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JÖNK ÖPING IN TER NATI ONAL BUSINE SS SCHO O L

JÖNKÖPING UNIVERSITY

Forecasting System at

Master thesis within International Logistics and Supply Chain Management Author: Mahir Dugic Daniel Zaulich Tutor: Susanne Hertz Hamid Jafari

Master´s Thesis in Business Administration

Author: Mahir Dugic, Daniel Zaulich

Tutor: Professor Susanne Hertz

Date: May 2011

Key words: Demand, forecasting, forecasting system, key performance indicators, retailing, supply chain management

Abstract

data collection was based on interviews with a total of 6 people working at IKEA

Support division (SSS).

From the empirical study several problems were identified linked with the performance of the forecasting. Problems with understanding the initial forecast from IOS were identified and this was because of lack of information about demand. SSS also wanted to know their local market in a better way this to be able to make more with forecasting wanted a closer collaboration between SSS, sales and the logistics department also wanted to have better information exchange. using and gives suggestions to solve the problems mentioned above. We have highlighted the importance of having a closer collaboration between IOS and IKEA Furthermore we have explained the importance of creating guidelines and routines regarding the forecasts and the flow of information. By considering our solutions presented in this thesis we think that the problems addressed above could be managed and hopefully lead towards a better forecasting

Contents

1 Introduction ............................................................................... 1

1.1 BACKGROUND .......................................................................................................... 1

1.2 PROBLEM DEFINITION .............................................................................................. 2

1.3 PURPOSE ................................................................................................................... 2

1.4 RESEARCH QUESTIONS .............................................................................................. 2

1.5 DELIMITATIONS ........................................................................................................ 3

1.6 OUTLINE OF THE THESIS ........................................................................................... 3

2 Frames of Reference ................................................................... 4

2.1 SUPPLY CHAIN MANAGEMENT IN RETAILING ...................................................................... 4

2.1.1 Retailing ............................................................................................................................ 5

2.1.2 Stockout ............................................................................................................................. 6

2.1.3 Demand management ......................................................................................................... 6

2.1.4 Inventory management ........................................................................................................ 8

2.1.5 Warehousing cost ................................................................................................................ 8

2.1.6 Classification of customers and products .............................................................................. 8

2.2 POSTPONEMENT AND SPECULATION .................................................................................... 9

2.3 FORECASTING ........................................................................................................................ 10

2.3.1 Data collection for forecasting ............................................................................................ 11

2.3.2 Working with forecasts ..................................................................................................... 12

2.3.3 Forecasting techniques ....................................................................................................... 14

2.4 CHOOSING FORECASTING METHOD .................................................................................... 15

2.5 PERFORMANCE MEASUREMENT AND KEY PERFORMANCE INDICATORS ........................ 16

2.5.1 Forecasting performance and accuracy ................................................................................ 17

2.6 SUMMARY OF THE FRAME OF REFERENCE .......................................................................... 18

3 Methodology ............................................................................ 20

3.1 CHOICE OF METHOD ............................................................................................... 20

3.2 CASE STUDY ............................................................................................................ 20

3.3 DATA COLLECTION ................................................................................................. 20

3.3.1 Primary and secondary data ................................................................................. 21

3.3.2 Observations ..................................................................................................... 21

3.3.3 Interview ........................................................................................................... 22

3.4 DATA ANALYSIS ...................................................................................................... 22

3.5 THE INTERVIEW AND OBSERVATION PROCESS ......................................................... 22

3.6 RELIABILITY AND VALIDITY .................................................................................... 23

4 Empirical study ........................................................................ 25

4.1 HISTORY & FACTS ................................................................................................................. 25

4.1.1 Home furniture market in Sweden .................................................................................... 25

4.1.2 IKEA in southern Sweden ............................................................................................... 25

4.2 IKEA JÖNKÖPING ................................................................................................................ 26

4.3 IKEA OF SWEDEN ................................................................................................................ 27

4.3.1 Working with forecasts ..................................................................................................... 28

4.3.2 Initial forecast for new products ......................................................................................... 28

4.3.3 Key performance indicators ................................................................................................ 29

4.4 FORECASTING SYSTEMS AT IKEA JÖNKÖPING ................................................................. 29

4.4.1 Maintaining Stock levels .................................................................................................. 30

4.4.2 Initial forecast for new products ......................................................................................... 31

4.4.3 Working with SRS .......................................................................................................... 31

4.5 PERFORMANCE MEASUREMENTS ......................................................................................... 32

4.6 PROBLEMS ............................................................................................................................... 32

5 Analysis .................................................................................... 34

5.1 WHAT KIND OF FORECASTING SYSTEM IS IKEA JÖNKÖPING USING TODAY? ............. 34

5.2 WHAT ARE THE PROBLEMS WITH THE CURRENT FORECASTING? .................................... 34

5.2.1 Sale Supply Support and IKEA of Sweden ...................................................................... 35

5.2.2 Sale Supply Support and the local market ......................................................................... 35

5.2.3 Sale Supply Support and the department of sales and logistics ............................................ 36

5.3 WHAT KIND OF SOLUTIONS COULD BE INDICATED TO IMPROVE THE FORECASTING

SYSTEM? ............................................................................................................................................ 37

5.3.1 Sale Supply Support and IKEA of Sweden ...................................................................... 37

5.3.2 Sale Supply Support and the local market ......................................................................... 38

5.3.3 Sale Supply Support and the department of sales and logistics ............................................ 38

5.4 PERFORMANCE ANALYSIS AT IKEA JÖNKÖPING ............................................................. 39

5.4.1 Service levels ..................................................................................................................... 40

6 Discussion ................................................................................ 41

6.1 FUTURE RESEARCH AREAS .................................................................................................... 42

7 Conclusion ............................................................................... 43

8 References ................................................................................ 44

Appendices APPENDIX 1 INTERVIEW QUESTIONS

APPENDIX 2 IKEA JÖNKÖPING KPI

Figures

FIGURE 1.TCI SERVICE TO THE RETAILING SECTOR (AGARWAL, 2007) 4 FIGURE 2. MAP OF IKEA STORES IN SWEDEN (INTER IKEA SYSTEMS, B.V, 2011) 26

FIGURE 3. IKEA JÖNKÖPING AND A6 CENTER 27

FIGURE 4. GLOBAL FORECASTS AT IKEA 28

FIGURE 5. FORECAST ACCURACY AT IKEA 29

FIGURE 6. SERVICE LEVELS AT IKEA 30

FIGURE 7. IKEA JÖNKÖPING AVERAGE KPI 40

Tables

TABLE 1. EVALUATION OF DIFFERENT FORECASTING METHODS (OLHAGER, 2000). 16 1

1 Introduction

This chapter has the aim of explaining general information that leads to the purpose of the thesis. First presented in this chapter is the background, problem definition and the purpose of the thesis. Finally delimitations and outlines of the thesis are stated.

1.1 Background

The retailers role of the supply chain is to connect the customer with the manufacturer in order to create value to products and services by providing an assortment, breaking bulk, holding inventory and providing services. Furthermore retailers have created an increasing role of the supply chain management activities (Levy & Weitz, 2009). Van Hoek, Commandeur, & Vos (1998, p.33) explain that increasingly variable and uncertain in time and place there are still differences in . Today´s market is in general more obvious and less disordered; this is because of steady removal of barriers which affects the trade and investments by actors in foreign countries (ibid). To meet the customer requirements the products need to have a special character of qualities and that these qualities need to fit in relation to its future area of use, furthermore these qualities must be available at the time when the customer needs it (Alderson, 1950). Supply chain management is a concept that has been developed to meet the customers demand. Harland (1996) describes the supply chain as the distribution of physical goods and information between nodes in the chain. To manage all the business activities in the supply chain the term supply chain management is widely used. Douglas et al (1996, p.1) define the activities as management of material and information flows both in and between facilities, such as

An important

part within the supply chain process is demand management and Lambert & Cooper (2000, p.73) define the process as GHWHUPLQHZKDWDQGZKHQFXVWRPHUVZLOOSXUFKDVHquotesdbs_dbs22.pdfusesText_28

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