Operations Management

This report provides an overview of operations management and its significance in business. It focuses on the case study of IKEA Company, discussing its operations, management of inventories, and product scheduling. The report also explores relevant theories and principles related to operations management.

Name
Course
Operations Management
University
Tutor
Date

Operations Management
Introduction
Business operations can be defined as different ways through which the business is able
to create optimal outputs from the various available inputs; this can be offering services or
manufacturing physical products (Hill & Hill, 2012). An operation can also process a customer
surrogate, for instance, dress to be dry cleaned, and this is similar to the processing of
information. Management is defined in the English dictionary as the process of controlling or
dealing with people or thing (Slack and Lewis, 2015). In the organization context, management
involves the interlocking of functions to create business policies, planning, organizing, directing
and controlling the available resource with the aim of achieving the objectives on the
organization in line with the stipulated policies. It is the process that combines and transforms
various inputs in a controlled way as per the organization policies (Hill & Hill, 2012).
Operation management entails the organizing, planning and supervising business
processes coupled with appropriate improvements for higher profitability. Daily operations in the
business have to be adjusted regularly so as to support the strategic goal of the company and
should be preceded by careful evaluation and deep analysis of the current processes. Operations
management is a term with a long historical background. Production management was the earlier
term used for operations management showing its origins in the manufacturing industry.
According to (Balogun et al, 2016) operations management is concerned basically with the
change of state or manufacturing of physical goods.
Another study (Slack and Lewis, 2015), argues that operations management is merely about the
efficient and effective management of any type of operations regardless of it being a physical

good or service good. According to (Slack et al, 2004) operation management is that section of a
company which deals with the transformation of a wide range of inputs to the desired output or
services with the needed level of quality and standard. In modern business operations, operation
management has taken a totally new turn as compared to years back in history. It is seen as a
bunch of activities which cause careful planning, leading, controlling and organizing the
organization operations. This dictates the contribution of operation management to the
profitability or downfall of the organizations (Balogun et al, 2016).
To further explain the real world application of the concepts and literature around
operation management, this report uses IKEA Company for the assignment. This paper presents
how IKEA Company is able to establish and handle its customer requirements. The report also
indicates the operations and management of the inventories, product scheduling in the
organization. Relevant theories and principles have also been used to create an understanding of
the company operations.
Historical Overview of IKEA Swedish Company
IKEA is a privately owned company in the retail industry. The multinational company
designs and sells home furniture, accessories, and kitchen appliances among others. IKEA has
been able to expand its operations in not less than 300 stores around the globe. The company is
known for its specialty in the production and sales of low priced goods inform of flat pacts for
indoor assembly by the customers. The history of its foundation dates back to 1943 in Sweden. It
was started by Ingvar Kamprad, who was then 17 years old. The young man took the initials of
his own name, the family farm (Elmtaryd) and the Agunnaryd, home village and formed the
IKEA as the company name. The store initially started with small sales of lighters and pens

before it started selling furniture in the year 1948. Five years later, Kamprad opened a showroom
in Almhult where customers checked the displays and made orders. It was not until 1958 when
the founder opened the first retail store (Kristoffersson, 2014).
In order to reduce the cost of doing business for the company, flat packing was initiated
in 1956 and this had a tremendous effect on the profits of the small company. During this
period, the company was facing stiff and unfair competitions from other companies in Sweden to
a point that they cut off some of the suppliers of the company (Kristoffersson, 2014). In
response, IKEA undertook its own design work and contracted supplier outside Sweden such as
Poland and Denmark. Furthermore, the company set up its own manufacturing subsidiary by the
name Swedwood (Jacobs et al, 2014).
IKEA started its international business retailing business by opening its first store in 1963
at Norway. This trend continued with more store being set up in Switzerland, France, Australia,
United States of America, Russia, the United Kingdom, China, and Germany (Jacobs et al,
2014). By the 90s, the company became oriented to designs and yet still maintained is a vision
of keeping the price low for its customers. In the year 1997, IKEA focused on meeting the needs
of kids. During this time, several products and design were developed for the kids. Through its
donations, the company has helped set up the Kamprad House which basically serves cancer
patients. Generally, the company store is large enough to cover an area of 17,280 square meters.
Due to high Swedish taxation, the company is not owned by shareholders but it's rather run by
nonprofit foundations, holding companies and operating organizations (Kristoffersson, 2014).

Organization Business Activities, Strategies and Delivery process
IKEA Company the vision of offering a wide range of good designed, operational home
furniture products prices suitable for the majority of the people. The company way of doing
business in all the 355 stores spread in 29 nations has made the company the largest home
furnishing retailer in the world. The organization has maintained its large number of consumers
due to its ability to provide unique services, inventory management techniques and a supply
chain that has remained strong among its competitors (Porter, 2004; Jacobs et al, 2014).
The workforce for IKEA is currently staggering at 208, 000 employees who manage the
large furniture stores of the company. The management of these individuals is complicated can
easily lead it problems if not handled well (Hill & Hill, 2012). It is a challenge for the managers
to keep track of a large number of employees during working hours. This challenge was
evidenced in 2013 when the company sales increased by a mere 3 % as compared to the previous
year when the sales had increased by 9.5%. This shows that a drop in the performance of the
employees can easily impact the sales (Hill & Hill, 2012).
Components of Activities at IKEA
Cost
The cost objective of an organization can be affected directly by the flexibility
effectiveness, speed, dependability, and quality and hence it helps in achieving low-cost factor
for a unit product. IKEA has a robust supply network which helps the organization in keeping
inventory in good form such that extra products can be developed at low cost(Jacobs et al, 2014).
The organization is, therefore, prevailing in developing furniture of the best quality and
distributes the product at a competitive price. In addition, the company helps in maintaining

market competitiveness. Also, the technology and the process sections of the company are very
effective in the control of costs by lowering the cases of reworks and by doing a proper analysis
of process variability which reduces the chances of the company incurring extra costs (Jacobs et
al, 2014).
The company has a design department that helps in meeting the increasing costs. This
department is tasked with the matching of up with the current trends in the furniture and fashion
industry to keep customers entertained and attracted. The design department also aims at
providing requisite ambiance inside the company stores to create a suitable buying environment
for its customers. The company tries to lower the cost of producing designed products to all its
customers. To tap optimally from this aspect, the company stores are designed in such a way that
the products can be placed effectively and the consumers can choose the products as per their
liking (Johnson & Clark, 2005).
Flexibility
Operations at IKEA are competent enough to be quickly changed as per the customer’s
requirement. The flexibility benefits have helped the company for many years to incorporate
new products and services. In addition, the global sourcing strategy applied by the company has
helped it to be highly responsive to the end user requirements. The organization is also known to
provide mix flexibility services when supplying products and services.
In addition, the company storage units offer great flexibility to house a wide range of
sizes and dimensions of its products so that they can be availed to the end users at any point in
time. IKEAs office furnishing stores give various kinds of services and the end users are given
flexible paying choices. Common payment choices provided by the company include cash,

cheque, debit or credit payment and the purchased goods are delivered without delay (Jacobs et
al, 2014). The output level of the company also benefits from the volume flexibility of the
organization. The unit store management teams are also efficient for the company to assess the
stock levels of the products. Customers of the organizations also benefit from the flexibility since
their products are delivered without delay.
Dependability
The organization operations have been very successful in creating dependability to the
IKEA through handling of activities in the right times. The company has scheduled conventional
opening and closing hours hence operations are considered as the dependent. In addition, the
organization has adopted easy reorder systems which aid in maintaining the share of product out
of stock at the minimum level. Another aspect of dependability can be evidenced in the
company’s culture of maintaining sound queuing times such that products are made available to
the end users in short periods.
Establishing Customer Requirement
The organization success can also be attributed to the ability to establish customers’
requirements. This aspect has enabled the company to develop the right products that easily sell
(Scholes, 2008). To achieve this, the organization has always provided its customers with
questionnaires and conducted interviews. The task of establishing customer requirements or need
is mainly in the docket of the marketing department of the organization and is also supplemented
by the requirement cited from other departments.

Suggestions to Improve Company Performance
As much as IKEA is making profits, there is room to make more and maintain good
performance. The company should consider having skillful and efficient staff team so that only
best services are delivered and reduce the wastage of company resources. The speed of
operations in the company can be increased by using up to date process technologies so that the
products can be stored in the right times and stimulate customer service.
In the incidences of dependability, the organization should always strive to deliver the products
on the agreed times to maintain good customer relations (Johnson & Clark, 2005). Also,
flexibility in the operations has to be handled efficiently to help in availing products in stores in
the right times and in line with the requirements of the customers. Flat packing and automation
can be utilized by the company in controlling the cost and provision of lower-priced products to
the customers.
Conclusion
The literature provided in the report generally shows that operation management is a difficult
task for a company to implement effectively. The company has to commit to setting the strategy
in the right direction so that more benefits can be realized in forms of customer satisfaction and
in sales. IKEA Company has to understand and implement the main pillars of operation
management so that its trend of success and compatible advantage can last for years in the
furniture business.

Reference List
Balogun, J., Hailey, V. H. and Johnson, G. (2016) Exploring Strategic Change FT Prentice Hall
Hill, A and Hill, T (2012) Operations Management Strategic Context and Managerial Analysis.
Third Edition, Palgrave Macmillan
https://www.ikea.com/ Accessed last on 19th December, 2018.
Jacobs, F.R., Chase, R.B. and Lummus, R.R., 2014. Operations and supply chain
management (pp. 533-535). New York, NY: McGraw-Hill/Irwin.
Johnson, R and Clark, G (2005) Service Operations Management (Improving Service Delivery).
2nd ed. FT Prentice Hall
Kristoffersson, S., 2014. Design by IKEA: a cultural history. Bloomsbury Publishing.
Lowson RH (2002) Strategic Operations Management The New Competitive Advantage.
Routledge.
Porter, ME (2004) Competitive Strategies: Techniques for Analysing Industries and Competitors.
Free Press
Scholes, K (2008) Exploring Corporate Strategy: Text and Cases FT Prentice Hall
Scholes, K, Johnson, G and Barney JB (2005) Exploring Corporate Strategy: Text Cases: With
Slack, N and Lewis, M (2015) Operations Strategy. FT Prentice Hall
Slack, N, Chambers, S and Johnson, R (2004) Operations Management 4th ed. FT Prentice Hall