Woxsen Business School, Hyderabad

OPERATION MANAGEMENT Capstone Project

“Streamlining Success: A Comprehensive
Analysis of IKEA's Operations
Management"

SUBMITTED TO- Dr. Sujit

Singh SUBMITTED BY- GROUP
5

Rishabh Thakur:23WU0202230
Rahul Kiran Sonkar:23WU0202250
Nazimul Haque:23WU0202032
Ridisha Bhavikatti:23WU0202229
Yash Jhalani:23WU0202281

GROUP 5
 Title: "Streamlining Success: A Comprehensive Analysis of IKEA's
Operations Management"
Abstract:

Project Objectives:

The main objectives of this capstone project are to analyze the operations management practices of IKEA, a
renowned global player in the home furnishing industry.
Specifically, the project aims to investigate various aspects of IKEA's operations strategy, product and service
design, process design, planning and control mechanisms, innovation and improvement initiatives, supply chain
management, and quality management.

Methodology:

The methodology employed involves a multi-faceted approach, combining extensive literature review with primary
research methods.
Academic literature related to operations management and IKEA's organizational practices serves as the foundation
for analysis.
Primary research includes interviews and surveys conducted within IKEA's organizational units, allowing for
insights into the company's internal processes and strategies.

Key Findings:

 Analysis of IKEA's operations strategy reveals a strong alignment with its business objectives,
emphasizing efficiency, cost-effectiveness, and customer-centricity.

 Examination of product and service design processes highlights IKEA's success in catering to
diverse consumer needs while maintaining a focus on affordability and sustainability.

 Evaluation of process design and planning mechanisms showcases IKEA's commitment to

continuous improvement and adaptation to changing market demands.

 Insights into innovation and improvement initiatives demonstrate IKEA's embrace of lean principles and
agile methodologies to drive operational excellence.

 Examination of the supply chain management and quality management practices underscores
IKEA's efforts to ensure product availability, quality, and customer satisfaction.
 Table of Contents

1. Introduction

Background and Objectives

2. Operations Strategy

Overview and Alignment with Business Strategy

Product and Service Design

Product Range and Development Process

3. Process Design

Supply Chain and Store Operations

4. Planning & Control

Inventory Management and Demand Forecasting

5. Innovation and Improvement

Innovation Strategies and Continuous Improvement

6. Supply Chain Management

Overview and Efficiency

7. Quality Management

Quality Control and Customer Satisfaction

8. Conclusion

Summary of Key Findings and Recommendations

9. Recommendations

Actionable Strategies for Improvement

10. References

1. Introduction

IKEA, founded in 1943 by Ingvar Kamprad in Sweden, has grown into one of the world's largest
furniture retailers, with over 400 stores in 52 countries. Known for its affordable and stylish furniture,
IKEA has revolutionized the home furnishing industry with its flat-pack and self-assembly concept,
enabling cost-effective shipping and convenient assembly for customers.
Purpose and Scope

The purpose of this project is to conduct a comprehensive analysis of IKEA's operations management
practices, focusing on key areas such as operations strategy, product and service design, process
design, planning and control, innovation, supply chain management, and quality management. The
scope of the project encompasses an in-depth examination of IKEA's operational processes and
strategies, to identify areas for improvement and provide actionable recommendations for enhancing
efficiency and effectiveness.

2. Operations Strategy

Overview of IKEA's Operations Strategy

 IKEA's operations strategy is centered around the concept of offering well-designed,

functional home furnishings at affordable prices. Central to this strategy is IKEA's
commitment to cost leadership and differentiation through product innovation and
operational efficiency. Key elements of IKEA's operations strategy include:

 Efficient Supply Chain: IKEA operates a highly efficient supply chain, with centralized
procurement, strategic supplier partnerships, and optimization of transportation and
distribution networks to minimize costs and ensure timely delivery of products to
stores worldwide.

 Self-Service Model: IKEA's self-service model allows customers to browse through a

wide range of products displayed in its large warehouse-style stores, facilitating cost
savings through reduced labor and overhead expenses.

 Flat-Pack and Self-Assembly: IKEA's flat-pack and self-assembly concept enables cost-
effective packaging, transportation, and storage of products, reducing shipping costs
and increasing convenience for customers.

Alignment with IKEA's Business Strategy

IKEA's operations strategy is closely aligned with its overarching business strategy, which focuses
on providing value to customers through affordable, well-designed products. By streamlining its
operations and leveraging economies of scale, IKEA is able to maintain its position as a price leader
in the furniture retail industry while simultaneously offering innovative and stylish products that
appeal to a broad customer base.
 A) IKEA value chain Analysis

Evolution of IKEA's Operations Strategy

Over the years, IKEA's operations strategy has evolved in response to changes in consumer
preferences, market dynamics, and technological advancements. Initially focused on cost leadership
and operational efficiency, IKEA has increasingly emphasized sustainability, digitalization, and
omnichannel retailing in its operations strategy. This evolution reflects IKEA's commitment to
staying relevant and competitive in a rapidly changing retail landscape.

Recommendations for Further Refinement

To further refine its operations strategy, IKEA should consider the following recommendations:

 Enhance Sustainability Practices: Invest in renewable energy sources, eco-friendly materials,

and sustainable production processes to minimize environmental impact and meet growing
consumer demand for sustainable products.

 Strengthen Digital Capabilities: Expand online sales channels, improve website

functionality, and enhance digital marketing efforts to capitalize on the growing trend of e-
commerce and digitalization in retail.
  Optimize Store Layout and Customer Experience: Continuously review and optimize store
layouts, customer flow management, and in-store services to enhance the overall shopping
experience and drive customer satisfaction and loyalty.

 Foster Innovation and Product Development: Continue to invest in research and

development, collaborate with designers and suppliers, and introduce innovative products and
solutions that address evolving customer needs and preferences.

3. Product and Service Design

Overview of IKEA's Product Range and Design Philosophy

IKEA offers a wide range of well-designed, functional home furnishings and accessories at affordable
prices. The company's design philosophy is rooted in the principles of simplicity, functionality, and
accessibility. IKEA products are characterized by clean lines, minimalist aesthetics, and practical
features that address the everyday needs of consumers.

A) IKEA Worldwide Retail Share in 2023

IKEA adopts a customer-centric approach to product design, catering to diverse consumer segments
with varying tastes, preferences, and budgets. The company offers a mix of basic and premium
products to appeal to different demographic groups, from budget-conscious shoppers to design
enthusiasts. IKEA's extensive product range includes furniture for every room in the home, as well
as textiles, kitchenware, lighting, and storage solutions, ensuring that customers can find products
that suit their individual needs and lifestyles.

Discussion on IKEA's Product Development and Design Process

IKEA's product development and design process is characterized by a combination of in-house design
expertise, collaboration with external designers and suppliers, and ongoing market research and trend
analysis. The company's design teams work closely with suppliers to develop innovative solutions that
optimize functionality, durability, and affordability. IKEA also emphasizes sustainability in its product
development process, striving to minimize waste, reduce environmental impact, and use renewable
materials whenever possible.

Recommendations for Enhancing Product and Service Design at IKEA

To enhance product and service design at IKEA, the following recommendations are proposed:

 Expand Product Range: Continuously expand and diversify IKEA's product range to
address emerging consumer trends and preferences, such as sustainable living, compact
living solutions, and smart home technology.

 Improve Customization Options: Introduce customizable and modular product lines that
allow customers to personalize their furniture and home accessories to suit their individual
style and needs.

 Enhance Digital Design Tools: Develop user-friendly digital design tools and virtual reality
applications that enable customers to visualize and customize their living spaces,
facilitating the online shopping experience and driving engagement and conversion.

 Strengthen Design Collaboration: Foster stronger collaboration with designers, artists, and
influencers to co-create unique and exclusive product collections that resonate with
IKEA's target audience and differentiate the brand in the marketplace.

4. Process Design
Overview of IKEA's Supply Chain and Logistics Processes

IKEA's supply chain and logistics processes are critical components of its operations, enabling the
efficient sourcing, manufacturing, and distribution of products to stores worldwide. Key features
of IKEA's supply chain include:

 Centralized Procurement: IKEA centrally manages its procurement activities, allowing

for bulk purchasing and negotiation of favorable terms with suppliers to minimize costs.

 Strategic Supplier Partnerships: IKEA maintains long-term partnerships with a select group
of suppliers, fostering collaboration and ensuring quality, reliability, and sustainability in the
supply chain.

 Efficient Distribution Network: IKEA operates a network of distribution centers

strategically located near major markets, facilitating timely and cost-effective delivery of
products to stores and customers.

a) IKEA Global Supply Chain Process

Evaluation of IKEA's Store Layout and Customer Flow Management

IKEA's store layout and customer flow management are designed to optimize the shopping
experience and encourage impulse purchases while minimizing congestion and wait times. Key
aspects of IKEA's store layout include:

 Self-Service Model: IKEA stores are organized into clearly defined departments and
display areas, allowing customers to browse and select products at their own pace without
the need for assistance from sales staff.

 Furniture Showroom: IKEA's unique showroom layout allows customers to visualize

how products will look in their own homes by showcasing fully furnished room settings
and inspiring design ideas.

 Efficient Checkout Process: IKEA employs a streamlined checkout process with multiple
cash registers and self-service kiosks to minimize wait times during peak hours.

Analysis of Opportunities for Process Improvement within IKEA's Operations

Despite IKEA's efficient supply chain and store operations, there are several opportunities for
process improvement to enhance operational efficiency and customer satisfaction:

 Inventory Management: Implement advanced inventory management systems and demand

forecasting algorithms to optimize inventory levels, reduce stockouts, and minimize
carrying costs.

 Order Fulfillment: Enhance order fulfillment capabilities by integrating online and offline
channels, enabling customers to seamlessly purchase products across multiple touchpoints
and choose their preferred delivery or pickup options.

 Customer Service: Invest in training and development programs for store staff to improve
product knowledge, communication skills, and customer service standards, ensuring a
consistently positive shopping experience for customers.

Recommendations for Optimizing IKEA's Processes

To optimize IKEA's processes, the following recommendations are proposed:

  Invest in Technology: Leverage emerging technologies such as artificial intelligence,
machine learning, and robotics to automate repetitive tasks, streamline operations, and
improve accuracy and efficiency across the supply chain and store operations.

 Continuous Improvement: Implement a culture of continuous improvement and lean

management principles, encouraging employees at all levels to identify inefficiencies,
propose innovative solutions, and drive process optimization initiatives.

 Sustainability Integration: Integrate sustainability considerations into process design and

decision-making, prioritizing eco-friendly practices, renewable resources, and waste
reduction initiatives throughout the supply chain and store operations.

 Customer Feedback Loop: Establish a feedback loop with customers to solicit input,
gather insights, and identify pain points and opportunities for improvement in the
shopping experience, enabling IKEA to proactively address customer needs and
preferences.

5. Planning & Control

Overview of IKEA's Inventory Management and Supply Chain Planning

IKEA's inventory management and supply chain planning are key components of its operations. The
company employs sophisticated systems and processes to optimize inventory levels, minimize
stockouts, and ensure timely delivery of products to stores. Centralized procurement, strategic
supplier partnerships, and efficient distribution networks contribute to IKEA's ability to effectively
manage inventory and meet customer demand.

Evaluation of IKEA's Demand Forecasting and Capacity Planning

IKEA utilizes advanced demand forecasting techniques and capacity planning models to anticipate
customer demand and allocate resources accordingly. By analyzing historical sales data, market
trends, and customer preferences, IKEA can accurately forecast demand for its products and adjust
production and inventory levels to meet anticipated demand while minimizing excess inventory and
carrying costs.
A) IKEA inventory Management Strategies.

B) IKEA Business Model

Discussion on How IKEA Manages Demand Fluctuations

IKEA employs various strategies to manage demand fluctuations and maintain operational flexibility.
These include:

 Flexible Production: IKEA works closely with suppliers to maintain flexible

production schedules and adjust manufacturing output in response to changes in
demand.

 Inventory Buffer: IKEA maintains strategic inventory buffers at distribution centers and
stores to accommodate fluctuations in demand and minimize stockouts during peak periods.

 Promotional Activities: IKEA uses promotional activities, sales events, and marketing
campaigns to stimulate demand and drive sales during off-peak periods, helping to
balance demand and smooth out fluctuations.

Recommendations for Enhancing Planning and Control Mechanisms at IKEA

To enhance planning and control mechanisms, IKEA should consider the following recommendations:

 Invest in Advanced Analytics: Implement advanced analytics tools and predictive

modeling techniques to improve demand forecasting accuracy and capacity planning
effectiveness, enabling IKEA to better anticipate and respond to changing market
conditions and customer preferences.

 Collaborate with Suppliers: Strengthen collaboration with suppliers and supply chain
partners to enhance visibility, communication, and coordination across the supply chain,
enabling IKEA to better synchronize production, inventory, and distribution activities.

6. Innovation and Improvement

Analysis of IKEA's Approach to Fostering Innovation

IKEA fosters innovation through a combination of internal research and development, strategic
partnerships, and open innovation initiatives. The company encourages creativity and experimentation
among its employees and collaborates with designers, suppliers, and customers to generate new ideas
and solutions. IKEA's commitment to sustainability and affordability also drives innovation in product
design, materials sourcing, and manufacturing processes.

Discussion on Tools and Methodologies for Continuous Improvement

IKEA employs various tools and methodologies for continuous improvement, including:

 Kaizen: IKEA embraces the principles of Kaizen, promoting a culture of

continuous improvement and incremental changes at all levels of the organization.
 Value Stream Mapping: IKEA utilizes value stream mapping to identify
inefficiencies, eliminate waste, and streamline processes across the value chain.
 Agile and Scrum: IKEA applies agile and scrum methodologies to product development
and project management, enabling cross-functional teams to collaborate effectively and
deliver value iteratively and incrementally.
Assessment of IKEA's Commitment to Lean Principles and Agility

IKEA demonstrates a strong commitment to lean principles and agility in its operations. The company
continuously seeks ways to eliminate waste, reduce lead times, and improve efficiency throughout its
supply chain and store operations. By adopting agile practices and embracing a culture of
experimentation and adaptation, IKEA can quickly respond to changing market conditions, customer
preferences, and competitive pressures.

Recommendations for Promoting Innovation and Improvement at IKEA

To promote innovation and improvement at IKEA, the following recommendations are proposed:

 Foster a Culture of Innovation: Encourage creativity, risk-taking, and experimentation among

employees by providing training, resources, and incentives to support innovation initiatives.
 Invest in Research and Development: Allocate resources to research and development efforts
focused on sustainability, digitalization, and customer-centric innovation, ensuring that
IKEA remains at the forefront of industry trends and emerging technologies.
 Strengthen Collaboration: Enhance collaboration with external partners, including designers,
suppliers, startups, and academic institutions, to leverage complementary expertise and
drive innovation across the value chain.
7. Supply Chain

a) IKEA FLOW CHART

Overview of IKEA's Global Supply Chain Network

IKEA operates a complex global supply chain network spanning multiple countries and continents.
The company sources raw materials and components from suppliers worldwide, transports them to
manufacturing facilities for production, and distributes finished products to stores and customers
globally. IKEA's supply chain network is characterized by strategic supplier partnerships,
centralized procurement, and efficient logistics operations.

Analysis of IKEA's Use of Information Technology in Supply Chain Management

IKEA leverages information technology extensively to enhance visibility, transparency, and

efficiency in supply chain management. Key technologies and systems used by IKEA include:
  Enterprise Resource Planning (ERP): IKEA utilizes ERP systems to integrate and
streamline business processes, including procurement, production, inventory management,
and distribution, enabling real-time data sharing and decision-making across the supply
chain.

 Supply Chain Analytics: IKEA employs supply chain analytics tools and dashboards to
analyze and visualize supply chain performance metrics, identify trends, and optimize
operational processes, enabling continuous improvement and informed decision-
making.

 Collaboration Platforms: IKEA utilizes collaboration platforms and digital portals to

facilitate communication and collaboration with suppliers, enabling transparent and efficient
exchange of information, orders, and documentation throughout the supply chain.

Recommendations for Optimizing IKEA's Supply Chain Efficiency and Sustainability

To optimize IKEA's supply chain efficiency and sustainability, the following recommendations are
proposed:

 Invest in Digital Supply Chain Technologies: Continue to invest in digital supply

chain technologies such as artificial intelligence, blockchain, and Internet of Things
(IoT) to improve visibility, agility, and resilience in the supply chain, enabling IKEA
to better anticipate and respond to disruptions and market changes.

 Enhance Supplier Collaboration: Strengthen collaboration with suppliers and supply

chain partners to drive innovation, improve sustainability practices, and enhance supply
chain resilience, fostering long-term partnerships based on trust, transparency, and shared
value creation.

8. Quality Management

Evaluation of IKEA's Quality Control Processes and Standards

IKEA maintains rigorous quality control processes and standards to ensure that its products
meet high-quality standards and customer expectations. These processes include:
 Supplier Audits: IKEA conducts regular audits and inspections of its suppliers' facilities
to assess compliance with quality standards, production processes, and environmental
regulations.
 Product Testing: IKEA conducts extensive product testing and quality assurance checks at
various stages of the production process to identify defects, ensure product safety, and
meet regulatory requirements.
 Customer Feedback: IKEA solicits feedback from customers through surveys, reviews,
and customer service interactions to identify quality issues and areas for improvement.

a) IKEA - 4 Levels of Quality Check

Discussion on IKEA's Approach to Managing Product Quality and Customer Satisfaction

IKEA places a strong emphasis on managing product quality and customer satisfaction through:

 Design Excellence: IKEA focuses on design excellence, functionality, and durability

to deliver products that meet the needs and preferences of customers.
 Warranty and Returns Policy: IKEA offers generous warranty and returns policies to reassure
customers and address any issues or concerns they may have with products.
 Continuous Improvement: IKEA continuously monitors and evaluates product quality
and customer satisfaction metrics to identify opportunities for improvement and
implement corrective actions as needed.
Recommendations for Enhancing Quality Management Practices at IKEA

To enhance quality management practices at IKEA, the following recommendations are proposed:

 Strengthen Supplier Relationships: Foster closer relationships with suppliers and supply
chain partners to improve communication, collaboration, and transparency, enabling
proactive identification and resolution of quality issues.
 Invest in Technology: Leverage advanced technologies such as artificial intelligence,
machine learning, and data analytics to automate quality control processes, improve defect
detection, and enhance product traceability and transparency.
 Enhance Training and Development: Provide training and development opportunities for
employees to enhance their knowledge and skills in quality management, product testing,
and customer service, empowering them to deliver high-quality products and services.

9. Financial Performance:

Financial Performance: (The financial year 2023)

In fiscal year 2023, IKEA Group exhibited notable financial performance, marked by resilient retail
operations and strategic cost management efforts. Here's a structured breakdown of IKEA's financial
performance:

Retail Sales Growth:

Total retail sales reached EUR 47.6 billion, indicating a 6.6% increase compared to the previous year
(EUR 44.6 billion in FY22). When adjusted for currency effects, the growth rate stood at 7.3%.

Sales Composition:
Retail sales encompassed IKEA products, food, and services to customers, contributing to the overall
revenue growth. Both store sales and online sales exhibited positive growth trends throughout the fiscal
year.

Cost Trends and Stabilization:

In the initial half of FY23, raw material and commodity prices, alongside transportation and logistics
costs, remained elevated. However, a stabilization phase ensued, leading to a moderate increase in
sourcing and supply costs compared to the preceding fiscal years.
The stabilization in cost trends facilitated a reduction in sales prices to IKEA franchisees, enhancing
affordability for retail customers.
Revenue and Profit Figures:

Inter IKEA Group recorded total revenues of EUR 29.1 billion, representing a notable increase from EUR
27.6 billion in FY22. This revenue growth was attributed to wholesale sales, franchise fees, and retail
sales from specific IKEA stores.
Net profit surged to EUR 1.6 billion, marking a substantial improvement from EUR 0.7 billion in FY22.
This surge in profitability signifies enhanced operational efficiency and cost management strategies.

Cost Management and Gross Margin:

Despite inflationary pressures on operational costs, IKEA Group effectively managed its cost base
through strategic initiatives and an internal restructuring program.
The stabilization of sourcing costs and supply chain disruptions resulted in a moderate increase in the
cost of goods sold. However, this was offset by improved gross margin and profitability compared to
the preceding fiscal year.
a) IKEA INCOME STATEMENT 2023

b) IKEA BALANCE SHEET 2023

Financial Performance Analysis: IKEA India Private Limited

Profitability Analysis:

Net losses have widened considerably over the 5-year period, from INR 3,240.63 million in 2017 to INR
38,202 million in 2022, indicating significant struggles in achieving profitability.
EBITDA has been negative throughout the period, deteriorating from - INR 2,175.83 million in 2017 to -
INR 5,136 million in 2022, with a trailing 12M EBITDA margin standing at -47.73%.
Net profit margin declined from -215.65% in 2017 to -83.77% in 2022, while operating margin improved
slightly from -200.91% in 2017 to -65.46% in 2022 but remained negative.
Returns on common equity, assets, and invested capital have all been negative and declining over the
period, indicating worsening capital efficiency and shareholder returns.

Liquidity Analysis:

The current ratio declined from 15.50x in 2017 to 2.00x in 2022, reflecting a deteriorating liquidity
position.
The cash conversion cycle increased from 122 days to 164 days, indicating slower cash conversion.
Operating cash flows have been negative, suggesting persistent operating losses and liquidity concerns.

Leverage & Solvency Analysis:

 Debt levels increased substantially, with net debt rising from negative INR 5,336.95 million in 2017 (net
cash position) to INR 43,357 million in 2022, leading to a sharp rise in net debt to equity ratio from -37%
to 2225%.

Tangible common equity ratio turned negative, indicating insolvency concerns.

Growth Analysis:

Assets grew by 211% over 5 years, indicating high growth.

In summary, IKEA India has shown significant struggles in achieving profitability over the past five
years, with widening net losses, negative EBITDA, and declining returns. Liquidity position has
deteriorated, leverage and solvency concerns have arisen, and efficiency metrics could not be fully
assessed. The company's growth trajectory seems overextended without signs of profitability, raising
concerns about sustainability and business viability. Structural changes may be needed to address the
challenges and ensure long-term profitability.

IKEA Supply Model:

IKEA Value Chain Analysis:

IKEA's value chain encompasses a series of activities that add value to its products and services, ultimately
contributing to its competitive advantage. Here's a breakdown of IKEA's value chain:

Inbound Logistics:

IKEA sources raw materials and components from suppliers worldwide.

The company focuses on cost-effective procurement and efficient supply chain management to ensure timely
delivery of materials to manufacturing facilities.

Operations:

IKEA's manufacturing processes emphasize efficiency, automation, and standardization.

Products are produced using sustainable practices and innovative design techniques to meet quality standards while
minimizing costs.

Outbound Logistics:

IKEA distributes products to its stores and distribution centers globally.

The company utilizes a multi-modal transportation network to optimize delivery routes and minimize
transportation costs.
Marketing and Sales:

IKEA's marketing strategy emphasizes affordability, functionality, and sustainability.

The company uses creative advertising, in-store displays, and digital marketing channels to promote its products
and attract customers.
Service:

IKEA provides customer service support, including product assembly, delivery, and returns.
The company offers additional services such as interior design consultations and home furnishing solutions to
enhance the customer experience.
Procurement:
IKEA focuses on strategic sourcing and supplier relationship management to ensure quality and cost-effective
procurement.
The company collaborates with suppliers to uphold ethical and environmental standards throughout the supply
chain.

IKEA Entry Mode - Hierarchical:

IKEA typically follows a hierarchical entry mode strategy when expanding into new markets. This approach
involves establishing full control over operations through direct investment and ownership. Here's how IKEA
implements the hierarchical entry mode:

Company-Owned Stores:

IKEA establishes company-owned retail stores in new markets to directly serve customers and control the retail
experience.
These stores adhere to IKEA's standardized format, layout, and branding, ensuring consistency across locations.
Manufacturing and Production Facilities:

In some cases, IKEA may invest in manufacturing and production facilities in new markets to localize production
and reduce costs.
This allows IKEA to adapt products to local preferences and regulations while maintaining control over quality and
supply chain logistics.
Distribution Centers:
IKEA sets up distribution centers in strategic locations to efficiently manage inventory and logistics.
These distribution centers support the company's retail stores and e-commerce operations, ensuring timely delivery
of products to customers.

IKEA's operation functions:

Operation Management:

IKEA focuses on optimizing operational processes to ensure efficiency and cost-effectiveness.

It employs lean principles to streamline production, minimize waste, and maximize value for customers.
Operation management at IKEA involves overseeing the entire value chain, from sourcing raw materials to
delivering finished products to customers.

Lean Management:

IKEA embraces lean management principles to eliminate inefficiencies and improve productivity.
The company emphasizes continuous improvement, empowering employees to identify and implement process
enhancements.
Lean management techniques, such as value stream mapping and 5S methodology, are utilized to optimize
operations and enhance overall performance.
Process Management:

IKEA utilizes process management techniques to standardize and optimize workflows across its operations.
It employs process mapping and analysis to identify bottlenecks, streamline processes, and enhance productivity.
Process management at IKEA involves continuous monitoring and refinement to ensure alignment with
organizational goals and customer expectations.

Capacity Management:

IKEA carefully manages its production capacity to meet customer demand while maintaining cost efficiency.
It utilizes demand forecasting and capacity planning to optimize resource allocation and production scheduling.
Capacity management at IKEA involves balancing production capabilities with market demand fluctuations to
minimize underutilization or overutilization of resources.
10. Investigation

Primary Research Methods:

Online Surveys: Designed and distributed online surveys to IKEA customers using readily
available survey platforms. The survey aimed to gather feedback on customer
experiences, preferences, and satisfaction levels with IKEA products and services.
 Online Reviews and Social Media Analysis: Conducted analysis of online reviews and
social media discussions related to IKEA to understand customer sentiments, trends, and
concerns. Utilized online review platforms and social media monitoring tools for data
collection.
 Web Research and Publicly Available Information: Conducted extensive web research to
gather publicly available information on IKEA's operations, including company websites,
press releases, and news articles. This provided insights into IKEA's strategies, initiatives,
and recent developments.

Secondary Research Sources:

 Literature Review: Reviewed academic journals, industry publications, and online

resources to gather information on topics such as supply chain management, product
design, and retail operations.
 Company Reports: Analyzed IKEA's annual reports, sustainability reports, and other
company publications to understand its operations, strategies, and performance.
 Market Research Reports: Referenced market research reports and industry analyses
to identify trends, challenges, and opportunities in the furniture retail sector.

Data Collection Tools and Techniques:

 Quantitative Analysis: Used statistical tools and software to analyze quantitative data, such
as financial metrics, performance indicators, and survey responses.
 Data Visualization: Created charts, graphs, and visualizations to present data in a clear
and concise manner, facilitating interpretation and understanding.

11. Analysis

In this section, we analyze IKEA's operations management practices by employing various analytical
tools and frameworks, correlating our findings with established theory in operations management.

1. Correlation with Theory:

We have correlated our observations and data analysis with key theories in operations management,
including lean manufacturing, total quality management (TQM), and supply chain management
principles.
For example, IKEA's emphasis on cost leadership and operational efficiency resonates with lean
manufacturing principles, which aim to minimize waste and maximize value for the customer.

2. Use of Analytical Tools and Frameworks:

SWOT Analysis:
 Strengths: IKEA's strong brand image, efficient supply chain, and extensive product range
contribute to its competitive advantage.
 Weaknesses: Dependence on global suppliers may expose IKEA to supply chain
disruptions, and limited physical stores in some regions could hinder market penetration.
 Opportunities: Growing demand for sustainable products presents an opportunity for IKEA
to expand its eco-friendly product offerings and capture new market segments.
 Threats: Intense competition from both traditional furniture retailers and online
platforms poses a threat to IKEA's market share and pricing strategy.

a) IKEA SWOT ANALYSIS 2023

Value Chain Analysis:

IKEA's value chain comprises primary activities such as inbound logistics, operations, and outbound
logistics, supported by secondary activities including procurement, human resource management,
and technology development.
By analyzing each value chain activity, we identify opportunities for cost reduction, process
improvement, and value creation throughout IKEA's operations.

VRIO Analysis:

 Value: IKEA's unique value proposition lies in its ability to offer well-designed,
functional furniture at affordable prices, leveraging its efficient supply chain and flat-
pack design.
 Rarity: IKEA's brand reputation, global presence, and extensive product range are rare
resources that contribute to its competitive advantage.
 Imitability: While IKEA's operational model can be imitated to some extent, replicating
its scale, brand image, and customer loyalty presents significant challenges for
competitors.
 Organization: IKEA's organizational culture, focused on innovation, cost-consciousness,
and sustainability, enables effective execution of its operational strategies.
 a) IKEA VRIO ANALYSIS

3. Discussion on Company Case and Related Theory and Practice:

We observe that IKEA's operational practices align closely with the principles of lean manufacturing
and supply chain management.
The company's flat-pack furniture design and efficient distribution system reflect lean principles by
minimizing production costs and reducing transportation expenses.
Additionally, IKEA's emphasis on quality control and customer satisfaction resonates with TQM
principles, as evidenced by its stringent quality standards and continuous improvement initiatives.

12. Conclusion

Summary of Key Findings from the Analysis

Through our analysis of IKEA's operations management practices, several key findings have emerged:
IKEA excels in supply chain efficiency and product design, leveraging its global network and
innovative approach to deliver affordable, high-quality products to customers worldwide.
The company demonstrates a strong commitment to sustainability, digitalization, and customer
satisfaction, driving continuous improvement and innovation across its operations.
Opportunities for enhancement exist in areas such as inventory management, supply chain visibility,
and quality control, where IKEA can further optimize processes and mitigate risks.

Insights into IKEA's Operations Management Practices

IKEA's operations management practices are characterized by a balance of cost efficiency, innovation,
and sustainability. The company's ability to streamline processes, leverage technology, and
collaborate with suppliers and customers has enabled it to maintain a competitive edge in the dynamic
retail landscape.

Implications for IKEA's Future Operations Strategy and Performance

Looking ahead, IKEA's future operations strategy should focus on:

Enhancing supply chain resilience and agility to adapt to changing market conditions and mitigate
disruptions.
Investing in digitalization and data analytics to improve decision-making, optimize resource
allocation, and enhance customer engagement.
Strengthening sustainability initiatives and responsible sourcing practices to address environmental
concerns and meet evolving consumer expectations.
Continuously innovating and improving product design, quality, and customer service to sustain
growth and maintain customer loyalty in an increasingly competitive marketplace.

13. Recommendations

Specific Actionable Recommendations for IKEA:

 Enhance Supply Chain Visibility: Implement advanced tracking and monitoring systems
to improve visibility into the supply chain, enabling real-time monitoring of inventory
levels, order status, and shipment tracking.
  Strengthen Supplier Collaboration: Foster closer collaboration with key suppliers
through joint innovation initiatives, strategic partnerships, and supplier development
programs to enhance transparency, quality, and sustainability in the supply chain.

 Invest in Digitalization: Accelerate digital transformation initiatives to digitize manual

processes, automate routine tasks, and leverage data analytics for predictive
forecasting, demand planning, and inventory optimization.

Long-Term Strategies for Improving IKEA's Operations:

 Sustainable Innovation: Embed sustainability considerations into product design, materials

sourcing, and manufacturing processes to minimize environmental impact and meet
growing consumer demand for eco-friendly products.

 Customer-Centricity: Adopt a customer-centric approach to operations, focusing on

enhancing the shopping experience, personalization, and omnichannel integration to meet the
evolving needs and preferences of customers.

 Continuous Improvement: Cultivate a culture of continuous improvement and operational

excellence, empowering employees to identify inefficiencies, propose innovative
solutions, and drive efficiency gains throughout the organization.

Implementation Considerations and Potential Challenges:

 Change Management: Address resistance to change by providing training,

communication, and support to employees at all levels of the organization to facilitate
adoption of new processes and technologies.

 Technology Integration: Ensure seamless integration and compatibility of new

technologies with existing systems and processes to minimize disruption and maximize
efficiency gains.

 Supply Chain Risk Management: Proactively identify and mitigate supply chain risks,
including geopolitical, economic, and environmental factors, through scenario
planning, diversification of suppliers, and contingency planning.
14. References

Barta, G. (2020). IKEA: The Global Retailer. Palgrave Macmillan.

Christopher, M., & Holweg, M. (2011). "Supply Chain 2.0: Managing Supply Chains in the Era of
Turbulence". International Journal of Physical Distribution & Logistics Management, 41(1), 63-82.

IKEA. (n.d.). "About IKEA." Retrieved from

https://www.ikea.com/ms/en_US/about_ikea/ikea_identity/index.html

IKEA. (n.d.). "Sustainability Report." Retrieved from https://www.ikea.com/ms/en_US/this-is-

ikea/sustainability/index.html

Kumar, S., & Craighead, C. W. (2019). "Agility and Risk Mitigation Strategies for Supply Chain
Resilience: A Conceptual Model." International Journal of Production Research, 57(1), 217-237.

Slack, N., & Brandon-Jones, A. (2019). "Operations and Process Management: Principles and
Practice for Strategic Impact." Pearson Education Limited.

Tang, C. S. (2012). "Robust Strategies for Mitigating Supply Chain Disruptions." International
Journal of Logistics Research and Applications, 15(2), 131-142.

Waters, D. (2020). "Global Logistics: New Directions in Supply Chain Management." Kogan
Page Publishers.