Operations in practice IKEA1

(All chapters start with an 'Operations in practice examole that illustrates some of the issues that will be covered in the chapter.

Love it or hate it, IKEA is the most successful furniture retailer ever. With 276 stores in 36 countries, it has managed to develop its own special way of selling furniture. The stores layout means customers often spend two hours in the store - far longer than in rival furniture retailers. IKEA's philosophy goes back to the original business, started in the 1950s in Sweden by Ingvar Kamprad. He built a showroom on the outskirts of Stockholm where land was cheap and simply displayed suppliers' furniture as it would be in a domestic setting. Increasing sales soon allowed IKEA to start ordering its own self-designed products from local manufacturers. But it was innovation in its operations that dramatically reduced its selling costs. These included the idea of selling furniture as self-assembly flat packs (which reduced production and transport costs) and its 'showroom-warehouse' concept which required customers to pick the furniture up themselves from the warehouse (which reduced retailing costs). Both of these operating principles are still the basis of IKEA's retail operations process today.

Stores are designed to facilitate the smooth flow

of customers. from parkina. moving through the store itself, to ordering and picking up goods. At the entrance to each store large nouce-boaras provide advice to shoppers. For young children, there is a supervised children's play area, a small cinema, and a parent and baby room so parents can leave their children in the supervised play area for a time. Parents are recalled via the loudspeaker system if the child has any problems.

IKEA 'allow customers to make up their minds in their own time' but 'information points' have staff who can help. All furniture carries a ticket with a code number which indicates its location in the warehouse.

(For larger items customers go to the information desks for assistance.) There is also an area where smaller items are displayed, and can be picked directly. Customers then pass through the warehouse where they pick up the items viewed in the showroom. Finally, customers pay at the checkouts, where a ramped conveyor belt moves purchases up to the checkout staff. The exit area has service points and a loading area that allows customers to bring their cars from the car park and load their purchases.

Behind the public face of IKEA's huge stores is a complex worldwide network of suppliers, 1,300 direct suppliers, about 10,000 sub-suppliers, wholesale and transport operations include 26 Distribution Centres.

This supply network is vitally important to IKEA. From purchasing raw materials, right through to finished products arriving in its customers' homes, IKEA relies on close partnerships with its suppliers to achieve both ongoing supply efficiency and new product development. However, IKEA closely controls all supply and development activities from IKEA's home town of lmhult in Sweden.

But success brings its own problems and some customers became increasingly frustrated with overcrowding and long waiting times. In response IKEA in the UK launched a 150 m programme to 'design out' the bottlenecks. The changes included:

• Clearly marked in-store short cuts allowing customers who lust want to visit one area. to avoid having to go through all the preceding areas.
• Express checkout tills for customers with a bag only rather than a trolley. Extra 'help staff' at key points to help customers.
• Redesign of the car parks. making them easier to navigale
• Dropping the ban on taking trolleys out to the car parks for loading (originally implemented to stop vehicles being damaged).
• A new warehouse system to stop popular product lines running out during the day.
• More children's play areas.

IKEA spokeswoman Nicki Craddock said: 'We know people love our products but hate our shopping experience. We are being told that by customers every day, so we can't afford not to make changes.

We realized a lot of people took offence at being herded like sheep on the long route around stores. Now if you know what you are looking for and just want to get in, grab it and get out, you can.'

Ouestion

Identify from the case, the critical decision that Operations Managers make as outlined in the first 20marks

lecture.

furriturt. The stires" lavoul meath cutherers ohen kgend two houn in the stcoe - tar longer than in Fyul The engral timinest, startod in the 1966 in Deroder biriply dioplayed zupclers' furnture at in woild te hom local manufacturors. But it wan inhovation in Bs operatione that or amatically feduced hs laillog oonts. Theve neluded the idea of nullevg tornhere all purthang raw makiak noti Dowegh io frusted on clowe gatraraph with its muplaess to achene. bericegit which Eotuirad cuslomers 70 pick the Mrrit re up thambalyet from tha a lunoube twith rabucect ahd dowiogmart activied from bof Aly home sown of atil the beab of loit A s detal operations procets fodty. dutriel in fiomiont theren are chespred ia tacilitate fle ternoce fow Fur icocest brings bi gen probienu and mome of cuntornert, tom pliking. moving troush the shore Gutowers tecame incoeasingy tuntratad with to aach sicee large totroe-bok dy proplde andice to in the UK la fnched a Cleg m pragrammen ts lawos out' sheepers. For poung chiblen, there is a mockerined the boctlersacis. The charros inciluatat. chibrecis play anct, a smal cinoma, and a parert and betry noom toe parmiti can lemie their chibdron in the + Fuary markad in otore short cute allowing oustimen Bocorvosod piay arna for at teme. Pou th are rocaliod with The loudsecaber sridem it De ohild hat ary gectient. WC "alow clishomers to main op ther minde in racter than a Boclepe thar own grwe' but 'ifloonatoon boirts' hatio still who can hap. Al furviture cires a bckit with a oode 4 Extro Thip stait at kay poenta to heip cuntoners. Rumber which indicaled Ats location in the warouse. 4. Fudetign of the car peikt, meing them ewier to For lapor iemn oustomars. go to the rifontimion denket nitigute lor assetance) There s also an area eture temaler tarn are dicplaryd, and can be pocked directy Guntomerl Fen past though the warehoule wiare teny fick up vhicles teiry damagat. the itens wiewed in the shouroom. Findly, ountroners A faer in rehouse nytere ts isce poculer fruduct lines nurvicig ouf dioling the dar: - Mere childres's ghy artaks ousiormers to bring that earh fion the tol park and neoght lowe our prodketi but hate tur ahephing laad their purchande Eohird the puble tace of sitelis hupe storet in a Nqy dty. to me cont affond not to mube chavger. cumplas wondwide network of supplen. 1300 diect supplerk, about 10.000 sub-sigelore, wholinall ared 3w akep on the long roule arcund atone. Now if joe Thes sipply network in whthy impertant in BiEA. From grob it and get out you cin:' Question Identify from the case, the critical decision that Operations Managers make as outlined in the first lecture. 20 marks (4) chapters stat with an 'Dperations in practice' arample that dlunteates some of the insuen that will be oovwed in the chuphar) Love it or hate it, WCEA is the most successful furriture rotalor aver. Wht 276 stores in 36 countrios, it has maragid to devolop its own sporial way of seding fumiture. The stcees' layout means customers ofter spend havo hours in the store - far longer than in fival fueniture rotallors. INEA's phliosopty goos back fo the original business, started in the 1950 in Swodon by ingvar Kamprad. He bult a showroom on the outskirts of Stockholm whore tand was choap and simply displayod supplers' furiture as it would be in a domestic suitling, Increasing sates soon aliowed IKEA to start ordering is own seld-dedigned products from local anarufacturers. But it was innovation in its operations that dramatically rectuced its selling costs. These includod the idea of seling tumatre as purchasing raa materiak, right through to fristhed self-asserrbly flat packs (which reduced production products artiving in its customers" homed, MEA tolist and trarmport costs) and its 'shownocm-warohoure' on close partnerships with its supplers to achieve concept which reqtired customers to pick the furmitura both cogoing supply eflesency and new groduct up thombolves from the warohouse fwhich roducod stil the basis of IKEA's retail courations process lodey. Almhil in Sweden. Stores are dosighed to faciltate the smooth flow But suceess brings its awn problioms and scrne of customers, trom parking. moving through the store custormars bocame increasinchy fruntratod aith itself, to ordering and picking up ooods. At the entranse overcrowding and long wailing firmes. In responoe lKEA to esch store lapge notice-boards provide advice to in the UK launchod a Ctso m proeramme to "dosigh out' shoppers. For young chlidren, thore is a supervisod the battionecks. The changes includedt children's play area, a small cinema, and a parent and baby room so parents can leave their chlidren in the - Clandy maked in-store thort eult allowing cuntamers suporvisod play aroa for a time. Parents are rocaliod via who just want to visit one area, to avcikd thaning in go through all the precoding aneas the loudspeaker system if the child has any probiems lKEA 'allow customers to make up ther micots in - Expreos chockout tills flor cuntomore w the a bag oni) thoir owen frme' but 'information points' have stall who rathat that a trolley. can help. Al furniture casries a ficket with a code - Extra Thelp itutf at key pointe to bule cuntornors number which incicates its location in the warohouse - Redesign of the car perk, ifaking them wariter to For larger itoms eustomers go to the information desks navigate for ascistance.) Thore is also an aros where smaler itores Dropping the ban on tuking troloys out fo the car are displayed, and can be picked dinoctly. Customers parks for loading loriginally implemented to stup thon pass through the warehouse whore they pick ap vehicles being dimagich. - A now warchoule syntarn to stoo pepular product the iterns viowed in the showrocm. Finaly, customors linen nunning out durng the din. pay at the checkouts, where a fanped comveyor belt moves purchases up to the chackout staft. The exit - More chlldea's play lartars. aroa has sorvice points and a loading area that allows IKEA spolketaoman Nicki Craddock said: VWe know customors to tring thoir cars trom the car park and pocple love our product but hate our shopping load their purchases. experionce. Wh are boing told mat by euntoman Bohind the public tace of ICEA's huge stores is a evory day, so wo can't athord not to make changas. complex worldaide notwork of suppliors. 1,300 direct We rialived a iof of pocple tock offonce at boing harchol supplest, about 10,000 sub-supplises, wholesale and lhe shaep on the lang roule arsund atorest Now if you transport operations include 26 Distribution Contren. know what you are looking for and juat ant fo gof in. This supply netwoek is vitaily important to IKEA. From grab it and got out, you can" Question Identify from the case, the critical decision that Operations Managers make as outlined in the first lecture. 20 marks