Ikea

IKEA adopts GS1 standards by Bo Raattamaa (bo.raattamaa@gs1.se) During the autumn of 2007, all of furniture giant IKEA’s warehouses worldwide and their 400 largest suppliers will start to use GS1’s system of barcodes and SSCCs. The next step will be to implement the system for all IKEA stores. IKEA is also studying the possibilities and advantages of implementing RFID. Before the summer, IKEA wound up a pilot project which showed that the GS1 system quickly improves traceability, exception handling, and product quality. “The introduction of the system reduces costs considerably. This means both lower prices and higher product quality for IKEA’s customers. This trend will continue when we introduce RFID,” says Jan Ståhl, business developer at Supply Chain Development IKEA of Sweden. In April 2004, IKEA commenced a study of which systems and methods were being used for traceability in the group and how these could be improved. In general, the situation was that goods could not be traced at pallet level outside an individual IKEA warehouse, but only at truck level. As the deliveries arrived from the supplier, they were logged at the incoming goods dock. The pallets were given unique numbers by each individual warehouse. However, if a pallet was sent from one IKEA warehouse to another, it needed to be re-registered, a very time consuming process. "We concluded that the structure for traceability and identification of products was too fragmented,” says Jan Ståhl. "It was obvious that we needed to introduce a better and standardized structure." IKEA decided to invest in the GS1 system and it’s package number SSCC. This consists of 18 digits and is bar-coded using GS1-128. Using this key a package can be uniquely identified by everybody involved: suppliers, transporters, and, in this case, IKEA’s warehouses and stores. The system was used in the pilot project for IKEA’s warehouses in Älmhult and Torsvik together with their three largest suppliers. The system quickly demonstrated many positive effects. Previously when the warehouse had received pallets these stood around in the dock area awaiting logging and processing before they could be moved further into the warehouse. In the pilot project the barcode was read as the pallet was unloaded allowing it to be fetched immediately by a truck driver and put into the store. The time to unload a truck was reduced by 44%. The turnover in the warehouse’s dock area increased by 55%. "Inventory control is improved, stock information is more accurate, and the pallets’ traceability is much better. This also applies to the three suppliers who have started to use the system for internal traceability in their own warehouses." Traceability at the pallet level also improves product quality by simplifying the warehouses’ exception reporting to the suppliers since all information about the pallets origin is readily available. "The idea is that, due to the different legal demands on product quality and product content in different countries, we can easily trace the raw materials from which our products are made thus further improving quality." The pilot project was completed at the beginning of the summer. In the autumn, the system will go into use in all of IKEAs warehouses worldwide. Together these handle over 20 million cubic meters of goods each year. Warehouse staff has already received training in the GS1 system. IKEA already uses a warehouse management system which can process pallet numbers which means that it is ready for the traceability functions provided by the GS1 system. "It’s not just about implementing SSCC, but also getting all IKEA’s other IT systems to process this information and GS1’s identification procedures," continues Jan Ståhl. Rollout of the system to the warehouses will begin in September. At the same time, it will be implemented by IKEA’s 400 largest suppliers worldwide. More suppliers will be included in the next phase and the system will finally be used by nearly 900 suppliers. The cost advantages achieved by introducing the GS1 system will in general automatically result in price reductions for customers. Costs and prices will be reduced even further through a parallel project for the implementation of the GS1 system in IKEA stores. "Our store in Malmö can already accept, capture, and process SSCC numbers," says Jan Ståhl. "Next year we will start to roll out the system to all our other stores worldwide." Now that IKEA has implemented the GS1 system it is possible for them to start using RFID to further improve traceability, exception reporting and inventory control. "Using RFID we can have multiple read points to ensure that we load and unload the right goods. In principle it is easy to put tags on the pallets, but implementation of an RFID solution also requires installation of antennae and that the equipment for sending and receiving information," says Jan Spjuth, project manager at Supply Chain Development IKEA of Sweden. When it will actually be possible to start using RFID at IKEA depends on a number of market factors. The cost of RFID tags and readers is expected to go down. Competitors are planning strategic RFID initiatives. But most of all, an established RFID standard is required. IKEA is therefore supporting and following RFID/EPC developments. "The RFID project has only just started," says Jan Spjuth. “We will not be developing our own RFID system, but will follow the standards that exist.” IKEA plan to start carrying out RFID tests next year at a number of stores for certain product flows. "We have already taken the first step by joining GS1 and starting to use SSCC. This is a prerequisite for the introduction of RFID/EPC," concludes Jan Spjuth. Måns Widman (translated by Jeremy Morton) About Ikea IKEA is a multinational furnishings company founded in 1943 by Ingvar Kamprad.  The first IKEA store was opened in 1958 in Älmhult. Today the group has almost 240 stores in 34 countries. In 2006 the turnover was SEK 161 billion (roughly EUR 20 billion). The company has some 104,000 employees in 44 countries. The number of suppliers totals some 1500 in 55 countries. More information at www.ikea.com.