Operations Management
Role of operations manager
Operations management: The importance of OM at IKEA
Operations management is defined as "the design and management of products, processes, services and supply chains. It considers the acquisition, development, and utilization of resources that firms need to deliver the goods and services their clients want" (What is operations management, 2012, MIT Sloan). Tasks of the operations manager may span from "determining the size and location of manufacturing plants, deciding the structure of service or telecommunications networks, and designing technology supply chains" to daily controlling functions (What is operations management, 2012, MIT Sloan). Although not all organizations have an official 'operations manager,' no organization can ignore operations management. Scheduling and controls; managing inventory; quality control, and maintaining equipment are all examples of functions virtually every organization must perform (What is operations management, 2012, MIT Sloan). A good example of an organization that has used operations management to establish a competitive edge and to function more effectively in the marketplace is IKEA.
IKEA is a discount furniture store that offers DYI furniture at a low price. Customers can order IKEA products online or in the store, but regardless, the customer must carry and assemble the product him or herself. By not paying for expensive transportation, assembly, and keeping the products largely confined to low-cost wooden items made of inexpensive materials, IKEA was...
Apartment dwellers, young people, and people living alone can all find products suited to their size and space requirements at IKEA." Cost savings earned by IKEA were passed through to customers in lower prices (estimated cost savings are 20-50%, compared with the competition)" (Owens 2012).
The need for a lower price point means that IKEA furniture is subject to a rigorous design review process, and operations managers must strive to find a way to create furniture that meets quality standards within the desired price range. "No design -- no matter how inspired -- finds its way into the showroom if it cannot be made affordable. To achieve that goal, the company's 12 full-time designers at Almhult, Sweden, along with 80 freelancers, work hand in hand with in-house production teams to identify the appropriate materials and least costly suppliers" (IKEA, 2005, Businessweek). IKEA deliberately casts a wide net to find the lowest-cost suppliers: it has 1,300 suppliers in over 53 countries. It also tries to engage in 'out of the box thinking' to find the best manufacturers. For example, when constructing an armchair it contracted with ski makers, because of their experience in working with bent wood and makers of supermarket carts when constructing wheeled sofas. In contrast to the American emphasis on infinite choice, it has also limited customer selection of materials and colors to keep costs down. "The 50 cents Trofe mug comes only in blue and white, the least expensive pigments" (IKEA, 2005, Businessweek).
However, IKEA…
