OPERATIONS RESEARCH

COURSE CODE: IEN05

OPERATIONS RESEARCH
The discipline of applying advanced[1] analytical[2] methods to help make
better decisions[3]
[1] OR uses highly developed tools
[2] OR resolves problems by breaking them down to basic principles
[3] OR is not about the ideal, but about sound judgments and conclusions

THE ORIGINS OF OPERATIONS RESEARCH

 The beginning of the activity called Operations Research has generally
been attributed to the military services early in World War II.
 Because of the war effort, there was an urgent need to allocate scarce
resources to the various military operations and to the activities within
each operation in an effective manner.
 The British and then the US military management called upon a large
number of scientists to apply a scientific approach to dealing with this
and other strategic and tactical problem.
 They were asked to do research on (military) operations. These teams of
scientists were the first OR teams).
 By developing effective methods of using the new tool of radar, these
teams were instrumental in winning the Air Battle of Britain.
 Through their research on how to better manage convoy and anti-
submarine operations, they also played a major role in winning the Battle
of the North Atlantic.
 Similar efforts assisted the Island Campaign in the Pacific.
 When the war ended, the success of OR in the war effort spurred interest
in applying OR outside the military as well.
 At least two other factors that played a key role in the rapid growth of OR
during this period:
o Substantial progress that was made early in improving the
techniques of OR.
o Onslaught of the computer revolution.
THE VALUE CREATED BY OPERATIONS RESEARCH
Some of the proven benefits of OR in the industry:
a. Business insight i. Productivity
b. Business performance j. Profits
c. Cost reduction k. Project development
d. Decision making l. Quality
e. Forecasting m. Recovery
f. Improved scheduling n. Resources
g. Planning o. Risk
h. Pricing p. Throughput

IMPACTS OF OPERATIONS RESEARCH

ANNUAL
ORGANIZATION NATURE OF APPLICATION YEAR
SAVINGS
Manage oil and coal inventories for 1989 $59 M
Electric Power
electric utilities to balance inventory cost
Research Institute
and risk of shortage
Optimally blend available ingredients 1989 $30 M
Texaco, Inc. into gasoline products to meet quality
and sales requirements
Integrate a national network of spare 1990 $20 M +
parts inventories to improve service $250 M
IBM
support less
inventory
Yellow Freight Optimize design of national trucking 1990 $17.3 M
System Inc. network and the routing of shipments
Quickly coordinate aircraft, crew cargo 1992 VICTORY
U.S. Military Airlift
and passengers to run the Operation
Command
Desert Storm airlift
Design a system of fare structures, 1992 $500 M
American Airlines overlooking and coordinating flights to more
increase revenues revenues
New Haven Design an effective needle exchange 1993 33% less
Health program to combat the spread of HIV/AIDS
Department HIV/AIDS

FIVE SIGNS THAT OPERATIONS RESEARCH CAN HELP

1. You face complex decisions.
2. You’re having problems with processes.
3. You’re troubled by risk.
4. Your organization is not making the most of its data.
5. You need to beat stiff competition.
CLASSIFICATIONS OF OPERATIONS RESEARCH TECHNIQUES
Despite the wealth of labels available in the field of OR, most projects
apply one of three broad groups of methods, which may be described as:
 Optimization and Heuristic methods
 Simulation methods
 Data Analysis methods

OPERATIONS RESEARCH TECHNIQUES

1. Linear Programming – problem solving approach that has been
developed for situations involving maximizing or minimizing a linear
functions subject to linear constraints that limit the degree to which the
objective can be pursued.
2. Integer Linear Programming – approach used for problems that can set u
as linear programming with additional requirement that some or all of the
decision recommendations be integer values.
3. Network Models – specialized solution procedures for a problem consisting
of nodes that are interconnected by lines intended for areas such as
transportation system design, information system design and project
scheduling
4. Project Scheduling PERT/CPM – techniques that helps managers to carry
out their project scheduling responsibilities.
5. Inventory Models – used by managers faced with the dual problems of
maintaining sufficient inventories to meet demand for goods and, at the
same time, incurring the lowest possible inventory holding costs.
6. Waiting-line/Queuing Models – developed to help managers understand
and make better decisions concerning the operation of systems involving
waiting lines.
7. Computer Simulation – technique used to model the operation of a
system which employs computer program to model the operation and
perform simulation computations.
8. Decision Analysis – determine the optimal strategies in situations involving
decision alternatives and an uncertain or risk-filled pattern of events.
9. Goal Programming – technique for solving multi-criteria decisions
problems usually within the framework of linear programming.
10. Analytic Hierarchy Process – multi-criteria decision-making technique that
permits the inclusion of subjective factors in arriving at as recommended
decision.
11. Forecasting – technique that can be used to predict future aspects of a
business operation.
12. Markov-Process Models – useful in studying the evolution of certain
systems over repeated trials.
Example: Used to describe the probability that a machine,
functioning in one period, will function or break down in another
period.
 13. Dynamic Programming – an approach that allows us to break up a large
problem in such a fashion that once all the smaller problems have been
solved, we are left with an optimal solution to the large problem.

THE SEVEN STEP MODEL BUILDING PROCESS

When Operations Research is used to solve and organization’s problem,
the following seven-step model-building procedure should be followed:

Define Observe Formulate Verify Select Present Implement

1. DEFINE THE PROBLEM

o Specify the organization’s objectives, the scope of the problem
and the areas in the organization that must be studied before
the problem can be solved.
o Identify the best measure(s) or performance.
2. OBSERVE THE SYSTEM
o Determine the steady state behavior of the system.
o Identify the constraints of the problem.
o Collect data to estimate the value of parameters that affect the
organization’s problem.
3. FORMULATE A MATHEMATICAL MODEL OF THE PROBLEM
o Construct mathematical relationships between the factors
identified and objective of the study.
o Make use of various mathematical techniques available.
4. VERIFY THE MODEL AND USE THE MODEL FOR PREDICTION
o Determine if the mathematical model developed is an accurate
representation of reality.
o Test the model using other data that were not used to estimate
5. SELECT A SUITABLE ALTERNATIVE
o Choose the best alternative that meets the organization’s
objectives.
o Using various scientific tools that may help in selection.
6. PRESENT THE RESULTS AND CONCLUSIONS OF THE STUDY
o Present the model and recommendation to the decision-making
individuals or groups in the organization.
7. IMPLEMENT, EVALUATE, AND CONTROL RECOMMENDATIONS
o If the organization has accepted the study, then the analyst aids
in implementing the recommendations.
VARIOUS MODEL CLASSIFICATION
1. ICONIC MODELS – physical replicas or representation of real objects.
Example: Scale model of an airplane
2. ANALOG MODELS – models that are physical in form but do not have the
same physical appearance as the object being modeled.
Example: Speedometer, Thermometer
3. MATHEMATICAL MODELS – models that represent a problem by a system
of symbols and mathematical relationships or expressions.
Example: Maximize cx
s.t.ax ≤ b
x≥0