Do you know how Ikea keeps the cost of its furniture and home products so low? And why they sell sofas as kits — not fully assembled?
Ikea is known for good quality at low prices. One of the factors contributing to that is figuring out how to maximize the transportation of their products, whether in large quantities or one customer at a time. Distribution and logistics are critical to Ikea’s appeal and success. The company wants to avoid “shipping air” and works hard to achieve that goal.
Unlike other companies, Ikea actually emphasize shipping efficiency early in the product design process. To avoid “shipping air” – or lots of empty space around a finished product – they have re-thought how to design and ship products. By designing a sofa to be assembled from components that can ship in a flat pack, they now reduce the space required to ship a pre-assembled sofa by 50%. In one year, Ikea is able to reduce the number of trucks required to deliver the Ektop sofa by 7,477 trucks. And they pass some of that savings onto the consumer, by cutting the sale price by 14%.
When shipping a particular style of coffee mug, the company wasn’t happy with the number of mugs they could pack on a pallet. So the solution to that problem was to redesign the mugs, not once, but three times. Ikea now designs their mug product to accommodate standard pallet sizes. According to the industry book, Effective Operations and Performance Management, those redesigns increased the number of mugs that could fit onto a pallet from 864 to 2,204. The net result of savings for the company was a 60% reduction in shipping costs. Innovative design is a hallmark of Ikea’s business, not just for the way their products look but also for the way they can be transported.
Mugs aren’t the only product Ikea “re-designed” to maximize efficient shipping. The company also realized flat packing would allow for more product to be held on each shipping pallet. The idea for flat packing came to an employee one day as he watched a customer attempting to fit a table into the back of his car. The problem was resolved by removing the table’s legs giving way to the company’s flat packing concept.
Ikea has earned its reputation for selling good quality merchandise at prices that are lower than their competitors in part because they pass along savings to their customers, derived from more efficient shipping.
While Ikea redesigned their mugs other companies redesign their packing boxes. One such company managed to reduce the size of their boxes by a tiny amount which allowed them to increase the number of boxes that fit onto a pallet from 120 to 300.
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