IKEA Demand Planning by Karolina Bergman

“To create a better everyday life for the many people”

With demand planning a company can optimize their inventory and increase profitability. This by reducing cost impact on our products, for example we can plan better timing or take advantage of volume discounts. Demand planning is a supply chain management process to be able to create reliable forecasts. The analysis includes historical data, close relationship with suppliers and creating and managing forecasts, amongst other things.

I wanted to have a look at an example of an existing company’s demand planning to be able to understand the planning process better.

IKEA has 375 warehouses in 27 countries and sells for 33,8 billion euros worldwide (2014). IKEA has around 32 demand planners working on different levels and stages.

They have an operational planning, or in other words, their restocking needs, which is done manually by every store every three weeks.

They also have the tactical planning, which covers weeks 4 - 84, with new historical data loading weekly on a store level. The operational and tactical forecasts are then merged into a final forecast of each article in house.

After that, the forecasts are combined, compared and accommodated with the sales planning in each country, called Retail Forecast Groups, which are grouped up and served on a several countries level, called Distribution Services Region. (In Europe for example, there are six different Distribution Services Regions.) The DSR help the transportation and warehouse planning.

By doing the demand planning effectively, a company can keep track of their growth and find a structure in the demand throughout every year and reduce costs by working closer with their suppliers.