INTRODUCTION TO

OPERATIONS RESEARCH
What is Operations Research?
What is Operations Research?

▪ Also known as

▪ Management Science
▪ Decision Sciences
▪ Quantitative Analysis
▪ Business Analytics (Not Data Analytics)

▪ Application of mathematical techniques for solving

management problems.
Problem Solving Approaches

▪ Qualitative Approaches

▪ Quantitative Approaches

▪Scope of Applicability
Advantages of the Quantitative Approach

▪ Directs attention to the essence of an analysis: to solve a specific problem.

▪ Improves planning which helps prevent future problems

▪ Results in more objective decisions than purely qualitative analysis.

▪ Incorporates advances in computational technologies to managerial problem-solving.

 Problem Solving
Management Science
Observation Problem Definition Techniques

Model Building

Determining a Solution
Feedback
Testing a Solution Solution

Interpretation and
Analyzing Solution Information
Implementation
Problem Solving

Observation Problem Definition

Model Building
Management Science
Techniques

Feedback
Solution

Information
Implementation
Problem Solving

Observation Problem Definition

Model Building
Management Science
Techniques

Feedback
Solution

Information
Implementation
Symptoms – Problem Identification
Symptoms – Problem Identification
▪ Long waits (customer service)
▪ in the hospital
▪ Traffic signals
▪ Customer care
▪ For the mechanic to arrive and fix the problem

▪ High cost of
▪ Transportation
▪ Labour
▪ Equipment

▪ Low productivity/ROI

▪ Low customer penetration/reachability

Need

Construction of Road to a remote village Need for advanced aircraft

What is a model?
What is a model?
What is a model?

▪ Representation of a person or thing in a smaller scale.

▪ A thing used as an example.

▪ Abstract representation of an existing problem situation.

▪ Management science models consists of a set of mathematical relationships.

▪ These relationships are consists of numbers and symbols.

What is a model?

▪ A Model

▪ An abstraction of reality. It is a simplified, and often idealized, representation of reality.

▪ Examples : an equation, an outline, a diagram, and a map
▪ By its very nature a model is incomplete.
▪ Provides an alternative to working with reality

▪ Symbolic models
▪ Use numbers and algebraic symbols

▪ Mathematical models
▪ Decision variables
▪ Uncontrollable variables
Deterministic Versus Probabilistic Models

▪ Deterministic models

▪ Used for problems in which information is known with a high degree of certainty.

▪ Used to determine an optimal solution to the problem.

▪ Probabilistic models

▪ Used when it cannot be determined precisely what values (requiring probabilities) will occur
(usually in the future).
What is a model?

▪ A vendor buys puffs from a bakery at Rs.12 and sells at IIMK at a price of Rs.20. The
vendor has a cash reserve of Rs.90 to be used for the purchase of the puffs in the
morning before it begins selling them. How many puffs the vendor should buy?
What is a model?

▪ A vendor buys puffs from a bakery at Rs.12 and sells at IIMK at a price of Rs.20. The
vendor has a cash reserve of Rs.90 to be used for the purchase of the puffs in the
morning before it begins selling them. How many puffs the vendor should buy?

▪ Decision: the number of puffs the vendor should buy

What is a model?

▪ A vendor buys puffs from a bakery at Rs.12 and sells at IIMK at a price of Rs.20. The
vendor has a cash reserve of Rs.90 to be used for the purchase of the puffs in the
morning before it begins selling them. How many puffs the vendor should buy?

▪ Decision: the number of puffs the vendor should buy, 𝑥

What is a model?

▪ A vendor buys puffs from a bakery at Rs.12 and sells at IIMK at a price of Rs.20. The
vendor has a cash reserve of Rs.90 to be used for the purchase of the puffs in the
morning before it begins selling them. How many puffs the vendor should buy?

▪ Decision: the number of puffs the vendor should buy, 𝑥

▪ Basis?
What is a model?

▪ A vendor buys puffs from a bakery at Rs.12 and sells at IIMK at a price of Rs.20. The
vendor has a cash reserve of Rs.90 to be used for the purchase of the puffs in the
morning before it begins selling them. How many puffs the vendor should buy?

▪ Decision: the number of puffs the vendor should buy, 𝑥

▪ Basis: Maximize profit?

What is a model?

▪ A vendor buys puffs from a bakery at Rs.12 and sells at IIMK at a price of Rs.20. The
vendor has a cash reserve of Rs.90 to be used for the purchase of the puffs in the
morning before it begins selling them. How many puffs the vendor should buy?

▪ Decision: the number of puffs the vendor should buy

▪ Basis: Maximize Profit, 𝑍 = 20𝑥 − 12𝑥 = 8𝑥

What is a model?

▪ A vendor buys puffs from a bakery at Rs.12 and sells at IIMK at a price of Rs.20. The vendor
has a cash reserve of Rs.90 to be used for the purchase of the puffs in the morning before it
begins selling them. How many puffs the vendor should buy?

▪ Decision: the number of puffs the vendor should buy

▪ Basis: Maximize Profit, 𝑍 = 20𝑥 − 12𝑥 = 8𝑥

▪ Constraint: Subjected to constraints, Total value of the purchase should be lesser than Rs.90 Or 12𝑥 ≤ 90
What is a model?

▪ A vendor buys puffs from a bakery at Rs.12 and sells at IIMK at a price of Rs.20. The
vendor has a cash reserve of Rs.90 to be used for the purchase of the puffs in the
morning before it begins selling them. How many puffs the vendor should buy?

▪ Decision: the number of puffs the vendor should buy

▪ Basis: Maximize Profit, 𝑍 = 20𝑥 − 12𝑥 = 8𝑥

▪ Constraint: Subjected to constraints, Total value of the purchase should be lesser than Rs.90 Or 12𝑥 ≤
90
Can purchase quantity be negative? i.e. 𝒙 ≤ 𝟎
What is a model?

▪ A vendor buys puffs from a bakery at Rs.12 and sells at IIMK at a price of Rs.20. The
vendor has a cash reserve of Rs.90 to be used for the purchase of the puffs in the
morning before it begins selling them. How many puffs the vendor should buy?

▪ Decision: the number of puffs the vendor should buy

▪ Basis: Maximize Profit, 𝑍 = 20𝑥 − 12𝑥 = 8𝑥

▪ Constraint: Subjected to constraints, Total value of the purchase should be lesser than Rs.90 Or 12𝑥 ≤
90
Add non negativity constraint i.e. 𝒙 ≥ 𝟎
What is a model?
▪ A vendor buys puffs from a bakery at Rs.12 and sells at IIMK at a price of Rs.20. The vendor has a cash reserve
of Rs.90 to be used for the purchase of the puffs in the morning before it begins selling them. How many puffs
the vendor should buy?

▪ Decision: the number of puffs the vendor should buy

▪ Basis: Maximize Profit, 𝑍 = 20𝑥 − 12𝑥 = 8𝑥

▪ Constraint: Subjected to constraints, 12𝑥 ≤ 90

𝑥≥0

▪ Variables: 𝑥 is referred as decision variable or controllable variable

▪ Parameters: Constants
Model Solution

▪ Choosing 𝑥 = 7 makes the Profit= 𝑅𝑠. 56

▪ However, 𝑥 = 7 in itself is not the actual decision but a prescription that may be used by
the vendor for maximization of her profit.

▪ The prescription helps developing recommendations or guidelines for the manager to

take decision.

▪ Many management science techniques may not generate answer or recommended

decision but provide description results.
Model Solution

▪ Choosing 𝑥 = 7 makes the Profit= 𝑅𝑠. 56

▪ However, 𝑥 = 7 in itself is not the actual decision but an information that may be used by the vendor for
maximization of her profit.

▪ The information helps developing recommendations or guidelines for the manager to take decision.

▪ Many management science techniques may not generate answer or recommended decision but provide
description results.
Month Sales Month Sales
January 30 July 35
February 40 August 50
March 25 September 60
April 60 October 40
May 30 November 35
June 25 December 50
Total 480
Monthly Average =480/12=40
Sales units
Is it actually being applied in industry?

▪ Airline pricing ▪ Workforce planning

▪ Retail pricing ▪ Marketing campaign

▪ Portfolio optimization
▪ Healthcare operations

▪ Transportation
▪ Call centres

▪ Production Planning & Inventory

Control ▪ Investment planning
 Management Science Modelling Techniques

▪ Linear Mathematical Programming ▪ Simulation

▪ Probabilistic Techniques ▪ Game Theory

▪ Network techniques ▪ Graph Theory

▪ Nonlinear Programming ▪ Multi-criteria Decision Making

▪ Decision Tree ▪ Dynamic Programming

Management Science and Business Analytics

▪ Descriptive Analytics

▪ Predictive Analytics

▪ Prescriptive Analytics
Management Science Models in Decision Support Systems

Decision Maker

Databases Databases
Databases User Databases
Management Science
Databases
Interface Tools

Internet/e-business
Management Science Models in Decision Support Systems
▪ Statisticians (Median Salary: $84,060) ▪ Medical and Health Service Manager (Median Salary: $98,350)

▪ Mathematicians (Median Salary: $103,010) ▪ Actuary (Median Salary: $101,560)

▪ Operations Research Analyst (7Th) (Median Salary: $81,390)

▪ Accountant (Median Salary: $69,350)

▪ Business Operations Manager (8Th) (Median Salary: $100,410)

▪ Financial Manager (Median Salary: $125,080)