Operational Management in IKEA: Strategic Planning and Analysis Report

This report provides a comprehensive analysis of IKEA's operational management. It begins with an introduction to operational management and its significance in IKEA's business success, including the importance of strategic planning and the organization of production processes. The report...Read More

Operational
Management

Table of Contents

INTRODUCTION
The Operational management is a business function which is responsible for to
coordinate, control and the planning of the resources which are needed in an organisation to
produce its products and services. This report is focusing about the operational management in
IKEA and different working of OM in company, the report is putting light on understanding link
between OM and strategic planning, and to organisation of production processes, followed with
network plan of critical path.
TASK 1
1.1 Operation management and its importance on IKEA's business success
Operation management is the administration of any organisation or business practice,
which creates most effective and efficient possibilities in an organisation. It takes up conversion
of material and labour into most effectively profitable goods and services for an organisation.
This management system balances cost with the revenue for a company (Caralli, Allen and
White, 2010). It assists company with several resources which helps in understanding the link
between various tasks and in their management.
It plays very crucial role in the management of work on trade-offs which helps to make
effective decisions
Operation’s management improves the organisation's financial health by rising its productivity
which helps the company to meet the customer's demand and priorities. IKEA is a private retail
Swedish company, which provides home accessories, appliances and furniture to their customers.
The production system of the company is mainly putting their efforts in the reduction of wastage
and to produce more profit. The operation management system in IKEA is playing very crucial
role in the success of the company as: -
 It provides various designs and assistance in production and profit making.
 It assists company with several resources which helps in understanding the link
between various tasks and in their management.
 It plays very crucial role in the management of work on trade-offs which helps to make
effective decisions (Cook, Husband and Boxall, 2016).
 Operation management team teaches others in IKEA about the process in every task.
Management team provides information about the work process and other strategic
changes which are implemented in an organisation.
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 It built specific expertise in context with traditional functions and improves the running
process.
The main operational strategies of IKEA is to provide the best possible quality of
Furniture and their services at most affordable prices for everyone, consisting with excellent
quality and durability. These thinking strategies had taken IKEA to top furniture seller in the
world. Some crucial aspects behind the succession of IKEA are hitting right demographic, by
proving not so expensive products but not cheep at quality and because of their quality stores.
1.2 Analysing Operations function
Being the function of an organisation, the functions of Operational management are to
manage different process and involvement of goals. It seeks for to optimise or utilise different
resources input for to produce the productive output (Loorbach, 2010). The management team
takes the decision about different functions, focusing on to increase productivity, avoid possible
waste and generation of the best possible profit such as: -
 Equipment Upgrades: - One of the function of operational manager is to examine work
functions and to determine what changes in company can result in improvement of
productivity. It consists of upgrading the equipment and other resources in an
organisation. IKEA is continuously upgrading their equipment to provide better services
to their customers and to the company itself such as introduction of Automatic billing
machienes, Upgraded delivery process for their products and others.
 Coordination of Communication: - Communication within different departments of an
organisation is very crucial, improved communication in a company will directly affects
in the increment in the productivity. It helps in the exchanging of information from one
department to another which increases the pace of work in company and its production
rate, at IKEA the company is providing their employees full of transparency in
communication and sharing of information. The organisation is giving full details about
their current strategies and policies to their employees which promotes the building of
trust.
 In collection of Revenue: - Operational manager is the in-charge of revenue collection
and billing processes of the company (Terpstra and et.al., 2012). The main function is to
maintain the cash flow by using different techniques to collect revenue quickly, and
billing for another department to run the organisation properly. IKEA is using many of
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the sourcers such as online money transfers and others sources of revenue collection such
as their department stores, delivery services and other.
 Training: - Along with Human resource department, operation managers also work to
improve different techniques, and train employees to develop their skills and ways to do
their jobs. The Cited organisation is applying and performing various tanning activities to
their employees regarding to provide customer's satisfaction and to develop their
efficiency.
IKEA is one the biggest leading brand in retail industry and providing different products
in different markets, the company is having more than 123,000 workers in different functions
such as purchasing, distribution, whole-sale and retail range. To manage the information and
coordinates within the organisation, the operational management system of the company is
playing crucial role in its success. The company is using the most upgraded technology for the
implementation of their work. The operational management team is providing information about
every single process to their employees and to the different departments. The cash flow in the
organisation is very frequent which allows them to invest in different departments and business
processes.
1.3 Evaluating the operation management of IKEA by using a Process model
The operations carried out by Management system works on certain processes which are
their process models (Rademeyer and et.al., 2010). Operational management of IKEA works on
different functions to assist the productivities and profit making to their company. Some different
process models of functions of IKEA.
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Operation management carry off the work function and applies the changes which
increases the productivity and efficiency of the company and its workers. For this a particular
process is carried out focusing on the profitable output (Burgoyne, 2012). The process is mainly
carried out on 3 factors such as Input, then Processing and ending with Output.
The function carried out by the management system works such as : -
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Illustration 1: Process transformation model
(Source: - LESSON 9 - BUSINESS BASICS PART II - OPERATIONS MANAGEMENT,
CUSTOMER SERVICE, IS & HR, 2017)

Input Processing Output
First, analysis the work
function and the need of up-
gradation in equipments.
Replace new upgrades with
old one and by providing
proper work functions (Todini,
2014).
Will produce efficiency in
work and will increase the rate
of profit.
Analysing the communication
errors in company.
Modify the exchange of
information to more accurately
and quickly.
This will increase the work
process pace and productivity
of the company.
Analysing the collection of
revenue and billing (Osborne,
Radnor and Nasi, 2013).
Creating the ways for to
quickly collect the revenues
and raising amount for the
company.
If the company is having cash
then it can invest it in profit
making and to manage the cash
flow of the company (Brudan,
2010).
Finding Points for the
improvement and proceeding
to their training.
Training Employees to work
more effective and efficiently,
Trained and more efficient
workers saves time and
expenses of company and
make profit.
By the use of this process model of operational management IKEA can develop Better
System, better control, better decisions and better co-ordination in an organisation. But it has
some limitations too, such as this process is dependent on computers, and their may be distance
between research and manager which can promotes communication gap and creates
misunderstanding in company.
TASK 2
2.1 Appraising the importance of the 'Three Es'
''Three Es'' are fundamentals in this competitive time to drive the company around the
concepts and objectives. These three Es stands for Economy, Effectiveness and Efficiency.
Using the right balance of these three Es will provide IKEA to be more flexible for the upcoming
challenges and pace the current market profit rate (Yeoman and et.al., 2012). IKEA should focus
on maintaining long-term relation with their customers instead of gaining short term profit. The
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best way to lead in this direction is by the creation and delivering of the values by their activities.
These values provide profit if under right balance these 3 Es are developed.
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Effectiveness: - The delivering of services and products as excepted by IKEA, to accomplish the
objective, effectiveness of should be understand for the delivering and achieving of the goals by
IKEA. The best way to increase the effectiveness of any organisation, is setting up of an
objective which will push the limits of the company and helps in to achieve success.
Effectiveness could be understood on the basis of the delivery of services and on the basis of
achievement of the goals. The best way to analyse the Effectiveness is by setting up of the targets
and monitoring them in accordance to their rate of accomplishing.
Efficiency: - Efficiency is the right use of resources by the company to accomplish its task using
minimum amount of assets (Helmreich, Klinect and Wilhelm, 2017). It is in trend to deliver the
same amount of values by consuming the least assets of a company and reducing the most
possible waste, which will provide them great profit. Efficiency, basically is the right use of
resources resulting in the accomplishing of the objectives.
IKEA believes to make the best possible products by the using the least resources,
keeping in mind, that it will not put negative impact on the appearance and functionality of the
company. The organisation mainly use raw material which are wood, cotton, metal, glass, plastic
and other product which are efficiency recyclable. The company uses flat-packs for their
transportation which enables them to transport more efficiently.
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Illustration 2: Importance of "Three Es"
(Source: - The three E's and the difference between craftsmanship and
modern management, 2014 )

Economy: - Economy factor deals with the financial side activities of the company which is the
current financial position of company in the market (Helfat and Winter, 2011). It is the
fundamentals balance of using resources to achieve goals at most reasonable cost. It can be
termed as the key which balances the use of resources in order to achieve the set objective and
goals at most reasonable costing. Or Economy can also be taken as the careful management of
resources such as labour, material or money.
2.2 Impact of tension between cost minimising and quality maximising
Cost minimisation of delivering good and services can be the best efficient way to make
profit, because it increases the sale of the company. But maintaining and providing the best
quality with cost minimisation is very important. Hence, the major output of IKEA is branding
techniques and their better marketing. Company can't reduce its marketing cost, so it can
minimise its production cost and extra over time. IKEA can reduce its unnecessary secondary
expenses to minimise the cost of its products even by providing the same or better quality.
Minimisation of cost can provide several benefits to an organisation such as it will provide low
unit cost, increases the profit margin and operational profits, it will increase the cash flow of the
company and provides higher return on the equity of the company (Galindo and Batta, 2013). On
the other hand it can also lead IKEA with insufficient capacity to handle that sudden increase in
the demand.
Whereas, in quality maximisation focus is on to maintain and improve the quality of the
products and services offering by IKEA, the higher quality products may link to increase in
productivity and cost reduction overtime. Company have to manage the balance in between cost
and quality because if any of these two unbalances then it can make big loss to the company.
On taking both the aspects which are Quality maximising and Cost minimising the
tension between these two can be easily understood such as, in this current competitive market it
is very much important for the manufacturer to provide the best quality of services and products
on the same direction it is very difficult to maintain both and maximise the quality with most
reasonable prices and production of such quality products at lowest possible cost.
2.3 The significance of five performance objectives
The company should be concerned about to provide customer's satisfaction by makin
completing their requirements for fast and affordable services, as well as it is the aim of these
performances objective to help their own suppliers in direction to improve their services which
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they offer to the company. The performance of an organisation basically depends on five main
objectives which are -Quality, speed, Dependability, cost and flexibility. The performance of
IKEA and the management of its operations depends such as: -
Quality: - Quality is most preferred in the list of performance objective, the quality is discussed
very largely in terms of conformance meaning. If the quality of IKEA is good within operations,
the customers will have less complains about the products of the company which directly means
that they are satisfied with products and services offering by IKEA. Satisfied customer will
likely to come back again and buy their needs from IKEA, maintaining customer's relation by
providing good quality will bring more revenue for the company (Mellat-Parast, Adams and
Jones, 2011).
Speed: - Speed refers to the 'speed of response', it is the time taken in between external and
internal customer who are requesting for the product and services. It is mainly affected by
internal and external forms. The external speed is very important to respond to the customers
demand faster, and it is positively viewed by the customers and makes them more likely to come
back again to IKEA. For the fast delivering it may take extra charge by the postal services. On
the other side by Speed's internal affects works on the cost reduction. It is how much efficient the
company is for the production of products having high demand, which enables the company to
deliver those products to their customers in less time.
Dependability: - It is how much the company is dependable, that is the quality of company to
deliver their products and services on time. Externally it is depends on time delivering of the
products and internally dependability affects the cost by saving the time, money and providing
the stability to the company (Buscheck and et.al., 2012). IKEA is very dependable company by
their customers and continuously maintaining relation with their customers.
Flexibility: - Flexibility can be referred to products and services flexibility, mix flexibility, or
delivery flexibility. It is very importance in an organisation to be flexible at different factors to
deal with different situations and fits them to put their products and services in some way to their
customers. It allows the company to introduce variety of products according to customers
demand. IKEA is very bendable company, it continuously changing as according to the market
condition and customer's satisfaction.
Cost: - It is the amount of resources used for an operational cost. The structure of cost is very
different of companies, and if all the above high speed, high quality, flexibility and dependability
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performance objectives are carried out in an organisation successfully it can result in the
reduction of cost.
The key performance objective for IKEA which is acting as great asset for company
success is their Low price which is 30 to 50% lower than market price. Their product strategy is
providing them assets to offer low price, the organisation focuses on low production cost of their
products and services which enables them to provide such low prices for their goods (Prajogo,
Huo and Han, 2012). Also, other objectives like their good designing and functions that is well
designed shopping areas and cheerful decorated rooms, gleaming and tempting atmosphere and
others.
TASK 3
3.1 Linear programming adds value to production process
Linear program consists of step in particular manner which provides solution to the
problems in a company. These are of basically two types graphical linear programming and
computer solutions. Linear programming helps in production processes by providing full
information about the Resources for Input to start the process, about the Processing and its
requirement and the sources of Output. It saves time in making too much research before the
starting of production process (Osborne, Radnor and Nasi, 2013). It helps to achieve the best
outcomes in mathematical models. It also provides information about the function's values. It
helps IKEA to use available resources and to solve their diverse combined problems, it more
easy to adapt and flexible for IKEA to provide better quality of decision to the company.
These two can be understand with the help of mathematical techniques in the
development in crop planning model which is used for the solving of objectives like maximising
financial results minimising in different production costs on agriculture holding. This model is
further structured in two sub-divisions first is linear programming and other is weighted goal
programming the example is taken of the time required in the analysis of planning of critical path
in network planning as follows.
3.2 Critical path analysing and network planning
This is a analysis of project's and methods of planning that will allow project completion
in the shortest time. Critical path analysing(CPA) is the way or techniques for the identification
of necessary activities help in the completion of task. It includes identification of time and
relationship activities for task completion. The CPA is techniques used to construct a project
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models which includes a list of activities, time and dependencies between activities for to
complete the task. Using CPA a company can calculate the longest path to end the project for
planned activities and the shortest and latest way to finish those activities. It helps the
organisation to reduce the risk and cost of the complex projects, it is a planning and decision
making tool as well.
CPA requires complex plan projects such as large number of businesses participate in different
projects which involves significant risk and investment and complex and other is with the
increase in risk and complication is it very much crucial for the identification of relationship
activities.
Network planning analysis can act as the key factors in management based on time
management. Time production can be implemented by using the soonest time to start the process
which was identified in critical path analysis. Network planning is the best way to complete
complex projects in the shortest time (Brudan, 2010). It helps in the identification of the
activities which assist in task completion without any delay.
CPA calculates the longest path of planned activities to accomplish project along with earliest
start time and the importance of activities.
3.3 Need for operational planning and control in production process
Operational planning presents a specific plans about the use of resources by an
organisation. It provides specific activity's details and about the events which are undertaken for
implementation of strategies. Operational planing is management of daily activities in a company
and have different significance of year to year. These plans are produced by staff and the chief
executives of the company.
Swedwood, as the leading manufacturer of IKEA is producing high-quality furniture, and
controls the process of production in IKEA. For to achieve optimum execution out from
production system, control system utilizes different type of control techniques (Elbashir, Collier
and Sutton, 2011). These techniques are: -
 Regular management of inventories by the production control in IKEA
 The Control system organises the schedules for the production
 It manages the best utilization of the resources and processes for the production.
Along with all these, operational planning and control in production process provides the
proper analysis of various divergence which are non-controllable and controllable, these also
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manages the adoption of these divergences use and their motivation, it help in to provide
accurate, and appropriate planning and other standard setting processes with fairer reflection of
current action.
TASK 4
4.1 Set of operational outcomes for IKEA
The main mission of the IKEA is to provide the best quality of furniture in terms of good
design and excellent durability, at most reasonable prices to their customers. In this concern
IKEA is using different types of operational strategies to satisfy their customers. The company
has distinguished itself from their other competitors by organising their stores differently. The
company doubles the warehouses and result the customers are able to see everything in one roof.
As an outcome for this, most of the customers started to prefer shopping at IKEA because of
their variety and low prices (Todini, 2014). The company also linked their other objective with
performance objective, which directly and indirectly influences other strategies.
Accordingly, the quality is the desirability of the product's feature and its reliability that
is how much the product can be helpful and efficiently effectively.
4.2 Network plan and the indication of resultant critical path
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It took 6 weeks to the company to redesign products, after changing the design the
redesigning of packaging took 2 weeks, then for redesigned products order and receive of
components and material it takes 2 and 3 weeks respectively. For assembling product, make up
packing it takes 4 & 1 weeks respectively. For the test market design, revising redesigned
products-packaging and to present result it takes 6, 3, 1 and 1 weeks respectively.
4.3 Quality management techniques application in the improvement of operations in IKEA
Quality management techniques are built to ensure the consistency of products and
services of the company. IKEA can use these techniques to improve their operation such as,
 Operations can be improved in an organisation by developing the focus of customers in
each step and training their employees to provide full customer satisfaction
 By providing leadership techniques for the completion of operations, and having same
ideas and objectives can be very helpful for IKEA
 By using the techniques of process based quality-management
 By continuous improvement in the quality can improves the operational management and
product selling in IKEA (Podgórski, 2015).
The Crosby theory of quality management can also been referred by IKEA to improve their
operations. By setting goals for quality management company can improve their operations.
CONCLUSION
From the report it can be concluded that operational manager needs to account many
factors while proceeding the production of their products. Operational management helps to
manage the decision to balance quality and cost of their product and services. It helps in the
conclusion of weather outsourcing with technology or inventory.
From the above report the importance of operational management for IKEA can be
concluded and its appraisal around different markets and their conditions. The report is also
focusing about different programming and their adds values in production processes.
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