Operations management
In every single business there will be two types of managers, one is line manager and the
other is staff manager. line manager is like marketing, operational and finance manager.
These managers have the rights to report directly to the CEO of the company and the other
functions of these managers are such as to purchase, human resources, accounting,
engineering and supports this three-line managers functions. Finance managers are
answerable for cash flow, book keeping, and accounts of the company. marketing is liable for
advertisement, increases or decrease of sales, customer synergy and what does the operations
management deals with.
Operations management is a process of changing raw materials into finished goods the
process itself is operations management where it brings land, labour, capital, organisation all
together and contribute the output as goods and services and it also concerned with the design
and the operation of system for manufacturing transport, supply or services .(ROY N R
2005).
operations management refers to administration process which increases the efficiency of the
organisation, operations management is a business function, correlation to marketing, finance
and accounts. operations management can be more successful and adds more value during the
transformation process. Operations management is the management of resources business
uses to increase the value. Value creation is the heart of the business (Reid D R and Sanders
R N ,2010).
Operations management is about how organisations produce goods and services. Everything
which we were, eat, drink, use, read, or know about it is operations borrowing a book from
library ,buying goods from stores, going for a haircut, treatment which we take in hospital
each and everything is an operation but we don’t call it as operation that’s it so the process
whatever we do to get an output is operations( Nigel Slack)
The aim of paper is to analyse the efficiency and success of IKEA’s operational management
IKEA is very concern about its operations.
Background
IKEA is a Swedish founded multinational company that designs and sells furniture’s, home
accessories and kitchen appliances and other useful goods. Founded in 1943 in Almhult,
Sweden and its headquarters is in Leiden, Netherlands and it is located in 424 locations
(IKEA Fans , 2009) IKEA is known for its low price and high quality and it is the biggest
home furnishing company in the world abbreviation of IKEA is Inguar Kamprad the name of
the founder Elmtard the farm where he grew up Agunnard his hometown in Sweden and at
the beginning it was only selling stationary, photo frames and small stuffs. after years of hard
work and development IKEA became a huge reputed brand in the market selling food,
housewares and furniture’s worldwide.
Company vision
“TO create better everyday life for many people “it all about not only giving the best quality
for its customers it is also giving the best for environment. Corporate social responsibility of
IKEA is more sustainability life at home, use resources in sustainable way, offering better life
for people and community (IKEA ,2011).
Company mission
IKEA mission is to offer quality products desire of customers design with more durability
and less cost so that everyone can afford to buy them. The company target is to increase the
value and willing to do more work like transportation, door delivery of furniture assemble of
furniture for a better price
IKEA statistic
Number of stores worldwide – 424
Number of countries operating – 52
Annual revenue -£37.08 billion (2018)
Net income - £1.46 billion (2018) (Forbes, 2018)
In each and every situation in IKEA operations management supports strategic direction in
IKEA. IKEA is a successful company because of its operations strategy in each and every
process from cutting wood till the furniture reaches final consumer everything is operations.
Its operations are getting the order required from sellers and delivering the product to
consumers.
IKEA targets are global middle class, urbanities, young adults, young married couples,
college students. The geographic degree is around the world, or if nothing else all nations
where financial and framework conditions sup-port the idea. IKEA isn't just a retailer, yet in
addition, manages control of products design to guarantee the quality of product and effective
manufacturing of it. The organization does not manufacture, depending rather on a large
group of suppliers ensure efficient, geographically dispersed production. IKEA operation in
33 distribution centres and 11 customer distribution centres. It has 30 trading services offices
in 25 countries and 1084 suppliers in 54 countries. The entire supply chain is heavily
depended on forecast. They also have fragmented supply chain planning with local
optimization. But recently IKEA centralized all forecasting activities and need calculation in
order to control stock level and replacement. Operation strategy in IKEA strongly linked to
its product and its suppliers as IKEA is a furniture retail company operation allays an
important role in the organisation and some of the strategies of IKEA are price a starting
point for both developers and designers. Limited range of big scale volume-price and cost
down process. IKEA follows a belief with its customers “We do our part, you do yours
together we save money”. Its operation is wide rage of production according to the need of
customers. Product adoption according to the need of different market. Defining product line
and product depth.
Process design
The process of originating and developing a plan for a product, service or process. the first of
these tasks can be positioning the process in terms of Varity, volume and characteristics. The
second task concern with detail analysis of variability, objective and capacity of process
(Slack et al 2006). IKEA believe what people dream and desire that is the main source of
inspiration to design process. They admit that people should afford whatever they design,
that’s the main objective of IKEA that’s the eliminatory element for the designer at IKEA, is
to design price tag first.
IKEA follows operations management modified product policy when level of manufacturing
is low, and customisation is high as per consumer.
IKEA innovation is basic S-shaped improvement in performance. Design of the product and
design of the process are inter linked in IKEA. IKEA produces 10,000 varieties of product.
IKEA is using mass production to produce their production. The different variants of its
products don’t affect the basic process of production (Slack et al, 2010). This is particular
means that the volume is high usually with narrow effective variety.
Characteristics
Mass production are used under following situations:
Duplication of same product, machines have high production capacity and output rates, large
quantity of products, low in process inventory, performance balanced production line, high
demand of the product, to save the manufacturing cost, planning and controlling can be easy.
Advantages
Following are the advantages of mass production: higher rate of production with limited
cycle time, proper utilization of resources, low skill operators are required, saves time, low
inventory, manufacturing cost per unit is low.
Limitation
Following are the limitation of mass production : If a single machine breakdown the whole
production should be stopped , there should be major changes in process line as it is mass
production there will be no much variety or innovation in the product, mass productions are
manufactured according to the demand of the product if there is no demand there will be no
manufacturing of the product, (Kumar S.A, Suresh N, 2008) . warehouse of the mass
production is of the biggest limitation and transportation is also another biggest limitation.
IKEA is a very repeated company, they have different types of suppliers all over the world,
IKEA is not the one who is cutting the tress it is outsourcing the wood through some
suppliers. IKEA is the third largest consumer of wood in the world most of the woods are
transported from Easter Europe and Russia, there the wages are low and large number of
loading is done illegally.
Business process of IKEA
Generally, IKEA follows 3 business process they are
Generating product availability data
Order fulfilment process
Generating inventory order
Generating product availability data
First the customer’s order the product which they want then the sales and marketing takes the
order and they check for the availability of the product, supply chain management check for
the availability quote and if the product is available product availability data is generated.
Order fulfilment process
Supply chain management request for goods to supplier, supplier delivers product to IKEA,
sales and marketing fulfil the order of the costumer and they will confirm the payment details
and the end customer receives product and receipt.
Generating inventory order
After the customer purchasing the goods, sales and marketing will check for sales order then
sales order will be generated IKEA needs to restock the goods which ever it was sold so
supply chain management will purchase inventory finally inventory order will be generated.
Lean operations
Lean operation is a method for running an association by concentrating on providing more
customer satisfaction while utilizing a few assets. The target of lean tasks is two-fold:
Creating value for customers and disposing of waste. Organizations that utilization lean
activities are exceptionally worried about productivity. Everything in a business' activities
that don't meet a definitive end of giving customer value and increasing benefits is cut from
the organization. Consequently the "lean" in lean activities. For the most part, in the event
that you actualize lean activities, you want to eliminate all the inadequacy. Lean activities
enable organizations to accomplish more with less which makes value and builds profits.
Lean operation in IKEA
Building and parking: The Building and Parking: the building does not cost much financially,
but it’s very efficient they use each and every corner of the building perfectly. the concept of
lean is less resources and more productivity building itself is a perfect example of it.
customers have free space to park their vehicles who have purchased something from the
store what you have to do is just pay for what you have purchased in the store and show the
receipt in the checkout and they will validate it
Pencil and measurement tape: at the entrance of the store you will see rack where you can see
pencils and measurement tapes. you can take one for own use. the pencil is made out of wood
and printed IKEA on it and the ruler is made out of paper which cost very less for the
company. the idea is very simply that costumers can come to the store without a measuring
tape or a notepad so they can measure the furniture’s and take a note of things which they
want buy.
The catalogue : Whenever we are going to big stores or to shops to buy somethings they’ll
give us free catalogue which has each and every detail about the shops and etc but in IKEA
they don’t give you a catalogue but you can borrow if you are in need of they follow this
because customers will no use it after coming out of the store they’ll throw so they don’t
waste papers in IKEA products clearly provides information on the product itself. So, a waste
has been avoided!
The arrangement and placement: the increasable a and best piece of IKEA is the
arrangements of things inside the house, as it gives you replica of lounge area, washroom,
living room, kitchen. The items are in different sizes so that they can give an idea about the
costumers how these items should be organized depending upon costumer’s house space.
they demonstrate few items so that customers can know how they can use the item.
No employee around: if you visit an IKEA store you cannot find employees walking in the
store there will be no employees to assist in IKEA stores the information whatever the
employees will provide about the product will be clearly visible on the product. As there are
no much employees there will be no confusion among the employees.
Reusable bag: till June 2009 IKEA was providing free bags foe whatever product costumer
buys but after June 2009 environmental day it started charging for the bag it’s a big yellow
bag IKEA written on it its easy to carry and can have capacity to hold many items and the
material is renewable to protect environment and consumers can use the bag n number of
times they need not to waste money buying bag again and again.
Disposable waste: everywhere throughout the store we can see three different bins, one is for
plastic, one is for paper and one is for other waste. So, while throwing the waste consumers
can throw the waste in respected bin that will be easy for the bin collector to collect specified
wastes which reduce his time to separate the waste.
Information check on PC : as we know there are less number of workers in IKEA so on some
places instead of workers IKEA have installed desktop computers on different place which
has each and every information about each and every item in IKEA just one simple touch to
know whole products about IKEA , in the fastmoving generation everything is getting
computerised so this is one of the best imitative taken by IKEA .
Space for children: there is a very big space for children’s to play and their parents can shop
peacefully this a perfect balance where parents can come to store leave the children in play
area and shop without fear and there are many games for children’s in which they can
completely involve and they will not bother about their parents till they shop everything and
they are back the space has less cost it’s a lean and at the same time it is effective and
efficient .
Delivery service: if the costumers are buying some heavy furniture’s or items, they can use
delivery service of IKEA which is quick and easy, where costumer are benefited by the same
day delivery if they purchase goods before 3 o’clock and sometimes the delivery may delay
due to the distance.
Assembly service: when you buy furniture at IKEA, you will get small parts and you can
easily assemble it by yourself. But for the costumers who cannot assemble IKEA gives them
another benefit they can send a person to assemble the furniture and they have to pay 5%
retail price of the furniture price for him. Its benefit for the costumer because the consumer
need not to buy any assemble tools.
Current issues
As it’s a global company its very hard to control each and every country has a different
culture so IKEA maintains multicultural where it can balance everyone. Low cost needs to
maintain good quality. there is no communication between consumers and stakeholders. there
is no innovation in products (Financial Times, 2017)
Negative publicity : IKEA is not the one who actual cutting down trees for the furniture they
outsource the woods from suppliers from different part of the world , IKEA is the third
largest consumer of wood in the world most of the woods are from eastern Europe and
Russia, where wages are low and large amount of logging is done illegally, which leads to
socio economic factor of mass production so for this reason people have a negative thought
on IKEA (The local ,2018)
Lack of innovation: as IKEA is a furniture-based company it cannot produce innovative
product as it deals with mass production N number goods will be identical. . (Essay UK,
2019)
Store density – more stores, the same number of customer’s IKEA is expanding day by day
by opening new stores, but the number of costumers remains the same due to change in taste
and preferences consumers are moving to other products. (Business Insider, 2018)
E-Commerce – as change in the trend E-commerce people have everything in their tip of
hand whatever they want to buy they just can order through online and get the product
delivered to house. hence people are not so interested in buying the furniture’s in traditional
way going inside stores and buying it. . (Essay UK, 2019)
Huge competition: As IKEA is a global company it has a huge competition in each and every
country where the competitors are thinking beyond IKEA and acquiring the market. (Essay
UK, 2019)
Suggestions
IKEA is a brand and it has its own brand value IKEA product designers should concentrate
more on innovative product than identical product, As IKEA deals with trees it should start
planting as many tresses possible with environment concern. IKEA should create a link
between consumers and stakeholders so that stakeholders can correct their mistakes in the
product. Getting adopted to the new trends IKEA should instantaneously adopt the online
trend and should start being active online through which people can always be in touch with
IKEA. IKEA should not think about how many stores it can open it should think about are all
the consumers are happy who are purchasing in the existing stores.
Appendix
Week 3 (retail)
Operations management is the administration of business practices to create the highest level
of efficiency possible with an organisation. It is concerned with converting raw materials into
finished goods and services as efficiently as possible to maximize the profit of an
organisation. Retail the sale of goods to the public in relatively small quantities for
consumption rather than for resale. The process of retail is from manufacture to whole seller
from whole seller to retailer from retailer to final consumer. Input is raw materials and output
is satisfaction. The best way to start understanding the nature of operations is look around
you everything you can see around you except the flesh and blood has been processed by an
operation. Retail is a place where we get both goods and services, best buy, Walmart are the
examples where goods are sold as well as costumer experience the services. But retailing
includes even the smallest kiosks at your local mall. Example of online retailers are amazon,
eBay and Netflix some services are pure services, and some are pure goods e.g.: - crude oil
for pure services and some are pure services such as physiotherapy. In some cases, goods and
services comes together e.g.: - washing machine installation, telephone. 10 Strategic
operations management decisions goods and services design, quality, process and capacity
design, location selection, layout design, human resources and job design, supply chain,
inventory, scheduling, maintains. Volume for retail is to much and it depends on the kind of
retail where it is situated. Varity there are very different types of product in retail there are N
number of companies in the market. Variation there are seasonality for some if the product
for e.g.: - umbrellas are sold only in rainy season. visibility retail is parallelly visible where
customer can visibly touch and feel the product, but they cannot know what happens behind
the production.
IKEA is one of the few companies that have managed to make this strategy work
successfully, building ever greater value products within an intense market, with increasing
amounts spent on product research and design. IKEA follows a strategy called as hybrid
strategy costs extensive research and development and design in order to focused on quality
at minimal cost. IKEA has managed to achieve this core competency by switching a majority
of production from Europe to China. Innovation using new material that contribute more to a
sustainable environment and are less costly and using newest way to packaging handling and
transporting materials. Keep focusing on their advertising to ensure their products and value
continue to be at the fore front of the everyday person as a consumer of choice.
https://www.businessinsider.com/IKEA-employees-customer-service-issues-201811?r=US&IR=T
https://www.thelocal.se/20180809/five-challenges-IKEA-faces-as-it-opens-in-india
https://www.ft.com/content/71c730ce-4b5c-11e7-919a-1e14ce4af89b
https://www.essay.uk.com/free-essays/marketing/analysing-of-IKEAs-strategic-marketingproblems.php