Operations Management: Process Design and 4Vs

Managers of large companies are used to project management in their day-to-day activities, whether in the acquisition of new systems, hiring of human resources, changes in processes, changes in the physical structure, purchase of new equipment, among others. The question that remains is: how to carry out such changes without changing the most efficient alignment of the company's operations? How to ensure that such changes do not result in increased costs, which could affect the expected benefits? Some concepts and best practices in operations management can help a lot.

One of the fundamental stages for excellent operations management is the process design, that is, the stage in which the processes that will compose the operation will be designed and chained. It is at this stage that highly relevant aspects will be defined for the business to be profitable, and for this it is essential to know and understand the existing relationships between what one wants to offer, to whom and how.

The first point for process design is the positioning of processes in the Volume-Variety matrix. Volume describes the amount of demand (flow of people or products) that the company meets, while variety governs the breadth of supply in the company's portfolio. These two characteristics are closely related, so that, in general, companies that operate with high volume have low variety and those that have low volume offer high variety.

Figure 1 – Volume-Variety Matrix

Source: SLACK, Nigel et al. Operations and Process Management: Principles and practices of strategic impact

The Volume-Variety Matrix presents an alignment diagonal, where the developments are usually located. Any departure from this diagonal could result in unnecessary costs for the company, such as the loss of the chance to gain in scale given that the variety is low (in the case of position 1) or an attempt to produce high volumes, which would be incompatible with high variety (in the case of position 2).

Two other important characteristics for classification of the operation: the variation in demand (a summer inn in Búzios versus a hotel for business tourism in Copacabana) and the degree of visibility that the consumer has of the production of the output (a hair salon versus a hair dye factory).

These four characteristics (volume, variety, variation and visibility) form the 4 process V's and are fundamental for process design definitions. In companies that operate with low volume and high variety, demand variation is usually high and the degree of visibility is also high. In companies with high volumes and low variety we have low variation and low visibility. In this way we obtain the process-product matrix, in which we observe different types of operations according to the aforementioned characteristics. We rank for both manufacturing operations and service providers.

Figure 2 - Process-Product Matrix for Products

Source: SLACK, Nigel et al. Operations and Process Management: Principles and practices of strategic impact

Figure 3 – Process-Product Matrix for Services

Source: SLACK, Nigel et al. Operations and Process Management: Principles and practices of strategic impact

The proper positioning of the enterprise in the process-product matrix is ​​fundamental for the success of the business. And this develops in some aspects, such as technology and the work project, for example. The choice of technology should reflect the volume-variety relationship, so that the smaller the variety and the greater the volume, the greater the automation of activities, the greater the scale of the technology and the connectivity/coupling of the process system. Similarly, the work design – the way people carry out their activities within the process – should also reflect the volume-variety relationship. For example, in realities of high volumes and low variety we would have the division of labor as the prevailing model. It should be noted, however, that there are other approaches that could be applied in order to enhance the work, such as the employee empowerment in decision making, teamwork, role rotation, etc.

Finally, we define the layout of the processes, in charge of physically organizing the processes according to the established characteristics and respecting the optimization of the flow of resources, people, products and services. You layouts fixed position, for example, are suitable when there is high variety and low volume and, therefore, the flow is not so relevant and the option is to move transforming resources rather than transformed ones. At the other end of our matrix we would have the layout of product, in which the organization is made so that the transformed resource flows along a “line”.

In order to run an efficient and effective operation, managers must pay attention to the process design stage: placing the company in the volume-variety matrix, understanding how demand variation and visibility will affect its operations and defining, accordingly, with the process-product matrix, the technology, the work project and the layout most suitable for the business to be as profitable as possible.

References:

SLACK, Nigel et al. Operations and Process Management: Principles and practices of strategic impact. Bookman Editora, 2013.