IKEA Operation Management

Introduction
Operation management is an area of management that is concerned with design, controlling and production
as well as redesigning of the business operations of organization for manufacturing of goods and services.
The term operation management is being majorly used for increasing the efficiency and effectiveness of
planning the activities that have significant impact on the business process of organization. In this
Assignment IKEA we will explain the importance of operation management for leading furniture company
IKEA that is offering the high quality goods in wide range. Additionally, the report will discuss about the
process model and information about the use of “Three Es” as well as the five performance objectives for
managing the operations of IKEA.
IKEA is world largest furniture manufacturing and retailer organization that is operating business in different
parts of world according to needs and demand of the customers. As of December 2018, IKEA owns 384
stores in 48 nations and offering more than 12000 products.

Explanation about Operations management importance for IKEA Furniture

Importance of operation management can be understood by taking case on IKEA Furniture. IKEA is a
Swedish Company which sells appliances, furniture, home accessories. The aim of IKEA is to reduce
wastage, and enhance productivity with low cost. At the store, the organization wants to utilize their
warehouse properly, taking details of customers and deliver product with shifting cost is low. IKEA business
make successful by managing such operations effectively. Operation management controls business
operation of system. It mainly deals with design, and improvement of overall system. It supports organization
to improve its financial performance. In case of IKEA, operation management observes activities to ensure
and sustain efficiency and effectiveness (Ivarsson and Alvstam, 2010). Efficiency is considered important
to achieve primary object i.e. maximize profitability. For this purpose, it identifies expertise human resource
and other technical resource that reduce cost of operations. IKEA reduces cost by discarding less profitable
cost projects. It uses maximum resources to achieve maximum output. The effectiveness and efficiency leads
to productivity yield and improve capacity by utilization of resources that improve quality. It has been
identified that operation management is playing important role in IKEA Company. Its control and
coordination range is broad which include product evaluation, advertising, promotion, product development
and distribution, sales and service.
Operation management is considered important for manufacturing industry. This is because manufacturing
industries take care about so many processes and operations involved in manufacturing. The organisations
generally start process from obtaining raw materials and then process in order to create goods. Therefore,
successful execution of operation needs to include operation management especially for manufacturing
industry. Apart from this service industry also include various process like assessment of customer
expectation, take feedback of service etc (Edvardsson and Enquist, 2011).

Analyse the operations function of IKEA Furniture

The operation functions are series of process that are interdependent to each other and linked procedures. It
consumes one or more resource as input at each stage. Operation functions depend on decisions and result.
Strategic plans are designed according to future condition and demand. The operation functions of IKEA
furniture are explained below:
 Design process and identify requirement: This function describes a planning stage. Operational manager
identify process and mechanism of their execution. This would identify number of human resource and
technical tools required. The operation manger also has knowledge to handle such process effectively. In
case of IKEA Furniture, this operation function estimate about list of raw materials, technical tools and
human resource. All such needs are consider as input for next stage (Hill and Hill, 2012). These are collected
in sufficient number so that next stage would not suffer from lack of any resource.

 Process activities: Process stage is considered most important function. Here the expectation is high as the
organisation aims to produce goods of quality. For Example- IKEA is including production processes which
can be operate safely, give results on time, best quality in output with low cost. All these objectives should
be fulfilled at the process stage. It includes all the activities that must be executed one by one. The activities
include sufficient number of input also (Slack.et.al.2010).
 Monitor and Reviewing: Operational manger need to perform monitoring function at time of processing of
activity. Monitoring involve cost and quality of product. In case of IKEA- product quality is monitored and
if it does not meet the quality standard then current process rejects the product and is sent back to
manufacturing for correction. The organisation wants to minimise cost of process. Therefore, operational
managers are required to keep the cost under control. The output from process function is evaluated and
finally quality department reviews the manufactured products to assess the product quality (Li.et.al.2011).
This review defines quality and cost of developed of product. The reviewing is beneficial to set cost for sale
goods so that company get profits.

Three E’s of Business-Economy, effectiveness and efficiency

Operational tasks of a business can be carried out easily with the proper balancing among 3E’s. Three E’s
are- economy, efficiency and effectiveness.

 Economy: Economy means to perform a task in cost effective manner. This factor of business describes the
optimum use of resources to accomplish a task. Only the required amount of human resource, capital and
time is expected to be invested in order to achieve specific goal. IKEA furniture analyses the exact need of
resources required to complete a task. Thus, proper number of resources like furniture, material and human
power can be used to reduce the cost in manufacturing (Berger-Walliser and Shrivastava, 2014).
Organisation eliminates unnecessary activities to reduce the cost. Product also will be cost-effective for
customers.
 Efficiency: Efficiency means to complete a task with minimum efforts. IKEA analyses solutions and selects
the most efficient way to perform the task. Organisation also provides equipments and training to accomplish
the task easily. Efficiency is required in organisation to deliver the orders within time period. It also helps to
save precious business time and resources so that organisation can increase productivity with efficiency.
However, efficiency should not affect the economy badly. Proper balance is required to achieve more
benefits.
 Effectiveness: Effectiveness is related to perform a task in better way as it can be. Efficiency may lead to
reduce effort but it may be lengthy process to achieve goal. Effectiveness helps to find optimized way to
achieve goal. IKEA is using e-business strategies to attract more customers. Organisation is giving discounts
and offers to online buyers. This can be said an effective way to sale out more goods (Naik, 2014).
Implementation of efficient and effective methods in business may not be economic in initial state but future
can be predicted smooth and managed. So business needs to consider three E’s to make processing easy,
effective and cost-effective.

Evaluation of operation management in IKEA

Operation management can be defined as the process to design and manage the production of new products
and restructure the business operations to meet requirements. Operation management includes four basic
 steps: inputs, transformation process, output and feedback. Operations carried out by IKEA to produce
products are given to illustrate operation management of company.

 Inputs: Input may be raw material and resources to design a new product or service. According to use, inputs
can be categorized in two types.

1. Transformed resources: This type of inputs is used as the raw material to develop a product from
them. IKEA uses glue, plywood, frames and iron nails as input to transform.
2. Transforming resources: This type of resources is not used as raw material and only helps to achieve
desired products. Transforming inputs used by IKEA company are: machines, human efforts and
capital (Slack, 2015).

 Transformation process: This is the actual processing where raw material of IKEA takes the form of
output. Input may be either in form of information, human power or physical requirements to build output.
For instance, to create new Sofa, company’s described transformed input will be processed with the help of
transforming resources. Plywood, glues and iron nails will be used in a proper manner to create the output.
Thus, the manner of treating inputs for an output is transformation process.
 Output: Result of transformation process is the output. Transformation process may produce some
undesirable outputs. IKEA company checks the outputs whether they are meeting the quality standard of
organisation or not. A damaged or poor quality product cannot be sold and is a loss for the organisation.
Producing higher number of poor quality products leads to operational failure and poor financial
performance (Krajewski.et.al.2013).
 Feedback: Feedback is the suggestions to improve the output. If the production processes can be modified
or improved to solve the issues, than a better quality product can be expected from output. IKEA uses
feedback to eliminate production mistakes.

Tension between cost minimisation and quality maximisation

This is the biggest challenge for IKEA Furniture to minimize cost and maximize quality also. IKEA wants
to include such procedures and resources that minimize the cost of operation but does not decrease quality
of goods. However, the achievement of double goals simultaneously is difficult task. Quality is the vital
parameter for IKEA in order to sustain at the present position. But it has been analyzed that quality
sustainability increase cost and time also. The quality of output expected by customers may result in
increased expenses. On the other hand, some time cost minimization suffers from quality degradation. Lower
quality of goods affects the brand image. It can decrease selling of goods also (Hirschey, 2016). Therefore
it is very critical to handle both the parameters together- cost minimization and quality maximization.
Although cost minimization is necessary to gain more profit on sales. It is also required to compete with
other brands.

Evaluation of significance of the performance objectives

For furniture organization, it is essential to have the knowledge about the performance objectives of
operation management that would help manager to analyze the effectiveness of operations to meet the desired
outcome:
 Dependability: The major focus of the organization would be on the availability of resources as well the
tools that have been used for design and development of the furniture products and services.
 Cost: For any type of work and operational activity the cost plays critical role as IKEA always focus on the
minimization of cost and maximization of quality which could be vary according to needs of customers
(Moghaddam.et.al. 2011). The performance of organization also been considered according to investment
and gain from the business.
 Flexibility: In operation management and production process of IKEA flexibility in the planning and
execution is important as it helps to meet the time frame of completing the task as well manage the human
resource planning.
 Quality: IKEA is one of the biggest brands in the furniture industry and the customers trust the organization
considering the quality that have been produce and offered to them. The organization has most numbers of
satisfied customers in terms of quality of furniture across the globe.
 Speed: In order to meet the deadline of completing the tasks speed of manufacturing need to be good in
terms of managing the resources, utilization and scheduling of the activities (Niknam.et.al. 2011). If IKEA
management is able to maintain the proper communication among the departments than it will influence the
performance.

Linear programming and how it adds value to production process

Linear programming is the process that involve process and planning of managing the operations and make
decision for establishing the tools and equipments according to needs and activities of organization. This
process involves the mathematical concept for developing the plan. The management of IKEA could use this
method for achieving the best outcome to maximize the profit by increasing the efficiency. This method adds
value to the operational activities of IKEA by helping in determining the network flow; defining the
engineering process and calculating the price and cost of each unit to make the decision for implementing
the changes in the existing process (Mohammadi.et.al. 2014). In addition to this, to make the decision like
purchasing of raw material the organization would use the linear programming which will help to forecast
the production cost as well help to identify the areas of monitoring that minimize the cost and encourage the
production of furniture.
Apart from that, linear programming will help the IKEA management to analyze the variation in the
production process which will support to maintain the effectiveness in operational activities.

Conclusion
Report has analysed the functions of IKEA and evaluated the approach of company using the process model
to understand the operational activity of organization objectives for IKEA and explained the linear
programming for planning and controlling of design and development process of furniture organization.
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