Ideally, the concept of supply chain management is coined on two fundamental ideas. Foremost is that each and every product that practically gets into the hands of the end users represent the cumulative efforts of a significant number of companies. Collectively, these companies are referred to as the supply chain. The second idea is that, while the concept has been there for a considerable period of time, a majority of the organization have only put the focus on what is ensuing within what is referred to as the “four walls”. Each aspect of the chain of activities, which ultimately deliver product to the end user is misunderstood and mismanaged by the businesses. As a consequence, the supply chain becomes disjointed and ineffective. From these two ideas, the supply chain management can be defined as an active management of the activities entailed in the supply chain with an aim of maximizing customer value and also attaining a sustainable competitive advantage and a superior market share. It has often been indicated that in the modern world competition is longer between organizations. Rather, it is between supply chains. This assertion is supported by Carroll (2010) when he cites the issues in the automotive industry owing to supplier failures. In the modern-day world, firms face several challenges not only just to choose a supply chain management but to implement it in a successful manner. According to Matt (2008), an informative perspective is core owing to the fact that information flow is a fundamental and an integral aspect of the supply chain management and material flow is closely dependent on the flow of information. However, Supply Chain Management Initiative can fail miserably unless an organization is aware of the issues that are likely to occur in its planning or implementation phase (Ayers, 2000). Today, there are two issues pertinent to supply chain management. These include strategic insights, supply chain risks and supply chain frameworks and standards.
Usually, there is no single best and effective way in which supply chain can be organized in each and every situation. In addition, there is no universally set choices optimal for each and every Strategic Chain Management. Lack of informational exchange in a supply chain is what Carroll (2010) refers to as bull wick effect.
Supply Chain Risks
Usually, SCM is faced with risks of disruptions given rise by factors within it, as well as, by outside environmental forces. Therefore, risk management in the field of supply chain management is a fundamental aspect as it aims at establishing approaches of identifying, assessing, analyzing and treating areas of vulnerability and risks in the supply chain.
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Frameworks and Standards
To streamline businesses while at the same time bridging the risks associated with supply chains, there has been established an array of different frameworks and standards. Owing to these varieties, organizations are faced with challenges to choosing the ones to implement and to what extent they should be applied. Effectively and efficiently identifying the most appropriate framework and standards is an essential thing order to improve the overall SCM performance.
Usually, in an organization, efficiency, as well as, overall success is assumed through continuous efforts. Nevertheless, there is no possibility of optimal decision making owing to the fact that the choice set is characterized by a great deal of complexity and is generally unknown. This is due to the pertinent uncertainties and possibilities. Therefore, supply chain management involves making several choices at each and every step of exploration.
Description of the Problem Environment
The reference company for this particular paper will be IKEA Company
Globally, the IKEA Company is considered to be the most successful mass-market retailer. The company sells home furnishing whose style resembles furniture from the Scandinavian region, as well as, other household goods. The company has approximately 230 stores located in 33 nations. In addition to this, overall, the company hosts about 410 million shoppers in any particular year. The company began its operations in 1943 in Sweden and it has continued with its original ethos with cost obsession fused with design culture as the underlying basis. With the main aim being to lower prices across its entire offering by 2-3% on average annually, the company’s signature feature is the flat packed product, which ends users tend to assemble at their households, thereby, reducing the costs associated with transportation. According to Matt (2008), the company designs its own furniture made by approximately 1,500 suppliers from at least 50 nations spread across the world. The key component of the company is to find the most appropriate manufacturer for the right product.
The Supply Chain of the Company
The main marketing channel of this particular company is its catalogue, which is distributed globally in approximately 191 million copies in 56 distinct editions and 27 different languages and it displays some of the company’s 9,500 articles sold. The company’s growth has been described by many as tremendous and the underlying sales have experienced a continued growth. IKEA Company’s supply chain is global with sales made across the world. Divided into three geographical areas the stores of the company are supplied through 31 centers of distribution. In turn, these stores have approximately 1,350 suppliers in at least 50 countries. In terms of purchasing or in other words supply, Europe stands for 69% with Poland, being the largest purchasing area with 16% of the 69%. Asia comes second with 28 percent with China accounting for 22% of the total. The third is North America, which supplies about 3%. In terms of sales, the majority occurs in Europe with 82% being sold there with Germany accounting for 16% of the total sales. North America accounts for 15% of the sales and the U.S leads the pack with about 10%. Together, Asia and Australia account are the lowest sales point, accounting for only 3% of the total sales of the IKEA Company (Ayers, 2000).
This particular research will attempt to focus on a significant range of topics related or that are under supply chain management. These will include distribution, outsourcing, facility selection, production, inventory, location, transportation, as well as, information. In relation to IKEA Group, the following is the company’s supply chain flow chart.
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Outline (on demand)
For supply chain managers in a significant number of contemporary organizations such things as regulations devised by the government, disruptions to supply chain, as well as, consumer and quality issues are major and growing concerns. In the management of the modern day global supply chain, the presence of unsynchronized data can be detrimental as, according to Carroll (2010), it can compromise the success of the management. An organization, in most cases largely depends on the existing relationship between the supply chain manager and the stakeholders, in addition to the efficiency and the quality of the business process across the company’s extended form of a supply chain.
In the modern business environment majority of organizations are continuing to experience inefficiencies in their supply chains associated with a direct consequence of increased risks. Manufacturing, disruptions, delays in transport, inventories that have bloated, obsolete inventories, in addition to, stock-outs are among the negative results pertinent to the risks. IKEA Group has been taken as an almost “Gold Standard” in every aspect, including its supply chain. However, just like almost every other companies, IKEA groups also faces severe problems in its supply chain. The most prevalent problem is delays in delivery, owing to the fact that the company products are manufactured all through the world continents. In an article written by Carroll (2010), it was indicated that IKEA Group had some unsatisfied customers. In his research study, Bussiek (1999) interviewed 20 IKEA Group customers. The researcher established that out of these 20,2 of them declared that they will never place an order with IKEA. Other fife responded that though they might place an order with the company, they have had a not so appealing experience pertaining to the delivery of their products. However, three of when explained that they understood the uncertainties involved and, thus, they do not hold the company accountable for the delays.
As he was quoted saying, the chairman of this business said that there are a wide variety of events that occur in the company’s supply chain and which encompass a high degree of unpredictability. Among the most common issues that IKEA group faces are suppliers, making late deliveries. Another common cause as identified by the chairman is the customer tendencies of reducing, increasing or even cancelling ordered consignment. Further, though not often, the trucks that the company uses to transport may break down during the transportation. Moreover, like it was approximately five years ago, employees, who are referred to as critical aspects of a company’s success, may go on strike owing to some minor deficiencies. When any of these occurs, the supply chain of the company is characterized by late deliveries. As the main problem of study in this particular research, IKEA Group faces late delivery and, thus, it forms an integral and a fundamental basis of this particular research and analysis.
Generally, the underlying problem that faces IKEA Group is late deliveries. However, there are several problems that arise and, thus, the late deliveries. As earlier identified, the chairman of the company indicated that the most prevalent issues that IKEA group faces are suppliers, making late deliveries, and the tendencies of customers of reducing, increasing or even cancelling ordered consignment. Further, the trucks that the company uses to transport may break down during the transportation but as the chairman identified, this is not a commonplace problem. Moreover, like it was approximately five years ago, employees, who are referred to as critical aspects of a company’s success may go on strike, owing to some minor deficiencies. Therefore, to improve the system under the limelight, it is necessary that measures and strategies necessary to eliminate such issues to be devised.
Model Solution and Results
To provide the solutions to the underlying problems in the IKEA Group’s supply chain, it is necessary to apply some particular methodologies. The methodologies that are applied here include, according to Matt (2008), issues facing supply chains have existed in organizations for a couple of years and in industrial organizations such as IKEA Group since the onset of the industrial revolution. Using some particular methodologies, solutions to these problems have been advanced. However, since the arrival of the information, as well as, internet advent, not only new but particularly effective solutions have developed.
Regardless of whether offline or online, solutions to supply chain involve a combination of tools, as well as, techniques. Some of these are manual while others have information technology attributes. According to Carroll (2010), the theory of practice advanced to explain the supply chain problem resolution is beyond the scope of research studies. However, before suggesting solutions to the problems, facing the IKEA group’s supply chain, it is necessary to indicate some generic activities that have to precede the information technology solutions to the problems or those that must be conducted concurrently with them. Foremost, IKEA Group is simultaneously a member of multiple supply chain. Therefore, work in any particular chain might have impacts on others. Owing to this fact, it is necessary that all the major components of the supply chain of the company to be accessed. Secondly, understanding each fundamental chain is a prerequisite. This is done by using flow charts, as well as, process maps. Further, the performance of the company’s supply chain is measured in several areas, which include delivery, quality, cost, customer service and satisfaction and cycle times among others. In addition, it is necessary that relationships with business partners and key employees in this particular organization to be established and maintained.
The first methodology for solving the issue facing the company’s supply chain is using inventories. This involves building inventories as forms of insurance against the uncertainties. Through this form of a solution, both products, as well as parts, usually flow in a very smooth manner. It requires coordination of each and every activity and links of the company’s supply chain in an effort towards, ensuring that goods move smoothly and on time to the company customers. This helps to keep the inventory low and also keep the costs down. The coordination is very fundamental since supply chain partners are usually dependent on each other. However, they do not at all times work together guided by the same objective. This methodology involves identifying and understanding the causes of uncertainties, a determination of the manner, in which uncertainties will affect other activities up and down the adopted supply chain and then a formulation of ways in which uncertainties can be mitigated or eliminated entirely.
Another methodology that can provide solutions to the underlying problem is Electronic Trading Markets and exchanges
This involves the creation of virtual markets for the company under the question. In this particular case, the entire supply chain system of the company is controlled by one buyer and the suppliers to the company adjust their activities, as well as, information systems in order to fit the information system of the buyer. Matt (2008) indicates that a trading market, involving partners in businesses, can help greatly in providing salutations to supply chain management problems. For IKEA group, the company can use CSX technology, which has been developed as the extranet for tracking what Carroll (2010) identifies as cross-country shipments, as part and parcel of the company’s supply chain management initiative. Such a technology is very efficient in not only identifying bottlenecks but also forecast demands, while at the same time doing an analysis of the supply chain performance (Ayers, 2000).
The third methodology that can be very efficient in solving the underlying problem is software support, in addition to, software integration along the company’s supply chain. As Carroll (2010) identifies, the software supports a variety of activities along with a company’s supply chain. Initially, software packages were designed with an aim to support individual segments of a company’s supply chain. Usually, there are software applications for operations in the upstream supply chain, which includes placing an order with the supplies within the supply chain. A significant range of applications usually tends to deal with activities related to internal supply chain, which includes scheduling of production, inventory costing and control. In this type of a solution, there is software that automates the works and operations of a supply chain. When activities becomes automated, order issuing whenever an inventory falls below the designated level tends to increase the productivity of a company and the quality and quantity available to customers increase.
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