Analyzing the Negative Impact of Supply Chain Regionalization

Abstract

In response to increasing global trade, IKEA implemented a more efficient supply chain strategy and introduced a new policy in 2011 to localize its supply chain. The objective of this inquiry was to examine the alterations in supply chain management. Following the transition from centralized to regionalized supply chains, corporations faced adverse consequences such as decreased operational efficiency, increased operating expenses, and reduced adaptability in meeting market needs. These implications include increased complexity in supply chain management, decentralized operating models that result in repeated investments in fixed assets, and trade restrictions that create challenges in integrating information. The article proposes implementing efficient management systems, enhancing collaboration with local suppliers, and utilizing artificial intelligence to optimize the structure of the supply chain based on the observed impacts and outcomes. The objective is to offer risk management guidance for firms that have reached maximum production capacity and require a shift in their supply chain management methods.