Top 5 – The Four V’s of Operations Management

July 3, 2013

Operations Management is essentially how businesses produce goods and services.  From the desk you may sit at, to the coffee beans used to make your coffee to the tools you use for trade or on weekends or the car you drive about town, all of these come to you from the Operations Managers who organise their production.

Services are also produced, the knee operation you need to have, the insurance claim you need settling, the plumber you need to arrange to fix your bathroom leak, all of these come from operations managers.

Depending on the business there are different names for Operations Managers which may help you identify these in your own business.  For example in a distribution company they may be called the ‘Fleet Manager’ in a hospital environment, an ‘Administrative Manager’ and a ‘Store Manager’ in a retail environment.

The Operations function is central to the organisation as the goods and services it produces is the reason for the business existing.  The Operations function is one of three key functions within a business.  The other core functions are Marketing, including Sales and Product and Service Development.

Below are the top 5 keys to learning about Operations Processes

1. 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 is different ways and the main four are known as the Four V’s, Volume, Variety, Variation and Visibility.

2. The Volume Dimension
A great example of this is 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 their employees are doing as well as the systemisation of the work, where standards and procedures drive the way in which each part of the job is carried out. This combination provides a low cost base. In contrast a local café has 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.

3. 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 offers 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 the a low cost model is more easily achieved with less variety.

 4. The Variation Dimension
Consider two home building companies.  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.

 5. 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 greatly affects the customers’ experience.

More information is available on Operation Processes  under the topic “Operations Management”, which includes models, templates, dos and don’ts and more.  Simply click here to subscribe

Operations Management

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