Operations and Project Management for IKEA discussion

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Business Finance


Q1) Critically examine three relevant Operation Management (OM) decision areas (e.g. quality, inventory management, layout or process design etc.) in your chosen company (or workplace, as long as evidences can be validated with credible resources within your workplace) (suggested 750 words)

Q2a) Compare and contrast your chosen organisation with another contemporary one using the 4 Vs (Volume, Variety, Variation and Visibility) (suggested 150 words – please see Note 2)

Q2b) Examine the ways to improve operational performance within your chosen company (suggested 350 words).

Note 1: Introduction and conclusion is suggested to be 250 words.

Note B: Please include a table with the comparison of your companies 4 V’s in Appendix A and include a short discussion referring to this in the main body of the Report.

You will be required to undertake a case study and complete a case analysis report. This can be based on operations of your current or previous workplace or any other organisation known to you. The report will be 1,500 words in length (not including references and appendices). It should include answers to all the case questions (given above) and must make use of relevant unit concepts on the aspect covered.

*** Words count = 1500 words.

*** In-Text Citations and References using Harvard style.

*** References should be at least 20 references.

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                                                 IKEA is a privately-held, international home products retailer that sells flat pack furniture, accessories, and bathroom and kitchen items in their retail stores around the world. The company, which pioneered flat-pack design furniture at affordable prices, is now the world's largest furniture retailer. IKEA was founded in 1943 by 17-year-old Ingvar Kamprad in Sweden and it is owned by a Dutchregistered foundation controlled by the Kamprad family. The company which was originated in Småland, Sweden, distributes its products through its retail outlets. As of August 2009, the chain has 301 stores in 37 countries, most of them in Europe, North America, Asia and Australia.  The IKEA Concept began when Ingvar Kamprad, an entrepreneur from the Småland province in southern Sweden, had an innovative idea. In Småland, although the soil is thin and poor, the people have a reputation for working hard, living frugally and making the most out of limited resources. So when Ingvar started his furniture business in the late 1940s, he applied the lessons he learned in Småland to the home furnishings market. Ingvar's innovative idea was to offer home furnishing products of good function and design at prices much lower than competitors by using simple cost-cutting solutions that did not affect the quality of products. Ingvar used every opportunity to reduce costs, and he scraped and saved in every way possible - except on ideas and quality. The name IKEA comes from the initials of Ingvar Kamprad, I and K, plus the first letters of Elmtaryd and Agunnaryd, which are the names of the farm and village where he grew up.        Despite its Swedish roots, IKEA is owned and operated by a complicated array of not-for-profit not and for-profit corporations. The IKEA corporate structure is divided divided into two main parts: operations and franchising. Most of IKEA's operations, including the management of the majority of its stores, the design and manufacture of its furniture, and purchasing and supply functions are overseen by INGKA Holding, a private, for-profit profit Dutch company. Of the IKEA stores in 36 countries, 235 are run by the INGKA Holding.. The remaining 30 stores are run by franchisees outside of the INGKA Holding. INGKA Holding is not an independent company, but is wholly owned by the Stichting Stichting Ingka Foundation, which Kamprad established in 1982 in the Netherlands as a tax-exempt, tax exempt, not-for-profit not foundation. The Ingka Foundation is controlled by a five-member five member executive committee that is chaired by Kamprad and includes his wife and attorney. While hile most IKEA stores operate under the direct purview of Ingka Holding and the Ingka Foundation, the IKEA trademark and concept is owned by an entirely separate Dutch company, Inter IKEA Systems. Every IKEA store, including those run by Ingka Holding, pays pays a franchise fee of 3% of the revenue to Inter IKEA Systems. The ownership of Inter IKEA Systems is exceedingly complicated and, ultimately, uncertain. Inter IKEA Systems is owned by Inter IKEA Holding, a company registered in Luxembourg. Inter IKEA Holding, ng, in turn, belongs to an identically named company in the Netherlands Antilles that is run by a trust company based in Curaçao. The owners of this trust company are unknown (IKEA refuses to identify them) but are assumed to be members of the Kamprad family. In Australia, IKEA is operated by two companies. Stores located on the East Coast including Queensland, New South Wales, and Victoria are owned by INGKA Holding. Stores elsewhere in the country including South Australia and Western Australia are owned by Cebas Pty Ltd. Like elsewhere, all stores are operated under a franchise agreement with Inter IKEA Systems.   The IKEA vision, business idea and market positioning statement provide a framework for all IKEA marketing communication worldwide. The IKEA vision is "To create a better everyday life for the many people." To meet this vision IKEA provides many well-designed, well functional products for the home. It prices its products low so that as functional many people as possible can afford to buy them. However, in creating low prices IKEA is not willing to sacrifice its principles. ‘Low price but not at any price’ is what IKEA says. This means it wants its business to be sustainable. IKEA supplies goods means and services to individuals in a way that has an overall beneficial effect on people and the environment. Customers all over the world have responded positively to IKEA’s approach. The business idea is "To offer a wide range of well designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them." The market positioning statement is "Your partner ner in better living. We do our part, you do yours. Together we save money."        The IKEA Concept is based on offering a wide range of well designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them. Rather than selling expensive home furnishings that only a few can buy, the IKEA Concept makes it possible to serve the many by providing low-priced products that contribute to helping more people live a better life at home. The IKEA Concept guides the way IKEA products are designed, manufactured, transported, sold and assembled. All of these factors contribute to transforming the IKEA Concept into a reality.  Fundamental activities such as eating, sleeping, storing items, socialising and so on create a demand for furniture and practical products that solve essential human needs. The IKEA product range meets these needs by offering a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them. The IKEA range includes products for every part of the home. Low Price Function Design Uniquely IKEA 1. Design- While most retailers use design to justify a higher price, IKEA designers work in exactly the opposite way. Instead they use design to secure the lowest possible price. IKEA designers design every IKEA product starting with a functional need and a price. Then they use their vast knowledge of innovative, low-cost manufacturing processes to create functional products, often co-ordinated in style. Then large volumes are purchased to push prices down even further. Most IKEA products are also designed to be transported in flat packs and assembled at the customer's home. This lowers the price by minimising transportation and storage costs. In this way, the IKEA Concept uses design to ensure that IKEA products can be purchased and enjoyed by as many people as possible. 2. Function- The many people have many needs. They live with kids. They need more storage. They have to make the most out of a small space. So IKEA designers are always seeking new ways to improve people's lives - without emptying their wallets. But how can good design and function be combined with good quality, all at a low price? It starts with focusing on what's important. Will an expensive finish on the back of a shelf or under a table-top improve the function? Absolutely not. So IKEA designers do not do it, because a product is of no use to the customer if it is not affordable. 3. Low Price- Low price is a prerequisite for the IKEA Concept to realise the IKEA vision - "to create a better everyday life for the many people". As the IKEA Concept aims to serve "the many people", the IKEA product range needs extremely low price levels. IKEA designers do their part to keep prices low by using production capabilities from other areas in unique and previously unimagined ways - like having a shirt factory produce furniture upholstery. Or using leftover materials from the production of one product to create an entirely new one. IKEA customers also contribute to keeping prices low. They select and pick up the products themselves, transport them home and then assemble them themselves. And they can enjoy them already later that day.         IKEA stores are usually very large blue buildings with few windows and yellow accents. They are designed around a "one-way" layout which leads customers along "the long natural way." This layout is designed to encourage the customer to see the store in its entirety (as opposed to a traditional retail store, which allows a consumer to go right to the section where the goods and services needed are displayed) although there are often shortcuts to other parts of the showroom. The sequence first involves going through furniture showrooms making note of selected items. Then the customer collects a shopping cart and proceeds to an open-shelf warehouse for smaller items (Market Hall). Then the customer visits the furniture warehouse (Self Serve) where they collect previously noted showroom products in flat pack form. Sometimes they are directed to collect products from an external warehouse on the same site or at a site nearby. Finally they take their products to the cashier's station to make payment. Newer IKEA stores, make more use of glass, both for aesthetic and functional reasons. Skylights are also now common in the Self-serve warehouses. More natural light reduces energy costs, improves worker morale and gives a better impression of the product. Whilst the original design involved the warehouse on the lower level and the showroom and marketplace on the upper, today most stores globally have the Showroom upstairs with the marketplace and warehouse downstairs. Additionally, some stores are single level. Some stores maintain separate warehouses to allow more stock to be kept on-site at any given time, although this occasionally results in challenges in finding the items, as well as a perception of having to queue in line twice. Single-level stores are found predominantly in areas where the cost of land would be less than the cost of building a 2-level store – examples include the store in Saarlouis, Germany and Haparanda, Sweden. Some stores also have dual level warehouses and machine controlled silos which allow large quantities of stock to be accessed throughout the sselling day. Most IKEA stores offer an "as-is" area at the end of the warehouse just prior to the cashiers. Returned, damaged and formerly showcased products which are not in new condition or taken out of the IKEA product range are displayed here, and sold with a significant discount, but also with a "no-returns" policy. Most IKEA stores communicate the IKEA policy on environmental issues in the "as-is." In the United Kingdom, this is referred to as "Bargain Corner."        The vast majority of IKEA stores are located outside of city centres, primarily because of land cost and traffic access. Several smaller store formats have been unsuccessfully tested in the past (the 2 "midi" concept in the early 90s, which was tested in Ottawa and Heerlen with 9,300 m , or a "boutique" shop in Manhattan).  1. Timings- An important feature of many IKEA stores is their long opening hours. Many IKEA stores are in operation 24 hours a day with restocking and maintenance being carried out throughout the night. However, public opening hours tend to be much longer than most other retailers, with stores open well into the evening in many countries. In the UK for example, almost all stores are open past 8pm with opening times often around 9-10am. Ikea Croydon has one of the longest opening hours worldwide being open from 10am 12 Midnight Monday to Friday. 2. Restaurants- Many stores include restaurants serving traditional Swedish food such as potatoes with Swedish meatballs, cream sauce and lingonberry jam, although there are variations. Besides these Swedish staples, hot dogs and drinks are also sold, the latter for around 5 SEK (approx $1 USD), along with a few varieties of the local cuisine, and beverages such as lingonberry juice. Also items such as Prinsesstårta — Princess cake are sold as desserts. Refills of coffee, tea, and soft drinks are free of charge, even in countries where this is uncommon in other restaurants. 3. Grocery Store- Many stores also have a minishop selling Swedish-made, Swedish-style groceries, such as Swedish meatballs, packages of gravy and various Scandinavian cookies and crackers, as well as salmon and salmon roe. 4. Child Care- Many stores have a play area, named Småland, for children aged 3 to 10 years (may vary). The service is offered completely free of charge. Parents drop off their children at a gate to the playground, and pick them up after they arrive at another entrance. Parents are also given free pagers by the on-site staff; the staff will set off these pagers should a child need his/her parents sooner than expected. The area mostly features things such as slides, seesaws, cartoons, a ball pit, etc.        Much of IKEA's furniture is designed to be assembled by the consumer rather than being sold pre-assembled. IKEA claims this permits them to reduce costs and use of packaging by not shipping air; the volume of a bookcase, for example, is considerably less if it is shipped unassembled rather than assembled. This is also a practical point for many of the chain's European customers, where public transport is commonly used; the flat-pack distribution methods allow for easier transport via public transport from the store to a customer's home for assembly. IKEA contends that it has been a pioneering force in sustainable approaches to mass consumer culture. Kamprad refers to the concept as "democratic design," meaning that the company applies an integrated approach to manufacturing and design. In response to the explosion of human population and material expectations in the 20th and 21st century, the company implements economies of scale, capturing material streams and creating manufacturing processes that hold costs and resource use down, such as the extensive use of particle board. The intended result is flexible, adaptable home furnishings, scalable both to smaller homes and dwellings as well as large houses. IKEA has also expanded their product base to include flat-pack houses, in an effort to cut prices involved in a first-time buyer's home  IKEA products are identified by single word names. Most of the names are Swedish in origin. Although there are some notable exceptions, most product names are based on a special naming system developed by IKEA in conjunction with Colin Edwards (international naming expert and furniture enthusiast). • • • • • • • • • Upholstered furniture, coffee tables, rattan furniture, bookshelves, media storage, doorknobs: Swedish placenames (for example: Klippan) Beds, wardrobes, hall furniture: Norwegian place names Dining tables and chairs: Finnish place names Bookcase ranges: Occupationss Bathroom articles: Scandinavian lakes, rivers and bays Kitchens: grammatical terms, sometimes also other names Chairs, desks: men's names Materials, curtains: women's names Garden furniture: Swedish islands       • • • • • • • Carpets: Danish place names Lighting: terms from music, chemistry, meteorology, measures, weights, seasons, months, days, boats, nautical terms Bedlinen, bed covers, pillows/cushions: flowers, plants, precious stones Children's items: mammals, birds, adjectives Curtain accessories: mathematical and geometrical terms Kitchen utensils: foreign words, spices, herbs, fish, mushrooms, fruits or berries, functional descriptions Boxes, wall decoration, pictures and frames, clocks: colloquial expressions, also Swedish place names For example, DUKTIG (meaning: good, well-behaved) is a line of children's toys, OSLO is a name of a bed, BILLY (a Swedish masculine name) is a popular shelf, DINERA (meaning: (to) dine) for tableware, KASSETT (meaning: cassette) for media storage. One range of office furniture is named EFFEKTIV (meaning: efficient), SKÄRPT (meaning: sharp or clever) is a line of kitchen knives. Because IKEA is a worldwide company working in several countries with several different languages, sometimes the Nordic naming leads to problems where the word means something completely different to the product. While exotic-sounding names draw attention, e.g., in anglophone countries, a number of them call for a snicker. Notable examples include "Jerker" desk and "Fartfull" workbench. Also, the most recent new product, Lyckhem (meaning bliss). The products are generally withdrawn, probably after someone pointed at blunders, but not before generating some news. Company founder Ingvar Kamprad, who is dyslexic, found that naming the furniture with proper names and words, rather than a product code, made the names easier to remember.  IKEA publishes an annual catalogue. First published in Swedish in 1951, the catalogue is now published in 55 editions, in 27 languages for 36 countries, and is considered to be the main marketing tool of the retail giant, consuming 70% of the company's annual marketing budget. The catalogue is distributed both in stores and by mail. Most of the catalogue is produced by IKEA Communications AB in IKEA's hometown of Älmhult, Sweden where IKEA operates the largest photo studio in northern Europe at 8,000 square metres in size. The catalogue itself is printed on chlorine-free paper of 10-15% post-consumer waste.  IKEA has launched a loyalty card programme called "IKEA Family." The distinctive orange card is free of charge and can be used to obtain discounts on a special range of products found in each IKEA store. In particular, it gives 25% off the price of commissioned ranges of IKEA products on presentation of the card. The card also gives discounts on food purchased in the restaurant and the Swedish Food Market. In conjunction with the card, IKEA also publishes and sells a printed quarterly magazine titled IKEA Family Live which supplements the card and catalogue. The magazine is already printed in thirteen languages and an English edition for the United Kingdom was launched in February 2007. It is expected to have a subscription of over 500,000.         The IKEA brand is the sum total of the emotional and rational values that consumers associate with the IKEA trademark and the reputation of our company. The brand image is the result of over 50 years work by IKEA co-workers at all levels all over the world.  The overall task of IKEA marketing communication is to build the IKEA brand and inspire people to come to the stores. The IKEA concept builds on a relationship with the consumer. Nine key messages are used within the IKEA marketing communication to build this relationship. These are  • • • • • • • • • The IKEA concept is based on the market positioning statement. "We do our part" focuses on their commitment to product design, consumer value and clever solutions. By using inexpensive materials in a novel way and minimising production, distribution and retail costs, their customers benefit from low prices. The IKEA product range is developed to be extensive to have something that appeals to everyone and to cover all functions in the home. The products are modern not trendy so they are practical enough for everyday use. IKEA is the home furnishing specialist- IKEA products are functional and appealing; they enable people to improve their home life through practical solutions to everyday problems. Low price is not appealing unless it represents good value for money. This is where IKEA is able to make a real difference. IKEA is committed to having a good relationship with our suppliers and so we are able to purchase good quaility, economically produced designs that are bought in bulk to keep costs down. By making all their furniture flat packed they cut down on transportation and assembly costs. Function - IKEA products are based on a functional approach to design. IKEA design means products that are attractive, practical and easy to use. They don't have unnecessary features, they give genuine solutions for specific home furnishing needs and are made of the most suitable materials for their purpose. The right quality- IKEA products are subjected to rigorous tests to make sure that they meet national and international safety standards. Convenient shopping- The IKEA store offers "everything under one roof", most of it available for immediate take-away. IKEA offers service where they need it, but allows customers to make most of the decisions themselves. This means that they need to make it easy to choose the right products by displaying them correctly, describing them accurately and having a simple returns policy. A day out for the whole family- IKEA aim to look after thier customers by planning for their needs. Not only do they provide inspiration and ideas, but they also encourage people to touch, feel and use the products on display to see how they would fit into their own home. They have new products arriving all the time, seasonal themes, play areas for children, special events and a great value family restaurant. Swedish IKEA, - The key IKEA messages all have their roots in the Swedish origin of IKEA. Swedish furniture is light and fresh yet unpretentious. The warm welcoming Swedish style has become a model of simplicity, practicality, and informality that is now world renown.         IKEA has a long tradition in marketing communication focusing primarily on printed media which has proven its values and success to the company over the years. Other media now being used to an increasing degree include TV, radio, and internet based communication.  The IKEA marketing mix consists of 4 different areas of focus. 1. The IKEA product range is our starting point. All other marketing communication is used to amplify the product range. 2. The store is the IKEA retailer’s primary medium for presenting and communicating the range, its low price and the IKEA concept. 3. The IKEA catalogue is the main marketing tool with around 70% of of the annual marketing budget being spent on this alone. It is produced in 38 different editions, in 17 languages for 28 countries. 110 million catalogues were circulated last year - three times higher than that of the Bible, with 13 million of these being available in the UK. 4. The IKEA advertising, PR and other types of communication are complements to the IKEA range; store and catalogue are used to spearhead the penetration of our target market.  Although IKEA household products and furniture are designed in Sweden, they are largely manufactured in developing countries to keep down costs. With suppliers in 50 countries, roughly 2/3 of purchasing is from Europe with about 1/3 from Asia. A small amount of products are produced in North America. Comparatively little production actually takes place in Sweden, though it still remains the fourth-largest supplier country (behind China, Poland and Italy). China accounts for about 2.5 times as much supply as Sweden. For most of its products, the final assembly is performed by the end-user (consumer).  For IKEA, distribution is an important part of the equation of creating home furnishing articles at prices which are as low as possible. Today approximately 10,000 IKEA products are manufactured by 1,600 suppliers and transported to 186 IKEA stores around the world, often via one of the company’s 27 centra l warehouses and distribution centres. At IKEA, distribution is all about making the route from the manufacturer to the customer as short as possible. In the early days of IKEA, the “warehouse” was a shed on Elmtaryd Farm in the south of Sweden where the founder of the company, Ingvar Kamprad, lived with his parents. In those days products were despatched from Elmatryd with the help of the county milk van that visited the farm each day. Things have changed a bit since then, however. Today IKEA operates 27 distribution centres in a total of 16 countries. From here IKEA products are delivered to 186 stores around the world – 165 IKEA Group stores and a further 21 stores operated by other franchisees.       Large volumes + flat packs = low costs IKEA works in various ways not only to rationalise and simplify distribution, but also to minimise the impact this part of the business has on the environment. The secret is to calculate as exactly as possible how many products will be needed to satisfy demand. This eliminates any unnecessary costs for production and warehousing. The hallmarks of IKEA distribution are: • • • • A global distribution network large volumes flat packages Low costs. The aim, of course, is to make sure that the right products are always available at the store when the customers wish to buy them. Better efficiency means lower prices The fact that IKEA products are sold packed fl at means that they can be transported with greater efficiency. By minimising “wasted space” it is possible to transport and store more packages at a time. And by increasing what is known as “the filling rate” in containers etc. (in other words, reducing the amount of wasted space), the cost of transporting each item goes down. One good example of this is HOTT kettle. Making better use of the available space by stacking some of the kettles upside down makes it possible to fit ten kettles into a box instead of just six. As a result, less packaging materials are needed and distribution costs are kept lower. More deliveries by rail in future Today 60 percent of all IKEA freight is transported by road, 20 percent by rail and 20 percent by sea. Less than one percent is air freighted. The aim is to constantly increase the proportion of goods transported by rail. Within the next three years 40 percent of all IKEA freight within Europe will be moved by rail. For some years now, all the freight companies working with IKEA have been required to provide statistics for a so called “Environmental Performance Sheet” that details how their operations impact on the environment. This enables IKEA to keep a check on these companies’ environmental work and to monitor what measures they are introducing to reduce the use of fuel and minimise emissions.              The INGKA Foundation is officially dedicated to promoting “innovations in architecture and interior design.” With an estimated net worth of $36 billion, the foundation is unofficially the world’s largest charitable organization, beating out the much better known Bill and Melinda Gates Foundation, which has a net worth of approximately $33 billion. Despite its enormous wealth, the Ingka Foundation does very little charitable giving. Detailed information about its grantmaking is unavailable, as foundations in the Netherlands are not required to publish their records. But IKEA has reported that in 2004-2005, the Ingka Foundation's donations were concentrated on the Lund Institute of Technology in Sweden, and the Lund Institute reported the receipt of $1.7 million grants from the foundation during both of those years. By way of comparison, the Gates Foundation made gifts of more than $1.5 billion in 2005. Notwithstanding the Ingka Foundation's lack of concerted philanthropic activity, IKEA is involved in several international charitable causes, particularly in partnership with UNICEF. These include: • In the wake of the 2004 Boxing Day Tsunami, IKEA Australia agreed to match dollar for dollar co-workers donations and donated all sales of the IKEA Blue Bag to the cause. • After the Pakistan earthquake of 2006, IKEA gave 500,000 blankets to the relief effort in the region • IKEA has provided furniture for over 100 "bridge schools" in Liberia. • In the 2008 Sichuan earthquake in China, IKEA Beijing sold an alligator toy for 40 yuan (US$5.83, €3.70) with all income going to the children in the earthquake struck area IKEA also supports American Forests to restore forests and reduce pollution. Links with Education In 2008 IKEA was a supporter of the Design Wales Ffres Awards, providing a creative brief for undergraduate design competition.  In September 2005 IKEA Social Initiative was formed to manage the company’s social involvements on a global level. IKEA Social Initiative is headed by Marianne Barner. The main partners to IKEA Social Initiative are UNICEF and Save the Children. On the 23rd of February 2009 at the ECOSOC event in New York, UNICEF announced that IKEA Social Initiative has become the agency’s largest corporate partner, with total commitments of more than 180 million USD. Examples of involvements:       • IKEA through IKEA Social Initiative contribute €1 to UNICEF and Save the Children from each soft toy sold during the holiday seasons, raising a total of €16.7 million so far. • IKEA Social Initiative provided soft toys to children in cyclone affected Myanmar. • Starting in June 2009, for every Sunnan solar-powered lamp sold in IKEA stores worldwide, IKEA Social Initiative will donate one Sunnan with the help of UNICEF.  In 1990, IKEA invited Karl-Henrik Robèrt, founder of The Natural Step, to address its board of directors. Robert's system conditions for sustainability provided a strategic approach to improving the company's environmental performance. This led to the development of an Environmental Action Plan, which was adopted in 1992. The plan focused on structural change, allowing IKEA to "maximize the impact of resources invested and reduce the energy necessary to address isolated issues." The environmental measures taken, include the following: • Replacing polyvinylchloride (PVC) in wallpapers, home textiles, shower curtains, lampshades, and furniture—PVC has been eliminated from packaging and is being phased out in electric cables; • minimizing the use of formaldehyde in its products, including textiles; • producing a model of chair (OGLA) made from 100% postconsumer plastic waste; • introducing a series of air-inflatable furniture products into the product line. Such products reduce the use of raw materials for framing and stuffing and reduce transportation weight and volume to about 15% of that of conventional furniture; • reducing the use of chromium for metal surface treatment; • using wood from responsibly-managed forests that replant and maintain biological diversity; • using only recyclable materials for flat packaging and "pure" (non-mixed) materials for packaging to assist in recycling. • introducing rental bicycles with trailers for customers in Denmark. More recently, IKEA has stopped providing plastic bags to customers, but offers reusable bags for sale. The IKEA restaurants also only offer reusable plates, knives, forks, spoons, etc. Toilets in some IKEA restrooms have been outfitted with dual-function flushers. Most stores only offer paper plates and plastic knives, forks, and spoons. IKEA has recycling bins for compact fluorescent lamps (CFLs), energy saving bulbs, and batteries. In 2001 IKEA was one of the first companies to operate its own cross-border freight trains through several countries in Europe. In August 2008, IKEA also announced that it had created IKEA GreenTech, a €50 million venture capital fund. Located in Lund (a college town in Sweden), it will invest in 8-10 companies in the coming five years with focus on solar panels, alternative light sources, product materials, energy efficiency, and water saving and purification. The aim is to commercialise green technologies for sale in IKEA stores within 3–4 years.                                                                                                                            TOTAL QUALITY MANAGEMENT AND SIX SIGMA Edited by Tauseef Aized Total Quality Management and Six Sigma http://dx.doi.org/10.5772/2559 Edited by Tauseef Aized Contributors Aleksandar Vujovic, Zdravko Krivokapic, Jelena Jovanovic, Svante Lifvergren, Bo Bergman, Adela-Eliza Dumitrascu, Anisor Nedelcu, Erika Alves dos Santos, Mithat Zeydan, Gülhan Toğa, Johnson Olabode Adeoti, Andrey Kostogryzov, George Nistratov, Andrey Nistratov, Vidoje Moracanin, Ching-Chow Yang, Ayon Chakraborty, Kay Chuan Tan, Graham Cartwright, John Oakland Published by InTech Janeza Trdine 9, 51000 Rijeka, Croatia Copyright © 2012 InTech All chapters are Open Access distributed under the Creative Commons Attribution 3.0 license, which allows users to download, copy and build upon published articles even for commercial purposes, as long as the author and publisher are properly credited, which ensures maximum dissemination and a wider impact of our publications. After this work has been published by InTech, authors have the right to republish it, in whole or part, in any publication of which they are the author, and to make other personal use of the work. Any republication, referencing or personal use of the work must explicitly identify the original source. Notice Statements and opinions expressed in the chapters are these of the individual contributors and not necessarily those of the editors or publisher. No responsibility is accepted for the accuracy of information contained in the published chapters. The publisher assumes no responsibility for any damage or injury to persons or property arising out of the use of any materials, instructions, methods or ideas contained in the book. Publishing Process Manager Marina Jozipovic Typesetting InTech Prepress, Novi Sad Cover InTech Design Team First published July, 2012 Printed in Croatia A free online edition of this book is available at www.intechopen.com Additional hard copies can be obtained from orders@intechopen.com Total Quality Management and Six Sigma, Edited by Tauseef Aized p. cm. ISBN 978-953-51-0688-3 Contents Preface IX Section 1 Quality Management 1 Chapter 1 Artificial Intelligence Tools and Case Base Reasoning Approach for Improvement Business Process Performance 3 Aleksandar Vujovic, Zdravko Krivokapic and Jelena Jovanovic Chapter 2 Improving ‘Improvement’ by Refocusing Learning: Experiences from an –Initially- Unsuccessful Six Sigma Project in Healthcare 23 Svante Lifvergren and Bo Bergman Chapter 3 Project Costs and Risks Estimation Regarding Quality Management System Implementation 41 Adela-Eliza Dumitrascu and Anisor Nedelcu Chapter 4 What Quality Management Allied to Information Can Do for Occupational Safety and Health 69 Erika Alves dos Santos Chapter 5 Reducing Mirror Slippage of Nightstand with Plackett-Burman DOE and ANN Techniques 101 Mithat Zeydan and Gülhan Toğa Chapter 6 Redesigning the Service Process for Total Quality in Government Hospitals: Evidence from Kwara State 117 Johnson Olabode Adeoti Chapter 7 Some Applicable Methods to Analyze and Optimize System Processes in Quality Management 127 Andrey Kostogryzov, George Nistratov and Andrey Nistratov Chapter 8 Competence Education and Training for Quality 197 Vidoje Moracanin VI Contents Section 2 Six Sigma 217 Chapter 9 The Integration of TQM and Six-Sigma 219 Ching-Chow Yang Chapter 10 Qualitative and Quantitative Analysis of Six Sigma in Service Organizations 247 Ayon Chakraborty and Kay Chuan Tan Chapter 11 Lean Six Sigma – Making It ‘Business as Usual’ 287 Graham Cartwright and John Oakland Preface Total quality management, now a well known idea, is a philosophy of management for continuously improving the quality of products and processes. The idea is that the quality of products and processes is the responsibility of everyone who is involved with the development and/or use of the products or services. TQM involves management, workforce, suppliers, and even customers, in order to meet or exceed customer expectations. The common TQM practices are cross-functional product design, process management, supplier quality management, customer involvement, information and feedback, committed leadership, strategic planning, cross-functional training, and employee involvement. Six Sigma is a business management strategy which seeks to improve the quality of process outputs by identifying and removing the causes of defects and minimizing variability in manufacturing and business processes. A six sigma process is one in which 99.99966% of the products manufactured are statistically expected to be free of defects. TQM’s focus is general improvement by approaching the problem collaboratively and culturally whereas Six Sigma utilizes the efforts of many departments, generally with a statistical approach. It makes use of measuring and analyzing data to determine how defects and differences could be minimized to the level where there are 3.4 defects per million cycles/products. Six Sigma can easily be integrated into quality management efforts. Integrating Six Sigma into the TQM program facilitates process improvement through detailed data analysis. Using the Six Sigma metrics, internal project comparisons facilitate resource allocation while external project comparisons allow for benchmarking. Thus, the application of Six Sigma makes TQM efforts more successful. In today’s highly competitive environment, organizations tend to integrate TQM and six sigma to gain maximum benefits. This volume is an effort to gain insights into new developments in the fields of quality management and six sigma and is comprising of articles authored by renowned professionals and academics working in the field. Both beginners and veterans in the field can learn useful techniques and ideas from this volume. Tauseef Aized, Professor and Chairman, Department of Mechanical Engineering-KSK campus, University of Engineering and Technology, Lahore, Pakistan Section 1 Quality Management Chapter 1 Artificial Intelligence Tools and Case Base Reasoning Approach for Improvement Business Process Performance Aleksandar Vujovic, Zdravko Krivokapic and Jelena Jovanovic Additional information is available at the end of the chapter http://dx.doi.org/10.5772/46082 1. Introduction Contemporary and every day more perfect information achievement, becomes available for everybody, and simply, very quickly become a necessity. It is necessary that organizations use information technology as a tool for developing a sense of learning, acquire and use knowledge. Information tools should not be use like tools for automation of existing processes. There should be another aspect or already obsolete category. With this aspects, thinking and attitudes, it can be said that we living in the century of knowledge and that we have already overcome period of information technology which should be, simply, implemented like support in the way for achieving knowledge. This informational environment has been recognized in the world and because of there are significant rising in the use of artificial intelligence tools. There is evidence that is a great number of eligible to use and easily available software for needs of the development of such as systems in the field of artificial intelligence. Also, in [1] states that investment and implementation of artificial intelligence show significant results, particularly in attempt of to get higher profit. The artificial intelligence, like the word itself says is the area that deals with the development of systems that mimic human intelligence and a man with tend to replace him in some activities based on knowledge. That is way for over viewing problem of human absence, cost of services, disinclination of people to provide knowledge and similar. Specified conditions, particularly from the standpoint of the necessities of knowledge, and also the fact that in area of research topic for the purposes of quality management systems, there are evident gap [2, 3-10, 11]. That facts justifying the author's striving to be in this research and accept to use artificial intelligence tools for developing systems oriented to knowledge. These views and attitudes were in agreement: that there is no correct programming software that has a strong base of knowledge that could assist in © 2012 Vujovic et al., licensee InTech. This is an open access chapter distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. 4 Total Quality Management and Six Sigma identification of a problem, that has not developed a single expert system that deals with the measurement, evaluation, corrective and preventive action to improve organizational performance and the like [12, 13-16, 10]. It is also an incentive to be based on such analogies create a foundation set up and entered the field of artificial intelligence in order to obtain knowledge as one of the most important factors for creating competitiveness in the market [17-19, 20]. Everything above can be understand like introduction for developing an research whit main aim for developing a system in the field of artificial intelligence that would be based on the analysis in the quality management system and that has given recommendations for achieving business excellence and improve the financial performance of the organization. The main parts and activities of that research stay in the basis of this chapter. 2. The main targets, methods and contribution Based on the introduction and results of researching literature source and practice, in the scope of this research, it can be set up main targets, and that are:    to find (regardless of size or type of organization) area in organization which have priority from the standpoint of improvement, to establish new concept of Degree of Readiness and Coefficient of Significance which can show intensity and type of action which should be provide in direction of achieving business excellence and to develop and testing in real condition an expert system for improvement business process performances even those of financial character base on analogy with human body function. In this sense, it can be use science method for inductive and deductive way of deciding and concluding. First one was used for collecting, estimating and analyzing of experimental data, or to making general knowledge by using specific knowledge and particular facts. The second one was used for applying and checking specific conclusion in real condition. Also, like science approaches it was used: analogy method, expert decision and “ex post facto” or previous case and facts. Beside that, many other methods and tools were conducted like: knowledge discovery in data base, data mining, case base reasoning-CBR, object oriented programming, artificial intelligence tools, Analytic Hierarchy Process-AHP, expert choice, testing in real condition, Visual Basic and Select Query Language. Through a detailed analysis of literature sources and software, it was found evident gap in applying artificial intelligence tools for improvement business process performances based on Quality Management System-QMS and especially in experience of other and case reasoning. In this research, analogy between human body function and process oriented organization were established, and areas in organization which is prior from the standpoint of improvement were identified. Two unique data bases and significant number of company and data, make original experimental value and bases for research. Also, new concept of Artificial Intelligence Tools and Case Base Reasoning Approach for Improvement Business Process Performance 5 Degree of Readiness and Coefficient of Significance for achieving business excellence stay in the basis of new expert system for achieving business excellence. By applying this expert system, especially on prior area, employees should drive they process performances to excellent condition, even those of financial character. Also, many actions for improvement with appropriate coefficients which show theirs intensity where found. This action should be understood also like preventive action for strengthening organizational condition to avoid some failure in the system. This expert system was tested in real conditions in one very successful organization which will be participant in competition for European Award for business excellence. This test and verification showed that the system could be useful and also the efficient and effective 3. Experimental research, areas for research and reasons for developing expert systems The basic facts of this research are attempted to define two levels of experimental data. The first level of the data is related to quality management systems and nonconformities that have emerged. This is a basic level of data which reflects the situation in the quality management systems and identify critical places that are subject to improvement. The base of these data is unique and consists of the 1009 nonconformities (cases), identified in over than 350 organizations. If we know that in our area in the field of competent certification body has, approximately 500 certificates, then the number of 350 is about 70% of the total number. That fact points out to the significance of sample for analysis. The term nonconformities refer to any non-conformance of requirements of ISO 9001, nonconformity non-fulfilment of a requirement [21]. During the external audits of quality management system, competent and trained auditors can identify several types of nonconformities (Figure 1). We are using most significant data from highest level of pyramid at which were collected at the level of many country like external estimation and evaluation of they performance and condition. Distribution of nonconformities depends on the rules that define the certification body itself. However, for the purposes of this research is used classification which is the most common in the literature, which is favour by the authoritative schools in the world in the field of management system and that is clearly recommended by European guidelines in the subject area, which is split into three levels. The first level is the disagreements that are evaluated as insignificant deviations from the standards and requirements which are interpreted as an oversight or random error. The other two categories are interpreted as nonconformities that represent a great deviation from the essential requirements, which are reflected in the frequent discrepancies in individual requirements, representing a deviation that brings into doubt the stability of the management system and threatening the operations of the organization. Data base of nonconformities which is under consideration in this research contains only nonconformities in the domain of the other two categories, and that giving greater importance to this research and gives greater significance results. 6 Total Quality Management and Six Sigma Figure 1. Data source (highest level of data significance) Non-conformances are identified in accordance with the structure requirements defined in the ISO 9001 standard as follows: - - - Quality management systems: 4.1 general requirements, 4.2 documentation requirements, Management responsibility (module 5): 5.1 management commitment, 5.2 customer focus, 5.3 quality policy, 5.4 planning, 5.5 responsibility, authority and communication, 5.6 management review, Resource management (module 6): 6.1 provision of resource, 6.2 human resources, 6.3 infrastructure, 6.4 work environment, Product realization (module 7): 7.1 Planning of product realization, 7.2 customer related processes, 7.3 design and development, 7.4 purchasing, 7.5 production and service provision, 7.6 control of monitoring and measuring devices, Measurement, analysis and improvement (module 8): 8.1 general, 8.2.1 customer satisfaction, 8.2.2 internal audit, 8.2.3 monitoring and measurement of processes, 8.2.4 monitoring and measurements of product, 8.3 control of nonconforming product, 8.4 analysis of data, 8.5 improvement. Artificial Intelligence Tools and Case Base Reasoning Approach for Improvement Business Process Performance 7 Accordingly, for example in the field of 8.2.1 from the standpoint of the appearance of nonconformances organizations have a significant and frequent or large deviations in the sense that it does not follow the information about the observations of users, it did not define the methods for obtaining this information, they do not have strong communication with customers and similar. Or for example in the field of 8.2.3 with the observed aspect, organizations do not apply appropriate methods for monitoring and performance measurement processes, have not mechanisms for implementation of corrective measures in cases that have not achieved the planned performance of processes and the like. This data will be used like the basis of CBR approach or approach where it is possible to make significant conclusion in the sense of main target of this research. This approach is shown in figure 2. Figure 2. Case based approach The second level of data consist data from evaluation organizations that participated in the competition for the quality award based on European Quality Award criteria. This database is unique, as well as in the previous case. Data were transferred in encoded form in order to secure the identity of the organization. Data were collected in 100% extent (34 organizations) and thus are significant and give a real picture of the situation in our organizations. These data are used for comparison with previous, basic level data. That is way for making improvement or exalt from basic level on the level of business excellence and way for making knowledge which reproduce expert system on his output. That is also comply with literature more existent attitude, and natural way that organization should first implement 8 Total Quality Management and Six Sigma Quality Management System and after that system which is based on Total Quality Management concept [22, 23-26, 27]. Extent [%] In order to show the current directions and trends in the field of development of software for quality, and to select under researched areas in the field of software quality, it was conducted a detailed review and analysis of a total of 143 software. All necessities information for that analysis are available in site (http://www.qualitymag.com) where are publish updated software items which are related to quality. The results of the analysis are shown in the figure 3. 23% 18% 16% 15% 11% 4% 4% Process mapping 3% Flow chart 6% Corrective action QFD FMEA TQM Six sigma Statistical analysis and control Control of documentation 0 Figure 3. Results of analysis of existent software for quality On the x axis diagrams are shown the software ability and orientation. Obviously is that the software in the field of quality is usually oriented to the control of documentation, statistical control and analysis, six sigma model, concept of total quality management, FMEA and QFD methodology, corrective action, flowchart and process mapping. However, there are specific tools for automation: the implementation of the quality management system Artificial Intelligence Tools and Case Base Reasoning Approach for Improvement Business Process Performance 9 documentation, description of information flow, implementation methods and techniques of quality, and more. Therefore, it can be concluded that there is no software that is based on the application of artificial intelligence tools in the sense of the definition of preventive actions for the purpose of improving the process. The greatest number of software is related to the application of statistical methods in the process of monitoring and improving quality. It is obviously that a large number of software is based on total quality management systems concept. The facts point out present approach which we develop in this research and also justify further research in this area. It is interesting that a large number of software are base on the corrective actions and on the other hand there is not any registered software that has application for output preventive action what is, of course, main recommendation of ISO 9000 series. This fact also gives stimulus in terms of development of software that emphasis to the prevention. That approach is unique in the field of software for quality and makes this research more significant. Beside this analysis, in this research were analyzed huge amounts of available books in order to point out the justification of applying expert system. Expert systems are different from other artificial intelligence systems in that, they attempt to explicitly and unequivocally embody expertise and knowledge with the software [28]. Expert systems are also identified as one of the most commercial branches and in most number of projects used artificial intelligence tools [29, 30]. For example, it is estimated that in the first half of 21st century, even 75% of all legal documents be written with the assistance of expert systems [31]. Also expert systems will be of vital importance for measuring the quality of products and services [32-34]. Expert systems are an area of special importance with rise trends in modern business conditions [35, 36-38]. They have special significance in a highly developed countries where is actual knowledge based economy. This research highlight trends, significance and justification of developing and implementing expert systems. Main idea and approach for developing expert system come from analogy between human body functions and process in some organization which was organized based on process modelling from ISO 9000 respect. This approach is present on figure 4. This research tries to deal with perfection of functioning of the human body compare with a process modelling structures of the implemented quality management system. The challenge made in this way, tried to create a system that is universal for all sizes of organization, which incorporates a large number of gathered data, in fact a large number of experiences, in order to get a better image of the system status. This should be added to the primary goal which is to develop a model for improvement of management system, oriented to achieve BE according to show off how to maintain and improve the performance of the human body. However, the goal is also, to develop a system for measuring performance and capacity of each activity in the QMS, in order to obtain a true picture of the systems and capabilities in order to define the areas where improvements should be made, with clearly defined intensity of improvement. On the basis, thus established the analogy is made to compare elements of implemented QMS to the systems that have applied for Quality award for BE as a system with high performance. 10 Total Quality Management and Six Sigma Figure 4. Analogy with the human organism in order to improve organizational performance To establish the analogy between the process modulated organizational structure and the human organism, so as to create the system that is independent from organizational functions and based only on the process model, following division of man functions was made [39, 40]: - willing and unwilling functions. Willing functions (term “functions” is used in medical terminology, although it is equally correct, to use a term “activities” in view of ISO 9000 standard terminology. For reasons of consistent referencing and use of theories from the field of medicine, the author has chosen to use the term functions.) are those dependent on man’s profession and performed by man’s will. They are variable and dictated by a central control of the organism. For example, when a worker at the construction site lifts his hand, it is not the same as when a referee at the game lifts his hand and etc. Willing functions refer to functions of external motoric organs. Second category is made of unwilling or automated functions and their use is given by their existence. There are functions that are same in all professions and all people (considering that they exist, i.e. that human body is in good health) and do not depend on the man will but are simply executed. For example, those are functions of secreting enzymes, hormones, heartbeats, and similar, like ordinary body functions, and functions that cannot be controlled [41, 42]. With such a ratio of functions in the human body, we can establish the analogy of the system with implemented quality management system. Analogy in term of willing function goes in direction to developed all data in to two category, production and service organization and make some analyses, which is not subject of this research. Artificial Intelligence Tools and Case Base Reasoning Approach for Improvement Business Process Performance 11 In order to meet requirements of this research, only analogy in terms of unwilling functions has been considered. The idea is to use all nonconformities (undependable of organization type or size) and base on case base reasoning approach, make conclusion about readiness of systems to making some top form. 3. Approach to developing expert system At the market today, we can find many tools for creating expert systems. These systems can be developed in a programmable environment through tools of type C + +, Visual Basic or some other programs which are related to development of expert systems. However, today are developed specialized tools for creating expert systems which allow a high degree of automation in process of developing expert systems. There are called expert system shells. From the standpoint of this research it was carried out choice of expert system shell from the aspect of next four criteria [43-45, Personal communication with group for consulting from London South Bank University, Business, Computing & Information Management, 2011): - programmability, comprehensiveness, universality, price. During the election, it was analyzed 58 shells. All information about shells are available on the Internet [2], and classified in a group of commercial shell. Detailed analyses were conducted separately for each tool through analyzing belonging site. For evaluation on the basis of the criteria it was adopted the scale of 1 to 5 where 1 is unsatisfactory grade. According to defined criteria as a most distinguished tool for the needs of the research was adopted ACQUIRE shell. That tool is non programming oriented and it has affordable price. This is a tool that supports the work of the Windows operational environment. It has possibility to develop all elements of expert system and supports forward, backward and combined chaining. For the presentation of knowledge it can be used production rules, the action table, or combined techniques. During a process of developing expert system, the role of engineer for knowledge took up first author, and the role of one expert took up second author. Also, as sources of knowledge were used following: - experience from eleven prestigious organizations in the world of field of quality management systems, business excellence and organizational performance [46], guidelines from standards for improving organizational performance [47 ], best practices from auditing of ISO 9001 oriented system [48], experience and practice of organizations that participated in the competition for the Oscar of quality award [49], theory and principles of TQM [50], experiences that are listed in [51] and indicate the path to business excellence. The expert systems are included and knowledge gained through many concrete practical projects of quality management systems implementation, and many training on that topic. That knowledge is next: 12 Total Quality Management and Six Sigma - knowledge that are specific to certain companies, knowledge derived from specific experiences and on specific way of solving problem, knowledge of those that are best for certain jobs and are passed special training, knowledge of those that is proven in practice for the specific job and similar. For the purposes of this research, expert system was develop for modules 5 (management responsibility) and module 8 (measurement, analyses and improvement) of ISO 9001 standard. The reason for that is that these areas have the greatest importance in achieving business excellence [1] and therefore they should be considerate from the standpoint of improvement. Also, another reason is that module 8 has requirements that are oriented to the improvement and that is essence and priority. The idea of this research is to make the integration of decision support systems (DSS) which is operate on first level of experimental data, and expert system. That is modern approach of integration a number of tools with the aim of acquiring a larger volume of better knowledge [52] and make system with higher level of intelligence. Today trends are integration expert systems and traditional decision support systems which as output give data and information [53]. Integration of expert systems and decision support system can be achieved in two ways [54]. The purpose of this research is to use model which is present on figure 5. based on the collection and analysis of data obtained at the output of the decision support system and it provide important information like one of inputs for expert system and its knowledge base. This is the model which is completely compatible with previous remarked analogy with human body. This two approach stay in base of this analogy integrative model for improvement business process performance. Figure 5. Integrative approach for merging expert system like separate part of DSS components Artificial Intelligence Tools and Case Base Reasoning Approach for Improvement Business Process Performance 13 For the purposes of this research, we developed a decision support system in the MS Access, Select Query Language and Visual Basic environment. This system is base on the first level of experimental data, and like one of outputs it gives results which are present on figure 6 (for module 8). Figure 6. Results of DSS systems for module 8-measurement, analysis and Applying Pareto method and rules of 70/30 it can be identified area which is crucial from the standpoint of improvement. Also, this system like support for making decision provides written presentation of nonconformities which can be shown as experience of other companies. That could be use like important data for the definition of knowledge in expert system. In addition, this system provides, and comparative analysis with the period of the four years before, which also has significance for the definition of knowledge in the expert system. Connection between data from the first and data from the second level was achieved through the introduction of the concept of "Degree of readiness (Si)" in achieving business excellence, in accordance with the following expression: S i  N z %  * K z , i=1,2,...,26 (1) where: Si Degree of readiness for all type of organizations for all requests of ISO 9001 Nz Power of a standard clause in terms of percentage. Nz = ƒ (number of nonconformities from experimental database) Coefficient of significance for achieving business excellence Kz That degree is applies to every single request of ISO 9001 and showing the willingness or the ability of organizations (both manufacturing and service sector) to attain business excellence in some areas. To find this degree, we are using method Analytic Hierarchy Process (AHP) and corresponding software Expert Choice. Results are shown in table 1. 14 Total Quality Management and Six Sigma Requests 821 823 85 84 54 824 56 53 71 41 51 72 55 Organization (power) 66.67 50 37.14 57.9 48.72 40 44 70 56.52 65.22 72.73 56.76 66.67 Kz Si Requests 0.090 0.075 0.072 0.066 0.064 0.064 0.059 0.054 0.04 0.038 0.038 0.038 0.037 6.00 3.75 2.674 3.821 3.118 2.56 2.596 3.78 2.26 2.478 2.763 2.157 2.467 83 52 81 822 73 61 75 64 76 62 74 63 42 Organization (power) 50 40 60 46.3 76.19 100 37.5 63.64 44.68 62.07 52.94 50 49.26 Kz Si 0.036 0.035 0.033 0.032 0.026 0.022 0.022 0.019 0.018 0.008 0.008 0.005 0.005 1.8 1.4 1.98 1.481 1.981 2.2 0.825 1.21 0.804 0.496 0.423 0.25 0.246 Table 1. Review of the degree of readiness for all type organization in relation to every request of the standard It is important to emphasize this because it was used and it is very important during definition of preventive measures in terms of defining their priorities and "power". Also, “power” of prevention was related with number of nonconformities in particular area. That means, larger number of nonconformities, or larger number of experience, make possibilities for defining more effective and efficient preventive action like output of expert system. Through application of Pareto method, based on coefficient of significance following requests were identified as the most significant for achieving business excellence: requests - 821, 823, 85, 84, 54, 824, 56, 53, 71, 41, 51, 72, 55 At the same time, this is important areas, and have high level of priority for improvement from the standpoint of achieving business excellence and it is very important for defining preventive action of expert system and intensity of that action. If we take a look at the list of "Coefficients of significance" for business excellence achieving, especially the most important ones and perform comparison with the list of variables and their significance in terms of: Business Process Reengineering (BPR), manufacturing strategy, benchmarking and performance measurement, being the result of the appreciated research [55] and [56] it may be found significant intercompatibility. The concerned compatibility is especially reflected in the following variables, evaluated in the relative research as highly significant for the following four projects, i.e.: customer satisfaction, quality, employee satisfaction and personal growth, customer adaptability, identification of top managers with BPR goals, strong process orientation, results orientation, direct customer cooperation. On the other hand, the above mentioned four areas Artificial Intelligence Tools and Case Base Reasoning Approach for Improvement Business Process Performance 15 are considered as highly important for any market-oriented organization, thence it can be concluded that organizations by strengthening their capacities in areas of presented "Coefficients of significance" (especially the most important ones), are not only strengthened in terms of the business excellence achieving as per European Award model, but also in the stated four areas. But some of these areas are much more important then other. Because that, the research was further elaborated in order to indicate most important area for improvement and area where should be focus attention and where should be provide very intensive action in order to achieve best organizational condition and results. This research was conduct from the standpoint of occurrence of nonconformities in all type of organisation regardless of they size or type (both for manufacturing and service organisation). Parallel the Pareto method (70/30) was carried out in that direction and based on that, it was identified next areas: requests - 56, 75, 62, 822, 74, 76, 54, 72, 85, 821, 55, 63 Now we are search for common requests (area) that are most important and where should be oriented focus and where should be provide extensively action in terms of achieving business excellence regardless of type or size of organization. And they are: 1. 2. 3. 4. 5. 6. 821 – customer satisfaction, 72 - customer related processes, 54 – planning, 85 – continual improvement, 56 – management review and 55 – responsibility, authority and communication. This area is most important for defining output of expert system and for defining intensity of action for improvement. Objects were defined during the process of expert system developing. That were depend of problem which should be solved, base on ISO 9001 oriented check list an based on experience which can be find on DSS output. Base on results of DSS system, it is defined value of the object and relation between them. In that way, it is created decision tree, which is present on figure 7. At the end, after starting the program, in a short time, system introduce user in a set of dialog boxes. One of them is shown on figure 8. Depend on the answers, expert system produce user’s report, like one which is presented on figure 9. Data obtained from this report, user can use and implement knowledge that an expert system produces. However, users can improve performance of an organization in the field where such as performance are on lower level. Also, it can be improvement performances of other, non critical, area and can be reach level of business excellence. 16 Total Quality Management and Six Sigma Figure 7. Decision tree Figure 8. User’s dialog box Artificial Intelligence Tools and Case Base Reasoning Approach for Improvement Business Process Performance 17 Figure 9. User’s report This expert system was developed in three iterative steps. Each of them resulted of the improvement, for example improvement of the definition of objects, set the input data, the relation between objects depending on the priorities of execution and more. The expert system was implemented and tested in practical, real conditions in the organization that has a clear commitment to participate in the competition for the European Award for Business Excellence, also providing important measures in that direction. Evaluation was done on the basis of technical and ergonomic characteristics based on guidelines in standards ISO/IEC 9126/1:2001 for evaluation quality of software. The results are shown in Table 2. Category Awerage mark Awerage mark Technical characteristic Fault of presented software Benefit of new software Influence on job organisation 8.2 8.7 9.2 8.7 Ergonomic characteristic General ergonomic characteristic System adaptability 9.8. Total awerage mark 9.2 9.7 9.6 Table 2. Results of expert system evaluation Figures showed significant high mark by categories, and thus the total amount. Software was evaluated positive in terms of technical characteristics and in terms of ergonomic. In this sense, product has small time of response, it is compatible with most used operating system, it has an excellent user’s oriented interface, and it has easy data entry and a good 18 Total Quality Management and Six Sigma view of the output, installation is simple and the software is very competitive. Also, in this sense, within the organization, it was carried out the reorganization of the priority areas from the viewpoint of improvement, implemented preventive measures for the potentially unstable areas and also applied the measures for the improvement (offered by this system) leading to business excellence achieving. 4. Final considerations Nowadays, very small number (a few per cent) of the scientific research activities in area of quality management systems are based on topic of the collection and analysis of information with aim to improvement business results. That fact justify author’s effort to make preventive actions for improvement business performances through establishing synergy between area of quality management and artificial intelligence like area which is strictly oriented on producing knowledge. Also, through analysis of the available software for quality management, it can be concluded that there are no any software from field of artificial intelligence that was developed for quality management systems improvement. That means that each further step in this direction brings positive scientific research results. The research point out necessity of making connection between more software solutions and tools in order to make the system with a higher level of intelligence. For this purpose, it is best to apply the integration of decision support systems and expert system. That is best world experience. With this approach it can be make system that producing knowledge and that is greatest resource which can make organization more competitive and can ensure improvement of organizations performances. Based on those facts in this research we developed unique analogy integrative approach which stays in the basis of model for improvement business process performance in the direction for achieving best organizational performances. As the most important requests for achieving business excellences were identified requests which are mostly related to: measurement, analysis and improvement (module 8 - ISO 9001) and management responsibility (module 5-ISO 9001). The next area is most important for excellence organizational condition and at the same time area where should make very intensive action for improvement and strengthening: 821 – customer satisfaction, 72 customer related processes, 54 – planning, 85 – continual improvement, 56 – management review and 55 – responsibility, authority and communication. It is interesting to highlight, that all activities and process which is related with customer and achieving his satisfaction and anticipation his needs, are in the focus and that should be direction and guidelines for all employees. Also, it is shown that the strengthening, especially in these areas is used to lead to the significant progress in terms of: business process reengineering, manufacturing strategy, performance measurement and benchmarking, as very important aspects of market-oriented organization. This research present interesting and useful results which should be use for defining measurement for improvement business performance in way for achieving business Artificial Intelligence Tools and Case Base Reasoning Approach for Improvement Business Process Performance 19 excellence. Those results are related with term of Degree of readiness which show part (every request) of ISO 9001 certified model and they ability for achieving top business form. Also, interesting results are present through values of Coefficient of significance. This two indexes show direction about area and intensity of action which should be provide to make best organisational condition. In organizations that have specific information through database and information systems, it is necessary to develop systems that will assist staff in decision making. These systems provide data and output information on the basis of which, in accordance with the principle of decision making base on fact, the employees make business decisions that certainly contribute to improve organizational performance. However, in the today complex business condition, organization must make stride from level of data and information to level of knowledge. That is way for ensuring prestigious position on the market. That could be achieving through development expert system base on expert knowledge and base on output of decision support system. This approach could be related with one modern approach, which calls case base reasoning. This approach is base on experience of other companies, and that approach could be use for defining preventive action. In this sense, it can be use a system that was developed in this work. That system was testing in real condition and proved to be very useful and that showed great level of efficiency and effectiveness for real business conditions. According to process of testing and estimation, users of the system were put ratings that are present in table 2. They indicate that this system can: make financial benefits, provide better organisation of job, stimulate all employees to improving own process, synchronise function in organisation, identify priority area for improvement, define intensity of action for improvement, stimulate preventive versus corrective action, encourage better involvement of new staff in to the activities, bring higher level of flexibility and other. Author details Aleksandar Vujovic, Zdravko Krivokapic and Jelena Jovanovic Faculty of Mechanical Engineering, University of Montenegro, Department for Production Engineering, Podgorica 5. References [1] Vujovic A (2008). Improvement of business processes performances based on management systems by using artificial intelligence. PhD thesis, University of Montenegro. [2] Metaxios K S, Psarras J and Askounis D (2001). Expert systems in production planning and scheduling: A state-of-the-art survey. Journal of Intelligent Manufacturing, Vol. 13, No. 4, pp. 253-260. [3] Smith A (2001). The role of tacit and explicit knowledge in the workplace. Journal of Knowledge Management, Vol. 5, No. 4, pp. 11-21. 20 Total Quality Management and Six Sigma [4] Lang C (2001). Managerial concerns in knowledge management. Journal of Knowledge Management, Vol. 5, No. 1, pp. 43-59. [5] Bollinger S and Smith D (2001). Managing organizational knowledge as a strategic asset. Journal of Knowledge Management, Vol. 5, No 1, pp. 8-18. [6] Clark T and Rollo C (2001). Corporate initiatives in knowledge management. Education and Training, Vol. 43, No 4, pp. 206-14. [7] Coff W (2002). Human capital, shared expertise, and the likelihood of impasse in corporate acquisitions. Journal of Management, Vol. 28, No. 1, pp.107-128. [8] Jacob M (2002). Implementing formal design review. Industrial Quality Control, Vol. 23, No. 8, pp. 398-404 [9] Dommartin A (2003). ISO 9001:2000 and the EFQM excellence Model-The floor and the ceiling of the corporate house. ISO Management System, Vol. 3, No. 1, pp. 18-21. [10] Liao S (2005). Expert system methodologies and applications - a decade review from 1995 to 2004. Expert Systems with Applications, Vol. 28, No. 1, pp. 93-103. [11] Padhy N (2005). Artificial intelligence and Intelligent Systems. Oxford University Press: USA. [12] Kanji K G (1998). An innovative approach to make ISO 9000 standards more effective. Total Quality Management, Vol. 9, No. 1, pp. 67 - 78. [13] Najmi M and Kehoe F (2000). An integrated framework for post - ISO 9000 quality development. International Journal of Quality & Reliability Management, Vol. 17, No. 3, pp. 226 - 58. [14] Mohan R and Miller D (2004). Expert systems applications for productivity analysis. Industrial Management & Data Systems, Vol. 104, No. 9, pp. 776-785. [15] Elmuti D (2004). World-class standards for global competitiveness: an overview of ISO 9000. Industrial Management, Vol. 38, No. 5, pp. 5-9. [16] Srdoc A, Sluga A and Bratko I (2005). A quality management model based on the deep quality concept. International Journal of Quality & Reliability Management, Vol. 22, No. 3, pp. 278-302. [17] Shin M, Holden T and Schmidt A (2001). From knowledge theory to management practice: towards an integrated approach. Information Processing and Management, Vol. 37, No. 2, pp. 335–355. [18] Kreng V and Ming Tsai C (2003). The construct and application of knowledge diffusion model. Expert Systems with Applications, Vol. 25, No. 2, pp. 177-186. [19] Augier M and Knudsen T (2004). The architecture and design of the knowledge organization. Journal of Knowledge Management, Vol. 8, No. 4, pp. 6-20. [20] Murray J and Chao M (2005). A cross-team framework of international knowledge acquisition on new product development capabilities and new product market performance. Journal of International Marketing, Vol. 13, No. 3, pp. 54-78. [21] ISO 9000:2005 (2005), “Quality management systems -- Fundamentals and vocabulary” International organisation for standardization, Geneva, 2005, 30 p. [22] Zhang Z (2000). Developing a model of quality management methods and evaluating their effects on business performance. Total Quality Management, Vol.11, No.1, pp. 129 – 37. Artificial Intelligence Tools and Case Base Reasoning Approach for Improvement Business Process Performance 21 [23] Sun H (2000). Total quality management, ISO 9000 certification and performance improvement. International Journal of Quality & Reliability Management, Vol.17, No.2, pp.168 - 79. [24] Escanciano C, Fernandez E and Vazquez C (2001). Influence of ISO 9000 certifcation on the progress of Spanish industry towards TQM. International Journal of Quality & Reliability Management, Vol.18, No.5, pp.481 - 94. [25] Gotzamani D and Tsiotras D (2002). The true motives behind ISO 9000 certification. Their effect on the overall certification benefits and their long term contribution towards TQM. International Journal of Quality & ReliabilityManagement, Vol.19, No.2, pp.151 - 69. [26] Tummala R and Tang L (2003). Strategic quality management, Malcom Baldrige and European quality awards and ISO 9000 certification: core concepts and comparative analysis. International Journal of Quality & Reliability Management, Vol. 13, No. 4, pp. 8-38. [27] Casadesus M and Karapetrovic S (2005). An Empirical Study of the Benefits and Costs of ISO 9001: 2000 Compared to ISO 9001/2/3: 1994. Total Quality Management, Vol. 16, No.1, pp.105–120. [28] Kosko B (1992). Neural networks and fuzzy systems: a dynamical systems approach to machine intelligence. Prentice Hall: New Jersey. [29] Bidgoli H (1997). Modern information system for managers. Department of Management, California State University: Bakersfield-California. [30] Welbank M (1983). A review of knowledge acquisition techniques for expert systems. Ipswich: Martlesham Consultancy Services, Martlesham, United Kingdom. 49 p. [31] Paquin L C, Blanchard F and Thomasset C (1991). Loge–expert: from a legal expert system to an information system for non-lawyers. In Proceeding ICAIL '91 Proceedings of the 3rd international conference on Artificial intelligence and law in Oxford. St. Catherine’s College: Oxford. [32] Eppinette M and Inman R A (1997). Expert systems and the implementation of quality customer service. Industrial Management &Data Systems, Vol. 97, No. 2, pp. 63–68. [33] Alavi, M. and Leidner D E (2001). Review: Knowledge Management and Knowledge Management Systems: Conceptual Foundations and Research Issues. MIS Quarterly, Vol. 25, No. 1, pp. 107-136. [34] Karhu K (2002). Expertise cycle – an advanced method for sharing expertise. Journal of Intellectual Capital, Vol. 3, No. 4, pp. 430-46. [35] Winn G, Gopalakrishnan B, Akladios M and Premkumar R (2005). Expert systems what SH&E managers need to know about software verification and validation. Professional Safety, Vol. 50, No. 8, pp. 45-52. [36] Comesana J and Carlos J (2002). Creating an expert system for detailed scheduling. International Journal of Operations & Production Management, Vol. 22, No. 7, pp. 806819. [37] Giarratano J and Gary R (2004). Expert systems: Principles and Programming-4th edition. PWS Publishing Company: Boston. 22 Total Quality Management and Six Sigma [38] Fleet D, Peterson T and Van Fleet E (2005). Closing the performance feedback gap with expert systems. Academy of Management Executive, Vol. 19, No. 3, pp. 23-35. [39] Relja M and Klepac N (2002). From gene to therapy- huntingtonova korea. Biochemia medica, Vol. 12, No. 1-2, pp. 35-39. [40] Belak L, Gacina N and Radic T (2005). Food technology. In profesional material for students of High school for management in tourism in Sibenik: Sibenik. [41] Vilber K (2002). No limits-Popular psychology. Babun: Beograd. [42] Gilja I (2005). Prostate urinary incontinence. Medix, Vol. 11, No. 60/61, pp. 119-120. [43] Bielawski L and Lewand R (1988). Expert systems development - Building PC based applications. John Wiley & Sons, Hoboken: New Jersey. [44] Elder J and Abbott D (1998). A comparison of Leading Data Mining Tools. In Knowledge Discovery and Data Mining proceedings of the Fourth international Conference in New York, Elder Reasearch: New York. [45] Goebel M and Gruenwald L (1999). A surveyof data mining and knowledge discovery software tools. SIGKDD Explorations, Vol. 1. No.1, pp. 20-33. [46] Oakland J (2001). Total Organizational Excellence - Achieving world class performance. Elsevier Butterworth – Heinemann: Oxford. [47] MEST ISO 9004:2009 (2009), “Managing for the sustained success of an organization. A quality management approach”, International Organization for Standardization, Geneva, 2009, p. 54. [48] Tricker R (2006). Best Practice - ISO 9001:2000 - The Quality Management Process....
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Explanation & Answer


Title: Operations Management
Thesis Statement: Operation management area plays a vital role in controlling and designing
processes of production of goods and services.


Examining three relevant operation management (OM)

Compare and contrast IKEA with Ethan Allen

Ways to improve operation performance within IKEA



Operations Management
Institutional Affiliation




Operation management is a common term in the business arena. It has the upper hand in
the business competitiveness both in the local and international market. Operation management
helps a company want to operant smoothly, grow its business, satisfy customers and boost its
bottom line. According to Hitt, Ireland, & Hoskisson, (2012), global competition, e-commerce,
productivity, customer service, and quality of goods and services the company offers are part of
the operation management. According to Hasan, (2013), operation management entails managing
the systems or two processes which create goods or provide services. Operation management
includes several processes that a company undertakes to enable it to run smoothly (Chen, 2017).
These activities include inventory management, quality management, forecasting, facilities and
layout, scheduling, locating facilities, purchasing, distribution, motivating and training
employees. Also, it involves operation management maintenance as well as distribution.
According to Hitt, Ireland, & Hoskisson, (2012), operations management has an impact on the
organizations' ability to compete. Operation management area plays a vital role in controlling
and designing processes of production of goods and services. It enables the business to improve
efficiency in its production and to meet the customer’s needs.
Examining Three Relevant Operation Management (OM)
According to Chopra, (2009), IKEA is an international retail store which designs and
sells furniture, bathroom and kitchen items, and accessories. IKEA is one of the leading furniture
retail stores in the world. IKEA Corporation is privately held and has various branches in North
America, Asia, Europe and Australia (Chopra, 2009). The main vision of the company it to
between people lives every day. Up to date IKEA has over 424 stores which operate in different
countries. The company offers modern furniture, home accessories and so on to customers at a



competitive price the customers can afford (Hellström, & Nilsson, 2011). IKEA operation
management comprises of many processes which include inventory management, quality
management, and layout or process design and so on.
Quality Management
According to Hitt, Ireland, & Hoskisson, (2010), quality management entails ensuring the
organization products or services are consistent. Quality management entails determining
quality policies, formulating and implementing quality planning and assurance, quality con...

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