Operations Management of Ikea - Essay Example

Introduction Operations management is a set of complex management activities involved in planning and organizing company operations. The importance of operation management to an organization is that it improves productivity and they help companies meet their customer’s competitive priorities. Operations management deals with the design, operation and improvement of the system that creates and delivers firm primary products and services (Hill and Jones, 2011). The roles of operation management involve co-coordinating all the production factors; these production factors include technology, capital, land, labor and equipments. It also ensures that business operations in an organization are efficient, that is, using few resources effectively for production and having a maximum output. A process design (layout) is the arrangement of facilities in an organization that has the same functions and brings together similar activities. The importance of the layout is that it minimizes the functions that are related to travels, which means the total material cost in travel time and distance is reduced. For example, layout problems involve the location of facilities in a plant. Other important factor includes flexibility, motivation and system protection. In an organization like IKEA layout contributes to the total efficiency of operations and will greatly reduce the total operation cost by over 50%. Hayes and Wheelwright came up with a capability and maturity model that explains how an operation could move from being a barrier to strategic success (Hill and Jones, 2011). Stage one is about being an innovator and creator of opportunities and the last stage suggests that operation capabilities should improve so as to make the strategic impact on the operation function. This model is important to organizations since it provides a way of moving from being a barrier to achieving success. Material requirement planning (MRP) is a technique that assists an organization in a detailed planning of its production. The importance of MRP is that it ensures all products and materials are in line and helps in planning a manufacturing scheme. Question 1 If a company is planning to excel in its objectives, it should look for the best performance strategies at place; ranging from 4vs which are volume, variation, visibility and variety, performance objective and market requirement planning. The secret to a customer’s satisfaction at IKEA lies in the 4v’s strategy. If a company wants to perform in the sales market, it must consider all aspects of the 4v, volume dimension is among them. Volume The rate in which a product is produced greatly determines its ratings at the market. A company that produces a large amount of a certain product has a greater capability of staying in the market competition as compared to a company that produces the same product but in small quantities (Hill and Jones, 2011). This shows that by producing several products the company will minimize the cost of energy and fuel. For instance, a company that bakes 20 cakes a day will use the same amount of electricity as the company that bakes 200 cakes a day in the same oven. The IKEA has a large (high) production rate of furniture ranging from household goods to office and school desks as compared to other companies. This is because IKEA produces a range of different products, thus, minimizing the cost. Variety dimension Different people in society have different tastes; to suit all these people the company should consider the fact that they should produce different products to suit different varieties of people’s taste. A courier company that works mainly with shipping products from household to food will not sell as much as another courier company that picks the same products from houses to deliver them to another town. It also produces a variety of products and distributes these products to many other consumers; customers can also order custom made products from the company which can be manufactured at reasonable prices (Hill and Jones, 2011). Although it started as Furniture Company, now the company also has lots of cafes all over the world, this means that the variety is high. Variation dimension The ability of a company to change its production trend while considering the rate in which the demand dictates will help the company in economizing the cost of production, hence, preventing the possibility of overproduction and, in the end, hefty losses (Wallace and Mark, 2004). Assume a café that does not limit the amount of food it cooks a day according to the number of customers; for example, on Saturday and Sunday students of a nearby school who are among the most regular customers of the café do not come to school. The cafes will most likely incur a lot of losses on weekends. The company opens its offices, especially restaurants, all days a week but during the weekends they prepare small amount of food to avoid losses. Visibility dimension This is how much a company’s operation is exposed to bring about satisfaction of the customers; visibility dimension is the level at which a consumer can access the products or services of a company. Some companies can choose to have an online purchase line rather than a let out store. IKEA, for instance, has stores all over the globe. It also has stores with well-trained staff who can treat customers satisfactorily. In general, the company has a pretty high visibility. The 4vs are important to IKEA because they have helped the company maintain its status as a good and trusted furniture manufacturer; the company maintains the 4vs model (Wallace and Mark, 2004). The volume, variety, and variation have to be high since they make the consumer choose a certain product from a certain company; visibility will vary with the success brought about by the other v’s QUESTION 2 Stage 1 It’s termed as the poorest contribution stage in any company in terms of operation functions. This process, even though it is termed as the poorest, gives a company originality of its products. IKEA has built its name through producing the best and unique products as compared to other furniture companies. Stage 2: external neutrality IKEA has been the best company in the world in terms of furniture manufacturing. This has been achieved through making the best products as compared to the same producing companies all over the globe. As for the IKEA food restaurant, they have to make sure it does as good as other fast food giants such as the McDonalds or KCF to keep it up (Stahl and Grigsby, 1997). Stage 3: internal supportive IKEA set goals and it have helped the company stay where it is in terms of market cover and sales ratings. This has been achieved through ensuring that the company’s set goals are attained within the stipulated time frame. Stage 4 external supportive This stage mostly deals with the best means a company can come up with; it is creative plans that will make it stay in the market. The company has to look for ways of making their products better than other companies. The reason why IKEA is the best furniture company ahead of the rest is because it produces much better products as compared to other companies (Stahl and Grigsby, 1997). IKEA is currently at stage 4 because the company has already taken the first position in terms of sales and market, and has come up with clever ways that have made it stay in the same position. It has mechanisms that help it stay ahead of other companies in terms of sales and customers satisfaction. Hayes and Wheelwright model is important to IKEA Company because it has provided a new way to the company, which helps to turn the barriers into success. For example, IKEA started as a furniture dealer but right now it has cafes all over the world. Furniture business and cafes are different businesses that require different strategies and IKEA managed to break the barrier from being a furniture manufacturer to establishing cafes. QUESTION 3 Objectives are laid down by companies to ensure their survival in the market. A company has to look for a way of outpacing another company so as it can stay in the market. The five objectives that are likely to ensure a company’s good performances are: Dependability objective This is the ability of consumers to depend on a certain company for both goods and services (Magretta, 2011). A company should have the ability to deliver required goods to its customers the way the customers want the goods to be processed and within the time frame provided by the customers. If this objective is attained, it will make the customers trust the company and motivate them to buy more. Speed objective This is the time frame between the periods when a customer orders goods from a manufacturer to the time he or she gets the goods (Magretta, 2011). The customer will trust a company more when the goods are delivered in time than when with a delay. Best two performance objectives for IKEA are: Quality objective IKEA has to undertake the quality performance objective to ensure that it achieves its customer satisfaction goals; it also has to ensure that other companies do not get on its level in terms of competition (Stahl and Grigsby, 1997). If a company produces poor products for its consumers, it risks losing market of its products and can be overtaken in the market ratings. IKEA has to make sure that all its products are of the best quality as compared to other competitors. Quality does not have to be a one day thing, it should be consistent to earn the trust of customers all the time. Flexibility objective The company that produces goods which are among the best in the world should have branches all over the world to improve its customers accessibility, since many people should have easy access to these products, and in return, this will improve the company’s performance (Magretta, 2011). Consumers should be able to access goods and services of a company at all parts of the market region. If the company fails to supply its products to the consumer’s pick-up points then it is likely to lose most of the market probabilities. Cost objective Cost objective is a situation when companies are trying to base their consumers’ trust on the cost of their products; the company that incurs the lowest cost of producing certain goods is the company that will benefit the most in terms of profit. This is because the market price will be much lesser than that of the other competitors. The better a company tries to minimize the cost of its production the higher the profit it accumulates from its sales. QUESTION 4 Material requirement planning is the plan made by the manufacturer of certain products to manufacture products that adhere to specific requirements (Magretta, 2011). At IKEA, MRP is used when the company is experiencing fluctuating purchase trends of its products. Demand objective This is the forecasted nature of the market demand of certain products. The specification of what is to sell will determine what the company buys as materials. Customer’s orders These are the specifications that customers have requested on the products they want. If a customer wants a product to be in a certain nature, the manufacture will purchase materials that match with the customers’ demands. MRP is important to IKEA since it helps the company to make sure that the demands of the customer are fully met, thus, satisfying their needs. Secondly, the system helps the company in controlling the cost of its products by knowing what to buy at what time instead of impulse purchases. Thirdly, it helps the company to know the types of materials they require at a given time from the prediction of the market trends and, lastly, it helps in reducing the inventory of the company MRP diagram (Leon, 2007, pg.439). Conclusion IKEA has an operations management that deals with the design, operation and improvement of the system which creates and delivers firm primary products and services. The management also has a proper layout and MRP that has boosted its production. IKEA can be said to be on top of the food chain as far as home furnishings are concerned, the company seems to be very well organized in terms of production, customer satisfaction and general performance, and that is the secret of its good performance in the furniture business. The company also has good prices for its customers and with the current economy nobody would like to spend more on something he or she could have bought for a significantly less price. References Alexis Leon, 2007, Enterprise Resource Planning, London, Tata McGraw-Hill Education Charles W. L. Hill and Gareth R. Jones, 2011, Essentials of Strategic Management, New York, Cengage Learning Joan Magretta, 2011, Understanding Michael Porter: The Essential Guide to Competition and Strategy, Harvard, Harvard Business Press Books Michael J. Stahl and David W. Grigsby, 1997, Strategic Management: Total Quality and Global Competition: Blackwell Business, New York, John Wiley & Sons Hopp, Wallace J. and Spearman, Mark, 2004, To Pull or Not to Pull: What Is The Question? (Commissioned Paper), High Beam Business, Business articles. Retrieved on 2/17/12 from http://business.highbeam.com/433316/article-1G1-118330717/pull-not-pull-question Read More