Internal Benchmarking at IKEA - Continuous improvements in the Store Development Process

Problem IKEA uses a standard store concept when building IKEA stores. Developing a standard store concept simplifies the procedure to build many similar stores in a more efficient way. However, a difficulty in the process of establishing and using a standardised concept is how to continuously update the concept itself. Today there are big differences in retail construction costs between different IKEA countries, which indicate that there are differences in construction performance and efficiency in different store projects. Therefore it should be possible to find good and bad solutions through a benchmark analysis. Benchmarking can thus be a proper tool in the continuous process of updating the standard store concept. However, essential when conducting a benchmark analysis is to have comparable economic data. In the case of IKEA it would be interesting to examine how big the problem is for IKEA today with incomparable economic data deriving from the store projects in the different countries. And, if this is a big problem, what can then be done in order to come to terms with it? Purpose The purpose of this Master Thesis is to examine how IKEA can develop an appropriate economic framework for an internal benchmarking procedure, in order to update the standard concept, decrease construction costs and improve construction performance when building new stores. Method This research follows the systemic methodology approach where the main system is the IKEA store project development process. Further more it can be considered a case study. The cases studied are four IKEA store projects in the four countries Poland, Germany, the United Kingdom and the United States. These were primarily chosen because of the great differences in retail construction costs. The data is mainly collected in three ways; quantitative data sent from the contact persons in the different store projects, qualitative data through visits and interviews with contact persons and other key persons within IKEA and through everyday conversations with people at IKEA while conducting the research. Conclusions Major problems concerning the store project cost follow ups are identified in the store project analysis. One great problem is that the legal accounting system in all the store projects studied in various ways influence the store project cost follow up. Another big problem is that there is a lack of understanding as to why the project cost follow up is important. Further more, the conclusion of the store project analysis is also that the store project cost follow up is too inflexible and deliberate deviations from the specification has to be done in order to study costs for different items specifically. These problems result in incomparable economic data in the project cost follow ups. To be able to accomplish an internal benchmark analysis in order to improve the store development process and the standard store concept within IKEA, the project cost follow ups from different store projects all over the world have to be comparable. This can be accomplished by implementing the three cornerstones: Better specification and cost follow up structure, Automatic accounting through EDI and Increased understanding and motivation. Better specification and cost follow up structure concerns changing the build up and use of the specification stated in the IKEA Financial Manual. This is essential in order to simplify the project cost follow up process and to be able to analyse cost variations easier. By using automatic bookings through EDI less manual work will be made. This will result in less wrong bookings, deliberate as well as undeliberate, and hence a great potential for saving both time and money arises. Finally an increased understanding of the full use of the store project follow up process and higher motivation for making correct bookings is essential in order to establish an appropriate economic framework for internal benchmarking.