Ikea Operations Management Essay

4780 words - 19 pages

Operations Management

Critical Evaluation of Relevant Issues - IKEA case

Table of Contents2Executive Summary 2Introduction 2Company profile and Situational Analysis 3Growth and profitability 5Culture 5Goals 5Competitors 5SWOT analysis 6PESTLE Analysis 6Political Analysis 6Economic Analysis 6Technology Analysis 7Sociological Analysis 7Legal Analysis 7Environmental Analysis 7Input-Transformation-Output 8Corporate Objectives 9Quality 10Speed 10Dependability 10Flexibility 11Cost 12Polar representation 12Process Design 12Process type 15Cost 16Flexibility 17Quality 17Process Design - Product Design 18Recommendations 19Conclusion Executive SummaryOperations Management is how organizations produce goods and services (Slack et all, 2010).Organizations must be able to align their processes to fulfill customer requirements and ensure they are satisfied, which leads to careful planning and if successful to a competitive lead.This reports focus on IKEA, and how IKEA operations management has made them one of the leaders in retail in the world, with a deep analysis of IKEA corporate organization and operations management.IntroductionIKEA is the most successful furniture retailer in the world. The product line consists of well-designed furniture at low prices. During 2011, IKEA has reported 25.2Billon Euro total revenue and 2.966Million Euro net income. This success was not achieve in one day; it took long time and careful planning in order to achieve customer requirementsCompany profile and Situational AnalysisIKEA's is global organization with sales in more than 250 own stores in 24 countries and 32 external franchisees in 16 countries. The stores are supplied through 31 distribution centers, or directly from the 2000 suppliers in more than 50 countries. IKEA's supply chain consequently has a global spread with both sales and purchasing in all major regions of the world. IKEAs growth has been tremendous and sales are still growing. Currently IKEA plans to open 10-20 new stores every year with a goal to double sales within the coming five year (IKEA, 2012).Considering the pace of growth in sales, the many stores and warehouses, and the fact that some business areas change up to 30% of its assortment every year, supply chain planning is a real challenge. The supply chain needs tight control and high levels of visibility to keep costs down and avoid obsolete inventory and/or stock outs.The IKEA supply chain is mainly make-to-stock (MTS) and only a few products are made to customer orders. Consequently, the entire supply chain is heavily dependent on forecasts. The regions and the stores have traditionally had a strong power and a high degree of local freedom in terms of planning and placing replenishment requests. This has led to a fragmented supply chain planning with local optimization and a lot of manual intervention with plans throughout the supply chain.Furthermore, due to frequent shortage situations some regions have purposely overestimated demand to...

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