1. Define the meaning of Operations Research and discuss the origin and development of it.

Operations Research (OR) is the field of how to form mathematical models of complex
management decision problems and how to analyze the models to gain insight about possible
solutions.

Operational Research (OR for short) looks at an organisation's operations - the functions it exists
to perform. The objective of Operational Researchers is to work with clients to find practical and
pragmatic solutions to operational or strategic problems.

Although scientists had been involved in the hardware side of warfare (designing better planes,
bombs, tanks, etc.), scientific analysis of the operational use of military resources had never
taken place in a systematic fashion before the Second World War. Military personnel were
simply not trained to undertake such analysis.
OR started just before World War II in Britain with the establishment of teams of scientists to
study the strategic and tactical problems involved in military operations. The objective was to
find the most effective utilisation of limited military resources by the use of quantitative
techniques.

These early OR workers came from many different disciplines, one group consisted of a
physicist, two physiologists, two mathematical physicists and a surveyor. What such people
brought to their work were "scientifically trained" minds, used to questioning assumptions, logic,
exploring hypotheses, devising experiments, collecting data, analysing numbers, etc.
Many were of high intellectual calibre (at least four wartime OR personnel were later to win
Nobel prizes when they returned to their peacetime disciplines).
Following the end of the war OR took a different course in the UK as opposed to in the USA. In
the UK (as mentioned above) many of the distinguished OR workers returned to their original
peacetime disciplines. As such OR did not spread particularly well, except for a few isolated
industries (iron/steel and coal). In the USA OR spread to the universities so that systematic
training in OR began.
You should be clear that the growth of OR since it began (and especially in the last 30 years) is,
largely, the result of the increasing power and widespread availability of computers. Most
(though not all) OR involves carrying out a large number of numeric calculations. Without
computers, this would simply not be possible.

Manufacturers used operations research to make products more efficiently, schedule equipment
maintenance, and control inventory and distribution. In addition, success in these areas led to
expansion into strategic and financial planning and into such diverse areas as criminal justice,
education, meteorology, and communications.
A number of major social and economic trends are increasing the need for operations
researchers. In today’s global marketplace, enterprises must compete more effectively for their
share of profits than ever before. In addition, public and non-profit agencies must compete for
ever-scarcer funding dollars.
This means that all of us must become more productive. Volume must be increased. Consumers’
demands for better products and services must be met. Manufacturing and distribution must be
faster. Products and people must be available just in time.

2. Suppose you are being interviewed by the manager of the commercial firm for a job in a
research department which deals with the application of quantitative techniques. Explain
the scope and purpose of quantitative technique and its usefulness to the firm. Give some
examples of the applications of quantitative techniques in industry.
Quantitative analysis is the process of collecting and evaluating measurable and verifiable data
such as revenues, market share, and wages in order to understand the behavior and performance
of a business. In the past, business owners and company directors relied heavily on their
experience and instinct when making decisions. However, with data technology, quantitative
analysis is now considered a better approach to making informed decisions.
A quantitative analyst’s main task is to present a given hypothetical situation in terms of
numerical values. Quantitative analysis helps in evaluating performance, assessing financial
instruments, and making predictions. It encompasses three main techniques of measuring data:
regression analysis, linear programming, and data mining.
Quantitative Analysis Techniques
1. Regression Analysis
Regression analysis is a common technique that is not only employed by business owners but
also by statisticians and economists. It involves using statistical equations to predict or estimate
the impact of one variable on another. For instance, regression analysis can determine how
interest rates affect consumers’ behavior regarding asset investment. One other core application
of regression analysis is establishing the effect of education and work experience on employees’
annual earnings.
In the business sector, owners can use regression analysis to determine the impact of advertising
expenses on business profits. Using this approach, a business owner can establish a positive or
negative correlation between two variables.
2. Linear Programming
Most companies occasionally encounter a shortage of resources such as facility space,
production machinery, and labor. In such situations, company managers must find ways to
allocate resources effectively. Linear programming is a quantitative method that determines how
to achieve such an optimal solution. It is also used to determine how a company can make
optimal profits and reduce its operating costs, subject to a given set of constraints, such as labor.
3. Data Mining
Data mining is a combination of computer programming skills and statistical methods. The
popularity of data mining continues to grow in parallel with the increase in the quantity and size
of available data sets. Data mining techniques are used to evaluate very large sets of data to find
patterns or correlations concealed within them.
Applications of Quantitative Analysis in the Business Sector
Business owners are often forced to make decisions under conditions of uncertainty. Luckily,
quantitative techniques enable them to make the best estimates and thus minimize the risks
associated with a particular decision. Ideally, quantitative models provide company owners with
a better understanding of information to enable them to make the best possible decisions.
Project Management
One area where quantitative analysis is considered an indispensable tool is in project
management. As mentioned earlier, quantitative methods are used to find the best ways of
allocating resources, especially if these resources are scarce. Projects are then scheduled based
on the availability of certain resources.
Production Planning
Quantitative analysis also helps individuals to make informed product-planning decisions. Let’s
say a company finds it challenging to estimate the size and location of a new production facility.
Quantitative analysis can be employed to assess different proposals for costs, timing, and
location. With effective product, planning, and scheduling, companies will be more able to meet
their customers’ needs while maximizing their profits.
Marketing
Every business needs a proper marketing strategy. However, setting a budget for the marketing
department can be tricky, especially if its objectives are not set. With the right quantitative
method, marketers can easily set the required budget and allocate media purchases. The
decisions can be based on data obtained from marketing campaigns.
Finance
The accounting department of a business also relies heavily on quantitative analysis. Accounting
personnel uses different quantitative data and methods, such as the discounted cash flow model,
to estimate the value of an investment. Products can also be evaluated based on the costs of
producing them and the profits they generate.
Purchase and Inventory
One of the greatest challenges that businesses face is being able to predict the demand for a
product or service. However, with quantitative techniques, companies can be guided on just how
many materials they need to purchase, the level of inventory to maintain, and the costs they’re
likely to incur when shipping and storing finished goods.
The Bottom Line
Quantitative analysis is the use of mathematical and statistical techniques to assess the
performance of a business. Before the advent of quantitative analysis, many company directors
based their decisions on experience and gut. Business owners can now use quantitative methods
to predict trends, determine the allocation of resources, and manage projects.
Quantitative techniques are also used to evaluate investments. In such a way, organizations can
determine the best assets to invest in and the best time to do so. Some of the quantitative analysis
methods include regression analysis, linear programming, and data mining.
 3. Model building is the essence of the operations research approach?

 The essence of an operations research approach is modeling.

 The complexities and uncertainties of a decision-making situation can be reduced to a
logical framework that can be subjected to formal study by creating a model.
 People can assess a larger number of alternatives and restrictions using operations
research mathematical models than they could if they only used an intuitive method.
 A systems orientation, the usage of interdisciplinary teams, and the application of the
scientific method to the circumstances in which the study was undertaken are three
fundamental aspects of operations research.
4. What is the purpose of a model? How does a model achieve this purpose? Consider in
your answer the concept that a model is an abstraction of reality.

Operations Research deals with decision problems by formulating and analyzing mathematical
models – mathematical representations of pertinent problem features

The model-based OR approach to problem solving works best on problems important enough to
warrant the time and resources for a careful study.

The three fundamental concerns of forming operations research models are

 decisions open to decision makers,

 the constraints limiting decision choices, and

 The objectives making some decisions preferred to others.

Optimization models (also called mathematical programs) represent choices as decision variables
and seek values that maximize or minimize objective functions of the decisions variables subject
to constraints on variable values expressing the limits on possible decision choices.

The model consists of:

• Decision variables

• Constraints

• Objective function
Leather Limited manufactures two types of leather belts: the deluxe model and the regular
model. Each type requires 1 square yard of leather. A regular belt requires 1 hour of skilled labor
and a deluxe belt requires 2 hours of skilled labor. Each week, 40 square yards of leather and 60
hours of skilled labor are available. Each regular belt contributes $3 profit and each deluxe belt
$4. Write an LP to maximize profit.

The decision variables are:

X1 = number of deluxe belts produced weekly

X2 = number of regular belts produced weekly

The appropriate LP is:

Maximize z = 4x1 + 3x2 (objective function)

Subject to x1 + x2 ≤ 40 (leather constraint)

2x1 +x2 ≤ 60 (labor constraint)

x1, x2 ≥ 0