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 ...view middle of the document...
As far as demand variation is concerned, weekends and public holidays are much busier than working week days; therefore variation is relatively high.
However, from IKEAs experience, demand is relatively predictable. Because of this predictability, they can plan to have more staff available at busy periods. However, because customers are encouraged to perform much of the service themselves, the need to fluctuate staff is less than it would be in a conventional store. Also in conventional stores, because of the high level of expertise and customer contact required, it is much more difficult to obtain the services of part-time staff during peak demands. The relatively standardized and simplified service given by IKEA makes it easier to schedule part-time staff in busy periods.
Finally, customer contact is, in some parts of the operation, high, but overall it is lower than in most furniture retail operations. Customers are responsible for choosing the types of furniture they require, working out whether the furniture would fit together in their own home (special sheets and tape measures are provided by IKEA to help customers do this), filling in order forms when special furniture has to be delivered, serving themselves with smaller items into trolleys, entering the warehouse area and picking out from the warehouse shelves the larger items that are in cartons, transporting the goods through to the checkout and finally loading the goods on to their own car. Most of this occurs with very little customer contact. In many instances the only point at which interaction takes place between customer and service staff is at the point of payment. In effect the customer is ‘trained’ to perform much of the value adding part of the service themselves. Clearly this cuts down the costs of the transaction as far as IKEA is concerned. These savings can then be passed on to the customer.
2. What do you think might be the major problems in running an operation like IKEA?
The dependency on a high degree of customer participation has some advantages but it may also have some drawbacks. Customers need to be ‘trained’ by clear use of signage, by instructions within the brochures and catalogues and by observing other customers behaviour.
Furthermore, the store needs to be laid out such that it is difficult for customers to deviate from the standard route through the store to the checkout. However, some customers may not behave in the prescribed manner and staff will need to be able to cope with these exceptions. If customer training is not well handled, several difficulties can arise. For example, customers may pick up goods from shelves or the warehouse, change their mind and then leave them around the store in unsafe positions. Alternatively, if customers are puzzled by the nature of the operation they will need tactful help from customer contact staff.
The other major problem facing the store would probably be stock availability. The system works best when...