Forecasting, although referred to as an imperfect science, is a necessary procedure for the organisations. Proper forecasting, particularly in the supply chain management, helps the organisations in ensuring that the production and the supply of the products and services is enough to satisfy the demand. Companies that have a global footprint, make use of sophisticated software for demand forecasting, but smaller organisations that are relatively smaller can adopt forecasting in the supply chain management process by making use of simple techniques. The most common techniques that are used for forecasting to ensure the effectiveness of supply chain management are the calculation of moving averages, exponential smoothing and weighted mean. Forecasting related to supply chain management deals with the control of the inventory for the procurement and transformation of raw materials in order to effectively manage the flow of materials with respect to the demand and supply (Kim & Chain Management, 2017). Software systems are also being used to stimulate and analyze real time data which acts as a predictive tool for the identification of supply-chain delays. A service level agreement (SLA) is another method to ensure quality in the supply chain management process by the identification of the minimum service quality that is necessary to be provided in order to meet the business needs. Another very important asset that proves to be valuable for an organisation in the management of the supply chain, is the previous experience. Having the data related to supply and demand of the product or the services for the organisation and it's thorough analysis, can help the organisation in prediction of the future demand and estimating the quantity of goods or services to be produced (Blackhurst, et al., 2012).
Third party logistics
Third party logistics, also known as 3PL is the process of outsourcing of the distribution and fulfilment processes of an organisation to third party vendors or businesses. 3PL is a term used in the logistics and supply chain management that includes all the services of contracts which involve the storage or shipping of products (Hume, 2013). An organisation can opt to outsource a single service, like only the storage of goods, transportation from one point to the other etc. or the organisations can opt for the outsourcing of the bundle of system wide services for the management of their entire supply chain. There are a number of factors that need to be kept in mind by the organisations in order to determine whether a third party organisation will be able to fulfil the required job, and will be able to carry out the required process in the desired way (Cetinkaya, 2011). Some basic requirements for a third party logistics are the certifications and the qualifications related to the job assigned to them, the availability of space and equipment, if required, and their willingness to commit to providing the best customer service and sincerity towards the task assigned to them (Jaegler & Sarkis, 2014).
In times of disasters, natural calamities and hazards, it becomes increasingly important to deliver health and aid to the people affected from it. The supply chain in such cases needs to be agile and quick in order to respond to the sudden onset of disasters which may occur in any part of the world. The branch of logistics which takes care of the organisation of the delivery and storage of the supplies for providing aid during a natural disaster or any other emergency, to the affected areas is known as humanitarian logistics. The primary process of humanitarian logistics includes the acquisition and delivery of the requested services as well as supplies at the exact place where it is needed in as little time as possible while ensuring the best value for money. In order to properly carry out the humanitarian logistics operations, a basic framework needs to be developed, in order to model and forecast the demand on the basis of historical data and previous experiences.
It is important to maintain adequate inventory levels at all times, as the uncertainty level of the delivery to be carried out to a place requiring humanitarian aid is very high. It needs to be well collaborated between the various levels, including the government, the non-government organisations, the alliances and the organisations taking care of the logistics and supply chain. It is also important to be aware of the local conditions of the places for which the inventory has to be maintained. Cultural awareness, as well as an awareness of the geography is needed (Chkanikova, 2012). For an in-time delivery of the required support and aid for humanitarian logistics operations to be carried out in a proper and effective manners, it is also necessary to communicate with the people in the field and the people who are carrying out the process of delivery of the required goods. A number of technologies like Geographic Information System (GIS), Global Positioning System (GPS) etc. can help the organisations in carrying out these activities to be more prepared and effective in their approach.
Using Information Technology (IT) in Logistics and Supply Chain Management
Technology and its introduction in the business organisations has simplified and better equipped a lot of their tasks and procedures. The implementation of technology in the supply chain has enabled the organisations to effectively control the increasing complexity of the supply chains at present. The organisations in today's world are not considered as independently functioning entities, but are looked at, as a part of a network of multiple organisations operating in an industry. This can also be perceived as a network of multiple supply chains which carry out the process of delivery of goods and services to the end users. The organisations are facing an increasing pressure to manage the supply chains in order to constantly improve the efficiency of the organisations, which ultimately helps in the improvement of the productivity and profitability. As a result, the organisations have adopted information technology to support their supply chain by binding the processes of the organisation together in a more synchronized fashion. The organisations have integrated the supply chains with the information technology advancements in a number of ways. The latest software and technologies help in faster processing of the organisational transactions, which has made these processes faster and more accurate. The implementation of technology in the planning process also allows the decision makers of the organisations to get a holistic view of all the functions of the organisation and plan accordingly to operate successfully. The organisations have also implemented information technology in collaborating the entire supply chain process and for the coordination of the order tracking process with the delivery of the same. This helps in orientation of the organisation towards excellence and also consolidates all the diverse processes of the business, thus making them easier to manage and keep a track of (Busch, 2010).
Case study 1
Activities undertaken by IKEA to ensure the sustainability of their supply chain
IKEA has been an organisation offering furniture and accessories, operating in 38 countries around the world since last 60 years. They constantly work towards serving their mission of creating a better life for the people. IKEA has a supply chain process involving the flow of production and processes through the primary, secondary and tertiary sectors. This organisation takes responsibility of a sustainable development very seriously and works towards organizing the operations of the company to positively affect the environment (Kersten, et al., 2015).
They do this by ensuring that at all three stages, the organisation does not cause any damage to the environment and operates in a responsible manner. The raw materials obtained on manufacturing the furniture sold by IKEA is obtained from more than 1300 suppliers all over the world. During the sourcing process, they ensure that the working conditions at the suppliers and as well as their social responsibilities are taken care of. The environmental impact that the organisation has, is constantly monitored using the 'e-Wheel' that helps them in understanding the environmental impact that the products sold by IKEA are going to have during the procurement of raw materials for them, the production process, during the usage of the furniture by the customer and ultimately during the recycling of the product (Westpac Group, 2014). In the secondary sector, that deals with the production of the furniture, IKEA minutely observes and carries out all the actions that contribute towards saving the resources and their implementation during the production process is taken very seriously. They have a code of practice that is given to the suppliers, and its implementation by them is ensured at all times. IKEA has also formed partnerships with organisations like UNICEF, World Wildlife Fund (WWF) etc. to carry out community programs that address issues like child labour, animal protection, sustainable uses of the available natural resources etc. They also carry out training programs for responsible management of the forest resources in Russia, Bulgaria, Romania and China. The tertiary sector activities of IKEA are also watched over to ensure sustainability. They are heavily focused on the long-term ambition of growing sustainably and contributing towards the environment.
Present impact and future implications of the sustainable sourcing and supply practices
The long term ambition of IKEA is to become the leading organisation of home furnishing in the world. However, they do not want to do this by simply focusing on expansion of their market share and increase in the profitability. Being a global organisation, IKEA has adopted the process for sustainable development and has taken it very seriously to imbibe its principles in every aspect of their organisational working (Barbara, 2013). This is the primary factor that differentiates this organisation among all the organisations operating in the home furnishing industry. IKEA takes steps like using legs that are hollowed from inside for the furnitures, that saves the resources by not just reducing the resource utilization from the environment, but also allows the organisation to save on the costs (UNEP, 2014). IKEA takes good care of their employees which keeps them happy and provides them full assistance in their growth and development in both personal and professional fields. This makes them more dedicated towards their work and loyal towards the organisation, thus, reducing the long-term cost of employee turnover and loss of productivity. The concept 'you do half, we do half; together we save money' of IKEA, also helps them in saving the costs which contributes towards the increasing profitability of the organisation. By recycling more than 70% of their waste products, the organisation is helping in the reduction of the accumulation of waste that goes into the landfills otherwise (Campos, 2015).
Case study 2
Improvement in the efficiency and effectiveness of IKEA’s logistics and supply chain management
IKEA makes use of a number of procedures for the improvement in the efficiency and effectiveness of their supply chain management and logistics for the entire organisation. The organisation IKEA strives to provide the people with well designed and functional furniture at lower prices. The designing of the products is absolutely unique, which reduces the manufacturing costs to a great extent, while still being able to meet the strict requirement of the organisation related to the functionality, efficiency, quality and environmental impact of the furniture. As many as 50% of the products available in the IKEA store are made from recycled or sustainable products. This is done without having to compromise on the quality or durability of the furniture being provided. The organisation uses less fuel and manpower in the receipt of the materials, and their shipping of the products. This also contributes to the decrease in the impact of the organisational working on the environment.
The sustainable relationships that they have with the suppliers, allows them to get the best materials at competitive prices, as they maintain long term relationships with the suppliers. While the organisation works towards providing the people with furniture at low prices, they make sure that this is not done at the expense of any of their business principles. Most of the furniture produced by IKEA is sold in pieces to their customers, which they can take home and assemble. All these pieces of the furniture are placed conveniently and efficiently in the packages that are flat, which helps in lowering the transportation cost for the organisation. As these packages tend to take up less room in the vehicles in which they are being transported, this maximizes the number of products that can be shipped at one go. The flat packaging of the products also results in lower space consumption by them when being stored in the warehouses or for order fulfilment. This helps in the reduction in the cost of fuel and storage which is eventually passed on and shared with customers as well. This is a win-win situation for all (Kell & Cramer, 2012). Another excellent concept of sustainable supply chain management adopted by IKEA is the integration of their retail process as well as their warehouses. Every retail showroom of IKEA has a warehouse, generally in the lower levels, which is used to store and stack additional furniture. This furniture act as a reserve for the organisation when needed.
Assurance of end to end customer satisfaction
IKEA has prioritized customer satisfaction for their business, and they take all possible measures to ensure that the customers get the best deal at the lowest prices. Being the most successful furniture retailer in the world presently, there is a increasingly high demand for their products. The increasing demand for the products allows them to stay competitive in the furniture and accessory industry, and cross functional logic of supply chain management adopted by the organisation also helps them by providing them an advantage that none of their competitors can duplicate in any form. The organisation takes all measures to minimize the costs and the impact caused by the production, supply and transportation of the goods of the organisation on the environment. The logistical management process of the organisation is absolutely unique and helps in cost reduction for the organisation by preventing over stocking as well as under stocking of the goods within the store and in their warehouses (Nelson, 2015). While the organisation works towards providing the people with furniture at low prices, they make sure that this is not done at the expense of any of their business principles. Another very famous principle of IKEA for supply chain management is the 'cost per touch inventory'. The organisation believes that the more times a product is touched by a person or moved from one place to another, more costs keep getting associated with it. Therefore, they believe in minimizing the touches to furniture, which lowers the handling costs for them, and these benefits are ultimately enjoyed by both IKEA and their customers who get a better deal for quality furniture.
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