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Transition phase

Transition phase

04/07/2011 | Channel: Retail

As the world's leading furniture retailer, A strong distribution network is an absolutely crucial element for IKEA

IKEA is one of the most recognisable names in furniture and home wares, famed for its well designed, functional and affordable products, with retail stores located in 38 countries throughout the world. IKEA Distribution Benelux serves all the stores in the region: Belgium, the Netherlands and Luxembourg. There are six stores in Belgium and 12 in the Netherlands, all of which are served by two central warehouses located in Winterslag and Oosterhout respectively. To improve supply chain efficiency these distribution centres (DC) have been remoulded into high-flow DCs, transporting only high demand items directly to retail stores.

General manager of IKEA Distribution Benelux, Rick Kaper, explained this high-flow method in more detail and the benefits gained from it: “The idea behind it is that high-flow DCs are closer to the stores so that if there are availability issues for specific items, we can react quickly on those needs. The slower moving articles are housed in the European Low Flow DC in Dortmund, Germany, and it supplies all stores in Europe with slower moving articles. Within the high flow we also have a differentiation between fast movers and really fast movers, and improving our transit set-up for this last group is a big focus of our company at the moment.”

As with many other major chain stores around Europe, IKEA continuously optimises the supply chain, while at the same time lowering costs, to make sure the customer in the end gets the lowest possible price. The impact of the DCs continuously reduces total cost, by constantly improving technology and creating smarter work processes to increase the efficiency by which products can be handled and then sent onwards whilst at the same time reducing labour costs. One big focus for IKEA Benelux in this respect is to develop an optimal cross docking solution where incoming pallets will only need to be handled a single time. “When the suppliers come in with a trailer, the ambition is that we only touch the pallet once and that is to put it directly onto the delivery truck,” Rick explains.

The company has taken up a number of new processes to achieve this goal. With IKEA´s financial backing as well as its logistical expertise, there are a number of innovations central to IKEA Distribution Benelux’s superior logistics. First is its use of renewable energy. “There is a big focus on sustainability and one of the biggest things we have done recently, carried out in two phases, is a large solar panel project,” illustrates Rick. “The distribution centre is roofed with panels, enough to provide around 50 per cent of its electricity needs. The project was completed in February and has proved incredibly successful.”

Pallets are another area looked at by the company, leading to an interesting innovation: the removal of pallets, or at least of traditional pallet types. Instead, IKEA has developed its own product in-house that uses re-useable plastic slides as well as paper pallets. This means goods arriving at the warehouses will not be required to be sitting atop pallets. The benefit of such a system is not only reduced handling costs but also a reduced volume of each unit so that more items can be transported through the supply chain at once. The challenge for the distribution centre is now to adapt the current infrastructure (semi - and full automated silos and conventional racking) to optimally use the benefits of eliminating the traditional wooden pallet.

A close working relationship with suppliers is an important element of the overall chain too. “Within IKEA Distribution Benelux we want to have long-term relationships because we see that is beneficial to both supplier and IKEA,”says Rick. “Our biggest supplier, for example, could be described as an interim company providing us with the right workers for our business, staff who understand our business and react quickly. This gives us a big advantage in flexibility, meaning if we need more people immediately they can be provided to us.”

This highlights that it is, ultimately, the men and women working for the company that provide the knowledge and skills required for safe, reliable and quick turnaround of goods. The centres are populated with highly competent staff organised into effective function-led teams; for example a dedicated transit team with an experienced team leader and logistics engineer providing support. This has seen IKEA Distribution Benelux become a market leader in transit efficiency.

Recent changes in the distribution model have seen a changing role for DCs that make efficiency and flexibility more important than ever before. “What has been happening over the last years is an increase of deliveries direct from suppliers to IKEA retail stores,” Rick explains. “This has changed the role of our DC from a full-scope ´supplier´ to retail towards a multifunctional production unit that maximises the flexibility in the supply chain, by serving as a back-up solution for the fluctuating demand. Anytime the stores need to restock high turnaround goods, they need to be able to get it quickly from the storage centres. If an article is on promotion and sells quickly, we will have to scale up and make sure all stores receive the numbers they require. In the future, this will increasingly become a central function.”

Looking forwards, IKEA Distribution Benelux’s supply chain strategy is to have the customer in focus in everything it does, by further improving the quality of its work and continue reducing costs whilst improving efficiency. This will contribute to lower prices and provide better availability for the customers of IKEA. Rick concludes with an outline for the future: “We will need smarter, more efficient ways of working so that we have solutions for pallet-less handling of our goods. All our co-workers also need to take a next step in customer awareness, thinking as a customer and acting in the best way for the customer in everything they do. This will be an important focus point over the next five years. Beyond that, we also have goals that will lead us to being carbon neutral and to run entirely on renewable energy as these provide economic advantages as well. Our ambition is to keep a leading position in efficient handling of goods whilst increasing the quality of our work and doing this the most sustainable way possible. In the end we want to contribute the best we can to the vision of IKEA, creating a better everyday life for as many people as possible.”

Ikea Benelux
Employees 204
Services Furniture distribution and retail