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Operations by design – the four V’s

By Ian Crocombe

Operations can be costly, hence the ongoing drive for productivity and efficiency. There are four aspects of your business that will drive the way your operations are designed and their associated cost profile.

First, think McDonald’s and you’ll understand the impact of volume on the design of an operation. High volume requires repeatability, task specialisation, standardised operating procedures and ultimately low unit costs. Low volume implies multitasking and skilling, a greater breadth of knowledge and higher unit costs.

Next, compare buses and taxis. Both take you to and from places yet their degree of flexibility’s totally different. Cabs have the ability to adapt to traffic conditions, add ad hoc stops and changes. Buses, on the other hand,  have fixed routes, defined stops and require little active or reactive knowledge. Choosing how you respond to customer demand by embracing variety and flexibility or providing a fixed track solution will both inform how you set up your operation and the way it is charged to customers.

Any B2C operation has to deal with the challenge of visibility – the extent to which customers can ‘see’ into your operation. The more visible it is, the less patient customers generally are! Waiting for a takeaway food order when you can see into the kitchen can make minutes seem like hours! Operations for example digital businesses with remote fulfilment (like Amazon) have chosen to limit visibility meaning their operation can be designed, automated and delivered at scale.

Finally, remember holidays? Being a successful summer holiday resort hotel implies seasonal demand that affects investment decisions, recruitment policy and managing the issue of under-occupancy at other times of the year. Understanding variation in demand and its predictability over hours, days, months or even years matters. The knack is to spot what is normal and what might have special causes and investigate.

Ian Crocombe | UK Business Advisors (ukba.co.uk)

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