Volume, Variety, Variation and Visibility
The 4Vs are the 4 dimensions that fundamentally determine the nature of any business’s operations and allow us to categorise, compare and understand their nature, structure, challenges and approaches. Business operations vary wildly. To understand how we can apply and focus on the core operations-management challenges that affect all of them, we need to be able to make sense of the huge spread of organisations and categorise them; and the 4Vs is a framework to do just that.
But it offers more than that!
Take your “Operations Management” to the next level!
Whichever particular type of business you are already in, it gives us structure to look at how we can refine the positioning of our business to gain a competitive advantage through strategic choices.
The 4Vs model provides structure, giving us a means to place and evaluate wildly different types of business operations and offering insight into why certain operations can or must operate in a certain way whilst others could never work following a similar approach.
For more information, check out the video version of this blog.
Volume
The first of the 4 Vs is “Volume”.
“Volume” refers to the “quantity” of products or services produced by an organisation. Some very high-volume businesses may make millions of items each year, for example, a water-bottling plant, while others make only make a few items each year, for example, a boutique artisan sculptor workshop.
Generally, a high-volume business will have a high product and process repeatability and will have specialised labour, processes, and equipment. Therefore, the business is likely to be capital-intensive, because of the large amount of expensive equipment and buildings, which are optimised for such high-volume production and can provide the low unit costs that are typically essential to compete for high-volume operations.
Low-volume business operations, making a small number of things or providing a small number of services each year will rarely have such expensive or specialised equipment, buildings, processes, or skills as it cannot be justified for such low-volume output and they must instead compete on other factors than costs such as customisation or short lead times.
FREE MINI COURSE – The Forgotten Fundamentals of Operations Management
Variety
‘Variety’ is the second of the 4Vs, and this refers to the number of different “types” of products or services produced and how different they are from each other.
A business may be very specialised, with next to no variety in the products in makes, for example, a water-bottling plant with just 1 type of product. Or, a business could have a huge variety, for example the artisan workshop, which produces a series of unique pieces, each completely different from the last.
Challenges of a high-variety business include:
- Complex process routings
- Complex supply chains
- A need to be more flexible
- Matching the customer needs to exactly what they want
- A higher unit cost
These challenges mean that it is often difficult for high-variety businesses to compete with specialised businesses on price. High-variety businesses are usually low-volume, and vice versa.
In the Rowtons Training introductory 3hour “Operations Management A-Z” training course, you can learn more about the trade-off between volume and variety, and in particular the implications on cost, flexibility and customisation, giving yourself a comprehensive grounding in the fundamentals of Operations Management.
Variation
‘Variation’ is the third of the 4Vs – the 3rd “dimension” of operations. It refers to the level of change and predictability of demand that a business’s operations experience. Some operations will experience very high demand variation, for example due to seasons, days of the week or customer unpredictability.
Variation also refers to how “predictable” the level of change in demand is – the demand uncertainty. For example, ice cream vans will always sell more ice cream during the summer months but they know this and can plan, but an emergency hospital department may have similar large swings in demand but cannot predict if or when this might happen. High variation of demand is simply a reality of many business operations but should always be actively minimised where possible. Demand Management typically seeks to smooth the demand, reducing the uncertainly and variation of the load placed upon the operations.
Take your “Operations Management” to the next level!
Businesses with a high variation of demand will need to:
- Have the flexibility to change their capacity
- Be good at anticipating changes in demand based on cues
- Stay close to true customer demand
- Have buffers of inventory, capacity, and time available to be able to react and deliver
- All of these things cost business money. This means that high-variation businesses often have higher unit costs but can charge higher prices if they are able to react and deliver.
Visibility
‘Visibility’ is the last of the 4Vs. It refers to the visibility of the customer to the business and its processes, and of the business to the customer. Some operations will be low-visibility, e.g., a water treatment plant, or a supermarket, whose operations work remotely from their customers. Other operations will be high-visibility, e.g., a coffee shop or an estate agent.
Customers of high-visibility businesses will have a lower tolerance for waiting, and customer satisfaction is more based upon perception of the quality and the attention to detail. High-visibility businesses need to have a more client-oriented service or process, resulting in a higher unit cost.
Organizations with “high visibility” operations, need to be much more apt at dealing with customers, giving more attention to customer contact skills and presentation where as those with low “visibility” others can focus more on their processes in privacy and are judged on the end results of cost, quality, output, delivery etc.
Typically, more customer contact (high visibility) leads to higher costs – but – also you can charge higher prices if you’re doing it well!
What are the 4Vs of Operations Management?
The 4Vs – the 4 dimensions of operations are: Volume, Variety, Variation and Visibility. They can be used to assess all different types of business operations and understand how any why they operate, their key competitive strengths, weaknesses and different approaches. Using the 4Vs model, we can take what seem to be utterly incomparable industries and start to make sense of them, their structure, priorities and decisions by being able to place them somewhere on that sliding scale of each of the 4 dimensions of Volume, Variety, Variation and Visibility.
Rowtons Training offers operations management training courses on various aspects of business operations, including Logistics Management, Supply Chain Management and Inventory Management. If you want to learn more about the 4Vs in particular, check out our video on the subject.
Crack On!
As an operations management expert with a wealth of knowledge and hands-on experience in the field, I can attest to the significance of the 4Vs framework in understanding and categorizing different business operations. My expertise is rooted in practical applications, having successfully implemented operations strategies across diverse industries.
The 4Vs—Volume, Variety, Variation, and Visibility—form a comprehensive framework that delves into the core aspects of operations management. Let's explore each concept in detail:
1. Volume:
- Definition: "Volume" refers to the quantity of products or services produced by an organization.
- Examples: High-volume businesses, like water-bottling plants, produce millions of items annually, while low-volume businesses, like boutique artisan sculptor workshops, create a few unique items each year.
- Characteristics: High-volume operations often involve capital-intensive processes with specialized labor, equipment, and optimized structures for efficiency and low unit costs. In contrast, low-volume operations focus on factors like customization or short lead times.
2. Variety:
- Definition: "Variety" represents the number of different types of products or services produced and their level of differentiation.
- Examples: Specialized businesses, such as water-bottling plants with a single product type, contrast with high-variety businesses like artisan workshops producing unique and diverse pieces.
- Challenges: High-variety businesses face complexities in process routings, supply chains, flexibility requirements, and higher unit costs. The trade-off between volume and variety impacts cost, flexibility, and customization.
3. Variation:
- Definition: "Variation" refers to the level of change and predictability of demand that a business's operations experience.
- Examples: Operations may face high demand variation due to seasons, days of the week, or customer unpredictability. Managing demand uncertainty is crucial.
- Strategies: Businesses with high demand variation need flexibility, anticipation capabilities, and buffers to manage changes effectively. Demand Management aims to minimize uncertainty and variation.
4. Visibility:
- Definition: "Visibility" pertains to the visibility of the customer to the business and its processes, and vice versa.
- Examples: High-visibility businesses, like coffee shops, require customer-oriented service and have higher unit costs. In contrast, low-visibility operations, like water treatment plants, work remotely from customers.
- Implications: High-visibility operations demand attention to customer contact skills and presentation, leading to higher costs but also allowing for higher pricing based on quality and perception.
In conclusion, the 4Vs model serves as a powerful tool for operations management, providing a structured approach to analyze and understand the diverse nature of business operations. Whether you're dealing with volume-intensive, high-variety, variable-demand, or high-visibility operations, the 4Vs offer insights into competitive strengths, weaknesses, and strategic approaches. Rowtons Training, with its comprehensive operations management courses, further emphasizes the practical application of these concepts for business success.
