Optimal Outbound Minimum Order Quantity (MOQ) in food supply chain

Abstract

IKEA is a Swedish multinational company that sells furniture, home accessories and food products. The company is spread over 50 countries and is known for its efficient supply chain and cost-effective products. Food has always been important for IKEA and is keen on selling the best quality food and services in all its stores in different cities worldwide. For food products, the central distribution centre is located in Helsingborg, Sweden. This Central distribution acts as a local distribution centre for the Scandinavian market. Products/items from various suppliers are received in the central distribution centre. The orders to the retailer are picked at the central distribution centre and then sent to the local distribution centres/terminals. The purpose of the master thesis is to analyse an optimal minimum order quantity (MOQ) at IKEA’s food sales channels. In addition, the study will focus on analysing the various operations related to ordering, labour, inventory, pallets, storage, and transportation impacted by the MOQ policy. To fulfil this purpose, empirical data on the current situation was collected to observe the process. Interviews and on-site visits were planned to understand the process and operations at different places. The empirical data collected were analysed to identify the problems/ disruptions related to order management. In conclusion, to stabilise the ordering by retailers, an Optimal Minimum order quantity (MOQ) is implemented, by which irregular ordering quantities by the retailers could be controlled. Meanwhile, the labour and time spent during picking and sorting products at the central distribution centre could also be reduced. Overall, in addition to all these, the costs involved in all these processes could be minimised. Moreover, a real-time and practical implementation method was also suggested to effectively use the analysed solution.