Essay Preview: Ikea
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IKEA is one of the worlds top furniture retailers, selling Scandinavian-style home furnishings and accessories. Ingvar Kamprad, the founder of IKEA believes that home furnishings should be good design, good function and good quality, coupled with low prices. This philosophy is maintain and clearly communicated to all customers and their staff, reflected and achieved in their operations management strategies, which play a major role in contributing to IKEA’s success.
IKEA sources products globally. Suppliers are strategically located in countries that has abundence of raw materials. The company uses just-in-time concept to streamline inventories and work-in-progress, which is supported by the close proximity between the supplier and distribution centres. This effectively reduces cost and time and helps to maintain the inventory in the warehouse, within the retail outlet.
The primary reasons why IKEA can offer high quality products at low prices are their efficient methods of distribution and their emphasis on maintaining close relationships with their suppliers. They created the flat packaging design concept and cut out the need for distribution by having the flat packaged products picked up on site and assembled at home by the customers. The cost savings earned by IKEA through the various processes are passed to customers where they are spared storage, transportation and assembly costs, resulting in dramatically lower product prices.
The company values its staff and encourages them to go for training, to build a highly skilled workforce. It does this by setting up various training programmes to educate its philosophy and core management strategies to staff throughout the world.
IKEA uses cutting edge technologies that would improve and benefit their operations. This is reflected in their RFID tracking project where tagged trolleys are being tracked. To address the problems of missing trolleys, these trolleys would be tracked on their way out of the depot and checked in on their return. By implementing RFID technology, it has helped them to save on cost and time.
IKEA’s success is largely atributed to its successful operations management strategies, which helps to maintain its strong position in the furniture retailing industry.