Introduction to Operations Management - I

Prof. B Mahadevan
Introduction

Operations is a basic requirement in any organization. It's applicable in both manufacturing and services. It can
be a truck manufacturer, it can be a manufacturer of plastic, or, you know, an industrial equipment or it could
be a service. Service could be a restaurant, a hospital, a health centre, you name anything. What's common in
all these? All of these, first of all, have activities. Varieties of activities that happen in these organisations.
There are people involved who are engaged in these activities and of course, there are trading partners. What I
mean by trading partners, as you all know, is the suppliers on one side of products and services and the
distributors, the retailers on the other side. So, all these things are involved in delivering products and services
to the customers.

So, it's all about ensuring that all these things work in perfect alignment, which means that what we want to
intend doing through the activities? What we want people to do when they deal with products and customers?
What we want the trading partners to do? All of them must be in complete alignment and that is the only way
by which we will be able to deliver what the customer wants. It's very simple.

Now, the most important thing is we should be able to do this better than the competition. If we are not able
to do this any better than the competition then, you know, it's a problem. The organisation may find it going
very difficult. So, while this entire definition looks so simple, in reality, when we really get into a little more of
detail what we will find is it's not as simple as it appears at the outset. It throws several challenges and that's
where the issue of operations really come.

So, in order to understand that what we will do is we will take 2-3 simple examples which we are aware. So,
that we will be able to appreciate what this operations is all about and what are we supposed to do in the
name of operations management. Let's first take the example of, let's say, an insurance claim. I have a vehicle
and there was a claim required. I do the paper work and, you know, leave it with the service provider. Or, I
have applied for a loan, it could be a housing loan, it could be an education loan or may be an industrial loan,
whatever it is. Now, what we find at times is two weeks, three weeks, not much is happening and it appears
there is a lot of work getting done. In reality, we know it doesn't take so much time. But, we all wait. This is all
pointing to there is something wrong or there is something which needs to be done which can speed up, which
can make things much easier, faster and all these. Let's look at another problem. This is a service industry.

Now, let's look at another example from a manufacturing company. Now, in many of the manufacturing
companies what really happens is, you know, they plan for a certain production and, of course, they order
material and materials arrive and then the machines are engaged, the workers are engaged. But, quite often
we hear people saying that, you know, there is an issue of quality or it is too expensive. They have done the
operations, they have created the products but it appears it is quite expensive or they are not able to deliver in
time or they sometime feel these quality, cause, delivery all these are in a very tight trade-off. So, what do we
mean by that is if I want a good quality, it turns out to be expensive? Or, if you want to speed up delivery it
becomes expensive. So, this is what is called the trade-offs. So, manufacturing firms are always stunted in their
journey by this problem. How do I manage my productivity? And sometimes these quality, cause, delivery, and
flexibility all these are coming in the way and how do I handle it? Looks like, you know, we need, you know,
much clearer understanding of what do we do about this?

There is another problem you find in both manufacturing and service firms. There is, you know, what they call
it as this problem of an interesting paradox. You know, in manufacturing companies they have lot of inventory.
© All Rights Reserved. This document has been authored by Professor Mahadevan B and is permitted for use only within the course
Introductions to Operations Management-1 delivered in the online course format by IIM Bangalore. No part of this document, including
any logo, data, illustrations, pictures, scripts, may be reproduced, or stored in a retrieval system or transmitted in any form or by any
means – electronic, mechanical, photocopying, recording or otherwise – without the prior permission of the author.
 Introduction to Operations Management - I
Prof. B Mahadevan
Introduction

There are inventory piling up in the stores, finished goods at in the market. Customers are complaining, "I am
not getting what I am asking for". In service firms there seems to be enough people, but customers wait
longer. So, there is this trade-off. At one level, it appears as though we have plenty of resources, but on the
other side it's not translating into what the customers are really asking for. So, these kinds of things only
suggest that we need to understand operations. So given this, let's try to understand what is operations, in
very simple terms.

What we could have noticed by this conversation that we have had is an operation system is one in which of
course, there are activities to be performed and why are we doing this activities? Because we want to
transform a set of inputs into some useful output. So, if it is a manufacturing, the notion of input and output is
very clean. You bring raw material, do some processing and then there is a useful product. In the case of
services, customers come in, something happens to them, or, you know, some issues are addressed and then
your satisfied customer goes out. So, it's all about a transformation process and also there are multiple stake
holders. So, activities, transformation process—which converts some input into output—and multiple people
involved.

So, operations management is, after all what, a very systematic approach to address all these issues pertaining
to the operations. So that's where I think we need a little more formal ways of understanding what it is.

© All Rights Reserved. This document has been authored by Professor Mahadevan B and is permitted for use only within the course
Introductions to Operations Management-1 delivered in the online course format by IIM Bangalore. No part of this document, including
any logo, data, illustrations, pictures, scripts, may be reproduced, or stored in a retrieval system or transmitted in any form or by any
means – electronic, mechanical, photocopying, recording or otherwise – without the prior permission of the author.