Operation Management

1. How is the IKEA operations design different from that of most furniture retail operations?

Although some furniture retailers do have large ‘out of town’ operations, many use premises within town or shopping malls. IKEA’s operations are very large and purpose-built. They feature very large car parks and are located close to major motorway intersections. In fact, everything about the design of IKEA’s operations encourages high volume of throughput. This high volume means that many of the fixed costs of running the IKEA operation such as local taxes, administrative costs and some energy costs are spread over a high volume of individual sales transactions. This reduces the overall cost of making a sale, a part of IKEA's strategy of offering good value for money.

The variety of products sold in IKEA stores is relatively large compared with many furniture retail operations. For example, it includes small items such as glassware and kitchenware as well as very large items such as sofas, tables and shelving systems. Modular design of some products such as shelving systems allows variety to be extended even further from a few basic component parts. These components can be assembled together (by the customers) in different ways to offer an almost infinite variety of combinations. However, as far as the variety of service is concerned, it is relatively narrow. Most products are sold in cartons, customers are left to make their own decisions without interference from sales staff (though advice is available if requested), and even when ordering special products the staff only take down the order in a standardized form.

The checkout operation, where customers pay for the goods, is also highly standardized, with everyone going through exactly the same sequence of activities. Even delivery to the customers’ home is largely a matter of the customers carrying the goods themselves in their own cars (though a delivery service is also available). As far as demand variation is...