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Optimization Techniques Notes

Operations research is the science of rational decision-making and improving complex systems using quantitative analysis. It uses an interdisciplinary team approach and mathematical models to represent relationships and provide an objective basis for decisions. Some common applications of operations research include production management, transportation, marketing, finance, and defense. Linear programming and PERT/CPM are two important operations research techniques used for resource allocation and project scheduling respectively. Decision theory analyzes decision problems under risk and uncertainty using decision trees, game theory, and other analytical tools.

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2K views

Optimization Techniques Notes

Operations research is the science of rational decision-making and improving complex systems using quantitative analysis. It uses an interdisciplinary team approach and mathematical models to represent relationships and provide an objective basis for decisions. Some common applications of operations research include production management, transportation, marketing, finance, and defense. Linear programming and PERT/CPM are two important operations research techniques used for resource allocation and project scheduling respectively. Decision theory analyzes decision problems under risk and uncertainty using decision trees, game theory, and other analytical tools.

Uploaded by

Soumyajit Pathak
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© © All Rights Reserved
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Download as PDF, TXT or read online on Scribd
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Definition of Operations Research

Operations Research is the science of rational decision-making and the


study, design and integration of complex situations and systems with the
goal of predicting system behavior and improving or optimizing system
performance. It utilizes a planned approach following a scientific method
and an interdisciplinary team, in order to represent complex functional
relationships as mathematical models, for the purpose of providing a
quantitative basis of decision-making and uncovering new problems for
quantitative analysis.

Scope of Operations Research


1. Finance Budgeting and Investments
2. Purchasing Procurement and Exploration
3. Marketing Management
4. Production Management
5. Personnel Management
6. Research and Development
7. National Planning and Budgeting
8. Defence Services
9. Agriculture and Irrigation
10. Education and Training

Features of OR Approach
The broad features of OR approach to any decision problem are summarized as
follows -

1. Interdisciplinary Approach A team of individuals speciliazing in


different fields/discipline should be orgranized in a way that each
aspect of the problem can be analysed by a particular specialist in
that field.
2. Scientific Approach The scientific method consists of observing and
defining the problem; formulating and testing the hypothesis; and
analysing the results of the test. The data so obtained is then used
to decide whether the hypothesis should be accepted or not. If the
hypothesis is accepted, the results should be implemented otherwise an
alternative hypothesis has to be formulated.
3. Holistic Approach While arriving at a decision, an operations
research team examines the relative importance of all conflicting and
multiple objectives. It also examines the validity of claims of
various departments of the organization from the perspective of its
implications to the whole organization.
4. Objective-Oriented Approach An operations research approach seeks to
obtain an optimal solution to the problem under analysis. For this, a
measure of desirability (or effectiveness) is defined, based on the
objective(s) of the organization. A measure of desirability so defined
is then used to compare alternative courses of action with respect to
their possible outcomes.
Phases of OR Approach to Problem Solving

Classification of Methods/Models of Solving


Methods for Solving Operations Research Models
Methodology of Operations Research
Linear Programming
Linear Programming is a mathematical technique useful for allocation of
scarce or limited resources, to several competing activities on the
given criterion of optimality.
Applications
1. Agriculture
2. Military
3. Production Management
4. Financial Management
5. Marketing Management
6. Personnel Management

Guidelines of Linear Programming Model Formulation


Step 1. Identify the decision variables
Step 2. Identify the problem data
Step 3. Formulate the constraints
Step 4. Formulate the objective function
Two Phase Method
Big M Method
PERT/CPM
PERT/CPM is a technique used for assisting project managers carry out their
responsibilities.
Phases of Project Management

PERT/CPM Network Components & Precedence


Relationships
Critical Path Analysis
Critical Path is the longest path through the project network; the
activities on the path are the critical activities, therefore any delay in
their completion must be avoided to prevent delay in project completion.
Table Structure

Project Scheduling
Hence, revised scheduled completion time of the project can be calculated
as:

Ts = Z i + Te

where value of Z corresponds to the probability of project completion time.

Trade-Off
Crashed Total Cost = (Total Direct Cost) + (Cost Slope of crashed
Activity * time units of the crash) + Indirect cost of new project time.

Resource Allocation
The Analysis for stabilizing the rate of resource utilization by various
activities at different times without changing the project duration is
called resource levelling.

Resource Smoothing
Transportation Algorithm

North-West Corner Method (NWCM)


Least Cost Method

Vogels Approximation Method


Modi Method

Unbalanced Supply and Demand


Degeneracy and its Resolution

Alternative Optional Solution


Maximization Transport Problem

Decision Theory
Decision analysis is an analytical approach of comparing decision
alternatives in terms of expected outcomes.

Decision alternative is a finite number of decision alternatives are


available to the decision maker at each point in time when a decision is
made.

State of nature is an event or scenario that is not under the control of


decision makers.

Payoff is a numerical value (outcome) obtained due to the application of


each possible combination of decision alternatives and state of nature.

Steps of Decision Making Process


Types of Decision- Making Environments

Criteria of Decision-making
Decision Making Under Risk
Decision Tree Analysis
Game Theory

Strategy

Two-Person Zero-Sum Games


Pure Strategies (Minimax and Maximin Principles)
Saddle Point is the payoff value that represents both minimax and maximin
value of the game.

Rules of Dominance

Dominance Rules is the procedure to reduce the size of the payoff matrix
according to the tendency of players.

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