1.

INTRODUCTION TO OR
1.1 TERMINOLOGY

The British/Europeans refer to "operational research", the Americans to

"operations research" - but both are often shortened to just "OR" (which is the
term we will use). Another term which is used for this field is "management
science" ("MS"). The Americans sometimes combine the terms OR and MS
together and say "OR/MS" or "ORMS".

Yet other terms sometimes used are "industrial engineering" ("IE"), "decision
science" ("DS"), and problem solving.
In recent years there has been a move towards a standardization upon a
single term for the field, namely the term "OR".

Operations Research (Management Science) is a scientific approach to

decision making that seeks to best design and operate a system, usually
under conditions requiring the allocation of scarce resources.

A system is an organization of interdependent components that work

together to accomplish the goal of the system.
1.2 THE METHODOLOGY OF OR

When OR is used to solve a problem of an organization, the following seven

step procedure should be followed:
Step 1. Formulate the Problem

OR analyst first defines the organization's problem. Defining the problem

includes specifying the organization's objectives and the parts of the
organization (or system) that must be studied before the problem can be
solved.
Step 2. Observe the System

Next, the analyst collects data to estimate the values of parameters that
affect the organization's problem. These estimates are used to develop (in
Step 3) and evaluate (in Step 4) a mathematical model of the organization's
problem.
Step 3. Formulate a Mathematical Model of the Problem

The analyst, then, develops a mathematical model (in other words an

idealized representation) of the problem. In this class, we describe many
mathematical techniques that can be used to model systems.
Step 4. Verify the Model and Use the Model for Prediction
The analyst now tries to determine if the mathematical model developed in
Step 3 is an accurate representation of reality. To determine how well the
model fits reality, one determines how valid the model is for the current
situation.
Step 5. Select a Suitable Alternative

Given a model and a set of alternatives, the analyst chooses the alternative
(if there is one) that best meets the organization's objectives.

Sometimes the set of alternatives is subject to certain restrictions and

constraints. In many situations, the best alternative may be impossible or too
costly to determine. Step 6. Present the Results and Conclusions of the Study

In this step, the analyst presents the model and the recommendations from
Step 5 to the decision making individual or group. In some situations, one
might present several alternatives and let the organization choose the
decision maker(s) choose the one that best meets her/his/their needs.
After presenting the results of the OR study to the decision maker(s), the
analyst may find that s/he does not (or they do not) approve of the
recommendations. This may result from incorrect definition of the problem on
hand or from failure to involve decision maker(s) from the start of the project.
In this case, the analyst should return to Step 1, 2, or 3.
Step 7. Implement and Evaluate Recommendation

If the decision maker(s) has accepted the study, the analyst aids in
implementing the recommendations. The system must be constantly
monitored (and updated dynamically as the environment changes) to
ensure that the recommendations are enabling decision maker(s) to meet
her/his/their objectives.
1.3 HISTORY OF OR

OR is a relatively new discipline and traces its history to war. In 1941 an

Operational Research Section (ORS) was established in Coastal Command of
the UK forces, which was to carry out some of the most well-known OR work in
World War II.

Although scientists had (plainly) been involved in the hardware side of

warfare (designing better planes, bombs, tanks, etc) scientific analysis of the
operational use of military resources had never taken place in a systematic
fashion before the Second World War. Military personnel, often by no means
stupid, were simply not trained to undertake such analysis.

These early OR workers came from many different disciplines, one group
consisted of a physicist, two physiologists, two mathematical physicists and a
surveyor. What such people brought to their work were "scientifically trained"
minds, used to querying assumptions, logic, exploring hypotheses, devising
experiments, collecting data, analyzing numbers, etc. Many too were of high
intellectual caliber (at least four wartime OR personnel were later to win
Nobel prizes when they returned to their peacetime disciplines).

By the end of the war OR was well established in the armed services both in
the UK and in the USA.

OR started just before World War II in Britain with the establishment of teams
of scientists to study the strategic and tactical problems involved in military
operations. The objective was to find the most effective utilization of limited
military resources by the use of quantitative techniques.

Following the end of the war OR spread, although it spread in different ways
in the UK and USA.

You should be clear that the growth of OR since it began (and especially in
the last 30 years) is, to a large extent, the result of the increasing power and
widespread availability of computers. Most (though not all) OR involves
carrying out a large number of numeric calculations. Without computers this
would simply not be possible.
2. BASIC OR CONCEPTS

"OR is the representation of real-world systems by mathematical models

together with the use of quantitative methods (algorithms) for solving such
models, with a view to optimizing."
We can also define a mathematical model as consisting of:

Decision variables, which are the unknowns to be determined by the

solution to the model.
Constraints to represent the physical limitations of the system
An objective function
An optimal solution to the model is the identification of a set of variable
values which are feasible (satisfy all the constraints) and which lead to the
optimal value of the objective function.
An optimization model seeks to find values of the decision variables that
optimize (maximize or minimize) an objective function among the set of all
values for the decision variables that satisfy the given constraints.
Two Mines Example

The Two Mines Company own two different mines that produce an ore
which, after being crushed, is graded into three classes: high, medium and
low-grade. The company has contracted to provide a smelting plant with 12
tons of high-grade, 8 tons of medium-grade and 24 tons of low-grade ore per
week. The two mines have different operating characteristics as detailed
below.

Mine Cost per day ('000) Production (tons/day)

High Medium Low
X 180 6 3 4
Y 160 1 1 6

Consider that mines cannot be operated in the weekend. How many days
per week should each mine be operated to fulfill the smelting plant
contract?
Guessing

To explore the Two Mines problem further we might simply guess (i.e. use our
judgment) how many days per week to work and see how they turn out.

work one day a week on X, one day a week on Y

This does not seem like a good guess as it results in only 7 tones a day of
high-grade, insufficient to meet the contract requirement for 12 tones of
high-grade a day. We say that such a solution is infeasible.
work 4 days a week on X, 3 days a week on Y
This seems like a better guess as it results in sufficient ore to meet the
contract. We say that such a solution is feasible. However it is quite
expensive (costly).

We would like a solution which supplies what is necessary under the contract
at minimum cost. Logically such a minimum cost solution to this decision
problem must exist. However even if we keep guessing we can never be sure
whether we have found this minimum cost solution or not. Fortunately our
structured approach will enable us to find the minimum cost solution.
Solution
What we have is a verbal description of the Two Mines problem. What we
need to do is to translate that verbal description into an equivalent
mathematical description.

In dealing with problems of this kind we often do best to consider them in the
order:

Variables
Constraints
Objective
This process is often called formulating the problem (or more strictly
formulating a mathematical representation of the problem).
Variables

These represent the "decisions that have to be made" or the "unknowns". We

have two decision variables in this problem:
x = number of days per week mine X is operated
y = number of days per week mine Y is operated
Note here that x 0 and y 0.
Constraints
It is best to first put each constraint into words and then express it in a
mathematical form.

ore production constraints - balance the amount produced with the

quantity required under the smelting plant contract

Ore
High 6x + 1y 12
Medium 3x + 1y 8
Low 4x + 6y 24

days per week constraint - we cannot work more than a certain

maximum number of days a week e.g. for a 5 day week we have
x5
y5

Inequality constraints

Note we have an inequality here rather than an equality. This implies that we
may produce more of some grade of ore than we need. In fact we have the
general rule: given a choice between an equality and an inequality choose
the inequality

For example - if we choose an equality for the ore production constraints we

have the three equations 6x+y=12, 3x+y=8 and 4x+6y=24 and there are no
values of x and y which satisfy all three equations (the problem is therefore
said to be "over-constrained"). For example the values of x and y which satisfy
6x+y=12 and 3x+y=8 are x=4/3 and y=4, but these values do not satisfy
4x+6y=24.

The reason for this general rule is that choosing an inequality rather than an
equality gives us more flexibility in optimizing (maximizing or minimizing) the
objective (deciding values for the decision variables that optimize the
objective).
Implicit constraints

Constraints such as days per week constraint are often called implicit
constraints because they are implicit in the definition of the variables.
Objective

Again in words our objective is (presumably) to minimize cost which is given

by 180x + 160y
Hence we have the complete mathematical representation of the problem:
minimize
180x + 160y
subject to
6x + y 12
3x + y 8
4x + 6y 24
x5
y5
x, y 0

Some notes
The mathematical problem given above has the form

all variables continuous (i.e. can take fractional values)

a single objective (maximize or minimize)
the objective and constraints are linear i.e. any term is either a constant or
a constant multiplied by an unknown (e.g. 24, 4x, 6y are linear terms but xy
or x2 is a non-linear term)

Any formulation which satisfies these three conditions is called a linear

program (LP). We have (implicitly) assumed that it is permissible to work in
fractions of days - problems where this is not permissible and variables must
take integer values will be dealt with under Integer Programming (IP).
Discussion
This problem was a decision problem.

We have taken a real-world situation and constructed an equivalent

mathematical representation - such a representation is often called a
mathematical model of the real-world situation (and the process by which
the model is obtained is called formulating the model).

Just to confuse things the mathematical model of the problem is sometimes

called the formulation of the problem.

Having obtained our mathematical model we (hopefully) have some

quantitative method which will enable us to numerically solve the model (i.e.
obtain a numerical solution) - such a quantitative method is often called an
algorithm for solving the model.

Essentially an algorithm (for a particular model) is a set of instructions which,

when followed in a step-by-step fashion, will produce a numerical solution to
that model.

Our model has an objective; that is something which we are trying to

optimize. Having obtained the numerical solution of our model we have to
translate that solution back into the real-world situation.

"OR is the representation of real-world systems by mathematical models

together with the use of quantitative methods (algorithms) for solving such
models, with a view to optimizing."