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Mapping and analysis of a distribution process in a make-to-order supply chain

Andersson, Björn LU and Brink, Tobias LU (2013) MTT820 20122
Engineering Logistics
Abstract
Background: Supply chains become more and more complex. Mapping can be a good way to understand a company’s supply chain and its processes. IKEA’s Direct Delivery Customer (DDC) process has a rather unique characteristic at IKEA. By using a make-to-order strategy are sofas, sofa covers and custom made worktops delivered to customers’ home from the supplier. The material flow goes through IKEA’s Customer Distribution Center (CDC). The DDC material flow has historically been very small and has therefore not received much attention. The volume of this material flow is continuously increasing.

Problem description: The CDC terminal in Torsvik perceives problems as lack of space and much manual administrative work due to the growing DDC... (More)
Background: Supply chains become more and more complex. Mapping can be a good way to understand a company’s supply chain and its processes. IKEA’s Direct Delivery Customer (DDC) process has a rather unique characteristic at IKEA. By using a make-to-order strategy are sofas, sofa covers and custom made worktops delivered to customers’ home from the supplier. The material flow goes through IKEA’s Customer Distribution Center (CDC). The DDC material flow has historically been very small and has therefore not received much attention. The volume of this material flow is continuously increasing.

Problem description: The CDC terminal in Torsvik perceives problems as lack of space and much manual administrative work due to the growing DDC material flow. The trend indicates that the impact of the perceived problems becomes more and more serious as the flow continues to grow. To fully understand the process and enable process improvements, it is requested to thoroughly map the process.

Purpose: The purpose of this study is to map the DDC process and investigate how it is managed. Another purpose is to identify problems in the process and suggest improvements.

Objectives:
1. Explain why a product is classified as DDC and why transshipment is made at the CDC terminal in Torsvik.
2. Create understanding of the DDC process by mapping from customer order to the point when the products are delivered at customer’s home.
3. Identify and describe problems that occur in the part of the DDC process managed by the CDC terminal in Torsvik.
4. Suggest short-term and long-term improvements in the DDC process for the CDC terminal in Torsvik.

Method: The study is based on a system approach since synergy effects are expected between the different parts in the studied process. Improvement efforts require a system view to avoid sub
optimization. The study was performed as a case study with single case design. Primary qualitative methods were used, as semi-structured, unstructured interviews and participating observations. Quantitative methods for collecting data also occurred, but to a minor extent.

The authors developed their own research procedure. After the literature review the research procedure was refined, in order to explain how the literature review would be used to answer the
objectives. The refined research procedure contains the 6 steps; exploration, current state, identify and describe problems, analysis of problems and recommendations.

Conclusion: The mapping resulted in a description of the DDC process current state. Nine problems were identified through the mapping and analysis. Seven of these problems; lack of gate area, long lead time, no one responsible for the entire process, low efficiency in administrative work, missing goods, large amount of handovers, and custom related problems were further analyzed in terms of source, consequences and customer impact and potential solutions. From these seven problems it became clear that five depends upon low IT-support, one way or another.

In this case study it became clear that a growing material flow creates a more complex information flow. This information flow often requires to be managed with IT-support, which was missing
in this case.

The analysis resulted in five short-term and two long-term recommendations. The short-term recommendations are; reduce lead time, share process maps, conduct a workshop with intention to increase efficiency in administrative work, inspection of loaded goods and modify the limit of orders in the IT-system. The long-term recommendations are; investigate possibility to implement IT-support and centralize process responsibility. (Less)
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author
Andersson, Björn LU and Brink, Tobias LU
supervisor
organization
course
MTT820 20122
year
type
M1 - University Diploma
subject
keywords
Supply chain, process mapping, Value Stream Mapping, Swimlane flowchart, process analysis, process improvement, make-to-order, distribution
other publication id
5746
language
English
id
3631948
date added to LUP
2013-04-09 12:47:37
date last changed
2013-04-09 12:47:37
@misc{3631948,
  abstract     = {Background: Supply chains become more and more complex. Mapping can be a good way to understand a company’s supply chain and its processes. IKEA’s Direct Delivery Customer (DDC) process has a rather unique characteristic at IKEA. By using a make-to-order strategy are sofas, sofa covers and custom made worktops delivered to customers’ home from the supplier. The material flow goes through IKEA’s Customer Distribution Center (CDC). The DDC material flow has historically been very small and has therefore not received much attention. The volume of this material flow is continuously increasing. 

Problem description: The CDC terminal in Torsvik perceives problems as lack of space and much manual administrative work due to the growing DDC material flow. The trend indicates that the impact of the perceived problems becomes more and more serious as the flow continues to grow. To fully understand the process and enable process improvements, it is requested to thoroughly map the process.

Purpose: The purpose of this study is to map the DDC process and investigate how it is managed. Another purpose is to identify problems in the process and suggest improvements. 

Objectives: 
1. Explain why a product is classified as DDC and why transshipment is made at the CDC terminal in Torsvik. 
2. Create understanding of the DDC process by mapping from customer order to the point when the products are delivered at customer’s home. 
3. Identify and describe problems that occur in the part of the DDC process managed by the CDC terminal in Torsvik. 
4. Suggest short-term and long-term improvements in the DDC process for the CDC terminal in Torsvik. 

Method: The study is based on a system approach since synergy effects are expected between the different parts in the studied process. Improvement efforts require a system view to avoid sub 
optimization. The study was performed as a case study with single case design. Primary qualitative methods were used, as semi-structured, unstructured interviews and participating observations. Quantitative methods for collecting data also occurred, but to a minor extent. 

The authors developed their own research procedure. After the literature review the research procedure was refined, in order to explain how the literature review would be used to answer the 
objectives. The refined research procedure contains the 6 steps; exploration, current state, identify and describe problems, analysis of problems and recommendations. 

Conclusion: The mapping resulted in a description of the DDC process current state. Nine problems were identified through the mapping and analysis. Seven of these problems; lack of gate area, long lead time, no one responsible for the entire process, low efficiency in administrative work, missing goods, large amount of handovers, and custom related problems were further analyzed in terms of source, consequences and customer impact and potential solutions. From these seven problems it became clear that five depends upon low IT-support, one way or another. 

In this case study it became clear that a growing material flow creates a more complex information flow. This information flow often requires to be managed with IT-support, which was missing 
in this case. 

The analysis resulted in five short-term and two long-term recommendations. The short-term recommendations are; reduce lead time, share process maps, conduct a workshop with intention to increase efficiency in administrative work, inspection of loaded goods and modify the limit of orders in the IT-system. The long-term recommendations are; investigate possibility to implement IT-support and centralize process responsibility.},
  author       = {Andersson, Björn and Brink, Tobias},
  keyword      = {Supply chain,process mapping,Value Stream Mapping,Swimlane flowchart,process analysis,process improvement,make-to-order,distribution},
  language     = {eng},
  note         = {Student Paper},
  title        = {Mapping and analysis of a distribution process in a make-to-order supply chain},
  year         = {2013},
}