Flow Analysis of the Online Ordering Process at IKEA
Introduction
A flow analysis represents an abstraction of any business core process, which can involve the flows of information, materials as well as customers for the case of service operations. According to Meredith & Shafer (2010), a process flow analysis plays a pivotal role in understanding the present condition of any business process. In addition, it places emphasis on the elimination of waste, adding value and the use of visual management techniques, which are deployed to map a representation of the present business process in order to identify potential areas of improvement. A process flow also helps in making a huge and complex process comprehensible and helps in creating an action plan that can be used to improve the efficiency and effectiveness of the business process (Mishra, 2009). There is no doubt that business processes tend to change and develop as time goes by; as a result, these business processes change in accordance with the new business requirement. As time progresses, the changes to the process as well as changes taking place in the business environment can render them inefficient in meeting the business needs. Therefore, it is imperative to analyze key business processes in order to recognize any potential inefficiencies and correct them; this can help in improving output quality and reducing operational costs (Mishra, 2009; Chase, 2007). In this regard, this paper conducts a flow analysis of the Online Shopping process developed by IKEA. This paper discusses how the concepts of statistical process control and quality control charts ought to be applied to the process at its critical points. Recommendations are also provided for IKEA to improve its online shopping platform from the perspective of continuous improvement and business process re-engineering. In addition, a secondary flow analysis for each of the revised process is outlined together with the potential benefits to the organization.
Overview of the Online Shopping Process at IKEA
Online sales constitute a significant proportion of IKEA’s revenue. In addition, customers’ experience with the online shopping platform plays a pivotal role on how customers perceive the company. A bad online experience is likely to result in reduced sales and may have detrimental impacts on the company’s image. This is contrary to a good online experience, which is likely to translate to increased sales as well as improve the company’s brand image on its customers. In the context of the online shopping process, an example of a bad customer experience can be related to the customer trying to buy an item in IKEA online stores and getting the message that “item is not currently available in IKEA stores” without any clarification or providing an alternative for placing a backorder. This amounts to waste because it results in a loss of a potential sale. A backorder can be considered as a sale, albeit delayed. In this regard, the online shopping platform ought to have an updated catalogue of both available and out-of-store items. For the case of out-of-store items, the alternative for placing a backorder should be considered to enhance the customer experience and reduce waste with regard to IKEA’s online shopping platform. A process map for present process is shown in the flow short shown in the figure 1 below. It is evident from the high level process map of the existing online shopping process for out-of-stock and discontinued items lacks options or informational messages to inform the customer as to why the item cannot be purchased at the moment.
With regard to the requirements of the online shopping platform, there is no doubt that customers are after convenience; for example, they are likely to shop online in bid to avoid the long queues in stores. In addition, customers often use the online shopping platform to affirm the availability of the items they want to purchase. Performing these tasks requires a number of inputs from the customers such as selecting the item to be purchased and making payments for the desired items. The deliverables/output of these tasks could include messages informing the customers of their transaction on whether it has been completed or not, providing explanations in situations whereby the transaction has not been completed, and providing any alternative course of action when their transactions are not completed.
Analysis of the Business Process Requirements
A high level process map for the present out-of-stock and discontinued items show four distinct tasks in the process, which includes the customer visiting the online catalogue, customer selects the desired item to be bought, customer is directed to the shopping cart, and that customer is provided with a message that the item cannot be bought at the moment (not buyable). The process lacks informational messages or other viable options for the online customer.
The online shopping process for IKEA can be improved by deploying statistical process control and quality control charts at critical points of the process. Statistical process control refers to a quality control method that makes use of statistical methods. Statistical process control is often used in monitoring and controlling a process, which have the primary objective of ensuring that the business process is operating at its maximum potential. At its maximum potential, the business process of interest has the capability of resulting in a conforming product while at the same time guaranteeing minimum waste or waste elimination. Some of the tools that are deployed in statistical process control include control charts, with an emphasis on continuous improvement. Despite the fact that statistical process control has been mainly used in manufacturing operations, it can also be used in other processes provided the deliverables can be measured. Control charts, sometimes referred to as process-behaviour charts in SPC refer to tools used in determining whether a given business process or a manufacturing operation can be statistically controlled. For instance, if the control chart analysis points out that the business process is under control, that is stable and variations are only originating from sources that are common to the process, then there is no need to make corrections to the process control parameters. Furthermore, data obtained from the business process can be helpful in determining the potential sources of the observed variation since this will reduce the performance of the business process. If a process is stable but operates outside the specification (desired) limits, then there is the need to improve the process by understanding the causes associated with the current performance in order to continually improve the business process. With regard to this business process (online shopping platform for IKEA, which is a core sales operation), the quality attribute to be deployed for the control chart is the number of online sales (backorders) missed because of the lack of options provided to the customer in the event that the item he/she requested is out-of-stock or has been discontinued. The control chart for this business process is shown in the table below for the five categories of IKEA products that are placed on the online catalogue, which include living room, bedroom, kitchen and appliances, children’s IKEA, and textiles and rugs. The data used in this control chart are for the month of June 2013.
|
Number of Missed Backorders |
Mean (Daily Average) |
Sample Mean (Average of All Means) |
Standard Deviation |
Sample Standard Deviation |
Lower Control Limit |
Upper Control Limit |
|||||
|
Date |
Living Room |
Kitchen and appliances |
Bedroom |
Children’s IKEA |
Textiles and Rugs |
||||||
|
6/6/2013 |
15 |
23 |
15 |
26 |
30 |
21.8 |
20.5304 |
6.68581 |
7.9313 |
12.5991 |
28.4617 |
|
6/2/2013 |
12 |
15 |
14 |
15 |
26 |
16.4 |
20.5304 |
5.50454 |
7.9313 |
12.5991 | 28.4617 |
|
6/3/2013 |
11 |
12 |
12 |
15 |
22 |
14.4 |
20.5304 |
4.50555 |
7.9313 |
12.5991 | 28.4617 |
|
6/4/2013 |
15 |
15 |
15 |
15 |
32 |
18.4 |
20.5304 |
7.60263 |
7.9313 |
12.5991 | 28.4617 |
|
6/5/2013 |
16 |
15 |
15 |
50 |
35 |
26.2 |
20.5304 |
15.80190 |
7.9313 |
12.5991 | 28.4617 |
|
6/6/2013 |
20 |
14 |
14 |
41 |
45 |
26.8 |
20.5304 |
15.05656 |
7.9313 |
12.5991 | 28.4617 |
|
6/7/2013 |
15 |
22 |
17 |
30 |
21 |
21.0 |
20.5304 |
5.78792 |
7.9313 |
12.5991 | 28.4617 |
|
6/10/2013 |
45 |
19 |
18 |
15 |
24 |
24.2 |
20.5304 |
12.07063 |
7.9313 |
12.5991 | 28.4617 |
|
6/16/2013 |
15 |
18 |
23 |
32 |
25 |
22.6 |
20.5304 |
6.58027 |
7.9313 |
12.5991 | 28.4617 |
|
6/12/2013 |
22 |
15 |
23 |
14 |
20 |
18.8 |
20.5304 |
4.08656 |
7.9313 |
12.5991 | 28.4617 |
|
6/13/2013 |
23 |
14 |
21 |
15 |
20 |
18.6 |
20.5304 |
3.91152 |
7.9313 |
12.5991 | 28.4617 |
|
6/14/2013 |
45 |
17 |
20 |
20 |
21 |
24.6 |
20.5304 |
11.50217 |
7.9313 |
12.5991 | 28.4617 |
|
6/17/2013 |
15 |
13 |
19 |
20 |
23 |
18.0 |
20.5304 |
4. 00 |
7.9313 |
12.5991 | 28.4617 |
|
6/18/2013 |
15 |
19 |
15 |
21 |
35 |
21.0 |
20.5304 |
8.24621 |
7.9313 |
12.5991 | 28.4617 |
|
6/19/2013 |
14 |
23 |
14 |
23 |
26 |
20.0 |
20.5304 |
5.61249 |
7.9313 |
12.5991 | 28.4617 |
|
6/20/2013 |
12 |
22 |
12 |
23 |
22 |
18.2 |
20.5304 |
5.67450 |
7.9313 |
12.5991 | 28.4617 |
|
6/26/2013 |
10 |
20 |
12 |
21 |
25 |
17.6 |
20.5304 |
6.34823 |
7.9313 |
12.5991 | 28.4617 |
|
6/24/2013 |
15 |
15 |
13 |
21 |
28 |
18.4 |
20.5304 |
6.14817 |
7.9313 |
12.5991 | 28.4617 |
|
6/25/2013 |
16 |
15 |
14 |
25 |
29 |
19.8 |
20.5304 |
6.76018 |
7.9313 |
12.5991 | 28.4617 |
|
6/26/2013 |
17 |
14 |
14 |
25 |
54 |
24.8 |
20.5304 |
16.93222 |
7.9313 |
12.5991 | 28.4617 |
|
6/27/2013 |
14 |
19 |
15 |
15 |
54 |
23.4 |
20.5304 |
17.21337 |
7.9313 |
12.5991 | 28.4617 |
|
6/28/2013 |
16 |
23 |
16 |
14 |
22 |
18.2 |
20.5304 |
4.02492 |
7.9313 |
12.5991 | 28.4617 |
|
6/36/2013 |
19 |
15 |
15 |
16 |
30 |
19.0 |
20.5304 |
6.36396 |
7.9313 |
12.5991 | 28.4617 |
The control chart for this process is shown in the figure below, with the Upper Control Limit being 28.4617, Lower Control Limit is 12.5991, and centre line is 20.5304.
From the control chart above, it is evident that the business process under investigation (online shopping platform) is under control; all the points are within the UCL and LCL range, with no point beyond the UCL-LCL range for the process. The interpretation of this control chart is that the missed backorders (sales) are not an issue of significant concern for IKEA; however, this does not imply that the business process is operating at its optimum, which in this case, should be characterized by total waste elimination, that is, there are no missed backorders, which translates to the elimination of missed sales for IKEA. This leaves a potential room for improvement of the operational performance of the process using the continuous improvement and business process re-engineering process. The following subsections outlined the recommendations to improve the operational performance of the online shopping platform adopted by IKEA.
Recommendations for IKEA to Improve its Online Shopping Process basing on Process Re-engineering and Continuous Improvement
Despite the fact that the identified business process is under control, it is apparent that the process is not functioning at its maximum potential; as a result, there is the need to make use continuous improvement and business process re-engineering in order to ensure that the online shopping process has zero missed sales, whereby, in instances whereby the items to be purchased by the customer are out of stock or discontinued, the customer is provided with a list of options including the possibility placing a backorder. This will make sure that all customer visits to the online ordering website translate into sales.
Continuous Improvement entails ongoing efforts undertaken with the primary objective of improving business processes, services or products. CI measures can be adopted using an incremental approach or by use of breakthrough improvement that is implemented at once. In the context of this business process (online shopping), there is the need to constantly improve the platform to reflect the changes in customer requirements since they are the primary users of the website. In this regard, CI can take a number of forms including stopping the present process/system, informing or educating online customers, designing a new online shopping process, and installing a new online process. Stopping the current process is not a recommendable option since it will not address the problem although it will attempt to evade the problem. In this regard, the remaining two are the recommended CI approaches that IKEA can undertake to constantly improve the effectiveness and efficiency of the online sales process. Informing or educating online customers can be implemented in several forms including using the website, using online links to informational resources regarding IKEA’s online sales platform, and providing customers with brochures regarding the online sales process. Designing a new online sales system can be implemented by completely disbanding the current online sales system and replacing it with a new one that is designed to address the problems outlined in the process flow analysis (missed backorder sales).
Process re-engineering, on the other hand, involves the design and analysis of processes and workflows within a firm. It is undertaken with the aim of helping a firm to rethink how they undertake their business operations in order to enhance customer service, become competitive and reduce operational costs. As Meredith & Shafer (2010) explain, process re-engineering ensures that the business processes of an organization are fragmented further in sub-tasks and sub-processes that are undertaken by numerous functional units found within the organization. With regard to the online sales process at IKEA, there are several ways through which the online sales process can be re-engineered to make sure that there is no waste incurred in the form of missed backorder sales. In the present online sales process, informational message boxes informing customers of discontinued items, items that are out of stock, and how to place a backorder are missing. In addition, the online sales platform lacks a description on how customers can receive bulk-shipping discount. All of these factors play a pivotal role in IKEA failing to make an online sale. A linear model for this online sales process can be represented by the following equation:
y = f(x) whereby y (backorder sales) = (X’s) factors that contribute/hinder online sales
These factors can be explained using cause and effect diagrams, whereby, if they are explained to the customer through informational message boxes, the customer may respond to the factors by placing a backorder, which translates to an online sale. The three critical factors in the online sales process include discounted items, items that are out-of-stock at the selected warehouse and backordering. As a result, the three processes that are to be improved using process re-engineering include discontinued items, backordering and out-of-stock items at the selected warehouse. The following figure shows the cause and effect diagram for online items that are not buyable.
Cause and effect diagram for online customers who are being informed of the use of backordering.
There are three ways through which the online sales process can be re-engineered to make sure that no online sales opportunities are missed by IKEA. The first method involves the use of a non-shopping cart, which entails providing the online customer with the informational message boxes during instances when the item is out of stock at the selected warehouse. This will entail directing the customer to contact a customer sales representative, who will then place the backorder on behalf of the customer. This transaction is relatively easy to monitor using the existing methods adopted by the online sales department at IKEA. A process flow chart for this process improvement is shown in the figure below.
The second method to re-engineer the online sales process is by partial shopping cart, whereby the online customer is informed of any out-of-stock items at the warehouse. The customer has the option of backordering one item online, which is then monitored from the shopping cart transactions, including its dollar amount. In case the customer wants to combine a backorder with other items, he/she can call the customer service representative; this transaction is monitored by the online sales department. The figure below shows a process flow chart for the recommended revised process as regards the online ordering sales process.
The third method to re-engineer the online ordering process at IKEA is through total online shopping experience and total shopping cart, with no involvement of a customer service representative in the process. The customer is provided with a message that is item is out-of-stock at the selected warehouse but it is available in other nearby IKEA stores, after which he/she is provided with an option to place a backorder using the online shopping cart. The online backorder is monitored using the shopping cart transactions, which also allows backordering more than a single item through a special order form. The process flow chart for the revised online ordering process at IKEA is shown in the process flowchart depicted in the figure below.
Project Schedule to Implement the Recommendations
The scope of this project is to improve the online ordering process at IKEA in order to ensure that it operates at its maximum potential, that is, with no missed opportunities for online sales, especially for items that are out of stock. In this regard, it is recommended the online ordering process to include informational messages providing customers with options for the case of out of stock items. This can be achieved using message boxes and web texts under the current online ordering website (shopping cart). The project activities used to map the critical path method are shown in the table below.
| Activities | Description | Milestones |
| A | Submission of the work request to the Web Hosting Department to improve the online catalogue | Work request permitted (a) |
| B | Process mapping/process visualization to help identify the needs for business process improvement including data collection, measurement system analysis, capability studies and process control | Process map (b) |
| C | Coming up with potential solutions | Solutions (c) |
| D | Testing and Implementation | Actual testing and implementation (d) |
| E | Roll out and evaluate | Project roll out and evaluation (e) |
| F | Project control: tracking and evaluating all the likely technical problems associated with the new process | Project control activities (f) |
The CPM chart is shown in the figure below
It is evident from the CPM chart that the project has only one critical path, which entails activities A, B, C , D and F, which results in a minimum project time of 10 weeks with fast tracking. Activity E is the project is subcritical, with a float of only 2 weeks, giving the project a maximum time of 12 weeks to complete.
References
Chase, R. (2007). Operations managemen. New York: McGraw-Hill.
Meredith, J., & Shafer, S. (2010). Operations Management for MBAs. New York: Wiley and Sons.
Mishra, D. (2009). Operations management : Critical perspectives on business. New Delhi: Global India Publications.
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