The 4 Vs of Operations Management: How Simba Chips Did It With Nik Naks
‘In the end, all business operations can be reduced to three words: people, product, and profits.’ — Lee Lacocca, Father of the Ford Mustang
All Hail Nik Naks
‘How do they [Simba Chips] do it?’ has been the recent conundrumical topic of choice in the unforgiving streets of black twitter.
A lot of people took to social media to commend the snack giant Simba Chips for their praiseworthy ability to keep their popular 20g Nik Naks cheese puffs at R1 per packet for so many years.
Personally, I am also astounded by the company’s ability to maintain such a stable and ridiculously low price for such a well-known product.
In my case. these snacks have been R1 since I was in pre-school (that’s 2004) and I would remember this because whenever granny gave me some pocket money I would rush to buy those cheese puffs from this other tiny spaza shop (owned by some scary looking old man who was rumoured to chase kids and pinch their ears for no reason — we were so terrified of him!) on my way to pre-school.
It is easy to overlook this but in a world where the time value for money means that the R1 coin I have now could very well be a fraction of the R1 coin I had back in 2004 and South Africa’s labour costs are sky high and ever increasing — it must take some magic wand to keep the price of such a beloved product stable, or does it?
Operational Operations
All operations’ functions in business have one basic intention, convert inputs into outputs but one operations’ process differs from the other basically in four ways (Erasmus; Strydom and Rudansky-Kloopers: 2016):
The Four Vs Of Operations Management
1. Volume
Volume refers to the number of units that can be produced by the operation over a given period of time (Erasmus; Strydom and Rudansky-Kloopers: 2016).
2. Variety
Variety refers to the range of products that is produced by the operation over a give time period time. In the case of snacks, this may refer to flavours (Erasmus; Strydom and Rudansky-Kloopers: 2016).
3. Variation
Variation refers to the change in the demand patterns around the product line (Erasmus; Strydom and Rudansky-Kloopers: 2016). Some operations specialise in seasonal products such as most citrus fruits whose demand peaks during winter while some tropical fruits’ demand peaks in summer.
4. Visibility
Visibility refers to how much of the operations process the client/customer gets to observe, experience, or see (Erasmus; Strydom and Rudansky-Kloopers: 2016).
A person purchasing a pair jeans experiences very little of the operations process i.e. they do not see when or where the jeans were made.
They come in, purchase the final product and off they go.
On the flip side, a person buying pizza, or a hamburger gets to experience or see much of the operations process i.e. they wait while their pizza/burger is being prepared.
Adding Cheese To The Puffs
The winning operations formula is: High Volume; Low Variety; Low Variation and Low Visibility and this is where Simba Chips hit the bullseye.
Let us look at look at our favourite R1 cheese puffs in the context of the 4 Vs operations’ formula.
Volume
Until recently (where there is an introduction of different flavours of the 20g R1 Nik Naks puffs) Simba produced only one flavour of the 20g puffs and that was cheese.
To get a picture of just how big is the volume of units of the 20g cheese puffs produced, I want you to look back to your childhood and realise just how every street vendor, tuck shop, spaza shop, wholesaler and big retailer had the 20g R1 cheese puffs on their shelves.
It is still like that today, every shop has it and in every shop, it costs the same R1 it did back in 2004.
I would bet you a million dollars (gladly because I do not have it) that every street vendor that sets out to sell in the streets thinks of Nik Naks as the first product they would stock up.
The beauty of producing the same product is that it keeps some costs fixed.
Variety
Simba was only producing only one flavour of the 20g puffs, that is cheese.
They had zero variety.
That meant that they did not incur any additional costs for product development and testing and no additional costs on marketing new products.
No additional cost whatsoever.
Variation
What is the best season to enjoy cheese puffs? The best mood? The best weather? The best Justin Bieber album to listen to while enjoying them?
The answer to all those questions is a big, fat NONE!
People have cheese puffs whenever they want to regardless of whether it is Uncle Tom’s wedding or Aunt Jumaima’s funeral.
There is absolutely no variation in demand patterns.
The demand is there and stable throughout the year in fact, if anything, the demand increases when there are kiddies’ parties (how do you do it Simba?).
Visibility
The problem with a highly visible operations process is that customers have a short waiting tolerance.
When you get to the pizza outlet you do not want to wait an hour for your pizza, you want to get there and not have to wait too long to get your order.
The more customers have to wait, the more irritable they become.
When I go to the shop to buy my 20g cheese puffs I get them nice and sealed.
I do not arrive there to find Dr. Frankenstein calculating how much cheese to put in or farmer Abednego and Dorothy the quality control officer checking whether Abednego’s corn meets all the quality specs.
We do not see the operations process at all. We do not wait to get our products either.
For all we know the cheese puffs could be made by Santa Clause and his elves, come to think of it… it makes sense! Santa and the elves do not get paid, maybe that is how Simba does it — since they do not have labour costs their costs are on the floor and can afford to sell the puffs for R1 for so long profitably. I think I am onto something here!
Tying It All Up
The biggest take away from this to a Start-up entrepreneur working on developing a product line is take into consideration the four 4 Vs of operations when planning out your operations functions and realise just how the High Volume, Low Variety, Low Variation and Low Visibility formula has worked wonders for Simba Chips, maybe the same formula can give you a competitive edge against your competition.
Disclaimer
This article was written for educational purposes only.
I have not conducted an in-depth research into the operations of Simba Chips and this article is not in any way reflective of the operations of the company and/or any of its subsidiaries.
I am not in any way affiliated with Simba Chips as such, this article is not an endorsement of the brand in any way and I will not be getting any form of compensation for it.
Thank you so much for reading and I hope that with this article I have made your entrepreneurial journey somewhat better.
Thought-provoking quote from the Rookie
‘A company can seize extra-ordinary opportunities only if it is very good at the ordinary operations.’ — Marcel Telles, Brazilian Investor and founder of 3G Capital
