Ikea warns that supply chain disruptions are likely to last into 2022

Ikea is buying containers and re-routing goods to mitigate global supply chain disruptions as supply chain disruptions continue.
Ikea is also reducing the number of versions of some products.
// Ikea is buying containers and re-routing goods to mitigate global supply chain disruptions
// The retailer’s biggest challenge is currently moving goods out of China, where roughly a quarter of its products are made

Ikea 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 retailer, which 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 remain available.

Ingka Group chief executive Jesper Brodin said: “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.”

READ MORE: Ikea faces shortages across 1000 product lines

Bordin told Reuters that he expects the supply chain crisis to continue into next year, with the biggest challenge currently to get goods out of China, where almost 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, instead of suggesting similar alternatives, the retailer is temporarily removing unavailable products from its websites and store showrooms.

Brodin said no one at Ikea had anticipated the current global supply chain crisis, and that there would need to be preparedness in the 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 £35.5 billion in the fiscal year to end-August, up 6 per cent from the previous year and 1 per cent from pre-pandemic fiscal 2019.

E-commerce also grew by 73 per cent to account for 26 per cent of total retail sales.

Ingka said separately its retail sales rose 6 per cent to £31.7 billion, 2 per cent 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.”

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