Four V's Model of Operations

A model for characterising an operation is the four V's which looks at these dimensions:

• volume – how much does the operation do?
• variety – how wide is the range of activities?
• variation – how variable is demand?
• visibility – to what extent do customers see what is done?

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The size of the throughput, e.g. how many burgers are you shifting? As it goes up costs tend to go down.

This is a measure of how the activities vary, if you make one product that is uncustomised then you have very low variety, if everything is bespoke then it is high variety. Even with products/services that look otherwise identical (e.g. driving licences) there could be high variety if there are complex decisions to be made in some cases (e.g. people with medical conditions or driving offences in the case of driving licences).

The lower the variety the lower costs.

This is about how demand changes over time. If demand was always the same, e.g. one order a day of the same size, then variation would be low. If you were selling ice cream in a holiday resort then you might have very high variation across the day and year.

Lower variation reduces costs.

This is about how much the customer sees of the operation. So high visibility is associated with retail premises, e.g. the bespoke sandwich shop where the customer watches you make the sandwich is an example of very high visibility. An online transaction is a very low visibility one, the customer places an order and then it arrives. Also associated with visibility are expectations of speed of response and variety. In a retail environment a customer can ask for anything and expects you to have it instantly.

Costs go up as visibility increases, partly because highly visible operations need to have more staff and those staff need customer service skills.

Operations Management