The topic revolves around the concepts of logistics and supply chain management considering the business organization Ikea in United Kingdom. The management of supply chains means the proper flow and exchange of products and services along with the storage of raw materials, resources and work –in-process inventories to ensure that the finished goods reach from the point of origin to the consumption efficiently. The logistics operations are part of the supply chain management, where the processes are effective to manage proper flow and storage of goods. It also includes the acquisition of information related to the supply chains and movement of products from the point of origin to consumption (Christopher 2016). The report is prepared to discuss the relationship between supply chain management and logistics operations and the importance of ERP at Ikea, UK. Lastly, the best practices to reduce the operational costs and supply chain costs will also be included here.
IKEA, UK is one of the most reputed furniture manufacturers in United Kingdom that has been designing and selling ready to assemble furniture items, kitchen appliances and home accessories to fulfill the various needs and requirements of the customers. The ready to assemble products are made available at different market segments, which creates ease for the customers in setting up good furniture and create beautiful designs within the homes (IKEA.com 2018).
Supply chain management is the process of managing the flow or movement of goods and services along with the storage of raw materials and resources. Supply chain management basically refers to the process of interconnected activities that enables transformation and movement of the raw materials and resources to the finished goods and services until it reaches the end users. The management of supply chains also includes management of the work-in-process inventories and making sure that the finished products of Ikea are properly moved from the point of origin to the point of consumption. Ikea, being one of the largest home-furnishing retailers in UK has nearly 300 stores all over the place (Islam et al. 2013). Due to this, there is more focus on managing unique supply chain and inventory management techniques for keeping products’ prices under control and distributing those goods in the market properly to ensure ease accessibility for the customers as a whole. The stores of Ikea hold more than 9500 products and so the items should be kept in stocks properly, which should be possible b managing the supply chain operations and managing the inventories with convenience.
Logistics management is an effective process included during the management of supply chains and it enables the organization to make sure that competitive advantage is achieved by the company. It can guarantee high level of satisfaction among the customers as well as keep the stocks filled in the warehouses so that the products are manufactured and delivered to the customers with convenience. Logistics management also involves the various activities associated with the transportation of foods, managing inventories and other warehousing activities (Dekker et al. 2013). It would facilitate the planning, control, coordination and management of supply chains to ensure successful handling and packaging of the materials along with relevant forecasting techniques too. The logistics operations during the supply chain management has helped in identifying the customers’ needs properly as well as defined the service related objectives by designing the logistics system properly. It has allowed Ikea to develop knowledge of the consumer market and even identified the various components of the market to market the products accordingly. Customers’ services were delivered and the supply chain management enabled to create a logistics network design for managing the inventories and transportation costs with much ease and efficiency (Mangan, Lalwani and Lalwani 2016). The packaging decisions and behaviors are also responsible for influencing the cost and productivity of the organization to fulfill the needs of material disposal in various logistical areas of the company too (IKEA.com 2018).
It could be seen that the logistics operations management have the potential for allowing the organization to achieve higher levels of satisfaction and cost advantage too. The management of logistics also involves the governance of supply chain functions, which include both inbound and outbound transportation management through fleet and road networks. Other functions included warehousing activities, handling of materials, planning for supply and demand and management of third party logistics’ service providers (IKEA.com 2018). It would result in providing better customers’ services along with proper sourcing and procurement through the integration of functions including the manufacturing of sales, marketing, finance and use of information technology. The logistics operations start from the accumulation of raw materials and resources until the final stage where the goods are transferred to the consumers. By adhering to the needs and preferences of the customers, Ikea has managed proper planning and implementation, which has further facilitated the development of strategies to address the complex issues faced by the customers (Jacobs, Chase and Lummus 2014). With the management of supply chains and ensuring keeping enough stocks in the warehouses, the expectations of the consumers were met and they had been provided with good quality products too that made them loyal customers of Ikea, United Kingdom.
The logistics operations’ management includes various parties including the marketers, suppliers, retailers, warehouses and even few of the customers. The logistics functions have enhanced the business performance and even ensured higher level of customer satisfaction through the better customers’ services delivery. The costs of products and services act as effective indicator that is responsible for the management of relationship between the supply chain management and logistics operations. The logistics operations’ management has aimed to decrease the costs from suppliers to the end users, without making any compromises on the quality of products and time taken to prepare those. Thus, the customer satisfaction indicators are included in the logistics operations’ management, which has resulted in delivering products at a much lower price to keep the customers satisfied (Rushton, Croucher and Baker 2014). The prices of the products are kept lower through lower labor and production cost along with lesser cost of storage and transportation facilities.
Enterprise Resource Planning or ERP is the integrated management of the major business processes that have been influenced with the use of various software and information technologies. ERP is an effective software used at Ikea to collect, store, analyze, interpret and manage the data and information obtained to ensure successful business operations and processes. The ERP software provides an updated view of the business processes with the use of databases containing all the necessary data and information to rack the business resources such as raw materials, resources and capacity of production and cash flow too. It is useful for sharing data and information across various departments and ensures proper manufacturing, production, sales, accounting and profit achieved by the company (Peck and Jüttner 2013).
By using the ERP software, it has become easy for Ikea to manage accurate provision of delivery rates and even developed strong relationships with both the new and existing customers. It has enhanced the rates of delivery and ensured providing the products t the customers on time. The ERP implementation ensured accurate provision of order rates and even tracked the returns and repairs done for the products and services. It has helped in gaining complete set of information about the transactions made with proven automated reports. The accurate provision for discount would be possible by implementing ERP, which could enable deduction of discount rates according to the backend systems. The products offered at discounts could easily make the customers delighted and influence their buying behaviors too (Wang et al. 2016). The invoices would be issued and a lot of time would be saved as well while taking any action. This is how, the customers’ services would improve and this could lead to the satisfaction of the customers with ease and effectiveness.
The electronic business encompasses use of communication processes and managing business with internet. It has developed communication networks for enhancing the process of sharing, exchange and flow of data and information, furthermore strengthened the link between the value chain between the business and its customers. It has not only improved the effectiveness of selling marketing and purchasing made by the customers, but also has improved the customers’ services, reduced the operational costs and streamlined business operations and processes with much convenience. The e-business has also created strategic and customer centered business environment, where mutual benefits have been gained by the businesses and an enhanced customer relationship management of CRM system has been developed. This has also improved the supply chain activities’ effectiveness and seamlessly streamlining the business operations (Ahi and Searcy 2013).
Ikea has used ERP to ensure coordination with the various business aspects like sales, manufacturing, service and accounting services managed at various departments of the organization. Smooth flow of information has been possible, which has further helped in understanding the different consumer market segments with ease and effectiveness. The company has maintained a good record in terms of profitability and even managed to implement ERP with the use of Lawson software (Golicic and Smith 2013). It has not only made the company to deal with various business uncertainties but also has improved the accounting efficacy by resolving the issues alongside the management issues too. The use of ERP has also benefited the organization to understand the various production processes and even monitor the progress of manufacturing and production processes consistently (Dyckhoff, Lackes and Reese 2013). This has not only allowed Ikea, UK to achieve the highest quality standards, but has helped in gaining sustainability and competitive advantage in business. The adoption of ERP further assisted in integrating the costs, revenues and enabled transparency and accountability in an appropriate way too. Thus, the costs of production have been reduced and the products and services are made available at lower prices too, which is considered as one of the major benefits obtained by using ERP (Waller and Fawcett 2013).
There are various approaches by which the costs of logistics and supply chain management operations can be reduced largely. It is important for Ikea, UK to understand the process of supply chain management properly and then ensure proper movement of goods and services from the manufacturing department to the customers. It should be done through the accumulation of raw materials and resources to present the best quality finished products that would be delivered to the customers. It is recommended for Ikea to ship the goods in full container loads rather than in less than a container load or LCL, because it is much more safe and cost effective. The goods must be loaded according to the specifications and should not be shared with other vendor goods (Monczka et al. 2015). This would reduce the custom delays and thus could be a preferably economical option for Ikea, UK. Bt, while transporting smaller freights, the more economical option us by using LCL, which can reduce the costs of logistics operations and at the same time, reach those to the end users on time.
Cargo insurance is a new approach followed by Ikea in UK to reduce the costs of logistics operations management. The insurance would cover the value of products and ensure that money could be obtained in case of any discrepancies (Winter and Knemeyer 2013). The outsourcing could also enhance the effectiveness of supply chain management operations along with better storage and reduced costs of transportation facilities. Maintaining the visibility of the supply chain could also improve the planning and control the logistics operations, furthermore manage the safety stocks. This would overcome the supply and demand processes uncertainties as well as manage standardization of service levels with appropriateness. The optimization of resources could also be a suitable option for Ikea to manage the assets properly as well as improve the business efficiency (Ross 2013).
Conclusion
The report was prepared to analyze the different aspects considering the management of logistic and supply chain operations at Ikea in United Kingdom. The company was considered as one of the major furniture retailers, which had managed the supply chain and logistic operations properly to keep the production process successful and ensured delivering the products and services to the customers on time as well. From this topic, it could be understood that a positive relationship had been maintained between the supply chain management and logistics operations, which had enhanced the inventory management efficiency and even improved the customers’ services to achieve their satisfaction.
References
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