Operations Management And Strategy: A Case Study Of IKEA

Literature Review

Operations management is a planning process related to designing and managing the business operations and coordinate effectiveness in the process of production, which creates value in the produced goods and services (Sousa and Voss, 2008). OM is aligned with the business strategies of an organization to convert input like man, material and labour into outputs like commodity, service and products and provides a platform to organization to attain highest profitability with the lower cost.   

In respect with creation of goods and services for the customers, there are three main functions i.e. marketing, finance and operations. Each of them is distinct in their fields in term of process, responsibilities, knowledge and decision-making (Carroll and Shabana, 2010). Moreover, in every industry, there is two major type of organization where one is manufacturing based and other is service based. Manufacturing operations include process of product manufacturing and creation of tangible outputs whereas Service operations result in intangible output that can be produced and consumed simultaneously.

In addition, to achieve competitive advantage in the industry, there are several others strategic operations decision for the business enterprises and each of these operation decisions is taken to attain operation strategy, which represents speed, quality, flexibility, dependability and cost (Augier and Teece, 2009). 

For taking out each strategic decision effectively, it is important for the business enterprise to consider several primarily governing factors, which are explained in below literature review section. In last, 

In every organization, there are three main levels of strategy, which are divided into corporate strategy, business strategy and operational strategy. In operational or functional strategy, various business aspects such as marketing, finance and operations are combined together for the long-term growth of the future perspectives in order to support the business and corporate strategy (Oltra and Luisa Flor, 2010).

Operation strategy can be perceived as an effective and collective use of production capability, manufacturing strengths and information technology (Ferreira and Otley, 2009). Some of the objectives of operation strategy are profitability, product innovation, effective product design and many others. This makes operation strategy a competitive weapon, which can create competitive advantage in the market and given an organization a strategic direction (Chang, 2011).

For enhance the business performance, some of the widely use operational strategy is – Just-in-time production (JIT), Total quality management (TQM), benchmarking, flexible manufacturing systems (FMSs) and so on with another potential strategy can be used in aligning with them (Chang, 2011). In addition, there are five operations competitive priorities used in align with the overall business strategy. Below, the table represents the same –

Operations competitive priorities	Competitive factors
Cost	Low cost / Low price
Quality	High quality
Speed	Fast delivery
Dependability	Reliable delivery
Flexibility	Frequent new and wide range of products/services, Changing the volume and timing of product/service deliveries.

As per the statement by Peng, Schroeder and Shah (2008), the degree of uniformity or relation between the five operations competitive priorities can help in measuring the effectiveness of business operations strategy.

In refer to operation process of the business, one of the key and important decision area for the management is the designing of the product. For effective designing of a product, various activities and aspect are incorporated such as process of product planning, manufacturing, raw materials planning, supply chain decision and logistics. An innovative and creative product design can help the firm to gain a competitive edge over its rivalries and meets the customer demand in an effective way (Porter, 2010). On the other side, there are various planning needs to be made and necessary key decision to be finalized such as which supplier need to be contacted, what type of materials, components and war materials should be used in the operation process, how and where it should be transported and many more (Gapp, Fisher and Kobayashi, 2008)

Background of Organization

In every business whether manufacturing based or service based, operation function helps as a supportive function to various practices employed in the product life cycle (Heizer and Render, 2011). This also helps operation manager to design a system for introducing new product effectively. In the area of operations management and supply chain, product life cycle helps in informing product design and service framework suited to the dynamic customer preferences in the market across PLC (Doha, Das and Pagell, 2013). 

This concept is focused on meeting the customer needs by designing the quality into a product. It is a function of continuous improvement that helps the customers in getting of quality products and also enhance the development cycle. Below there is a picture depicting the “House of Quality” for attaining the objectives of QFD (Goetsc, 2013). 

Although the primary governing factor of every management is to meet customer needs and preference with a quality product design, however, it also needs to be acknowledged that the product is manufactured easily with increased reliability, low cost and effective manufacturing and operation process (Skander, Roucoules and Meyer, 2008). The key concept behind Design for manufacture efforts is to alter the existing commodity design into a new product design in a way by making the process of operations and manufacturing quicker or less expensive. It is one of the significant methods to enhance the product design process. For incorporating this process, there are several set principle and guidelines that improve the manufacturing process. These are simplification, standardization and modularization (Porter, 2010). 

There is an interconnection relation between process and product design. Both the aspect also has a significant impact on the product cost, quality and satisfaction of customers. For example, in a manufacturing process, if the product design does not match up with the process design, the product that will be manufactured comes under standard quality (Porter, 2010). Every business enterprise has different type of process and as per Hayes and Wheelwright, there is two type of manufacturing processes – variety and volume.  

IKEA is a furniture retail company founded 75 years ago by Ingvar Kamprad in Sweden (IKEA, 2013a). He was a 17 year old carpenter who was also listed by Forbes in 2015 as one of the ten richest people in the world. With the business, he also sells various other things such as pencils and ball-point pens. To meets customer needs at reduced price, the company originally incorporated to sell wallets, watches, pens, jewelry and many other things (IKEA, 2013b). 

Ingvar Kamprad introduced new product range of furniture in 1948. This furniture is produced close to his home by the local manufacturers. With innovative manufacturing, the sales of furniture started to grow rapidly (IKEA, 2013b). With their continuous business growth, IKEA open first home furnishing store in Sweden, which is approx. 6,700 square meters (IKEAFANS, 2013). In Sweden, it was considered at the largest furnishing store at that time. 

IKEA now becomes one of the largest retailer and seller of home furnishing in the world. Their major products range includes table, chairs, cabinets, beds and other household goods sell in around 40 countries around the globe. 

The vision of IKEA is to make a better life for the people with the help of their innovative business ideas and offering of wide range of home furnishings well designed and at affordable prices so that many people can buy (Inter IKEA Systems, 2012a). 

In the retail stores of IKEA, there is various wide and well-functioned range of home furnishings with other household products ready to sale. The product range of IKEA is divided into several departments including kitchen, bedroom, decoration, lightening and many more (Inter IKEA Systems, 2012c). Moreover, all their product range are of innovative design which is wide in function and style. The company also promised to their customers that will always found their preference irrespective of any function or style. 

IKEA follows a distinct and unique approach for the purpose of selling their products. They made well-designed and functional products for the customer with a low price aspect so that it can become affordable to all. So, their products range are of low prices which help people to live a better life at home. Considering every retail store, all their products are designed, manufactured, transported and sold under the administration and management of the IKEA concept. 

As per the business mission of IKEA, the company needs to provide products made of good design and function with excellent quality and durability and also at reasonable prices so that majority of the population can easily buy their products. The operational strategic of IKEA includes various performance aims as well as operations competition primacies considering speed, quality, cost, flexibility and dependability. These competitive primacies and performance goals help IKEA to gain competitive edge in the market.

Quality			· Specifications met. · Supplementary services.
Speed	· Unique layout of store. · Automation (Conveyor belts)
Dependability	· Hub and Spoke model to ensure availability.
Flexibility		· International sourcing to adjust volume changes.	· Mix and match to get large differences in offerings.
Cost		· Tight inventory
	Capacity	Supply Network	Process and Technology

In the global market, IKEA already gains competitive advantage by manufacturing quality and innovative products. The major product range of IKEA is planned to fit customers commitments. Although their specification is quite well, the customers of IKEA is also satisfied with the performance of the products. Moreover, in their retail stores, IKEA also maintained quality environment in the shops as the design of their store’s layout are maintained in a unique way, which helps customers to shop. It used to display market halls, furnishing items and self-serve areas, which is maintained in an effective way (Inter IKEA Systems, 2012b). IKEA delivers low customer contact customer services, however, their staff needs fully helpful by meeting customer needs with the help of note paper, catalogues, unique measures and pens. The company also well-known for its quality service due to their various supporting facilities made for the customer convenience and these are childcare services, IKEA for kids and IKEA restaurants. In last, it can be said that their product range delivers good quality products range that benefits the customers in many ways.

Due to the effective operations in the process of manufacturing, IKEA is very responsiveness to the customers. The company provides them a smoothing shopping experience that helps customers to get quality products in less time. For instance, the company provides them huge area for easy parking which saves lot of time in finding of the respective parking. Customers can also concentrate on the shopping as IKEA provides their kids a playing area (Inter IKEA Systems, 2012,b). Moreover, the customer can get flat-packs products easily as their stores have in-house shortcuts. Each product in IKEA store has a coded number, which makes easy for customers to track and get a specific product in warehouse. There are many more ways where the customers can save lot of time with the special layout design of store and warehouse including several other aspects that create a smooth flow in the customer purchasing process.

IKEA facilitates an effective forecasting planning and demand management that helps them in creating a dependability advantage to the company. Moreover, there was no issue persist in their warehouse’s relation to stock-outs or over stock as they effectively measure customer demand. The company also ensures reasonable queuing time in the store during the purchasing process and also making up enough parking space available. This all helps IKEA to deliver highly dependability for customers that saves time of the customer and cost to shop in the stores of IKEA

 Due to the flexibility in their operations, IKEA attains competitive advantage. The company follow global sourcing strategy that helps them to be more responsive towards the customer demands. They also bring flexibility in the products by presenting the products fast to their competitors and meet customers demand effectively.

Other than product and service flexibility, the operations of IKEA also allows delivery and volume flexibility (Inter IKEA Systems, 2012,d). The company have management teams for both stores and warehouses that manages stocks level of the products and also source suppliers to make alterations in several aspects quickly.

One of the distinct features of their operation strategy is the reduction of costs in all the processes. They have a stock control system that monitors sales pattern and this helps them to response fast and thus saves cost in unexpected situations. The labour cost also saved in the company due to their approach to self-service.

Moreover, low cost and low price are determined by the efficacy of speed, quality, dependability and flexibility of product and services provided.

As per the company belief, every product has a product life cycle and it is the management responsibility to find what to do at every stage of a product life. In case of IKEA, there is a never ending list in terms of enhancement at every stage (Inter IKEA Systems, 2012d). For instance, the products of IKEA is strong and durable, lighter as made by board-on-frame (BoF) technology, well-designed to response the affordable needs of the customers.

In order to meet the customer preference, IKEA has focused on majorly three elements in the product development and design, which are function, low price and design. These three elements are always reinforced in their every product development, idea and product redesign. IKEA products design always decided on the factory floor, which is composed collective work of various designers and manufacturers. In addition, their products designs are framed under flat-packs enable them to decrease cost of warehousing and transportation. Moreover, IKEA never designs a product with more function but rise the price as a product is of no usage to the consumer if it is not affordable.

     Low price    Function        Design          Unique products

Process design is integrated with the product design. As a manufacturer, IKEA has varieties of styles in the product design and process selection. For instance, IKEA is making plan to design a new table. Below, there are few stages from product design to process selection and their integrated relation –

Steps – Steps from product design to process selection

Thus, IKEA can produce such a variety and high volume at a mass production level.

This concept relies on designing of quality into the products to meet the customer needs effectively. This concept brings customers into the designing process and makes continuous improvement. QFD concept can be adopted by IKEA to deliver right value to the customers with their products. For instance, IKEA should do a house of quality on various home furnishings products like cupboards, sofas and cabinets to gain the needs of customers, demand for different style and pattern of products. “Bill of materials” can also be created by IKEA for the specific home furnishing products. A respective training programme can also be started by IKEA in order to train designers and suppliers to make different style and designs of products as per the requirement of the customer. This will help lot for IKEA in order to develop qualitative products and making of continuous improvement.

IKEA focus primarily on price, design and function but a business also demands effective manufacturing, reduction of costs and increase reliability. IKEA needs to also focus on this to design a product in an economical manner. For instance, if a product has complex design and lot of functions, there can be issue raised of lead-time in manufacturing as it requires more time in identification. However, if IKEA practice DFM, product manufacturability can be raised under the set guideline and principles in light with various technologies such as simplification, standardisation and modularization. This practice will help IKEA in achieving economy of scale.

The barrier in implementing quality function deployment (QFD) is the changing demands and preference of the customers. Moreover, it will be difficult for IKEA to implement house of quality as each customer demands is different and variation can be seen in them frequently in respect with the suitable home furnishing products. In addition, manufacturers can also perceive problems due to limited resources and lack of suppliers. IKEA is also focused on mass production process and this creates difficulty in offering customized products.

The next barrier in the implementation of design for manufacturer (DFM) is because the company has huge variety of products that need to be manufactured with different types of materials and components. Moreover, IKEA needs a longer time to adapt and work with the practice of simplification, modularization and standardization. There is also a challenge for the designers to design new products with constituents that are standard across all the products. This will result in the longer time for new product design and development in IKEA products.

While framing this report, I came to know up several concepts, tools and approaches relating to the operation management. Moreover, I also have learnt about the function of operation management lead to enhance cost, speed, flexibility and dependability. I have also completely understood two strategic operation management i.e. product design and process selection. From this assignment, I also gained knowledge about several approaches in relation with operation management such as quality function deployment (QFD) and design for manufacturer (DFM).

As IKEA is the chosen company for this assignment, I have also learned some operation processes from the organization. For instance, IKEA operates its home furnishing products business successfully by having different practices in the product and process selection. Moreover, IKEA also focuses on various small aspect such as innovative packaging of products to decrease the transportation warehousing cost.