Chapter - 01

Operations Research

Introduction & History of Operations Research

Any problem that requires a positive decision to be made can be classified as an
operations research (O.R.) type problem. However, the approach used in decision making
has changed considerably over the years. Although OR problems have existed since the
creation of man, it was in 1885 when Ferderick W. Taylor emphasized the application of
scientific analysis to methods of production; then the real start took place. The name
(O.R.) probably came from a programme under taken by Great Britain during World War
II "research in military operations". It was during the early part of the war that Great
Britain brought together a group of specialists from a number of areas to work on the
military defense of their country. The work of this first O.R. group involved, among other
things, studies to determine the best use of air power and the newly invented Radar.
Because of the success of O.R. in military operations, it quickly spread to all phases of
industry and Government. By 1951, O.R. had taken its place as a distinct science in the
United States. Hence it is said that O.R. is the art of winning war without actually
fighting it.
Operations Research in India
In India O.R. society founded in 1959, also became a member of international Federation
of OR Societies in 1959. The Journal OPSEARCH was published for the first time in
1963. Now O.R. techniques are used in almost all walks of our life and OR is emerging
as an inter-disciplinary area of knowledge that can make contribution to the solution of
the problems in diversified areas of interest. There is too much impact of O.R. in
economics, management, engineering and other social and behavior sciences.
Industries in India are also becoming conscious of the role of operations research and a
good number of them have well trained OR teams. Some of Indian organizations using
OR techniques are Indian Airlines, Railways, Defence Organizations, TATA, TELCO,
DCM, STC etc. Assignment Models have been used by Kirloskar company for allocation
of their salesmen to different areas so as to maximize the profits. DCM, Calico, and
Binnys' have been using linear programming techniques for cotton blending. Many
organizations are making use of PERT/CPM techniques for effective management and
control of their construction projects.
Nature of Operations Research
As stated earlier, Operations Research involves research on (military) operations. This
indicates the approach as well as the area of applications of the field. Thus it is an
approach to problems of how to coordinate and control the operations or activities
"within an organization Following is an example which elaborate the nature of operations
research. In order to run an organization effectively as a whole the problem that arises
frequently is of coordination among the conflicting goal of its various functional
departments. For example, consider the problem of stocks of finished goods. The various
departments of the organization may like to handle this problem differently. To the
marketing department, stock of large variety of products is a means of supplying the
company's customers with what they want, and where they want it. Clearly, the fully
stocked ware-house is of prime importance to the company. The production department
argues for long production runs preferably on a smaller product range, particularly if
there is a significant time loss when production is switched from one variety to another.
On the other hand, the finance department sees stocks kept as capital tied up
unproductively and argues strongly for their reduction. Finally the personnel department
sees great advantage in labour relations if there is a steady levels of production leading to
steady employment. To optimize the whole system, the decision maker must decide the
best policy keeping in view the relative importance of objectives and validity of
conflicting claims of various departments from the perspective of the whole organization.
Operations research thus helps to seek the optimal solution to a problem and not merely
one which gives better solutions than the one currently in use. The decision taken by the
decision maker may not be acceptable to every department but it should be optimal for
the organization as a whole or at least for a large portion of the total organization. In
order to obtain such types of solution, the decision maker must follow the effects and
interactions of a particular decision.
Definition of Operations Research
It is not possible to give a uniformly acceptable definition of Operations Research.
However, few definitions which are commonly used and widely accepted are given
below.
(a) "Operations Research is the application of scientific methods, techniques and tools
to problems involving the operation of a system so as to provide those in controls of
the system with optimum solution to the problem". C.W. Churchman
(b) "Operations research is the art of giving bad answers to problems which otherwise
have worse answers". T. L. Saaty
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(c) "Operations research is a scientific method of providing executive departments
with a quantitative basis for decisions regarding the operations under their control."
P.H. Morse and G.E. Kimball
(d) "Operation research is a scientific approach to problem solving for executive
management". H.M. Wagner
(e) "Operation research is concerned with scientifically deciding how best to design
and operate man machine systems usually under conditions requiring the allocation
of scarce resources". O.R. Society of America
(f) "O.R. is an aid for the executive in making his decision by providing him with the
needed quantitative information based on the scientific method of analysis." C.
Kittel
(g) "O.R. is the application of scientific methods to problem arising from operations
involving integrated system of men, machines and material. It normally utilizes the
knowledge and skill of an inter-disciplinary research team to provide the managers
of such systems with optimum operation solutions." Febrycky and Torgersen
(h) "O.R. is the application of scientific method by interdisciplinary teams to problems
involving the control of organized (men-machines) systems so as to provide
solution which best serve the purpose of the organization as a whole." Ackoff &
Sasieni
Features of Operations Research
From the various definitions of Operations Research the important features or
characteristics of Operations Research can be listed as below:
1. System Orientation. OR study the situation or problem as a whole. This means that
any action or activity has same effect on the other part of the organization. The
optimum result of one part of a system may not be the optimum for some other part.
Therefore to evaluate any decision, one must identify all possible interactions and
determine their impact on the organization as a whole.
2. Inter-disciplinary Team Approach. Operations Research is inter-disciplinary in
nature, and is performed by a team of scientists whose individual members have
been drawn from different scientific and engineering disciplines. No single
individual can have a thorough knowledge of all aspects of the undertaking.
Managerial problems have economic, physical, psychological, biological,
sociological and engineering aspects. This requires a number of people which
expertise in the areas of mathematics, statistics, engineering, economics,
management, computer science and so on. Another reason for the existence of
Operations Research teams is that knowledge is increasing at a very fast rate. No
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 single person can collect all the useful scientific information from all managerial
areas. So, Operations Research team brings the latest scientific know how to
analyze the problem and helps in providing better results.
3. Scientific Approach. Operations Research uses the scientific methods to solve the
problems. Most of the science studies such as Chemistry, Physics, Biology etc. can
be carried out in the laboratories, without much interference from the outside world.
But same is not true in the systems under study by OR teams. For example, no
company can risk its failure in order to conduct a successful experiment.
So, Operations Research is a formalized process of reasoning. Under OR the
problem is to be analyzed and defined clearly. Observations are made under
different conditions to study the behavior of the system. On the basis of these
observations, a hypothesis describing how the various factors involved are believed
to interact and the best solution to the problem is formulated. To test the hypothesis
experiment is designed and executed. Observations are made and measurements
are recorded. Finally results of the experiments are studied and the hypothesis is
accepted or rejected. So, Operations Research is the use of scientific method to
solve the problem under study.
4. Decision making. Operations Research increases the effectiveness of a
management decisions. Management is most of the time making decisions. It is thus
a decision science which helps management to make better decisions. So, the major
premise of OR is the decision-making, irrespective of the situation involved. So
decision making is a systematic process and consists of the following steps.
(a) Diagnose the problem, and establish the criterion. The criterion may be the
maximization of profits, utility and minimization of cost etc.
(b) Select the alternative course of action for consideration.
(c) Determine the model to be used and values of the parameters.
(d) Evaluation of various alternatives.
(e) Selecting the best and the optimum alternative.
OR is thus a decision science which helps management to make better decisions.
5. Use of computer. Operations research (OR) often requires a computer to solve the
complex mathematical model or to perform a large number of computations that are
involved. Use of a digital computer has become an integral part of the operations
research approach to decision making.
6. Objectives. Operations research always attempts to find the best and optimal solution
to the problem. For this purpose objectives of the organization are defined and

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 analyzed. These objectives are then used as the basis to compare the alternative
courses of action.
7. Quantitative solution. Operations research provides the managers with a quantitative
basis for decision making. OR attempts to provide a systematic and rational
approach for quantitative solutions to the various managerial problems.
8. Human factors. In deriving quantitative solution we do not consider human factors,
which doubtlessly play a great role in the problems. So study of the OR is
incomplete without a study of human factors.
Types of Operations Research Models
A Model is a representation of the reality. Most of our thinking of operations research in
business take place in the context of models. A model is a general term denoting any
idealized representation or abstraction of a real life system or situation. The objective of
the model is not to identify all aspects of the situation but to identify significant factors
and their inter-relationship. A model can be helpful in decision making as it provides a
simplified description of complexities and uncertainties of a problem in hand in logical
structure. A major advantage of modeling is that it permits the decision maker to
examine the behavior of a system without interfering with as going operations.
A broad classification of operations research models is given below:
(a) Physical Models. These models include all forms of diagrams, drawings graphs,
and charts. Most of which are designed to deal with specific types of problems. By
presenting significant factors and inter-relationships in pictorial term, physical
models are able to indicate problem in a manner that facilitates analysis. For
example, a BAR chart can be used effectively as a summary presentation of a
company's monthly production forecast. These models are easy to observe, build
and describe, but cannot be manipulated and used for prediction. There are two
types of physical models - Iconic models and Analog models.
(i) Iconic Models. An icon is an image or likeness of an object or system it
represents. An iconic model the least abstract physical replica of a system is
usually based on a smaller scale than the original. The range of management
problem areas where these models can be used effectively is extremely narrow.
However, it consists largely of these fields that are oriented towards engineering
and science. For instance Indian Airlines as well as Air India use flight simulators
to train their pilots and members of the crew. These flight simulators are Iconic
models of different types of aircraft and the trainee really feels as if he is piloting
the actual aircraft. Thus an iconic model has all the operating features of the real
system. These models can simulate the actual performance of a product thereby
availing the tremendous expense of designing full scale experimental models.
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 (ii) Analog models. Analog models are closely associated with iconic models.
However they are not replicas of problem situations. Rather, they are small physical
systems that have similar characteristics and work like an object or system it
represents e.g. children's toys model of rail, roads etc., whereas the actual objects
are complex and might not allow direct handing or manipulation. The objectives of
constructing these models is to understand by analogy.
(b) Mathematical Model or Symbolic Model. Symbolic model employ a set of
mathematical symbols to represent the decision variable of the system under study.
These variables are related together by mathematical equations. In other words
equations are mathematical model commonly used in operations research. Simple
demand curve in economics is a symbolic model predicting buyer's behaviour at
different price levels. Similarly profit and loss statement and budget for next year
are both symbolic models. Profit and loss account is just reproduced on one sheet of
paper, and it summarizes the result of a year but does not recreates every action,
which took place during the year. Following are the examples of mathematical
models which have been applied to business and industry.
 Allocation model — Sequencing model
 Routing model — Competitive model
 Queuing model — Dynamic Programming model
 Simulation — Decision theory
 Replacement model — Goal programming
 Markov analysis.
(c) By Nature of Environment.
(i) Deterministic Models. In this model everything is defined and the results are
certain. Certainty is the state of nature assumed in these models. For any given
input variable there shall be same output variable, e.g. in EOQ models, one can
easily determine economic lot size, one can apply sensitivity analysis, where
change of one variable shall cause certain change in the outcome.
(ii) Probabalistic Model. In cases of risk and uncertainty, the input and output variables
take the form of probability distribution. In fact such models are semi-closed model
and reveal the probability of occurrence of an event. In fact they reveal the complexity
of the real world and uncertainty prevailing in it, e.g. in a game theory where saddle
points or equilibrium points of the player does not exist, we apply probabilistic model.
Similar kind of model can be applied in inventory control.
(d) By the Extent of Generality
(i) General Models. General model is one which does not apply one situation only
rather it has got general applications. For example linear programming model is
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 known as a general model since it can be used for product mix, production
scheduling, marketing, transportation, assignment problems.
(ii) Specific Model. Specific model is applicable under specific condition only, e.g.
sales response curve, or equation as a function of advertising is applicable in the
marketing function alone.
Principles of Operations Research Modeling
The following principles must be kept in mind while formulating models.
1. Principle of Simplicity. Mathematicians are of the habit of making complex models
whereas one should go in for simple model if it is sufficient. It means model must
be kept simple & understandable.
2. Understand the problem, only then apply the appropriate technique. If we do not
understand the problem properly, we can not apply the appropriate technique of
Operation Research. For example, in case of allocation of scarce resources, the
technique of LPP may be applied.
For queuing problem we must apply queuing theory. So, 50% of the problem is
solved, if it is properly understood and the required technique is recommended.
3. Model must be validated before implementation, otherwise it can be implemented in
phases for validation e.g. Two-Phase Simplex Method.
4. A model can analyze the data but it can not be better than the information that goes
into it. It means data can be interpreted but can not be generated.
5. Models are for the decision makers. Operations Research models are to aid the
decision maker but not to replace them. The decision is to be taken by the
management e.g.,
In LPP X1 = 0 X2 = 9
X1 = 6 or X2 = 3
In the above multiple optimal solution is provided by LPP giving same total profits.
It is for the management to decide whether to discontinue the product X1 or
continue to produce X1 because the total profits are the same.
6. A model should never be taken too literally. It means it does not provide unique
answer. In sensitivity analyses, or under simulation, we can find still better results.
7. Flexible Model: Model should be flexible enough to incorporate changes. It should
give range where one solution is valid as in case of sensitivity analyses.
8. Seek Cooperation from Operations Research Experts. As we know, the tested
results of the model are implemented. It is to be done by Operation Research
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 Experts. Hence it must be according to the expectation of those who are to execute
so that cooperation of Operation Research Experts may be sought to implement the
models.
9. Use of Computers. Use of computers is made wherever possible in case of
implementation of models. OR techniques are usually complex and only computers can
solve them. Hence, steps should be clearly stated to enable the OR researcher to
develop computer software for future implementation of the techniques. Without
computers, perhaps the OR experts will be like illiterate person in the years to come.
Typical Applications/Scope of Operations Research
In the field of industrial management, there is a chain of problems starting from the
purchase of raw materials to the dispatch of finished goods. The management is interested
in having an overall view of the method of optimizing profits. In order to take decision on
scientific basis, operation research team will have to consider various alternative methods
of producing the goods and the return in each case. Operation research study should also
point out the possible changes in the overall structure like installation of a new machine,
introduction of more automation, etc. Operations Research has been successfully applied
in industry, in the fields of production, blending, product mix, inventory control, demand
forecast, sale and purchase, transportation, repair and maintenance, scheduling and
sequencing, planning, scheduling and control of projects and scores of other associated
areas. Operation research approach is equally applicable to big and small organizations.
For example, whenever a departmental store faces a problem like employing additional
sales girls, purchasing an additional van, etc., techniques of operation research can, be
applied to minimize cost and maximize benefit for each such decision.
Some of the areas of management where techniques of Operations Research applied
are listed below:
1. Finance, Budgeting and Investments
(a) Cash flow analysis, long-range capital requirements, investment
portfolios, dividend policies, etc.
2. Purchasing, Procurement and Exploration
(a) Determining the quantity and timing of purchase of raw materials,
machinery, etc.
(b) Rules for buying and supplies under varying prices.
(c) Bidding policies.
(d) Equipment replacement policies.
(e) Determination of quantities and timings of purchases.
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 (f) Strategies for exploration and exploitation of new material sources.
3. Production Management
(i) Project Planning.
(a) Location and size of warehouses, distribution centers, retail outlets, etc.
(b) Distribution policy.
(ii) Manufacturing and Facility Planning
(a) Production scheduling and sequencing.
(b) Project scheduling and allocation of resources.
(c) Selection and location of factories, warehouses and their sizes.
(d) Determining the optimal production mix.
(e) Maintenance policies and preventive maintenance.
(f) Maintenance crew sizes.
(g) Scheduling arid sequencing the production run by proper allocation of machines.
4. Marketing Management
(a) Product selection, timing, competitive actions.
(b) Advertising strategy and choice of different media of advertising.
(c) Number of salesmen, frequency of calling of accounts, etc.
(d) Effectiveness of market research.
(e) Size of the stock to meet the future demand.
5. Personnel Management
(a) Recruitment policies and assignment of jobs.
(b) Selection of suitable personnel with due consideration for age and skills, etc.
(c) Establishing equitable bonus systems.
6. Research and Development
(a) Determination of areas of concentration of research and development.
(b) Reliability and evaluation of alternative designs.
(c) Control of development projects.
(d) Co-ordination of multiple research projects.
(e) Determination of time and cost requirements.

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From all above areas of applications, one may conclude that operation research can be
widely used in taking timely management decisions and also used as a corrective
measure.
Phases and Processes of Operations Research Study or Methodology of Operations
Research
Operations research provides managers with quantitative basis for decision making.
Operations Research enhances a managers' ability to make long range plans and to solve
the everyday problems of running a concern. OR is a logical and systematic approach to
provide a rational basis for decision making. Phases and processes of OR study must also
be logical and systematic. Scientific methodology of operation research involves
following steps. But it is not necessary that we shall study the each and every step
invariably present.
1. Observe the problem environment. The first step in the scientific methodology of
Operations Research is to observe the problem environment. The operation
researcher shall pay visits, attend conferences, send observation and do the research
work, and in this way succeeds in getting sufficient information to formulate the
problems.
2. Analysis and defining the problem. The Operation Researcher would define the
problem by its type and the form of its solution. As a result, he could determine
which factors were relevant to the solution and could isolate those under the control
of management. Suppose a manager notices that a reduction in sales volume is
causing fall in the profit of the current year, the operation researcher has been asked
to analyze the problem. Now the Operation Researcher analyses company's
products prices, and promotions. He discovers that promotion is the problem area.
He must investigate the various variables responsible for reduced sales. The culprit
could be the amount of money spent, the media used, advertising theme, the
timings, or a combination of any of these.
Notice the methodology adopted by the Operation Researcher, he has isolated the
problem area, and secondly he has formulated the problem as an inter-connected
series of factors within the control of management. He will also provide the cost-
benefit analysis which will help the management to decide whether to proceed or
not.
3. Developing a model. Once the project is approved by the management, the next step
will be to construct a model, which represent situation under study. Operation
Researcher can construct the model to show the relations and inter-relations
between an action and a reaction or between a cause and effect. Operation
researcher's task is to produce a model which enables him to forecast the effect of
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 factors crucial to the solution of given problem. The proposed model may be field
attested and modified in order to work under stated environmental constraints. A
model may also be modified if the management is not satisfied with the answer that
it gives.
4. Collecting data required by the model. 'Garbage in and Garbage out' is famous
saying, no model will work appropriately, if data is not appropriate. Such
information can come from well kept records from experiments or even from
hunches based on experience. The data collection can clearly affect the models
output significantly. Operation researcher should not assume that he has solved the
problem once he has defined his objective and defined the model. The required data
collection takes time to prepare if data collection errors are to be reduced.
5. Coining up with a solution. Once the operation researcher has collected and
prepared data inputs then he can solve the model. Under the conditions represented
by the model, the solution provides an answer to the problem on which operation
researcher is working. Usually operation researcher takes simplified assumptions
and solution generally will work, only under those simplified assumptions.
Therefore once operation researcher have given a solution, try altering the inputs
and the model & watch what happens to the output. Therefore it is recommended to
apply sensitivity test, to discover not only the magnitude of these reactions but also
to their directions.
6. Qualifying the models and solution. The next step for the operation researcher is to
explain its findings to the management. It is his important duty to specify those
conditions under which the solution can be used. He should also point out any
weakness, so that management will know what risks. They are taking when they are
going to employ the model to generate results. He should also specify the limits
within which the results obtained from using the model are valid and define those
conditions under which model will not work.
7. Implement the solution. Implementation of the solutions obtained in previous step is
the last step of O.R. process. In O.R. the decision making is scientific but
implementation of decision involves so many behavioral issues. Therefore, the
implementing authority has to resolve the behavioral issues. He has to sell the idea
of use of O.R. not only to the workers but also to the superiors. Distance between
management and O.R. scientist may offer a lot of resistance. The gap between one
who provides a solution and one who wishes to use it should be eliminated. To
achieve this O.R. scientist as well as management should play a positive role. A
properly implemented solution obtained through Operations Research techniques
results in improved working and wins the management support.
A brief summary of steps, process activities and process output is presented below:

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 Process Steps Process Output
Process Activities
Step I Visits Sufficient information
Observe the problem Conferences, and support to proceed
environment Observations Research
Step II
Define and analyse the Define objectives and nature of solution
problem Define limitations requested
Step III Define interrelationships Model that works under
Develop a Model Formulate equations stated environmental
Use known O.R. model constraints
Search alternate model Sufficient inputs to •
Step IV Analyze internal-external data operate and test model
Select Appropriate data Analyze fact
input Collect opinions Solution that supports
Use computer data banks, Current organizational
Step V& VI Test the model Final objectives Improved
Provide a solution limitations Update the working and
Qualified the model model
Step VII Resolve behavioral issues
Implement the Solution Sell the idea and give Management support
explanations Get management for long run operation
involved of model
Techniques or Tools of Operations Research
An operation researcher may use the following techniques. This is not exhaustive,
because still more and more techniques can be added in the said list.
1. Linear Programming. This technique is used to find a solution for optimizing a given
objective. Objectives may be maximizing profit, or minimizing cost. Objective
function and boundary conditions are linear in nature. Linear programming
techniques solve product mix and distribution problems of enterprises. LPP
techniques used to allocate scarce resources in an optimum manner in problems of
scheduling, product mix etc. It consists of an objective function which is same
measure of effectiveness like profit, loss, or returns an investment and several
boundary conditions putting restrictions on the use of resources.
2. Queuing Theory. This theory deals with the situations in which queue is formed.
There are different types of situations in which queue is formed, e.g. customers
waiting for service, machines waiting for repairmen and air craft’s waiting for
landing strips etc. Waiting line theory aims at minimizing the overall cost due to
servicing and waiting. On the other hand if queue becomes long there will be a cost

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 due to waiting of units in the queue. This technique is used to analyze the feasibility
of adding facilities and to assess the amount and cost of waiting time. These
calculations then can be used to determine the desirable number of service facilities.
3. Inventory Control Models. When to buy, how much to buy and how much to keep in
stores are some of the questions which production managers, purchase managers,
and material managers address themselves to. Inventory control aims at optimizing
inventory levels. Inventory may be defined as a useful idle resource which has
economic value by raw materials, spare parts, finished products etc. Inventory
control models help an above said manager to decide reordering time, reordering
level and optimal ordering quantity etc. Inventory planning answers two questions
viz., how much to buy and when to buy? The approach is to prepare a model of the
situation that expresses total inventory costs in terms of’ demand, size of order,
possible over or under stocking and other relevant factors and then to determine
optimal order size, reorder level etc. using inventory control models.
4. Network analysis. Net work models are a very popular and widely used quantitative
technique. This model helps the managers to plan, schedule, monitor and control
large projects, such as construction of a building, making a ship, or planning for a
space flight. The Net work analysis help the mangers to determine total project
completion time, probability that a project will be completed by a certain date, least
cost way of shortening total project completion time etc. Programme Evaluation
and Review Technique (PERT), Critical Path Method (CPM), and other net work
techniques such as Gantt Chart come under network analysis.
5. Replacement Problems. The theory of replacement is concerned with situations that
arise when some items such as machines, men, electric light bulbs or any other
equipment require replacement due to their decreasing efficiency, failure or break
down. Sooner or later all equipments require to be replaced. Replacement may be
necessary because of obsolescence due to new discoveries and better design of the
equipment. In replacement decision the cost of the equipment to be installed and the
one being replaced, scrap value, useful life, return and others relevant aspects have
to be considered. The replacement theory helps to solve all replacement problems.
6. Sequencing. Models have been developed to find a sequence for processing jobs so
that the total elapsed time for all the jobs will be a minimum. The models also help
to resolve the conflict between the objectives of maximizing machine utilization
and complying with predetermined delivery dates.
7. Integer Programming. Integer means complete or whole number. One important
limitation of linear programming models is the assumption that all the variables can
take any value, may be decimals or fractions. Sometimes some of the variables are
restricted and can take only integer value e.g. number of taxis in a flee, the number
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 of power plugs in a factory and so on. With the techniques of linear programming
sometimes it is difficult to get the best solution when the figures are rounded off.
Rounding off figures to the nearest-integer may lead to poor choice of solution.
Integer programming has been developed to meet the increments of such situations.
By using the integer programming algorithm a series of continuous linear
programming problem are solved in such a way that the solution containing un-
acceptable non-integer value are ruled out and the best higher programming
solution is obtained. These are certain techniques which are applied for the purpose
getting the best solution of the given problem.
8. Assignment Problems. Assignment problem is a special type of linear programming
problem. It deals in allocating the various resources or items to various activities on
a one to one basis in such a way that the time or cost involved in minimizes one;
sale or profit is maximized e.g. Manager may like to know which job should be
assigned to which person so that all jobs can be completed in the shortest possible
time. Similarly in marketing set up by making an estimate of sales performance for
different territories one can assign a particular salesman to a particular territory with
a view to maximize over all sales.
9. Transportation Problems. Transportation problem deals with the transportation of a
product from a number of sources, with limited supplies, to a number of
destinations with specified demands, at the minimum total transportation cost. In
other words it is special procedure for finding the minimum cost for distributing
homogeneous units of a product from several points of sources to a number of
points of demand destinations. The main objective of transportation is to schedule
shipments from sources to destinations in such a way as to minimize the total
transportation cost.
10. Decision Theory and Games Theory. Decision theory is primarily concerned
with decision making under the conditions of risk and uncertainly. However, the
theory of games is concerned with decision making under conflict. Hence, both
decision theory and game theory assist the decision maker in analyzing problems
with numerous alternative courses of action and consequences. The decision maker
is to identify the best course of action on the basis of the above techniques. The
game theory assists the decision maker to have the knowledge of courses action
available to his opponent. In decision theory we use decision tables and decision
trees, which can be used to graphically represent and solve decision making
problem.
11. Markov Analysis. Markov analysis permits one to predict changes over time when
information about the behavior of a system is known. Markov analysis, which is
based on probability theory, allows a. manager to determine such information as a
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 future market share both in the short and long run. This technique is excellent not
for predicting future market shares but also for determining the probability that a
machine will be properly functioning in the future. If the current situation is known,
along with the propensity of the system to change over time. It is possible to use
Markov analysis to predict future conditions.
12. Simulation. In many cases, the goal has been to determine optimal solution. All real
life problems cannot be stated in mathematical form because of stochastic
relationships, complexity etc. such situation can be tackled by simulation. Hence,
simulation is a general technique that allows us to develop a dynamic model that
acts like a real process. Developing a good simulation model can be difficult but
simulation allows us to solve problems that are difficult or impossible to solve
otherwise.
13. Dynamic Programming. When we are faced with the problem of multi faced
solution which are inter-related and almost similar in nature, differing any in time
and space like, solution of suitable product mix, inventory planning control,
replacement of asset, choice of shortest route and similar other situations then
Dynamic Programming is applied. All possible results are analyzed and the best
solution is selected. Optimum solution is ascertained generally starting from final
decision point to the backward direction. There is no algorithm for dynamic
programming problems as is available in the linear simplex problem. For solving
each practical problem of specific dynamic programming, separate algorithm has to
be developed. These models are based on the principle of optimality given by
Bellman. In dynamic programming computational work is reduced considerably.
14. Goal-programming. Single objective function is taken in the linear programming
and all other factors are considered in the constraints, but in actual practice there
may be number of important objective functions. For example in non-power
planning, the objective may be to minimize cost, maximize production, allocations
of night shift work and assignment of highly technical and sophisticated duties
amongst the top level technical executives. In Linear programming any one of these
will be taken as objective function and other will be taken as constraints. This
makes the objective function less important and the solution obtained may not
satisfy all the objectives.
Charles and Cooper developed this Goal programming in 1961 in which several
objective functions are considered. Each objective function has a fixed value
known as 'target' and the Goal programming models are developed to minimize
deviations from these 'targets'.
15. Symbolic Logic. Symbols are more meaningful and accurate. Everything is
symbolic in this world. Words classes of things, functional systems and rules are
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 substituted with symbols. The whole problem is converted into algebraic equations
and propositions. Business problems are not commonly converted into symbols but
calculations are done on computers and stet a machine, that is why symbols have
extensive applications.
Operations Research & Management Decision Making
We know that operations research increases the creative capabilities of a decision maker.
Operations Research increases the effectiveness of a management decisions.
Management is most of the time making decisions. It is thus a decision science which
helps management to make better decisions. In these days, business problems are so
complex that it is almost impossible for the human being to comprehend and assimilate
all the important factors. Operations Research techniques can be very useful in such
situations. It is this scientific quantification used in Operations Research, which helps
management to make better decisions. Thus in Operations Research, the essential
features of decisions namely; objectives, alternatives, and influencing factors are
expressed in terms of scientific quantifications or mathematical equations. This gives
rise to certain mathematical relations, termed as a mathematical model.
Thus operations research may be regarded as a tool to supplement the feeling of the
decision maker. For example in distribution areas Operations Research suggest the best
locations for agencies, warehouses as well as the most economical kind of transportation;
in marketing areas Operations Research may help in indicating the most profitable type,
use, and size of advertising campaigns, in regard to available financial limits. Operations
Research models frequently yield actions that do improve an intuitive decision making.
Sometimes Operations Research has been instrumental in bringing order out of Chaos.
For example an Operations Research oriented planning model becomes a vehicle for
coordinating marketing decisions, within the limitations imposed on manufacturing
capabilities.
Thus in Operations Research, the essential features of decisions, namely, objectives,
alternatives, and influencing factors are expressed in terms of scientific qualifications or
mathematical equations. For different situations different models are used and this process is
continuing since World War II. Operations Research based planning model helps the
marketing executive in taking marketing decisions relating to distribution points, choice
of customer etc. subject to the limitations imposed on manufacturing capabilities.
Operations Research techniques also help in ascertaining the best locations for factories
and warehouses, project scheduling as well as most economical means of transportation.
Recently Operations Research has exerted successfully many different areas of research
for military, Government, service organizations and industry. In brief, Operations
Research study approach in business decisions leads to better control, better co-
ordination, and better system and at the end better decision.

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Limitations of Operations Research
The previous sections have brought out the positive side of Operations Research. only.
However, there is also the need to point out the negative side. Certain common traps and
pitfalls can and have, ruined the otherwise good work. Some of these pitfalls are quite
obvious while others are go subtle and hidden that extreme care is required to locate
their presence.
Operations Research has certain limitations. However, these limitations are mostly
related to the problems of model building and the time and money factors involved in its
application rather than its practical utility. Some of them are as follows:
1. Magnitude of Computations. Operations Research tries to find out optimal solution
taking into account all the factors. In the modern society these factors are
enormous and expressing them in quantity and establishing relationships among
these required complicated calculations which can only be handled by machines.
2. Non-Quantifiable Factors. Operations Research provides solution 6nly when all
elements related to a problem can be quantified. All relevant variables do not lend
themselves to quantification. Factors which cannot be quantified, find no place in
Operations Research Models. Operations Research do not take into account
qualitative factors or emotional factors which may be quite important.
3. Gap between Manager and Operations Researcher. Operations Research being
specialist's job requires a mathematician or a statistician, who might not be aware
of the business problems. Similarly, a manager may fail to understand the
complex working of Operations Research .Thus there is a gap between the two.
Management itself may offer a lot of resistance due to conventional thinking.
4. Money and Time costs. When the basic data are subjected to frequent changes,
incorporation them into the Operations Research models is a costly affair.
Moreover, a fairly good solution at present may be more desirable than a prefect
Operations Research solution available after sometime.
5. Implementation. Implementation of decisions is a delicate task. It must take into
account the complexities of human relations and behaviour. Sometimes resistance
is offered only due to psychological factors.
6. Selection of Technique. Operations research techniques are very useful but they
cannot be used indiscriminately. Choice of technique depends upon the nature of
problem, operating conditions, assumptions, objectives, etc. Thus, identification
and use of an appropriate technique is essential.
7. Not a Substitute of Management. Operations research only provides the tools and
cannot be a substitute of management. It only examines the results of alternative
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 courses of action and final decision is made by management within its authority
and judgment.
8. Sub-optimization. Sub-optimization is deciding in respect of a relatively narrow
aspect of the whole business situation or optimization of a subsection of the
whole. Functional heads some times, without taking care of wider implications,
sub-optimize their functions. This may cause loss in that part of the organization
which is left out of the exercise and as such should be avoided.
Problem in Model Formulation in a Nut Shell
In the very first phase of O.R.-the problem formulation phase-a number of pitfalls can
and do arise. It is necessary that the right problem be selected and it must be completely
and accurately defined. Is the right problem being solved? Is the scope considered wide
and proper? Will it result in optimization or only sub-optimization? Will the solution
properly reflect the objectives as well as the imposed constraints? Are properly
effectiveness measures being used? This phase of problem formulation is perhaps the
most important and toughest part of Operations Research study. Secondly, data
collection may also consume a very large portion of time and money spent on Operations
Research study.
Thirdly, the whole study by operations analyst is based on his observations in the past.
Strictly speaking, these observations can only be related to the laws that operated in the
past, as there is no evidence that the laws will continue to operate in future also. If the
laws are applied to the future, it clearly amounts to extrapolation in time. Fourthly, the
operation researcher, while making observations, may affect the behaviour of the system
he is studying. Moreover, however comprehensive his experiments maybe, his
observations can never be more than a sample of the whole. These difficulties present
special hazards to operation researcher. His aim is to find out what happens in a working
organization. He can get the information in two ways: by direct observation or from the
previous records, the behaviour of an organization depends upon the activities of the
persons in it and the very fact that they are being observed is bound to affect their
behaviour. On the other hand, accuracy of previous records is always doubtful and they
seldom provide the complete information in all the points sought.
Perhaps the greatest difficulty in OR, however, is created by the time factor. The
managers have to make decisions one way or the other, and a fairly good solution to the
problems at the right time may be much more useful than the perfect solution too late.
Further, the cost involved is also an important factor. Sometimes, some simple
application of OR may yield a good solution quickly and it may be unwise to spend a lot
of money and effort to produce a slightly better solution much later.
Other pitfalls in problem solving include
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i. Warping the problem to fit a standard model, tool or technique
ii. Failure to test the model and solution before implementation
iii. Failure to establish proper controls.
It is the responsibility of Operations Research scientist to translate his highly specialized
and technical thoughts, ideas and concepts into simple operation procedures capable of
being easily understood by the management and workers alike. He must also ascertain
that the new proposals are properly implemented. But for the proper implementation, the
whole OR study becomes useless.
Lastly, what may appear to be a pitfall is fact that OR study may raise more questions
than it answers. However, this may ultimately result in more deep insight into the system
yield further benefits and improvements.

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