Republic of the Philippines

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

OFFICE OF THE VICE PRESIDENT FOR BRANCHES AND SATELLITE CAMPUSES
BATAAN BRANCH

COURSE OUTLINE:
Module 1 - Introduction to Operation Research
Module 2 - Linear Programming
Module 3 - Solution Approaches to Linear Programming
Module 4 - Duality and Sensitivity Analysis
Module 5 - Integer Linear Programming
Module 6 - Special Types of Linear Programming Models
Module 7 - Network Models

MODULE 1- INTRODUCTION TO OPERATION RESEARCH

Course Objectives

Explain the nature, definition, significant and characteristics of operation research.

Describe the major phases of a typical operation research study.

Walk the students through the origin and development of operation research.

Overview : The subject operations research (OR) is a branch of applied mathematics, that is
used to provide a scientific base for management to take timely and effective decisions to their
problems. It tries to avoid the dangers from taking decisions merely by guessing or by using
thumb rules. Management is a multidimensional and dynamic concept. It is multidimensional,
because management problems and their solutions have consequences in several dimensions,
such as human, economic social and political fields. As the manager operates his system in a
dynamic environment, he needs to consider all aspects in addition to economic aspect, so that
his solution could be useful in making decisions.

Operation Research (OR) is a relatively new discipline. The contents and the boundaries
of the OR are not yet fixed. Therefore, to give a formal definition of the term Operations
Research is a difficult task. The OR starts when mathematical and quantitative techniques are
used to substantiate the decision being taken. This is quite appropriate because these
quantitative techniques form the main part of what is known about OR. However, it does not
imply that practical OR studies are primarily mathematical exercises. As a matter of fact, the
mathematical analysis often represents only a relatively small part of the total effort required.

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 Republic of the Philippines
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
OFFICE OF THE VICE PRESIDENT FOR BRANCHES AND SATELLITE CAMPUSES
BATAAN BRANCH

Course Materials

THE ORIGINS OF OPERATIONS RESEARCH

Since the advent of the industrial revolution, the world has seen a remarkable growth in
the size and complexity of organizations. The artisans’ small shops of an earlier era have
evolved into the billion-dollar corporations of today. An integral part of this revolutionary change
has been a tremendous increase in the division of labor and segmentation of management
responsibilities in these organizations. The results have been spectacular. However, along with
its blessings, this increasing specialization has created new problems, problems that are still
occurring in many organizations. One problem is a tendency for the many components of an
organization to grow into relatively autonomous empires with their own goals and value
systems, thereby losing sight of how their activities and objectives mesh with those of the
overall organization. What is best for one component frequently is detrimental to another, so the
components may end up working at cross purposes. A related problem is that as the complexity
and specialization in an organization increase, it becomes more and more difficult to allocate the
available resources to the various activities in a way that is most effective for the organization as
a whole. These kinds of problems and the need to find a better way to solve them provided the
environment for the emergence of operations research (commonly referred to as OR).

The roots of OR can be traced back many decades, when early attempts were made to
use a scientific approach in the management of organizations. However, 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. Therefore, the British and then the U.S. military management called upon a large
number of scientists to apply a scientific approach to dealing with this and other strategic and
tactical problems. In effect, they were asked to do research on (military) operations. These
teams of scientists were the first OR teams.

When the war ended, the success of OR in the war effort spurred interest in applying OR
outside the military as well. As the industrial boom following the war was running its course, the
problems caused by the increasing complexity and specializations in organizations were again
coming to the forefront. It was becoming apparent to a growing number of people, including
business consultants who had served on or with the OR teams during the war, that these were
basically the same problems that had been faced by the military but in a different context. By the
early 1950s, these individuals had introduced the use of OR to a variety of organizations in
business, industry, and government. The rapid spread of OR soon followed.

At least two other factors that played a key role in the rapid growth of OR during this
period can be identified. One was the substantial progress that was made early in improving the
techniques of OR. After the war, many of the scientists who had participated on OR teams or
who had heard about this work were motivated to pursue research relevant to the field;
important advancements in the state of the art resulted. A prime example is the simplex method
for solving linear programming problems, developed by George Dantzig in 1947. Many of the

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 Republic of the Philippines
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
OFFICE OF THE VICE PRESIDENT FOR BRANCHES AND SATELLITE CAMPUSES
BATAAN BRANCH

standard tools of OR, such as linear programming, dynamic programming, queuing theory, and
inventory theory, were relatively well developed before the end of the 1950s.

A second factor that gave great impetus to the growth of the field was the onslaught of
the computer revolution. A large amount of computation is usually required to deal most
effectively with the complex problems typically considered by OR. Doing this by hand would
often be out of the question. Therefore, the development of electronic digital computers, with
their ability to perform arithmetic calculations millions of times faster than a human being can,
was a tremendous boon to OR. A further boost came in the 1980s with the development of
increasingly powerful personal computers accompanied by good software packages for doing
OR. This brought the use of OR within the easy reach of much larger numbers of people, and
this progress further accelerated in the 1990s and into the 21st century.

THE NATURE OF OPERATIONS RESEARCH

As its name implies, operations research involves “research on operations.” Thus,

operations research is applied to problems that concern how to conduct and coordinate the
operations (i.e., the activities) within an organization. The nature of the organization is
essentially immaterial, and, in fact, OR has been applied extensively in such diverse areas as
manufacturing, transportation, construction, telecommunications, financial planning, health care,
the military, and public services, to name just a few. Therefore, the breadth of application is
unusually wide.

The research part of the name means that operations research uses an approach that
resembles the way research is conducted in established scientific fields. To a considerable
extent, the scientific method is used to investigate the problem of concern. (In fact, the term
management science sometimes is used as a synonym for operations research.) In particular,
the process begins by carefully observing and formulating the problem, including gathering all
relevant data. The next step is to construct a scientific (typically mathematical) model that
attempts to abstract the essence of the real problem. It is then hypothesized that this model is a
sufficiently precise representation of the essential features of the situation that the conclusions
(solutions) obtained from the model are also valid for the real problem.

Next, suitable experiments are conducted to test this hypothesis, modify it as needed,
and eventually verify some form of the hypothesis. (This step is frequently referred to as model
validation.) Thus, in a certain sense, operations research involves creative scientific research
into the fundamental properties of operations. However, there is more to it than this. Specifically,
OR is also concerned with the practical management of the organization. Therefore, to be
successful, OR must also provide positive, understandable conclusions to the decision maker(s)
when they are needed.

Still another characteristic of OR is its broad viewpoint. As implied in the preceding

section, OR adopts an organizational point of view. Thus, it attempts to resolve the conflicts of
interest among the components of the organization in a way that is best for the organization as
a whole. This does not imply that the study of each problem must give explicit consideration to

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 Republic of the Philippines
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
OFFICE OF THE VICE PRESIDENT FOR BRANCHES AND SATELLITE CAMPUSES
BATAAN BRANCH

all aspects of the organization; rather, the objectives being sought must be consistent with those
of the overall organization.

An additional characteristic is that OR frequently attempts to search for a best solution

(referred to as an optimal solution) for the model that represents the problem under
consideration. (We say a best instead of the best solution because there may be multiple
solutions tied as best.) Rather than simply improving the status quo, the goal is to identify a best
possible course of action. Although it must be interpreted carefully in terms of the practical
needs of management, this “search for optimality” is an important theme in OR.

All these characteristics lead quite naturally to still another one. It is evident that no
single individual should be expected to be an expert on all the many aspects of OR work or the
problems typically considered; this would require a group of individuals having diverse
backgrounds and skills. Therefore, when a full-fledged OR study of a new problem is
undertaken, it is usually necessary to use a team approach. Such an OR team typically needs to
include individuals who collectively are highly trained in mathematics, statistics and probability
theory, economics, business administration, computer science, engineering and the physical
sciences, the behavioral sciences, and the special techniques of OR. The team also needs to
have the necessary experience and variety of skills to give appropriate consideration to the
many branching out of the problem throughout the organization.

DEFINITIONS OF OPERATIONS RESEARCH

Any subject matter when defined to explain what exactly it is, we may find one definition.
Always a definition explains what that particular subject matter is. But if you ask, what
Operations research is? The answer depends on individual objective. Each and every definition
may explain one or another characteristic of Operations Research but none of them explain or
give a complete picture of Operations research. But in the academic interest some of the
important definitions are discussed below.

(a) Operations Research is the art of winning wars without actually fighting. – Aurther Clarke.
This definition does not throw any light on the subject matter, but it is oriented towards
warfare. It means to say that the directions for fighting are planned and guidance is given from
remote area, according to which the war is fought and won.

(b) Operations Research is the art of giving bad answers to problems where otherwise worse
answers are given. - T.L. Satty.
This definition covers one aspect of decision-making, i.e., choosing the best alternative
among the list of available alternatives. It says that if the decisions are made on guesswork, we
may face the worse situation. But if the decisions are made on scientific basis, it will help us to
make better decisions. Hence this definition deals with one aspect of decision-making and not
clearly tells what is operations research.

c) Operations Research is Research into Operations. - J. Steinhardt.

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 Republic of the Philippines
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
OFFICE OF THE VICE PRESIDENT FOR BRANCHES AND SATELLITE CAMPUSES
BATAAN BRANCH

This definition does not give anything in clear about the subject of Operations Research
and simply says that it is research into operations. Operations may here be referred as military
activities or simply the operations that an executive performs in his organizations while taking
decisions. Research in the word means that finding a new approach. That is when an executive
is involved in performing his operations for taking decisions he has to go for newer ways so that
he can make a better decision for the benefit of his organization.

(d) Operations Research is defined as Scientific method for providing executive departments a
quantitative basis for decisions regarding the operations under their control. - P.M. Morse and
G.E. Kimball.
This definition suggests that the Operations Research provides scientific methods for an
executive to make optimal decisions. But does not give any information about various models or
methods. But this suggests that executives can use scientific methods for decision-making.

(e) Operations Research is the study of administrative system pursued in the same scientific
manner in which system in Physics, Chemistry and Biology are studied in natural sciences.
This definition is more elaborate than the above given definitions. It compares the
subject Operations Research with that of natural science subjects such as Physics, Chemistry
and Biology, where while deciding any thing experiments are conducted and results are verified
and then the course of action is decided. It clearly directs that Operations Research can also be
considered as applied science and before the course of action is decided, the alternatives
available are subjected to scientific analysis and optimal alternative is selected. But the
difference between the experiments we conduct in natural sciences and operations research is:
in natural sciences the research is rigorous and exact in nature, whereas in operations
research, because of involvement of human element and uncertainty the approach will be totally
different.

(f) Operations Research is the application of scientific methods, techniques and tools to
operation of a system with optimum solution to the problem. - Churchman, Ackoff and Arnoff.
This definition clearly states that the operations research applies scientific methods to
find an optimum solution to the problem of a system. A system may be a production system or
information system or any system, which involves men, machine and other resources. We can
clearly identify that this definition tackles three important aspects of operations research i.e.
application of scientific methods, study of a system and optimal solution. This definition too does
not give any idea about the characteristics of operations research.

(g) Operations Research is the application of the theories of Probability, Statistics, Queuing,
Games, Linear Programming etc., to the problems of War, Government and Industry.
This definition gives a list of various techniques used in Operations Research by various
managers to solve the problems under their control. A manager has to study the problem,
formulate the problem, identify the variables and formulate a model and select an appropriate
technique to get optimal solution. We can say that operations research is a bunch of
mathematical techniques to solve problems of a system.

(h) Operations Research is the use of Scientific Methods to provide criteria or decisions
regarding man-machine systems involving repetitive operations.

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 Republic of the Philippines
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
OFFICE OF THE VICE PRESIDENT FOR BRANCHES AND SATELLITE CAMPUSES
BATAAN BRANCH

This definition also explains that operations research uses scientific methods or logical
means for getting solutions to the executive problems. It too does not give the characteristics of
Operations Research.

(j) Operations Research is the application of the methods of science to complex problems
arising in the direction and management of large systems of men, materials and money in
industry, business, Government and defense. The distinctive approach is to develop a scientific
model of the system, incorporating measurements of factors such as chance and risk, with
which to predict and compare the outcome of alternative decisions, strategies or controls. The
purpose is to help management to determine its policy and actions scientifically. - Operations
Society of Great Britain.

The above definition is more elaborate and says that operations research applies
scientific methods to deal with the problems of a system where men, material and other
resources are involved and the system under study may be industry, defense or business etc,
gives this definition. It also say that the manager has to build a scientific model to study the
system which must be provided with facility to measure the outcomes of various alternatives
under various degrees of risk, which helps the managers to take optimal decisions.

In addition to the formerly stated definitions, there are hundreds of definitions available
to explain what Operations Research is? But many of them are not satisfactory because of the
following reasons.

(i) Operations Research is not a well-defined science like Physics, Chemistry etc. All these
sciences are having well defined theory about the subject matter, whereas operations research
do not claim to know or have theories about operations. Moreover, Operations Research is not
a scientific research into the control of operations. It is only the application of mathematical
models or logical analysis to the problem solving. Hence none of the definitions given above
defines operations research precisely.

(ii) The objective of operations research says that the decisions are made by brain storming of
people from various walks of life. This indicates that operations research approach is inter-
disciplinary approach, which is an important character of operations research. This aspect is not
included in any of the definitions hence they are not satisfactory.

(iii) The above-discussed definitions are given by various people at different times and stages of
development of operations research as such they have considered the field in which they are
involved hence each definition is concentrating on one or two aspects. No definition is having
universal approach.

But salient features of above said definitions are:

1. Operations Research uses Scientific Methods for making decisions.
2. It is interdisciplinary approach for solving problems and it uses the knowledge and
experience of experts in various fields.

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 Republic of the Philippines
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
OFFICE OF THE VICE PRESIDENT FOR BRANCHES AND SATELLITE CAMPUSES
BATAAN BRANCH

PHASES OF AN OR STUDY

Any Operations Research analyst has to follow certain sequential steps to solve the
problem on hand. The steps he has to follow are discussed below:

Step I: Observe the problem environment

The first step in the process of O.R. development is the problem environment
observation. This step includes different activities; they are conferences, site visit, research,
observations etc. These activities provide sufficient information to the O.R. specialists to
formulate the problem.

Step II: Analyze and define the problem

This step is analyzing and defining the problem. In this step in addition to the problem
definition, the objectives, uses and limitations of O.R. study are also defined. The outputs of this
step are clear grasp of need for a solution and understanding of the clear nature of the problem.

Step III: Develop a model

This step develops a model; a model is a representation of some abstract or real
situation. The models are basically mathematical models, which describes systems, processes
in the form of equations, formula/relationships. The different activities in this step are variables
definition, formulating equations etc. The model is tested in the field under different
environmental constraints and modified in order to work. Sometimes the model is modified to
satisfy the management with the results.

Step IV: Select appropriate data input

A model works appropriately when there is appropriate data input. Hence, selecting
appropriate input data is important step in the O.R. development stage or process. The activities
in this step include internal/external data analysis, fact analysis, and collection of opinions and
use of computer data banks. The objective of this step is to provide sufficient data input to
operate and test the model developed in Step_III.

Step V: Provide a solution and test its reasonableness

This step is to get a solution with the help of model and input data. This solution is not
implemented immediately, instead the solution is used to test the model and to find if there is
any limitations. Suppose if the solution is not reasonable or the behavior of the model is not
proper, the model is updated and modified at this stage. The output of this stage is the
solution(s) that supports the current organizational objectives.

Step VI: Implement the solution

At this step the solution obtained from the previous step is implemented. The
implementation of the solution involves so many behavioral issues. Therefore, before
implementation the implementing authority has to resolve the issues. A properly implemented
solution results in quality work and gains the support of the management.

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
OFFICE OF THE VICE PRESIDENT FOR BRANCHES AND SATELLITE CAMPUSES
BATAAN BRANCH

APPLICATIONS OF OPERATIONS RESEARCH

Day by day, operations research is gaining acceptance because it improves decision

making effectiveness of the managers. Almost all the areas of business use operations research
for decision making.

Today, almost all fields of business and government utilize the benefits of Operations
Research. There are voluminous applications of Operations Research. Although it is not
feasible to cover all applications of O.R. in brief; the following are the abbreviated set of typical
operations research applications to show how widely these techniques are used today:

Accounting:
Assigning audit teams effectively
Credit policy analysis
Cash flow planning
Developing standard costs
Establishing costs for byproducts
Planning of delinquent account strategy

Construction:
Project scheduling, monitoring and control
Determination of proper work force
Deployment of work force
Allocation of resources to projects

Facilities Planning:
Factory location and size decision
Estimation of number of facilities required
Hospital planning
International logistic system design
Transportation loading and unloading
Warehouse location decision

Finance:
Building cash management models
Allocating capital among various alternatives
Building financial planning models
Investment analysis
Portfolio analysis
Dividend policy making

Manufacturing:
Inventory control
Marketing balance projection
Production scheduling
Production smoothing

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 Republic of the Philippines
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
OFFICE OF THE VICE PRESIDENT FOR BRANCHES AND SATELLITE CAMPUSES
BATAAN BRANCH

Marketing:
Advertising budget allocation
Product introduction timing
Selection of Product mix
Deciding most effective packaging alternative

Organizational Behavior / Human Resources:

Personnel planning
Recruitment of employees
Skill balancing
Training program scheduling
Designing organizational structure more effectively

Purchasing:
Optimal buying
Optimal reordering
Materials transfer

Research and Development:

R & D Projects control
R & D Budget allocation
Planning of Product introduction

Limitations of Operations Research

Operations Research has number of applications; similarly it also has certain limitations.
These limitations are mostly related to the model building and money and time factors problems
involved in its application. Some of them are given below:

i) Distance between O.R. specialist and Manager

Operations Researchers job needs a mathematician or statistician, who might not be
aware of the business problems side. Similarly, a manager is unable to understand the complex
nature of Operations Research. Thus there is a big gap between the two personnel.

ii) Magnitude of Calculations

The aim of OR is to find out the optimal solution taking into consideration all the factors
that impact the problems. In this modern world these factors are enormous and expressing them
in quantitative model and establishing relationships among these require voluminous
calculations, which can be handled only by machines.

iii) Money and Time Costs

The basic data are subjected to frequent changes, incorporating these changes into the
operations research models are very expensive. However, a fairly good solution at present may
be more desirable than a perfect operations research solution available in the future or after
some time.

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 Republic of the Philippines
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
OFFICE OF THE VICE PRESIDENT FOR BRANCHES AND SATELLITE CAMPUSES
BATAAN BRANCH

iv) Non-quantifiable Factors

When all the factors related to a problem can be quantified only then operations
research provides solution otherwise it does not. The non-quantifiable factors are not
incorporated in OR models. Importantly, OR models do not take into account emotional factors
or qualitative factors.

v) Implementation
Once the decision has been taken it should be implemented. The implementation of
decisions is a delicate task. This task must take into account the complexities of human
relations and behavior and in some times only the psychological factors.

ACTIVITIES/ASSESSMENTS

A. Case Study

This case study illustrates how a successful implementation phase might need to involve
thousands of employees before undertaking the new procedures. Samsung Electronics Corp.
initiated a major OR study in March 1996 to develop new methodologies and scheduling
applications that would streamline the entire semiconductor manufacturing process and reduce
work-in-progress inventories. The study continued for over five years, culminating in June 2001,
largely because of the extensive effort required for the implementation phase.

The OR team needed to gain the support of numerous managers, manufacturing staff,
and engineering staff by training them in the principles and logic of the new manufacturing
procedures. Ultimately, more than 3,000 people attended training sessions. The new
procedures then were phased in gradually to build confidence. However, this patient
implementation process paid huge dividends. The new procedures transformed the company
from being the least efficient manufacturer in the semiconductor industry to becoming the most
efficient. This resulted in increased revenues of over $1 billion by the time the implementation of
the OR study was completed.

A. Discussion Questions:

1. Why do you think The OR team of Samsung Electronics Corp. had some success in the
implementation of their OR study?

2. If the OR study took five years to complete and then resulted to huge dividends for the
company, is an OR department necessary to a business enterprise? Support your
answer.

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 Republic of the Philippines
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
OFFICE OF THE VICE PRESIDENT FOR BRANCHES AND SATELLITE CAMPUSES
BATAAN BRANCH

B. Research Work:

Research on Samsung Electronics Corp. and profile the company. Make your research
work with the following format:

Font face - Californian FB

Font size - 11
Paper size – letter (8.5 x 11)
Margin – Normal (1 inch on all sides)
Orientation – Portrait
Line Spacing – 1.5

Answers from this assessments/activity shall be uploaded online via channel agreed
upon by the class on the designated date and time of submission.

REFERENCES

To learn an introductory chapter on Operation Research (OR), browse through the

following references:

1. P. Rama Murthy, Operations Research; (Book)2nd edition, Copyright © 2007, 2005 New
Age International (P) Ltd., Publishers 4835/24, Ansari Road, Daryaganj, New Delhi -
110002

2. PDF Notes on Quantitative Techniques for Managers, MBA-H2040

3. Frederick S. Hillier and Gerald J. Lieberman, Introduction To Operations Research, ninth

edition, published by McGraw-Hill, a business unit of The McGraw-Hill Companies, Inc.,
1221 Avenue of the Americas, New York, NY 10020. Copyright © 2010 Previous editions
© 2005, 2001, and 1995

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