Critical Analysis of IKEA Operations

IKEA is a Swedish-established multinational group that fabricates and sells kitchen appliances, ready-to-assemble furniture, and a range of home accessories. Founded in Sweden in 1943 by a 17-year-old investor, the company has maintained the title of the largest furniture retailer for a period of 10 years to date with over 370 stores in 47 countries (Garvey, 2017; Wood, 2015). The acronym IKEA represents the initials of the founder’s name (Ingvar Kamprad), the name of the farm he grew up (Elmtaryd), and the name of his hometown (Agunnaryd). Today, the multinational group is not only known for modernist designs, cost control, and continuous product development, but also for its revolutionary operations strategies that enable the company to rise above competition in the global arena. This paper analyzes the firm’s operations based on the following theoretical frameworks: the 4Vs (volume, variety, variation, visibility), the 5S (kaizan), Just In Time (JIT), and Mass customization.

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            IKEA aspires to provide a wide range of well-designed and effective furnishing items that are superior, durable, and affordable for the majority. Initially, the founder of the firm employed a strategy whereby the company was expected to produce furniture that was easy to build, as well as that was easy to distribute in disassembled form at stores and display in showrooms with detailed information such that sales assistants would be unnecessary. Compared to other furniture retailers, IKEA has managed to lure customers into spending more time in its stores (Garvey, 2017). The way in which the firm organizes its stores further distinguishes it from other retailers. At IKEA, stores serve as warehouses where shoppers are given the opportunity to view everything under one roof. The overall strategy that the firm uses in its operation is unique in its form and is especially designed to cope with a high specialization and repeatability. It is specifically focused on affordability, a wide variety, high-end traditional furnishings, low variation, and customer contact. Furthermore, the operation strategy is well aligned with other business strategies that the company uses in that it links with performance objectives pertaining to quality, dependability, speed, flexibility, and cost.

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The 4 Vs

            IKEA operations are central and each product is followed from inception, through completion, to tertiary stages of delivery. However, like other ordinary manufacturing operation processes, IKEA operations utilize a range of inputs like knowledge, raw materials, time, equipment, and capital to produce the final product (furniture) (Laurin and Fantazy, 2017). This characteristics can be exemplified via the 4Vs: volume, variety, variation, and visibility.

Volume

            IKEA maintains high volumes of stock and has a significant number of product lines for beds, chairs, lighting, sofas, and other products that can be self-assembled (Wang, Pfeil, and Reiterer, 2016 ). These high volumes result in a high repeatability of products and low exclusivity between various varieties of a specific product. Thus, IKEA should adjust its operations strategy to incorporate innovation. IKEA’s high-volume business also has a lean buffering capacity that leads to a limited amount of stock. This is maintained to reduce the likelihood of accumulating stock. Additionally, the presence of operations in many countries allows for the privilege of economies of scale and low production costs. Still, IKEA should not dismiss the opportunity of hiring machinery and additional staff to manage the high volumes.

Variety

            Variety entails a business’ ability to maintain variability in product offerings. IKEA depends on many product lines that have numerous varieties. In fact, the firm’s furniture has a high “value for money” since it is designed to sell as a “flat pack” that can be easily assembled by the customer with minimal skills. Specifically, the firm uses Swedish designs that emphasize on bold colors, style, and usability (Garvey, 2017). A majority of products are promoted as modular in order to allow for various variations of the same type of product. It also enables the company to hold significantly less amount of stock. A downside of the wide range of varieties is that it can lead to a high degree of complexity in operations that are needed to meet expectations of the clientele for each product offering. Even so, IKEA has succeeded in managing these complexities in the last half a century, and although the high level of complexity tends to raise the costs of managing inventory, IKEA’s wide variety compensates the losses with sales resulting from extensive product diversity.

Variation

            IKEA experiences a moderately variable demand pattern (Laurin and Fantazy, 2017). Although the demand is not subject to high peak and off peak seasons, it is affected by other factors. For example, the location of many stores is usually far off urban areas. This leads to issues of inaccessibility for customers, especially those who do not drive. The choice of sub-urban areas for erection of premises may also result in customers frequenting the stores during weekends rather than weekdays. Some customer may, therefore, avoid visiting the stores on weekends due to overcrowded showrooms.

Visibility

            Visibility entails how much activities of the operations are experienced by customers or what degree of operations is exposed to the clientele. IKEA maintains a self-service concept in its stores, but it also engages its customers through a high level of contact (Laurin and Fantazy, 2017). The company provides tape measures, catalogues, shopping lists, and pens for taking notes and measurements. Assistance and information is provided via free catalogues that highlight the available range of products along with their dimensions and illustrations.

            What is more, IKEA has designed the stores in a way that promotes a “family shopping experience.” Customers have access to extra facilities such as restaurant, Swedish shop, and daycare services (Laurin and Fantazy, 2017). Parents have the option of leaving their kids in a supervised play area or moving around with them in push chairs while shopping. The firm also sells car roof racks besides providing pick-up vans and mini trucks on a rental fee. Large spaces around car parks and loading areas allow customers to load their purchases easily and without congestion.

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            In sum, IKEA’s desire to integrate social values in its operations is one of the most significant factors that differentiate the firm from conventional furniture retailers. Other factors that contribute to the company’s success include product differentiation, cost leadership, and experience in the retail market (Laurin and Fantazy, 2017). Based on its unique operations strategy, IKEA is perhaps one of the most exclusive multinational retailing firms that operate globally. The firm tries as much as possible to differentiate itself from the rest of the industry which relies on traditional retailing approaches. In fact, mainstream conventional furniture retailers operate in a highly fragmented market where large departmental outlets rival small independent stores. IKEA has also succeeded in serving its customers based on aesthetic tastes that suit specific regions.

5S and Kaizen

            5S is an organization approach that uses five Japanese words: seiri, seiton, seiso, seiketsu, and shitsuke. These are respectively translated as “Sort”, “Set in Order”, “Shine”, “Standardize” and “Sustain”. These attributes illustrate the organization of a workspace for effectiveness and efficiency through the identification of used items, maintenance of spaces and items, and sustenance of orderliness. The 5S approach was initially meant for manufacturing but works well in office, administrative, and even healthcare environments.

            For IKEA, sorting is a necessary and commonplace procedure for ensuring that furniture and home products and appliances are well organized in the stores, and that frequently unused items are discarded. Fast selling products are strategically placed near the show rooms while the rest are sorted tactically in accordance with their rates of retailing (Laurin and Fantazy, 2017). In particular, IKEA stresses the need for systematic arrangement so that customers can retrieve products effectively. Pieces of furniture are arranged in manners that mimic specific house arrangement ideas and stores are generally set in segments, with each segment presenting a particular category of products. The overall arrangement promotes an efficient workflow with frequently-used equipment remaining readily available for customers and staff.

            IKEA’s administration ensures that the workspace is clean at all times and that all equipment is tidy and organized. On occasion, the staff performs thorough cleaning and proceeds with daily follow-up cleaning in order to maintain improvement. A shining work environment is a significant factor in the success of all operations at IKEA stores. The stores are also standardized. Showrooms are quite similar in all of the firm’s stores and appear to represent the brand (Laurin and Fantazy, 2017). By the same token, work spaces and shelves of specific products are identical. Tools are usually placed at the convenience of each workstation and each member of staff is trained to be aware of their responsibilities at all times. Finally, IKEA sustains a routine of a well sorted, organized, clean, and standardized work environment. The firm’s administration maintains these high standards and does not allow gradual declines to outdated approaches of operations. The concept of Kaizen guarantees that IKEA promotes a culture of conscious improvement with minimal wastes, better quality, and prompter lead times.

Just in Time (JIT)

            Just In Time (JIT) represents a strategy of increasing efficiency and decreasing wastes by obtaining goods in the capacity that they are needed in the production process. IKEA makes very few products and instead relies on a network of suppliers. Relationships with suppliers are deeply rooted in the company’s history and inventories are managed relatively consistent with the JIT strategy through two strategies. The first strategy is min/max replenishment where IKEA locations have in-store managers who track the inventory system. Stock levels are normally set by the needs of a single day (Lu, 2014). The next strategy is high-flow/low-flow, where high-flow symbolizes products that sell fast while low-flow represents products that sell slow. This type of inventory system enables the firm to manage inventory without running out or overstocking.

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Mass Customization            

One of the reasons why IKEA is popular in the furniture industry is mass customization. This manufacturing and marketing technique blends the personalization and flexibility of custom-manufacture with low unit costs that are related to mass production. Through various design studios (Baier, Rese, and Schreiber, 2016) the IKEA facilitates the customization of products to suit clients’ tastes.

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