The 4 Vs of Operation Management

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Business operations can most easily be described as the focus of an organisation where the majority of direct labour occurs.

In a service based business, operations are usually task-oriented and will follow clear steps until the service is completed. Whereas in a manufacturing company, operations are even more central and will follow the product from inception through to completion and then on to a tertiary stage, which would usually be delivery.

Keys ways to learning about differences in Operations Processes

The 4 V’s Overview
All operations processes have one thing in common, they all take their ‘inputs’ like, raw materials, knowledge, capital, equipment and time and transform them into outputs (goods and services).  They do this in different ways, and the main four are known as the Four V’s, Volume, Variety, Variation and Visibility.

1. The Volume Dimension
A great example of this can be seen by looking at a fast food giant, such as McDonalds.

They are a well known example of high volume low cost hamburger and fast food production.   The volume of their operation is key to how their business is organised.  Essential to their operation is the repeatability of the tasks, as well as the systemisation of the work. From this, standards and procedures drive the way in which each part of the job is carried out and then by combining in this way provides the organisation with a low cost base. In contrast a local café or restaurant will have a much lower  volume of output, less labour, less systemisation, and each staff member completes a wider variety of tasks which results in higher unit costs.

2. The Variety Dimension
A common example used to describe the variety dimension is the contrast between a taxi and a bus service.  Both offer hired transportation services but a taxi service has a much higher variety dimension as they will basically pick you up and drop you off wherever it is you need to go.  A bus can only provide a defined route and schedule.  Whilst they offer a similar service, variety and flexibility is high for the taxi company and low for the bus company. It is worth noting here that a low cost model is more easily achieved with less variety.

 3. The Variation Dimension
Consider two home building contractors.  One offers prefabricated homes that you choose from a catalogue or online.  It is transferred to site and erected over the course of a few days.  The second building company offers customised homes they have display homes they have built that you can walk through. Each aspect of the home from the façade to the number of bedrooms to the floor materials to the type of heating can all be customised to the customer.  The design and build phase can take anywhere between 24 weeks to 52 weeks.   Company two will have a much higher level of cost and lower volume than company one who offers standard pricing and can control costs much more easily.

 4. The Visibility Dimension
This dimension refers to a customers ability to see, track their experience or order through the operations process.  A high visibility dimension includes courier companies where you can track your package online or a retail store where you pick up the goods and purchase them over the counter.  A low visibility dimension could be a web design company who takes your order and advises your new website will be ready in 4 – 8 weeks.  The service skill of employees will greatly affect the customers’ experience.

These four aspects should be carefully dealt with in ensuring process excellence. It includes higher efficiency, faster cycle time and higher overall productivity. In essence, adding value to organisation. As the competitive nature of the  business world increasingly demands, value creation is the key path to survival. It is well recognised that the four Vs of operation, once aligned and appropriately tuned, should ensure value creation.

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