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Module: BUSI55215_2023

Z0 code Z0200461

Deadline date 11/01/2024

Word count 1902

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Please note that these instructions overrule guidance that you may have seen elsewhere.

IKEA Gateshead

Part A: - The Gateshead IKEA first opened in 1992 has been open for more than 28
years now and is one that has sustained and established itself. While some IKEA’s
like the Coventry one shut down initially. This is one of the 22 stores in UK that have
been operational for a while now.

Here are some key performance objectives that IKEA sets for it’s organisation to

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focus on and how it aligns with it’s operating Strategy. Their strategy revolves around
using automation of processes, global sourcing, lean manufacturing and e-
commerce to help company’s operations get better optimization. Global sources
enable IKEA to access to a bigger product range at a lower cost, and process
automation enables them to improve efficiency while reducing costs and e-
commerce allows the company to reach a bigger audience. All this helps IKEA to
retain market leadership and remain competitive in the retail market sector.

1. Lean Manufacturing: - IKEA currently uses lean manufacturing in its supply

chain strategy. This uses different techniques which help in improving
production and in reducing waste. They use Just- in – time (JIT) production
techniques this ensures that components and materials are being delivered
just in time for them to be used in production. This helps to in reducing costs
and amount of waste produced all this while improving efficiency.
2. Global Sourcing: - This plays a crucial part in IKEA’s supply chain strategy.
For this they source a goods from different countries in Asia, Europe and the
US. This gives IKEA the access to a wide range of products at a lower cost,
this helps them retain their position in the retail market. IKEA has established
a great reputation for sustainability and responsibility as they ensure that they
responsibly source all goods and maintain a strict ethical code.

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3. Commerce: - This is a part of IKEA’s supply chain strategy too as it helps

them to go beyond their brick and mortar stores and reach a bigger audience.
While IKEA has a wide online presence through social media activity, mobile
app and e-commerce store. This helps in reaching a larger audience and
increase company’s presence and they have invested in logistics systems to
make sure that online orders are always completed on time without any
problems.
4. Automation of Processes: - This strategy involves use of automated systems
and robots to improve efficiency while reducing costs. This enables IKEA to
focus on maintain customer satisfaction and maintain quality while they
streamline their operations. This improves working conditions for employees
at IKEA as it reduces the manual labour required through automation.

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Now we will be comparing IKEA to it’s closest rival i.e. Wayfair: -

Competitor analysis based on Polar diagram

Cost: - Both IKEA and Wayfair offer competitive prices while IKEA leverages it’s
design, distribution and manufacturing to save cost and give that benefit to customer
it does this while offering good quality for price and good design. IKEA is known for
its minimalistic and modern designs and a wide range of products, but Wayfair offers
a more diverse range of style from many different suppliers.

Speed: - IKEA’s optimized global supply chain gives it a key strength over Wayfair
allowing to maintain a comprehensive inventory and keep costs to a minimum while
ensuring timely fulfilment of order.

Dependability: - While through a good control over their supply chain and product
manufacturing are not dependent on anyone are therefore more streamlined while
Mayfair has to depend on their suppliers which creates many aspects, they can’t
control therefore makes IKEA more dependable.

Quality: - While IKEA offers good quality products for the money their designs are
modern too but Mayfair’s quality may vary due to various suppliers on their online
marketplace.

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Flexibility: - IKEA is adaptive in its marketing and product which is modified to suit
local customer preferences and tastes for different markets it operates in which really
hard for a retailer like Wayfair.

Bottlenecks and process map

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Figure : Process map for IKEA

IKEA stores are designed to make the process fluid for customers and designed in
such a way that it is laid out in a domestic style which has many subsections like
kitchens, bathrooms, bedrooms etc. Customers then take a code that is attached to
their selected items and then collect it from self-service furniture area. There is an
activity area where they can pay for it there. But they will have to go to main
checkout area if they want to get additional items as well. Customer’s have to
contact a member from staff if they need a large item for which they then go to a
different checkout near warehouse and pay their after this the warehouse team will
receive the request and then customers need to wait till the item is retrieved from

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warehouse and then delivered to customer. This shows that IKEA uses a functional
layout for their design as similar activities and products are located near each other.

But we see some operational issues i.e. bottlenecks in the process map as there is a
significant delay in warehouse logistics and there are delay issues at point of sale
too.

The first delay we can see is at point of sale because the customer to go further in
the checkout area in order to get additional items as mentioned above. The other
delay is caused due to in efficiency caused in warehouse and therefore customer
has to incur waiting times.

In order to tackle this, we have to reduce movements and identify why customer has

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to go to different zones to pay for certain items.

Part B: - In order to tackle this first we analyse the bottlenecks under the lens of
Lean management theory. It aims to reduce lead time and decrease use of
resources such as financial and human capital etc. that are necessary for producing
goods and services required to meet customer needs. The core components of this
theory that deal with this issues identified are- Pull philosophy, Waste elimination
and Synchronised flow without interruptions. According to the two main issues that
we identified we can see that customers have to make extra motion as they have to
pay for their items at different locations and time is wasted when customers have to
wait for their order which affects their shopping experience which has been the
primary thing customers seem to complain about. We can also see that pull
philosophy which is a just in time technique has not been used to it’s maximum
potential here. This helps in removing problems that affect an operation’s efficiency
and reduce lead times. In this warehouse staff start the retrieval process when the
customer has paid for it at a different counter and not when the customer initially has
requested for the item. This creates an even longer queue as the customers who do
need anything from the warehouse have to wait in the same place as well. This also
increases the pressure on staff as they have to serve the customer on such a short
notice and there is a chance of human error as well. This also creates problems like

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if the customer is dissatisfied with the waiting time, they might go to customer service
and then ask for a refund even before the product is delivered to them which then
again causes unnecessary movements creating inefficiency in the process and adds
to operation costs while wasting time all of which goes against lean system concept.

Recommendations: -

 To improve warehouse logistics the company can use this

Change the time of retrieval of items: - IKEA staff can retrieve the items at an
earlier point then wait for customers to go pay for the product and wait for it. If
they get the item as soon as the customer requests it this give them more
time to retrieve the item so by the time a customer gets to the counter the
product is ready there itself for them to pay for and just collect it. This will

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reduce waiting time for them and will reduce delays at point of sale.
 Smart lane System: - This is a system which was created after a lot of
research as big ques and waiting time has been a major cause for customer
dissatisfaction in the retail space for a long time now. Tesco has already
implemented this successfully so it is tried and tested. This system infrared
intelligence technology which monitors movements of customers entering the
store. This helps predict demand which in turn helps notify the staff an hour
before if extra support will be needed to fulfil it efficiently. This will help in
streamlining the process at checkout for IKEA this will help in easing the
traffic. This gives them time to make adjustments in time.
 Scan and Go: - This is again a well-researched system that has been
successfully implemented by many supermarket chains like Sainsbury’s and
Tesco. In this system customers carry their handheld device and then they
scan the items which they want to buy during this the items are
simultaneously bagged. In the end customers just pay and leave the store.
This will help IKEA reduce checkout times and improve customer experience
which will also enable the store to use their human capital better as this
automates the process too. Customers get a digital receipt also which
complements the lean principle of management as it saves costs for IKEA and
adds more value to their while there is waste elimination. This system will

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enable them to leverage artificial intelligence and augmented reality as the

data that is collected can then be used to upsell and increase profits for IKEA.
 Integration of processes- Customers have to go to a different counter from the
furniture self service checkout right now which creates unnecessary
movement and waiting time for them instead IKEA could introduce a system
allowing customers to pay for the additional items also there itself. This will
help to reduce waiting time and traffic at the main checkout.

Limitations: -

There are limitations to these recommendations also which are as follows:

While smart lane system is an investment and extra cost for IKEA and the hassle to

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install the system. There are chances of technical faults which could lead to more
traffic at the main counter or shortage of staff as they will take time to get used to
new systems and then educating the customer on the process is also a time taking
process. There could also be over prediction of demand which could then raise a
query for more staff which will not be actually required. This again goes against the
principle of waste elimination i.e. lean management.

Similar problem can arise for scan and go system too as it is an extra cost
investment for IKEA and will include time also in order for the employees at stores to
get proper training to get familiar with the technology. If technical problems arise
then it will get even busier at the checkout counter again leading to wastage of time
and resources which can potentially be counterproductive for the store.

So, in the end even though IKEA follows many lean principles of management they
still have the potential to implement new systems for waste elimination. This will help
them tackling the bottlenecks and improve the shopping experience for potential new
customers and their existing loyal customer base.

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References

Kumar, K. (2022, December 6). IKEA’s Supply Chain Strategy-2023 Comprehensive

Insight. Dfreight.org. https://dfreight.org/blog/an-insight-into-ikeas-supply-

chain-strategy/#:~:text=What%20is%20IKEA

admin. (2023, December 27). IKEA competitor analysis - The Strategy Story. The

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Strategy Story. https://thestrategystory.com/blog/ikea-competitor-analysis/

Dhaimaan Mahmud. (2018, December 13). IKEA: Operations Analysis.

ResearchGate.

https://www.researchgate.net/publication/332550402_IKEA_Operations_Anal

ysis

Slack, N., Brandon-Jones, A., & Johnston, R. (2013). Seventh Edition Operations

Management. Pearson.

https://colbournecollege.weebly.com/uploads/2/3/7/9/23793496/operations_m

anagement_by_slack_nigel_7th.pdf

UKEssays. (November 2018). Management Information Systems In Tesco

Information Technology Essay.

https://www.ukessays.com/essays/information-technology/management-

information-systems-in-tesco-information-technology-essay.php?vref=1

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Nott, G. (2020). Why coronavirus is driving a scan & go shopping revolution. The

Grocer. https://www.thegrocer.co.uk/store-design/why-coronavirus-is-driving-

a-scan-and-go-shopping-revolution/646695.article

Wallis, J. (2017, October 9). The rise of Scan and Go technology and how it works.

Finextra Research. https://www.finextra.com/blogposting/14606/the-rise-of-

scan-and-go-technology-and-how-it-works

Millard, M. (2015). The Subtle Presence of Lean Practices in IKEA. Kainexus.com.

https://blog.kainexus.com/improvement-disciplines/lean/the-subtle-presence-

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of-lean-practices-in-ikea

Stackpole, T. (2021, June 4). Inside IKEA’s digital transformation. Harvard Business

Review. https://hbr.org/2021/06/inside-ikeas-digital-transformation

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