Bolivarian Republic of Venezuela

Ministry of Popular Power for University Education, Science and Technology

Territorial Polytechnic University of the state of Trujillo “Mario Briceño

Iragorry”

National Administration Training Program

Valera state trujillo

Members

Angy Duran CI 19,795,577

Fiorela Castro CI 21,366,211

Rosa Marin CI 10,910,211

Saio Kamara CI 286.254

Douglas Diaz CI 9,326,186

Valera, November 2016

 Index

Index........................................................................................................................................ii
Introduction............................................................................................................................iii
History of Operations Research..........................................................................................4
Definition of Operations Research......................................................................................5
Characteristics of Operations Research............................................................................6
Application of Operations Research...................................................................................7
Importance of Operations Research...................................................................................8
Rebirth of Operations Research..........................................................................................9
Experience or Seniority Curves.........................................................................................10
Definition...........................................................................................................................10
Example 1........................................................................................................................11
Example 2........................................................................................................................12
Conclusion............................................................................................................................17
Bibliographic references.....................................................................................................18

ii
 Introduction

The palpable difficulty of making decisions has made man look for tools
or methods that allow him to do so in the shortest possible time, thus
minimizing risk factors, based on the use of technology that prevails today.
Such tools that provide consistency for the application of decision making are
found in the mathematical models of “Operations Research”. These models
relate the typical variables submerged in the variants of a company, such as:
organization, sales, purchases, expenses, production, raw materials, costs,
profit, inputs, among others...

For this reason, the present research work will address the initial topic
on operations research, understanding this as the science with which the
complex problems that arise in the management and administration of
organizations can be faced, regardless of their nature. Whatever its activity,
through the application of a scientific methodology through mathematical
models, operations research assesses factors such as chance and risk that
allow predicting and comparing the results of decisions, strategies or
alternative controls.

For this reason, it will be developed below how operations research

arises, its definition and characteristics, in the same way, its application and
the benefit they provide for decision making and finally the experience curve
with its examples.

iii
 History of Operations Research

The beginning of Operations Research dates back to the time of World

War II where the urgent need arose to allocate scarce resources to the
different military operations and the activities within each operation, in the
most effective way, which is why, As the American and English military
administrations called upon large numbers of scientists to apply the scientific
method to strategic and tactical problems, these scientists were asked to
conduct research on military operations. All the efforts of this team of
scientists (who were the first Operations Research team) achieved the victory
of many battles.

After the war ended, the success of Operations Research in war

activities generated great interest in its applications outside the military field.

Since the 1950s, the use of Operations Research had been introduced
in industry, business and government, since then, this discipline has
developed rapidly.

An important factor in the implementation of Operations Research in this

period is the improvement of the techniques available in this area. Many of
the scientists who participated in the war found themselves seeking
substantial results in this field; An outstanding example is the simplex method
for solving linear programming problems, developed in 1947 by George
Dantzing. Many of the tools used in operations research such as linear
programming, dynamic programming, waiting lines, and inventory theory were
developed in the late 1950s.

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 A second important factor for the development of this field was the
advent of the computer revolution; To handle the complex problems related to
this discipline, a large number of calculations are generally required that are
almost impossible to carry out by hand. Therefore the development of the
digital computer was a great help for operations research.

In the 1980s, with the invention of increasingly faster personal

computers accompanied by good software packages to solve operations
research problems, this put the technique within the reach of many people.
Today a whole range of computers are used, from large scale computers to
personal computers for Operations Research.

Definition of Operations Research

Operations research or operations research or operational research

(also known as decision-making theory or mathematical programming) (IO).
It is a modern discipline that consists of the use of mathematical models,
statistics and algorithms, in order to carry out a decision-making process. It
frequently deals with the study of complex real systems, with the aim of
improving (or optimizing) their operation.

Operations research allows the analysis of decision making taking into

account resource scarcity, to determine how a defined objective, such as
profit maximization or cost minimization, can be optimized.

That is why operations research is the science with which the complex
problems that arise in the direction and administration of organizations can be
faced, whatever their activity. By applying a scientific methodology through
mathematical models, operations research assesses factors such as chance

5
and risk that allow predicting and comparing the results of decisions,
strategies or alternative controls.

That is, as its name suggests, operations research means “doing

research on operations,” which is why it is applied within organizations
regardless of the area of work, since operations research aspires to
determine the best course of action or optimal course of the decision problem
taking into account the restriction of limited resources.

Characteristics of Operations Research

Among the most notable characteristics that operations research has

are the following:

 Use the scientific method to investigate the problem at hand. In

particular, the process begins with careful observation and formulation
of the problem including the collection of relevant data.
 Take an organizational point of view. In this way, it attempts to resolve
conflicts of interest between the components of the organization so that
the result is the best for the entire organization.
 It tries to find a better solution (called optimal solution), for the problem
under consideration. Instead of being content with improving the state of
things, the goal is to identify the best possible course of action.
 It is necessary to use the team approach. This team should include
personnel with strong backgrounds in mathematics, statistics and
probability theory, economics, business administration, computer
science, engineering, among others. The team also needs to have the
experience and skills to enable proper consideration of all ramifications
of the problem.

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 It tends to represent the problem quantitatively in order to analyze it and
evaluate a common criterion.

It is of great importance to highlight that to do good operations research

is to have a broad point of view from different perspectives, that is, to obtain a
better result, you must consider all the components that affect or influence the
performance of operations.

Application of Operations Research

Operations Research or Operational Research is a quantitative

methodological tool that allows us to optimally allocate scarce resources and
in general efficiently support the decision-making process. Operations
Research makes use of mathematical models with the objective that the
decisions they provide us are significantly better compared to those decisions
that are made on a qualitative basis.

Some areas of organizations where operations research can be applied

are the following:

Functional areas : A sample of the problems that IoT has studied and
successfully solved in business and industry is below:

Personnel : Automation and cost reduction, personnel recruitment,

classification and assignment to tasks of better performance and production
incentives.

Market and distribution : Product development and introduction,

packaging, prediction of demand and competitive activity, location of
warehouses and distribution centers.

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 Purchases and materials : Quantities and sources of supply, fixed and
variable costs, replacement of materials, replacement of equipment, buying or
renting.

Manufacturing : The planning and control of production, optimal

manufacturing mixes, plant location and size, material traffic and quality
control.

Finance and accounting : Cash flow analysis, required long-term

capital, alternative investments, sampling for security in audits and claims.

Planning : With Pert methods for progress control of any project with
multiple activities, both simultaneous and those that must wait to be
executed.

Importance of Operations Research

The importance of Operations Research lies in being a management

science, focused on making managerial decisions, based on the scientific
method to solve problems. It is used to make decisions within systems,
therefore, the use of mathematical models constitutes its essence; Its
purpose is to help make decisions scientifically, having an unlimited breadth
of applications in business, industry, government and defense.

That is to say, operations research is a modern scientific discipline that

is characterized by the application of theory, methods and special techniques,
to seek the solution of administration, organization and control problems that
occur in the various systems that exist in nature and those created by human
beings, such as organizations that are identified as organized systems,
physical, economic, ecological, educational, social service systems, etc.

8
 The most important objective of the application of operations research is
to support “optimal decision making” in systems and the planning of their
activities.

Rebirth of Operations Research

The roots of operations research go back many decades, when the first
attempts were made to employ the scientific method in the management of a
company. However, the beginning of the activity called operations research is
almost always attributed to military services provided at the beginning of the
Second World War.

Like any developing discipline, operations research has been evolving

not only in its techniques and applications but in the way in which it is
conceptualized by different authors. Currently, there is not only one definition
but many, some too general, others too misleading, Here we select two of the
most accepted and representative ones.

Operations Research deals with the resolution of problems related to

the conduct and coordination of operations or activities within an organization.
Its scope of application is very broad, applying to problems in manufacturing,
transportation, construction, telecommunications, financial planning and
management, health sciences, public services, etc.

In general, it can be applied to all problems related to management,

planning and design. Operations Research includes a very broad set of
techniques aimed at providing quantitative support for decision making. The
method used is the scientific method, and the techniques used are, to a large
extent, mathematical techniques.

9
 That is to say, this science is reborn due to the efficient and effective
results that it obtained since its implementation since the Second World War
and that over the years it has been improved through methods and systems,
thus helping organizations to achieve solution of their problems based on
studies of their operations in order to produce solutions that help us do two
things: maximize profits, utilities and the satisfaction of our clients and/or
minimize costs, distances and times.

Experience or Seniority Curves

Definition

The experience curve is the key instrument to facilitate managers, the

more formal management of the competitive cost structure. The experience
curve offers empirical relationships between changes in the direct
manufacturing cost and the accumulated volume of production. (Hax and
Majluf 1982).

The experience curve shows that the manufacturing cost of a repetitive

task decreases by a fixed percentage each time the cumulative production
volume (in units) doubles. This curve offers an estimate of the potential for
annual cost reduction taking into account different combinations of
experience slippage and market growth rate.

That is to say, this experience curve refers to the analysis of the

industrial production of standardized goods and we see that the cost of
production decreases as experience is added, so this means that the

10
accumulated volume produced increases. From this analysis, the law of
experience was formulated which says: "The unit cost of the added value of a
homogeneous product, measured in constant monetary units, decreases by a
constant percentage with each doubling of experience." In other words, this
law translates and formalizes at the level of the production unit what
economists call at a global level, the improvement of productivity with an
increase in experience that would imply a decrease in costs. But this is a
statistically proven law of observation, but we cannot say that it is a natural
law.

From the following table it is clear that the potential for cost reduction is
a very important element for industries in which the effects of experience
produce an intense influence and which are found in markets with expansion,
that is, when market share increases, production volume increases with a
reduction in cost since the unit fixed cost decreases with the increase in
quantity produced.

Example 1.

Suppose that a company has an experience curve with an index

(maximum production cost) of 120 bolivars and the accumulated production
volume (units) of 140 units.

11
 Experience Curve

Production costs

Output
Reply

1. How much is the production cost if you produce 100 units?

The production cost for 100 units is 60 Bs.
2. How much is the production cost if you produce 10 units?
The production cost for 10 units is 100 Bs.
3. What will be the production quantity, if the production cost is 70 Bs?
The production quantity will be 50 units.
4. What will be the production quantity, if the production cost is 80 Bs?
The production quantity will be 27 units.

Example 2.

12
 A TV manufacturing company produces two models of television sets,
the Astro and the Cosmo. There are two production lines, one for each
model, and two departments are involved in the production of each model.
The capacity of the Astro production line is 70 TV sets per day. The capacity
of the Cosmo line is 50 televisions per day.

In department A, kinescopes are manufactured. In this department, one

hour of work is required for each Astro model and two hours of work for each
Cosmo device. Currently, a maximum of 120 working hours per day can be
allocated for the production of both types of apparatus in department A. In
department B the chassis is built. Here, one hour of work is required for each
Astro television and also one hour for each Cosmo model. Currently 90 hours
of work can be assigned to department B for the production of both models.
The profit contribution is $20 and $10, respectively, for each Astro and
Cosmo television.

1. What will be the maximum production to maximize your profits?

13
 2. Suppose the selling price of the star is $24 per unit and the total cost is
$4 per unit.

Solution 1.

A = daily production of Astro devices (televisions/day)

C = daily production of Cosmo devices (televisions/day)

Objective Function:

Max 20A + 10C (Bs)

Conditional restrictions

A ≤ 70

C ≤ 50

A+2C ≤ 120

A+C ≤90

A, C ≥ 0

Variables A and C must not be negative

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Explanation

From the table it is observed that the production quantity of the Astro
model is 70 units, that is, the maximum established capacity is produced
since it has a high profit and lower use of resources (production hours), while
the Cosmo model only It produces 20 units, its maximum production being 50
units, this is observed since this model has greater use of resources
(production hours) and less profit.

Regarding the maximization of profit (contribution margin), this is

calculated by multiplying (70*20=$1400) + (20*10=$200) = $1600.

The total work hour in department A is 110, where (1*70=70) +

(2*20=40)=110.

The total work hour in department B is 90, where (1*70=70) + (1*20=20)

= 90.

Solution 2

Star

Sale price $24 per unit

Total cost $4 per unit

Profit $20 per unit

Profit = Sales Price – Total Cost

Profit= 24-4= $20

15
 Experience Curve

Star
10

9
Production costs

10 20 30 40 50 60 70 80 90 100
Output
Reply

1. How much is the production cost if you produce 50 units?

The production cost for 50 units is 3 Bs.
2. How much is the production cost if you produce 20 units?
The production cost for 20 units is 5.5 Bs.
3. What will be the production quantity, if the production cost is 2 Bs?
The production quantity will be 95 units.
4. What will be the production quantity, if the production cost is 4 Bs?
The production quantity will be 30 units.

16
 Conclusion

As a result of the investigation regarding operations research, it is

concluded that it was born from the Second World War when the urgent need
arose to allocate scarce resources to the different military operations and the
activities within each operation, in the most efficient way. effective, and for
which Operations Research was used, which serves to make decisions,
always taking into account the scarcity of resources in order to improve or
optimize their functioning.

Subsequently, due to the resounding success of the application of

operations research in the Second World War, its application began in
industries and organizations, since through it all operations are studied and a

17
problem is solved by taking take into account all alternatives and
perspectives, with the implementation of different techniques or methods.

It is of great importance to highlight that currently many industrial

organizations have decided to carry out extensive studies of their operations
in order to make an optimal decision with the primary purpose of maximizing
their operations (profits).

Bibliographic references

Internet consultations

 Operations research
http://www.monografias.com/trabajos70/investigacion-operaciones/
investigacion-operaciones.shtml#ixzz4PEwRMaJ2

http://es.slideshare.net/yajairam1/investigacin-de-operaciones-
21107828

https://es.wikipedia.org/wiki/Investigaci%C3%B3n_de_operaciones

http://www.investigaciondeoperaciones.net/
aplicaciones_de_la_investigacion_de_operaciones.html

 Importance of Operations Research

18
 http://www.gestiopolis.com/importancia-de-la-investigacion-de-
operaciones-en-las-organizaciones/

http://www.cudi.mx/sites/default/files/CUDI/eventos/ITESI/
itesi_Odette_Chavez.pdf

 Applications, operations research in administration

http://nulan.mdp.edu.ar/1851/1/01464.pdf

 Experience curve.

https://prezi.com/vrfs7ozwmyki/economia-de-escala-curva-de-
experiencia/

http://admusach.tripod.com/doc/CurvadelaExperiencia.htm

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