1. Operations & Logistics Management Lesson 4- Different types of operations

2. OPERATION CHARACTERISTICS Every business operates differently regardless of the transformation process. These differences are based on four key operation characteristics that determine the manner in which the production function operates.

3. OPERATION CHARACTERISTICS Operation Characteristics/ Decision The Volume Dimension The Variety Dimension The Variation Dimension The Visibility Dimension

4. DECISION 1- The Volume Dimension The number of machines used Level of automation Level of standardisation of process that can be achieved The space required to actually produce the products The space required to store raw materials and packaging materials.

5. DECISION 1- The Volume Dimension contd. The space required to store raw materials and packaging materials. The space required to dispatch the product. Than manner in which the product should be dispatched. The processes to be performed in producing the product.

6. The Volume Dimension LevelAdvantage Disadvantage High Economy of scale provides a cost advantage, in gaining a greater market share. The greater the potential of staff dissatisfaction due to repetitive processes that provide little or no stimulation. Can easier satisfy a higher level of demand since the production process is faster due to automated activities. If demand suddenly reduces, the volume of excess will translate in potentially higher losses. Low Can include a higher level of variety to easier adjust to customer likes and needs. Limited production may result in longer waiting periods. The greater the level of staff satisfaction due to multi- skilling that limits boredom. Unit cost is higher so the organisation cannot compete against bigger organisations.

7. DECISION 2- The Variety Dimension Refers to the variety of goods to be produced and sold to clients.

8. DECISION 2- The Variety Dimension Contd. High Variety More flexibility to produce goods & services to match customers’ requirements. Low volumes of products & services. Higher cost (production process & final price) Low Variety Greater standardisation of processes. High volumes of products & services. Economy of scale in terms of cost.

9. DECISION 3- The Variation Dimension To what extent is the level of demand going to change over time? The variation dimension relates to those external factors that affect the level of demand for a specific product. Although these factors are external to the operations, they directly influence the level of demand.

10. DECISION 3- The Variation Dimension contd. Nature of the product determines which variation factors will influence it and to what degree demand will be affected. E.g. In winter months: ↑ in demand for bakery (people tend to eat more in winter) ↓ in demand for swimsuit

11. DECISION 3- The Variation Dimension contd. Variations can be caused by any external factor. E.g.: the weather Holiday/ school seasons Salary payment cycles

12. DECISION 3- The Variation Dimension Contd. High Variation Lower volumes of products & services. Higher unit cost. Low Variation Stable operations since the demand expectation remains relatively constant.

13. DECISION 4- The Visibility Dimension How much of the operations internal workings need to be exposed to our customers, or do we want to expose to our customers? Would it be beneficial to us if the customers could see what we are doing? What are the potential risks involved in exposing our production processes to our customers? Does the current production process, layout, location, and location size lead itself to be visible to our customers? Which back office operations should be exposed to customers? Which front office operations can be automated to reduce all customer contact?

14. DECISION 4- The Visibility Dimension Contd. Most mass production processes are vast & located far from the outlets. Individuals that perform the production processes are not usually exposed to the client, thus have no or limited experience in dealing with the public. For those products/ services where a measure of customer interaction is already in existence, the choice to expose a greater portion of the production process is more realistic. Example: A small community bakery versus a mass production bakery.

15. DECISION 4- The Visibility Dimension Contd. Advantages Client can judge the cleanliness for themselves. Clients can form a bond with the people behind their product. Disadvantages Any sloppiness within the work area will be noted by clients. If clients perceive poor hygiene, they may not return. Any staff altercations could be viewed by clients and create a poor impression of the organisation.

16. SUMMARY IMPORTANT: Volume, variety, variation and visibility characteristics are factors that must be considered and planned within the context of (a) business strategy and (b) medium- and long- term objectives. The four characteristics have a direct impact on the nature of products and goods produced. The four characteristics are all interrelated.

17. QUESTIONS: 1.How are operations different from one another? 2.Explain the relationship between variety and volume and describe why you are unlikely to find many high volume-high variety and low volume-low variety operations. 3.Identify the seasonal factors which would increase or decrease demand. 4.Identify five operations environments, which are dependent on a fully integrated visibility dimension.

18. DISCUSSION QUESTIONS 1.Consider the organisation you work for, how would you describe its operations? 2.Are the operations in your organisation affected by the variation dimension? 3.Identify the seasonal factors which would increase or decrease demand in your organisation (if applicable). 4.Are the operations in your organisation affected by the visibility dimension? If so, explain?