IKEA expects supply chain crisis to continue into 2022

IKEA has warned that it expects the supply chain crisis to continue into 2022, according to sources reported by Reuters.

The Swedish furniture giant said it is leasing more ships, buying containers, and re-routing goods between warehouses to mitigate the “perfect storm” impacting global supply chains.

IKEA said it is limiting the number of available versions of some products because of limited quantities of some raw materials, to ensure that its most popular products remain available to its customers.

Ingka Group - the owner of the majority of IKEA outlets - chief executive Jesper Brodin told Reuters that the biggest current challenge is transporting goods out of China, where almost a quarter of IKEA’s products are manufactured.

The news comes after IKEA reported record revenues of €41.9 billion in its financial year ending August.

This represents a 6 per cent year-on-year increase compared to 2020 and a 1 per cent rise from the pre-pandemic 2019 fiscal year.

E-commerce continues to represent a growing part of the retailer’s business; IKEA’s e-commerce revenues grew by 73 per as consumers stayed home over the pandemic, and they now account for 26 per cent of the group’s total retail sales.

The news comes after IKEA said earlier this week that it is planning on moving more of its production to Turkey, to mitigate some of these supply chain concerns.

The ongoing supply chain issues have not dented the appetite for consumer goods amongst UK consumers; consumer spending grew 13.3 per cent this September when compared to the same month in 2019 according to Barclaycard data.

“It is re-steering and re-routing,” chief executive Jesper Brodin of Ingka Group told Reuters. “And on the retail side, we have learned agility like never before because every day you have to work with what you have.”

"You have to find ways to solve customer needs with limitations that we have never seen before. It’s a perfect storm. [But] I think we are way past being surprised. This is the new normal for us.”

He added: “And when things stabilise we will have learned so much about agility and about sales steering.”

“Assuming that goods still make it into the UK supply chain, retailers should consider the most efficient, cost effective and reliable means to fulfil a consumer's order,” said Rob Shaw, managing director EMEA, Fluent Commerce. “The behaviour of consumers, over the last 18 months or so, has adapted within often constrained conditions (when you consider lockdown for example).”

“We (consumers) have become well informed and creative to ensure we obtain what we need. Services, like curbside collections, click and collect and ship from store have now become the norm. It is, not always, correct to assume drivers are always needed to get orders completed.”

“Retailers should, as a matter of urgency, ensure that firstly, they know exactly what products they have available to sell, at any given time, across all of their fulfilment channels. Inventory visibility is paramount. From there, decisions (and incentives) can be offered to consumers on how best they want to receive goods.”

He added: “For example, rather than charging for delivery, why not offer promotions or discounts for consumers to pick up orders themselves.”

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