OPERATION MANAGEMENT

Operation Management

Operation Management

This paper is based on operation management and has two sections, each dedicated to two of the leading firms in supply chain management. In the first section, IKEA's mass customisation approach regarding supply chain will be discussed. The second section involves a discussion on Tesco's inventory management strategy.



IKEA's Mass Customisation

The demanding task for many companies today is to look at customers as individuals, to develop products and services proactively to individual customers' preferences, and then to produce and distribute these offerings. In the last decade, mass customization has emerged as an approach to reach exactly this objective (Anderson, 2007). This part discusses the background of mass customization and the elements of this strategy, and it comments on its implementation in practice. In particular, it describes the four major building blocks of a mass customization system: (a) mass customization provides custom products or services meeting the needs of each individual customer; (b) this demands a co-creation process, which integrates the customer into the value chain of the provider; (c) mass customized products and services should be affordable for the same customers who previously purchased a standard good, which demands adequate prices and, subsequently, cost levels; and (d) to achieve such a situation of low costs and differentiation at the same time, mass customization relies on stable solution spaces, which set the constraints and fulfillment options of a mass customization system (Badurdeen, 2007).

A good example of both customisation and personalisation is provided by IKEA, the leading household manufacturing firm and retailer. The company is a pioneer of exploring personalisation techniques on the Internet, and it has been using a virtual model and recommendation service on its Web site. The system recommends a customized bundle of standard mass products matching each other and the customers' style profile. This service provides customers with a set of coherent outfits rather than with isolated articles of household. But each product is still a standard product. In 2003, IKEA also introduced mass customization. Over the Internet, customers can order ready-made furniture products. All products are made to order in a specially assigned factory (Blecker, 2007).

The company offers a substantial number of design options and varieties that customers choose using a dedicated Internet toolkit. Obviously, mass customization and personalization can be combined and benefit each other. A customer may use the recommendation system based on his or her virtual model to explore the existing assortment of products and find those fitting to his or her needs. If such a product is not available in a category he or she likes, he or she may be transferred to the customization offering where he or she can configure this product, though having to pay a premium and to wait a bit longer until this item is produced just for him or her.

Mass customization thus demands a process of customer codesign. Codesign activities are performed in an act of company-to-customer interaction and cooperation. Customers are integrated into value creation by defining, configuring, matching, or modifying an individual ...