OPERATIONS MANAGEMENT

EXECUTIVE SUMMERY

In the settings of production, manufacturing, or the provision of services, operations

management is primarily concerned with the coordination of activities such as planning, arranging,
and monitoring. IKEA, a well-known global corporation, was the subject of this study, which
looked at their operation management method. The best-kept secrets behind its seamless backend
operations and effective supply chain procedures, as well as my own personal viewpoint, have
been addressed in this article. After that, they looked into how IKEA had been able to keep the
prices of its goods low. I have highlighted the areas of the company's performance where it is
falling short and provided recommendations to further enhance IKEA's Warehouse Facilities. In
the end, they evaluated the significance of long-term partnerships with suppliers in the context of
a contemporary notion of operation management.
1. What are IKEA’s best-kept secrets behind its smooth backend operations and
efficient supply chain processes? Discuss your views.

IKEA aims to provide every consumer with

well-designed, functional furniture at
reasonable prices, so that they are accessible to
everyone. The business incorporates supply
chain and inventory management into its
overall strategy. To set itself apart from the competitors, KEA has committed to a year-round
fixed-price product library. Our supply chain strategy, back-end operations, and inventory
management techniques allow us to provide over 9,500 items at affordable prices. Each of these
positions adds to IKEA's overall performance. The value chain begins with the product's basic idea
and design. IKEA is known for developing goods with minimal production costs while yet
satisfying stringent functional, quality, and distribution criteria. IKEA strives to utilize as little
resources as possible in the production of its furniture while maintaining high quality standards.
This saves money on packing, handling, and shipping.

Customers get ready-to-assemble products flat-packed to save on shipping, storage,

building, and assembly expenses. IKEA recognizes the importance of effective communication
and relationship management with suppliers due to the volume of purchases and suppliers (over
1800 in 50 countries). In addition to its 43 local trade offices in 33 countries, the business has a
worldwide distribution network that ensures over 95% of inventory is available. Given its scale, it
seems sense that IKEA would encourage supplier competition. No. With long-term contracts with
suppliers, IKEA thinks it can achieve a low cost of products supplied in big volume while
maintaining long-term business ties with suppliers. Working directly with suppliers at their
factories is possible because of this situation. "IKEA highlights the need to employ efficient, cost-
effective, and innovative methods," according to the organization. Collaboration, which gave us a
better intelligence when it comes to smart product design, packaging, and distribution, is our most
notable characteristic. Shoppers are free to go through the main showroom and check over the
items on the ground floor. It is possible to buy and bring home any furniture available on the floor
by lifting it from a rack that goes to a height far beyond what is possible for most people. More
supplies are held on reserve racks for later use above these places.

2. How has IKEA been able to lower the costs of its products? Discuss your views

Customers all around the world are amazed by the inexpensive goods, which have the
additional benefit of exceptional quality. One of the most important elements contributing to its
worldwide popularity is the cheap cost of the product. Ikea is also a master marketer in its own
right. The company's primary competitive edge is the cheap pricing it offers, which continue to
attract consumers to its retail locations.

Conceived for less:

IKEA's main attraction is its low prices. The company's low prices have helped boost
customer confidence globally. IKEA's main idea is to keep prices low so that everyone can afford
its products. The IKEA prices are nearly half of its competitors. IKEA's product design approach
influences price management. Not everything IKEA does has to be more costly. Ikea may lose
customers and its image if it abandons its core idea. It works backwards, creating things first, then
price them. Following pricing, the company determines whether the product can be manufactured
at that price. IKEA has mastered the method of offering superior products at lower prices
throughout the years. It generates the price tag first, then fits into it. In other business areas, IKEA
has been able to cut costs and benefit its customers.

Material that is both strong and light:

IKEA describes the production process and raw materials utilized on its website. The
company uses low-cost materials that are lightweight and strong. IKEA is a significant influence
in pricing management.
Cost-cutting measures at IKEA
In order to manage lower price, you must focus on all aspects of your company. Marketing,
sales, and logistics are hidden retail expenses. However, IKEA has managed to keep expenses and
consumer pricing low. For starters, it gets less traffic than the others. All product details, including
pricing and specs, remain accessible. The IKEA employees can assist you in the shops. Flat-
packing saves on freight. This allows more furniture to be packaged and delivered to shops.
Shipping and installation costs are also reduced or eliminated. IKEA saves money via self-
assembling. Customers pick up furniture in shops to avoid free shipping charges. Task-Rabbit may
assist assemble furniture. The IKEA experience is unique. It has developed to be worldwide.
IKEA's global growth is boosted through franchises. IKEA has long sought cheaper furnishings.
An item's price may be reduced at any moment. IKEA is always upgrading design and construction
to reduce costs.

3. What are your suggestions to further improve IKEA’s Warehouse Facilities

A. Utilize every available space. You'll get more from your warehouse by creating a more vertical
storage layout. You may be able to keep more inside the same square footage if you make the
necessary investments to store and sort the items you need for big storage containers. Consider
also the kind and variety of shelves utilized. Storing tiny things on pallet racks waste space and
make the misplacement of items simple. Instead of utilizing the same racks throughout your
warehouse, multiple kinds of racks may be necessary for different commodities. Make advantage
of standardized containers to keep shelves looking neat and well-organized at all times.

B. Stock is at a minimum. Accepting lean inventories for your warehouse is equally as important
as accepting lean inventory for your manufacturing facility. The basic idea of Lean is exactly what
you need, and nothing more or less. Increase the likelihood of reducing or eliminating safety
stockpiles as well as the likelihood of influencing suppliers to supply smaller quantities more often.

C. Use the latest technologies in development. Warehouse management software like an ERP that
has a WMS module that can come up with the best ways to carry out the processes of picking and
removal may help make things more efficient. The system also provides automated selection lists
to mobile readers and devices, reducing mistakes and wasting time and paper. Your warehouse is
cleaner. With RFID (balance code) scanners, picking errors may be reduced. The University of
Arkansas found that RFID accuracy increased 27% in only 13 weeks.

D. Offices should be in order. People will be more efficient if their workspaces are properly
arranged since they will save time that would have been spent searching for supplies and tools. To
guarantee your workstations are as organized as possible, use the "5S" lean manufacturing
approach. the techniques for keeping order, decreasing mistakes, and creating consistency:
preserve order, avoid errors, and create uniformity.

E. Optimize the efficiency of work. If you cannot develop efficient picking plans for your WMS,
construct them manually. To reduce trip time, analyze your material use patterns and put
volumetric goods close to the entrance of the warehouse. Also, shop goods that are often sold next
to one other. In principle, you will simplify operations if you attempt to store things you choose in
the most accessible places to prevent picking delays.

4. Critically assess the importance of sustainable relationships with suppliers?

Purchasing is an important strategic role in the company, generating income and managing
costs. However, bad supplier relations may cost both parties time and money. Building and
sustaining good relationships with suppliers would therefore benefit the whole business. Source
Relationship Management (SRM) helps buyers and suppliers connect and determines how to
interact with each supplier.

SRM attempts to improve the relationship between a buyer and his suppliers. To improve
quality, efficiency, creativity, and other benefits, Buyer Connection Management focuses on
creating mutually beneficial relationships with suppliers. However, it is important to remember
that supplier relationships should never be unilateral. It should always be based on mutual benefit.
In the best-case scenario, both parties are satisfied with their business relationship. Supplier
relationship management offers numerous benefits that ultimately improve the bottom line.
Among them are:
A. Optimal procurement technique
Even well-planned processes may be enhanced. Suppliers may provide suggestions and
criticisms to assist improve operations and timeframes for the market. This will eventually lead to
lower costs. Experts in procurement are now realizing that partnerships with big suppliers may
benefit both parties. Businesses have ignored SRM because they have focused on improving
customer relationships and cutting costs. Companies increasingly recognize the value of efficient
provider relationship management. According to PWC's study, good buyer relationship
management leads to the following benefits:
➢ Increasing market share;
➢ Market reacted;
➢ Higher investment return
➢ Order shortening leads to times.

B. Cost saving
A supplier relationship management software may remove much of the costs associated
with signing new contracts with new suppliers. A business may save money by forming mutually
beneficial relationships with key suppliers. Good supplier connections may help you save money
by reducing expenses, delays, and quality problems (which means a better service for the
consumer).
C. Less waste and less price fluctuation
Waste may be produced due to inefficiencies in the customer-supplier process. Contracts
define what will be delivered and at what price. Uncovering and eliminating waste sources may
decrease expenses and enhance services. A fixed price or scaled rise may be exchanged for
minimum order quantities, longer contractual terms, or other restrictions. This reduces company
price volatility, which sometimes scares consumers. With a defined cost foundation, companies
may set their own prices, leading to happier and more loyal customers.
D. Efficiency boost
Communication will improve as a company's relationship with its supplier develops.
Learning more about the business enables the supplier to offer more efficient service. Order issues
will be minimized, and if they arise, the close connection between the two will help resolve them.

CONCLUSION

Ikea must take advantage of every chance to increase the efficiency of its business
operations in order to generate money. According to the results, the company was deemed
unprepared for any sudden changes in management, and such events would lead workers to have
trouble comprehending work processes and putting them into action. When operating on a
worldwide scale, it is critical that the company find solutions to common issues. It may be able to
save more resources and time as a result, while also performing tasks more efficiently. Customers
have learned to expect high-quality service from Ikea since the company has always set high
standards for itself in this regard.
References

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