IKEA's Supply Chain Operations: Distribution Structure and Challenges

This presentation summarizes a report analyzing IKEA's supply chain operations, particularly its distribution structure and the challenges it faces with multichannel sales in Australia. The study highlights IKEA's shift from traditional brick-and-mortar stores to smaller formats and e-commerce to reach a broader customer base, especially millennials. While this shift presents opportunities, it also introduces complexities related to inventory deployment, market risks, and supplier relationships. The presentation emphasizes the need for strategic considerations, such as developing Industry 4.0 environments for real-time updates and strengthening supplier relationships. Key findings suggest that IKEA needs to make robust decisions to address sustainability issues and market risks. Recommendations include improving supply chain visibility, strategically mapping distribution centers, and implementing prevention strategies involving all stakeholders to achieve IKEA's sustainability goals. Desklib offers this presentation and other resources for students.

3b. Oral presentation

Introduction
This presentation aims to present a summary of works conducted in the
report section of this task. The report discussed about the supply chain
operations of IKEA in particular its distribution structure. The purpose of
the study was to identify whether IKEA faces any complexity or
challenges in managing its supply chain, which is to sell homewares,
furniture and other items through different channels.

The contents of presentation
 The scope
 A summary of the required concepts
 The analyses
 Findings
 Conclusions and recommendations

The scope
The study deals with the supply chain of IKEA. It particularly focuses on
its distribution structure, which is undergoing major changes in Australia.
A new multipurpose distribution facility was constructed at Marsden Park
(FDC, 2020). This facility is a reflection of IKEA’s emerging strategy,
which is to sell goods through multichannel to access a wider customer
base not accessed currently.

A summary of the required concepts
The supply chain is an entire structure that comprises of suppliers,
company and its customers on a broader aspect. IKEA has been doing
well with its traditional business models, which was to accomplish larger
part of sales through physical stores. The study marks IKEA’s focus shift
from traditional brick-and-mortar stores to small format stores and e-
commerce stores. IKEA as shown in the study is trying to be more
accessible to the millennial population of Australia whose numbers are
expected to grow in the future. Millennials love shopping from online
channels perhaps because it offers an easy shopping experience.
Besides, It is time saving as otherwise they will have to invest time in
visiting to stores, spending minutes or even hours there and finally
making a purchase (Moreno et al., 2017). The change in consumer
behavior did encourage IKEA shift from big stores to smaller and e-
commerce stores.

The analyses
The change such as in the form of multichannel sales strategy may explore
IKEA to many complexities. As found in the study, IKEA should make strategic
considerations on quick notes to take the industry opportunities to its
advantage and not let others occupy these. Such actions can be helpful in
preserving the competitive advantage. Inventory deployment as understood
from the study will still remain a problem for IKEA until it comes of many other
distribution facilities spread across the different parts of Australia. As obtained
from the study IKEA faces many issues such as market risks and ineffective
relationship with the suppliers. Relationship with the suppliers can be
strengthened by developing the Industry 4.0 environment and facilitating an
exchange of real-time updates. Industry 4.0 will help to develop a visible
supply chain where connected parties have access to latest updates in real-
time (Stock & Salinger, 2016). Study shows that the zero policy of IKEA can be
best implemented if there is prevention strategy from all the supply chain
stakeholders. All should contribute to IKEA’s zero policy goal.

Findings
Findings of the report suggest that IKEA is multinational company and a
major name in retail sector; however, it has often shown signs of failure
on part of taking robust decisions. After so much has happened to the
retail industry IKEA is now moving forward and taking some bold
strategic and management decisions. One of the decisions was to
construct a multipurpose distribution facility to support faster product
delivery as well as multichannel operation. Findings show that IKEA faces
many complexities, risks and sustainability issues in its supply chain.
These issues need a quick counter response from IKEA, so that, issues
do not damage the company’s market reputation.

Conclusions and recommendations
Therefore, it was being found that IKEA should consider few things as recommended
here to have its long-term sustainability goals fulfilled. These are:
Supply chain visibility: To make supply chain equally visible to its suppliers, IKEA
and its customer. It is needed to facilitate demand forecast with more accuracy. It is
required as well to increase customer trust of the brand.
Strategic mapping of distribution centers: Distribution facilities need to be built
around the most populous region and comprising of more wealthy people.
Prevention: It is about suppliers supplying sustainable goods. It is about letting
customer know how they can contribute in the cause of IKEA’s sustainability
initiatives.

References
 FDC. (2020). IKEA Multi-Function Logistics Unit, Marsden Park | FDC.
Retrieved 21 February 2020, from
https://www.fdcbuilding.com.au/projects/ikea-multi-function-logistics-
unit-marsden-park/
 Moreno, F. M., Lafuente, J. G., Carreón, F. Á., & Moreno, S. M. (2017).
The characterization of the millennials and their buying
behavior. International Journal of Marketing Studies, 9(5), 135-144.
 Stock, T., & Seliger, G. (2016). Opportunities of sustainable
manufacturing in industry 4.0. Procedia Cirp, 40, 536-54