Lean Management at IKEA (Research Paper Sample)

Lean Management at IKEA
Word Count: 2,655
Contents TOC \o "1-3" \h \z \u Introduction PAGEREF _Toc356282994 \h 4Description of the organization PAGEREF _Toc356282995 \h 4Current problem at IKEA PAGEREF _Toc356282996 \h 5The evidence that supports the existence of the problem PAGEREF _Toc356282997 \h 5How the problem harms the firm. PAGEREF _Toc356282998 \h 6Literature review PAGEREF _Toc356282999 \h 7Lean management PAGEREF _Toc356283000 \h 7Lean principles PAGEREF _Toc356283001 \h 8Lean implementation framework PAGEREF _Toc356283002 \h 10TQM bundle PAGEREF _Toc356283003 \h 10JIT bundle PAGEREF _Toc356283004 \h 10TPM bundle PAGEREF _Toc356283005 \h 11Future trends of lean manufacturing PAGEREF _Toc356283006 \h 11Implementation of lean manufacturing at IKEA PAGEREF _Toc356283007 \h 12Description PAGEREF _Toc356283008 \h 12Conclusion PAGEREF _Toc356283009 \h 13Appendix PAGEREF _Toc356283010 \h 14Table 1: action plan PAGEREF _Toc356283011 \h 14Table 2: SWOT analysis PAGEREF _Toc356283012 \h 15References PAGEREF _Toc356283013 \h 15
Introduction
For so long, the implementation of the lean philosophy has concerned many managers. The process has been known to increase efficiency in the diverse manufacturing processes and business processes. Liker defined lean as the philosophy that is implemented in order to eliminate waste in the flow of production and pass the benefits to the consumer (Linker 1996, p.12). The process, if carefully implemented leads to large-scale manufacturing excellence. Lean lays emphasis on the minimization of resources that facilitate manufacturing activities. The non-value adding activities are identified then eliminated. This paper will identify the current problem at IKEA, profile literature that is related to lean management and make a conclusion.
Description of the organization
IKEA is the largest retailer of accurately designed, inexpensive furniture for the home. The firm develops its products and sells them in global IKEA stores at relatively low prices to low and middle income earners. The stores sell a variety of ready-to-assemble household goods, majorly furniture and kitchen accessories. Its markets and stores are mainly in Western Europe but it has expanded them to Poland, China, Australia and Singapore.
The order winners for the IKEA are the considerably low cost and the high quality of their products. IKEA’s strategy is to ensure cost saving and pass the same to the customers by way of offering a price cut of 20-30% compared to what other players in the industry offer (Edvardsson 2009, p. 23). In addition to cost, the delivery of ready-to-assemble, eco-friendly products are the major winner quantifiers in the market. The production is guided by variety, price, quality and profile that are delivered by the highly collaborative, qualified professionals who range from copywriters, art directors, photographers, interior decorators and even project leaders.
Current problem at IKEA
Currently, IKEA is the leading furniture retailer in the world. The firm is reputable for cultural and fashionably designed branding. It has continually responded to the increasing concern by the public about its sustainability regarding variety of products, stores and suppliers. IKEA faces a number of problems ranging from organizational focus that affects the effectiveness of its operations to the enormous size and scale of its international business. The modern household goods are expensive due to rising cost in raw material making the strategy of low cost untenable. To compound the problem, IKEA has competitors in Tesco and Wal-Mart companies that not only offer the same products but also follow the strategy of cost reduction. Since IKEA has 11,500 product varieties that include furniture and home accessories with outlets in many countries, Edvardsson foresaw a management crisis (Edvardsson 2009).
The sheer size of the company makes management of operations and control of standards and quality difficult. Furthermore, there has been variation on the quality of products from one country to another. For instance, in some countries where the firm has subsidiary companies, legislations regarding work conditions and quality control are compromised whereas in others they are adhered to. This, therefore, facilitates the existence of a weaker link within the supply chain that negatively impact on the brand and reputation of the firm. However, effective supply chain management will really help to overcome these problems.
The evidence that supports the existence of the problem
The problem originated from the 2008 downsizing of the company’s organizational structure that sought to reduce the cost of production. This came about when the company realized that it could not get desired results from the existing positions. The company also slowed down the pace of expansion to 15 stores a year from the normal 25 because it had reached its market maturity as a result of over planning. As a result, the demand for low cost products with high quality has become unsustainable because of the reduction in capacity. An analysis documented by Dahlvig revealed that during the 2008 fiscal year, the firm registered a drop in its net profits. The analysis showed that the year 2010-2011 the company experienced a drop when its pre-taxed profits in the UK and US fell from $35 million to $22 million (Dahlvig 2012, p.12). On the other hand, its key competitors that include Wal-Mart and Tesco reported pre-tax profits.
"The guardian newspaper" reported that the company was adversely mentioned in the horse meat scandal in the UK and claimed innocence while citing weakness in the supply chain. As a result, the firm filed charges against one of its suppliers in order to side-step accountability and play as victim to the allegations. The involvement of its supply chain in the horse meat scandal actually compromised the reputation of the firm. In addition, IKEA is losing customers because of the reported cases of low quality products occasioned by breakages.
How the problem harms the firm.
The strategy of low cost to attract the middle class consumer segment has gone a long way to compromise on the quality of products and reputation of the firm. In contrast, its competitors are targeting a variety of consumers that include the growing middle class and upper class and consequently present direct competition to IKEA. The horse meat scandal injured the reputation of the company as it lost important customers even though the firm was not directly involved. Additionally, stringent regulations are now enforced to avoid a repeat of the same. This will increase on wastage of time within the supply chain and reduce customer value.
Literature review
Lean management
Plenert described lean management as the practice of aligning the value adding activities of a process in the supply chain of an organization against the waste (Plenert 2007, p. 161). Ruffa (2008) discussed that firms have to focus on the product and the value stream of the same product in order to differentiate between wasted activities and value creating activities. Further, he asserted that the introduction of leanness resulted from the approach to manufacturing that aimed at elimination of waste while emphasizing on creating value over a period of time (Ruffa 2008, p. 43).
Taghizadegan posited that lean management is not a concrete activity but it is about thinking (Taghizadegan 2006, p. 76). He said that lean thinking eliminates the conservative way of thinking about roles and responsibilities by focusing on continuous improvement on the core competencies that are valued by an organization. However, Hòflinger said that numerous cultural adjustments requisite for any meaningful implementation are needed in order to embrace empowerment and dissemination of the lean manufacturing in the supply chain (Hòflinger 1995, p. 23). This opinion was supported by Ruffa when he said that "lean as a way of thinking generate a unique culture that requires everyone in the organization to considerably cut down on the cost and cycle time in the value chain while improving performance of the product" (Ruffa 2008, p. 67).
From this analysis, the concept of lean could be viewed from two varying perspectives, namely; practical perspective and the philosophical perspective. Proponents of the philosophical perspective maintain that lean is the achievement of the overall organizational philosophy that has gone a long way to affect the thinking and behavior of people (Cooper & Slagmulder, 1999; Naim & Berry, 1999 and Hòflinger, 1995). They added that the elements of the philosophy supported the guiding principles and the expansive goals of the lean. On the other hand, Naylor, Naim, & Berry (1999) looked at lean from the practical perspective when they said that it involved the application of tools, techniques and management practices. In this regard, lean could be defined in terms of socio-technical systems that apply both technical systems and social system. To support this view, Abdulmalek & Rajgopal (2007) emphasized that effective management of the lean strategy requires companies to simultaneously manage technical and social systems. In addition, Naylor, Naim, & Berry (1999) demonstrated that simultaneous application of both technically-oriented and socially- oriented practices will guarantee good results. Integration of technical aspects and social aspects of lean will achieve maximum results. The social aspects could include work place relationships, task variety and autonomy.
Lean principles
The philosophy of lean is built on the principle of waste elimination. According to Hoflinger (1995), the major objective of lean is elimination of all activities that compromise the adding of value to the product. All the tasks that compromise on valu...