IKEA and H&M: Inventory Management and Operations Analysis

This report provides a comparative analysis of the inventory management and operational strategies employed by IKEA and H&M. It begins with an overview of both companies, highlighting their global presence and market positions. The report then delves into the specific inventory management techniques used by each, including IKEA's cost-per-touch and in-store logistics, and H&M's focus on managing finished products. Facility layout strategies, such as product and process layouts, are also examined in the context of each company's operations. Furthermore, the report discusses supply chain performance metrics like quality and cost, and suggests improvements for both organizations. Finally, it emphasizes the importance of effective inventory management in enhancing supply chain performance and meeting customer expectations. The report concludes by suggesting segmentation of inventory and regular calculation of safety stock levels to improve decision-making and facilitate expansion. The report is a great resource for students studying management and operations.

Running Head: MANAGEMENT 0
OPERATION MANAGEMENT

MANAGEMENT 1
Brief –
IKEA and H&M are the two manufacturing organisations selected for analysis in this
assignment. IKEA is one of the biggest home furnishing retailer having its operations
internationally. The company was founded in Sweden in 1943. The company have around
313 IKEA stores in 38 territories (Lieber, 2019). In most of the IKEA stores, it is possible to
lodge around 12000 products effectively. The company ranked number 40 as the World Most
Valuable Brands in Forbes list. IKEA furniture is loved by many consumers around the globe
due to their superior quality and affordable prices. Along with this, various exceptional
inventory management techniques are also employed by the enterprise that amazes both
consumers and rivals. As IKEA operates at international level, the company is responsible for
delivering high-quality products at a reasonable price internationally.
H&M was initiated in 1947 and today it becomes the second largest clothing retailer
all over the world. Considering Gartner Supply Chain, the company also attain number 4 rank
as best performing enterprise in Europe. H&M has around 4,433 stores in 61 countries. H&M
also use an investment management strategy which helps the company to take out maximum
stock control. In addition, H&M outsources all production with having more than 700
independent suppliers (Arrigo, 2010). The suppliers have their own subcontractors. The
supplier's operations are reviewed by more than 30 Code of Conduct auditors who operate at
H&M production offices. As company follow effective retail inventory management
technique, it helps them to get more favourable open market, compact inventory lead time
and more cost-efficiency in manufacture of goods.

MANAGEMENT 2
Sol –
Both IKEA and H&M employ varied sort of strategies in relation to inventory
management and it is differentiated by kinds of inventories managed. Inventory is considered
to be an item of value that a firm plans to sell for profit. It includes goods ready for sale
including any physical resource used in the production of finished goods (Pakdil & Leonard,
2014). Hence, the three different types of inventories rise include i.e. finished goods, raw
ingredients and work-in-progress. All these three sorts of inventories are managed by IKEA
and on another side, H&M presently manages finish products only.
Each company have adopted some of inventory characteristics that help them to
maximise profit and reduce costs. The major two different categories of inventory
management procedures that are employed by IKEA includes Cost-per-Touch inventory
management and in-store logistics personnel handling inventory management. In Cost-per-
Touch inventory strategy, customers are allowable to select the furniture that they need and
take the bundles by self. In-store logistics personnel handling inventory management is also
used by IKEA which also consists of in-store logistics manager accountable for the procedure
of ordering and a store goods manager holds material handling logistics at all stores of IKEA.
(Banker, 2009).

MANAGEMENT 3
Sol –
In H&M, the lady clothing is made in trendy styles with having complex designs. In
H&M, 100 designers coordinate and collaborate with each other’s helps in delivering trendy
clothing advance a year. The organisation invents and produces considering two-fold design
process. Hence, customer satisfaction is increased as the company provide real-time design
response that is associated with a customer-driven production strategy (Kamyab et al, 2016).
As the company manages inventory effectively, it aids to raise flexibility of product in align
with reduction of lead times. This ultimately increases the probability of buying rights
products. Along with this, it also helps H&M to fill-up stock to its stores swiftly including
best available products at reasonable prices. Hence, all these procedures aid the organisation
with increased performance of enterprise and overall operational efficiency.
Sol –
In a manufacturing firm, facility layout is an arrangement of various aspects of
manufacturing in an appropriate manner so as to attain desired outcomes of production .It
includes buildings, plant location by lines, building, passages and other parts that help the
enterprise to carry out various operations efficiently. Product layout, Process layout,
combination layout and fixed position layout are the major four dissimilar types of layout.
Product layouts is an assembly line where the necessary supplies and tools are available at
each unit of the assembly line depend on where the product is in production. In this category
of layout, only one product of one type of products is produced in an operating area and it
also provided better utilization of machines and manpower. According to Edis et al (2011),
the process layout is designed to keep all thing in an organised way and this helps everyone
to know where all supplies and tools are located. The process layout is lower desirable when

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the products are not standardised. A fixed-position layout is appropriate for a product that is
too heavy or large to move. Considering the nature of the product, an individual has little
choice in the use of a fixed-position layout. Various other components are brought here such
as machinery, tools, hardware to this location. On the other hand, sometimes many situations
calls for a mixture of all three main layout types and this mixture are known to be a hybrid or
combination layouts. Therefore, industries would to like use any type of layout as much.
Product layout is used by IKEA and on another side, both product and process layout
are used by H&M. With employment of process layout, H&M effectively able to
manufacture clothing of well quality as considering their operations, each cloth have
requirement of dissimilar processing and it needs to be done in a sequential manner. In
addition, product layout allows both H&M and IKEA to deliver high volume of clothing and
furniture respectively considering higher standards for the comprehensive markets (De Carlo
et al, 2013). In addition, IKEA may undertake fixed position layout but in case of H&M, it is
not necessary to be employed. In case of IKEA, it will help to deliver huge furniture which is
not necessary to move from place to another within the enterprise. Collectively, it can be
stated that combination layout is not essential in both the organisation i.e. IKEA and H&M.
Sol –
With the rising competition and fluctuating market environment elements,
manufacturing organisation relies highly on the performance of supply chain to develop and
implement strategies help them in gaining competitive edge in the industry (Grewal, Levy &
Kumar, 2009). Hence, it is significant for organisations to effectively measure the

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performance of supply chain. To measure performance, effective assessment helps both firms
to acknowledge metrics.
The two metrics i.e. quality level and cost/price of the products can be used by both
firms to measure the performance of supply chain. Both aspects can help the organisation in
identifying whether their supply chain is performing well or not. In addition, products
belonging to high-quality represents well supply chain performance and poor performance of
the supply chain is a mark low-quality products. In the same manner, affordable prices of
product represent a well-performing supply and high extreme prices of products represent a
poor performance of supply chain (Chen, 2011). Taking account of both metrics, H&M and
IKEA need to enhance various aspects considering the design and operations of their supply
chains and it will effectively make the best use of supply chain performance and its several
related aspects. Along with this, H&M and IKEA need to employ highly practised and
competent designers who can effectively produce the high-quality products with using
existing materials and thus offer well clothing. Collectively, both H&M and IKEA can
operate at profit by effectively delivering high-quality products at reasonable prices to
customers.
Sol –
Many enterprises now understand the significance of inventory management. It is
very important to control costs of operations and also met the expectations of the customers
by offering well-quality products on time. Focusing on improvement in inventory
management will directly enhance the performance of supply chain and it is possible that

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both the organisation can implement this without impacting customer benefit package and
operations (Vachon & Klassen, 2008). For case, both IKEA and H&M may divide their key
areas of operating inventory while considering stock levels. These three categories embrace
on replenishment requirements, safety of stock, and any excess stock. This segmentation will
help both organisations to make comprehensive decisions in managing the flow of inventory.
In addition, H&M and IKEA can also enhance their inventory management by calculating the
safety levels of stock on a regular basis to keep them updated. This will help IKEA and H&M
to make important decisions based on very true information and help them in their continuous
expansion to other nations.

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