IKEA lays out RM908m regional centre investment in Malaysia

The new centre will serve 12 retail stores within Asean, which is expected to reach 20 outlets by 2026


World’s largest furniture retailer IKEA, will be investing RM908 million in the country to establish its regional distribution and supply chain centre that would serve the entire Asean region.

The new centre is expected to manage an inventory of 9,500 stock keeping units (SKUs) worth RM6.6 billion annually, positioning it to be among the IKEA Group’s top 10 regional distribution centres globally.

A statement by the Malaysian Investment Development Authority (Mida) yesterday said that the centre will serve 12 retail stores within Asean, which are expected to reach 20 outlets by 2026.

The new 100,000 sq m specialised warehouse will also utilise IKEA’s integrated ICT systems and automation that would reduce the dependency on labour, while significantly increasing the efficiency and accuracy of its inventory management processes.

“Malaysia has always been a significant market for IKEA. Its retail stores in Malaysia are among IKEA’s most visited stores globally.

“With the establishment of the regional distribution and supply chain centre, Malaysia will strengthen its role in supporting IKEA’s growth in the Asean region,” Mida said.

Commenting on the development, International Trade and Industry Minister Datuk Seri Mustapa Mohamed said IKEA’s decision to select Malaysia as a base to support retailers in Malaysia, Singapore, Thailand, Indonesia, Vietnam, the Philippines and India underscores the strategic fit of the country in supporting IKEA’s overall growth strategy in the Asean region.

“The establishment also adds momentum towards making Malaysia a regional distribution hub and preferred logistics gateway to Asia as outlined in the National Logistics and Trade Facilitation Masterplan and National E-Commerce Strategic Roadmap.

“Deployment of technology in the logistics chain has been identified as the key factor in strengthening the capabilities of logistics service providers towards enhancing trade facilitation mechanisms,” he said.

Mustapa added that the government has been actively encouraging large local conglomerates and multinational corporations to set up their regional establishment in Malaysia through various business models including the principal hub (PH) scheme that allows companies to centralise their global activities such as procurement and distribution.

Such establishments bring along many multiplier effects to the country, ranging from creating high value jobs, incurring high business spending, intensifying usage of local ancillary services, increasing the flow of foreign exchange as well as strengthening the value chain in targeted industries.

To date, Mida has approved a total of 26 PH projects since its introduction in May 2015.

Over the next 10 years, these projects are poised to contribute RM16.8 billion in business spending, utilise local ancillary services worth RM2.2 billion and generate more than 1,800 high value jobs for Malaysians.

Among these renowned companies that have been accorded with the PH scheme include Honeywell, Super Group, Avago Technologies, Lotte Chemical Titan Holding Bhd, Daikin and Sharp.

As of August 2017, IKEA owns and operates 400 stores in 49 countries. In 2016, US$43 billion (RM184.04 billion) worth of goods were sold, a total that represented a 7.6% increase from 2015.

In Malaysia, IKEA’s physical stores are located in Cheras and Mutiara Damansara, Selangor.