Operations Management for a Typical Business - Case Study Example

Operations Management for a Typical Business Table of Contents 3 1 Importance of Operations Management 3 1.2 Operations Functions of IKEA Group 4 1.3 Operations Management of IKEA Group 4 2. 5 2.1 Importance of ‘Three Es’ 5 2.2 Impact of Tension between Cost Minimization and Quality Maximization 6 2.3 Significance of Performance Objectives 7 3. 8 3.1 Linear Programming 8 3.2 Critical Path Analysis and Network Planning 8 3.3 Need for Operational Planning and Control 8 4. 9 4.1 Operational Outcomes 9 4.2 Network Plan 9 4.3 Justification of Quality Management Techniques 10 Conclusion 11 Reference List 12 Introduction Operations management is identified as a significant factor in an economic growth of a country. It is defined as the supervision of activities specially related either indirectly or directly to the production of services and goods of the organization (Chandan, 1997). It refers to the decisions, activities, as well as responsibilities of administering the resources that are dedicated towards the manufacture and deliverance of services and products. The operations managers are accountable for managing and overseeing the resources which construct the function of operations. The business function is responsible for meeting requests of customers through the delivery of services and products (Kumar and Suresh, 2009). IKEA Group is an international collection of companies originated in 1943 in Sweden. It creates and sells furniture which are ready to use such as desks, chairs, and beds; home accessories; and appliances. It is the leading furniture retailer of the world. IKEA is recognized for its contemporary architectural designs for different types of furniture and appliances and its work of interior design is often related with eco-friendly simplicity. The company is recognized for its awareness towards cost control, constant product development, operational details, and corporate attributes which allowed them to decrease their cost of products. The corporate structure of IKEA Group is complex in nature and is managed by numerous foundations situated in the Luxembourg, Netherlands, and Liechtenstein (Ikea, 2012). 1. 1.1 Importance of Operations Management Operations management is very important for every organization. An effectual operation can provide several benefits to the company. It can minimise the cost of services and products by being proficient. Operations supervision can increase income through augmented customer satisfaction in generating quality goods as well as services. Efficient management of business operations can minimize the investment amount required to produce the service and goods by being innovative and effective in the utilization of resources. It offers the base for innovation through constructing a solid basis of knowledge and operations (Vidler, 2001). The tasks of the operations managers within the efficient and effective production of services and goods are divided into three parts which are direct responsibility, indirect responsibility, and broad responsibility. The operations managers are directly responsible for those activities which manufacture and deliver services and products. They are accountable for understanding the tactical goal and formulating an operations policy for the company. The operations managers are also responsible for designing the processes, services and products for the company as well as improving the operations performance through total quality management. They are indirectly accountable for the actions of other organizational function such as supplying logistics by means of the input benchmarks for finest transformation. The managers provide human resources with the requisite job specifications and also assist marketing teams in defining services and products. They are accountable for the knowledge management and technology awareness (Boyer and Verma, 2009). 1.2 Operations Functions of IKEA Group Operations functions of the company could be described as a planning of resources that are committed for the manufacturing and production of goods as well as services. The major purpose of the operations functions of IKEA is to present the company with an economical and competitive advantage. In the superstores of IKEA, the significance of the operations functions reflects in the reality that the company is committed towards providing the customer with peaceful environment along with the superior products. Two major sets of IKEA’s sub-operations are interior designing and warehousing. Warehousing enables the company having large furniture stocks in the store while the interior designing is accountable for giving each store of IKEA a fantastic and distinct look. Sales function is considered as a latest vertical for the company and is totally different from interior designing and warehousing. The core policies of the company depends on the notion of thrift, therefore they offer furniture of high quality at affordable rates so that the middle income group people can also purchase their products. IKEA want to attain goodwill and customer satisfaction through their functions and policies. IKEA achieve its success by the efficient management of their costs and by understanding their target market and by recognizing how they can serve the requirements of their customers (Andersen and Skjoett-Larsen, 2009). 1.3 Operations Management of IKEA Group The transformation process model utilizes resources in order to convert inputs into desired outputs (See Appendix 1). The inputs can be a customer, raw material, information, facilities, staff, or a refined product from other system (Khatei, 2015). IKEA obtain input from the environment and convert them into output. Finally, they discharge the outputs in their environment. The inputs are material i.e. wood; ideas of designing; staffs; finance; and location. The inputs are transformed with the help of manufacturing, marketing, research, and planning and production process into the outputs. The outputs are furniture and services in the form of help desk, information ticket, and catalogue of child care. The way the organization manages the delivery of their services within the stores is extraordinary. The management of delivery of services is the duty of the IKEA’s operation management. The employees within the store; the employees who communicate with suppliers, who accumulate and transport the goods to the shops and who design, control, plan, and continuously improve the method; all are involved in the operations management. The organization owes their success to the efficiency of their operations management, which provide a well designed and clean environment, an even customer flow, adequate goods to please customers, sufficient employees to serve the customers as well as stock the store, an appropriate service quality, and a continuous flow of ideas, in order to develop its already remarkable operations performance. So, it is observed that in order to be successful, operations management need to be effective as in the case of IKEA. The organization makes use of its resources proficiently and produces services and goods in a manner that satisfies the customers. Further, they should be innovative, energetic, and creative, in introducing improved and new means of producing services and goods (Pycraft et al, 2000). 2. 2.1 Importance of ‘Three Es’ Economy: It means carrying out things in a cheaper way, thereby avoiding more expenses than is required (Hussain, 2015). While auditing presentation, it is necessary to determine whether the correct resources have been acquired in the correct amount in the accurate time at correct place and at accurate cost. The operational manager should take into consideration the objectives of business, and also focus on the quantitative requirements of the company. The managers of operation department work as an assessor in order to examine the accessibility of resources. Accurate cost could be decided by determining various other costs which are included in it. These costs could be operating costs, capital costs, salvage costs, down time costs, and maintenance costs (Reider, 2001). By taking various measures, the organizations can cut down their unnecessary costs. Efficiency: It means carrying out things as even as possible, eradicating activities and processes that do not result in the finished products (Hussain, 2015). It can be inter-authority assessment where the comparison within same authorities offering similar services and products can be evaluated in terms of several areas such as number of customers, key performance indicators, operating expenses, etc. The organization may evaluate its performance aligned with the goal set by itself. This would be evaluation of factor like whether or not the entire management level is conscious of its objectives and goals (Reider, 2001). Effectiveness: It means carrying out things in such a way that the outcome would be a close match towards what the consumer actually wants (Hussain, 2015). It can be decided by investigating it against the goals and accomplishments of the company. The managers of operations department must observe whether the goals are exact and practical (Reider, 2001). The three E’s i.e. economy, efficiency, and effectiveness allows the organizations to get benefit over their rivals by becoming more supple and capable to react in faster rate to future and current challenges. Values themselves drive incomes, and such incomes are financed properly when 3E’s are expanded under the correct balance (Reider, 2001). 2.2 Impact of Tension between Cost Minimization and Quality Maximization All organizations aim to minimize the price within the business. The goal of the minimization of cost is to attain the cost-effective method of delivering services and goods to the requisite quality level. There are several advantages of cost minimization such as the organization could save money on their production, higher margin of profit, better cash flow and advanced operating profits. The organizations focus on quality maximization and continuously improving the services and products’ standards to meet and exceed the needs of customers. This can be done by carefully reviewing the work of business for completeness and accuracy, and by having a wish to complete the tasks on time. Sometimes there arise tensions between quality maximization and cost minimization. Maximizing and improving quality could be expensive and time consuming for the organizations. This goes in opposition to the minimization of costs and it becomes complicated for the organizations to minimize costs as well as maximize and continue with the good quality. If organizations are incapable towards maintaining these both then it may result in difficulties and consequently businesses will be incompetent to satisfy the demands of customers. This may further result in unhappy consumers and the organization may suffer losses (Tiwana, 2000). 2.3 Significance of Performance Objectives For IKEA, there are five performance objectives to which they give priority on the basis of requirements of customers and strategies of competitors and therefore lead to attain a competitive rim for the business. The significance of their five performance objectives are discussed below: Quality: The stores of IKEA are designed in the form of clean, tidy, and unique layout conforming towards their brand personality. The employees are friendly as well as helpful whenever required. Their supporting services for example childcare, crèche, and restaurant of self-service offer quality service to the customers. Speed: The design of the store is unique with parking and warehouse facilities. Each operation assists a smooth customers flow and also minimizes costs because there is less stagnation. It is well-matched with the target customers who demand dissimilar information, service and support, and also with their concept of modular design and self service to create the brand identity. Dependability: IKEA’s operation is providing dependability to them by carrying out things on time. The organization has usual opening hours and that’s the reason their operation is dependent. The quantity of goods which are out of collection is kept to minimum through the easy reorder system. They ensure that there should be continuous accessibility of parking. Flexibility: The operation permits service/product flexibility because they have capability to launch new services or products. The strategy of global sourcing makes IKEA more responsive towards the wants and needs of customers. Their product range includes office furniture to accessories and home furniture, childcare to crèche and self-service restaurant. Cost objective: The efficiency of speed, quality, flexibility, and dependability directly influence the cost objective, and also the low prices and operation strategy. The operation of high quality reduces cost as well as time involved in doing the things. Fast operations minimizes inventory and also improve customers’ flow which further facilitate to reduce overheads costs and increase sales (Pradeep, 2012). 3. 3.1 Linear Programming Linear programming is defined as a numerical method for determining a means to attain the best outcome such as lowest cost and maximum profit. It adds value to the given production process. It is a tool for optimization of linear goal purpose, subject to linear inequality and equality constraints. By the help of linear programming method, supervisors or operations managers of IKEA could evaluate the sales unit and prices which can increase their profits. It also assists the managers of operations department in the process of decision making. Linear programming method deals with efforts such as increasing the profits and enduring the organization can make the greatest utilization of accessible resources. It is also referred as an extraordinary case of numerical programming. The operational managers of IKEA can make use of optimization in order to produce measurable and concrete enhancements in performance (Hussain, 2015). 3.2 Critical Path Analysis and Network Planning Critical path analysis is a tool of project management and planning that locates the entire individual actions that makes a large project. It explains the order of activities in which it is meant to be commenced and also demonstrates which activities could merely take place one time. It is also described as the pathway in the system where the actions take the longest time in completing the project. These activities float is zero and so these activities are referred as critical. Any hindrance in activities which are on the crucial path will postpone the time of completion for the project, whereas the activities on another paths does not affect the project’s completion time (Hussain, 2015). A network planning method involves different levels of planning such as business planning, medium term and long term planning, short term planning, sourcing of IT assets as well as maintenance and operations. Using this tool, IKEA can ascertain a project is finished quickly and the resources are used efficiently. 3.3 Need for Operational Planning and Control Operational planning and control aims at creating a link between demand and supply in order to satisfy the requirements of customers. Control and operational planning guarantees the efficient and effective production process as well as delivery of services or goods. The operations managers of IKEA make plans of long term in order to decide the nature and amount of resources to fulfil their goals in an efficient and effective manner. The forecasts of demand are made in the aggregated terms. The IKEA managers of medium term control and planning gaze further on to measure the entire demand which the business should meet in a partly disaggregated manner. Short term control and planning is extremely effective by nature. The resources are used in accordance with plan therefore, difficult to craft main changes. Plan is referred to the formal expectation for future however it cannot assure the actual existence. Services and products might sometimes be no longer pertinent in the market due to changes in trends and choice of customers’ consumption. For these reasons, control is regarded as a solution to acclimatize according to the modification or changes. 4. 4.1 Operational Outcomes IKEA purchases products from approx 1300 dealers in fifty three countries. Co-workers in the offices of trading service scrutinize the IKEA’s products production. This permits them to negotiate prices, test new thoughts, as well as to check quality at the same time as observing working and social conditions among dealers. The underlying principle of their relation with the suppliers or dealers lies in their business proposal of providing products of low price in the environment friendly and socially responsible way. All the products of IKEA are manufactured in accord with a specifically planned code of conduct, which provides a base for their relationship with international suppliers. The organization makes few products within the country and depends almost entirely on their network of suppliers. With the help of their suppliers, the organization has been capable to construct innovative designs which feature environmentally responsible equipments. 4.2 Network Plan The tasks which are involved in producing the advertising campaign for IKEA are discussed below: 1. Planning of advertising campaign; 2. Making a TV video; 3. Designing of poster; 4. Test the TV video; 5. Test the appropriateness of poster; 6. Presentation of campaign to the company’s directors; 7. Communication of campaign to all the personnel of the company. The approximate time for every task are indicated below: Tasks Order/dependence Estimated time (hrs) 1 Must be completed first 4 2 Can only begin when 1 is completed 6 3 Can only begin when 1 is completed 7 4 Can only begin when 2 is completed 8 5 Can only begin when 3 is completed 10 6 Can only begin when 4 and 5 are completed 9 7 Can only begin when 4, 5 and 6 are completed 5 If it is supposed that the earliest start time for 1 is 0, then 2 and 3 cannot begin for 4 hours i.e. (0+4). Task 4 cannot begin until 1 and 2 have been finished, this takes total 10 hours i.e. (0+4+6). Similarly, task 6 cannot begin until 4 and 5 are finished, the earliest start time for task 6 is 21 i.e. (0+4+7+10). 4.3 Justification of Quality Management Techniques Six sigma is referred to a metric which is used for evaluating defects and improving the quality. It is also defined as a methodology used for reducing the defect associated with the product (Gibson, 2012). The concept of six sigma has the main goal of recognizing and eradicating the probable causes of mistakes and minimizing the likelihood of variability in manufacturing processes. IKEA utilizes the concept of six sigma in order to guarantee that they offer goods with reliable quality to their customers. The organization uses this concept as an improvement and quality control tool, especially they utilizes the methodology of DMAIC (define, analyse, measure, control, and improve) as a realistic implementation of six sigma concept to facilitate the process of product improvement. IKEA has also taken on various projects of six sigma with the key goal of improving the method of online consumer experience. At IKEA, other features of six sigma includes product development and improvement that is customer driven, optimization of design and manufacturing goals, and importance on small lead times attained through decreased product growth cycles as well as by management of product life cycle (Gibson, 2012). Conclusion The achievement of operational management of IKEA is the outcome of effective control and analysis on every characteristics of the company. The organization is very stringent towards its pricing policy, quality and its relationship with dealers or suppliers. The report focuses on the importance of operations management in IKEA. It also laid emphasis on the impact of tension between cost minimization and quality maximization. A network planning method involves different levels of planning. With the help of linear programming method, the operations managers of IKEA could evaluate the sales unit and prices which can increase their profits. The report also highlights the need for control and operational planning as they guarantee the efficient and effective production process as well as delivery of services or goods. Reference List Andersen, M. and Skjoett-Larsen, T., 2009. Corporate social responsibility in global supply chains. Supply chain management: An international journal, 14(2), pp.75-86. Boyer, K. and Verma, R., 2009. Operations and supply chain management for the 21st century. United States of America: Cengage Learning. Chandan, J.S., 1997. Management Concepts and Strategies. New Delhi: Vikas Publishing House Pvt. Ltd. Gibson, J., 2012. The case of IKEA’s entry into China. Journal of Applied Management and Entrepreneurship, 17(2), pp.1077-1089. Hussain, Z., 2015. Assignment on operations management. [online] Available at: [Accessed 19 Jan 2015]. Ikea., 2012. About IKEA. [online] Available at: [Accessed 16 Jan 2015]. Khatei, U.K., 2015. Operations Management – Output Production. [online] Available at: < http://www.academia.edu/1822715/Operations_Management_-_Output_Production> [Accessed 16 Jan 2015]. Kumar, S.A. and Suresh, N., 2009. Operations Management. New Delhi: New Age International Ltd. Pradeep, G., 2012. Operations Strategy. New Delhi: IWSB. Pycraft, M., Singh, H., Phihlela, K., Slack, N., Chambers, S., Harland, C., Harrison, A. and Johnston, R., 2000. Operations Management. South Africa: Pearson Education. Reider, R., 2001. Improving the Economy, Efficiency, and Effectiveness of Not-for-profits: Conducting Operational Review. United States of America: John Wiley & Sons. Tiwana, A., 2000. The Knowledge Management Toolkit. United States: Prentice Hall Publication. Vidler, C., 2001. Operations Management. United Kingdom: Heinemann Educational Publishers. Read More