventory forecasts. The form and movement of goods to forward inventories should be done 

at earliest possible time (ibid.) In this case, the CODP is located at the lowest level downstream 

in the supply chain. A decentralised distribution system is used and the product is stocked close 

to the customers. By this strategy, full economies of scale can be achieved as the products can 

be manufactured and distributed in large lot-sizes. However, the inventory investment will be 

high as a result of the decentralised inventories, and obsolete products may occur. When stable 

customer demand and high volumes are apparent and pivotal in the supply chain, this strategy 

is feasible (Mattsson, 2002). 



11 

 

 
Figure 3. Four supply chain postponement and speculation strategies and the related implications of 

each (Pagh and Cooper, 1998). 

The manufacturing postponement strategy means that the final manufacturing operations are 

performed after the product has been logistically differentiated some point downstream in the 

supply chain (Pagh and Cooper, 1998). The CODP is positioned prior to the final 

manufacturing operations. The products are distributed throughout a decentralized distribution 

system. The strategy will lead to reduced total inventory, and simplify the inventory planning 

and management. The complexity of customer order processing will increase and economies 

of scale will be reduced for the manufacturing operations performed downstream in the supply 

chain compared with the speculation strategy.  

 

According to Pagh and Cooper (1998), the logistics postponement strategy means that direct 

distribution from a centralised inventory to final retailers of fully finalized products are done. 

The CODP is moved upstream, to the central warehouse level. The full postponement strategy 

means that both manufacturing and logistics operations are initiated by the customer order. The 

strategy results in low inventories in the distribution system and low manufacturing inventory 

costs. 

 

Ferreira et al. (2015) argue that many of the theoretical classifications share the same concept, 

to delay the operations related to manufacturing or logistics until demand is available. 

Manufacturing postponement and production postponement are new denominations for the 

form postponement. Logistics postponement is also referred to as time postponement, 

geographic postponement and place postponement in the literature. In this study, the focus will 

be on the distribution of finishing goods, hence logistics postponement will be the focus. 

 



12 

 

2.5.1 Logistics postponement 

Logistics postponement refers to the flow of the final product (Pagh and Cooper, 1998; Yang, 

Yang and Wijngaard, 2007; Xiaoxun and Jiajun, 2016). Bowersox and Closs (1996) distinguish 

between time and place postponement, but refer to both as logistics postponement. Time 

postponement is defined as when forward movement of goods is delayed until the customer 

requirements are known. The place postponement is defined as keeping storage at centralised 

locations and ship the goods when the customer requirements are known.  

 

Several benefits can be explored when using the logistics postponement strategy. A benefit 

with postponement is that decisions are taken later regardless of the postponement type used, 

which increases the ability to respond quick to changes in customer demand (Graman and 

Magazine, 2006; Xiaoxun and Jiajun, 2016). Hence, companies can achieve better flexibility 

and more agile delivery by shortened and more reliable lead times (Pagh and Cooper, 1998). 

By taking decisions at a later point in time, increased product availability and reduction in loss 

of sales can be achieved (Ferreira et al., 2015). When decisions are delayed, forecast on 

aggregate demand is possible which makes it easier to do accurate forecasts (Yang and Burns, 

2003).  

 

In case of logistics postponement, the total inventory requirement is smaller, and thereby the 

inventory and carrying costs will be lower because of the risk-pooling (Mihiotis, 2013; Pagh 

and Cooper, 1998). Moreover, Chaudhry (2010) mentions that maintaining inventories at final 

locations do not only increase inventory costs, but also lead to stock outs or excess stock at the 

final locations. This because the balance of stock between final locations may not correspond 

to the actual customer requirements. When inventory is centrally located, there is greater 

flexibility in directing the goods to where it is needed. However, the logistics postponement 

strategy where regional warehouses are replaced by one central warehouse may lead to smaller 

shipment sizes and faster modes, hence increase the distribution costs (Pagh and Cooper, 1998; 

Chaudhry, 2010; Xiaoxun and Jiajun, 2016). 

 

Each company needs to identify a suitable CODP by finding a balance between speculation, 

i.e. forecast-driven activities, and postponement, i.e. customer-driven activities in the supply 

chain (Cooper, 1993). Yang and Burns (2003) mention that there may be limited value to apply 

a postponement strategy in easy predictable environments. The postponement strategy is a way 

to deal with the demand uncertainty in turbulent environments (Ferreira et al., 2015). 

Innovative products with short life cycles and great market uncertainty serve best for logistics 

postponement. According to Van Hoek (2001), the postponement strategy is feasible when 

products are more sensitive to inventory costs than transport costs, i.e. high value products with 

large product variety. Furthermore, the longer the supply chain channel is, the greater are the 

potential benefits of postponement (Mihiotis, 2013). 

 

Christopher et al. (2006) introduce four supply chain strategies, see Figure 4. Choice of strategy 

depends on supply characteristics, if the lead time is short or long, and on demand 

characteristics, if the demand of a specific product is predictable or unpredictable. An 



13 

 

unpredictable demand and long supply lead time implies that a postponement strategy should 

be used. Leaglie means a combination between lean and agile. Lean implies cost efficiency 

while agile implies flexibility and quick response to customers’ needs in the supply chain. 

 
Figure 4. Four supply chain strategies depending on demand and supply characteristics (Christopher et 

al., 2006). 

2.5.2 Implementation of postponement 

In general, there are understandings of the actual benefits of the postponement concept among 

companies. However, how to implement postponement and convince all parts of an 

organisation and supply chain are the main challenges. Graman and Magazine (2006) mention 

resistance to change processes, culture of the organisation, lack of coordination and 

organisational readiness as possible difficulties when implementing postponement. Older 

organisations which have strong local autonomy often find it more difficult to implement 

changes that represents a radical departure from existing practices, whereas younger companies 

often quickly reconfigure their operations. Several other potential barriers such as product and 

production characteristics, how a company manages its suppliers or customers, operational 

control and government regulation are mentioned in the literature (Yang, Burns and 

Backhouse, 2005; Bowersox et al., 2013). Furthermore, Chaudhry (2010) mentions lack of 

informational linkage across the supply chain as a key barrier towards the application of 

postponement strategy. Hence, information and communication technology (ICT) should be 

used to make the logistics chain transparent enough to make postponement feasible. 

 

When implementing postponement, a holistic view is needed (Yang and Burns, 2003). The 

viability of postponement depends on the structure of the supply chain characteristics (Yang 

and Burns, 2003; Ferreira et al., 2015). Open communication towards suppliers and customers 

is needed and as with other implementations, top management support is essential (Ferreira et 

al., 2015). Moreover, cross-functional teams should be created as it makes it easier to determine 



14 

 

how changes in one area of the supply chain affect other areas (ibid). Graman and Magazine 

(2006) mean that there is a trade-off between postponement and forecast accuracy. The need 

for postponement diminishes as the forecast accuracy improves. Hence, it may be more cost 

effective to improve the forecast accuracy than to implement a postponement strategy. 

2.6 Cross-docking 

Cross-docking is a logistics strategy where incoming shipments are unloaded from inbound 

vehicles at a distribution centre and loaded into outbound vehicles with little or no storage in 

between (Belle, Valckenaers and Cattrysse, 2011; Chopra and Meindl, 2016). If the goods are 

stored, they should only be so for maximum 24 hours. By this strategy, shipments can be 

consolidated, shorter delivery lead times can be achieved, and unnecessary inventory can be 

minimised (Yan and Tang, 2009). In a traditional distribution centre goods are stored, and when 

a customer request items, they are picked and shipped to the destination (Belle et al., 2011). 

Storage is costly because of inventory holding costs, and order picking is costly because it is 

labour intensive. Hence, as the cross-docking strategy eliminates the need of storage and order 

picking, costs can be reduced. 

 

Cross-docking is not the best strategy in all circumstances. The strategy is suitable if the 

demand rates are more or less stable, as there should be no imbalance between incoming load 

and outgoing load (Belle et al., 2011). With predictable demand, the planning of cross-docking 

becomes easier. Moreover, as cross-docking minimises inventory level at warehouses, stock-

out situations may more often occur. Cross-docking lowers the total inventory as goods are 

stocked at stores instead of both at stores and warehouses (Chopra & Meindl, 2016). If the unit 

stock-out cost is low, cross-docking can be the preferred strategy.  

 

By using cross-docking instead of the traditional distribution process, the decision making 

process in the distribution system is affected (Yan and Tang, 2009). Two different cross-

docking types can be used, namely pre-distribution and post-distribution cross-docking (Belle 

et al., 2011). In pre-distribution cross-docking, the suppliers do the preparation and sorting, and 

they have to know the order quantities of orders placed by each store (Yan and Tang, 2009). In 

post-distribution cross-docking, assignment of goods to destinations is made when they arrive 

at the cross dock. It will be higher operations’ costs at the cross-dock as the preparation and 

sorting will take place there. By post-distribution cross-docking, the influence of demand 

fluctuations can be reduced as the risk during the transportation period from the supplier to the 

cross-dock can be pooled. Hence, post-distribution cross-docking combines the advantages of 

pre-distribution cross-docking and traditional distribution centre through risk-pooling.  



15 

 

3. Method 
In this chapter, the research approach and strategy is provided as well as the research process. 

Furthermore, the different data collection methods, including a literature review, interviews, 

observations, internal documents and a survey, are described. Lastly, scenario building and the 

reliability of the study is discussed. 

3.1 Research approach 

For the study, an abductive approach was used. An abductive approach is a combination of an 

inductive approach and a deductive approach (Kovács and Spence, 2005). When using an 

inductive approach, the aim is to generate new theory by collecting data, while a deductive 

approach is used for testing theory. The abductive approach means that empirical and 

theoretical results has a constant relation (Dubois and Gadde, 2002). The research question can 

be changed when new empirical findings and new theoretical insights are received (ibid.). In 

this study, new directions of the research have been taken by both empirical and theoretical 

findings during the process. The authors of the study spend three months at IKEA of Sweden 

in Älmhult, as it is a way to obtain knowledge of how the organisation works and what theory 

is needed (Ong, 2012). By continuous empirical findings at the organisation, the theoretical 

framework was modified. Kovács and Spence (2005) describe that an abductive approach begin 

with a real-life observation and thereafter iterate between theoretical insights and empirical 

findings. By this, new understanding is developed and knowledge can be applied in different 

ways. The study started with observing how IKEA is currently working with its distribution 

and replenishment and the observation was based on the interviews and visits to IKEA stores, 

suppliers and distribution centres. In order to comprehend the problems with the current state 

and to research on the suitability to postpone the destination decisions, several interviews, a 

literature review and a survey were made. Hence, an abductive approach was suitable for the 

study. 

3.2 Research strategy 

Bryman and Bell (2003) separate between qualitative research strategy and quantitative 

research strategy. A qualitative research strategy means that non-quantifiable measurements 

are used for subjective analysis. The qualitative research is suitable when beliefs, incentives or 

motives needs to be understood. A quantitative research strategy means that measurable data 

is used for statistical analysis (ibid.). In case of a quantitative research method, the author 

generally put efforts on how and what to quantify but there is a risk of ignoring the related 

relationships or circumstances (Sofaer, 1999). A qualitative research method helps in 

understanding the events, scrutinize the patterns and identify the variations (ibid.). Depending 

on the data that needs to be used in a study, a decision of what strategy should be pursued is 

made. To map IKEA’s distribution network and to analyse scenarios of postponing decision of 

final destination, a qualitative research strategy was chosen to be most suitable.  



16 

 

3.3 Research process 

The research process was divided into three steps, see figure 5. The first step was to collect 

data by interviewing people working at IKEA and to make study visits, i.e. observations, at 

different IKEA sites. By this, IKEA’s distribution network was mapped and problems with 

deciding final destinations early in the supply were detected. Furthermore, internal documents 

were studied to get more information about the distribution network and also to verify the 

information from the interviews. Additionally, the empirical findings were guiding the search 

for relevant literatures to get a deeper understanding of the subject. This step helped in 

answering the research question 1.  

 

The second step was to create different scenarios with postponement in order to improve the 

current distribution network. Moreover, the scenarios were tested by interviewing different 

stakeholders in IKEA’s supply chain, including suppliers, transport department, customs 

department, DCs and IKEA of Sweden. Furthermore, a market study of retail companies was 

done through a survey and external interviews. Literature was studied in order to create the 

survey. People with suitable roles within several different companies were contacted to 

participate in the survey and interviews. The second step answered research question 2. 

 

The third step is to visualize the pros and cons with the scenarios and take into consideration 

the external actors’ experiences that were found in step 2. Additional interviews and literature 

study was needed based on the new upcoming information. This step answered research 

question 3. 

 
Figure 5. The research process. Green boxes is the data collection methods used and blue boxes is the 

steps and research questions. The grey arrows show the methods used for each step, and the black arrows 

show that step 1 helps to answer research question 2, and both step 1 and 2 are needed to be able to 

answer research question 3. 

3.4 Data collection 

When performing a research study, it is of importance to have multiple sources of data in order 

to eliminate subjective viewing (Bryman and Bell, 2003). In the study, data was collected 

through a literature review, internal and external interviews, internal documents, observations 

and a survey.  



17 

 

3.4.1 Literature review 

According to Bryman and Bell (2003), a literature review is important when performing a 

research study. It is necessary to gain general insight and knowledge of the field of study and 

to create a theoretical framework. Chalmers library’s database, Mendeley, Summon, and 

Google Scholar were used for the literature search. According to Bryman and Bell (2003), 

using synonyms in the searching is an efficient way to find the right information. Some of the 

keywords that were used in the search for relevant literature were “postponement”, “logistics 

postponement”, “geographic postponement”, “cross docking”, “distribution cross docking”, 

“physical distribution”, “order replenishment”, and “home furniture retail”. In order to be time-

efficient, only abstract, introduction and conclusion in the papers were read, and if it seemed 

relevant, the other parts were read as well. In some cases, searching among references in the 

relevant articles was done, and thereby new sources were found. 

3.4.2 Interviews 

In order to map the distribution network, interviews were conducted in a semi-structured form, 

meaning that open questions were asked. In this way, the interviewees could answer in their 

own terms and be reflecting. If a more structured interview form had been chosen, some 

relevant aspects could be missed out. According to O’Gorman and MacIntosh (2015), it is 

suitable to perform less structured interviews face-to-face to be able to absorb information more 

effective. Most of the interviews were performed face-to-face, but some of the interviews were 

held through Skype or by phone when face-to-face meetings were not possible. In order to 

focus on the interviewees’ answers and ask follow-up questions, it is of importance to 

document the conversation by taking notes or recording (O’Gorman and MacIntosh, 2015). 

Therefore the most of the interviews were recorded. However, some of the interviewees did 

not want to be recorded and this was of course accepted. Afterwards, the interviews were 

transcribed. In some cases, the interviewees were contacted for a second round of interviews 

to get some of the information confirmed or dismissed and to ask follow-up questions. 

 

Interviews were conducted with employees at IKEA of Sweden, IKEA Purchasing Services, 

IKEA Svenska Försäljningar AB, IKEA Services AB, IKEA Supply AB, IKEA Distribution 

Services GmbH & Co. KG, and IKEA Services India Private Limited. This in order to gain 

understanding about how IKEA’s distribution network works like and potential problems with 

it. The persons were selected with help from the authors’ supervisor at IKEA, and the purpose 

was to get information from different perspectives and from people with different knowledges 

and experiences. The objective with the interviews were also to discuss how the postponement 

idea could affect the different parts of IKEA. In total, 26 interviews with different employees 

at IKEA companies were conducted. In Appendix I all interviews are summarised by providing 

company name, role, date of interview and type interview. Apart from interviews with IKEA 

companies, interviews with two of IKEA’s suppliers, Pallco and Spaljisten, were conducted. 

The goal with these interviews was to get an understanding of their perspective on IKEA’s 

order planning, and how the postponement idea could affect the suppliers. The interviews are 

summarised in Appendix II. 



18 

 

3.4.3 Internal documents 

To understand the standard working methods in the case company, interviews were of great 

help. However, companies normally document their working methods and these manuals could 

reinforce the inputs that are collected through interviews. Efforts were made to collect and read 

the general working principles, competence profiles and various terminologies used in the case 

company. Special training and instructions were taken to use the Qlikview application to read 

and understand the different parameters of the distribution. Qlikview is a business intelligence 

and visualisation software that allows users to access data from multiple sources in a single 

platform in the form of reports, charts and graphs for better visualisation and decision making 

(Floyd, 2013). 

3.4.4 Observations 

Observation is a common used data collection method in a qualitative research. Observations 

allow the researchers to experience or to inspect the events using their own sense and to read 

the body language of the participants (Kawulich, 2005). While interviews present views of the 

participants and literature summarises the theory, an observation gives a personal experience. 

Visits to distribution centres were helpful in understanding the different activities like planning, 

loading/unloading, storage and space utilisation. Similarly, visits to selling units provided the 

understanding of challenges faced by those units with the product availability and space 

constraints. Since the supplier is the first actor in the upstream of the supply chain, 

comprehending views from their perspective were very useful. Interviews, literature review 

and observations were conducted simultaneously, therefore observations were yielding 

valuable inputs in refining the questions and ideas for next interviews and for finding relevant 

literature.  

3.4.5 Survey 

When a research is about analysing the benefits and challenges of a concept, one approach is 

to study the current use of that particular concept by others with somehow similar conditions. 

According to Wang (2014), a survey is an effective tool to get insights from the wider 

respondents as it takes less time and it is cost effective compared to other methods like 

interview, mail, telephone or visit. Richardson (2005) points out that a survey is useful when it 

is a need of answers or opinions from a large number of sources and the questions that are put 

forward are simple to understand and do not require any further explanation. To get the desired 

response from the larger population, a survey can be initiated via physical mail, telephone or 

online. With the advent of web-based survey tools it takes less time and minimum cost to 

administer the survey, and it is much easier to collect and analyse the data (Gay et al., 2009). 

By adopting the theories from Wang (2014) and Richardson (2005), the survey was divided 

into three phases and a timeline was fixed to follow the progress of the survey. The 3 phases 

are as follows:  

 



19 

 

1. Planning and preparation of the survey 

2. Testing and distribution of questionnaires 

3. Response and analysis of answers     

 

1. Planning and preparation of the survey 

The first phase is important as it involves defining the objective of the survey and preparing 

the list of questions according to the objective. The research question 2 is the guiding factor to 

formulate the objective of the survey. The objective of the survey is to find out at what stage 

of the distribution the retail companies are deciding the final destination of deliveries and what 

are the benefits or challenges perceived when decision is taken closer to the destination. The 

theoretical framework and the initial interviews were put to use for preparing the list of 

questions. Since the topic is very technical and requires higher understanding from the 

respondents, efforts were made to explain some of the questions with extra notes. Questions 

were formulated in a way that they were not sensitive to answer and not including internal 

information that respondent do not want to share. 

Special instructions like ‘possible to select multiple options’ and extra comment boxes were 

provided wherever it was necessary. The form of the questions are pre-coded questions with 

certain options. According to Richardson (2005), pre-coded questions are easy to answer and 

require less effort to analyse as compare to the open questions. The sequence of the questions 

were written in logical manner which means that questions which were easy to answer were 

put first then followed by some specific technical questions.   

2. Testing and distribution of questionnaires 

The platform used for the online survey was www.surveygizmo.com which provides software 

as a service for online surveys and is rated best in class. The platform allows to form questions 

with multiple options like ‘radio buttons’, ‘check box’, ‘drop down’, ‘star rating grid’ et cetera. 

The platform provides an option to send the survey to multiple persons with an email campaign 

and it could also be sent one at a time through personal mail or the link can be posted in any 

social media. A test version of the survey was sent to the authors’ supervisors and three IKEA 

employees to get feedback on the questions and to check the ease of answering the questions. 

After analysing the feedback certain changes were incorporated. In case of an online survey 

the questions and the instructions should be comprehensive because there will not be any 

further explanations (Berends, 2006). 

The survey was meant for the respondents who are working in the logistics and supply chain 

function in retail industry. Since the IKEA business interest is in the home furnishing business, 

efforts were made to select professionals working in home furnishing retailers across the globe. 

The main source of finding the respondents was LinkedIn. In total 74 respondents were selected 

from 22 companies located in 6 countries. 

 



20 

 

Finally, the survey was sent out to all the respondents, and the link of the survey was also 

posted in the ‘logistics and supply chain professionals’ forum at LinkedIn which has a member 

base of more than 250 000. After a week, a gentle reminder mail with the survey link was sent 

out to all the respondents. The survey questionnaire can be found in Appendix IV. 

3. Response and analysis of answers 

According to Wang (2014), Berends (2006) and Gay et al. (2009), two of the major issues with 

a survey is the low response rate and the no response to certain questions, and it is a major 

challenge to improve the response rate. In order to improve the response rate, efforts were made 

to incentivize the respondents for their time and inputs. An incentive in form of sharing the 

findings or result of the survey was communicated in the mail when the survey was sent out. 

In Table 1, the response status of the survey is shown. 

Table 1. Response status of the survey. 

Online Survey No's 

No of selected respondents 74 

Bounced 19 

Did not wish to share the process 2 

No response 49 

Desired Response 4 

 

In total, four responses were received and there were two persons who did not wish to share 

their logistic processes.  The desired response rate of the survey was 7%. The low response rate 

is further discussed in chapter “9. Discussion”. 

3.4.6 External Interviews  

In addition to the interviews with IKEA entities and suppliers, five external interviews were 

conducted to study their distribution network and replenishment setup, see Appendix III for a 

summary of the interviews. Two of the retail companies are based in Sweden and one retail 

company is operating in USA. One of the interview was held with a supply chain consulting 

company based in Sweden and which provides consultancy services to with various retail 

organisations. The last interview was conducted with an international trade consultant based in 

India. The interviews were semi-structured with questions extracted from the survey that suited 

the specific organisation. 



21 

 

3.5 Data analysis - Scenario building 

The IKEA’s supply chain consists of multiple entities and each entity plays a major role in 

achieving the goal of product availability at lowest cost. Present working strategy, issues and 

views from these entities were collected through interviews and site visits. Finally, the data 

collected from interviews, observation, internal documents and literature were analysed with 

help of scenarios to apply the concept of postponement in assigning the final destination.  

 

Scenarios provide a structure or a framework for the future course of action while considering 

the challenges and opportunities that will arise with changing parameters (Farge, 2017). 

Scenarios help in taking better business decisions for the organisations when it involves 

multiple stakeholders and altering the present working methods affects all its stakeholders. In 

other words, scenarios assist in visualising the risks when making decisions (Farge, 2017). 

Typical example of scenarios are military war games where decisions are taken after analysing 

different scenarios. According to Durance & Godet (2010), scenarios should be logical and 

feasible to the applied context. The scenarios can be categorised into three sections: 

explorative, goal specific and predictive, see Figure 6 (Börjeson et al. 2006; Farge, 2017). 

  

The exploratory scenarios are answers to questions like ‘what can happen?’ or what can be the 

result or effects due to the external factors and strategic factors. The goal specific scenarios are 

used to get specific results either by conservation of the present system or by transformation. 

The idea of the predictive scenarios is to predict the outcome or ‘what will happen?’ either by 

forecasting or analysing what-if situations. 

 
Figure 6. Three categories of scenarios: explorative, goal specific and predictive (Börjeson et al. 2006; 

Farge, 2017). 

For this research, the exploratory scenario building was suitable as Börjeson et al. (2006) 

emphasise that exploratory scenarios are developed when the users are well aware of the 

present situation and want to explore the outcome with alternate strategies. The two criteria 

that build the scenarios are external and strategic. How the external factors affects the 

stakeholders and how the changes in internal strategy guide the new developments will assist 

in building these scenarios. What-if scenarios are sometimes identical to exploratory scenarios 

but Börjeson et al. (2006) highlight that exploratory scenarios are planned with long-term 

horizon with structural changes whereas what-if scenarios are focused on immediate changes. 

 



22 

 

When planning the scenarios the focus should be to ask the right questions rather the finding 

the answers. Examining the present facts, observations and the future perception will bring 

comprehensive images into the scenarios. Farge (2017) recommends not to create more than 

five scenarios in order to avoid confusions and complexities and also insists to consider 

multiple thoughts and inputs. In this study three scenarios are developed and these scenarios 

can be implemented independently or can be combined together depending upon the lead time, 

product characteristic and overall benefits.   

3.6 Reliability of the study 

Triangulation is an effective method to increase the reliability of research findings (O’Gorman 

and MacIntosh, 2015; Yin, 2014). The triangulation method means that several sources of 

information are used to confirm the core content and reduce bias within the research (ibid). 

There is a risk of collecting subjective data when performing interviews in a qualitative 

research (Bryman and Bell, 2003). By using several data sources, the reliability could be 

secured. In total, 26 internal interviews, 2 interviews with suppliers and 5 external interviews 

were made, and multiple interviews with people in similar positions were conducted in some 

of the cases. Moreover, assumptions based on the interviews were confirmed or dismissed by 

comparing with other data such as internal documents and the literature review. The time spent 

at IoS gave direct access to information and employees, and thereby the reliability of the data 

was strengthen. Figure 7 illustrates how the different data sources were used to confirm the 

information. 

 
Figure 7. Triangulation by using five different data collection methods. 

  



23 

 

4. About IKEA  
In 1943, Ingvar Kamprad founded IKEA in Elmtaryd, Agunnaryd (IKEA, 2018b). The 

company begun as a mail-order business with general products for sale and has through time 

evolved to a unique concept by both developing and retailing low-price home furnishing 

products. IKEA’s vision is “create a better everyday life for the many people”, and the business 

idea is “offer a wide range of well-designed, functional home furnishing products at prices so 

low that as many people as possible will be able to afford them” (IKEA, 2018a). The vision 

and business idea explains the concept of offering quality at affordable prices for the customers.  

 

The IKEA concept is a global success. In FY2017, IKEA operated 355 stores in 29 different 

countries and the sale reached 34.1 billion euro (IKEA, 2017).  The biggest market is Europe, 

which accounts for 66% of the total retail sales, while the American market stands for 19%, 

the Asia Pacific market accounts for 11% and the Russian market stands for 4% (IKEA, 2017). 

Figure 8 shows how many stores, distribution centres and customer distribution centres that 

exist in the different markets. In 2015, IKEA had nearly 1000 suppliers and Europe stood for 

60% of the sourcing, Asia 35%, North America 3%, Russia 2% and South America 1% (IKEA, 

2015). 

 
Figure 8. The geographical presence of IKEA stores, distribution centres (DCs) and Customer 

Distribution Centres (CDCs) in FY2017 (IKEA, 2017). 

There are several companies which are operating under the trademark of IKEA. The company 

operates the stores under franchise agreements. In Figure 9, a simplified overview of IKEA’s 

franchise system is presented. The parent company of the IKEA group of companies is INGKA 

Holding B.V., which is based in Netherlands and controlled by stitching INGKA foundation 

(IKEA, 2018a). INGKA Holding B.V. is one of the franchisees and owns the majority of the 

stores. Moreover, the majority of the distribution centres and the customer distribution centres 

are also owned by INGKA Holding B.V.  

 



24 

 

 
Figure 9. A simplified overview of IKEA’s franchise system (IKEA, 2018c). 

Inter IKEA group is a group of companies under the umbrella of Inter IKEA Holding B.V., 

whose main areas of interest are Franchise, Range & Supply and Industry. Inter IKEA systems 

B.V. is the worldwide franchisor who owns the IKEA concept and the IKEA brand, IKEA of 

Sweden AB (IoS) is responsible for design and development of the product range and IKEA 

Supply AG is responsible for the supply. IKEA Industry is a wood-based furniture maker for 

the IKEA product range and it is the largest manufacturer of the wooden furniture in the world 

(Inter IKEA, 2018a). 

 

IoS is organised into 10 Business Areas (BAs), including Bedroom & Bathroom, Kitchen & 

Dining, Textiles, IKEA food, Livingroom & Workspace, Children’s IKEA, Lighting & Home 

Smart, Cooking & Eating, Outdoor & Storage and Free Range (Inter IKEA, 2018b). These 

Business Areas are divided into 20 Home Furnishing Businesses (HFBs) (IKEA, 2018d). 

Similarly, materials used for the IKEA products are divided into 40 Categories based on similar 

industry and production techniques, such as ceramic, glass, metals, plastics et cetera (IKEA, 

2018d). 

 

IKEA Supply AG is the wholesale company, hence the owner of the goods from the suppliers 

to the selling units and responsible for replenishment of goods (Inter IKEA, 2018a). When the 

stores receive the goods, they become the owners. Regardless of the replenishment solution, 

IKEA Supply AG is responsible for delivering the goods to the stores with free carrier 

agreements (FCAs) as incoterms.  

  

https://intranet-inter.ikea.com/aboutikea/Pages/default.aspx
https://intranet-inter.ikea.com/aboutikea/Pages/default.aspx


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5. IKEA’s Supply chain  
This chapter presents the basic principles of IKEA’s supply chain network along with the 

functions of its major stakeholders. It gives the reader a brief idea about IKEA’s distribution 

strategy and its replenishment solutions. 

5.1 Distribution Network  

IKEA has approximately 10 000 articles in the product range in each store (IKEA, 2014). There 

exist country unique versions of products, thereby the total number of articles is more. In 2016, 

the total volume of goods held in IKEA’s entire supply chain was more than 9 million cubic 

meter with a value close to 6 billion euro (IKEA, 2016a). This stock is spread across the 

distribution network which includes suppliers’ finished goods inventory, and stock at 

distribution centres, intermediary consolidation points, customer distribution centres and IKEA 

stores. IKEA has stores across the globe and the sourcing area is often not the same as the sales 

area. Hence, many products have long delivery lead times and considerable amount of the stock 

is in transit to selling units. In order to keep the stock at an optimum level in all the nodes and 

to keep the overall supply chain cost low, an efficient replenishment solution and an optimised 

distribution network are required. Figure 10 shows a simplified overview of IKEA’s 

distribution network. Below, the different units in the distribution network are described more 

in depth. 

 
Figure 10. A simplified overview of IKEA’s distribution network: Supplier, MRS/CP, Low flow DC, 

High flow DC, MRR, store and CDC are included. The different replenishment solutions, Direct 

Delivery, Transit Delivery and DCG Delivery are also shown. 

5.1.1 Supplier 

IKEA’s suppliers are the manufacturers of the company’s range of products. IKEA has around 

1000 suppliers around the world, including the own IKEA Industry production units. Some 

suppliers make-to-order, meaning that IKEA creates orders, then the suppliers start to produce 

the products. Other suppliers make-to-stock, meaning that they have finished products in stock 

based on IKEA forecast and ready to send when IKEA creates an order. The production lead 

time for IKEA’s suppliers is in average 15 days. 



26 

 

 

Suppliers are connected to multiple DCs and selling units depending on the products and the 

replenishment solutions. The supply lead time between a supplier and selling units depends on 

if it is a make-to-stock or make-to-order supplier, in the latter case the supplier’s production 

lead time is of importance. Furthermore, the delivery lead time between a supplier and selling 

units as well as the replenishment solution chosen will affect the supply lead time. IKEA uses 

On Time Delivery Supply Chain (OTD SC) to measure the performance of the supply chain. 

OTD SC is measured by two sub measurements, OTD Sender and OTD Logistics, see Figure 

11 below. OTD SC is measured in terms of quantity and time, and is contributed by all supply 

chain partners in order to improve the logistic performance and execution. OTD Sender is a 

measurement of the supplier performance with the readiness of the finished goods 

corresponding to the orders (Process Developer 3). Early readiness, cancellation of order and 

delay in production will affect the supplier performance. Apart from the OTD Sender 

measurement, suppliers are measured by for example quality and sustainability in production. 

The OTD Logistics measurement is further explained in “5.2 Transport solutions”. 

 
Figure 11. IKEA uses On Time Delivery Supply Chain to measure the supply chain’s ability to execute 

orders according to plan. It includes the sub measurements OTD Sender and OTD Logistics. 

5.1.2 Distribution Centre (DC) 

IKEA’s distribution centres (DCs) are strategically located logistics units for storage and 

consolidation of goods. Today, IKEA has 41 distribution centres across the globe (IKEA, 

2018c), see Figure 12. The stock at the DCs is replenished from suppliers, and the stored goods 

are transported to selling units on requirements. The DCs are also used as transit points, 

meaning that goods are unloaded from trucks and without taking into storage, they are loaded 

within 24 hours on new trucks and thereafter transported to selling units. 

 

The company has a wide range of products and each product has a different demand and sales 

volume. In order to achieve economy of scale and to ensure the optimal use of the transport 



27 

 

network along with the available storage space, DCs are divided into two categories, High flow 

DC and Low flow DC. High flow DCs are situated close to the selling units and typically serve 

one or a few countries whereas Low flow DCs are centrally located for a specific region and 

cater more countries. Goods are generally transported in full pallets from suppliers to DCs and 

from suppliers to selling units. In case of replenishment from High flow DCs to selling units 

the goods are mostly transported in full pallets, whereas goods are generally transported in 

pieces and multi-packs from the Low flow DCs to the selling units.  

 

 
Figure 12. The geographical locations of IKEA’s DCs. IKEA has in total 41 DCs (IKEA, 2018c). 

5.1.3 Distribution centre group (DCG) 

Instead of measuring the safety stock for individual DCs, a distribution centre group (DCG) 

structure is established to calculate the consolidated safety stock and replenishment orders to 

the suppliers (IKEA, 2013). Hence, a DCG is a group of DCs for a specific geographic region 

responsible for replenishing the stock to the selling units of that region. Figure 13 illustrates a 

simplified view of IKEA’s DCG network. 

 

 
 

Figure 13. A simplified view of DCG network (IKEA, 2013). One DCG, which can consist of a few 

DCs, supply several selling units. 



28 

 

5.1.4 MRS and MRR 

Mid receiving units close to the sender (MRS) are facilities close to the suppliers and are used 

when suppliers do not have the required volume to achieve the economical transport. The goods 

are consolidated at MRS to achieve full truck load or full container load. MRS can also act as 

a waiting zone for the final products until a vehicle is placed for the transport. A consolidation 

point (CP) at the sender side is one example of a MRS. Similarly, mid receiving units close to 

the receiver (MRR) are facilities close to the receivers. Goods from suppliers can be stored or 

cross docked at a MRR before sending to the selling units. Hence, a DC is a MRR per definition. 

A MRR sometimes acts as an external warehouse closer to the stores for rapid replenishment. 

Due to limited storage space that some stores have, extra warehouses closer to them and these 

warehouses are replenished from DCs. 

5.1.5 Selling Unit (SU) and Sales channels  

The last, most downstream units in the distribution network of IKEA are the selling units, and 

through these IKEA meets the customers. Selling units include both physical stores, Customer 

Distribution Centres (CDCs) and Central Parcel Units (CPUs). CDCs are warehouses that looks 

like DCs on the outside, but the goods are picked for individual customer orders. CPUs are 

similar to CDCs but handle only orders which are smaller in size, i.e. parcels. The stores are 

used as physical touchpoints and function like a cash and carry concept while the CDCs and 

CPUs mostly are used for the digital touchpoints. In some markets IKEA has small-format 

stores at city centres where customers can get more personalised shopping experiences, they 

place orders at the store and get the products delivered to their homes from CDCs or CPUs. In 

case of the digital format, customers place orders at the company’s own website and the 

products are delivered from the CDCs or CPUs.  Hence, CDCs and CPUs are designated for 

orders from customers using IKEA’s website, phone but also for customers that place orders 

at stores. The CDCs and CPUs are responsible for delivering goods directly to the final 

customer through external distributors. The orders can be delivered to customers’ homes or to 

designated pick-up points.  

 

In 2017, IKEA had 355 physical stores in 29 countries and 26 customer distribution centres in 

13 countries (FY2017, 2017). The replenishment of CDCs, CPUs and physical stores are done 

in the same way, through delivery from suppliers or DCs. Each selling unit is connected to both 

Low flow DC and High flow DC. There are no flows from selling units back to suppliers or 

DCs, and rarely any flow between the selling units. CDCs and CPUs are more automatized 

than stores. The physical stores have often limited storage space and need goods on time, while 

CDCs and CPUs have more space to work with. In CDCs and CPUs goods are not displayed 

like in stores but are put on racks in pallets or in boxes and are picked as per the customer 

orders. 

 



29 

 

5.2 Transport solutions 

IKEA is responsible for planning and execution of the transport of goods from suppliers to DCs 

and to the selling units. The minimum delivery lead time between supplier and selling unit is 

one day and the maximum can be up to 98 days. The goods may go by multiple modes of 

transport, as the goods are transported by sea for the longer distances. For shorter transports, 

trucks and carriers are most often used, but also trains to a certain extent. The transport 

operations are divided into five geographical areas: North Europe, Central Europe, South 

Europe, North America and Asia Pacific. North Europe and Asia Pacific are the biggest areas 

for transport operations. The transport operations are always planned and executed with the 

sender’s perspective. This means that the transport planning is based on the flow of goods from 

suppliers of a particular area to DCs and selling units across the world and for flow of goods 

from DCs to selling units of a particular area. For example, a team responsible of North Europe 

transport operations will only act on the flows that are originated in North Europe. If a delivery 

is sent from a supplier in North Europe to DCs or selling units in North America, a team 

responsible of North Europe will take care of the transport operations to the port in North 

America. Thereafter the team responsible of North America will take over the responsibility of 

the transport operations from the port to the DC or selling unit. In the same way, if anything is 

sent from a supplier in North America to North Europe, a team responsible in North America 

will take care of the transport operations to the port in Europe, thereafter a team responsible in 

North Europe will take care of the transport operations.  

 

Figure 14 shows a simple depiction of the IKEA transport network. Depending on the volume, 

goods from suppliers in China meant for European selling units can be sent directly to a port 

or consolidated at a CP. Different ports can be used as port of loading (POL) based on ship 

availability, freight cost, time and volume. Similarly, different ports in Europe can be used as 

port of discharge (POD) with proximity to the DCG. As mentioned earlier movement from port 

of discharge to selling units or DCGs will be handled by respective transport area. The figure 

also depicts similar goods flow from Europe to selling units in USA.  

 
Figure 14. A simplified supply setup with multiple nodes and combinations (IKEA, 2018e). 



30 

 

When IKEA purchases transport, they buy transport capacity. As it is not possible to put trucks 

or ships into stock, there must be a plan of how much the need is. Transport capacity planning 

is about accurate forecasts of volume and network. It must be the right volume but also the 

right sender and receiver combinations. In order to forecast the transport, future volume, future 

network and historical information is taken from the replenishment forecast. The information 

is converted into transport dimensions and the number of trucks and space in ships needed can 

thereby be calculated. The transport department is provided with the replenishment solutions 

that should be used between suppliers, DCs and selling units, and information about delivery 

solution, for example if a consolidation point should be used. By this information, a transport 

network can be designed, including suppliers, CPs, DCs, selling units and ports. Contracts are 

made with several external carriers and the contracts can be until further notice, for one to three 

years, or one-time buys. Transport has to be purchased from address to address as IKEA makes 

agreements on delivery routes with the carriers and these routes cannot be easily changed.  

 

There are different purchasing patterns for transport at IKEA. The purchase can be driven by 

changes such as expansion within IKEA, the market situation and the cost goal development. 

Expansion such as opening of a new market or opening of a new store in the existing market 

and sourcing from a new supplier are some of the factors influencing the overall volume and 

transport network. Moreover, planned regular yearly events are made for the ocean transports. 

Every year IKEA goes to ocean carriers and presents the volume forecast and transport network 

in order to purchase the ocean transport. Purchasing is also done on instant need because of 

unforeseen changes. The actual need may be more than the forecasted need due to various 

reasons such as campaigns and extra orders from the stores. In these cases, IKEA needs to 

make manual orders to carriers to meet the instant need and secure the availability of trucks 

and space in the ships. Over-forecasting of the transport capacity may also happen and it can 

affect the agreed price levels with the carriers. Stability and accuracy in the forecast are two 

major elements in order to secure the transport capacity and get good prices from the carriers. 

 

The transport department makes both mid-term and short-term planning. In mid-term planning, 

forecast is made for the current financial year and the next financial year. Short-term planning 

is done either weekly or every second week for 12 weeks in the future. The carriers are already 

nominated on routes but if any peaks are found, it will be acted on. In the daily business of 

transport, the delivery planners have access to what goods suppliers have ready to send in one 

system, and the planners send out transport bookings to carriers in another system. Thereafter, 

the suppliers get notifications and the loading and transport takes place three days after in case 

of transport by sea, and two days after in other cases. For the transport from DCs to selling 

units, vehicles will be booked one day in advance. The aim is to always send full truck loads 

in order to avoid transporting air and to perform economically in transport.  

 

In the same way as OTD sender is a measurement of the supplier performance, see “5.1 

Supplier” and Figure 11, the OTD Logistics is a measurement for the IKEA transport 

performance. Timely and full deliveries of the orders ensure better product availability for the 

customers (Qlikview, 2018). Some of the on time measurements can be seen in Table 2. Orders 

are often sent with prolonged lead time, i.e. safety lead times, in order to prevent shortages. 



31 

 

 

Table 2. OTD Logistics measurements. All orders that are received before the “on time” measurement 

are considered as too early, and all orders that are received after are too late. Moreover, cancellations 

are never “on time” (IKEA, 2018f). 

Valid for Measurement 

SUP-DCG Goods received 0 to 30 days too early are “on time” 

SUP-SU Goods received 0 to 7 days too early are “on time” 

DCG-SU Goods received 0 to 7 days too early are “on time” 

5.3 Customs 

IKEA has offices in North America, Asia Pacific and Europe that support custom clearance 

and other custom related matters and these are called custom service centres (CSC). Each CSC 

provides services to IKEA stores, DCs and other IKEA entities in that particular region. The 

CSCs are also involved in process development and implementation of customs laws and 

regulations.  

  

For example, CSC EU in Älmhult, Sweden, supports IKEA stores and distribution centres in 

18 European countries, primarily with custom clearance. Custom declarations for most of these 

European countries are handled digitally in a software platform which is connected to a 

software system at custom authorities of that country. The documents for the custom clearance 

are generally available approximately 2-3 weeks prior to the arrival of the ship at the port of 

discharge. For some countries where the digital platform is not implemented, the CSC EU 

sends the necessary documents to a custom broker. A custom broker is an external agent who 

is appointed by IKEA to do the custom clearance. All the documents should be provided to the 

broker one week in advance of the ship arrival.   

  

In general, to make the process smooth, there should not be any amendment once the custom 

declaration has been made. However, if any changes are occurring with the shipment, for 

example changes of the final destination, amendments must be done immediately. To comply 

with custom rules and regulations it is advisable to have corrected documents. It is possible to 

change the destination of the shipment after dispatch from supplier but before the custom 

clearance, yet it is complex and time-consuming. When goods are imported to the European 

Union, custom clearance is done at the entry point of the European Union, i.e. at a seaport, 

airport, landmark border or bonded warehouse, and thereafter goods are free for movement 

inside the European Union. For countries within the European Union where declaration is made 

in the digital platform, the shipment can be custom cleared on the same day, but for countries 

where it is done manually the time taken is minimum two days. 

 

When a CP is considered in the replenishment solution, the supplier sends the documents, i.e. 

invoice, packing list, country of origin et cetera, to the CP along with the consignment. 



32 

 

Thereafter the CP consolidates the goods from multiple suppliers as per the final destination 

and a new shipment number is generated. The CP in turn prepares the export documents and 

makes necessary arrangements to make the custom clearance for export. The CP is responsible 

for all consolidation services but has no role in fixing the final destination.  

 

There are many storage facilities available at close proximity to ports around the world which 

are known as free trade zones and bonded warehouses. These facilities provide retail and 

manufacturing companies with warehousing and distribution. Free trade zones are generally 

located near the seaports and airports to facilitate trade and to attract investments in a country. 

These are named differently in different countries such as free zones or export free zones and 

in United States of America it is referred to as Foreign trade zones. Akinci and Crittle (2008) 

define free trade zone as duty free areas which facilitate warehousing and distribution. Goods 

can be stored, exhibited, transhipped and if necessary re-exported duty free. Some of the 

benefits of a free trade zone according to IKEA (2018g) are duty avoidance and greater 

flexibility.  

 

Similar to a free trade zone, a bonded warehouse is a customs approved location where an 

importer can store the goods without paying any custom duty if the goods are not meant for 

sale immediately after the import (Verksamt, 2017). Custom duty will only be paid when the 

goods are taken out from the bonded warehouse for further sales. In case goods are not sold or 

there is no buyer for the imported goods in the imported country, the merchandise can be re-

exported without any payment of duty. 

5.5 Packaging & Label    

Labelling of IKEA products provides necessary information to customers and it should meet 

the regulatory requirements of the selling market. Additionally, the label should meet the 

requisite of warehousing and goods flow functions (IKEA, 2015a). Labelling and packaging 

are mostly standardised to serve different markets. However, there are variations and for 

example, the article number used for the markets in Russia, Asia and Europe is different. A 

sample of a label is shown in Figure 15, and the article name, article number, dimension and 

barcode is visible in the label. 

 

 
Figure 15. A sample label for an IKEA article (IKEA, 2015a). 



33 

 

5.6 IKEA’s replenishment solutions 

A selling unit is replenished in three different ways: through Direct Delivery, Distribution 

Centre Group delivery (DCG Delivery) and Combined Supply. The main objective of the 

replenishment solutions is to meet product availability at the lowest cost (IKEA, 2016a). 

Today, the total share in volume of pure Direct Delivery replenishment is approximately 70%, 

the total share of DCG Delivery is 22% and the total share of Combined Supply is 8%. 

However, there are differences between the different selling units, and for example smaller 

stores have less Direct Deliveries than bigger stores. 

 

In case of pure Direct Delivery, the goods are delivered directly from the supplier to the selling 

unit without being stored in a DC. However, goods that go by Direct Delivery can pass through 

various intermediate nodes including CPs and ports on the way to selling units. Some of the 

Direct Delivery goods are cross docked at a DC in order to meet optimal level of volume or 

full truck load in the transport. To be able to send frequent and not too big deliveries to the 

selling units, the cross docking is needed. When the goods are cross docked at a DC, it is called 

Transit Delivery. In case of Transit Delivery, goods are unloaded from trucks at the DC and 

within 24 hours loaded on new trucks and sent to selling units. For the Transit Delivery, only 

High flow DCs are used, not Low flow DCs. The goods that are replenished through Direct 

Delivery, including Transit Delivery, normally fall under the high volume and high flow 

category. Sofa and mattresses are example of goods with high volume and high flow, therefore 

Direct Delivery often is used as