Models in Management Science: Issues in Implementation

N. Ravichandran

W.P. No.2007-03-06

March 2007

The main objective of the working paper series of the IIMA is to help faculty members, Research

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INDIAN INSTITUTE OF MANAGEMENT

AHMEDABAD-380 015

INDIA

IIMA y INDIA

Research and Publications

Models in Management Science: Issues in Implementation

N. Ravichandran

Indian Institute of Management

Ahmedabad – 380 015, India

Abstract

Based on an empirical analysis of several real-life case studies in this paper, we

identify the key drivers for maximizing the chances of successful implementation of

management science models. The choice of (technique) methodology used, model

sophistication, top management involvement, training and orientation of middle

management cadre in the organization, intensity of competition, perceived fear and

anxiety in implementing the new solution procedure by the front-line staff, and the

involvement of an implementation agency in the organization emerge as some of the

key elements that influence the effectiveness of the implementation process. Based

on the experience of these situations, we propose a broad framework for an

effective implementation of management science model.

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Introduction

The ultimate purpose of an Operations Research Practitioner (ORP) while suggesting

solutions to problems is to see the implementation (and realization of the benefits

anticipated) in a real-life context. Unfortunately, such a desirable and much sought after

expectation does not get happen often, due to several reasons. It is easy to understand and

correct problems of implementation if we conceptualize the real-life problem solving

process in three different stages, viz., problem formulation and finding a desirable

solution (professional assignment to the ORP), understanding the implications of the

proposed solution in a given context (joint effort between the ORP and the organization)

and the actual implementation (a special team formed within the organization specifically

for this purpose).

Often, excellent models do not get implemented because of the complexity involved in

implementing a solution in a given context, changed conditions in which the firm or

organization operates, and the lack of enthusiasm in the organization in implementing the

proposed solution. In the Indian context, implementation is at best complex and tedious.

Only a small percentage (actual estimates are not available) of completed studies are

actually implemented. Needless to add, such poor responses to implementation lead to

lack of motivation among ORP in finding appropriate solutions to real-life problems.

Consequently our discipline does not grow in stature and importance among business

community and its credibility is eroded.

This paper is an attempt to identify (based on an empirical study) the key drivers that

contribute to effective implementation of management science models in real life. Based

on these observations, we propose a framework to facilitate their effective

implementation.

This paper is organized in three sections. The work reported here is based on our

experience (either as an ORP or as an academician) in dealing with several real-life

situations. The first section, based on these experiences, identifies a set of critical drivers

related to successful implementation of a management science model. In section 2, we

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develop a framework to implement a formal model. We conclude this paper with a brief

description of the situations used in the research.

To begin with, it may be useful to identify the key components of the implementation

process of any management science model. They are (a) the model content and the nature

of the proposed solution, (b) the organizational context (including the industry) to which

the solution is proposed, (c) mechanisms / processes available in the context of the

organization to implement a change management process, and (d) the motivation by the

management for initiating such an intervention.

While these four components have a significant role in the implementation process, it is

useful to realize that the ORP has a limited role in influencing all the stages of the

implementation process. Often, the ORP is an outside technical expert who is invited to

provide advice on addressing a real-life problem. In case the ORP is an in-house expert,

often, implementation is influenced by the (revised) business priorities of the

organization.

Implementing Models for Management Science: Key Drivers

• Selection of an Appropriate Methodology in Modeling a Situation

In resolving a real-life situation, the ORP is tempted to use the most sophisticated tool,

technique or methodology in resolving a particular situation. Often, an ORP is driven by

an ambition to exhibit his scholarliness, in-depth knowledge and expertise on the subject.

So long as the end result and recommendations are easily understood by the relevant user,

the choice of technology and its sophistication is irrelevant. When the users are involved

in the design and development of the model, several other factors like the familiarity of

the users with reference to a particular solution, the methodology, the involvement of the

users, and the need for comprehensive detail in the modeling context would be relevant.

The situation is characterized by conflicting demands and requirements. While the user is

driven by the need to solve a problem, the ORP is motivated by the internal satisfaction of

using a sophisticated technique. An appropriate choice balancing the interest of the user,

the context, and the ability of the ORP would maximize the chance of successful

implementation. An inappropriate combination or choice would reduce the chances of

successful implementation.

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This is best illustrated in the example of the supply chain realignment (redesign) of

Revised National Tuberculosis Control Programme. The programme was characterized

by multiple stakeholders, lack of goal congruence and objectives, and limited ownership

and responsibilities. Consequently, the system had either too much of inventory (of

drugs) or excessive shortage. The World Health Organization (WHO), which was

piloting this programme, sought assistance for improving the system. In his excitement to

improve and overhaul the system, the solution provider suggested a highly sophisticated

solution by using a combination of new initiatives like strategic outsourcing, dispensing

activities which are not adding value, and simplifying procedures with an extensive use of

information technology. While the proposed solution was the best possible under the

circumstances, the sophistication of the methodology and the lack of involvement of users

contributed to limited interest in its implementation. For political and diplomatic reasons,

WHO did not push for actual implementation. The ORP had a limited role in

implementing the new system.

• An optimal mix of contextual relevance, user sophistication, and professional

satisfaction of ORP would maximize the chances of model implementation.

In modeling a real-life situation, the ORP faces some difficult choices on the

methodology and the selection of degree of model sophistication. The real trade-off is

actually between the accuracy of the model (closeness to the real-life situation) and the

model complexity. This manifests in making appropriate choices related to linear vs.

non-linear approximation of relations used in the model; deterministic vs. stochastic

nature of representing the variables, obtaining formal closed form solution vs. developing

algorithmic procedures; and analytic formulation vs. simulation based models. Usually,

the conflict is between the professional excitement of the ORP vs. the real need for such

approaches. Again, the guiding factor in making the choice and trade-off is what is

needed for the model - the user comfort in the proposed procedure, the additional insight

obtained in the context of the model by using a sophisticated procedure. We are not

advocating a crude approximation to the real-life situation (this may well be the case if a

quick insight is needed), but propose a pragmatic orientation and approach.

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Consider the following examples:

• The Tirupati Tirumala Devasthanam (TTD) management wanted to replace the

physical queue of the pilgrims by a virtual queue. Under the new dispensation, a

pilgrim was given a due time (date) for visit and darshan. This was made possible by

considering a model based on the average load on the system and service rate, and

arriving at an estimated time for darshan. While this model is approximate, it is good

enough to deal with the situation. Any alternate model would have made the analysis

possibly more detailed but surely would have complicated its implementation.

• Bajaj Auto Limited used simple spread sheet computations to estimate the reduction

in the wastage for various combinations of metal sheet cutting plans. Usually, such

applications are formulated as mixed integer programme. However, by exploiting the

contextual information, a far more simple approach (based on spread sheet) was

attempted.

• In the context of Sree Cement, in order to optimize the distribution cost, a planning

model was formulated as an integer programming problem incorporating origin

destination requirements and mode (rail / road) choices. However, keeping the user

sophistication into consideration, a simple heuristic approach was developed to

consider various alternatives related to logistics planning. While this could not ensure

implementation, such an approach played an important role in reducing the inertia in

adopting scientific approaches to logistics planning.

• A sophisticated simulation model to quantify the trade-off between the stock-outs and

service level for various policy parameters in managing blood bank operations evoked

very little response and enthusiasm from the blood bank administrators in a range of

hospitals. Even though the ORP felt that the model was detailed, realistic (as it

involved all appropriate stochastic elements), and was customized to specific blood

banks, the priority of the blood bank administrators was completely different and was

driven by efforts to augment supply (of blood) rather than managing demand and

supply effectively. Again, an illustration of the disconnect between the model,

priority of the administrator, the user, and the expectations and expertise of the ORP.

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• Top management involvement is critical to implementation

Based on our experience and also the experiences reported in the literature, the single

important driver to ensure smooth implementation of a management science model is the

top management support. Actually, the top management support and the resultant

leadership style sets the pace for the implementation exercise in the context of the

organization. The following illustrations would support various dimensions related to this

critical enabler.

• The merger between Standard Charted Bank and Grindlays Bank was piloted and

monitored closely by the top management and was completed on time with expected

benefits.

• The procedure related to the management of religious procession in Ahmedabad was

substantially modified for enhanced effectiveness and institutionalized by the

leadership of top management in the Ahmedabad police department.

• The simulation experiment which quantified the capacity augmentation of Indian

Railways did not lead to any change in policy option due to lack of support from the

top management.

• The top management judgment in Hindustan Industries Limited (guided by middle

management) led them to explore seriously the resource augmentation option rather

than the process simplification option proposed by the ORP.

It is useful to realize that the top management support is not always guaranteed or focused

towards implementation of specific recommendation. It depends on the context and the

organizational dynamics. Often, studies are commissioned to understand a phenomenon

or delay a proposed solution or to manage conflicts within the organization. Also, the top

management may not have the intention of changing the status quo. Lack of appreciation

of these factors by the ORP would only lead to frustration.

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• The implementation pace and its impact is strongly influenced by the training

and orientation of the mid-level executives in the organization.

The involvement and participation of the mid-level executives in organizations are quite

varied. Several organizations use them only to execute or implement the decisions that

are made by the top management. Some organizations involve the participation and

finding solutions to management issues. There are few very organizations that have

developed an eco-system or organizational culture by which the middle management can

participate in problem-solving. In such an environment, the middle management is

endowed with skills related to problem-solving. This can accelerate the implementation of

solution procedures proposed.

Unfortunately, in the Indian context, several organizations involve the middle

management only at the execution level. There is an acute shortage of middle level

management with appropriate skill sets in management models.

For example, Madras Refineries Limited (MRL) did not have adequate and competent

staff to formulate and run a Linear Program model for blending operations which is a

standard application in the international context. The Christian Medical College and

Hospital (CMCH) at Vellore did not have appropriate talent in the department to manage

its materials function. The same is true for Cholan Roadways Corporation (CRC) and the

Indian Railways. The passenger reservation system of Indian Railways needed skills

from outside the organization.

The limited skill level in formal management models of middle level management

complicates the implementation process and is a drag on the realized effectiveness of the

proposed solution procedure. For example, in the logistics distribution planning model

for Sree Cements, the ORP was constrained to settle for a heuristic procedure to relate the

model to the skill base and knowledge level of the functional executives of the

organization. Obviously, this is a compromise on what can be achieved (an optimal

solution was feasible).

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• The intensity of competition accelerates the adoption of effective management

models.

The intensity of competition usually triggers two different levels of responses. The first

response focuses on enhancing the resource productivity resulting in better control on cost

and consequently flexible pricing in the market place. Enhanced resource productivity is

feasible by innovative methods of work or radically different ways of allocating

resources. Management science models are immensely suitable for such interventions.

The other response is to differentiate the product(s) and service(s) offered by the firm in

the context of industry competition. Such efforts usually require a change in the delivery

processes to identify and eliminate the inefficiencies in the system. Again, OR

methodology is a potential route to realize this improvement.

Based on our examples, Western India Chemicals Limited (WICL) was trying to improve

the cost of its logistics operations in response to the competitive environment in which it

was functioning. While the models proposed were comprehensive, the lack of cooperation

between marketing and logistics departments did not allow the organization to realize the

full potential of the recommendations. The inability of the top management to co ordinate

these two functions in the context of competition was an additional factor in not realizing

the benefits of the proposed models.

However, in the context of TTD, the competitive environment and the aggression of the

organization was replaced by the willingness of the management to convert TTD into a

pilgrim-friendly town. This desire coupled with leadership which was action-oriented

designed a new system to reduce the waiting time of the pilgrims and oversaw its

implementation.

The SCB and GB amalgamation and consolidation is a direct response to emerging

market opportunity and competitive banking environment in India. Again, as mentioned

earlier, there was an organization-wide support for the project. Able leadership, well

coordinated team work, and clear milestones led to the successful project implementation.

The materials management exercise initiated both at CMC, Vellore and CRC are direct

responses by respective organizations to the competitive environment. In both the

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situations, the respective organizations were attempting to contain cost without

compromising on deliverables to the customer. In the implementation phase, CRC drifted

away from its objective. CMCH felt that the first phase of the project was to sensitize the

middle management on the need to control material cost and hence did not move to the

second and final stage of implementation.

• The management’s effective handling of the perceived fear and anticipated

accountability by the middle management in the context of the proposed new

solution is a facilitator for implementation.

Often, scientific methods (new or improved) tend to be system-based and are independent

of individuals who are managing the system for a long time. Also, formal methods reduce

the scope for customized solution as existed before. Usually, the middle management and

front-line staff are unsure of how the proposed new system would impact them. There is

a fear of unknown developments and improvements. There is anxiety. The combination of

all or some of these parameters motivates the middle management team to work against

the proposed solution and hence delay or derail the implementation process. The senior

management should handle these anxieties by information sharing and a coaching process

to smoothen the implementation process. Some of our experiences support this.

In the context of TTD, there were several apprehensions by the stakeholders like shop

keepers, vendors, and security agencies regarding the impact of the proposed system on

their day-to-day life. The management understood their anxiety and responded by detailed

counseling and data support to assess the impact of the proposed system on the

stakeholders which ensured smooth implementation.

In Bajaj Auto, the system driven optimized solution for metal sheet cutting plan was used

as a benchmark to evaluate the performance of the machine operators. Since the operates

believed in the superior performance of the proposed system, they readily adopted the

proposed system. Further, the operators did not view the system as a threat to their

authority but realized and positioned the new system as a win-win situation by which

their productivity and performance can be improved and, at the same time, the trim losses

can be minimized. This unique positioning of the proposed solution greatly facilitated its

implementation.

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The passenger reservation system of the Indian Railways and the ticket accounting system

in road transport organizations were easily adopted by the front-end staff primarily

because they eased their operational responsibilities and allowed them to reconcile

accounts rapidly at the end of the work shift.

In the SCB and GB merger project, some redundancies in workforce was anticipated.

This was handled by a transparent information sharing process and a generous severance

package. By virtue of the uniqueness of the process, and involvement of stakeholders,

implementation was easy.

In the context of Sree Cements, the proposed logistics planning was positioned as a

bench-mark in monitoring the performance of the logistics group. The top management

did not adequately address the concerns of the group nor clarified the expectations.

Consequently, the implementation was not complete even though adequate training

sessions and several trail runs were conducted for the plant staff.

A Framework for Management Science Model Implementation

In this section, we propose a framework by which the implementation methodology of

management science models can be made effective.

• The ORP must assess the involvement and association of the top management in the

proposed solution. It is also important to understand the motivation for the proposed

intervention. In other words, seeking the involvement of the top management may be

the first critical step in the subsequent implementation process. Unless the purpose of

the study was only to understand a phenomenon, it may not even be advisable to be a

part of the study without top management involvement and explicit support.

• The critical need for the proposed intervention should be assessed based on the

competitiveness of the industry, the realized position of the unit, its ambitions, and the

positioning of the application in the overall context of the organizational priority.

Positive signals based on all these parameters would encourage the ORP to work on

the proposed opportunity. Alternatively, the ORP should be able to clearly and

convincingly argue the strategic importance or relevance of the proposed model in the

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overall context of the organization and enlist the support of executives who matter in

the organization.

• The ORP must assess the scientific maturity of the mid-level and senior executives.

As explained and discussed earlier, the choice of the technique used in the proposed

methodology would be decided based on this critical input. The ORP need to exercise

his judgment between the usage of sophisticated procedures vs. useful and

understandable solution procedures from the users’ perspective.

• The ORP may want to advise and prepare the middle management regarding the

challenges in implementation from the beginning. This can be done in several form,

viz., by involving the users from the beginning on problem-solving and problem

identification, using their role in obtaining relevant data, periodically sharing with

them on the progress of the model, and, actively involving them in generating solution

options and procedures.

• Periodic training and, orientation on the usage and maintenance of the system would

be an added advantage during implementation.

• Responding to the uncertainty, anxiety, and apprehensions of the middle management

related to the new procedure is critical. The ORP along with the implementation team

should evolve a comprehensive plan and strategy to deal with this situation.

• Usually, implementation teams which are piloted by the internal team in the

organizations have been found to be very effective. A recommendation or a solution

procedure made by an ORP with very little support during the implementation phase

would drift towards no implementation.

• There may be a need to form an implementation team specifically based on the

complex nature of the application. The ORP may or may not be a part of the

implementation team based on the specified terms and conditions of the engagement.

• The major risk for any implementation process is the relative priority to the new

models in the scheme of things in the context of the organization. There is usually a

gap between the ORP proposed solution, the role of the ORP, the absence of an

implementation team, and the perceived organizational priority for the new procedure.

For successful implementation, this gap should be bridged as early as possible.

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A Brief Description of the Situations Used in this Research

1. Cholan Roadways Corporation (CRC): In the context of this state-owned public

transport utility, the basic purpose and felt need for the intervention was a need to

have better control on cost of operations. Effective materials management (including

spares and consumables) was considered to be a significant opportunity. It was

proposed to computerize the material management system to get a better handle on

the materials function by taking advantages of developments in information

technology. The CRC has had very limited exposure of computer applications.

Almost everyone in the middle and senior management had no exposure to

management concepts, skills, and techniques. This initiative was proposed essentially

by the top management. Once the materials management system was designed, the

implementation was completely left to the departmental heads. When the

implementation was at the early stages, there was a change in the top management of

CRC. Eventually, the implementation drifted from a project to an activity of no major

consequence. The ORP had a very limited role in accelerating the pace and scope of

implementation.

2. Capacity Planning in Indian Railways: The Efficiency Bureau of the Indian

Railways - the equivalent of operations research department - sponsored a project to

study the impact of bunching of trains (passenger) of similar speed on the capacity to

carry more passengers by the same infrastructure. The need for such a study was felt

due to stagnant growth on rail network, congested rail network as a consequence of

trains operating with wide range of speed, and emerging competition from road

transport (to rail) on short distance travel of up to 200 kms. Simulation was used as a

methodology to study and quantify the impact on the number of additional trains that

can be run if the speed of the trains was made uniform or if trains with comparable

speed departed in the same time window. The study showed an improvement of up to

60 percent in capacity in several railway sections. The Efficiency Bureau brought the

details of the study, to the top management’s attention with a hope that some policy

changes on capacity management would be initiated. Unfortunately, this concept was

not received by the top management enthusiastically. Due to lack of demonstrated

political will, the follow up of the study to policy formulation did not materialize. At

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the tactical level, the project met the stated objective of quantifying the benefits of

bunched scheduling on capacity expansion.

3. Madras Refineries Limited (MRL): The MIS department of the state-owned oil

refinery initiated and developed a linear programming model to plan the blending

operations of the unit. While the application was developed in a span of few weeks,

the attention of the top management was fully occupied with process automation-

related activities in the refinery. In fact, there was a separate project team and

eventually a department was created to plan and execute process optimization

activities. While the benefits of process optimization were evident, the initiatives

related to optimized blending operations, optimal crude sources, efficient distribution

of product, and optimal mix of refined product would only enhance the competitive

advantage of MRL. In fact, this is a standard scheme of several refineries in the

international context. However, in the context of MRL, such a progressive view was

not evident. In fact, the management decided to focus somewhat narrowly on process

optimization and spent significant time and energy in perfecting this process.

Inadvertently, what should have been a complementary set of initiatives became a

somewhat marginalized initiative in the overall context of refinery activities. Partially,

the state-owned nature of the organization contributed to these developments. Quite

expectedly, the MIS department did not consider developing any such optimization

models subsequently.

4. Christian Medical College and Hospital (Materials Management System): Being

a charity organization, the ability to control cost is an important aspect of the

hospital’s functioning. A large number of items in various categories like

consumables, pharmacy items, linen and laundry, surgical consumables, medical

suppliers, etc. significantly contribute to the cost of patient care. Over a period of

time, a large section of hospital team members like General Superintendent, Medical

Superintendent, Head of the Departments, Finance, Nursing Superintendent, etc. were

involved in managing these items. Consequently, the synergy that was possible

among them in managing this function was not achieved. There was a felt need to

bring various players together to improve the efficiency of the hospital supply system.

The scope of this intervention was to identify an appropriate structure for the

department, operating policies to manage inventory, a proper accounting system for

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consumption monitoring, the effective ways of using information technology, and

developing an appropriate vendor sub-system. This project was conceived and piloted

by the top management of the hospital. When the recommendations were ready, a

meeting of all the concerned members was held to explore how they can bring

synergy in their working. The detailed implementation of the model was deferred.

As expected, in the next one year after the report was presented, there was a change in

the leadership with a completely new set of priorities related to the governance of the

hospital.

5. Hindustan Industries Limited (HIL) – Inplant Logistics Improvement: A study

was commissioned in HIL for improving the turnaround time of the trucks that arrive

in the facility for loading material. In the current form of operation, the truck stopped

at eight locations in the factory complex. It took a minimum of 1½ hours and a

maximum of 10 hours for the turnaround time for the truck to load the material and

leave the factory. Based on a detailed study and analysis of appropriate data, a revised

procedure to reduce the turnaround time was proposed. The revised procedure

envisaged empowered truck owners and operators, simplified accounting systems,

minimal checks and counter-checks, and extensive use of web-enabled information

technology. Under the new dispensation, a truck is expected to stop only once in the

factory complex before material loading. The new procedure compared with the very

best factory operations in the international context. The senior management team

along with the CEO of the group discussed the proposed solution. While the merits of

the proposed system were fully recognized and appreciated, the management chose to

operate with the existing conservative management philosophy. Consequently,

instead of adopting a dramatically new way of operations, the management decided to

augment the resources and facilities at various locations to decongest the bottleneck

section(s). In short, the management chose to deploy additional resources to the

system in lieu of reengineered processes.

6. Revised National Tuberculosis Control Programme (RNTCP): In response to the

poor implementation of NTCP, WHO redefined the programme objectives and

implementation details. To facilitate the process, a study was commissioned to

improve the availability of drug supply by fundamentally redefining the supply chain.

The study recommended sweeping changes in the structure, material flow, and

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information flow. It also recommended the classic demand forecast, order, receive,

stock account and deliver the material system to be changed to a pull-based system

based on market dynamics. Extensive use of information technology, vendor

cooperation, decentralized focus of activities, and elimination of wasteful activities

were also proposed. The document outlining the proposed system was commissioned

by the WHO. However, neither the WHO nor the local implementation agency based

at Delhi gave a serious consideration to the proposed change(s). Perhaps the

implementation agency was not yet ready to handle a radical change in the process.

Under the circumstances, an incremental approach might have been more appropriate.

7. Bajaj Auto Limited: Metal Sheet Cutting Plan: Bajaj Auto Limited, a leading

player in the two-wheeler market in the Indian context, decided to explore the

possibility of minimizing the trim looses in the metal sheet cutting plan activities. An

inter departmental team consisting of members from sourcing, production planning

and control, accounts, information technology and shift engineers, was formed to

analyze and recommend a procedure. A simple spread sheet-based model was

planning control and sourcing. The solution was used as a guideline to be followed in

the shop-floor. Performance incentives were designed based on the expected trim loss

and the actual trim loss realized at specific machine locations. The savings projected

were actually audited and certified by the finance department.

8. Virtual Queue in Tirumala Tirupati Devasthanam (TTD): Concerned by the long

waiting time experienced by pilgrims and the inability to add capacity at the servicing

location (because there is

only one Balaji), the management of TTD decided to

convert the physical queue as a virtual queue. Accordingly, a set of implementation

issues was discussed, and a revised procedure was evolved and put into action. Under

the revised procedure, a pilgrim would arrive at the centre, register electronically and

show up in the main entrance of the temple at a recommended time. The physical

waiting in the queue was completely dispensed with. The revised system required

some rational choices related to hardware selection, an appropriate algorithm to

compute the waiting time, and adequate data security measures to uniquely identify

the pilgrim. The revised system also required resolving some emotional issues related

to managing the stakeholders’ (security, vendors, priests, temple management, etc.)

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anxiety and expectation. By adopting a gradual approach to change and using data

support to enhance the credibility of the revised procedure, the implementation

process was completed. The new system is operational for the last five years even

though the senior management has changed since then at least twice.

9. The Annual Rath Yatra (religious tour) in Ahmedabad: The annual Ratha Yatra

held in Ahmedabad during March every year is an important social and religious

function. Over a period of time, the rath yatra posed several challenges to the

government related to law and order. Different political parties have used this as an

opportunity to make specific political statements. The event was marked by violence,

loss of life, and damage to property. Over a period, the top management of the police

force has evolved a robust methodology by which the Rath Yatra can be made safe

and peaceful. This involved a combination of measures including effective security

planning and arrangement, preventive measures leading to safe conduct of the Yatra,

close monitoring and effective contingency planning, and adequate deployment of

security forces. This was complemented by measures such as involving the

community, open door policy on implementation issues, stakeholders’ involvement in

the safe conduct of the Yatra, etc. As a consequence, the Yatra has been peaceful for

the past several years.

10. Western India Chemicals Limited (WICL): In response to the increasing

competitive environment and commodity nature of the product being sold, WICL

commissioned a study to explore the means and methods by which the supply chain

decisions can be better coordinated and optimized. Accordingly, an ORP developed a

sequence of formal models and optimized solutions to areas related to raw material

sourcing, deployment of trucks to ferry raw material, inventory management and

planning related to raw materials, finished goods inventory flow, inventory location,

refilling procedures, transportation mode choice, warehouse locations etc. was

developed. The top management and the departmental heads pertaining to

procurement, logistics, raw materials, and marketing discussed the proposed solution.

However, in the context of perceived competition, the top management’s effort was

spent in retaining the market share and increasing profitability. Also, the

communication gap between marketing and logistics was seen as a serious hurdle in

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experimenting with the proposed optimized solution related to supply chain

management.

11. Decision Support System for Blood Banks: A simulation-based decision support

system was developed to demonstrate the impact of different ordering rules

(procurement policy) on service levels and wastages. The model was extensive and

incorporated several realistic measures related to stochastic nature of demand,

componenting procedure of blood, substitutability, stochastic nature of supply, etc. The

model was also customized to respond to the unique nature of individual blood banks. In

spite of the accuracy of the model, its extensive nature, user-friendly features, and

demonstrated applicability to improve the overall performance of blood banks, the

administrators chose to follow the conventional strategy of augmenting supply (blood) to

manage the affairs of the bank.

12. Shree Cements Limited (SCL): The top management of SCL identified operational

efficiency in distribution planning as a source of cost advantage. Accordingly, they

commissioned a study to improve the overall planning related to distribution of

finished goods to market. A mixed integer programming model was developed

incorporating the projected demand at retail location, the various tax considerations,

freight charges and concessions applicable based on the quantity shipped, alternate

mode choices possible, billing procedures, options and its consequences to

profitability, choice of warehouse location, etc. The proposed solution indicated

about 10 percent savings in the overall logistics cost. Since the technical expertise

available in the logistics department was somewhat limited, a user-friendly heuristic

was developed using spread sheets. The heuristic system was to be used as a

reference to plan day-to-day operations. The incentives were based on the

performance on distribution cost with reference to the heuristic solutions. Several

training sessions, demonstrations, reconciliations, and hand-holding sessions were

conducted. Even a user manual was prepared and handed over to the logistics team.

The team experimented with the new system for a while and drifted back to the old

way of planning and distribution of finished goods.

13. Amalgamation of SCB and ANZ bank: SCB purchased ANZ for strategic reasons and

in response to market opportunity in Middle East and Asia. The managerial challenge

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Research and Publications

post-merger was to see how these two organizations can be integrated. There was a need

to integrate products, processes, technology, structure, staff, customers, premises,

incentive scheme, etc. Several complex issues related to regulation, taxation, customer

retention, and staff redundancy were a consequence of this integration. The integration

was conceived as a large project. The top management led the effort with the support of

the staff and designated module managers. Constant de-risking and monitoring was

done to ensure the project stayed on course. The involvement of the staff, celebrating

success, transparent procedures, open and extensive communication, and responding to

employee apprehensions enabled the integration. As a consequence, the SCB - ANZ

integration is considered as one of the most successful merger proposals in the banking

history which was completed as per the original time line with associated economic

benefits.

Acknowledgement

This paper is a modified and enlarged version of a paper presented in the National

Conference on Applied Stochastic Processes organized by Department of Mathematics,

Presidency College (Autonomous), Chennai during December 15-17, 2005.

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