Operation functions of an Organization
Case study
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 parking, moving through the store itself, to ordering and picking up goods. At the entrance to each store large notice- boards 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. DFS is another furniture retailer operating in the UK and Ireland. Compared to IKEA, DFS has a different business philosophy and this affects the operations that constitute the business. Questions Study the IKEA case above and any additional information you can gather from the company's web site or related web sites. Search the internet or any other sources for information that could help you to identify the characteristics of the DFS business and answer the following questions:
1. How is the IKEA superstore design different from that of DFS stores? (10%)
2. What do you think might be the major problem in running an operation like the IKEA superstore compared to DFS stores? (10%)
3. What do you identify as the main aim of the 'operations function' within the IKEA superstore? What are the two main sets of sub-operations in the superstore? Are they different from the 'sales function' in the store? Discuss in comparison to the 'operations function' within the DFS store. (10%)
4. List the main processes (and major activities if possible), for every identified sub-operation from question 3 above, and classify them according to what is being transformed in the process and what property changes (shape, location, ownership, physiological, psychological state, etc.). You can use diagrams to describe the flow of resources in both IKEA and DFS stores. (20%)
5. What is the position of the IKEA superstore operation on the four dimensions against that of the DFS (4-V analysis)? Explain. (20%)
6. Discuss the relative priority of the five operations performance objectives (quality, speed, dependability, flexibility and cost) of IKEA and DFS and which ones, in your opinion, are the most important to build into the design of the IKEA's or DFS's operations respectively. (Note: a polar graph can be used to indicate the importance of each objective for the operations at VBA). (30%)