Comprehensive Report: Operation Management Strategies for IKEA

This report provides a detailed analysis of operation management, specifically focusing on its application within IKEA. It begins with an introduction highlighting the importance of operation management and its various functions, such as layout arrangement, packaging, product design, and supply chain management. The report then delves into the significance of the 'Three Es' (Efficiency, Effectiveness, and Economy) in business operations, emphasizing their role in expanding business capacity and improving performance. It further examines the tension between cost reduction and quality increase, and the importance of performance objectives like cost, quality, speed, dependability, and flexibility. The report also discusses how linear programming adds value to production and evaluates critical path analysis and network planning. Finally, it explores operational outcomes, including the development of a network plan and the application of quality management techniques to improve operations within IKEA.

OPERATION
MANAGEMENT

Table of Contents
OPERATION MANAGEMENT.....................................................................................................1
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Importance of operation management...................................................................................1
1.2 Operations functions.............................................................................................................2
1.3 Evaluation of operation management using a process model..............................................2
TASK 2............................................................................................................................................3
2.1 Importance of ......................................................................................................................3
‘Three Es’ to business.................................................................................................................3
2.2 Impact of tension between cost reduction and quality increase:...........................................4
2.3 Significance of performance objectives ..............................................................................4
TASK 3............................................................................................................................................5
3.1 Linear programming adds.....................................................................................................5
value production, how?..............................................................................................................5
3.2 Evaluate critical path analysis and........................................................................................5
network planning........................................................................................................................5
3.3 Need for planning and control..............................................................................................6
TASK 4............................................................................................................................................6
4.1 Operational outcomes for selected........................................................................................6
organisation................................................................................................................................6
4.2Produce a network plan indicating the...................................................................................7
resultant critical path..................................................................................................................7
4.3 Improve.................................................................................................................................8
operations by Quality management.............................................................................................8
techniques ..................................................................................................................................8
CONCLUSION................................................................................................................................8
REFRENCES...................................................................................................................................9

INTRODUCTION
Following report is prepared in order to understand the importance of operation
management in IKEA Ltd. In the report the learner will get the idea about what is the importance
of operation management in the business and what are the various functions performed by it will
be also discussed in detail. The report will help in understanding how management operation
provide benefit to the business (Mohammadi,Soleymani and Mozafari,2014). Different Es will
be discussed in the following report in order to understand how they help the business in
achieving the targets. IKEA is one of the leading company which is providing the customers with
good furniture facilities and it is important to understand why operation management is
important for the cited company.
TASK 1
1.1 Importance of operation management
Operation management is the process through which IKEA produces the goods and
services for market so that revenue can be generated against it. The system of operation
management help the cited company in earning maximum profit. Operation managers are those
who carry out the operational activities. They are the one who responsible for inventory
management, capacity purchase maintaining the quality and to take other critical decisions
related with production. Different activities are performed by operation management which help
the cited company in increasing the total profit by developing the production capacity. The
operation team converts inputs into final outputs by processing them. Before starting the
production process the operation managers take various decisions like what should be a part of
operating management. From the last few years the importance of operation management has
increased. Its significance has increased due to the increased in customer awareness, developed
competition, need for reducing production cycle (Niknam,Meymand and Mojarrad,2011). Apart
from this the increased in the technology has demanded more efficiency from the operation
management by improving its quality of production. The process of operation management starts
with the identification of customers. Although the functions of operation management vary from
organisation to organisation it is of vital importance to each unit. As the cited company is dealing
in the business which needs to achieve customer satisfaction it is important the it has the
effective operation managers. Core importance of operations management are given below:
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 Helps in reducing the total cost of an enterprise
 Company can increase its profitability through using this concept
 It provides guidelines for developing alterations in the organisation
1.2 Operations functions
For IKEA operation management plays various important functions which help in
developing the overall standards of different operations. As the company deals in serving the
customers with the furniture services it is important to make the furniture available where it is
require and in the best way that customer feel satisfied after buying IKEA products. Different
functions performed by the management are:
 Arrange layout- It is required to give fast and effective flow to the to the store so that
customer process can be carried out smoothly.
 Packaging- As the product concerned is of huge structure it needs to be designed in a
stylish way so that it attracts more customers
 Product designing- The design of the products are selected carefully so that it is
comfortable and like by all.
 Job design- staff contribution is maintained by the operation management so that the
whole staff works towards achieving organisational goal.
 Supply chain- Operation management also checks that best location is chosen for the
location of the store where it can get maximum customers.
 Supply management- It is important that the placing of products is effective in the stores
so that the require product can be assessed easily by the customers as well as by the
management (Moghaddam,Seifi and Niknam,2012).
 Capacity planning- operation management also perform an important function of making
the required amount of stock available so that demand can be fulfilled and no potential
customer is missed due to unavailability of material.
 Supply chain management- This is the function in which supply of material to different
locations of stores are maintained.
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 Maintenance of warehouse- It is the duty of operational managers to maintain the quality
of warehouses where the stocks are kept. The management has to make sure that
cleanliness and safety is maintained in the go-downs.
1.3 Evaluation of operation management using a process model
Operation management for IKEA should be simple and smooth. It should be based on
strategies which can be easily understood by the employees. These strategies should be such that
it helps the management in achieving the targets as expected. It is very important that the
operation activities are controlled by the operation mangers so that the overall cost of the
business is reduced. The operational efficiency is improved by using the process model in order
to understand the process required to achieve the desired efficiency.
IKEA needs to maintain and arrange the staff accordingly so that they can cope up with
the provided machinery and keep the production process smooth. Company needs to follow the
whole process in the most efficient way so that maximum output is created by less investment.
Operational mangers also need to manage the whole finance so that operations are carried out in
the given budget and do not exceed it.
Through adopting this technique transformation is absorbed in the operations of organisations.
The physical features of products and clients are modified. The placement of different raw
materials is also changed so that they can give better output. Decision regarding stock keeping
and supply of information is carried in a manner that maximum satisfaction is given to the
person concern.
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Illustration 1: Process model

TASK 2
2.1 Importance of ‘Three Es’ to business
Be it IKEA or any other business three Es are of vital importance. It helps the business in
expanding and increasing its capacity which ultimately increase the performance of business. In
order understand its role in detail each one of them need to be studied in detail:
Efficiency- It is the capacity of business to produce desired output by using different inputs.
Efficiency helps the business in carrying out the enterprise activities in more managed and easy
form. It also act as a benchmark which helps management in comparing the actual performance
so that the deviations can be measured and if needed corrective actions can be taken. This help
management in achieving the desired quality. In order to achieve efficiency management need to
follow the set process.
Effectiveness- It can be understood in terms of achievements done by the IKEA. It is measured
by comparing the results with targets set against the same (Heizer and Barry,2013). Effectiveness
facilitates right work on right time by giving the management responsibility of doing the things
effectively. It can be measured by setting the objectives in advance so that it can be evaluated
after the same task is completed.
Economy- It is one the most important element from the three Es. It includes the financial
feature of the project completed. As for any business finance is the core element it is important to
consider it in order to improve the quality of business. In order to do the work efficiently and
effectively it is important that it is done economically. If the work done is very effective and
efficient but crossed the set budget it can not be considered effective. For calculating the
economy of production done it is compared with the value of input and the output produced
through it (Li and Feng,2014).
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2.2 Impact of tension between cost reduction and quality increase:
For IKEA it is important to maintain both, quality and cost of the product. It is important
because if company wish to maximise the profit it is required that the total cost is reduce to
minimum but for this the management can not compromise with the quality. It is important that
the quality is maintained at the reduce cost as any adjustment with the quality of product or
service will directly effect the demand from the consumers. Though increase for quality
company doesn't afford to do addition in the cost as it will effect the total profit margin for the
company. There are various other issues between quality and cost due to the change in the
present era. For performance the main objective has to be achievement of quality. It is measured
by the customer satisfaction with the product and service provided to them. If the customer are
satisfied with the products they will readily pay even the high prices for the same products that
are available in the market by other business entities (Bazmohammadi,Karimpour and
Bazmohammadi,2012). For maximising the profit it is also important that company maintains
loyalty with the customers. This will increase the total sales of the business which will directly
reduce the total cost of production. The speed of production will increase as a result of
improvement in the performance, the mistakes will be corrected which will also reduce the
customers negative feedbacks.
2.3 Significance of performance objectives
The resources of the business are optimally utilised by the business so that performance
of the cited company can be improved. Identification of best measure to perform various task is
the crucial process which is related to the interior and exterior factors which are competitive for
the cited business. Different objectives of operation of performance are as under:
Cost- It is one of the most important objective of performance is to complete the give project in
minimum cost. It is important that the total cost of production is supported with performance
which gives the best of it.
Quality- apart form cost quality is another factor that need to be maintained while the
performance. It is concerned with the maintenance of desired quality of performance which is
free from any error and omissions (Grids,2012).
Speed- it is important for the business to maintain the cost and quality of the product which is
supported with speed also. The demand of customer has to be fulfilled on time so that continuity
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in the sales is maintained. Although in case of excessive demand business can be provided with
lead time so that they can supply the products in the give time period.
Dependability- It is the delivery of the demanded products by the customer in the given time
frame as promised by the business to the client like allotment for different product or service. It
is important that reliable delivery is done to the customer (Tsarouhas and Arvanitoyannis,2010).
Flexibility- It is facilitating change in the business. Business should adopt to flexibility to ensure
expansion in business. It can be done adopting different types of flexibilities in the business
which are changing the volume of production, total time consumed to perform the task. After this
flexibility can also be done in changing the ability of marketing mix of different price product
place.
If the cited business achieve the above operation performance objectives it can compete with the
other firms more effectively. For any business to succeed it is important to value the customer
and also the success depends upon the group action.
TASK 3
3.1 Linear programming adds value production, how?
It is a mathematical process which is taken in exercise by various business entities in
order to get the best solution to different problems which take place in the different process of
the business like production increase, development in sales, change in profit and total share in
market. Therefore in this way it can be said that linear programming is an effective tool to invest
the resources in process of manufacturing of the business. IKEA can add extra value to the
produced goods with the help of LPP. It also helps the management of the cited business in
distributing the quantity in bulk to different whole sellers and retailers (Smith,Rahn and Wang
2010). It helps in doing growth in the business as it provides following benefits to cited
company:
 Recognisable and comparable results are achieved through this system
 When the activities can be judged through quantitative terms it becomes more easy to
determine the efficiency of the working staff.
 Resource allocation is done in the most suitable manner.
 Various alternative options are made available for the management which provides
management the best course of action.
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3.2 Evaluate critical path analysis and network planning
In order to review the project critical path and network planning help much. Optimum
time is provided to complete the task supported with the cost required for the same. The cited
company need to have good network planning so that distribution can be done to the different
retailers. It helps in reducing the total cost by doing the apt investments of finance and other
resources of the company.
In order to perform the different tasks on time it is very necessary that management has the
estimation regarding time requirements of each task. Through this process cited company can
complete its different projects on time and can take enjoy the benefits by covering maximum
market.
3.3 Need for planning and control
Operational planing help the operational team by providing them a blue print of the task
that has to be performed by them. It include the whole information about how production will
take place, how it will be converted into final goods and finally the way in which it will be
distributed in the market. It includes different objectives like target decision, manufacturing and
testing decisions etc. It can be used for the following purposes:
 Allocation of resources- As resources incur huge cost of procurement they need to be
allocated in a way that it gives maximum result to the business.
 Cost reduction- operational planning and control helps the production team in
minimising the cost of production by keeping effective control (Burke,2013).
 Maximising profit- By increasing the efficiency of the production team IKEA can
maximise its profit as the cost of production is reduced.
 Efficiency improvement- control help in increasing the efficiency of the production
team by providing them with proper guidelines and solution to problems.
 Meet the demand- By keeping control and doing proper operational planning optimum
quantity is produced on time which helps in maintaining the continuous flow of supply in
the market.
 Reduce in cost- As through keeping control wastage can be eliminated the total cost of
production is reduced.
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TASK 4
4.1 Operational outcomes for selected organisation
As discussed above the process of production of finished goods and services gave the
following outcomes to the business:
Company earned good profit by increasing its efficiency- By using the different strategies and
operational planning the cited company is successful in achieving the desired amount of profit. It
is the result of the effective operational team that under their guidance the production team
utilised its resources in most effective manner.
The total expenses of the organisation are reduced to minimum- With the help of control
budgets are provided to different production departments (Wang,2010). This helped management
in keeping control on the expenses as they carry out their activities in a way that their outcomes
will be compared with the set standards. If deviations are found out than actions were taken
against the concerned department. This way accountability was set which reduce carelessness on
the part of production team and total expense was reduced.
Targets are achieved- The system of operation management and planning helps the business in
achieving the set targets on time. This help the business in maintaining the supply of products in
the market which increased the brand value and also total sales of the cited company.
Time management- Through the effective management company is successful in doing an
effective time management for all their activities. Time allotment was done to different projects
and the production team was asked to complete the given project in the allotted time. This helped
the production team in doing good time management which increases their efficiency and
goodwill in the market.
4.2Produce a network plan indicating the resultant critical path
Innovative and new products can be expected in the cited business for development. It
has become important for promotion. In order to present a new market company need to
communicate the knowledge about it in the business by communicating about it in different
divisions. Critical path for the operation management in the cited company is as as follows which
is widely used for scheduling the task. The critical path is made with the help of different
mathematical based rule. It can be produce through spreadsheet or with the help of studying the
different stages involved in it like follow:
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First stage- It involves breaking down of the whole project into different operations according to
the sequence. Classification of different task is done by keeping different grounds of similarities.
For this the cited business planning is done for producing a new furniture (Niknam and
Golestaneh,2012). It starts with buying of raw material and putting all at one place.
Second stage- Time required to complete the production is done on the second stage. It is the
duty of the operational manager to estimate the time required for production of different products
so that resources can be provided to the production team accordingly.
Third stage- At this stage the relation between time and cost is set. Opportunity cost is
determine at this stage by the operation management. Company need to decide the route which
has to be chosen for the production of each commodity. Apt path need to be chosen which is
neither too long nor too short.
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4.3 Improve operations by Quality management techniques
For the cited company it is very important to have effective quality management as it
helps in developing the different operations and production process. It can be doing good
planning keep monitoring the activities and also by controlling the whole process of management
(Jung,Lee and Park,2014). For the cited company six sigma can be used as an effective
technique to analysis the quality of the products produced. It does the defect calculation which
took place in the production process of the furniture. Through this quality is maintained in the
different activities so that defect free products are produced (ChenWu and Fu,2012).
Another technique like total quality management can also be utilised as through this organisation
provide learning to the working staff so that it can give more effective results. ISO 9000 is one
more system through which standards are set against each product type and through this
maximum satisfaction can be provided to clients.
CONCLUSION
From the above report it can be concluded that operation management help much to
IKEA in improving its performance. It helped the cited company in minimising their production
cost with an increase in total efficiency. Three Es were also discussed in detail above which
shows how they are important for any business to increase the profitability of the business. In the
above report it is also discussed that how by using different operational activities company can
work for its production team and can maintain continuity in the supply of furniture in the market.
Along with this it also showed how distribution of different commodities is important for
increasing the supply and also the importance of store location is discussed in the above report.
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REFERENCES
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Systems.54. pp.525-535.
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objective optimal operation management of distribution network considering fuel cell
power plants. Energy.36(1). pp.119-132.
Moghaddam, A.A., Seifi, A. and Niknam, T., 2012. Multi-operation management of a typical
micro-grids using Particle Swarm Optimization: A comparative study. Renewable and
Sustainable Energy Reviews. 16(2). pp.1268-1281.
Heizer, R. and Barry, R., 2013. Operation Management, Sustainability and Supply Chain
management (Vol. 11). Pearson, UK.
Li, C.B., Li, P. and Feng, X., 2014. Analysis of wind power generation operation management
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microgrids with hydrogen storage and polymer exchange fuel cell power plants. Fuel
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Jung, D.K., Lee, D. and Park, S., 2014. Energy operation management for Smart city using 3D
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Online
Operations management 2017.[Online]Available
through<https://en.wikipedia.org/wiki/Operations_management>Accessed on [23rd May 2017]
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