The world’s largest furniture retailer shares the instructions to how it assembled parcel fulfilment success through its partnership with Packsize at its major Australian distribution centre.
Here at IKEA Marsden Park distribution centre (DC), we experienced over 300 per cent throughput at the height of online shopping during stay-at-home orders last year. It was clear in that moment we needed to revamp our production flow,” Project leader at IKEA Australia, Lachlan Pembroke, says.
Major furniture manufacturers got the rug pulled out from under them by the COVID-19 pandemic. Lachlan says the work-from-home boom has been a significant driver to the consumer demand for office and home furniture. “At the peak of lockdown in Australia, online customers were purchasing an array of items in home living, kitchen, and children furniture,” he says.
As a world leader in furniture and home products, many Australians turn to IKEA as their first choice for storage solutions. With an estimated one third of Aussies still working from home a year after initial stay at home orders, Lachlan says it’s vital to have an optimised production flow that can scale as spikes continue in online order fulfilment.
Transportation without air
Last year, IKEA Marsden Park DC jumped from servicing 1,000 orders per day pre-COVID to 4,000 orders per day, across a diverse range of products, many of them bulky pieces of furniture.
“We realised there was a bottleneck in our operations on the packaging side,” Lachlan says. He notes the challenges lied in the DC’s layout and parcel capacity and they were desperately seeking a solution to better service the thousands of customers looking to improve their homes and home workspaces.
“At Marsden Park, we were incurring costs for manual handling in our ‘box and man’ solution, and honestly looking for savings through a new packaging solution,” Lachlan says. “If we can save, then it means more saving for our customers.”
However, he says that saving shouldn’t come at a cost to values, especially when it comes to sustainability targets. Pre-covid, IKEA Australia was partly using non-recyclable packaging waste that customers had to dispose of, along with paying to ship air, that was creating a poor impression.
“We have strong values in sustainability, so it was essential for us to partner with a company who matches our culture and can help us meet our goals,” Lachlan says. He highlights the company’s long-term partnership with Packsize that has been key to transforming the DC’s efficiency.
“Our solution has a constant feed of corrugated board being fed into a machine that will cut the exact size box needed for the particular order. We’re building a box that is exactly the right size for the product, so you greatly reduce or completely eliminate the need for void fill,” Sean Ledbury, Managing Director at Packsize Australia says.
Packsize entered the Australian market five years ago and has seen rapid growth in this region. “As the e-commerce market grows here, so has our business,” Sean says.
By joining forces with Packsize, IKEA sought to minimise the different material fractions and qualities, along with optimising production flow, while always keeping in mind the full journey of its products to customers’ homes, protecting the product, supporting efficient handling, and inspiring and informing the customer. In addition, payment for the solution is by cubic metre of corrugate, freeing up precious capital for other investments.
“Our packaging solution saves packaging costs of between 20 to 30 per cent, but it also enables our customers to ship 30 per cent more orders per container or truck. So, they can save costs, reduce their environmental footprint and also greatly improve the end customer experience,” Sean says.
Scaling up fulfilment
Online retail accounts for just under half of IKEA Australia’s business, all of which is serviced by the Marsden Park DC. The DC ships approximately 62,000 customer orders per month, 49,000 of which are processed through Packsize On Demand Packaging System.
“Packsize invented on-demand packaging to reduce waste and the environmental impact of packaging. We’re proud to say that we have done not only that, but have also reduced costs and improved the end-customer experience as well,” Sean says.
“We have machines that can do from 200 boxes an hour up to 1,200 boxes an hour. So, if a customer is seeing their volume increase, we can come in and swap out a machine to give them more capacity and this doesn’t need to cost them anything,” he says.
This also creates opportunities for retailers to explore installing on-demand packaging capabilities in the back of a bricks-and-mortar store to fulfil orders from a central location or service click and collect orders, an option that many retailers are currently exploring.
Lachlan says the on-demand packaging system was implemented the year prior to the COVID-19 pandemic, in 2019. “Because of our initial partnership, I knew we could rely on the packsize team to help us crank up our packing fulfilment and find the perfect solution,” he says. Lachlan draws on the extremely low cost of implementation, and the local sales and support from Sean Ledbury and the greater packsize team.
“Our order lines peaked at 1.8 last year, usually sitting between 1.2 and 1.6. This is why we require flexibility to easily switch and expedite production flow that allows us to be agile, whilst also eliminating tedious manual labour,” Lachlan says.
Packsize’s On Demand Packaging solution has saved IKEA significant packaging costs since its installation in 2019 – with an annualised return on investment of 463 per cent. It has enabled IKEA Australia to optimise its packaging operation by reducing the cost and improving the quality of packaging, reducing product damage, tripling warehouse efficiency, and being one step away from providing customers with 100 per cent recyclable and compostable packaging.
For IKEA, 2021 is the ‘year of sustainability’. The Marsden Park DC’s on-demand packaging solution has allowed it to almost entirely phase out unnecessary single-use plastic packaging in terms of the box and the filler.
“We’ve been able to significantly increase its parcel quality and reduce product damage,” Lachlan says. He says the DC proudly operates three packsize on-demand machines and a conveyor system. “We’re able to further optimise through imaging hardware and software, but ultimately it’s the foundation of sharing common goals that are in favour of the consumer and wider sustainability that continues to enable the success of our partnership with packsize.”