Ikea Production and Operations

...

2 of 12 departments, or work areas as IKEA refers to. The work areas are (1) Design and product development, focusing on new products development and (2) Sustainability and TQE, focusing on products improvement.

In Design and product development area, every product idea with regard to the best use of raw materials and manufacturing opportunities will be tested, while the people in Sustainability and TQE area strive to improve all aspects of product quality while minimizing costs and optimizing social and environmental sustainability. Thus, the three R&D activities; (1) developing new products before competitors do, (2) improving product quality, and (3) improving manufacturing processes to reduce costs, exist in IKEA. Moreover, by splitting the activities into two work areas, each are able focus better at their respective goal and easier to communicate with other work areas.

IKEA Industry which is located in Lubawa, Poland developed modern wood technology, an innovative construction of furniture with high strength that is very light while it looks and feels like natural solid wood. The technology are used differently depending on the product lines, for example: Board-on-Frame (BoF) technology, in which products are made from wood-based frames filled with recycled, honeycombed paper - a fabrication chosen for its strength and rigidity, and later: Board-on-Stiles (BoS), which products also have a honeycombed paper filling, but the production technique is even more efficient – including particle board, fiberboard and paper filling in its manufacture. The best part is: while it costs less, the finished products are equally durable compared to solid wood.

Conclusions

• In an effort to be able to fulfill customers’ demands at all times, IKEA resorts to store product in high quantity. While this ensures availability, this also means IKEA has a high cost of inventory.

• When a certain amount of time has passed, unwanted products will be shipped to other stores which supposedly have higher demand for the products. This causes additional shipping cost.

Recommendations

• IKEA should reconsider its inventory management plan, “Is the current minimum amount of products available before reordering already effective?” By calculating the best reorder point using proper method and extensive historical data, IKEA could ascertain the effectivity of its operations. If by chance, the calculation result in a lower reorder point, it would save a significant amount of cost.

• Another means for IKEA to lower the reorder point is by optimizing the transportation and logistics to achieve reliable shipments. A faster and on-time delivery would lessen the need for the store to put additional reserve of products.