Building an ikea business management system on the sap business one platform Xây dựng hệ thống quản lý doanh nghiệp ikea trên nền tảng sap business one
SAP BUSINESS ONE
Introduction of SAP Business One
SAP Business One is an ERP solution specifically designed for small and medium-sized businesses, recognizing that they do not require the complex systems used by larger organizations This program includes essential modules for various functions such as news collection, logical analysis, procurement, customer relationship management, warehouse and inventory management, and finance, enabling smaller enterprises to efficiently manage their operations.
TopManage Financial Systems developed SAP Business One, which was later acquired and rebranded by SAP This software now boasts enhanced capabilities due to strategic acquisitions made by SAP, including the recent purchase of the reporting and analytics tool XL Reporter from Norwegian company iLytix Systems AS.
In 2005, Praxis Software Solutions, based in Minneapolis, was acquired by SAP in 2006, leading to the integration of internet CRM and purchasing features into SAP Business One Developed on Microsoft SQL Server and now compatible with SAP HANA, SAP Business One offers a mobile app for convenient access, available for local or cloud installation The software includes various modules tailored to different business processes, with the four primary modules being Sales, Purchase, Inventory, and Production.
Sales Process in SAP Business One
The sales process is crucial for every company, making effective management essential for controlling sales operations While many businesses still rely on paper documents, integrating an information system streamlines procurement and enhances information accuracy Small and midsize enterprises often turn to SAP Business One to optimize their sales processes and improve customer satisfaction This system facilitates the creation of comprehensive marketing documents that track the sales journey from item quotes to delivery, ensuring all relevant information flows seamlessly between documents Consequently, businesses can adapt the phases of their sales process to align with their operational needs.
- Departments involved in this process:
- There are three main sales processes in SAP Business One:
To enhance customer satisfaction, the company aims to implement an efficient sales process that swiftly addresses customer needs A thorough review of the sales process, from order placement to payment, is essential for understanding how each step impacts inventory management and accounting This comprehensive analysis is crucial for effectively deploying SAP Business One and optimizing all components of the sales process.
Sales process in SAP Business One is demonstrated in the following diagram:
Figure 1.1 Diagram of the sales process in SAP Business One
A sales blanket agreement is a long-term contract between a business and a customer, where the customer commits to purchasing large quantities of goods This arrangement typically involves the delivery of these goods in multiple smaller shipments over a specified timeframe.
When a valid agreement exists with the customer, the system seamlessly connects the sales document to that agreement, ensuring that the unit prices in transactions are directly sourced from it.
- Features of sales blanket agreement: It supports two types of agreements, including general and specific agreements
- General agreement: Used if only managing the quantity/sales target to get a reward after the target is completed
- Specific agreement: Used if a special discount is applied to each transaction, then the price on the sales document is taken directly from the agreed price
- Quotation is not a required document in the sales process
- Companies use sales quotes to send to customers for the purpose of providing price information for goods and services
- Quotations can be used to create sales orders once the customer approves the transaction
- A sales order is a document of commitment between a customer or potential customer and a company to purchase goods or services in terms of quantity and price
• Sales orders can be changed after added to the system
• A sales order can be copied from one or more quotations
Sales orders allow for the direct creation of purchase orders, serving as a means to manage inventory commitments While sales orders themselves do not initiate inventory transactions or alter inventory values, they do contribute to the overall count of sales commitments reflected in the item's inventory data.
When a customer places an order for 10 products, a sales order is generated by entering the customer code, item code, and quantity The system automatically retrieves the price based on the established price list for that customer or any previously agreed-upon price In this scenario, the order reflects a 5% discount applied manually.
- Delivery occurs when the goods have been released from the inventory
• Record the goods have been delivered to the customer
• It can be copied from one or more orders or quotations
• If the company uses the regular declaration method, changes in inventory value will be accounted for automatically
• If the delivery is copied from the order, the quantity of goods that are committed to sell will be reduced
- For example, the company delivers 10 products to the customer Then, inventory is reduced by 10 products Inventory account is reduced Cost price account is increased
- A/R invoice is the only required document in the sales process This is supposed to be a payment request and revenue recognition in the business operation report
• Sales invoices are the base for collecting money from customers
• Sales invoices recognize revenue on the profit and loss statement
• After adding the delivery, the sales invoice automatically records an increase in the debit account and the revenue account
The company issues an invoice for 10 products to the customer, which features a 5% discount The payment due date is determined by the payment terms agreed upon with the customer This transaction results in an automatic entry that reflects both the revenue account and accounts receivable from the customer.
- Incoming payments are used to record money from customers and reduce debts
- Incoming payments is the last step in the sales process, located in the Banking module
- Incoming payments can record wire transfers, checks, credit cards and cash
- When the incoming payment is added, the system will automatically account
When a customer promptly pays a bill for 10 products, the total amount received includes a 5% discount This transaction is recorded with an accounting entry that debits the cash account and the sales discount account, while crediting accounts receivable from customers.
Figure 1.7 An incoming payment 1.2.1.7 Return Process
To enhance customer satisfaction, the company has implemented a policy of free returns and exchanges In cases of delivery issues, the return receipt facilitates the re-import or re-delivery of goods Customers can initiate returns using a return request form, which serves as the foundation for the process Additionally, when customers wish to exchange an item, the "Negative Number" feature on the return documents allows for the re-entry of incorrect items while simultaneously arranging for a replacement delivery.
Figure 1.8 A return request created in the SAP system
Figure 1.9 A return document copied from the return request
Figure 1.10 A relationship map between a return request and a return document
- How to handle problems in delivery:
Figure 1.11 Diagram of handling return process
- Each document in the sales process must be assigned business partner information
- Business partners assigned in the sales pipeline:
- Notes about potential customers and customers:
• Potential customers can easily convert to customers
• Sales orders can assign customers or potential customers
• Since making the delivery note, it is mandatory to assign the customer on the document
The company is launching a targeted marketing campaign aimed at attracting new business customers in the inner city of Hanoi To meet the specific needs of these businesses, it is introducing a special pricing structure and tailored payment terms Additionally, the company is implementing customer groups to streamline the customer onboarding process and enhance administrative reporting efficiency.
Figure 1.12 Business Partner Master Data
- Business Partner Master Data has three types: Customer, Potential customer,
• Business partner data screen is linked to debit balance
• Retrieve reports directly from the mobile phone screen
• Each customer can have multiple shipping/billing addresses
• Defaults can be considered for each address type
- Terms of Payment are the basis for price classification and reporting:
• Each customer is assigned to a specific group
• Group sales reports can be viewed
• Each group is set with 1 default price list
- For the potential customer group:
• Use in pre-sales documents and in sales orders
• Not to be used in delivery notes or sales invoices
• Used in any sales documents
• Potential customers are converted into customers when the order is fulfilled
1.2.2.2 User Support Functions on the System
• Each department performs a function of the sales department
• Sales department creates quotes, purchase orders, etc
• Warehouse department creates warehouse receipts, returns goods, etc
• The accounting department prepares sales invoices, etc
- How does each department know what status the order is in? After the sales department created the sales order, the warehouse department received the warning:
• Warning the delivery note has not been invoiced
• Warning for unpaid sales orders
Figure 1.13 A warning of sales orders that have not been exported
- Sales Reporting: Sales reporting aims to track order fulfillment whether it is completed or at what stage it’s done
- Use quick reports in sales module:
Figure 1.14 A balance report of sales orders in total
Purchasing Process
The company typically follows a comprehensive procurement process when purchasing items from external suppliers However, in certain situations, it expedites orders by placing them over the phone, resulting in immediate delivery from the supplier.
Purchasing process in SAP Business One is demonstrated in the following diagram:
Figure 1.15 Diagram of the purchasing process in SAP Business One
A Purchase Request is not mandatory in the purchasing process; however, many departments utilize it to obtain authorization for procurement This document serves as a communication tool, providing the purchasing department with essential information to facilitate subsequent actions in the purchasing workflow.
Figure 1.16 A purchase request 1.3.1.2 Purchase Quotation
A purchase quotation is not mandatory in the purchasing process, but it serves as a valuable tool for companies to document pricing information for goods and services from suppliers These quotations can facilitate the generation of purchase orders once a suitable supplier's quote is chosen.
A Purchase Blanket Agreement is a long-term contract between a buyer and a supplier, designed to deliver goods or services over a specified timeframe and under established terms When the agreement with the supplier is active, the system automatically associates the purchase document with this agreement, ensuring that the unit prices in transactions are directly sourced from it.
• General Contract: Use if only managing the quantity/sales target to get a reward if the goal is completed
• Specific contract: Used if a special discount is applied to each transaction, then the price on the sales document is taken directly from the agreed price
- A purchase order (PO) is a document companies provide to a supplier specifying the items or services they want to purchase It demonstrates their commitment to the supplier
• Purchase order represents a commercial document between buyer and seller
• It includes the agreed quantity and price
• Data from the order is automatically copied to the documents that follow
• It causes no effect on accounting
• The order quantity appears in the inventory report
- Goods receipt PO is a document indicating delivery of goods from a supplier It is used to update inventory quantity and price
- Characteristics of the goods receipt PO:
• Create a goods receipt PO when receiving goods from suppliers
• Create direct input of purchase orders or copy from orders
• Match purchased inventory data with supplier delivery documents
• Goods receipt PO records inventory and record accounting information
- For example, 10000 products A are currently in stock The company ordered another
5000 pieces from the supplier Then, the supplier delivered 5000 pieces After receiving the goods, 15000 pieces are in stock
- The impacts of goods receipt PO:
• Copied items will turn gray on the original document
• Orders cannot be edited once fully copied
• Once all items are copied, the order will be closed
• The value of goods in stock will be updated according to the average cost or first in first out (FIFO) method
- An A/P invoice is a document that records payments to a supplier
• A/P invoice is the basis for paying NCC
• A/P invoice after saving will automatically account and update the supplier's debt
- For example, the company received an invoice for 5000 product A from a supplier, then entered that A/P invoice into the system This invoice will be the basis for payment with the supplier
- Outgoing payment is proof of payment to a supplier
• The final step in the purchasing process is to pay the supplier
• Outgoing payment can be used as payment methods in cash, payment order, credit card, and bank transfer
• After the outgoing payment is added to the system, the supplier’s debt reduction journal is automatically recorded
• Automatically offset with previously created invoices
The company owed the supplier for an invoice of 5,000 products, necessitating the creation of this invoice in the system Subsequently, outgoing payments were generated in accordance with the payment terms, allowing the system to effectively manage accounting by decreasing both cash and debt owed to suppliers.
Figure 1.22 A document of outgoing payments
When purchasing goods, various direct costs are incurred, including insurance, warehouse and yard rental, transportation, loading and unloading, preservation, and delivery Additionally, natural losses may occur during the purchasing process The purchasing accountant allocates these related costs to the acquired items based on their quantity or value, utilizing the relevant purchase cost invoices.
When transferring products to a warehouse, companies often incur delivery costs by hiring a third-party transporter These costs are typically added to the warehouse account for the specific shipment by the purchasing accounting department, accurately reflecting the total expenses associated with product storage and management.
2.3.1.9 Goods Return and Debt Reduction
A company received the correct quantity of goods but found them to be of unsatisfactory quality or damaged during transit, leading to a return of these items to the supplier They sought to clear their debt either before or after receiving the invoice In instances where the goods were satisfactory yet the invoice contained errors, the company requested a reduction in their debt with the supplier.
In this scenario, the company utilizes a delivery note to return goods prior to invoicing, followed by adjustments to the purchase invoice post-input If the goods receipt PO is found to be incorrect, the company has the option to cancel the note, leading to the automatic generation of a cancellation note Consequently, purchase orders are reopened and can be associated with new stock receipts.
- The key data important in purchasing is the supplier and item master data
Supplier master data plays a crucial role in all purchasing activities, encompassing both automated and manual financial procurement transactions This essential data includes vital information such as the supplier's contact details, address, payment methods, and accounting information.
Figure 1.23 A purchase order takes items from the Item Master Data
The item master data encompasses essential details such as the product code, product name, previous supplier, manufacturer catalog number, purchase unit of measure, item size, tax information, customs group for imported goods, and a link to Purchase Analytics.
1.3.3 User Support Functions on the System
- After the purchasing department created the purchase order, the warehouse department received the warning:
• Warning that purchased orders have not been stocked
• Warning that the warehouse receipt has not been invoiced
• Warning for unpaid purchase orders
Figure 1.24 A warning of purchase orders that have not been stocked
- Purchase reporting aims to track order fulfillment whether it is completed or at what stage it’s done
Figure 1.25 A purchase report queried and stored in the system
Inventory
The Inventory Module enhances inventory management by tracking item master data through batch and serial numbers, managing inventory transactions like transfers, item quantity settings, counts, and goods receipts Additionally, it facilitates pricing list management with special rates and volume discounts, supports the pick-and-pack process, and generates comprehensive inventory reports.
- Manage all the items that companies buy, produce, sell or stock
- Each item is managed on a unique code
- Store a lot of information needed for purchasing, sales, production processes, etc
Figure 1.27 Batch management and selection criteria
- Items that have already been traded cannot be deleted
- Locked items cannot be added to vouchers or transactions
- Locked items can be removed from the system's reports
The item category serves to generate reports based on item groups, allowing users to establish and manage these groups effectively It facilitates the automatic creation of new item codes using default group information and streamlines item handling by organizing inventory within the same group.
To enhance item management, companies can benefit from grouping their extensive inventory Item group reports enable users to analyze profits by product line, leading to more efficient item management By utilizing default settings for each item group, the process of item creation becomes quicker and ensures consistency across similar items.
- Grouping items based on: Group of items with common characteristics and properties, Sort items on reports, Classification of product lines, and Grouping for sales purposes
- The purpose of UoM is to assign units to an item and describe the relationship between different units of the same item
In the trading of goods, items are frequently bought and sold in various units, such as purchasing by the box or bag while selling by the kilogram To streamline the import and export processes in purchase and sale documents, the company has implemented a unit conversion system for goods.
Figure 1.29 Measurements of goods per unit
- The purpose of a price list is to assign a price list to an item and describe the relationship between the price list for an item
The company utilizes various price lists tailored for distinct customer groups, offering special pricing to select clients based on their relationship with the business Customers benefit from discounts that reflect the value of their purchases, while periodic promotions provide additional reductions on list prices, incentivizing higher purchase volumes and enhancing sales during special events.
Companies utilize the SAP Business One warehouse system to efficiently manage the manufacturing, purchasing, and selling of items across multiple locations This system allows for the representation of warehouses as virtual entities, accommodating both internal locations and supplier-managed warehouses As businesses expand into new regions, the creation of additional warehouses becomes essential for enhancing distribution capabilities.
• Documents containing goods in the buying and selling process are related to the warehouse
• Other import documents, other export documents, and internal warehouse transfers all contain warehouse information
- Warehouse categories: General warehouse, Local warehouse, Virtual Warehouse, Warehouse divided by locations
A virtual warehouse allows companies to create a digital repository for managing a supplier's inventory When a sale order is placed, the system prompts the company to generate a purchase order The supplier fulfills this order by delivering directly to the customer, who then receives an invoice from both the supplier and the company.
1.4.3 Commodity Import and Export Transactions
Commodity import and export transactions occur when companies manufacture, purchase, and sell products stored in various warehouses These businesses often need to transfer inventory between locations, but may also accumulate items that haven't been involved in buying, selling, or manufacturing processes Additionally, inventory may be exported for purposes like advertising and promotional activities.
- Companies use a goods receipt to add more quantities of the materials that they don’t know where these materials come from, also known as undetermined sources
- Instead, companies depend on the statistics from inventory reports or the Purchase department to get this number
Figure 1.30 A goods receipt in warehouses
Figure 1.31 Diagram of goods receipt process
Companies utilize a goods issue process to transfer materials or finished goods from one warehouse to another, ensuring timely delivery to customers This procedure is particularly important when a product is out of stock at the nearest warehouse For instance, if a customer orders product A, but it is unavailable at warehouse T1, the inventory department must export one unit from warehouse T2 to T1 This action results in a decrease of one unit in T2 and an increase of one unit in T1, facilitating efficient order fulfillment.
Figure 1.32 A goods issue in warehouses
Figure 1.33 Diagram of goods issue process
1.4.4 Method of Calculating the Cost of Inventory
- Two options for determining inventory value:
• Regular declaration system: Import and export transactions directly affect the quantity and value of inventory and automatic accounting in accounts
• Periodic inventory system: Import and export transactions only affect the quantity of inventory This method does not affect the value of the inventory and does not automatically account
To enhance oversight of its products throughout their lifecycle, the company implements a comprehensive tracking system High-value machinery and equipment will be monitored using unique serial numbers, enabling precise tracking of sales and service history for each item Additionally, other products requiring management based on expiration dates or origin will be organized in batches for efficient retrieval This dual approach ensures effective inventory control and accountability across all items.
- A serial number is used to track individual objects, while a batch number is used to track groups of goods with common characteristics
The company faces challenges in efficiently locating specific items within its extensive warehouses, as goods are often stored in various locations without a systematic plan This disorganization can lead to items being placed in multiple spots within the inventory, complicating the selection process for workers To address these issues, implementing a warehouse location management solution can significantly enhance the organization and retrieval of goods, streamlining operations and improving overall efficiency.
Figure 1.34 Business process integrated warehouse management
Production Process
SAP Business One offers tailored solutions for small to medium-sized production partners, focusing on individual and process management Its result module utilizes unique features to enhance opportunity identification and drive impactful decision-making, ultimately improving profitability for businesses.
Furthermore, this modern strategy achieves end-to-end flows with integrated solutions for supply chain administration, EDI, complicated manufacturing potential, and transportation management
The SAP Business One Production component effectively manages the planning of demand and supply for finished goods and raw materials, utilizing Material Requirements Planning (MRP) while considering various constraints such as labor, system capabilities, and resource availability.
1.5.1 Concepts in the Production Module on SAP Business One
A Bill of Materials (BOM) encompasses both items and resources, including machinery and labor Machines are classified as fixed assets, while laborers represent the company's workforce It is essential for the company to effectively plan and monitor the availability of these resources to ensure operational efficiency.
- A production process includes a production order, production order issue, and exporting raw materials to production
- Finished goods: Finishing production and production received
- Routing in the production process: A production order has many stages and each stage has different materials, resources, and completion time
To fulfill the month's yacht orders, the company must strategically plan its machinery, equipment, and labor to ensure timely delivery By establishing a system that incorporates both employees and machines as vital resources, the company effectively manages resource availability throughout the production process This proactive approach enables optimal utilization of resources to meet customer demands efficiently.
- There are three types of resources, including machine, laborer, and others
- Key data of resources consist of resource type, resource group, resource units per time period, cost per unit
- Resource group is used to group machines or employees with similar cost categories When a resource belongs to a group, the resource cost list is updated according to that group
1.5.2.2 Resource Units Per Time Period
- The productivity of a resource is measured in a unit of measure
- The unit of measure for the resource can be time or any other type of unit
- To calculate the time period of a resource in a production order, it is necessary to return the unit of measure to the resource's time
- Resource time period in units equals Setup time in 1 unit divided by Resource unit per unit of time
To ensure timely delivery of ordered products, a company must effectively plan and monitor its production capacity This involves evaluating existing capacity to prevent overlaps and optimize production planning for enhanced efficiency.
Effective resource management is vital for companies to ensure timely delivery to customers The department head must assess whether production can continue as scheduled or if adjustments are necessary to meet deadlines.
- BOM allows the company to list all the raw materials, assemblies, subassemblies, and components used to manufacture its products and the instructions
In SAP Business One, creating a Bill of Materials (BOM) involves entering essential product information, including required materials, warehouse location, issue method, and quantity This initial step in the production process is efficiently executed within the system.
- BOM Management is a function that allows the company to make changes to multiple BOMs at once:
• Add or remove components from selected material specifications
• Change the parameters (such as quantity, stock, shipping method, etc.) for the selected BOM
• Replace the rating of the materials
When a company chooses semi-finished or finished products for manufacturing, it transfers all relevant data from the Bill of Materials (BOM) to the Production Order This order specifies the anticipated production quantity and outlines the start and end dates for the manufacturing process.
The item data is sourced from the Bill of Materials (BOM), and the anticipated quantity of materials for export is determined by multiplying the norm by the production plan quantity of semi-finished and finished products.
In the manual method, companies are required to create issue documents for Production Orders manually, track the time resources spend on this process, and manage the quantities of exported materials effectively.
- In the automatic method, the issue documents in Production Order are automatically generated However, this method cannot be applied to items managed by series or batch
Upon entering the production warehouse, the system automatically registers finished and semi-finished products, facilitating the export of inventory alongside materials or resources using an automated method This process also includes the calculation of production costs for each item.
Conclusion
SAP Business One has demonstrated significant value in enhancing enterprise development by effectively managing departmental performance and financial flow Small and mid-sized companies, often working with limited budgets, require an affordable ERP solution to handle extensive data from customers and resources SAP Business One fulfills these needs, making it an ideal choice for businesses seeking efficient management and growth.
SAP Business One offers a diverse range of integrated modules that streamline various business processes on a single platform, catering to the unique needs of enterprises This integration not only reduces operational costs but also enhances convenience and efficiency by allowing all departments to access information on one page, making it easier for staff to manage tasks Additionally, SAP Business One ensures high accuracy and scalability for handling large volumes of data, which is essential for every business's success.
GENERAL INFORMATION OF IKEA CORPORATION
IKEA History, Missions, Values, and Vision
IKEA was established in 1943 by a 17-year-old Ingvar Kamprad in Sweden, who significantly enhanced the product range by introducing a ballpoint pen to the brochure The company innovated with "knock-down" furniture, flat-pack shipping, and customer-focused solutions, which included IKEA-branded finishes and clear assembly instructions This approach not only streamlined operations but also facilitated the introduction of new furniture designs As a result, IKEA revolutionized the home furnishings industry.
IKEA, a privately held company owned by the Kamprad family, has become one of the largest table retailers by collaborating with 1,500 suppliers across approximately 50 countries Their business concept focuses on offering a diverse range of well-designed, functional home furnishings at affordable prices, aiming to improve the everyday lives of the working class By enhancing the entire value chain, fostering strong supplier relationships, investing in innovative technologies, and implementing efficient production methods, IKEA strives to deliver quality products that cater to a broad audience while maintaining low costs.
IKEA is committed to sustainability, having established wind farms and solar panels to generate renewable energy, aiming to minimize their environmental impact They ensure that all inventory, including soft furnishings and carpets, comes from sustainable sources, achieving their goal of sourcing 50% of their wood from responsible origins two years ahead of schedule Additionally, IKEA offers products and services that help customers save energy, water, and reduce waste at home Their strategy focuses on providing stylish and durable home furnishings at affordable prices, making them accessible to a wide audience The company’s innovative approach to flat-pack furniture, which allows for easy transportation and assembly, enhances the shopping experience and sets them apart from competitors, ultimately encouraging customer loyalty.
IKEA focuses on five key objectives: Quality, Speed, Dependability, Flexibility, and Cost, to enhance its market representation The store layouts are strategically designed, reflecting brand consistency and high customer value in both products and services IKEA prioritizes speed by efficiently completing tasks and adapting to customer demands through comprehensive sourcing planning Each store's inventory management is decentralized, allowing for quicker responses to local market changes While maintaining a commitment to cost-effectiveness, IKEA minimizes expenses through high-quality products, reducing the need for rework and enhancing transaction efficiency To stay competitive, rivals must offer substantial value, build lasting customer relationships, and select optimal store locations IKEA's success is partly attributed to its strong partnerships with suppliers and its in-house manufacturing facility, Swedwood Manufacturer, which enables it to produce unique designs.
Organizational Structure
IKEA Group has successfully convinced key investors to invest EUR 5.2 billion to enhance the company's flexibility and adaptability in the evolving global market The IKEA leadership recognizes the challenges posed by new market entrants and online competitors like Amazon.com, deeming this transformation essential for maintaining competitiveness in the retail sector.
IKEA's administrative structure is highly hierarchical and often shrouded in secrecy, encompassing 11 franchisees across 500 locations in 63 countries This rigid system presents significant challenges, including limited flexibility, poor communication between senior management and agents, and a protracted decision-making process The recent administrative restructuring at IKEA may overlook the negative consequences associated with such a hierarchical model.
Inter IKEA Group unites various partners and formulates a strategic approach for all business sectors while coordinating all IKEA franchisees The group is structured around three core transactions, as illustrated in Figure 1 above.
- Inter IKEA Systems B.V is the furniture retailer's global franchisor
- IKEA Range & Supply creates and distributes goods for the home renovation and furnishing industries
- IKEA Industry creates home furnishings, accounting for around 10-12% of the whole range
The current administrative structure of IKEA, established following a major reorganization in 2016, is designed to enhance operational efficiency Key aspects of IKEA's range, supply, and result ventures were transitioned to the Inter IKEA Group, which is overseen by Inter IKEA Holding B.V This strategic move aims to streamline authority and refine processes within the organization Jon Abrahamsson Ring serves as the CEO of Inter IKEA Holding B.V.
Business Processes
Figure 2.1 IKEA’s supply chain diagram
IKEA operates a vast network of over 1,800 suppliers across 50 countries, adhering to a strict policy that prohibits unethical practices such as child labor and discrimination The company champions sustainable ideals and utilizes a structured approach within its supply chain The process begins with sourcing natural resources for products and packaging, while brand development occurs in Sweden Raw materials are then transported to the mill for manufacturing To optimize outcomes, IKEA employs a lean supply chain strategy using make-to-stock (MTS) techniques.
IKEA leverages advanced technology to minimize production waste before customer orders are placed The products are packaged and dispatched to regional distribution centers prior to reaching local supermarkets By employing accurate forecasting and innovative supplier strategies, IKEA keeps inventory levels low, effectively reducing excess waste Supplies are restocked only after hours, ensuring efficiency as customers approach the warehouse.
The unprotected supply chain model utilized by IKEA is unique, as it enables customers to engage directly with stock and facilitates on-demand construction of items However, the rise of low-cost offshore competitors and online retail has intensified the competitive landscape for IKEA Despite these challenges, the Swedish retailer maintains a strong reputation for its innovative supply chain, which has enabled it to navigate rivalry effectively and achieve impressive profits while adapting to market changes.
The Allure crop was designed to fit into a flat bundle for easier handling at events, leading to challenges in both product design and packaging novelty While cost considerations drive the supply chain, ethical practices and value also play significant roles This unique approach has enabled cost reductions alongside negotiating allure standards Key competencies such as change, efficiency, and adaptability are essential for enhancing an organization's supply chain capabilities and maintaining a competitive edge in innovation.
Conclusion
IKEA has developed a distinctive approach to trade activities, allowing them to overcome challenges and emerge as a leading competitor in the furniture industry To ensure consistent organizational and structural performance among franchisees worldwide, IKEA has effectively systematized its operations and administration This strategic organization has not only solidified IKEA's reputation but also contributed to its growth amidst rising competitors on the stock exchange Consequently, when consumers think of home furniture, the iconic yellow and blue IKEA logo is often the first brand that comes to mind.
IKEA has revolutionized the furniture industry by offering flat-pack designs that tap into customers' creativity and curiosity, transforming the purchasing experience This innovative approach not only reduces shipping costs but also aligns with the rising popularity of minimalist design, a trend that IKEA has championed for years.
BUILDING IKEA BUSINESS MANAGEMENT SYSTEM ON
Problem Statement of IKEA
This article focuses on analyzing IKEA's operations in the Purchasing, Inventory, and Production processes While IKEA engages in various business processes, the analysis will specifically target these three areas due to the essay's constraints The company holds competitive advantages in sourcing raw materials, managing inventory, and manufacturing furniture By examining these processes, the article aims to uncover how IKEA effectively manages its extensive operations as a global enterprise.
IKEA, as a global enterprise, faces the complex challenge of managing inventory across its widespread production lines located in various countries The company has specific requirements for selecting an ERP system, including customization, support, and budget considerations Due to the diverse scale of its production facilities, not all lines are equipped to utilize large-scale ERP software Consequently, I propose developing a distributed production line management system for IKEA using the SAP Business One platform This initiative will serve as an example of how IKEA can streamline its operations from the purchasing phase through to the production process.
SAP Business One is primarily designed for small and medium-sized enterprises, yet it effectively supports large operations like IKEA, which manages its extensive production lines across various countries using this system IKEA's item dataset is compiled from various reports, including financial documents that detail material costs and manufacturing research, with the item list stored in the OITM section of the Inventory module To manage this dataset, I utilized the Data Transfer Workbench to seamlessly upload it into the system, ensuring that the dataset files adhere to SAP Business One's standard format, which accommodates multiple information fields for tailored requirements.
Analysis System Functions
Table 3.1 Illustrate actors and the related system functions
1 System Administrator 1.1 Manage all business processes of IKEA and staff members on SAP Business One
1.2 Lead, manage the system, and have the rights to control every action and details on SAP Business One
3 Staff Members 3.1 Manage documents in Purchase, Inventory, Production processes
Quality characteristics or quality attributes are demonstrated as criteria for evaluating system performance or behavior in Table 2.2 Non-functional requirements
1 Easy to fix Identify errors quickly
The function errors do not affect other functions when fixed
2 Easy to maintain Add or change new functions quickly
Do not affect the existing functionality
3 Easy to use Easy to use the system and have user-friendly interface
Provide user manuals for the system
4 Accuracy The data in the system and the output data must be correct
Data is strictly inspected when performing operations
5 Flexibility Can perform multiple operations at the same time
Have the ability to process data at a stable speed and many people can access it at the same time
6 Manipulability Operations between components in the database need to be compatible with each other
Have a strong link between the data tables
7 Testability Easily test the system operation with sample databases to detect software errors
Errors are easily detected by testing the sample database
Building IKEA Business Processes on SAP Business One
3.3.1 Importing Item Master Data and Business Partner Master Data of IKEA
3.3.1.1 Prepare IKEA Item Master Data and Business Partner Data
IKEA's Item Master Data is essential for creating purchase orders, as it includes a comprehensive list of items previously sourced from various suppliers This critical inventory list, extracted from the company's annual report, enables IKEA to implement processes within SAP Business One Each item is uniquely identified by its ItemCode and categorized by ItemGroupCode, highlighting the diversity of products essential for effective inventory management Without this list, IKEA would face significant challenges in streamlining its operations.
Figure 3.1 A part of the list of IKEA's item data
- Business Partner Master Data: Every item has to be attached to a supplier, also known as a business partner A business partner list consists of two types: Customer (C) and
IKEA, a multinational furniture corporation, relies on a comprehensive customer list for its sales process and a detailed supplier list for purchasing materials To facilitate its global production, which spans countries such as Vietnam, China, Spain, Singapore, and Poland, IKEA imports a list of suppliers whose transactions are conducted in USD as per contractual agreements Each supplier is identified by a unique cardcode, referred to as "NCC."
Figure 3.2 A part of the list of IKEA's business partner data
3.3.1.2 Import IKEA Item Master Data and Business Partner Data in SAP Business One
To begin the process of importing IKEA datasets, I first gathered data from various sources and preprocessed it in Microsoft Excel to eliminate irrelevant information, ensuring it adhered to the standard SAP Business One format Subsequently, I utilized the Data Transfer Workbench to initiate the import, selecting "Master Data" as the data type, which is specifically designed for adding items and business partners.
In Step 2, I selected the "Add New Data" option since IKEA's information has not yet been entered into SAP Business One To modify or include additional details in the system, I will check the relevant options below It is crucial to complete this step accurately to ensure the system can proceed with the subsequent commands.
In Step 3, the business partner list is located within the Business Partners/Business Partner Master Data, while the item list is found in the Inventory/Item Master Data This step is crucial as it ensures that the imported data is correctly organized within the appropriate module.
- Step 4: This step shows the directory of the data files Following the guidelines, IKEA can avoid wrong files’ directories and ensure the data of standard templates
Step 5 involves a thorough verification process to ensure that the imported data columns align correctly with those in the Excel files If discrepancies are found, the import process will be halted, allowing for necessary adjustments to be made to the Excel datasets.
Step 6 emphasizes the critical importance of "Defining Error Handling" to prevent data errors during dataset imports I chose the option to "Cancel Import and Perform Rollback When One or More Errors Occur," which ensures that the import process halts upon detecting an error This approach maintains the accuracy of the entire process and allows me to identify and rectify any issues effectively.
- Step 7: When all required fields are selected, the Data Transfer Workbench starts importing data
The Data Transfer Workbench indicates the accuracy of datasets by the number of errors detected during the import process In this case, IKEA's item and business partner list was error-free, leading to a successful completion of the import Subsequently, the Data Transfer Workbench confirms that the datasets have been fully and successfully imported into SAP Business One.
IKEA places a purchase order to acquire materials for the production of 200 wooden tables from a selected supplier on their business partner list Each table is detailed with specific attributes, including Item Description, Quantity, Unit of Measurement (UoM), Unit Price, and Discount Percentage, among other essential information.
The company must prioritize key elements essential for all subsequent processes, including the Document Number, Posting Date, Delivery Date, Document Date, and comprehensive item information It is important to note that the currency for the Unit Price is USD.
Figure 3.12 Make a purchase order of 200 wooden tables
After IKEA generates a purchase order, a goods receipt PO is created from it, displaying amounts in VND for both the Total Before Discount and Total Payment Due This presents a system error, as changing the currency for previous documents in other companies proves difficult Adjusting the currency for IKEA's processes could inadvertently impact those earlier documents Consequently, I assumed that VND is being used in place of USD, while the actual value remains unchanged (Figure 3.13).
Figure 3.13 Create a goods receipt PO
The A/P Invoice is an essential document in the purchasing process at IKEA, required for the Accounting Department to properly record and calculate journal entries This invoice details the Total Payment Due that IKEA must fulfill.
$630,990 for this purchase order This cost is stored in the Outgoing Payments and IKEA has to pay the suppliers before the due date (Figure 3.14.)
Figure 3.14 Make an A/P invoice from the purchase order
IKEA's primary production lines include bedroom, bathroom, dining room, kitchen, and living room series, organized in designated warehouses labeled B01, BT01, D01, K01, and L01 These warehouses track the raw materials required for manufacturing each product, with a systematic arrangement of products stored in specific floors and rows for efficient inventory management.
IKEA effectively manages its inventory by tracking the location of raw materials and finished goods within its system, which minimizes loss and damage during the inventory process.
Figure 3.15.Warehouses created in SAP Business One
Figure 3.16 Sublevel codes for IKEA’s warehouses
Creating a Bill of Materials (BOM) is essential for KEA's production of 200 wooden tables The BOM must detail all necessary materials and resources, including 20 bottles of melamine, 450 MDF wood panels, 1000 iron bars, 2000 bolts, 2000 screws, 15 laborers, and 2 wood sawing machines These materials are stored across two warehouses, VT01 and 01, ensuring efficient management of resources for the manufacturing process.
Figure 3.17 Create a BOM of 200 wooden tables
Next, IKEA created a production order in the SAP Business One and set the status
“Planned.” All information in the BOM will be copied to this order document After IKEA added this order successfully, setting the status to “Released” is compulsory
REPORT AND EVALUATION
The production process of IKEA runs successfully on SAP Business One:
IKEA follows a structured purchasing process, beginning with a blanket purchase agreement and a purchase order for raw materials After receiving and approving a purchase quotation from suppliers, IKEA generates a purchase order The suppliers then prepare and deliver the raw materials, which are documented in a goods receipt PO for storage in IKEA's warehouses Assuming no materials were damaged, the Accounting department subsequently receives the purchase invoice for these materials.
Figure 4.1 Completed relationships in the purchasing process
IKEA efficiently manages its inventory by receiving ordered raw materials and transporting them to designated warehouses, where they are organized using bins Each raw material is meticulously tracked in an item list to facilitate future purchase orders To optimize production planning, IKEA assesses whether these materials will be utilized in the Material Requirements Planning (MRP) process by determining the appropriate planning method It is likely that IKEA employs certain raw materials for MRP to accurately forecast the quantity of items to be manufactured in the upcoming period.
In its production process, IKEA utilizes a Bill of Materials (BOM) to initiate manufacturing For the production of 200 wooden tables (Code TP0020), the company requires essential raw materials such as melamine, MDF wood, iron, bolts, and screws Additionally, the labor force consists of 15 workers to ensure efficient production.
2 wood sawing machines are resources
Figure 4.2 Completed relationships in the production process
After finalizing the Bill of Materials (BOM), IKEA initiated a production order for 200 wooden tables, ensuring that all BOM items were replicated in the order and readied for production This outlines the systematic approach to IKEA's business processes across its production lines Despite its global distribution of manufacturing sites, IKEA maintains a uniform process that includes purchasing raw materials, storing and inputting BOM data, and exporting materials for production This operational consistency enables effective production planning and quality control, allowing IKEA to efficiently manage its global distribution network.
Through the completion of my graduation project, I successfully developed the business management system for IKEA on the SAP Business One platform, ensuring a logical and coherent structure This process involved extensive research and the integration of external resources, which significantly enhanced my analytical skills and understanding of operational management within IKEA and similar enterprises The dedication I applied to this project not only improved my self-study abilities but also provided me with invaluable experiences that will serve as a strong foundation for my future career.
I have conducted extensive research to ensure my project is detailed and comprehensive However, my limited knowledge may have led to some shortcomings and incomplete aspects I kindly request that teachers review my work and provide suggestions for improvement to enhance my graduation project.
Upon finishing this project, I will focus on researching and developing additional real-world cases to enhance IKEA's business management using SAP Business One My goal is to optimize all processes to increase efficiency, speed, and accuracy, ultimately translating these improvements into practical solutions.