Operations Management Challenges and Strategies in IKEA

This report discusses the challenges faced by IKEA in operations management and explores the application of principles for quality management. It also evaluates the impact of productivity, workflow, and quality on organizational competitiveness and examines the integration of core operational strategies with business strategies. Additionally, it analyzes the role of management information systems and ICT applications in supporting operational processes. The report concludes with an evaluation of project methodologies and scheduling tools for effective project management.

REPORT ON
OPERATIONS
MANAGEMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................4
MAIN BODY...................................................................................................................................4
CONCLUSION..............................................................................................................................17
REFERENCES..............................................................................................................................18

INTRODUCTION
Operation management includes organizing, planning and supervising processes and
further making necessary improvement for gaining high profitability. It is multidisciplinary
functional area in the organization with marketing as well as finance.
Ikea is multinational furniture organization which was established by Ingvar kamprad in
Sweden. It was started in 1943. The report includes brief introduction to organization and
highlighting operation management challenges that is faced by company. Critically discussing
application of any three principles for maintaining quality management of operation management
practices. Evaluating impact of productivity, workflow and quality on the organizational
competitiveness. Evaluating integration of core operational strategies of company with its overall
business strategies. Report further carried forward with the discussion of role of management
information system in assisting strategic goals and operational processes success in organization.
The role of ICT application in supporting as well as enhancing operation management. Report
ends with analyzation of methodologies and scheduling tools which can be used for developing
project specification, controlling, scheduling and evaluation to effectively implement and
manage the project successfully. Concluding report with final findings and analyzing and
evaluating contribution of project leadership for effectively brining about change and manage all
stakeholder expectation.
MAIN BODY
Brief introduction to company and highlighting operation management challenges that are
faced by company. Critically discussing application of any three principle in maintaining
quality management of operation management practices
IKEA was founded in Sweden and it had its headquarter in Netherlands. It was
established in 1943 as mail-order sale business and the further begins to sell furniture in 1948.
IKEA is multinational group which manufacture, design and sell ready to use furniture, home
accessories and kitchen appliances (Heizer, Render and Munson, 2017). The company's name is
acronym for Ingvar Kampard, who is founder of company. It is currently operated its business
across 49 country and also have 145 stores globally. It mainly develops and manufacture
different type of furniture that are bed, sofas, bookshelves and tables along with bathroom
accessories and kitchen utensils. For effective functioning and management company consists of
various departments.

There are multiple operation management challenges that are faced by company. The
operation management is very important for IKEA as it is helpful for maximizing efficiency of
company while goods and service are being produced, so that the needs and demands of
consumer could be fulfilled. IKEA is company that manufacture furniture and thus some
operation management decision are involved in the company for purchasing fabric, wood, hiring
and training employees, planning for location and factory layout. So along with opportunities
many challenges are faced by company. The challenges which are faced by company are
sustainability, globalization, ethical conduct, system design and ineffective communication. The
company don't have effective communication among its employee and top management so that
problems which are faced by their employees couldn't be solved by company. Thus, employees
get demotivated. The company doesn't follow the sustainability in their companies business
operation so it can be indicated that they are harming country's natural resources. IKEA does not
have ethical business practice in their business. They lead to have a negative impact on the
company on its stakeholder and consumers as well. Designing system, managing system and
planning system represents wide range of challenges to the company, and they should effectively
manage and control it. The operation management of IKEA faces challenge while transporting
goods to the various countries. The trade barriers, technological advancement and transport
technology as well (Reid and Sanders, 2019).
There are major principles of operation management that can be used for focusing and
delivering the good and services to their customer's. The supporting IKEA for delivering good
result, by an optimized input of the material, equipment, human resource and technology. The
three operation management principles that can be further used by company are-
 Reality- The operation management of IKEA must focus on problem, instead of various
technique. As there is no tool which could present a universal and overall solution for
company' s problem. This principle can be used by IKEA that they could solve their
employees or any other operation issues by focusing on problem and then further
implementing solution and techniques on it so that it could be effectively solved. The
technique must be used according to the issue or problem so that manager can find
solution according to that. If IKEA follow this they can implement success in their
company and could gain their goals and objectives which are prescribed by them (Hitt,
Xu and Carnes, 2016).

 Organization- The processes in manufacturing are all interlinked with each other. All
elements have consistent and predictable for achieving the similar outcome in the profits
and revenue. IKEA must follow this operation management principle for its
manufacturing processes. The manufacturing process could be according to this principle
so that they could manage and coordinate their process effectively. With the help of these
they could render a quality product to their consumer and could satisfy their consumer.
The needs and demands of their consumer could be fulfilled by company effectively if
they focus on there manufacturing process effectively and having effectively using it in
their operation processes. This all will be helpful for company in gaining huge success in
market and getting revenue and profits as per their goals and objectives.
 Fundamentals- Pareto rule could be applicable to operation. That is 80% of the success
could come from the strict adherence for precisely maintaining discipline and record.
And the other 20% could come by application of new techniques to the processes. IKEA
could follow this principle in their companies operation management. They could get
success by maintaining record and discipline so that they can have changes in their
operation management accordingly (Bromiley and Rau, 2016). Further they can apply
new techniques and tools to these process and which could be further helpful for
company to manage and control their overall operation management. So the company can
get huge success and maximize the profit for them.
Effect of productivity, quality and workflow on organizational competitiveness
Productivity
Productivity is basically the different measure of efficiency in production. In short,
productivity mainly measures the level of output in correspondence to the input. The level and
degree of productivity plays an important role for IKEA and thus helps the organization to attain
competitive advantage. There are numerous determinants of productivity in IKEA and thus is
measured by various factors like technological improvement, labour growth, employee retention
etc (Thomé, Scavarda and Scavarda, 2016). Productivity is predominately the ability as well as
capability of the organization to make use of the available resources for producing the profitable
products as well as services which are desired by customers. Thus, when the productivity level of
IKEA is greater and high then they are able to fulfill the needs and wants of customers and this
helps them to achieve the competitive advantage. For example- When IKEA makes use of

various approaches like lean manufacturing, TQM then this eventually results in the increase of
productivity as the level of waste is reduced. Thus, by increasing the productivity organization is
able to sustain competitive advantage in market.
Workflow
The organizational workflow is basically the series of processes which the organization
undertake in order to achieve their goals as well as objectives. Organizational workflow plays an
essential role in IKEA and thus helps the organization to sustain its position in market. The
effective workflow is largely determined by people which organization recruits for performing
its functions. When a large range of small interruptions outweighs amount of the work done
within given period of time then this results in the slower progress, less job satisfaction among
employees and thus low quality of the care (Corbett and et.al.,2017). At the end due to lower
satisfaction, the employees does not perform satisfactorily and this results in negative impact
upon IKEA. Therefore, the ineffective workflow within IKEA leads to its negative image. It is
highly essential to examine that how the organizations accomplishes their activities as well as
tasks and what process they undertake for achieving their goals as well as objectives. When there
are less interruptions as well as blockage in the work then this helps IKEA to accomplish their
business strategy.
Quality
Quality in organizational context refers to the degree to which organization adheres to
various standards and policies and thus deliver the great product to customers. The level of
quality is imperative in IKEA and thus is the major deciding factor towards its success and
competitiveness. For example- when IKEA sells a high quality products like kitchen appliances
to their customers then this will definitely impact them in positive way (Choi, Cheng and Zhao,
2016). A high quality product will raise the satisfaction level as well loyalty of customers
towards organization and thus will help them to gain an edge over their competitors. Besides
this, it will help the company to enter the new market and hence to establish their position. On
the other hand, when the quality of products which IKEA sell to their customers does not fulfill
their expectations then this leads to the negative impact on company and hence there is threat of
loosing their position in market.

Core operational strategies in achieving business strategy
Supply chain
Supply chain is basically the network which helps the organization to effectively move
their goods as well as services between suppliers and their company. In short, supply chain forms
the major link between an organization as well as suppliers. The supply chain of IKEA poses a
profound impact on the operations as well as the strategy of its business. Its supply chain consist
of various activities ranging from procurement of the raw material to the delivery of products to
end users. Its supply chain basically consists of the three sectors which are primary sector,
secondary and tertiary sector (Ketokivi and McIntosh, 2017). Primary sector relates to
development of raw materials. Secondary sector concerns with converting this raw material into
product and tertiary sector involves delivering products to the outlets. Thus, this forms their core
operational strategy and this smooth and step by step process in supply chain of IKEA helps
them to gain competitive advantage by timely delivery to end users. Thus, supply chain of IKEA
is one of the major operational strategy which helps them to fulfill needs and demands of
customers and this in turn helps the company to achieve their goals and objectives.
Inventory management
Inventory management is one of the another most important operational strategy of IKEA
in addition to supply chain. Inventory management is basically process through which
organizations order, storing as well as uses their inventory for fulfilling customers needs.
Inventory plays one of the most important role in helping IKEA to sustain its performance. The
input as well as finished products forms the core operations of IKEA (Fisher, Olivares and
Staats, 2019). Maintaining the effective level of inventory helps the organization to save
themselves from detrimental effect and hence enable them to deliver the products to customers at
given time in proper quantity. When the company does not have the required level of the
inventory then the company is not able to fulfill the demands of customers and this poses a
negative impact on their overall performance. Thus, IKEA attains e-commerce as well as store
orders through maintaining the proper inventory level and this helps them to achieve their
organizational goals as well as objectives which is to enlarge customer base as well as achieve
competitive advantage. Therefore, this is one of the significant operational strategy which helps
IKEA to leverage their strategic view with its overall performance.

Performance indicators for improving company operations
Performance indicator is basically the framework which enables organizations to measure
the effectiveness of their activities and its overall impact on the customers. IKEA uses a variety
of performance indicator which helps them to track as well as monitor their operations.
Balance scorecard
This is the well-known and widely used performance indicators which enables the
organizations to recognize as well as improve the different internal functions of business as well
as the external outcomes. IKEA uses balance scorecard for measuring the effectiveness of
operations (Ivanov, Tsipoulanidis and Schönberger, 2017). The managers as well as top
management of IKEA gathers the information as well as data and thus uses this for making the
effective and efficient decisions for their organization. For example- in order to improve its
internal operations, IKEA makes use of this balance scorecard which helps them to known that in
which are improvement is required.
Conversion rate
This is the another performance indicator which organizations uses for measuring the
number of customers. In short, this indicator tells the organization that how many customers
have been converted into consumers during given period. This helps IKEA to improve their core
operations and thus tells them to know how many customers have been converted to consumers
(Matthias and et.al.,2017). For example- For a particular kitchen appliance, IKEA found that
there are more number of customers than other appliances thus this helps them to make
improvement in that product.
Six sigma
This is the process which helps the organization to reduce waste and thus improve their
overall operations. This is used as performance indicator in IKEA to know whether the
production department is utilizing all the available resources or not and whether the staff is
oriented towards reducing waste or not. This shows the overall performance of the departments
as well as help managers to ensure the proper quality of products (Swink and et.al.,2017).
Customer complaints
This is the another performance indicator being used by organization to estimate the
number of complaints which are being placed by customers for particular product, service or
entire company. IKEA every week figure out the number of complaints which the customers are

placing on different sources like website, mobile application etc (Gunasekaran and et.al.,2018).
When the number of complaints for particular product is more then IKEA designs various
strategies for making innovation in that product or for fixing that problem. This indicator helps
them to monitor their overall performance.
Sales revenue
Sales revenue is basically the amount of revenue which is being generated from the sales
of product and services. This performance indicator helps IKEA to track as well as evaluate the
improvement needed in the operations of organization. When sales to revenue ratio is high then
this indicates that company is gaining edge over competitors and hence their operations are
imperative while on the other hand, when this ratio decreases then this shows that sale of the
particular product is not in the way so as to achieve high profit. Thus, this helps IKEA to manage
their operations (Hill and Hill, 2017).
Management information system
Management information system is predominately the specification as how the
organization needs to translate their corporate goals and objective into actions wherein work is
performed. In short, management information system is primarily utilizing the technology,
businesses processes as well as people for recording, storing as well as processing the data for
producing information which decision makers in organization uses for making their daily
operations (Wild, 2017). In nutshell, it is collection of the systems, hardware and people for
processing the information.
Operational excellence
The role of management information system is highly imperative in IKEA and thus helps
them to achieve their strategic goals as well as enable them to conduct operational processes
smoothly. IKEA uses this MIS for improving its operations. For example- company uses this
system for automatically placing the order with supplier once inventory level has reached re-
order limit (Slack, 2018). This helps IKEA to ensure that their store never runs off inventory
level as well as customers can rely on them for finding their products. Thus, this overall
improves the capacity of organization along with their operations.
Improving customer relation
In order to attract the customers as well as fulfill their needs and demands, the historical
information is generally used for understanding the fluctuation in their needs as well as demands.

Here, management information system is used for creating services as well as products which
will address their needs. This helps IKEA to establish the long-term relation with customers as
well as suppliers and thus helps them to generate a large profit by enlarging customer base
(Waleczek and et.al.,2019).
Role of ICT
Not only does the managing information system helps IKEA to achieve their strategic
goals but ICT which is information and communication technology also enables the organization
to keep their operational process upfront and achieve the strategic goals and objectives.
Information and communication technology is basically the infrastructure as well as components
which helps the organizations to store and retrieve the digital data (Meredith and Pilkington,
2018).
Inventory management
One of the significant operational process of IKEA is supply chain and inventory level
where ICT plays an important role. Organization is required to maintain the appropriate level of
inventory as well as stock for meeting demands of customers without incurring much cost, thus
in this situation ICT tracks and monitor the quantity of every item which IKEA maintains and
this trigger the order of further stock when quantities falls down to the pre-determined amount
(Spring and et.al.,2017).
Data management
This is the most remarkable role of ICT wherein it helps the companies to store all the
relevant data within a database. In supporting the overall operations management, it is necessary
for IKEA to store all the data of their raw material, quantity, suppliers, delivery time etc. Thus,
ICT is considered as the effective tool which helps IKEA to keep a track of all these
informations as well as data to manage the overall operational process (Glock and et.al.,2019).
Besides this, it also helps the management to easily access the information about various aspects
whenever they want.
Effective communication
As the name indicates, ICT is mainly concerned with maintaining the proper channels of
communication between different level of organization like customers, suppliers, employees etc.
For managing the supply chain effectively and ensure its smooth flow, ICT helps IKEA in
number of ways. Firstly, through ICT the management and the production department is able to

communicate as to how much of raw material will be required where the management in turn
interact with suppliers regarding the quantity of stock (Pilkington and Meredith, 2018). Besides
this, ICT enables the company to track the movement if raw material and products by
communicating with suppliers or wholesalers.
Methods and technologies to optimize operational processes
There are generally wide range of requirements, methods as well as technologies which
allows the organizations to effectively optimize their operational process. These aspects mainly
helps the companies to manage their overall operational process from striving upon the raw
material to significantly delivering finished product to end users (Wamba and et.al.,2018).
Automation
Automation is basically using the technology for executing the recurring tasks as well as
processes within business where the manual work can be eventually replaced. This automation
plays a vital role within supply chain of IKEA and thus optimizes the workflow for maintaining
the competitive edge. This automation helps the company to accelerate productivity of their
supply chain and thus enables them to increase their profitability ratio. It is generally utilized by
IKEA in various facets of supply chain like payment as well as invoicing, order fulfillment,
picking or packaging, selling across the multiple channels and many more (Heizer, Render and
Munson, 2017). Automation plays the role of game-changer and and manages the overall process
from end to end. For example- besides spending the efforts and time on manual work for
tracking the information of suppliers, automation helps to focus on the performing the tasks more
competitively and thus helps them to keep their process upfront.
Artificial intelligence
Artificial intelligence is one of the well-known and widely used technology which helps
the organization to leverage their overall process together with the strategic view. Artificial
intelligence is basically taking up the speed when it comes to the global logistics as well as
supply chain in the operational process. Artificial intelligence is predominately the approach for
using the massive data for training machines in order to perform the activities within semi-
supervised ways (Reid and Sanders, 2019). This helps IKEA to estimate the demand of raw
material which will go in producing the product. When the organization appropriately estimate
the quantity of raw material, and they are bale to fulfill the needs of customers. Apart from this,
AI helps the organization to increase their productivity as well as profit ratio by stepping out of

the manual work, paper-based processes, manual invoice generation etc. Thus, at the end AI
forms the core component in operations process which helps them to gain an edge over their
competitors.
Lean management
This is one of essential requirement with operational process and also forms the well-
known method for optimizing operational process. Lean management is primarily performing the
functions of organization by emphasizing more on customer satisfaction while reducing waste as
well as increasing productivity. This forms the integral aspect of operation in IKEA which helps
them to facilitate the efficient process as well as improve their activities. IKEA uses this method
from reducing the amount of waste as well as for increasing the cycle time along with efficiency
(Hitt, Xu and Carnes, 2016). The main objective of IKEA behind using lean management is to
shorten the cycle of product development as well as make the product more viable and feasible.
For example- IKEA uses lean management for reducing the poor labour practices as well as
reducing the waste during production process. When the company uses all the available
resources for reducing waste then the load on production machines decreases and this leads to
the development of high quality products at much low cost.
Scheduling tools as well as methodologies
In order to develop the project specifications, its schedule a wide rage of scheduling tools
as well as methodologies are used. The main aim of these methodologies and tools is to effective
manage the project and hence implement it. The scheduling tools are basically the tools which
communicates that what work is need to be done, what type of resources will be used by
organizations and in what time-frame it needs to be completed (Bromiley and Rau, 2016).
Critical chain
This is one of the most important scheduling tool which is being used by organizations
for effectively implementing their project. It mainly emphasizes upon resources which are
needed for executing the tasks of projects. In short, this tool mainly considers the resource
constraints and dependencies (Thomé, Scavarda and Scavarda, 2016). The main rationale of
IKEA behind using this tool is that the traditional tools utilizes 30% of the time as well as
resources is range of wasteful techniques like bad multitasking etc. Thus, this tool enables the
organization to accomplish their work using finite resources along with completing in shorter
duration. For example- the buffer which is being used in this tool like project buffer helps IKEA

to bring down their delivery times as well as to ensure that given project is completed within the
given time frame along with pre-decided budget. Thus, critical chain is one of the most important
tool which is being used by this organization for ensuring successful implementation of project.
PERT
Program evaluation as well as review technique is one of the widely known tool which is
being used by organizations for scheduling the tasks flow within project as well as helps to
estimate total time which will be required for completing the particular project. This is one of the
most efficient tool within which helps in properly controlling as well as scheduling each of the
task of project and thus at the end allows the organizations to implement this successfully. IKEA
utilizes this tool for scheduling their project and for arranging the tasks within orderly manner
(Corbett and et.al.,2017). This tool helps IKEA to understand that how each and every activity is
dependent upon each other and need to be performed in a sequential manner for ensuring the
effectiveness of project. For example- during the project to establish a new product in market,
IKEA would have to consider each and every task in proper manner like first task will be
ordering for raw material, second task would be to start its conversion. Thus, without the raw
material production department cannot start their function. Hence, here each and every task is
relied upon each other.
Lean management
Apart from the scheduling tools, lean is one of the remarkable methodology which is
being used in the evaluating the project and properly implementing it. Lean methodology
basically is concerned with maximizing the value of customers while reducing and minimizing
the waste. It generally aims at creating more influential values for customers using less
resources. In short, it stresses upon eliminating the waste and thus increasing the quality. The
lean methodology used by IKEA generally identifies three wastes (Choi, Cheng and Zhao, 2016).
First is Muda which is about eliminating the waste which does not provide any value. For
example- overproducing the product than needed. Another waste is Mura which is eliminating
variances within workflow process during scheduling. For example- while establishing new
product if the company spends large amount of time in understanding its aspects then production
department will have less time for producing final product. Last is Muri which is removing the
overload in order to make process faster. Thus, by striving to remove these three types of waste,
IKEA is able to implement its project effectively by providing high quality products.

Role of Project leadership
Project leadership is basically one of the most important part in effectively implementing
the project and ensuring its effectiveness. The leaders which are responsible for the particular
project contributes to the great extent towards the successful completion of project and thus
forms an effective link between performance of organization and satisfaction of customers.
These leaders are highly responsible for fulfilling the expectations of wide range of stakeholders
and thus is concerned with bringing about the change which will at the end create value for the
customers (Ketokivi and McIntosh, 2017). The major stakeholders of IKEA are customers,
employees, government and the shareholders. Thus, the leaders are highly responsible for
fulfilling their needs as well as expectations.
Effectively communicate
This is one of the mots important and much needed skill within the leaders working on
the specific project. Communicating all the constraints as well as aspects of the project to their
stakeholders is highly necessary in order to gain their confidence and efficiently formulate the
project. This is also important for bringing the valuable change for society as well as for the
entire organization (Fisher, Olivares and Staats, 2019). The project leaders of IKEA before
commencing any kind of project like launching new product, bringing change in organizational
structure etc communicate with their major stakeholders like government, shareholders for
ensuring the effectiveness of project. For example-while launching a new product, it is highly
essential for the project leaders of IKEA to communicate wit their shareholders as well as
government as what will be the marketing budget, how much money will be required, what
resource will be required, will it be worth or not etc. Through proper communication, the leaders
are able to fulfill the stakeholder expectations.
Critical thinking
While working on any kind of project, brainstorming and critical thinking forms the vital
part and is required not only for completing the project but to make it valuable for all the
stakeholders. Hence, project leaders need to be engaged in critical thinking about various aspects
of the project in order to bring out a great change for the entire society. The leaders of IKEA are
continuously involved in applying critical thinking in order to solve the complex problem and to
complete it within given time-frame (Ivanov, Tsipoulanidis and Schönberger, 2017). For
example- during launch of new product, the project managers and leaders of IKEA needs to look

that what are the expectations of customers and what type of product they want in order to
resolve their problem. Thus, in order to fulfill their expectations, leaders need to apply
brainstorming and what features needs to be inculcated in the product or what characteristics it
need to have. Thus, in this way the project leaders of IKEA are engaged in fulfilling expectations
of stakeholders.
Transparency
Remain transparent to all the stakeholders is one of the core competency and skill of the
project leader which helps them to bring a valuable change to society and accomplish the
expectations of stakeholders. To remain transparent does not simply mean to disclose all the
financial information but in the wider sense it relates to remain accountable to the stakeholders
(Matthias and et.al.,2017). IKEA before beginning any project initially shows all the aspects
related to project to their shareholders as well as employees as how much money will be incurred
in this project, what will be time-frame, how much resource will be required, how many
employees will be needed for project etc. The leader when remain transparent ad accountable to
their shareholders then this eventually raises their confidence and trust for IKEA and ultimately
helps to bring the required change as well as helps to effectively formulate the project. This
forms the major project leadership skill for managing the demands of stakeholders.

CONCLUSION
It has been summarized that the operations management plays an important role within an
organizations and thus is the framework through they are able to effectively plan as well as
supervise the various operations like production, manufacturing etc. Within this operations
management, productivity, workflow and quality plays an important role and thus have the main
objective to help organization gain competitive advantage. There are various operational
strategies among which the important one is supply chain. The integration of supply chain in
organizational strategies help business to achieve their long-run and short-run objectives. In
order to track effectiveness as well s operations, organizations uses various performance
indicators like conversion rate, six sigma etc. For making the operational process highly efficient
and effective, role of MIS and ICT is highly profound. These helps the organization to manage
the inventory level accurately and maintain demand and supply chain. Besides this, various
emerging technologies like AI, automation enables organizations to step out of manual work and
thus optimizes their processes. There are various scheduling tools as well as methodologies in
project management which helps organizations to effectively implement their project and
schedule each and every task sequentially. In this, project leadership plays a crucial role where
their core competencies and skills helps the organization to fulfill all the expectations of
stakeholders.

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