Unit 16 Operations and Project Management Assignment – IKEA

Program	Diploma in Business
Unit Number and Title	Unit 16 Operations and Project Management – IKEA
QFC Level	Level 5

Introduction

Operation management is an area of management that is concerned with design, control and production as well as redesigning the business operations of an organisation for the manufacturing of goods and services. The term operation management is being majorly used for increasing the efficiency and effectiveness of planning the activities that have a significant impact on the business process of the organisation. The Unit 16 Operations and Project Management Assignment IKEA will explain the importance of operation management for the leading furniture company IKEA that is offering high-quality goods in a wide range. Additionally, the report will discuss the process model and information about the use of “Three Es” as well as the five performance objectives for managing the operations of IKEA. In the next part, the report will explain the liner programming and analyse the critical path as well as the networking planning. IKEA is the world's largest furniture manufacturing and retailer organisation that operates business in different parts of the world according to the needs and demands of the customers. As of March 2016, IKEA owns 384 stores in 48 nations and offers more than 12000 products. The next task report will produce the local area networking plan and identify the approaches that can be used for project management and quality control in the sales, stock and purchase process.

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Task 1

Explanation about Operations management is important for IKEA Furniture

 

The importance of operation management can be understood by taking case on IKEA Furniture. IKEA is a Swedish Company which sells appliances, furniture, and home accessories. IKEA aims to reduce wastage and enhance productivity at low cost. At the store, the organisation wants to utilise their warehouse properly, taking details of customers and delivering products with shifting costs is low. IKEA's business is successful by managing such operations effectively. Operation management controls the business operation of the system. It mainly deals with the design and improvement of the overall system. It supports the organisation to improve its financial performance. In the case of IKEA, operation management observes activities to ensure and sustain efficiency and effectiveness (Ivarsson and Alvstam, 2010). Efficiency is considered important to achieve the primary object i.e. maximise profitability. For this purpose, it identifies expertise in human resources and another technical resources that reduce the cost of operations. IKEA reduces cost by discarding less profitable cost projects. It uses maximum resources to achieve maximum output. The effectiveness and efficiency lead to productivity yield and improve capacity by utilisation of resources that improve quality. It has been identified that operation management is playing an important role in the IKEA Company.  Its control and coordination range is broad which includes product evaluation, advertising, promotion, product development and distribution, sales and service. 

Operation management is considered important for the manufacturing industry. This is because manufacturing industries take care of so many processes and operations involved in manufacturing. Organisations generally start the process by obtaining raw materials and then process to create goods. Therefore, the successful execution of operations needs to include operation management, especially for the manufacturing industry. Apart from this service industry also includes various processes like assessment of customer expectations, taking feedback on service etc (Edvardsson and Enquist, 2011).

Analyse the operations functions of IKEA Furniture

The operation functions are a series of processes that are interdependent to each other and linked procedures. It consumes one or more resources as input at each stage. Operation functions depend on decisions and results. Strategic plans are designed according to future conditions and demand. The operation functions of IKEA furniture are explained below:
 

• Design process and identify requirement: This function describes a planning stage. Operational manager identify the process and mechanism of their execution. This would identify several human resource and technical tools required. The operation manager also knows how to handle such a process effectively. In the case of IKEA Furniture, this operation function estimates about list of raw materials, technical tools and human resources.  All such needs are considered as input for the next stage (Hill and Hill, 2012). These are collected in sufficient numbers so that the next stage would not suffer from a lack of resources.

• Process activities: The process stage is considered the most important function. Here the expectation is high as the organisation aims to produce goods of quality. For Example- IKEA includes production processes which can be operated safely, give results on time, and best quality output at a low cost. All these objectives should be fulfilled at the process stage. It includes all the activities that must be executed one by one. The activities include a sufficient number of inputs also (Slack. et.al.2010).

• Monitor and Reviewing: Operational managers need to perform monitoring functions at the time of processing of activity. Monitoring involves the cost and quality of the product. In the case of IKEA- product quality is monitored and if it does not meet the quality standard then the current process rejects the product and is sent back to manufacturing for correction.  The organisation wants to minimise the cost of the process. Therefore, operational managers are required to keep the cost under control. The output from the process function is evaluated and finally quality department reviews the manufactured products to assess the product quality (Li.et.al.2011). This review defines the quality and cost of the development of the product. The reviewing is beneficial to set cost for sale goods so that company get profits.

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Three E’s of business-Economy, effectiveness and efficiency

Operational tasks of a business can be carried out easily with the proper balancing among 3E’s. Three E’s are- economy, efficiency and effectiveness.

• Economy: Economy means to perform a task cost-effectively. This factor of business describes the optimum use of resources to accomplish a task. Only the required amount of human resources, capital and time is expected to be invested to achieve a specific goal. IKEA furniture analyses the exact need of resources required to complete a task. Thus, a proper number of resources like furniture, materials and human power can be used to reduce the cost of manufacturing (Berger-Walliser and Shrivastava, 2014). Organisation eliminates unnecessary activities to reduce the cost. The product also will be cost-effective for customers.

• Efficiency: Efficiency means to complete a task with minimum effort. IKEA analyses solutions and selects the most efficient way to perform the task. The organisation also provides equipment and training to accomplish the task easily. Efficiency is required in an organisation to deliver the orders within the period. It also helps to save precious business time and resources so that organisations can increase productivity with efficiency. However, efficiency should not affect the economy badly. Proper balance is required to achieve more benefits.

• Effectiveness: Effectiveness is related to performing a task in a better way than it can be. Efficiency may lead to reduced effort but it may be a lengthy process to achieve a goal. Effectiveness helps to find an optimised way to achieve a goal. IKEA is using e-business strategies to attract more customers. The organisation is giving discounts and offers to online buyers. This can be said an effective way to sell more goods (Naik, 2014). Implementation of efficient and effective methods in business may not be economic in the initial state but the future can be predicted smoothly and managed. So business needs to consider the three E’s to make processing easy, effective and cost-effective.

 

Evaluation of operation management in IKEA

Operation management can be defined as the process of designing and managing the production of new products and restructuring the business operations to meet requirements. Operation management includes four basic steps: inputs, transformation process, output and feedback. Operations carried out by IKEA to produce products are given to illustrate the operation management of the company.

• Inputs: Input may be raw materials and resources to design a new product or service. According to use, inputs can be categorised into two types.

• Transformed resources: This type of input is used as the raw material to develop a product from them. IKEA uses glue, plywood, frames and iron nails as input to transform.

• Transforming resources: This type of resource is not used as raw material and only helps to achieve desired products. Transforming inputs used by IKEA company are machines, human efforts and capital (Slack, 2015).

• Transformation process: This is the actual processing where the raw material of IKEA takes the form of output. Input may be either in the form of information, human power or physical requirements to build output. For instance, to create a new Sofa, the company’s described transformed input will be processed with the help of transforming resources. Plywood, glues and iron nails will be used appropriately to create the output. Thus, the manner of treating inputs for an output is a transformation process.

• Output: The result of the transformation process is the output. The transformation process may produce some undesirable outputs. IKEA company checks the outputs whether they meet the quality standard of the organisation or not. A damaged or poor-quality product cannot be sold and is a loss for the organisation. Producing a higher number of poor-quality products leads to operational failure and poor financial performance (Krajewski.et.al.2013).

• Feedback: Feedback is the suggestions to improve the output. If the production processes can be modified or improved to solve the issues, then a better quality product can be expected from the output. IKEA uses feedback to eliminate production mistakes.

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Tension between cost minimisation and quality maximisation

This is the biggest challenge for IKEA Furniture to minimise cost and maximise quality.  IKEA wants to include such procedures and resources that minimise the cost of operation but do not decrease the quality of goods. However, the achievement of double goals simultaneously is a difficult task. Quality is a vital parameter for IKEA to sustain at present position. However, it has been analysed that quality sustainability increases cost and time. The quality of output expected by customers may result in increased expenses. On the other hand, sometimes cost minimisation suffers from quality degradation. Lower quality of goods affects the brand image. It can decrease the selling of goods also (Hirschey, 2016). Therefore it is very critical to handle both the parameters together- cost minimisation and quality maximisation. Although cost minimisation is necessary to gain more profit on sales. It is also required to compete with other brands.

To provide more benefits to customers on sales and to sustain itself in the market, the company may balance product cost and quality management in a business where it can. IKEA needs to find new ways to reduce the manufacturing cost of products. For that, the company can buy a lot of raw materials with discounts to reduce the cost per product. To sustain the desired quality, supplementary inputs like human efforts can be replaced somewhat with electronic machines to reduce the overall cost (Ajodhia, 2010). Management in the company can find new places to develop and outsource the business so that costs of transportation and supply can be reduced. The effect of all activities will be reflected in products as minimisation in cost with the same quality. This would reduce tension to some extent.

 

Evaluation of the significance of the performance objectives

For furniture organisation, it is essential to know the performance objectives of operation management that would help the manager to analyse the effectiveness of operations to meet the desired outcome:

• Dependability: The major focus of the organisation would be on the availability of resources as well as the tools that have been used for the design and development of furniture products and services.

• Cost: For any type of work and operational activity the cost plays a critical role as IKEA always focuses on the minimisation of cost and maximisation of quality which could vary according to the needs of customers (Moghaddam. et.al. 2011). The performance of the organisation has also been considered according to investment and gain from the business.

• Flexibility: In the operation management and production process of IKEA flexibility in the planning and execution is important as it helps to meet the time frame of completing the task as well as manage the human resource planning.

• Quality: IKEA is one of the biggest brands in the furniture industry and the customers trust the organisation considering the quality that has been produced and offered to them. The organisation has the most number of satisfied customers in terms of quality of furniture across the globe.

• Speed: In order to meet the deadline of completing the tasks speed of manufacturing needs to be good in terms of managing the resources, utilisation and scheduling of the activities (Niknam.  et.al. 2011). If IKEA management can maintain the proper communication among the departments then it will influence the performance. 

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Task 2

Linear programming and how it adds value to the production process

Linear programming is the process that involves process and planning of managing the operations and deciding to establish the tools and equipment according to the needs and activities of the organisation. This process involves the mathematical concept for developing the plan. The management of IKEA could use this method to achieve the best outcome to maximise profit by increasing efficiency. This method adds value to the operational activities of IKEA by helping to determine the network flow; defining the engineering process and calculating the price and cost of each unit to decide on implementing the changes in the existing process (Mohammadi.  et.al. 2014). In addition to this, to decide on purchasing raw materials the organisation would use linear programming which will help to forecast the production cost as well help to identify the areas of monitoring that minimise the cost and encourage the production of furniture.

Apart from that, linear programming will help the IKEA management to analyse the variation in the production process which will support to maintenance of the effectiveness of operational activities. 
 

Critical path analysis and network planning

Critical path analysis is a major tool for operation and project management that helps to analyse of network and handle the complex and time-sensitive operations of the organisation. IKEA management could use the critical path analysis for the following processes:

• Define the tasks and put down them in an order for manufacturing of furniture.

• Develop the flowchart to evaluate the relation in operations of production of furniture.

• Identification of critical and non-critical paths.

• Determination of the expected time of competing tasks.

• Use of alternative options for most critical paths.
 

Network planning: This is an iterative process, encompassing topological design, network synthesis and network realisation that plays a significant role in making decisions for operational activities and utilisation and arrangement of resources to achieve the goals and objectives (Akkerman. et.al. 2010). The management of IKEA could use network planning tools to define the problems in the production and designing of the furniture products and services according to the needs of target customers. In addition to this, the manager will perform the data acquisition, choice of forecasting and analysis of methods that could be beneficial for encouraging operational quality and minimisation of cost. In addition to this, network planning includes the proper documentation of whole activities and results for monitoring.

 

Need for operational planning and control

For IKEA furniture, operational planning and control are important to maintain the balance between the market requirement and analysis of existing resources to meet the objectives. The operational planning and control activities of furniture organisations help to develop the system, procedure and decision that aid in bringing various aspects of demand and supply together according to the objective of IKEA (Niknam. et.al. 2011). Moreover, operational planning and control involve the scheduling of tasks control of the activities of labour, capital input, and use of resources and materials to produce the desired quality as well as quantity of furniture goods. For IKEA, operational planning and control are needed for forecasting the demand of particular as well as various designs of furniture in different categories to maintain the activities. Apart from that operational planning involves the analysis of market trends, the development of new designs in furniture products to gain a positive advantage and well minimisation of costs to increase profits. In this process short and long term both types of decisions have been made by the project manager considering the capability and demand for goods and services.

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Design of possible layouts for producing the furniture and operational outcome

For managing the operations and activities for the production of furniture products and services the management of IKEA would use the following layout that helps manage the outcome maintaining the effectiveness of activities (Anderson. et.al. 2015). By using this design the manager of IKEA will able to analyse and monitor the specific process for developing and designing dressing tables produced by the organisation.
 

 

The proposed design has been developed using the Graph theory that helps to establish the relation and determination of the process that would be used for producing the dressing tables in different ranges but in specific designs. The layout of the design will help to compare the actual and desired output for products and services as well as manage the activities (Moghaddam. et.al. 2011). This design will support to optimisation of the sequence and make effective use of resources to meet the operational outcome. By including the comparison and monitoring of the tasks the IKEA manager will able to meet the outcome efficiently for the development of the dressing table.

 

Network plan and critical path for IKEA

To develop the furniture goods the management of IKEA could use the following network plan that will help to meet the deadline with the consideration of quality and design specifications proposed according to international ISO standards (Ipeirotis. et.al. 2010). For producing the furniture product the organisation will include the following activities:

• A- Planning of activities

• B- Analysis of alternative

• C- Design evaluation

• D- Inventory of raw material

• E- Allocation of resources

• F- Production method

• G- Quality control

• H- Production control

The estimated time of each task would depend on the other operations, the following table will show the estimated time for each activity.

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Table 1: Network activities
 

Tasks	Order to complete	Estimated time (Days)
A	Should be done first	2
B	Only start if A is completed	4
C	Could be initiated if A is done	2
D	Should be started if B and C are completed	5
E	Would be done as A is completed	3
F	Would be initiated if D and E are done	2
G	After completion of F	6
H	Can only start if G is done	4

 

 

 

Conclusion

From the above Unit 16 Operations and Project Management Assignment IKEA, it is been considered that operation management is an important approach and tool that helps to manage the organisational activities more efficient and controlled manner. The report has analysed the functions of IKEA and evaluated the approach of the company using the process model to understand the operational activity of the organisation. The next part report has evaluated the significance of performance objectives for IKEA and explains the linear programming for planning and controlling of design and development process of furniture organisation. Moreover, the report has designed and discussed the possible layouts. 

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References

Books and journals

Ajodhia, V., 2010. Integrated cost and quality benchmarking for electricity distribution using DEA. International Journal of Energy Sector Management,4(3), pp.417-433.
Akkerman, R., Farahani, P. and Grunow, M., 2010. Quality, safety and sustainability in food distribution: a review of quantitative operations management approaches and challenges. Or Spectrum, 32(4), pp.863-904.
Anderson, D.R., Sweeney, D.J., Williams, T.A., Camm, J.D. and Cochran, J.J., 2015. An introduction to management science: quantitative approaches to decision making. Cengage learning.
Berger-Walliser, G. and Shrivastava, P., 2014. Beyond Compliance: Sustainable Development, Business, and Proactive Law. Geo. J. Int'l L., 46, p.417.
Edvardsson, B. and Enquist, B., 2011. The service excellence and innovation model: lessons from IKEA and other service frontiers. Total Quality Management & Business Excellence, 22(5), pp.535-551.
Hill, A. and Hill, T., 2012. Operations management. Palgrave Macmillan.
Hirschey, M., 2016. Managerial Economics. Cengage Learning.
Ho, W., Xu, X. and Dey, P.K., 2010. Multi-criteria decision making approaches for supplier evaluation and selection: A literature review.European Journal of Operational Research, 202(1), pp.16-24.
Ipeirotis, P.G., Provost, F. and Wang, J., 2010, July. Quality management on amazon mechanical turk. In Proceedings of the ACM SIGKDD workshop on human computation (pp. 64-67). ACM.
Ivarsson, I. and Alvstam, C.G., 2010. Supplier upgrading in the home-furnishing value chain: an empirical study of IKEA’s sourcing in China and South East Asia. World Development, 38(11), pp.1575-1587.