Question

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

Answer 1

In the 4V diagram, the 4V stands for Volume, Variety, Variation & Visibility. These four factors are interrelated and have a direct impact on nature of goods and services produced by an organization. These factors needs to be considered while making operations strategy for successful business operations. The volume factor takes into account the fact that how much a firm needs to produce a product in order to satisfy customer demand. This helps to control over production or under production. So, by focusing on volume, a firm can ensure that resources are optimally used to produce the final product and there is no wastage and the firm is able to deliver its products on time without any delay. So, according to the demand of the product,a firm has to decide whether to keep high or low volume of product. The variety factor means the range of products that a firm produces. The firm has to decide whether to keep less or large variety of products. Less variety helps to ensure simple operations process. It results in mass production of standardized goods. Large variety requires more specialization. Due to variation, specialization of operations process is required. The variation factor focuses on changes in the level of demand overtime. Variation in demand depends on the nature of product produced by the firm. In order to determine the trends of demand, firms can use tracking. Variation in demand is due to external factors. If there is low variation in demand then it ensures stable business operations but if there is high variation in demand then the firm has to produce low volume of goods which results in increase in per unit cost of the product. Visibility factor focuses on the fact that how visible are business operations to its customers. A firm has to decide how much internal operations it should expose to its customers.

For example, Mc Donalds operations strategy includes serving products at low prices in order to beat the competitors. For achieving its business objective through this strategy it can use 4V diagram. In order to serve products at low cost, it ensures high volume which results in mass production of burgers. Since it has to ensure high volume, it keeps quite low variety. Also, the demand throughout the year is quite consistent. Some parts of its service are more visible and some are less. So, Mc Donald's is able to experience huge success by keeping the prices low, limited menu and fast services to its customers. So, we can see how 4V diagram can be used as an operations strategy visualization tool. By focusing on these four factors, a firm can easily formulate its operations strategy and can ensure smooth & successful running of the business.