Introduction to Operations Management - I

Prof. B Mahadevan
Order Qualifiers and Order Winners

We have seen a variety of possibilities for performance metrics under various heads. Now the question is
which is important? Let's take an example of an insurance service provider. Suppose, this firm wants to know
which performance metrics are important in order to stay competitive in the market. It could be cost or time
or responsiveness. If only this firm develops a good understanding of this aspect of performance metrics, it can
accordingly plan its operations and make appropriate operational choices.

So let's take again a few examples to understand this particular aspect of how do we prioritize performance
matrices and identify those which are very very important. Let's look at a study recently made by the insurance
regulatory development authority in India. They wanted to know what do customers really want? Or what are
they looking for in insurance products that firms in this country offer? So, here is a table, and there are reasons
and rural respondents and urban respondents, percentage of them, who actually said against each of that
factor. This may not add up to 100 it may be more than 100 because one can count multiple responses. So, if
you look at here, let's look at the second item which says that a vast majority of both the rural and urban
customers are actually saying that it's too expensive. And also, they are saying that it is a very limited range
and, of course, poor services they are also part of it. But then what we see is it's too expensive and looks like
there are limited range of products are being offered now. So, these two seem to stand out and, therefore, an
insurance service provider might want to develop performance metrics which addresses the issue of cost, the
issue of variety of offerings made and build their operational choices and measure them.

Let's look at another example, in the earlier example, we tried to understand what a customer wants. Now,
let's try to understand what happens to a firm when it operates in a market where there are competitors and
how it performs. So, you see three columns here. There is one column which is about the firm's performance
with respect to some of the metrics. And it also has what is the best and what is the average in the market in
that particular segment in which the firm is operating. Now cost of the passenger car, let's say this is a
passenger car in comparison, may be the firm offers at INR 700,000. The best offering of a similar product is
INR 540,000 and the average is INR 670,000. So we have several metrics here, so what you find is this
particular firm is very good when it comes to kilometres per litre, if you measure it as the fuel efficiency. But
one of the areas of concern is perhaps order delivery time. Because the best is just three days. Even the
average is much much lesser compared to what this company is offering. So, although this company seems to
do well in kilometres per litre and seems to offer a number of variations, perhaps if it wants to be even more
competitive, then one area could be cost to look at, another area could be the time.

So, it may be a good idea that they develop performance metrics in the area of cost and time and make
appropriate choices. They can become even more attractive in the market place. So this helps us prioritize the
choices.

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Introductions to Operations Management-1 delivered in the online course format by IIM Bangalore. No part of this document, including
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