CIPS Exam Report for Learner Community:

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Unit:
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Professional diploma in procurement and supply

PD3 - Strategic supply chain management
Nov13

Question 1 Learning Outcome 1.2

IKEA, as part of its strategic supply chain strategy in the 1990s, re-located some of its
manufacturing activities to low wage countries.
Discuss the possible benefits and problems of this strategy for IKEA.

(25 marks)

Candidates were required to consider both positive and negative aspects of IKEA locating to low wage
countries.
Advantages that could have been discussed are: reduced costs, location, infrastructure, resource capability,
access to raw materials, government incentives, market development, exchange rate advantages, and
reduced regulatory requirements.
Potential problems that could have been discussed are: customer resistance, quality, limited availability of
skills, language, culture, communication, logistics issues, ethics, reputational damage, sourcing and supplier
management, legal issues, exchange rate risks, quotas and tariffs.
Marks were allocated evenly between the potential benefits of the strategy, potential problems, and
application to the IKEA case.
Many candidates used the PESTLE framework to answer this question. However, this led to a number of
answers not addressing the sourcing, supplier management, and logistics issues. Another problem was that
many answers discussed other IKEA strategies that were mentioned in the case, such as supplier
rationalisation, competition between procurement teams, and supplier acquisition, rather than focusing on
the question. Discussing globalisation in great depth was another distraction.
Strong answers demonstrated a robust understanding of the issues, linked the discussion to the case
situation, and suggested actions to overcome the problems. Weaker answers lacked depth, focus, or
application.

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Question 2 Learning Outcome 2.4

Evaluate the extent to which the supply chain management strategy adopted by IKEA in the
case study may be considered to be lean and/or agile.

(25 marks)

Candidates were expected to give examples of both lean and agile approaches within the case study and to
assess the level of application of these concepts. Candidates could legitimately suggest that IKEAs approach is
more lean than agile or vice versa, depending on the evidence presented.
Features of a lean supply chain could include: low-cost production, value chain mapping, forecasting systems,
demand-pull, stock reduction, waste reduction, continuous improvement, efficiency initiatives,
decentralisation of tasks and responsibilities, integrated information systems, empowered cross-functional
teams, and mutual loyalty between employees and the organisation.
Features of an agile supply chain could include: streamlining of the physical flow of parts from suppliers,
scheduling processes, synchronising information flows linking demand and market planning, adapting and
responding quickly to changing market needs, quick response between distribution centres and retail stores,
and stockholding to achieve availability.
Answers could also have discussed leagility, where lean and agile principles are combined together in order to
achieve both operational efficiency and market responsiveness. Examples could include: the distribution
centres as de-coupling points, long-term forecasting combined with short-term scheduling, and late
customisation in terms of customers being able to select and combine their own choices of design, colour and
combinations of the standard range of products provided.
Marks were generally allocated evenly between the understanding of lean and agile principles and specific
examples from the case study.
Answers which used some sort of framework for analysis, such as the lean principles of Womack et al or the
seven wastes of Ohno, usually performed well. There was a lot of scope for candidates to extract case
examples that reflected the principles of either lean or agile supply chains. However, some answers were
entirely theoretical while others quoted examples from the case without linking them to either lean or agile
principles. There were also answers which discussed only one of the approaches, usually lean.
Strong answers demonstrated a robust understanding of the principles, clear examples from the case, and a
discussion of leagility. Weaker answers lacked depth, focus, or application.

Question 3 Learning Outcome 3.2

(a) Categorise, using a recognised model, the internal and external stakeholders of IKEAs

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(9 marks)

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supply chain identified within the case.

(b) Explain how IKEA might communicate effectively a strategic supply chain change to each
category of stakeholders.

(16 marks)

Candidates were expected to identify internal and external stakeholders, map them according to a recognised
tool of analysis, and discuss the communication methods that could be adopted for each stakeholder group.
The internal and external stakeholders could include: managers, employees, banks, shareholders, customers,
suppliers, national and local governments, regulatory bodies, pressure and interest groups, professional
bodies, trade unions , and local communities.
The methods of communication could include: advertisements, catalogues, focus groups, written reports,
newsletters, emails, briefings and consultation meetings, workshops and conferences, press releases,
questionnaires, website and the internet.
A communication plan is often drawn up, which lists all the stakeholders and their information requirements,
the communication methods to be used, and the information content and frequency of distribution.
In terms of (a), one mark was allocated for identifying a relevant model, while the other eight marks were
awarded in relation to the positioning of stakeholders with a justification. In terms of (b), marks were
allocated evenly between the understanding of communication techniques and their appropriate application
to specific stakeholder groups.
Most answers used Mendelows stakeholder model which incorporates power and interest as the two axes,
although other valid models were acceptable. The main problem in relation to (a) was that answers often
positioned stakeholders with little in the way of explanation or justification. In relation to (b), many answers
gave a list of communication methods without clearly linking them to specific stakeholder groups. Very few
candidates discussed an overall communication plan. Some focused on the word change and proceeded to
discuss change management principles. Only those principles related to communication methods were given
credit.
Strong answers explained and justified the position of stakeholders within the model, demonstrated a robust
understanding of communication methods, linked them to specific stakeholder groups, and discussed
communication plans. Weaker answers lacked depth, focus, or application.

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Question 4 Learning Outcome 3.3

Explain, using examples, how IKEA could assess the performance of its supply chain.

(25 marks)

This is a wide-ranging question, allowing candidates significant freedom to explain how IKEA could assess the
performance of its supply chain.
A range of approaches could have been discussed: balanced scorecards, benchmarking, the performance
pyramid, key performance indicators, focus groups, surveys and feedback. There are also a number of metrics
that could have been included: profitability, revenue, market share, time to market, stock availability, stock
turnover, efficiency, savings, order cycle times, on time delivery in full, customer satisfaction, and employee
motivation.
Answers could have discussed the importance of using SMART criteria, the development of strategic, tactical
and operational measures, the development and use of KPIs, the measurement of organisational, functional,
team and individual performance, and the purchasing, logistics, and distribution aspects of performance.
Ten marks were allocated for the discussion of performance approaches and metrics, while 15 marks were
allocated for the application to the case study and the development of relevant examples. Application and
examples, as indicated in the wording of the question, were very important.
The answers to this question were mixed, compounded by the fact that most candidates attempted this
question last and sometimes suffered from a lack of time. Better time management would help in this
respect. A number of answers consisted of a theory dump with little in the way of application or examples.
Describing models and theories in a closed-book exam is not desirable; doing so in an open-book environment
has no merit at all. There should be a rounded discussion and analysis of the issues. Other answers
concentrated on performance metrics only without mentioning the approaches, thus failing to address the
how in the question. It was found that the balanced scorecard approach is a poorly understood tool for
many candidates.
Strong answers demonstrated a rounded discussion and analysis of performance approaches, applied them
effectively to the case study situation, and developed a range of performance metrics appropriate to IKEAs
strategies and operations. Weaker answers lacked cohesion and application, and did not develop examples.

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