IKEA Warns Supply Chain Disruptions Likely to Last Into 2022
By Kathi on Oct 14, 2021 | 04:34 AM IST
IKEA, the world's biggest furniture brand, is leasing more
ships, buying containers and re-routing goods between warehouses as it works
hard to mitigate a "perfect storm" of global supply chain disruptions
which could last into next year, executives said.
The company, which earlier on Thursday reported record
annual sales as locked-down consumers spent more than ever on their homes, is
also reducing the number of versions of some products as it struggles with raw
materials shortages to ensure its most popular items are available.
"It is re-steering and re-routing. 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," said Jesper Brodin, CEO of
Ingka Group which owns most IKEA stores.
Jon Abrahamsson, chief executive at brand owner Inter IKEA,
told Reuters he expects the supply chain crisis to continue into 2022, with the
biggest challenge currently to get goods out of China, where roughly a quarter
of IKEA's products are made.
IKEA's stores in North America are the hardest hit by
product shortages, followed by Europe. To avoid disappointing shoppers, it is
temporarily removing unavailable products from its websites and store
showrooms, instead suggesting similar items.
Brodin said no-one at IKEA had anticipated the current
global supply chain crisis, and that there would need to be a preparedness in
future for unexpected swings in supply.
"It's a perfect storm. (But) I think we are way past
being surprised. This is the new normal for us. And when things stabilize, we
will have learned so much about agility and about sales steering," he
said.
A large share of IKEA's range is sourced relatively close
to sales markets. Around 70% of products sold in Europe, where IKEA has the
bulk of turnover, are produced on the continent.
Inter IKEA said sales of products and services at all IKEA
stores and online totaled 41.9 billion euros ($48.7 billion) in the fiscal year
to end-August, up 6% from the previous year and 1% from pre-pandemic fiscal
2019. E-commerce grew by 73% to account for 26% of total retail sales.
Ingka said separately its retail sales rose 6% to 37.4
billion euros. That was 2% higher than pre-pandemic levels, Brodin said.
"All over the world interest in life at home has
become bigger," Brodin said. "There is no sign of decline in demand
in any of our areas as it is right now,"
On the current fiscal year, Brodin said he believed demand
would remain high. "It is also a matter of how we manage to be agile
across the whole value chain... I'm truly optimistic we have a good, strong
year ahead of us."
He added that a new IKEA store, currently under
construction, would open in a central Stockholm shopping mall this year.