Building a perfect data delivery strategy for IKEA

Started in 1943 by Ingvar Kamprad, IKEA has been the world’s largest furniture retailer since 2008. Famed for its ingenious storage solutions, flat-pack designs, and affordable price point — not to mention its meatballs (Köttbullar) — Swedish-born IKEA has become a consumer favorite across the world.

Arguably, a large part of what has made IKEA so successful is its understanding of its customers – and staying true to its home-grown qualities to do so. Just looking at the name itself, IKEA comes from Ingvar Kamprad (the founder’s name), Elmtaryd (the farm where the founder grew up), and Agunnaryd (the founder’s hometown). It’s a business that has continuously seen value in the details, and this is just a small example of how IKEA has made what could just be flat-pack story into a welcoming home, complete with a warm brew.

This is a feeling that IKEA has curated again and again across its products, stores, and beyond, and all that delivery comes from accessing extra information — which brings IKEA to its main mission — to maintain that comprehension of the details across its operations, products and customers, even as the business continues to balloon on the world’s stage.

Meeting with Naveen Gupta, Global Data Lead at IKEA, SAPInsider hears how the Inter IKEA Group is building towards a data-centric strategy and, with the help of SAP Advanced Data Migration and Management by Syniti, is a company seeing the beginning of a whole host of data-based wins.

Understanding the ERP instruction manual

In charge of setting up IKEA’s data practice, Naveen’s role spreads across data governance, management, migration, integration, analytics and reporting throughout the Inter IKEA Group, the parent connecting the IKEA franchises with range development and suppliers, aligning IKEA’s wider strategy. He also leads the data stream for ERP implementation, and in this case, as we’ll delve into further, SAP S/4HANA.

For Naveen: “The key area of improvement is core data-driven decision-making for us. We have been very good in the last 80 years in terms of how we run our business. But now our next step is to go into a more digital and data-driven process.”

With homegrown systems across IKEA built on non-SAP databases, including pricing engines and logistics, the furniture retailer was finding it challenging to scale these systems in line with the size of its expanding operations and data set.

The IKEA system landscape was “very fragmented”, and as Naveen says, “our purchasing system was different to what our finance system was to our logistics system, and they were not talking to each other.”

While this was a solution set that had, to a large extent, worked well for IKEA in the past, with its people and processes doing the heavy lifting to keep the cogs turning, it had become increasingly challenging as time had shifted the business into a faster-paced industry. In this new omnichannel, ecommerce reality, a data-driven setup is required with systems that connect.

Wanting access to more “out-of-the-box” functionality away from its stifled legacy set, IKEA sought different solutions. Starting in 2020, IKEA kicked off its ERP journey, investigating a proof of concept – how it might implement a solution and its phases, and the right suppliers to complete the project.

With 450 stores across 50 different nations, and the goal of a complete omnichannel and smooth ecommerce process, IKEA had a lot of moving parts to consider and wasn’t about to leap into action before properly figuring out the process.

“It could not simply be that we move from one system to another from day one to day two. We had to make sure that our complex processes were understood by our service provider and solution provider,” presses Naveen.

In 2022, two years later, IKEA selected SAP Advanced Data Migration and Management by Syniti, for the implementation of SAP S/4HANA, and kicked off the first of three (finance, procurement and logistics) releases in October of that year, with the first release, finance, set for mass go-live by April 2025, then the remaining two following yearly, in 2026 and finally 2027.

More than just some modular updates, IKEA is seeking to remove all its data silos along the way with strong core SAP functionality.

“We are looking at end-to-end goods flow here, so basically, it’s not only a simple finance process,” Naveen explains. “We are also looking at how we actually manage our goods flow from a supply chain perspective and our finance processes together and how they kind of correlate to each other. Because, as I said, we were in different data silos, system silos, and we were not talking to each of the processes. And this will improve as we go into the end-to-end, goods flow process.”

IKEA’s kraftsamla journey

Some might have heard of the Swedish concept of Kraftsamla, which means togetherness, concentrating everyone’s efforts together to get results.

“We always use the term in our communication in IKEA, Kraftsamla, and this has improved a lot in terms of data processes. We have been on a data-driven journey. With help of SAP Advanced Data Migration and Management by Syniti we have been into kind of a place where we have created a lot of more awareness on why the data is important, what is the actual impact of the data and how the data is making the life easier for the processes going forward.”

When migrating IKEA’s core ERP system to SAP S/4 HANA, in the first stage of the migration process SAP Advanced Data Migration and Management by Syniti was able to shift 90 percent of its data set. Here, Naveen reports of the “positive surprise” at the amount of data migration and the quality that was achieved.

The data lead says: “This is something which I have not seen in my 20 years of program experience in SAP. SAP Advanced Data Migration and Management by Syniti was able to connect our different source systems to get the information, connect to SAP S/4HANA to make those validations and then was able to say, yes all that data looks good, let’s load that information.”

Since migrating to its SAP S/4HANA instance, and though not yet live with phase one of the project, Naveen has already seen IKEA’s data quality improve. The team has looked at the duplicated supplier and customer data records, begun to get a better view of the end-to-end procurement process and payment terms and see great improvements in how it completes inventory valuation.

In the past two years, IKEA has also been able to invest heavily in its omnichannel experience across vendors, to make it easier and more convenient for customers to shop. IKEA’s soon-to-be best-performing product? That’s its data. And it’s fueling things like AI-driven demand sensing coming from IKEA’s AI innovation lab, where the company can get adaptive forecasting and insights into customer behavior and preferences, market events, pricing, campaigns, localized weather reports and external economic factors, even as variables shift.

Naveen explains how the process has led IKEA to already be treating its data as a product, he says: “We have created a lot more awareness of why the data is important, what the actual impact is and how the data is making life easier for processes going forward. We are talking about different parts, like product master data, or business partner master data, financial master data. Now, in the product-centric approach, the data is also a product which needs to be maintained, managed and processed.”

Plus, over the past year, by keeping a close eye on its customers, IKEA has understood that its affordability keeps customers coming back again and again. In 2024, it took a controversial decision to lower its prices for customers across all its 63 markets.

The results? Though the company saw a slight drop in profits in financial year 2024, IKEA sales still amounted to €45.bn, and it saw an upward trend both in store visitation (+4.5 percent) and online visitation (+21 percent), with volumes remaining stable.

Moreover, thanks to IKEA’s approach to data across the board, the Group has begun to feed projects such as AI-enabled image censoring is checking for faulty products and packaging, the checkout process is becoming increasingly automated, and a future capability is coming where customers will be able to check if they can fit a product in their car make and model.

“From my perspective, data is key to AI, and if you don’t have the right data, you cannot have all of your AI processes executed. And for that, we are on a journey to make that data available to AI automatically, anonymously, so we do not have to be creating or touching any of the processes,” says Naveen.

The AI models at play currently for the retailer can’t be shared, but Naveen does say that IKEA has also begun a conversation with SAP about Joule, SAP’s AI copilot, though it is focusing on getting the best digital baseline in place with SAP S/4HANA as a priority for now.

Achieving sustainability in a low-cost, high-volume market

Operating in a low-cost, high-volume product market, could well place IKEA in a difficult spot when it comes to delivering sustainability wins. But Naveen’s vision is a brighter one, with data-led sustainability efforts bringing in better processes and profits, as well as good action for the planet.

Where IKEA is looking to make a difference is in waste reduction, and data is leading the charge here. Running data analytics in the production processes, IKEA is hoping to share information with suppliers and reduce its waste. IKEA is rethinking its handling of shipments with the help of data. Through careful tracking it can ensure its truck loads are full, and routing is optimized, IKEA can maximize the output of each journey from warehouses to stores to customers. It can also monitor how long a shipment is waiting at port, and work to reduce that time to ensure the shelf-lifed products, such as plants and food items, are delivered in good time.

From the bill of materials to make each product, to the logistics chain to deliver it to door, data is supporting IKEA’s “core value of sustainability” and brings welcome efficiency measures as well.

Next up on IKEA’s data to-do list?

User acceptance is next to cover off for phase one of IKEA’s SAP migration journey for phase one, and Naveen is confident that in the next two to three years, the business will have good data quality matrixes across the board. Naveen is ready for the next challenge: Getting suppliers—who do not have large IT infrastructure and are unsure of the data they need to provide for IKEA’s systems—onboard.

With phase two and three coming around the corner, it’s set to be a busy few years for IKEA, and Naveen shares the comparison of while the ERP journey is like a fast train, “the data journey is like a marathon, you have to go from one location to another, and you have to take time to come to a place where you are comfortable and you have done it multiple times.

“Data is the key to success for a digital transformation with SAP S/4HANA. In taking your time to make sure that the data governance and management processes are in place and data quality is validated and cleansed and transformed, so that when you start your ERP journey, it means that you are in good shape to start your processes.”

As the retail industry overall is sprinting towards digital transformation, IKEA is embracing innovation but, wisely, is taking time to read the instructions before reaching for the hammer.

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