OIM7501-B Emerging Issues in Logistics and Supply Chain Management

Module Title and Code : OIM7501-B Emerging Issues in Logistics and Supply Chain Management

Introduction

As a consequence of the Covid-19 epidemic, numerous nations enforced various degrees of shutdown. The rules prohibited the mobility of both personnel as well as goods. As a result, transit agencies, which were the foundation of supply chain networks, were operating at decreased capacity. Transportation expenses rose as a result of restricted methods as well as resources. Higher labour expenses, higher shipping prices, fewer facilities, as well as other factors contributed to the greater expenditures. The study will evaluate impact of pandemic on IKEA’s supply chain and logistic and further assess how the firm can resilient the distribution network.

Main Body

Background of the firm and its logistic and supply chain activities

IKEA is a Sweden-based global corporation that manufactures as well as distributes ready-to-assemble furniture, home furnishings, and kitchen equipment. Beds, infants’ furniture, couches as well as recliners, closets, chests, kitchen counters, as well as other items are among the company’s offerings. Ingvar Kamprad established the company in 1943. The preponderance of the engineering, retail management, logistics, as well as furniture manufacture is handled by INGKA Holding, a foundation based in Holland. While the majority of IKEA product lines are created in Sweden, manufacturing has indeed been outsourced to other Asian countries (Jacob and Chaves, 2021). IKEA’s business consists of over 1,800 vendors situated in 50 nations.

Zbaszynek, Poland, seems to be the firm’s biggest wood production factory, producing 30 million closets, desks, including tables annually. The supply chain activities in IKEA include; sourcing the raw materials, designing the products, integrating cost-per-touch stock strategy, in-store logistic, and transportation of products to the warehouses or outlets in different nations.

Critical analysis of supply chain activities

As per the view of Gong et. al. (2021) the supply chain consists of raw resource including component producers, and also the amenities which a company employs to create and distribute its products to intermediary to end customers. The distribution network, as defined, is an agreement between a firm and its suppliers for the creation as well as supply of a certain service or commodity. Producers, suppliers, resellers, transportation providers, fulfilment centres, and distributors are all part of the supply chain network.

The supply chain process of IKEA begins with the acquisition of primary resources for both the goods as well as its packing. Meanwhile, items are being created in Sweden. Raw resources are delivered to the facility in order to begin production. To regulate manufacturing, IKEA’s lean supply chain employs make-to-stock (MTS) techniques. IKEA reduces all sorts of wastage by producing before items are requested by clients (Srinivas et. al. 2021). The product is packed as well as shipped to local dissemination hubs before being delivered to local storefronts where clients may buy their items. The supply of service is downward, whereas the flow of knowledge is upward. IKEA employs many replenishing systems to deliver its items. It makes use of tactics such as direct shipments, cargo aggregation, cross-docking, distribution centres, client distribution centres, or a combine of these (IKEA, 2021). The brand’s items are shipped in flat-packs, allowing the company to fit more things into each package. It results in fewer journeys, which means less consumption of fuel as well as less pollutants. The brand enlisted the services of conventional transportation companies to assure that perhaps the items are supplied to the marketplace.

IKEA’s simple low-price promotional strategy has caused the corporation a slew of issues. According to Jia et. al. (2019) in order to save costs, the reliability of the items sold has deteriorated, therefore while the corporation has been successful in maintaining efficiency; it has also been unable to meet international quality standards.

Impact of disruption on logistic and supply chain activities

The influence of COVID-19 has necessitated a rethinking as well as revamping of IKEA firms’ logistics and supply chain management. Several IKEA outlets have been forced to shut down indefinitely. Furthermore, at the height of Covid-19 during April 2020, approximately three-quarters of IKEA’s 450 shops shuttered — for an estimated 7 weeks each (Gong et. al.  2021). In terms of logistics and transportation, the corona virus epidemic has had a significant impact on the IKEA Corporation. Kroon and Nilsson, (2019) stated that by predicting intrinsic as well as extrinsic risk concerns, supply chain mapping serves as a foundation basis for identifying weaknesses in logistics operations during pandemic. Considering the impact, the global disruption had affected the supply chain of IKEA through shortage of transportation facilities from Sweden to other nations as majority of products are being designed and manufactured in the home nation. Owing to the epidemic, global supply chains tend to confront significant hurdles. Such are industry-wide issues that have impacted the IKEA supply chain, resulting in goods delays as well as bottlenecks. The supply case appears to range greatly across regions and perhaps even across retailers within that nation. Furthermore, availability fluctuates throughout time.

Supply chain mapping framework

Considering the supply chain mapping framework, it can be stated that the IKEA Corporation is facing an ideal combination of issues, involving interruption of international trade movements as well as a driver scarcity, both of which have been considerably exacerbated by the Covid-19 outbreak. More precisely, the epidemic has produced a disturbance throughout the worldwide cargo delivery business, resulting in a scarcity of lorry operators. According to Feng and Lu, (2018) there is a shortfall of almost 100,000 drivers in the United Kingdom. Throughout the corona virus epidemic, when border controls have been implemented, several truck drivers from Europe returned to their native countries as well as subsequently opted to look for work abroad. Furthermore, tax adjustments on drivers rose, making it more costly for international operators to operate throughout the UK (Machado et. al. 2017).

OIM7501-B Emerging Issues in Logistics and Supply Chain Management 1 Figure 1: Supply chain of IKEA (Source: Jacob and Chaves, 2021)

 

Furthermore, logistics businesses have been spotted proposing that the government grant Lories short term work permits in the near term in order to aid the corporation solve the situation. However, the government has repeatedly pushed that firms do more to attract more UK commuters. As per Laurin and Fantazy, (2017) the IKEA firm sent more items previous year compared to this year after the epidemic interrupted the transportation industry.

In summary, furniture retailers like as IKEA may not be the only ones affected by the Covid-19 outbreak, particularly in the United Kingdom and Ireland, wherein trade and transportation concerns have indeed been problematic. IKEA is facing continuous distribution network issues as a result of Covid-19 and manpower constraints, with transportation, commodities, including sourcing all being affected. Furthermore, since individuals stay home, they are witnessing an increase in client demand (Ng, 2019).

Suggestions on making supply chain resilient

Post-pandemic, IKEA is advised to develop a slew of innovative ways to mitigate the impact of international supply chain bottlenecks on its activities (Phan et. al. 2017). It can spend more money on interim facilities to increase storage capacity and avoid manufacturing stoppage as well as delays. To address container constraints, IKEA is advised to purchase containers on a temporary basis in order to avoid distribution network interruptions. According to reports, the corporation may lease additional ships, engage in more containers, and re-route cargo amongst warehouses. Distribution network robustness may be increased by boosting raw material, work-in-process, including finished product stock levels; expanding production and/or storage facilities to enhance manufacturing overflow potential; while expanding the number as well as assuring the surge capabilities of essential raw products (Pires et. al. 2019).

Further, to mitigate the disruptions and emerging issues and make the supply chain more resilient the firm us required to focus on emerging trends and developments within supply chain and logistics management area as follows;

Technological innovation

As per the view of Tseng et. al. (2019) supply chain trends after pandemic mainly focuses on digital transformation and involvement of new technologies to mitigate the issues. In several distribution networks, the usage of artificial intelligence (AI) as well as robotics is increasing. Automation helps businesses to automate repetitive operations, whereas AI — that aims to imitate human cognition as well as “learn” — can help with much more sophisticated, difficult jobs. Combining Automated systems as well as artificial intelligence are useful strategies to speed up company distribution network as well as maintain a competitive edge in its specialty in a market where speed as well as accuracy are critical for profitability.

IKEA can envisions a plethora of technological solutions that will help them to streamline the actual products movement of the items as well as control their distribution network. The design and deployment of artificial intelligence is such critical enabler that will help business make decisions for the future planning, production, procurement, as well as implementation of the supply chain activities (Schniederjans et. al. 2020).

Another accelerator that can be considering by IKEA is the digital depiction of the items as well as settings, which will allow the firm to optimise their goods movement (Yang and Shao, 2019). The firm can focus on significant technological possibilities in front throughout the digitization of IKEA’s supply chain, the identification of every commodity with smart labels to facilitate traceability and visibility, as well as the deployment and management of robotic systems to move IKEA products in the most efficient way possible utilising, for example, webcam directed robotic systems and loading up & automated robotic devices.

Focus on sustainability

de Sousa Jabbour et. al. (2020) stated that as more customers value the planet, more firms have boosted their sustainability initiatives that are increasingly permeating the distribution network. Since there are so many various ways to concentrate on conservation, firm will need to customise their activities to the firm’s specific needs.

Corporations may resort to increasingly aggressive or dramatic actions in the interest of ecological stewardship in the future years. Others may opt to adhere to ecological production techniques or to strive towards zero-waste status (Yao et. al. 2019). Nevertheless, these efforts at preservation might not have been long-term feasible for enterprises. Such drastic changes necessitate a thorough redesign of the distribution chain, from raw resources sourcing through product delivery to customers. It is suggested to IKEA to revamp the supply chain networks towards more sustainable approaches.

The internet of things

As per the view of Manavalan and Jayakrishna, (2019) the Internet of Things (IoT) seems to be a system of connected items that are linked to the web as well as driven by sensors as well as technology. The Internet of Things currently performs a big role in the logistic chain, notably in logistics, however with more diversified implementations; it is expected to expand in prominence.

Further, to resilient the supply chain, it is important to focus on;

  • Create a flexible operating environment which can withstand the chaos caused by the outbreak as well as other similar difficulties.
  • Prepare for interruptions by using improved stock planning as well as smart warehouse administration.
  • Go digital – encourage technological change at all stages of activities while conserving resources. Adopt technology as well as software to ensure the continuation and development of the organisation (Schniederjans al. 2020).
  • Adopt a people-first, customer-centric attitude; accept alternate modes of working, such as remote as well as flexible employment.
  • Effective interaction is essential, as is accomplish this purpose with onsite as well as remote staff, vendors, especially consumers.
  • Observe, forecast, and evaluate periods of surpluses as well as shortages carefully and on a regular basis in order to regulate the network during such disruptions.
  • Make use of logistics/supply chain management structures to improve real-time access into functions.
  • Modifying equipment, resources, including competencies help to harmonize supply and demand.
  • Empower and encourage the staff by tackling the legitimate workers’ plus expanded logistics personnel’s emotional and physical wellness (Tseng al. 2019).
  • To enhance the distribution network, assist customers, vendors, including logistical systems disrupted by Covid-19.

Following the interruption of global supply networks caused by COVID, companies discovered flaws in their processes as well as the significance of improved inventory as well as procurement techniques.

IKEA, the well-known furniture company, has indeed demonstrated leadership in restoring its company by surviving the effects of global supply disruptions. IKEA likewise encouraged others appreciate the value of technologies and software in resolving bottlenecks. To control the negative consequences of the disease outbreak on their company, organisations should use potent stock management application as well as distribution networks to computerise their processes, save assets, as well as reduce costs (Wang et. al. 2019). Adopt the strategies and technologies recommended here to build a resilient structure, recuperate from damages, increase revenues, and remain unaffected by the epidemic as well as the ensuing worldwide logistic network disruptions.

Lessons learned for the firm

From the evaluation, several lessons have been learnt for the firm in the context of supply chain management. The first key lesson is that keeping up with emerging technologies can assist the firm regarding different issues like sourcing of raw material issues, transportation issues, et cetera. To minimise excess inventory, logistics managers realised the importance of having strong vendor transparency at all layers, leveraging robust techniques, as well as considering beyond “lean” supply techniques. When COVID-19 emerged, comprehensive logistics management notion advocated prior to the pandemic—became standard practise.

Further, it is being learned that COVID-19 informed businesses that crisis may strike in unpredictable ways as well as that their logistic networks could be readily vulnerable to unanticipated weaknesses that emerge fast.

Luckily, technologies have matured to the point that it can assist businesses in navigating VUCA (volatility, uncertainty, confusion, as well as ambiguity) situations and events. To minimise the influence of supply chain interruptions, businesses will require a digital procurement system that consolidates all of the supply chain’s processes, implementations, procedures, as well as details, linking all interested parties on a solitary digital channel — making it a critical system for handling a distribution network crisis. Adopt the strategies and technologies recommended here to build a resilient structure, recuperate from damages, increase revenues, and remain unaffected by the epidemic as well as the ensuing worldwide logistic network disruptions.

Conclusion

After evaluating the supply chain issues from global pandemic situation on IKEA, it has been inferred that the global disruption had affected the supply chain of IKEA through shortage of transportation facilities from Sweden to other nations as majority of products are being designed and manufactured in the home nation. More precisely, the epidemic has produced a disturbance throughout the worldwide cargo delivery business, resulting in a scarcity of lorry operators. IKEA is facing continuous distribution network issues as a result of Covid-19 and manpower constraints, with transportation, commodities, including sourcing all being affected.

Considering the issues, the firm is suggested to IKEA can envisions a plethora of technological solutions that will help them to streamline the actual products movement of the items as well as control their distribution network. To control the negative consequences of the disease outbreak on their company, organisations should use potent stock management application as well as distribution networks to computerise their processes, save assets, as well as reduce costs.

References

Books and Journals

de Sousa Jabbour, A.B.L., Jabbour, C.J.C., Hingley, M., Vilalta-Perdomo, E.L., Ramsden, G. and Twigg, D., (2020). Sustainability of supply chains in the wake of the coronavirus (COVID-19/SARS-CoV-2) pandemic: lessons and trends. Modern Supply Chain Research and Applications.

Feng, Y. and Lu, H., (2018, August). Optimization of Flatbed Loading in Picking Operations of IKEA Warehouse. In 2018 8th International Conference on Logistics, Informatics and Service Sciences (LISS) (pp. 1-6). IEEE.

Gong, Y., Jiang, Y. and Jia, F., (2021). Multiple multi-tier sustainable supply chain management: a social system theory perspective. International Journal of Production Research, pp.1-18.

Jacob, R. and Chaves, M.M., (2021). Developing a Supply Chain Mapping Framework: A case study at IKEA’s Comfort. Transport11, p.44.

Jia, F., Gong, Y. and Brown, S., (2019). Multi-tier sustainable supply chain management: The role of supply chain leadership. International Journal of Production Economics217, pp.44-63.

Kroon, E. and Nilsson, A., (2019). Development of Sliding Mechanism for IKEA Furniture.

Laurin, F. and Fantazy, K., (2017). Sustainable supply chain management: a case study at IKEA. Transnational Corporations Review9(4), pp.309-318.

Machado, C.G., de Lima, E.P., da Costa, S.E.G., Angelis, J.J. and Mattioda, R.A., (2017). Framing maturity based on sustainable operations management principles. International Journal of Production Economics190, pp.3-21.

Manavalan, E. and Jayakrishna, K., (2019). A review of Internet of Things (IoT) embedded sustainable supply chain for industry 4.0 requirements. Computers & Industrial Engineering127, pp.925-953.

Ng, I., (2019). IKEA: reducing non-price outlays and maximising demand. The Business & Management Collection.

Phan, T.K., Griffin, D., Maini, E. and Rio, M., (2017). Utility-centric networking: Balancing transit costs with quality of experience. IEEE/ACM Transactions on Networking26(1), pp.245-258.

Pires, A., Ávila, P., Putnik, G., Varela, L., Cruz-Cunha, M.M. and Caldeira, R., (2019). THE POTENTIAL OF VALUE ANALYSIS APPLICATION IN THE FURNITURE INDUSTRY-A CASE STUDY AT IKEA. International Journal for Quality Research13(4).

Schniederjans, D.G., Curado, C. and Khalajhedayati, M., (2020). Supply chain digitisation trends: An integration of knowledge management. International Journal of Production Economics220, p.107439.

Srinivas, S., Rajendran, S. and Ziegler, H., (2021). An Overview of Decisions, Performance and Analytics in Supply Chain Management. Supply Chain Management in Manufacturing and Service Systems, pp.1-17.

Tseng, M.L., Islam, M.S., Karia, N., Fauzi, F.A. and Afrin, S., (2019). A literature review on green supply chain management: Trends and future challenges. Resources, Conservation and Recycling141, pp.145-162.

Wang, Y., Han, J.H. and Beynon-Davies, P., (2019). Understanding blockchain technology for future supply chains: a systematic literature review and research agenda. Supply Chain Management: An International Journal.

Yang, L. and Shao, N., (2019). Sustainability Strategies in IKEA with the focus on Production and Suppliers.

Yao, L., Dong, Q., Ni, F., Jiang, J., Lu, X. and Du, Y., (2019). Effectiveness and cost-effectiveness evaluation of pavement treatments using life-cycle cost analysis. Journal of Transportation Engineering, Part B: Pavements145(2), p.04019006.

Online

IKEA, (2021). How we work. [Online]. Accessed through <https://about.ikea.com/en/life-at-home/how-we-work>.

QuickBooks Commerce, (2018). IKEA supply chain: How does IKEA manage its inventory? [Online]. Accessed through <https://www.tradegecko.com/blog/supply-chain-management/ikeas-inventory-management-strategy-ikea>.

 

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