IKEA Process Change
May 28
2010
A position paper showing the need for IKEA to redesign its order fulfillment process as means to improve customer retention.
Addressing Customer Retention
ABSTRACT A company will not have the capability to survive if the company cannot retain its customers. Customer retention is especially important to a company such as IKEA that is based on customers doing much of the work themselves regardless of the obstacles in place. There is currently a process in place within IKEA that does not provide a good environmental aspect for customer retention. This process is the process by which a customer is responsible for pulling their own merchandise, regardless of size or weight, from the floor of the store and taking it to be paid for. Pulling merchandise refers to the physical act of the customer taking control of a piece of merchandise and removing it from where it is stocked within the store. A new process must be placed in all IKEA stores that will provide the customer with an option for receiving help if needed when pulling an item. Moreover, any customer should have the expectation to be provided assistance when they need that help in any IKEA store. Customers that cannot get the merchandise that they would like to buy will enter an emotional state within the IKEA store that does not support that customer leaving the store on good terms or in a good mood. While the current process is a physical limitation placed on the customer by IKEA, then end result is an emotional decision made by the customer to not return to the store for any other merchandise. A new process including Six Sigma aspects should include permanents employees to assist customers with their orders in the store regardless of the terms of the sale such as whether the order was called in or not. The new process should also incorporate new stocking practices such as shelves that will automatically assist the customer in getting their merchandise. This shelving should be of a design to help the customer and not hinder their efforts to buy merchandise at the IKEA stores.
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Table of Contents I.
Overview
II.
Activities Matrix Analysis
III.
IV.
V.
VI.
VII.
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A.
Goals, Workers, Software
B.
Matrix Analysis
Potential Factors Affecting Goals and Performance A.
Factors affecting Goals
B.
Factors Affecting Performance
C.
Human Performance Analysis
Risk Management A.
Risk Management
B.
Measurements
C.
Six Sigma Considerations
D.
Fishbone Diagram
Planned Improvement Stages A.
Stages
B.
Fishbone Diagram
Potential Defects or Problems A.
Defects
B.
Problems or Issues
C.
Fishbone Diagram
Summary A.
Advantages
B.
Recommendations
I. Overview The purpose of this paper is to discuss the fact that IKEA is facing a paramount loss of customers that will be sustained due to a process that does not allow for the easy access and completion of pulling the desired items that customers want. This paper will describe a process change that will empower the customer to be able to pull their own order every time with the aid of employees in the IKEA stores. Pulling an order refers to the process by which the customer removes the item or items from the items stocked position in the store and takes the item to the checkout area for payment. Further description if the process change goals, workers, and needed software will be discussed. This will be followed by a discussion of some of the potential factors that will affect the goals and performance of the new process. Risk management and a discussion of the different planned stages of improvement are included to give detail into how the change should occur and how the risk of the new change should be managed. Finally a discussion of some of the potential defects in the new process will occur with insight into any potential problems and how they should be addressed. Many of these discussions will include fishbone diagrams to provide a visual representation of how the entire process change should be developed and managed. II. Activities Matrix Analysis A. Goals, Workers, Software How a customer perceives a company is based on his or her cumulative experiences. These experiences are derived from the customer’s touch points - all communication, physical and human interaction with the company during the lifecycle of the relationship (Brigham, 2007). Developing customer loyalty extends beyond simply having a high quality product. Therefore, 4
effective customer relationship management (CRM) should focus on how to make each touch point the most beneficial for the customer.
CRM is about creating customer loyalty by
holistically addressing ways to create a sustainable relationship with customers. Thus, improving customer retention at IKEA involves looking at how the customer perceives the organization during each activity of the process. IKEA seeks to improve the order pulling process as a way to incite customer retention and minimize the number of unsatisfied shoppers. In order to improve upon customer retention there needs to be an efficient process that customers are willing to repeat. It only takes one activity in the process to dissuade the customer from returning to the store to make a purchase. IKEA’s current order pulling process is based on self-service; putting the responsibility solely on the capability of the customer to fulfill their order. Subsequently, there is no staff designated to help customers pull their order should the customer not understand the label system or be capable of the physical movement of the product. Thus, customer retention is put at serious risk if the customer cannot rely on the services of IKEA employees to aid them in this process. Furthermore, should a customer pull the wrong order, there is the added stress of standing in a long line to return the item. Once again, this jeopardizes customer retention if the shopper feels that he or she has not received adequate customer service during the process making it very undesirable to repeat the process. The overall goal of the process improvement strategy is to eliminate customer inconvenience and maximize the level of customer service provided by the employees. Thus, IKEA needs to enhance its employees’ capacity to help the customer. The current process gives the customer too much discretion in pulling their own orders. Subsequently, the alternative process of calling in the order, removes the element of in-store touch points. The order pulling process must be improved in such a way that touch points and customer service qualities are integrated to the 5
extent that maximizes employees’ knowledge, skills, and abilities to cultivate customer relationships. B. Matrix Analysis
Customer
Customer shops
Calls order in
Satisfied with order
Not satisfied
Finds product
Employee Order received
Warehouse
Customer Finds/pulls order
Payment
Order pulled by employee
Customer pays Customer pays
Returns
Returns product
Figure 1: Matrix Analysis
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The blue process is the typical process customers will undergo when purchasing from IKEA. The red process is the alternative to pulling the order in person. The dashed lines in the diagram indicate areas of concern when considering customer retention. There are significant concerns in the blue process because there is no employee interaction with the customer and, subsequently, no real customer service. This directly leads to errors in the pulling process due to factors such as customer unfamiliarity with the pulling process, product labeling, etc. This increases the probability of return items and makes it unlikely that the customer will want to repeat the process again. The alternative process (red) presents another set of problems. Although the employee pulls the order for the customer in the red process, there is also the implication that the customer will only receive complete customer service if they call the order in as opposed to coming to the store to view and purchase the item simultaneously. Thus, customers are disconnected from the physical and human touch points of IKEA until they come to pay for the merchandise. Sustainable customer relationships cannot be developed without the presence of direct customer interaction in the process. Using the telephone to call in an order (red process) is not a strong enough touch point to guarantee customer retention. Both processes, especially the blue process, lack the activities that cultivate customer relationships. III. Potential Factors Affecting Goals and Performance A. Factors Affecting Goals Our goal of improving the buying process at an IKEA location can be directly affected by a number of outside influences. Some of the potential factors that need to be considered when looking to improve service are store layout, quality of employee and the type of customers you are looking to attract and retain. Store layout is important to factor into any system designed to move or satisfy people. IKEA are set up as a series of showrooms that customers can interact 7
with in order to visualize the potential of a particular item, a warehouse for selecting the items they want, and also has a normal flow influenced by directional markers and signage. Creating vibrant, clutter free, and easily navigable showrooms will improve the customer experience and make it easier for them to identify particular items. The type of customer that IKEA is looking to service will need to be identified in order to improve the customer service process. IKEA has a few distinct groups of customers that have distinctly different needs and expectations in terms of customer service and the purchasing process. B. Factors Affecting Performance Performance will ultimately be determined its Agility and real world relevance. Keeping the process simple, realistic and agile enough to grow and adapt with the changing business environment is essential to creating a long lasting design. Simplicity and agility needs to be at the forefront in order for the employees to follow through with it consistently and for the process to be able to evolve with outside forces such as weather, seasonal sales, or sudden increase in customer population.
Finally, the process needs to maintain realistic expectations for the
customers and employees in order to be quickly adapted into the real world. The human factor is possibly the most important factor in the process. People will be responsible for doing certain things. Employees and customers will need to follow along with the process in order for it to run smooth. Employees need to be very aware of how the process works through proper training in order to recognize when certain decisions or adjustments need to be made. Customers need to be able to follow the process without even realizing it. The design of the process needs to influence the actions of the customers so store employees can react and customer flow can continue normally.
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C. Human Performance Analysis One on one training helps to foster the relationship with the manager and can lead to some very good question and answer sessions, possibly leading to operational problem solving. This type of training, “infuses a business with new ideas and creative ways of solving old problems”, (associatedcontent.com, 2009). One of the hardest thing to do is not the training itself but to manage the training process to ensure it is useful and effective for the employee. It is important to think about your daily conversations with employees because.” No better opportunity exists to reinforce and help refine excellent employee performance’ (about.com, 2010). Employee training leads to a better-trained and better performing employee. Providing the correct training can also lead to a more satisfied employee. It is important to,” Build employees' competence and self-confidence through training, feedback and recognition”, (softpedia.com, 2006). Quality employee training can lead to a better performing and more satisfied and comfortable worker. Employee development is important as it shows the employee that the company is willing to invest time and money into their future with the company. The happier an employee is the higher the quality of work they can provide. IV. Risk Management A. Risk Management Risk is something that every company has to be aware of and willing to work with it has it come to light; Customers retention is not an easy task and will get better or worse depending on what the company does to help it get better. When IKEA hires an employee they give you a guide book or an employee manual that tells you how the business is run. Guide lines are important to a successful business and with the way that IKEA keep everyone feeling like a family it help with the atmosphere of the store, there are mothers, daughters, 9
husbands and wives working for IKEA at the same time. The duties of a Risk manager is to Support the functions with providing a safe and secure environment for IKEA customers and Coworkers, adequately insuring and protecting our assets and profits. If you hire a good manager that is willing to do the following jobs Co-ordinate Safety and Security training functions in partnership with Human Resources. Perform standardized Safety/Security compliance audits for all locations. Ensure compliance with governmental regulations. If you give your employees a good atmosphere to work in than they will in turn treat the customers with the same respect. “In our IKEA family, we want to keep the human being in the center and to support each other. We all have our rights but also our obligations. Freedom with responsibility! Your initiative and mine, our ability to assume responsibility and make decisions, is decisive.� Ingvar Kamprad, 1976, that is a good quote that was found in the employee hand book form the founder of IKEA and Freedom with responsibility is something that will help with Risk Management B. Measurements Learning from the customers and knowing what to measure the changes against will help the employees better understand what IKEA is trying to accomplish. To measure something you need to have something to compare it to. With the process of shopping in IKEA it can take as long a 3 hrs to get from beginning to end, and with kids it not easy. Customer retention is important, so by giving hours to employees that only help pull orders in the ware house is a great way to take some of the load off the customers. As a company we have to measure what it will take to get those hours and how much money we would charge to have us pull the order. To analyze the out come, getting the input of the customers and employees, and to see what the budget is. 10
C. Six Sigma Considerations Customer retention, IKEA is a well known Furniture store with well made furniture with prices that everyone can afford, and some things could use a little updating. Introducing the way that a customer gets furniture in a computer program and employees hired for pulling an order will be a new step in the way IKEA runs. Six Sigma will help you look deeper into the process of Customer retention. It helps you to measure, define, analyze, improve and control the process. Keeping up with the process like lower the shelves and the introduction of a new soft wear is a good way to show the customers that IKEA is doing all they can to help make the shopping experience as easy as possible.
D. Fishbone Diagram
Figure 2
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V. Planned Improvement Stages The implementation and integration of the improving the customer experience within IKEA will heavily rely on using the proper stages of development. When considering the initial improvements, customer satisfaction will be the ultimate goal. By using the steps and phases in a Six Sigma project we will be able to apply our improvements throughout the company. The first stage, define, will be used to determine the overall and potential goal of the improvements. In our case, an increase in the overall customer experience will be the goal for implementing new strategies. In order for our company to find the improvements that can increase customer satisfaction, we will first have to understand what makes our customers satisfaction decrease.
We will also have to discover what factors help increase customer
experience. By acknowledging the factors that have a positive or negative impact on our customers, we will have touched base with the problems within our organization and defined the areas that need attention. "Because customer satisfaction is a subjective, non-quantitative state, measurement won't be exact and will require sampling and statistical analysis." (Cacioppo, 2000) With customer satisfaction being a difficult to measure, most companies rely on a survey system to understand the concerns of the customers. Being able to find a method to measure the success of the improvements will be crucial in determining the effectiveness of the project. Using a method that is based on surveys will be the most easily implemented option and potentially the best option to reach a substantial amount of customers. The third step, analysis, will be the interpretation of the data received via the second stage of "measurement." The analysis of the surveys will be helpful in reaching the overall goal of increasing customer satisfaction. By using the sample surveyed we will be able to focus on the areas that are requiring improvements in our organization. The analysis will give us a point of 12
view from the customer and hopefully give an increased amount of incite about the customer experience. The analysis of the data will lead to the improvement stage. The improvement stage is where we can take action to increase the customer experience and maintain or increase our customer base. In this stage we will look at the concerns the customers acknowledged and find ways to improve or change the current processes. We will have a valuable resource in the analysis that will greatly help us in determining the improvements necessary to keep our customers happy and returning to our stores. After we implement the changes we deem necessary. We will have to maintain and control our changes, so they remain satisfactory and valuable to the company. By using the six phases of Six Sigma, we will be able to use a system that can outline the stages to implementation and policy changes for our organization that will increase customer satisfaction and in turn increase our bottom line.
Customer
Figure 3
Required Changes
Gather Data
Feed Make Required Changes to Store
View point of backbase customer
Make Customers feedback a priority
Sample Survey Customers
Increase Customer Satisfaction Make Required Changes to Store
Areas Needing Attention 13
Apply changes for Long-Term Influence
Maintain
VI. Potential Defects and Problems A. Defects One potential defect that may emerge during the life of improving IKEA’s customer retention process can occur with the shelves with rollers.
Some shelves may be defective upon
installation. Others may break or wear out through continuous use. When a rolling shelf is not working, the shelved item will not moved from the back to the front. This can make it very difficult for the customer to reach the item because they will have to reach in the back to get the item. Separating goods so that they do not weigh much could be another potential deficiency. Instead of stocking one package, employees now have to stock two or more packages. IKEA may have to hire more employees or pay current employees overtime to restock more packages. Also, because there are now more packages to stock, current stores may not have the floor space for the extra packages. B. Problems or Issues One potential problem that may emerge during the life of improving IKEA’s customer retention process is with the creation of a small staff of employees specifically assigned to assist customers in pulling their own orders. A store may experience a shortage of employees because one or more employees may call out sick or may quit. The store may also be understaffed during peak times and storewide sales, where there could potentially have more customers in the store at one given time and not enough staff members. Stocking goods on lower shelves is another potential problem. Current stores may not have enough floor space to stock most goods on lower shelves. Limited floor space also means that employees will have a harder time restocking shelves. Shelves on a whole can cause safety issues. “The safety of shelves is vital, they need to be built properly and ideally attached to a wall. If this is not done, there is a risk of a single shelf
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or the whole shelf unit collapsing, causing damage to what's on the shelf and possibly injuring or even killing people� (Big Dug, 2008). C. Fishbone Diagram Small staff
Lower shelves Not enough staff per customer
Limited store floor space
Especially during storewide sales or peak days and time
IKEA Customer Retention Potential Defects or Problems
Not all items will be within customer’s reach
Risk of employee calling out sick or quitting
Things that may cause deficiencies or problems in improvement of customer retention business process
Broken or worn out
More packages to stock
Customers may have difficult time reaching items in the back of shelves
Shelves with rollers
Employees may have difficulty restocking shelves
Especially if goods are separated in more than two packages
Separated goods
Figure 4 VII. Summary A. Advantages The advantages that a new process allows a company is that the new process is designed to remove issues and problems that limit a specific goal that the company seeks. In this situation, IKEA has an issue with customer retention which has occurred due to the current process in which a customer must remove his or her own goods from the stocked position in the store which may be unduly hard to accomplish. This occurs because of the two main factors which are that 15
the inventory may not be stored properly to provide easy removal and second because there are no dedicated employees in the store to aid the customer is pulling merchandise. A main advantage to the new process is that employees will be used as dedicated help to customer when they do need that extra bit of help to get to their goods. This is an advantage because is removes emotional and physical limitations of the IKEA shopping experience from the floor of the store. If a customer needs help, then there will always be an employee standing by to provide that extra assistance. This is also an advantage in that most customers that cannot get what they want to get in a store will become aggravated and angry if the issue escalates for too long. Providing shelving in the store that is made with a purpose to make inventory removal easier will provide a more pleasant shopping experience for every customer. Another advantage to the new shelving described in the process is that the shelves will automatically move the next item in line to the front of the shelf when a customer removes an item. This will help the next customer in line and will also help the company to reduce the man hours need to front the products on the shelves at the end of the day. B. Recommendations The recommendation of this paper is to institute this new process change in the timeliest manner possible. This recommendation is based on the research into the issue that has been completed and the results which basically state that IKEA has the capability to provide a much better shopping experience to all of its customers through some relatively minor changes. The first recommended action would be to immediately hire new employees at each store to help customers pull their orders. This will help to minimize the impact of the current process format while the interior shelving changes are being made. One last recommendation would be to institute a form of customer feedback about the existing process and then again after the new 16
process is in place. This will provide the real time customer feedback that can be used to continuously improve the process. Customer retention is critical to the success of any business and should be taken serious at all levels of the company to include the employee that may be providing help to a customer in pulling that customer’s order.
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List of Diagrams and Figures Figure 1: Activities Matrix Analysis
Page 6
Figure 2: Risk Management Fish Bone Diagram
Page 11
Figure 3: Planned Improvements Stages Fishbone Diagram
Page 13
Figure 4: Potential Defects Fish Bone Diagram
Page 15
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