Question

How can the 4V diagram be used as an operations strategy visualisation tool. Give an example? [10%]

Answer 1

answer..

The 4 V diagram discusses Variation, Volume, Variety, and Visibility and how it should be aligned and tuned to create value in the operations strategy of an organization.

1. The volume dimension: Taking the example of McDonald's the large fast food quick serve restaurant has high volume manufacturing of burgers. The high volume production defines their business model. Their strategy is to manufacture a high volume of burgers and sell at the lowest cost. Their business is focussed on repetitive task with systematized production. They have defined systems for the manufacturing process which is the bass for their volumes. In contrast a local café will have lesser volumes, and more diverse jobs for staff members. They will have less systematization and higher costs.

2. The variety dimension: A good example is the two means of transportation taxi service and bus service. The bus service will take the traveler on a predefined scheduled route at a lower cost. The taxi service will take the customers to their desired route and has the flexibility to adapt to the customer's requirement. It indicates that a low variety can reduce the overall costs but could be a less flexible business model. Similarly again taking the example of McDonald's they derive the low cost of manufacturing by offering a limited menu offering which is restricted to burgers and shakes. This allows them to maximize their production line and create more repetitive task to achieve a low-cost model.

3. The Variation dimension: Discussing the option of customization and variations a standalone restaurant will offer you variation in tastes by allowing you to use special ingredients, add spices according to your tastes but will be more expensive. In contrast, McDonald's allows zero variation and you have to take a burger as it is manufactured except for adding extra cheese to their burger zero variation is allowed. It allows the company to have repetitive processes and one standardized product which is offered to the customer. The time required to manufacture the burger is much less compared to a customized food item. Hence McDonald's can have a standardized product, lower prices, and high volumes. Comparatively, the standalone restaurant will have a higher cost of manufacturing will be having fewer volumes and will sell at a higher price.

4. The Visibility Dimension: The tracking of the value chain is higher in McDonald's where the number of raw material to a number of burgers sold can be tracked easily. Further, the company has an established turn around time for each activity. They can have clear time frames for each task as they have good visibility over their supply chain. The high visibility ensures high service levels and greater customer satisfaction level.

To conclude the organization has to align theirs 4v’s to create an operations strategy which creates higher efficiency, faster cycle time, and higher overall productivity. This has been executed by McDonald's to create an operation strategy to maximize their sales at minimum costs.