KUALA LUMPUR: IKEA, the world’s largest furniture retailer, has decided to establish its regional distribution and supply chain centre for Asean in Malaysia.

IKEA, which was founded in Sweden and headquartered in the Netherlands, is investing RM908 million for the new centre. It will adopt the structure and technology of IKEA’s biggest regional distribution centre in Germany.

The centre will be among the top 10 largest regional distribution centres of IKEA Group globally, Malaysian Investment Development Authority (MIDA), said in a statement today.

IKEA will manage an inventory of 9,500 stock keeping units worth RM6.6 billion annually.

Its new 100,000sqm specialised warehouse will utilise its integrated ICT systems to reduce dependency on manual labour and significantly increase the efficiency and accuracy of its inventory management processes.

MIDA said Malaysia has always been a significant market for IKEA. IKEA’s 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. The centre will serve 12 retail stores in Asean, which will increase to 20 stores by 2026,” it added.

International Trade and Industry Minister Datuk Seri Mustapa Mohamed said the project, which resulted from continuous engagements and facilitation by MIDA, represents a significant milestone for both IKEA and Malaysia.

“IKEA’s decision of selecting our country as a base to support retailers in Malaysia, Singapore, Thailand, Indonesia, Vietnam, the Philippines and India underscores the strategic fit of this country in supporting IKEA’s overall growth strategy in the Asean region,” the minister said in the statement.

“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 is key in strengthening the capabilities of logistics service providers as we enhance trade facilitation. Thus, IKEA’s high-flow and automated warehouse is certainly well-aligned to this agenda,” Mustapa added.

The government has been actively encouraging large local conglomerates and multi-national corporations to set up their regional establishment here through various business models.

This includes the Principal Hub 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.

As of todate, MIDA has approved 26 principal hubs applications, 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 renowned companies that have been accorded with the principal hubs scheme include Honeywell, Super Group, Avago Technologies, Lotte Chemical Titan, Daikin and Sharp.