The impact of omni-channel retailing on demand planning for new products at IKEA

Background: Omni-channel retailing has led to customers becoming more demanding and less tolerant than before. For instance, customers are demanding shorter delivery times, and higher precision in deliveries. Unless retailers adapt to an omni-channel approach today, their business is likely to suffer. To do so, more efficient planning of the supply chain is necessary. The first step of the planning processes is demand planning, which in turn has high influence on all the subsequent steps in the supply chain planning process for retailers. Therefore, it is of great importance that the demand planning process works well. Especially the demand planning process for new products, which have greater uncertainties in demand and are important for the long-term success of retailers. Purpose: To contribute to the general knowledge of how working with omni-channel retailing impacts the demand planning process for new products, as well as investigate how omni-channel retailing affects the demand planning process for new products at IKEA. Research Questions: 1: What are the challenges for demand planning of new products in omni-channel retailing? 2: How can these challenges be handled at IKEA? Methodology: For the purpose of this study, an exploratory single case study is used to compare theory with the current situation of IKEA. A study of external companies is also done to cover the gap in theory for demand planning in omni-channel retailing. Interviews was the main method for collecting data, both internally at IKEA and externally at reference companies. Conclusion: The result of this study is the identification of six challenges within demand planning for new products affected by omni-channel retailing. For example, online commercial activities is one challenge which refers to the uncertainty of its impact on demand. Another one is considering online sales patterns when forecasting for new products. After having identified the challenges, the analysis of IKEA was used to identify ways for IKEA to handle the six challenges. For instance, the commercial activities can be managed by careful planning and identifying which products that are most likely to be affected by the activities. By doing so, planning of safety stocks can be more strategic. Furthermore, IKEA is recommended to investigate what online-volume is needed to make forecasting on fulfilment type beneficial. IKEA also need to consider the trade-off between forecast accuracy, the demand planners work load and the technical feasibility. All the identified challenges together with ways of handling are presented in Table 14