Even if all operations are similar, they process inputs (either goods or information) with the help of the available resources leading to transformation as final output, they vary in several ways. They can be further classified into 4 broad dimensions/categories in which they vary:-
- Output volume
- Variety of the output
- Demand variation
- Degree of visibility from the customer perspective
Volume:- Volume is directly linked with many performance parameters such as utilization, standardization etc. A product with a higher volumetric scale gives the organization flexibility to put specialized machinery, leading to higher efficiencies, defining sop for each step. The volume brings down the requirement of multi-skilled workers (less labour cost) as one specific person/machine/resource can be assigned one specific job without worrying about the resource utilization factor All these factors combined drives down the cost of the product significantly lower due to economies of scale. At the same time product with lesser volumes requires non-specialized machines (lower throughput, higher changeover time) and multi-skilled staff (higher labour cost) which can perform multiple tasks as and when given. We can see this in real life where highly standardized food chains such as MacDonald’s & KFC can offer a lower price when compared to non-specialized food joints. High volumes are more open to systemization whereas low volumes. Although the non-specialized food joint can buy the same equipment, it will only drive the cost of business higher.
Variety:- The processing of raw material (goods/services) requires going through several activities before the final output is achieved/delivered. The capability of any activity to be undertaken is based on the resource utilized. when we introduce variation into the product, either we need to re-route the processing through different activities or set up the resource to deliver the desired result (which is changed. This needs either extra resources or reconfiguring leads to various types of losses. High variation in products or services pushes the system away from specific purpose resources to general purpose ones, leading to slower throughput and higher cost. Such as Taxies offer near unlimited combination of pickups and drops whereas buses run on fixed routes, although we might undertake the same length of journey, the cost per KM charged by TAXI will be higher than that of the bus.
Variation:- Each activity in operations got its capacity. The capacity depends upon the task to be performed and the resources utilized for that. The capacity can be increased by either increasing the resource or shortening the activity and vice-versa. In any organization, resources are planned based on experience and forecast ahead. If the system experiences a lower degree of fluctuation in forecasted demand, then resources will be built considering not too little buffer. activities can be planned much ahead of time, and raw materials and other capacities can be built well in advance in a planned manner. Whereas a system demand is constantly fluctuating will have to be built with extra resources to provide a capacity cushion to dampen the sudden surge in demand. Systems with low variation need not be built with safety capacity thus more economical.
Visibility:- Visibility is the value addition in the process by the resources which is ultimately experienced by the customer directly. We can understand in a way how much customer interacts with the product/information and in what degree of effectiveness. Such as a customer going into high visibility environment (physical store) vs browsing store webpage online. In the store, customer will experience more value adding services such as house keeping, decoration, interaction with staff etc. Where as no such engagement is done in webpage. Another example we can see to understand better is of transparent vs blind delivery systems. If you book a parcel through DHL, it will let you know on each and every stage what’s happening, where is it, is it pending customs, is it in transit. At the same time, when you book a mail through some of the traditional services, you will only know the expected date of arrival.
An Article by:-