7 Pages
1714 Words
Introduction Of Global Operations And Supply Chain
IKEA is a Sweden-based business that now operates in over 50 countries to operate its international business. They sell a wide range of luxurious household decorations, equipment, and furniture at reasonable prices. IKEA operates on a global scale, and a few of its products can be found all around, while others are only accessible from certain locations. Although, as a global company, IKEA faced various challenges during the COVID-19 pandemic, the company is still doing well, and they are world famous due to their efficient supply chain and logistics management system. The following discussion is based on a situational analysis of IKEA while the COVID-19 pandemic and what are the strategies adopted by the company for resolving these problems.
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Figure 1: Supply chain of IKEA
![Supply chain of IKEA]( "Supply chain of IKEA")
(Source: unwrappingsupplychain, 2020)
Situation analysis
Impact of covid-19 on the global supply chain and Business operations of IKEA
According to Han, (2023), the covid-19 pandemic has vastly affected the global supply chain as it disrupted the entire finance, trade, health, educational systems, and business operations. IKEA enhanced its online shopping experience as more people started making purchases online during the epidemic. This includes increasing their internet range and providing online interior design consultations. Only a few companies were prepared for the pandemic and serious disruptions affected 55% along with more than 75% negative impact. The impact of the Pandemic compelled IKEA to rethink and revamp their supply chain and business operations as most retailers of IKEA were forced to close their shops temporarily. It was majorly affected in the field of logistics and transport.
Impact of covid-19 on the global supply chain: National lockdown had slowed down the entire production of materials and finished goods but it certainly did not make a new challenge for the global supply chain (Ponnana and Uppalapati, 2022). This unpredictable situation brought supply chain companies to rethink their sustainability for the uncertain future. IKEA also created contactless purchasing alternatives including curbside pickup and home delivery in response to the epidemic. Customers could now shop without going inside the business, which decreased the chance of the virus spreading.
Lack of logistics and transport: During the pandemic, people were compelled to stay at home and most transport was unavailable due to the spreading of covid-19. It was the biggest challenge for Swedish retailers IKEA as the demand for household materials and goods gradually increased (Panwar et al. 2022). But without sufficient transport and workers it became difficult and like IKEA many companies' product lines went unavailable. According to the manager of IKEA, more than 20 stores had been closed in UK and Ireland due to supply chain problems and 1000 product lines were about to survive in the market. The ongoing problems of covid-19 resulted in a shortage of labour, a shortage of transport, and the acquisition of raw materials.
Pros and Cons of covid-19 affecting global operations of IKEA
Pros affecting IKEA: FY22 was undoubtedly a challenging year for every financial sector but IKEA continued to grow. While FY21 growth was limited FY22 made IKEA beneficial once the world reopened. Togetherness was one of the biggest achievements of IKEA in the post-pandemic (Catalan, 2022). IKEA authority thanked all their co-workers for their tireless contribution to their company to stand again. After the pandemic, they introduced several new products in the new market in IKEA stores and online channels.
Cons affecting IKEA: Although IKEA was strongly linked with products and organisation design the main problem was its inventory shortage. They were unable to afford thousands of products in different stores' Warehousing because it became costly. This is because they replaced their old products at very low prices with other stores (Ponnana and Uppalapati, 2022). However, it not only accelerated the risk of no sale but also increased the shipping cost. Another problem of IKEA was large organization as it not only requires maintenance but also expanded into other countries.
Problem-solving
Changes made in the business operations to sustain the market
While COVID-19 when the entire world was facing problems for their survival, as a global company IKEA was also among them, but for sustaining in the global market IKEA as a company adopted some problem-solving strategies to make their supply chain system more effective. As a company, they know what the customer looking for, thus they are good product-wise, but while the pandemic company started working on their supply chain system. Very first, they shifted most of their business from retail shops to online stores and converted their retail stores into fulfilment centres (Yun et al. 2022). Besides these company also developed novel offerings, such as driving-through clicking and collecting required items from the nearby stores of customers, contactless deliveries also introduced by the company, and IKEA also accelerated the expansion of the IKEA app in a few of the new untapped markets. Instead of firing out employees' the company was also concerned for them, with effective training they shifted their employees in the functioning and promotion of online business.
Improvement in the inventory management system by the company
For making their inventory management system more effective IKEA implemented some effective strategies, which are briefly discussed here;
RFID technology adopted by IKEA: With the adoption of RFID technology, the walls of stores are working as a screen where customers can easily. To make their Ikea catalogue more accessible and simpler to access while keeping them in a small space. The well-known IKEA pencil now functions as a scanner because of the RFID technology. As described in the study by Catalan, (2022), The magic pencil will also project different patterns or colours from various products onto it, in the future company is also planning to convert it into a touch screen. While online shopping this RFID technology also made the process easier, now customers can easily add items to their cart. After that, the customer's purchase will be prepared for either picking up or delivery to their residence.
Centralized Inventory Management: For making their warehouse and flow of inventory management more effective IKEA adopts centralized inventory management. This strategy helps to minimize its cost-per-touch, IKEA applies automatic filing and retrieval systems (Ponnana and Uppalapati, 2022). Items stored in a negligible-flow capacity tend not to be in great demand, and activities rely on manual procedures because employees aren't going to be changing and transferring inventory around as much as they would in a high-flow facility.
Development in the global supply chain and distribution network after the pandemic
After the pandemic for making their global supply chain management system and distribution network more effective IKEA as a global company adopted various technological advancements in their business. According to Perlangeli. and Rea, (2023), IKEA adopted a centralized inventory management system, RFID technology, and automation of processes in their business. The automation process entails using automated machines including robots and other equipment cutting down costs and increasing efficiency. This enables IKEA to consolidate its business processes and eliminated expenditures while maintaining in keeping standards of excellence and client fulfilment.
Conclusion
From the above discussion, it can be concluded that despite many challenges and a lot of suffering during covid-19 IKEA managed to overcome the situation with the help of their co-workers. After the pandemic, it changed its strategy to sustain itself in the competitive market and satisfied its customers with immediate fulfilment of their demands. The main problem they faced was space issues and due to this issue, they were compelled to replace their products. But keeping stores in Warehouses was quite challenging because of the high cost. Though covid-19 disrupted the supply chain temporarily and caused a substantial drop in household goods IKEA has successfully recovered with their strategies.
References
- Catalan, M.L.P., (2022). IKEA’s Supply Chain: Growth on Sustainability. Available at: https://yorkspace.library.yorku.ca/xmlui/bitstream/handle/10315/40822/SU22_LAPS_SAS_MScMP_MRP_Maria%20Catalan.pdf?sequence=1
- Catalan, M.L.P., (2022). IKEA’s Supply Chain: Growth on Sustainability. Available at: https://yorkspace.library.yorku.ca/xmlui/handle/10315/40822
- Han, X., (2023). Analysis and Reflection of IKEA’s Supply Chain Management. Available at: https://www.atlantis-press.com/article/125981413.pdf
- Panwar, R., Pinkse, J. and De Marchi, V., (2022). The future of global supply chains in a post-COVID-19 world. California Management Review, 64(2), pp.5-23. Available at: https://journals.sagepub.com/doi/pdf/10.1177/00081256211073355
- Perlangeli, G. and Rea, A., (2023). Strategic communication: CSR aspects in Industry 4.0–case study of IKEA in the Millennials. The role of Digital Transformation in customer journey case study Zara, 4(2), pp.47-57. Available at: http://archives.marketing-trends-congress.com/2023/pages/PDF/266.pdf
- Ponnana, R.K. and Uppalapati, N., (2022). Digital Transformation of IKEA’s Supply Chain during and after the pandemic. Available at: https://www.diva-portal.org/smash/get/diva2:1673117/FULLTEXT02
- Yun, J.J., Zhao, X., Kim, S.A. and Sadoi, Y., (2022). Open innovation dynamics of furniture design and function: The difference between IKEA and Nitori. Science, Technology and Society, 27(2), pp.172-190. Available at: https://journals.sagepub.com/doi/abs/10.1177/09717218221074906?journalCode=stsa
- unwrappingsupplychain.com, (2020). Supply chain of IKEA. [Available at: https://unwrappingsupplychain.com/2020/08/29/ikea-supply-chain-green-innovative/], [Accessed on: 28-04-2023].
- Ponnana, R.K. and Uppalapati, N., (2022). Digital Transformation of IKEA’s Supply Chain during and after the pandemic. Available at: https://www.diva-portal.org/smash/get/diva2:1673117/FULLTEXT02
