Recommending Operation Strategies for IKEA - Case Study Example

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Recommending an Operation Strategies for IKEA

Introduction

Operations management of a company can lead to its success or its failures. IKEA has various operation strategies that have been applied that has led to its expansion to the whole world. They have standardised their operations management, which has been one source of its continued success. Sometime the company has been met with competition in its new market. This paper seeks to lay out the company’s operations management and will give some recommendations that may become an operational strategy for its growth and more expansion.

IKEA’s Products and Services

IKEA has for years been known as the largest furniture retailer to date. Its major products today are still furniture in addition to some services that complements the company’s operations and helps it to gain more popularity in the market. The furniture is shipped unassembled, and they are also transferred to the customers in the same form. The popularity of the company in the market has been because of its consistency in maintaining quality furniture products (Jae-Woong, 2011, 149). In return, when it comes to furniture, the company has already been branded as the furniture place. It also has expanded its products range by constructing houses and flats then selling them to their customers. The company does this with an aim to help first home owners or the buyers to cut on costs incurred when buying and furnishing the home (Jae-Woong, 2011, 153). As the result, those who buy homes from IKEA keep their loyalty to the company.

The company also introduced the selling of solar panel packages in the UK stores after realizing that there was growing demand for the commodity. They are now being sold in other countries like Switzerland and Netherland (Jae-Woong, 2011, 157). It’s introducing of the product made an extra access to the market which guarantees that the buys will also be interested in other products too. IKEA in the UK has also launched a mobile network known as Family Network as a service for their customers. The company designs and manufactures their products. The designs are from Sweden, but the manufacturing takes place in the countries that IKEA exists. The ability to design and manufacture makes it more competitive in establishing and meeting the growing demand for innovation in furniture (Jae-Woong, 2011, 161). They are also able to meet the clients’ requests. The company has a catalog that is in more than twenty languages which make it the most used catalog in the world. Also, there is a loyalty card by the company known as IKEA Family, and it is available worldwide (Jae-Woong, 2011, 154). The card which is free of charge is used by the customers to obtain discounts attached to some the products in IKEA stores. Discounts are one means to winning customers loyalty too.

Company’s Operations Deployment

The company has made sure that they do not sell goods or store them when assembled. The only assembled goods are used mostly for the display purpose. Otherwise, the rest are not assembled unless on conditions that they have to remain assembled at the time of manufacturing (Errasti, 2013, 17). A good example of commodities that remain assembled throughout are the couches. However, the list of these products is very small compared to those that should be assembled after the sale. Realizing that most of the commodities that IKEA sell are large and wooden, they choose to have a way of having them assembled when at the clients’ hand (Errasti, 2013, 33). The reason behind this was to be able to preserve on space in the stores and warehouses, avoiding breakages during handling and while on transit, and to facilitate easy transportation for the company or the clients.

Initially, IKEA was concentrated in the country of origin. However after realizing that it is making it in the market, the company today has expanded into many parts of the world. The main reason has been that they can meet the requirements of the government and their clientele base. However, they expand to the countries and also open extra branches in the same countries. For instance, IKEA has about 17 branches in the UK (Errasti, 2013, 81). The same is repeated in other countries, the company has branches. The main objective of the company is to gain large world market share when it comes to the furniture business. Therefore, it has been able to achieve that while expanding to various countries and it continues to do the same even to date.

Moreover, the company designs and manufactures their products. To achieve this, the company does their designing, but the manufacturing happens in the locality of the countries the company has expanded to. Why they do their designing comes with different motivations. The first motivation is that the company wants to have its unique design. There is also an evaluation of the market and customer feedback which makes it possible for it to make additions or deductions on its design (Errasti, A. 2013, 133). When it is done internally, the company can manipulate how the final design will achieve the markets’ desire. Designing for themselves has also saved on the cost of outsourcing the service. Another thing the company does is to manufacture locally in the regions they have branches. They do this since it is a way of time saving and cost saving. The cost aimed is mostly the freight cost that would be too high since they operate with large commodities. The shipping of such commodities is too high, and that is why manufacturing them in the country of the branches become a reliable means to reduce shipping costs.

Finally, the company has implemented warehousing of the goods instead of having them in the stores. They open stores in prime areas and therefore getting space in such places could be too expensive. Furthermore, being that they deal with large commodities, stocking them in large number would mean making more space. Consequently, the company has a store which operates as a display of the commodities, but the real commodities are delivered to the stores for the customers or done directly to the customers address (Errasti, 2013, 138). As a result, it means the objective of making more sales while maximizing the small spaces they get for the stores. The cost of hiring large spaces in prime areas is reduced, and where the warehouses are located, they cost them lesser.

Aspects of Operations Management

In the market, different companies offer different commodities which are an avenue to generating income. However, some same avail commodities in the market, but one does more sales in comparison to the other (Krajewski, Ritzman, and Malhotra, 2007, 09). There are two aspects that may be used to determine why one is succeeding and why the other is failing.

Location and Layout

The location is one of the decisions that every investor must make and do it very wisely otherwise it may be the beginning of a failure even before the conception of business. It is a decision that will require a large financial involvement, which when invested is mostly irreversible procedure (Krajewski, Ritzman, and Malhotra, 2007, 57). Some of the factors that facilitate the location are the target market, the cost, and tangible as well as qualitative factors. A manager has to make into consideration that the location chosen is accessible by both the suppliers and clients and the transport network is very sufficient. After the location is established, the operations manager has the role to start working on how the facilities will be dispositional usually referred to like the layout. It will involve product, process, and manufacturing and fixed position layout (Krajewski, Ritzman, and Malhotra, 2007, 59).

All these are integrated together so that the final product or the outcome of a project will appear in a manner that will attract the customers. When done right, it may mean the success of the business. Consequently, mistakes in layout and location may mean a lifetime compunction in the business venture.

Supply Chain Management

Supply management is a means by which an operations manager establishes that the goods reach the site or the business premises. It has transportation and logistics as the main aim of achieving the aspect. Supply chain ensures that goods that are brought to the premises have arrived safely. The management has the mandate to establish a proper avenue of ensuring that the operation has been conducted in professionalism that makes the whole operation reliable (Chopra, and Meindl, 2007, 11). The coordination between the management and the suppliers is very vital for the safety of goods on transit. The management has to establish an appropriate way of loading and offloading of goods from the source to the destination. The supply chain management also involves the way goods will get to the client (Chopra, and Meindl, 2007, 14). After they are sorted and the destination is established, it is the work of the operation management to ensure that the goods are also safely delivered to the customers. The function of supply chain ends at the final user of the product. When done right, damages during transit, loading and offloading are minimized which saves on the costs that are incurred to do damage controls.

Location and layout can be a means of identifying a business opportunity in an area. When opening a business that will meet the demands of tourists, the aspect of a location and layout plays a big role (Chopra, and Meindl, 2007, 43). For an instant, it will be a rare situation to establish a tour and travel business in an area that has not been a visit by tourists for a long time. However, a location like beaches may be a good start for a tour and travel business. Supply management may create a business opportunity for a person who want to deal transports and logistics (Chopra, and Meindl, 2007, 47). When it comes to such a business, one may be required to establish an industrial area where production and warehousing are mostly established. Once such is located, then having the vehicles that will facilitate the supplying can be an effective means to make a move. Location and layout avail a business opportunity of retail shops if the area is an urban area which has many residential people.

Application of Supply Chain Management and Location and Layout in IKEA

IKEA have been applying supply chain management in various ways during its existence. It has first been able to link the timber suppliers with their manufacturing plants so that the raw materials can reach their destination on time that will enable the plants to manufacture the demanded goods (Jonsson, Rudberg, and Holmberg, 2013, 339). After goods are produced, they are packed well and loaded with the tracks which transport them to the company’s warehouses. In the warehouses, the company has established handling apparatuses that ensure that the products are carefully offloaded. Its supply chain has been made so effective that their goods have minimal damages. This has been facilitated by the fact that they do not ship the goods from outside the countries they have branches (Jonsson, Rudberg, and Holmberg, 2013, 342). They only ship in any extra raw materials that could be missing from the location. Therefore, any transportation of the finished products is within a geographical area of the country and hence minimizing too many stages of loading and offloading. The company extends its supplying to the clients locations from warehouses directly, especially on the heavy goods.

Similarly, IKEA has also maximized location and layout in their branches which have led to its continued success. Once they have located a country, they then establish their premises in locations that are prime and more adequate to be accessed by the locals. Since the company is more foreign in many countries, it can get prime areas which act as an added advantage. Although it costs them much, the long-term results have been its continued expansion to various developed countries in the world (Jae-Woong, 2011, 148). Their layout is simple, minimizing mostly on the stock but maximizing on the displays and demonstration on their commodities. The clients get the first class experience from the products. It makes this possible since the space they use has been set up on the final furniture look for the homes of the clients.

From its existence, IKEA services and products have been competitive in the market. They have the largest client base in the world when it comes to furniture. The competitiveness has been as a result of good operations management. However, it can still improve in its operations by also increasing outlets in developing countries that will act as a means to get a bigger market niche (Boyer, and Swink, 2008, 339). Most developing countries have an increasing population that can sustain its existence. Some people are working hard to raise the social status and are capable of helping such an enterprise to grow.

When it comes to attracting more customers, IKEA can diversify into producing all home accessories that are also affordable to the middle or even low-income earners. They can forecast middle-class people since they are the largest group in the world while the rich are fewer. If the products are favorable to the middle class, they can manage to attract more customers (Boyer and Swink, 2008, 341). They can also customize their products so that they can be able to meet the requirements and cultures of some regions that they operate in. With such, it attracts a sense of belonging to the locals, and they identify with the company. When it comes to discounts, not only the card holders should be able to access them, but also the new members (Boyer and Swink, 2008, 343). When clients know that they have discounts to their products, they will look forward to becoming part of its continuing success. Incentives can also be an addition to incentives that should increase more customers to be attracted to their business premises.

Conclusion

In a nutshell, operation management is a task that can facilitate the success or failure of a company. With the scrutiny of IKEA, its continuing success has been based on its capacity to standardize operations in all their stores in the world. They maintain the designs all over the world and has eliminated the transportation of goods to the countries of their existence. They have maximized on location and layout. Some improvements can be put in place to attract customers and improve the operations and management. With these, even more, success will be experienced in the company’s existing stores and expansions.