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OM in the News: It’s Ikea’s World

April 8, 2015
 At Ikea’s distribution center in Älmhult, Sweden, pallets are stacked and retrieved through a fully automated process.

At Ikea’s distribution center in Älmhult, Sweden, pallets are stacked and retrieved through a fully automated process.

In a stunning global expansion, the Swedish home furnishings giant has been quietly planting its blue and yellow flag in places you’d never expect. “Pay attention, Wal-Mart:” writes Fortune (April 6, 2015),  “You could learn a few things.” Ikea, it seems, is a genius at selling Ikea—flat packing, transporting, and reassembling its quirky Swedish styling all across the planet. The furniture and furnishings brand is in more countries than Wal-Mart, Carrefour, and Toys “R” Us.

In an industry where the product is often passed down from generation to generation, Ikea has shaken up the paradigm. It kept its prices down with an obsessive focus on costs. It might skip an extra coating of lacquer on the underside of a table that people never see or use. The company has also stripped out as much labor as possible from the system, pushing tasks that were once done by traditional retailers onto the customer. Flat packed furniture made it easier for customers to take purchases with them, cutting out the expense of stocking and delivery. (Ikea figured out flat packing in 1956, when a designer took the legs off a Lövet table to get it in his trunk.) The magic of flat packing allows goods to be jammed into shipping containers without wasting any space. Wasted space means wasted money and is also environmentally unfriendly. “I hate air,” says Ikea’s head of packaging.

The firm’s success, in large part, is based on improving its product design. As much as it has doubled down on market research and logistics, Ikea has been relentless in its focus on design. Ikea comes up with some 2,000 new products every year. Products under development go through rapid prototyping in the pattern shop to provide a sense of what they will actually look like in the flesh. During Fortune’s visit, one of the four 3-D printers was outputting a toilet brush. If air is the enemy in shipping, it is the ally in design. “The more air in our products, the better,” says Ikea.

Classroom discussion questions:

1. What operations strategies are key to Ikea’s success?

2. How pleased are students who have had to assemble the products themselves?

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