A Detailed Analysis of Operations Management at IKEA: A Report

This report provides a comprehensive analysis of IKEA's operations management, examining various aspects such as the importance of operational management, the operational functions within IKEA (including purchasing, distribution, and wholesale), and an evaluation of its operation management. The report also explores the significance of the 'three Es' (economy, efficiency, and effectiveness) within IKEA, the impact of the tension between cost minimization and quality maximization, and the implications of cost reliability, flexibility, and promptness in operations management. Furthermore, the report delves into the application of linear programming and critical path analysis, including network planning for a production line, the need for operational planning and control, and concludes with a discussion of quality management methods to improve operations within IKEA.

OPERATIONS MANAGEMENT IN
BUSINESS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Importance of management of operations for IKEA........................................................1
1.2 Operational functions of IKEA........................................................................................2
1.3 Evaluation of operation management of IKEA................................................................3
TASK 2............................................................................................................................................4
2.1 Significance of ‘three Es’ within IKEA...........................................................................4
2.2 Impact of the tension between cost minimization and quality maximisation..................5
2.3 Implication of cost reliability, flexibility and the promptness which covers the
management of operation....................................................................................................5
TASK 3............................................................................................................................................6
3.1 Way in which linear programming adds value.................................................................6
3.2 Critical path analysis and network planning of a production line in IKEA.....................7
3.3 Need for operational planning and control.......................................................................7
TASK 4............................................................................................................................................8
4.1 Producing a set of clearly defined operational outcomes for IKEA.................................8
4.2 Producing a network plan and indicating the resultant critical path................................9
4.3 Application of quality management methods to improve operations in IKEA..............10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
For making a better business environment, it is highly important to manage all the
operations of organization. The operation's management has significant importance to get more
valuable outcomes. Factors like effective supervision, control to various exercises and
management of production process are managed under the operational management. Effective
consideration of sources allow to have better improvement in managerial activities. It assists in
improving operational standards so that need can be accomplished. Moreover, facilities with
regard to production can be advanced to have better accomplishment of customer’s need. In this
report, IKEA has been taken into consideration for evaluating its operations (Stadtler, 2015).
Organisation was found in the year 1943 and it provides home furnishing products. Firm is trying
to improve the operations in order to increase the quality of products. This report covers the
importance of operational management in business. Also, the operational and capacity planning
is described in this report. Further, to identify the critical path, a network plan is made here.
TASK 1
1.1 Importance of management of operations for IKEA
Management of operations is all about managing different activities in the organization
which leads to run business in an efficient manner. The operation's designing, execution and
control can be considered to explain the operational management. With this approach, the
utilization of such sources could be better to have valuable outcomes. Basically, the
manufacturing side of organization has been highlighted that is more valuable for customers.
There are many functions that come under operational management such as purchasing,
distribution, wholesale, retail and more (Hair and et.al., 2014).
Every organization makes a feasible environment for effective utilization of resources
that helps in producing high quality products for the customers. The needs of customers can be
achieved by organizing activities in an effective manner. By having an assistance of diverse
operational and work standards, production and overall values can be advanced. Along with this,
enhanced level of quality practice is also one of the key practices which might affect the
outcomes. As per the market needs, employee’s abilities also need to be improved to support the
operational practice.

The operational management and leadership quality in employees are important for
controlling each activity effectively. By having an assistance of efficient raw material, the
quality of goods can be maintained effectively. Products have been distributed in all the stores of
IKEA and so, company needs to ensure about transportation and other essential values. The
operational management is essential to make sure about the whole sales department the cited
firm.
IKEA needs operational management in their system as it has some practices like
designing of products, manufacturing and others. The preference of customers has been changed
as values of today’s generation are being transformed. To be in the competitive market, IKEA
has managed their operations effectually and sustainability of company increased to a high
extent.
1.2 Operational functions of IKEA
Basically, IKEA has high goodwill in the manufacturing market with providing wooden
furniture and home packaging. Functions that are involved in the organization are purchasing,
distribution, wholesale, Range, and so on. The purchasing has significant importance in
production process. However, it is done on the basis of customer's requirements and needs
(Trkman, 2013).
Manufacturing is effectively the subject of production and so, company needs to set out
standards with respect to same. If needs and resources are considered during the purchase then it
might affect overall outcomes of business in a positive manner.
Distribution is one more operational function of IKEA that is done for distributing the
products to whole sellers and retailers. Another function like production includes manufacturing
and distribution process. The wooden furniture has been distributed to different stores of the
cited firm. If operational management is better, then it will have a positive impact on the
distribution of goods.
Wholesale is another function that has been managed by the organization. The
operational management must be effective to sell the products to wholesale shops and then the
items are supplied to the retailers. Range of products is decided as per the demand of customers
and market requirement. The management of those products is significantly important to be
successful in the competitive market. Marketing, finance and accounting as well as research and
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development are some functions of management of operations. The enterprise has managed all
the factors that can put a huge impact their operational management (Binz and et.al., 2014).
1.3 Evaluation of operation management of IKEA
In operation management, transformation process is also denoted in terms of
transformation model. This model has steps like input, transformation, output, controlling and
feedback of the respondent. The process model helps to identify the potential of firm and
production can be defined by this as well. It is important to maximize the quality of
transformation process. Thus, it can be said that each company should follow this model (Vom
Brocke and et.al., 2014).
The first element is input as quality of home furnishing products which is provided by
IKEA is up to the standard. Consideration of input is important in order to produce high quality
products and to meet the desired outcomes. Staff members should have specialised skills so that
standards can be advanced. Higher authority of company needs to ensure about machineries and
facilities provided to the employees. It enhances the positive values and improve the overall
performance. Transformation is the next step in which practices like designing, planning and
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Illustration 1: Transformation Process
(Source: Vom Brocke and et.al., 2014)

making strategies are involved. In case of any failure, this step will provide the backup plan so
that management could recover. Effective plan is made by the managers of IKEA for surviving
in such critical situations.
The next step of this model is output i.e. final outcomes and services. In process model,
next step is controlling in which the entire process and activities are controlled by IKEA for
producing primary products and services. The purchasing process, outcomes and practices are
controlled by the cited firm. At last, the feedback of customers recorded by organization which
helps managers to know about the weaknesses and drawbacks of products as they do
modification in their existing design to match the customers’ requirements.
TASK 2
2.1 Significance of ‘three Es’ within IKEA
Economy, efficiency and effectiveness are three Es' that can support in accomplishing the
goal of the organization. These are important for the business unit and supports the firm in
improving its performance level. To be in the competitive market, products should be effective
and to produce such, the utilization of resources should be optimized. The performance can be
measured by the three E's that are so essential for IKEA. The significance of ‘three Es’ in
business of IKEA is shown as below:
It is essential to have good economic condition so that cited firm can run its operations
effectively . It supports organization to produce quality products for their customers. The quality
and quantity can be maintained with the assistance of the sound economy. This helps the
organization to reach at maximum number of customers. Basically, the expenses can be
identified by economic factor of IKEA as the operations can be managed by organization by
knowing cost of each operation. Economy has a big involvement in the financial stability of
company to produce high quality products and for the effective operational management (Boehm
and Thomas, 2013).
Efficiency is also an important part in the working environment. The services provided
by organization and products can be evaluated on the basis of their efficiency. IKEA makes high
quality products for the customers which helps in meeting customer's needs. That is why service
users are satisfied with the products and services of the entity. The utilization of resources is
done effectively by IKEA which helps in getting optimistic results to the organization.
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The effectiveness of each operation made a positive impact on the system of
organization. Quality of the operations and activities is measured by its effectiveness.
Competition in the market is increasing day by day and so, operational management has to be
done effectively. This makes IKEA more successful and therefore, it is able to achieve the
desired objectives (Wixom and et.al., 2014).
2.2 Impact of the tension between cost minimization and quality maximisation
Cost impacts on the business to great extent, cost minimization can support in increasing
profitability of the business unit. . It helps IKEA to produce products as per the standards.
Quality maximisation is the process in which machineries and techniques are used which can
enhance the level of products. To reduce the cost and upgrade its products and services, IKEA
can use PESTEL analysis.
The rules and regulations changed by government considering all legislation help
organization to make expansion in their global operations. Thus, the number of customers will be
increased. Maximisation of customers will help the organization to increase their production
which leads to cost minimization. Economic condition of the nation can impact on business
performance to great extent. In case of inflation people do not buy products frequently that affect
overall sales volume of the organization (DaSilva and Trkman, 2014). The prices of its furniture
products have been increased by IKEA due to high inflation rate and therefore, sales volume has
been decreased. That is why cost of resources of cited firm have been increased. The products
should be eco-friendly so that they it will not harm the environment and number of people can be
attracted. The cost minimization and quality maximisation; both approaches make a positive
impact on the growth of business. IKEA has made attractive designs of home furnishing products
with high quality which has attracted customers at a large scale and thus, company has grown at
a high rate.
2.3 Evaluation of significance of the five performance objectives that underpin operations
management to organisation
The set of products can help in satisfying consumers and fulfilling their needs.,Of
companies identify requirements of clients then it would be easy for them to offer them products
as per their needs. . If organization fails to do that then it will impact on its financial performance
to great extent. The performance objectives make by corporation for maintaining the balance
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between demand and supply. There are five performance objectives thatcan help entity in
meeting with expectation of consumers(Pagell and Shevchenko,, 2014).
For example if the cost of furniture get reduced then people will take more interest in
buying furnitures . Also, the company will get competitive advantage from this approach. This
will help to improve the quality of the products and enhancing the business performance. It is
necessary to offer best quality products to customers and it needs to be affordable by them. This
will be helpful in increasing satisfaction level of clients.
The supply of products is necessary to be analysed for checking dependability of the
organization. The services and products such as home furnishing products should be delivered to
the user on time. The IKEA can increase the consumer loyalty for the organization that helps to
make a reputed brand image in the market. It should be the first priority for the organization to
identify customer's need thus the objectives will be accomplished so easily(Reim and et.al.,
2015).
There are five performance objectives:
Quality: IKEA should provide the better quality of furniture products to their customers. Quality
depends on performance of product. Desirability is one more important factor for measuring
standard. Cited firm should use their resources wisely to produce best furnishing items for their
services users.
Speed: The rate at which IKEA can generate sales quotes and how rapidly. Speed objectives
represents such issues as the time required to manufacture one or more furnishing products and
time that enterprise needs to develop new products.
Dependability: The dependability can be measured by evaluating the delivery time of product to
customer. The cost and price is another factor for checking dependability. IKEA should make
sure about the designs and pricing strategies to increase the dependability of their set of products.
Flexibility: The modification in the design of products and changes in the products lines can be
done by IKEA when needs and requirement of market has been changed. Organisation must deal
with various changes in the market. IKEA should increase adaptability in their operations.
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Cost: The cost performance objectives is all about the variation in the cost of products due to
changes in manufacturing process. Launching new products can be the reason behind variation in
cost. Cited firm should focus on decreasing the cost of manufacturing, this will help enterprise to
provide products on affordable price.
TASK 3
3.1 Way in which linear programming adds value
For cost minimization and quality maximisation, the firm can use a mathematical tool
called as linear programming. Linear objective functions and inequality constrains are optimized
by this tool. The linear programming can be used to make sure about planning, routing,
scheduling and designing of product which will help to get the desired objectives.
IKEA can use this tool to add value to the process of production so that organization can
identify the drawbacks in existing process. The tool can help organization to identify allocated
resources as the organization can resolve them in an effective manner as the production will be
increased. The quality of home furnishing products will be enhanced with the help of this tool
which works on mathematical phenomenon. There is a strategy named KAIZEN strategy which
is followed by IKEA to enhance the quality of drawback in organization that can be resolved by
using six sigma method. The engineering issues cannot be fixed by this tool but it can add value
to production line with improved efficiency of products. The existing plan and system can be
reviewed by this tool which will help organization to get proper solution for the required area.
The level of risk will be minimized by using linear programming. It is being used by EDEN
furniture which is another organization working with the same product line.
3.2 Critical path analysis and network planning of a production line in IKEA
Critical path analysis (CPA)
The operations which are complicated to handle and time sensitive of the production can
be handled by operation manager of IKEA with the help of project management tool called as
critical path analysis. For the future success, forecasting can be done by this technique. In case of
failure, new plan can be made by the manager to make it successful(Operation management
defined, 2017).. The time of each task will be minimized after effective examination of all
operations. IKEA is using this strategy to make an effective plan and to control other activities.
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The shortest period in which quality product can be produced by organization can be determined
by the critical path analysis. With the help of this, IKEA can get more optimistic results (Vissers
and Beech, 2005).
Network planning
The network planning is done to make effective utilization of resources. Program
evaluation and review techniques has been done in this process. IKEA has used this concept for
determining the important factor in composition process such as cost, resource and time.
3.3 Need for operational planning and control
Need for operational planning and controlling in IKEA is stated as below:- Quality Assurance: - IKEA is using effective operational planning which ensures that
quality of product is high and customer’s satisfaction to a high extent. It can use six
sigma and other quality control tools and techniques. Along with that, top management
also considers lower management to reduce the waste and improve product quality with
Zero defects. Inventory planning: - The furniture master company, inventory planning is used by the
IKEA to make sure about their production. By this strategy, company produces more
products with low investment (Operation management defined, 2017).
 Offers products as per consumer needs: - The main focus of IKEA is on customer
satisfaction. Company needs to know about client's demands that helps the management
in identifying loop fall and improving quality of their products. IKEA manufactures their
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Illustration 2: Network Planning

product as per service user's demand that leads to increase profitability of IKEA.
Organization emphasises on quality of products through adopting various tools and
techniques so that it can meet with expectation of consumers. Cited firm hires skilled
people those who can produce products as per the requirement of customers.
TASK 4
4.1 Producing a set of clearly defined operational outcomes for IKEA
IKEA has a strong brand image in the market and so firm should maintain its credibility
in the market by providing quality products at low prices. Company has maintained good
relations with the suppliers and they provide raw material at low cost. The relation with
distributors should be good to increase the sales of organization. To attract more customers,
IKEA should focus on sales services (Wright 2014).
SMART objectives of IKEA are shown as below:
Specific: To increase sales of organization by 20% in the end of 2017
Measurable: To enhance the market share by 35% till end of 2018.
Attainable: To recruit employees and get new technologies to enhance the quality of products by
20% within 1 year.
Relevant: To develop more stores in different places within 6 months.
Timely: To enhance number of consumers by 30% within 6 months
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4.2 Producing a network plan and indicating the resultant critical path
Network plan for sales department
Task Name Duration Start Finish Predecessors
Setting of objectives for sales 2 days Mon 12/12/16 Tue 12/13/16
Compare previous sales
records 3 days Wed 12/14/16 Fri 12/16/16 1
Forecasting of sales for future 5 days Mon 12/19/16 Fri 12/23/16 2
Compile information and data
related to customers 2 days Mon 12/19/16 Tue 12/20/16 2
Monitoring competitor sales
activities and strategies 4 days Mon 12/26/16 Thu 12/29/16 3,4
Selection of customer
segment 1 day Fri 12/30/16 Fri 12/30/16 5
Selection of methods to raise
the sales 3 days Mon 1/2/17 Wed 1/4/17 6
Implementation of strategies 2 days Thu 1/5/17 Fri 1/6/17 7
Monitoring 2 days Mon 1/9/17 Tue 1/10/17 8
Take corrective actions 1 day Wed 1/11/17 Wed 1/11/17 9
Project close 1 day Thu 1/12/17 Thu 1/12/17 10
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Critical path = 1+2+3+5+6+7= 24 days
In 24 days, the project will be completed.
4.3 Application of quality management methods to improve operations in IKEA
IKEA can adopt many techniques to improve their operations: Process flow diagram: Task related problems can be analysed with the help of this
technique. The time consuming operations can be minimized by using benchmarking
concept. IKEA can use this method for analysing the operations related to issues
(Understanding operation management, 2017). Basically, IKEA is a home furniture
manufacturing company so by using this method, organisation can improve the designs of
their products. It needs to make sure that it focuses on its production process every time.
Each step in the process of manufacturing can be evaluated with the help of this tool in
terms of efficiency.
 Control chart: This technique can be used by IKEA for controlling the activities.
Improvement can be done on the basis of limit which is considered between the upper
and lower. The control chart can help IKEA to make inspection of their operations. From
manufacturing to delivery of the product, each stage will be under control by using
control chart (Wright, 2014).
CONCLUSION
It can be concluded from the above report that management of operations has high
importance to run any kind of business organization. With this approach, objectives can be
successfully achieved by the organization. This is helpful to reduce the cost of operations and
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manufacturing as well. Also, it has been assessed that quality of home furnishing products can be
improved through operations management. The network diagram and critical path analysis also
prove to be helpful to analyse the actual scenario of practice and supports to improve with the
help of benchmarking techniques.
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REFERENCES
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Binz, T. and et.al., 2014. TOSCA: portable automated deployment and management of cloud
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Management, and Engineering & Design. Journal of Cleaner Production. 51. pp. 245-
260.
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DaSilva, C.M., 2014. Business model: What it is and what it is not. Long range planning. 47(6).
pp. 379-389.
Pagell, M. and Shevchenko, A., 2014. Why research in sustainable supply chain management
should have no future. Journal of supply chain management. 50(1). pp. 44-55.
Reim, W. and et.al., 2015. Product–Service Systems (PSS) business models and tactics–a
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Vissers, J. and Beech, R., 2005. Health Operations Management: Patient Flow Logistics in
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Wright, N., 2011. A journey towards organisation development. Industrial and Commercial
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Operation management defined, 2017. [Online] Available through:
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