The role of the operations manager

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 able to attract many budget shoppers. 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 has had to modify its operations and price model as it becomes an increasingly internationally-focused organization. When IKEA moved to the United States, it was forced to take into consideration the larger spaces most Americans lived within, the fact that the U.S. uses standard rather than metric measurements, and different American expectations of quality and durability. The Swedish norm for a sofa is that it should fit two people, for example, which is ill-suited to that of a large American family room and the color palate of Swedish IKEAK products was deemed too subdued. Swedish curtains were too short, textiles were of inferior quality, and "beds were measured in centimeters, not king, queen, and twin...kitchens didn't fit U.S.-size appliances" (IKEA, 2005, Businessweek). Even the glasses were too small. Products had to be redesigned to suit American customers but in a manner so that the IKEA price point was still observed, so as not to forego one of the company's major competitive advantages.

IKEA has also weathered criticism regarding its environmental record, given that many contend that it encourages the use of inexpensive furniture made of particle board that is disposed of within a few years. In response, IKEA has attempted to observe the most stringent E1 German standards regarding the release of formaldehyde emissions from particle board, begun use of ultraviolet and water-based lacquers to avoid harmful solvents and tried to reduce exhaust emissions in transportation whenever possible. "In a number of cases, the efforts have resulted in long-term cost reductions" for IKEA as well as benefits for the environment (Owens 2012). Branding itself as 'green' also involves reusing and recycling existing products, as well as resorting to new materials. "For its new PS line, it challenged 28 designers to find innovative uses for discarded and unusual materials" (IKEA, 2005, Businessweek).