Logistics and Supply Chain Management
This assessment is about logistics and supply chain management where different organisations adopt various methodologies to improve the business and its performance. The logistics and supply chain are very crucial factors for numerous companies to be in competition. This assignment will focus to understand what supply chain management is and how it is important for the large as well as small organisations (Christopher, 2016). It helps to keep up the economic demands. This report will also cover various supply chain theories and their strategic management in context of IKEA.
Supply chain management theories
From the last decades, various researchers are focussed on supply chain management (SCM) theories. According to them, it is the approach to minimise cost to manage flows among different stages of any business which includes management of numerous products, their information and also upstream and downstream in this chain. By SCM, companies like Ikea gain lots of benefits in its business. It is basically a proper management of networks that interconnect different businesses. The supply chain management is a process that spans with bringing raw materials from suppliers, then manufacturing products to make them reach to its consumers. The entities like Ikea must have effective supply chain network to be regularly competitive in market. Now, it has become very crucial in order to make a business successful (Some theoretical foundations of Supply Chain Management and Supply Networks: the role of social networks in selecting partners, 2004). It has also become a backbone for the growth of organisations. However, SCM is being more complex and dynamic with time due to globalisation and expansion of other big companies. If an entity is managing effective supply chain then it will prove to be a successful company.
Importance of the strategic wheel in developing a supply chain strategy
Strategic wheel of SCM is an essential tool to create unique values in the world of tough competition. It is a technique that helps to form a clear picture of creating values. For instance, in any business context like Ikea, the wheel of strategies help for product development, sales and services that reached to customers. In other words, it helps entities to know how to win over other organisations managing strategic approaches towards SCM (Mangan, Lalwani and Lalwani, 2016). It is important to apply various strategies using strategic wheel in company. This will help to make any company stand out from others and attract more customers. Rim of strategic wheel shows unique activity configuration and resources. Every wheel differs from each other in terms of value creation because each organisation has different purpose and unique activities to drive the purpose (Stadtler, 2015). Ikea is a manufacturing company that sells home and kitchen appliances, furniture, accessories, etc. to customers. This entity follows strategic wheel to get robust success in this field. By using this wheel, any firm can achieve its goals and objectives in a practical way.
Comparison of different organisations/supplier relationships and their supply chains
It is essential for organisations to manage healthy relationships with their suppliers to maintain the supply chain for long term. There are companies like Ikea, Tesco, etc. that have different relations with their suppliers. By this, companies can keep the quality of products and get time to time delivery of various goods and items.
Supplier relationship of Ikea: This organisation is a multinational manufacturing entity that is known for selling goods related to home and kitchen appliances, furniture, etc. to its customers. It has maintained healthy relations with its suppliers. Due to this, it is able to perform well in market till now and through this, Ikea is getting a firm’s growth and profits.
Supplier relationship of Tesco: This firm is a large supermarket retailer but still, it does not have a remarkable relation with its providers of goods and other products. The entity tends to find new suppliers now and then to reduce its manufacturing and supply costs (Jacobs, Chase and Lummus, 2014). It is not good for the entity due to making so many variations regarding suppliers and losing their trust.
Improving the logistics’ practices in organisations
Ikea impresses its consumers with affordable, high quality furniture and competitors with its unique supply chain and inventory management techniques (Rushton, Croucher and Baker, 2014). Points which contribute in improvement are:
- Proper Planning:
It involves procuring of goods, storage facilities and delivery of products to their location (Coyle and et. al. 2016). Ikea's various functions work together to support its distinctive value proposition.
- Environmental-Friendly Products Based on Green Procurement:
IKEA uses an “E-Wheel” to evaluate the environmental impacts of its products. The resources so obtained can be recycled and are renewable.
- Sustainable Relationships with Suppliers:
IKEA’s success is credited to its communication and relationship management to get good prices on what it procures (Adam Robinson, 2017). It takes care of employees while following national and international laws.
- Efficient Transportation:
Ikea may decrease the expenses by providing faster delivery of products. Following factors should be considered for efficient transportation:
- A logistics firm should opt for the shortest yet safest route which saves money as well as time.
- It need to use Cost-effective packaging that ensures low investment and safety of goods and also Optimize packaging so that it occupy less volume and it does not increase the weight of package.
Information technology that can be used to integrate different parts of the supply chain
All branches of IKEA (Franchisees) are connected to a common system networking named “inter IKEA system”. The basic unit of information is provided by managers at local stores (shift / branch/ area/ territory managers), all collaborating to disseminate information from local up to international level. Human computer interaction results in cost reduction, deployment of business, productivity transmission, integration and enhancement of business.
Data Security Control/ Biometric Control:
Employees are supplied with specialized computerized made IKEA identity cards. When these are swiped on a card reader, they have a data of time in, working hours and time out. For enhanced security, each card contains picture of employee (which a shift manager can check on duty).
Radio Frequency Identification (RFID):
Newer technology enables remote and automated gathering, sending information between RFID tags (attached with the products) and readers. RFID tag consists of an integrated circuit having specific data which could range from a unique identity number up to a thousand bites data.
All necessary informations get flashed at device when tags are shown to readers which is connected with stores at local area networks and higher level management (at international level) as communication satellites are in operation as well(Fernie and Sparks, 2014). So, information propagating starts when a product is shown to reader without any delay. Ikea enjoys the advantages given below:
- Data transmission, storage and analysis has become much easy
- No need to contact directly as Information between tags and readers is rapid.
- Easy access to inventory and stock level
- Sales accurate forecasts could be made
Enterprise Resource planning (ERP) tools:
ERP system (e.g. Baan, SAP, People soft, etc.) has become the core of many companies for their IT infrastructure. This system has enterprise wide transaction processing tools which capture data, reducing the manual activities and tasks associated with processing financial, inventory and customer order information. ERP system has achieved a high level of integration by utilizing a single data model, developing a common understanding of what the shared data represents and establishing a set of rules for accessing data (Fernie and Sparks, 2014).
Assessment of information technology that can be used to develop the relationship between organisation and its suppliers
IT can play an important role to build strong relationships in between the entities and its suppliers. It establishes communication between the two. The information technology also creates partnerships. It is helpful to develop strong relations through these points:
- By creating channels for communication: Communication is the main key to make any relationship healthy. It creates transparency between persons who are communicating. IT prevents missteps such as wrong inventory or missing orders. By communicating through various IT tools, misunderstanding can be eliminated from both the channels.
- By creating transparency: When organisations like Ikea and its suppliers communicate timely, it is beneficial for the two of them to build trust level. Information technology can create and develop solid trust in both parties through filling the communication gap (Schönsleben, 2016). In this way, two channels interact any time they want and resolve any misunderstanding regarding product supply, transportation or quality of goods.
- Analysis: It enables manufacturing and supply chain options and after that, it helps to maximise the best utilisation of assets.
Management of possible barriers to achieve an integrated supply chain strategy
Integrated supply chain: Meaning of integration in supply chain is maintaining collaboration, decision sharing, sharing vision and trust between producer and consumers. It is essential for a successful supply chain management.
There are many barriers in integrating supply chain management strategies. Some of them are lacking visibility, lacking predictability, less information and optimisation. These are the main obstacles to manage integrated Supply chain. To overcome these drawbacks, following initiatives can be taken:
- Improving visibility: It means that entities need to enhance visibility throughout the supply chain by sourcing of raw materials and deliver them to customers.
- Increase predictability: Ikea needs to increase predictability by creating transparency with suppliers and consumers. It is the way to manage integrated supply chain in company.
Strategies to mitigate the risks associated with information technology in SCM
There are various risks in implementing strategies of supply chain management. These are the barriers in managing integrated Supply chain SC. One of them is the risk that is associated with information technology (Govindan, Soleimani and Kannan, 2015). These are as follows:
Inventory management risk: It is the risk related to inventories. If the problem of inventory occurs then it is difficult to know how many inventories are there. So, it can be more challenging knowing exact number of inventories.
Risk of loss of data: Loss of data managed in database can impact negatively to the firm.
There are strategies to manage these risks in which main strategy is to keep the backup of every data and information related to products and goods that can be used in case of any loss.
Assessment to secure competitive advantage by implementing SCM strategy
There are many strategies to be in competition and to be over other competitors. By managing better communication between suppliers and companies, the centres of healthcare can get success in its business. Additionally, it can be said that to retain customers and quality of products. Ikea needs to manage IT risks so that it can be able to maintain all data and other information and prevent from any loss.
Analysis of the logistic practices in Ikea
Ikea’s supply chain system is very strong. It has a strong brand image in the market. It provides high quality services to the consumers. The healthcare centres maintains its logistics very properly. This has put large investments to make better logistics and supply of goods. It makes sure to deliver products to customers in a given time frame. In order to do this, they take care for their transportation and communication with suppliers timely so that any miscommunication or misplacement of products can be prevented (Prajogo, Oke and Olhager, 2016). This company has been consistent in managing logistics and gained robust success.
Contribution of IT in managing supply chain management in Ikea
The information technology plays a crucial role to manage supply chain in companies like Ikea. It is a firm that sells furniture and home appliances to buyers. This is a large multinational organisation to serve goods to customers. The entity uses IT to manage its supply chain. It makes the use of information technology to connect with its suppliers and investors (Rushton, Croucher and Baker, 2014). Through this, the entity easily manages a strong relationship with its suppliers. Company is also properly maintaining the logistics by which it moves goods from one place to another.
From the above report, it can be concluded that supply chain management is an important factor to give success to any firm. It is also helpful in managing quality and pricing of products in an effective manner. However, there are various issues occurred to handle it efficiently, still companies like Ikea tackle the risks associated with it properly (Bhat, 2014).
Books and Journals
Christopher, M., 2016. Logistics & supply chain management. Pearson UK.
Mangan, J., Lalwani, C. and Lalwani, C. L., 2016. Global logistics and supply chain management. John Wiley & Sons.
Stadtler, H., 2015. Supply chain management: An overview. In Supply chain management and advanced planning (pp. 3-28). Springer, Berlin, Heidelberg.
Jacobs, F. R., Chase, R. B. and Lummus, R. R., 2014. Operations and supply chain management (pp. 533-535). New York, NY: McGraw-Hill/Irwin.
Rushton, A., Croucher, P. and Baker, P., 2014. The handbook of logistics and distribution management: Understanding the supply chain. Kogan Page Publishers.
Coyle, J. J. and et.al., 2016. Supply chain management: a logistics perspective. Nelson Education.
Bhat, K. S., 2014. Logistics and supply chain management (Vol. 1). Himalaya Publishing House.
Fernie, J. and Sparks, L., 2014. Logistics and retail management: emerging issues and new challenges in the retail supply chain. Kogan page publishers.
Schönsleben, P., 2016. Integral logistics management: operations and supply chain management within and across companies. CRC Press.
Govindan, K., Soleimani, H. and Kannan, D., 2015. Reverse logistics and closed-loop supply chain: A comprehensive review to explore the future. European Journal of Operational Research. 240(3). pp.603-626.
Prajogo, D., Oke, A. and Olhager, J., 2016. Supply chain processes: Linking supply logistics integration, supply performance, lean processes and competitive performance. International Journal of Operations & Production Management. 36(2). pp.220-238.
Adam Robinson, 2017, 6 Important Tips For Effective Logistics Management. [online]. Available through <http://cerasis.com/2017/05/12/effective-logistics-management/>
Some theoretical foundations of Supply Chain Management and Supply Networks: the role of social networks in selecting partners, 2004. [Online]. Available through <http://www.impgroup.org/uploads/papers/4572.pdf>