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Logistics And Operations Management: IKEA Add in library

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Question:

Discuss the logistics and operations management by IKEA?
 
 

Answer:

Introduction

The logistics and operation management is important for any organization to align their activities and generate high advantage from their business operation. Furthermore, their management helps in producing the exact amount of goods and services and with minimum wastage of resources. The supply chain significantly improves the process of product and services from production till its delivery to final consumers. The logistics and operation management takes account of design, implementation and system management in order to organize inventories, raw materials, physical facilities, finished goods and other materials related to operation (Bilgin and Wuhrer, 2014). The current report will be carried in context to particular organization that is IKEA. The component activities will be mentioned along with the problem faced by IKEA in their logistics and operation management. Moreover, suggestion will be provided to improve the performance.

Problem statement of IKEA

Managing Logistics

The company is facing enormous challenge due to large amount of products coming in and out from each store of IKEA each day which makes the logistics department tough to manage it. The logistics department is facing problem in tracking the everyday move of the products from the store along with handling the employees. Moreover, the manager of the company can be facing trouble in making effective coordination between logistics departments and sales departments. Apart from that, as the management of logistic requires high level of educational an analytical skill along with communication skill which is lacking in the company (Arrigo, 2005). Therefore, manager find hard to coordinate the task of employees and assign respective roles. Thus, the management of IKEA is not able to effectively manage their logistics.

 

Receiving and Replenishment

The efficient movement of products such as furniture within the stores of IKEA is one of the major activities that assure effective sales and required availability of products at low cost. However, it is evident that company faced problem in receiving and replenishment co-workers in 2010. As a result, the goal of monitoring and recording deliveries was affected and due to that company faced certain decline in their sales up to 9% in 2010 (Diva-portal.org, 2015). Moreover, the customers were not able to locate their required product and due to this the customers were dissatisfied with such activity of the employees. Apart from that, it was also known that, goods were not received on time in the different IKEA stores which delayed their operation time and providing quick service to the customers.

Workforce Management

A sufficient number of workforces are required to manage a large furniture superstore, IKEA. Therefore, management of workforce is a critical issue for the company. Moreover, it is difficult for the managers to track the performance of employees and their activities while performing job. Therefore, it affected the sales of the company worldwide.  It is evident from the report of Statista that in 2013 the sales of the company increased only by 3.2% whereas in 2012 the sales were higher by 9.5%. Thus, decline in the performance of the employees has affected the sales.

 

Component Activities of IKEA

Quality

The IKEA is extensively involved in the trade of furniture to large area and mostly targeting the average income group so that they can acquire fashionable furniture product at low cost. The company not only involve them in providing quality product to customers but also focus on meeting customer expectations. Therefore, the company concentrate on Quality Control Model in their operation such as Quality staircase Model so that overall performance of the suppliers can be improved in terms of quality and best service can be delivered to the consumers. Apart from that, the company follows mandatory standards and engage in testing the products before it can be delivered to the end users (Edvardsson and Enquist, 2011). Therefore, in order to be sure that products match completely with the requirements and expectations of consumers, the company use IKEA Test Laboratory to test the product by entirely following ISO standardisation.

The design department of IKEA is involved in the product design which is related to store design, developing furniture or other product. The design department plans the effective design that can ensure better sales for the company and satisfy the need of the customers (Efbl.org, 2015). On the other hand, the department consider the designs that are well developed and rest are rejected by them. This helps the company to provide the product in highest quality and ranges.

Speed

The speed is normally considered as shortest possible time to meet the request of the customers and provide quick service to them. Therefore, in order to provide prompt service to the customers, IKEA try to maintain long term relationship with the suppliers so that products can be supplied in quick time without making customer wait for the product too long (Elabestlog.org, 2015). The IKEA stores help the company to store all or different ranges of furniture products so that customers can receive product from stores whenever they want. Apart from that, the stores are designed with unique layout which comprises parking facilities and warehouse. On the other hand, the consumers can be easily found the store in quick time from the blue and bright yellow identity of the stores (Gattorna, 2009). Moreover, the company holds a play area where the customers can leave their kinds in order to concentrate on product purchase. On the other side, the company offers loan catalogues to customers to screen out their choices. It is also evident that stores hold more than 14000 items which ensures immediate availability of products. Therefore, it helps the company to cut down the excess cost in distributing products (Heaven, 2012). The company has about 27 distribution centres so that products can be transported to different locations. Therefore, it helps in filling the gap between customer and manufacture.  Moreover, the modular designs let the items to be flat packs with specific code which makes the consumer to choose the product with ease from the warehouse. Therefore, customers are able to get products with speed and with highest quality and least cost (Hbs.edu, 2015).

 

Dependability

The operation of the company is effective in providing dependability to the IKEA by carrying the respective activities in time. Moreover, the company has conventional opening hours therefore, operation is considered as dependent. On the other hand, the company adopts simple reorder system which helps in keeping the share of product out of the stock at the minimum level. Further, the company in order to increase the pace of fresh stock arrival, the system provide great assistance even if there is situation of stock outs (Hultman et al. 2012). However, the company re-examine the reorder quantities and buffer if there is any change in the sales pattern nature. Apart from that, the operation of IKEA helps in maintaining the sound queuing time so that products can be made available to the customers.

 

On the other hand, the IKEA is highly dependent on their home furnishing specialist. The specialist provides practical solution to the company to develop best furniture product at low cost. Moreover, specialists not only assist company but also provide solutions to the customer that helps in improving the home life of the customers (Hunter, 2009). The Business Intelligence department of IKEA is involved in forecasting the design of the product so that it can meet the expectation or desire of the customers. The intelligence team of IKEA is involved in studying the market and what are demanded by the customers so that product can be developed and manufactured with higher effect. Therefore, the business intelligence provides best result to the company and helps in converting ideas into actual shape that can ensure higher sales and income (Ikea.com, 2015). The business intelligence studies the behaviour of consumers so that product can be developed according to their perspective that can satisfy them. Apart from that business intelligence helps the company in graphic design and store design so that large number of customers can be attracted to buy the furniture and that too in low cost.

Flexibility

The IKEA’s operation is competent enough to change quickly and far as per the requirements of customers so that they can gain flexibility benefit. Therefore, the product and service flexibility is followed in the company which helps in incorporating fresh product and services in the operation of IKEA. Moreover, the strategy of global sourcing of IKEA effectively blends with the flexibility operation which makes it highly responsive to needs and wants of the end users (Jonsson, Rudberg, and Holmberg, 2013). The suppliers are extremely involved in designing sourcing strategy so that new products can be developed and supplied to the customers. Apart from that, the company also offers mix flexibility that helps in supplying variety of products and services. It is known that the company offers products from furniture for home to furniture for office and accessories, child care facility, crèche and self-service restaurant which attracts customers (Li et al. 2012).

On the other hand, storage units provide great flexibility to hold wide rangers or sizes of products so that it can be delivered to customers at any point of time. Moreover, the office furnishings area of IKEA provides various kinds of services and moreover, the customers are provided flexible payment option such as via cheque, cash, debit or credit payment, etc and the product are delivered automatically (Roberts, 2012). Apart from that, volume flexibility is also allowed by the operation of the company which helps in controlling the output level. The individual store management teams can be effective for the company to assess the level of stock for each product. Therefore, the change in the demand of the products in particular location can be known by the individual stores. The delivery flexibility is helpful for the company to alter the product delivery timing so that the customers do not have to wait too long for the product (Snee.org, 2015).

Cost

 According to Hultn (2012), the cost objective can be directly affected by the quality, speed, dependability and flexibility effectiveness. Therefore, it helps in gaining low cost factor for the product. The supply network of IKEA provides great assistance to the company in keeping the inventory tight so that more number of products can be developed with less usage of inventory and at low cost. Therefore, company is successful in designing the furniture to best level and supply the product at reasonable price. Moreover, it helps the company in gaining market competitiveness. Apart from that, the process and technology section is also effective in controlling the cost that helps in decreasing the level of reworks and does detail analysis of the process variability so that company do not need to incur extra cost for the production of furniture (Teachenergy.org, 2015). On the other hand, the design department also helps in meeting the increasing cost. The design department tries to match up with the trends of current fashion so that customers can be attracted instantaneously. Moreover, they focus on providing requisite ambience in the stores so that sound environment can be delivered to customers to shop. The department try to maintain the high quality from the product design till the delivery of product to the customers. Moreover, as designing a product requires high cost but design department of IKEA controls the cost and best furniture product is provided at low cost which can be affordable by average income group customers. Apart from that, the store is designed in such that the product can be effectively placed and customers can make selection according to their preferences (Li et al. 2011).

Suggestion for improving performance

In order to improve the quality of operation, the company has to engage efficient and skilful employees so that best service can be delivered and wastage of product can be reduced. On the other hand, in order to increase speed of operation, the process technology has to be updated so that products can be stored in store at right time and prompt customer service. Moreover, in case of dependability, the product has to be delivered on agreed time so that customers can remain associated with the company. Further, flexibility in operation has to be handled carefully so that product is available in time in stores and specific requirements of consumers are met. On the other side, the automation technique and flat packs can be useful in controlling the cost and providing low cost products to customers.

Conclusion

From the whole study, it can be concluded that operation management is a tough job for the company to handle. The company has to place their strategy in right plot so that higher benefit can be gained in terms of sale and customer satisfaction point. IKEA is highly involved in aligning their operation and meet the criteria of performance objectives. Thus, the study has considerably focused on the five major pillars of performance objectives in order to have clear understanding of the operation of IKEA and propose some suggestion that can help in enhancing the performance of the company.

 

References

Arrigo, E. (2005). Corporate Responsibility and Hypercompetition. The Ikea Case. Symphonya. Emerging Issues in Management, (2).

Bilgin, F. and Wuhrer, G. (2014). International Marketing compact. Wien: Linde.

Diva-portal.org, (2015). Towards Efficient Road Transport in Logistics Operations. [online] Available at: https://www.diva-portal.org/smash/get/diva2:322352/FULLTEXT01.pdf [Accessed 8 Mar. 2015].

Edvardsson, B. and Enquist, B. (2011). The service excellence and innovation model: Lessons from IKEA and other service frontiers. Total Quality Management & Business Excellence, 22(5), pp.535-551.

Efbl.org, (2015). IKEA: Culture as Competitive Advantage. [online] Available at: https://www.efbl.org/upload/7730963-Strategijski-menadzment-Studija-slucaja-IKEA-2010-12-16.pdf [Accessed 8 Mar. 2015].

Elabestlog.org, (2015). Reconfiguration of the Supply Chain Structure. [online] Available at: https://www.elabestlog.org/sites/default/files/cases/Ikea%20Reconfiguration%20Supply%20Chain.pdf [Accessed 8 Mar. 2015].

Gattorna, J. (2009). Dynamic supply chain alignment. Farnham, UK: Gower.

Hbs.edu, (2015). The IKEA Effect: When Labor Leads to Love. [online] Available at: https://www.hbs.edu/faculty/Publication%20Files/11-091.pdf [Accessed 8 Mar. 2015].

Heaven, D. (2012). Robot learns using IKEA-style instructions. New Scientist, 216(2886), p.24.

Hultn, B. (2012). Sensory cues and shoppers' touching behaviour: the case of IKEA. International Journal of Retail & Distribution Management, 40(4), pp.273-289.

Hultman, J., Johnsen, T., Johnsen, R. and Hertz, S. (2012). An interaction approach to global sourcing: A case study of IKEA. Journal of Purchasing and Supply Management, 18(1), pp.9-21.

Hunter, M. (2009). Selected readings on strategic information systems. Hershey, Pa.: IGI Global (701 E. Chocolate Avenue, Hershey, Pennsylvania, 17033, USA).

Icmrindia.org, (2015). IKEA's Cost Efficient Supply Chain - Operations Case Studies - Case Study, Case Studies|Case Studies. [online] Available at: https://www.icmrindia.org/casestudies/catalogue/Operations/OPER084.htm [Accessed 8 Mar. 2015].

Ikea.com, (2015). IKEA Group Yearly Summary FY13. [online] Available at: https://www.ikea.com/ms/en_CA/pdf/yearly_summary/ikea-group-yearly-summaryfy13.pdf [Accessed 8 Mar. 2015].

Impgroup.org, (2015). Global Sourcing Development at IKEA – a Case Study. [online] Available at: https://impgroup.org/uploads/papers/7056.pdf [Accessed 8 Mar. 2015].

Jonsson, P., Rudberg, M. and Holmberg, S. (2013). Centralised supply chain planning at IKEA. Supply Chain Management: An International Journal, 18(3), pp.337-350.

Korsgaard, S., Rask, M. and Lauring, J. (n.d.). The Diversity Management Paradox in Globalization - The Swedish IKEA Way. SSRN Journal.

Li, H., Guo, H., Li, Y. and Skitmore, M. (2012). From IKEA Model to the Lean Construction Concept: A Solution to Implementation. International Journal of Construction Management, 12(4), pp.47-63.

Li, H., Guo, H., Skitmore, M., Huang, T., Chan, K. and Chan, G. (2011). Rethinking prefabricated construction management using the VP based IKEA model in Hong Kong. Construction Management and Economics, 29(3), pp.233-245.

Roberts, T. (2012). From new materialism to machinic assemblage: agency and affect in IKEA. Environ. Plann. A, 44(10), pp.2512-2529.

Schirone, D. and Torkan, G. (2012). Food in IKEA: A Strategy to Support the Core Business. BMR, 1(4).

Snee.org, (2015). Market Driving supplier Strategy: IKEA's Global sourcing network in two developing countries. [online] Available at: https://www.snee.org/filer/papers/482.pdf [Accessed 8 Mar. 2015].

Teachenergy.org, (2015). OPERATIONS MANAGEMENT. [online] Available at: https://o.teachenergy.org/operations-management-ikea-case-study.pdf [Accessed 8 Mar. 2015].

Tuck.dartmouth.edu, (2015). IKEA as an Innovator. [online] Available at: https://faculty.tuck.dartmouth.edu/images/uploads/faculty/ron-adner/17EIS_Main_Project_-_IKEA_-_Final.pdf [Accessed 8 Mar. 2015].

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