Notes

Program Name: BBA – 4th SEMESTER

Course Name: Fundamentals of Operations Research

Unit Number-1 Unit Name: Introduction to OR

Topic Name – Introduction to OR and Evolution of OR

 Introduction to OR and Evolution of OR

Introduction

Operations Research has gained significant recognition in today's intricate business

landscape. For every complex challenge that arises in industries nowadays, well-defined
Operations Research tools serve as a comforting solution. Decision-making in the current
social and business environment has become increasingly intricate. Organizations routinely
optimize well-structured problems at the operational level, but there is now a greater
emphasis on addressing broader tactical and strategic issues.

To effectively tackle these challenges and lead in the ever-advancing global age, decision-
makers cannot rely solely on their personal experiences, guesswork, or intuitions. The
consequences of making incorrect decisions are severe and costly. Therefore, decision-
makers must understand the relevance and applicability of quantitative methods in the
decision-making process. Operations research is a valuable tool that aids in comparing all
possible alternatives (courses of action) to assess their potential outcomes. Additionally, it
allows for examining the sensitivity of solutions to changes or errors.

Definitions

Operations Research (OR) is a field that combines experimental and applied science to
observe, comprehend, and forecast the behavior of purposeful man-machine systems. OR
professionals actively utilize this knowledge to address real-world issues in business,
government, and society.

The Journal of the Operational Research Society (UK) : Operations Research (OR) as a
scientific discipline that employs advanced analytical methods to make better decisions,
optimize processes, and design systems. OR aims to use mathematical models, statistical
analysis, and computer simulations to solve complex problems and improve the efficiency
and effectiveness of organizations and systems in various domains.
Significance of OR

➢ OR techniques come to the rescue when faced with complex problems that cannot
be solved through normal guessing. These methodologies provide a feasible solution
along with thorough analysis and research.
➢ Even in crucial situations where the problem holds great significance, decision-
makers cannot afford to be lethargic. OR's meticulous and detailed methodologies
leave no room for neglecting any aspect of the problem.
➢ When confronted with entirely new problems lacking precedence, OR plays a crucial
role in assisting analysts. Its extensive array of techniques enables the resolution of
novel and unforeseen challenges.
➢ For repetitive problems, OR proves invaluable by offering analysts ready-made
models or processes to expedite decision-making and enhance the overall process.

Scope of OR

Operations Research's (OR) success in modern business extends across various

sectors, including manufacturing, service operations, logistics, distribution,
transportation, and telecommunication. It is utilized for multiple activities like
scheduling, routing, workflow improvements, eliminating bottlenecks, inventory
control, business process re-engineering, site selection, and operational planning. OR
also plays a crucial role in developing software for material flow analysis and
designing flexible manufacturing facilities, using pattern recognition and graph
theory algorithms. There are ongoing efforts to design re-configurable
manufacturing systems and progressively automate discrete manufacturing
processes. Additionally, OR projects focus on deploying computer-based methods for
assembly line balancing, business process reengineering, capacity planning, pull
scheduling, and setup reduction.
Revenue Management involves the use of OR to forecast demand accurately and
adjust price structures over time to allocate fixed capacity more profitably.
In Supply Chain Management, OR is applied to make decisions related to purchasing,
transporting, manufacturing, distributing, and delivering goods. The primary
 objective is to reduce overall costs and improve the efficiency of customer order
processing. OR's power lies in its ability to comprehensively examine complex supply
chains and search for optimal resource allocation strategies.
In the retail sector, OR groups analyze data from store loyalty card schemes to
provide insights into merchandising policies and profitability improvement. OR
methods are also employed to determine the timing and location of new store
developments.
Financial Services use OR to address issues like portfolio and risk management,
customer service planning, credit risk management, cash flow analysis, and capital
budgeting.
OR supports marketing managers in selecting the appropriate product mix and
making optimal sales resource allocation and assignments.
In Human Resource Management, OR techniques are applied to activities such as
manpower planning, resource allocation, staffing, and scheduling training programs.
OR plays a role in designing Decision Support Systems, managing information
systems, organizational design, control, software process management, and
Knowledge Management.
Production Systems, a subset of operations research, focuses on solving real-world
operational problems in various fields, including manufacturing,
telecommunications, healthcare, facility location and layout, and staffing.

Advantages of Operations Research

o Operations Research facilitates better and quicker decision-making by evaluating the

risks and outcomes of alternative decisions. It enhances the quality and effectiveness
of decisions.
o Operations Research provides in-depth knowledge about specific actions, making it
valuable for preparing future managers.
o Operations Research develops models that offer a logical and systematic approach
to understanding, solving, and controlling problems.
o Operations Research reduces the chances of failure by providing multiple alternative
solutions for a problem, allowing management to choose the best decision. Risks
associated with each solution can be evaluated.
 o It helps optimize resource utilization by suggesting the most effective methods and
efficient ways through techniques like linear programming.
o Operations Research helps identify the limitations and scope of an activity, providing
insights for improvement.
o Managers can use Operations Research to measure employee performance,
compare it with standards, and make informed decisions. Mathematical solutions
obtained from Operations Research can be modified or accepted based on
managerial judgment.
o It enables the suggestion of alternative solutions for achieving optimum profit if
desired by management.

Limitations of Operations Research

o Formulating mathematical models for real-life problems can be challenging, as it

may not always account for all factors involved. The use of computers becomes
necessary for complex computations, which may not be feasible for small
organizations.
o Some problems involve intangible factors, such as human emotions and
relationships, which cannot be quantified. This makes it difficult to determine the
best solution, as such factors are often excluded.
o Operations Research relies on specialists, such as mathematicians or statisticians, to
understand and solve complex problems. Managers without specialized knowledge
may not achieve optimal results.
o Models used in Operations Research are abstractions of real-life situations and may
not capture the full complexity of reality.
o Assumptions need to be made about the nature and importance of certain factors to
construct an Operations Research model.
o In some cases, management may prefer a reasonably good solution without the use
of Operations Research over a slightly better solution provided by the technique,
considering the time and cost involved.
The field of Operations Research (OR) has evolved significantly over the years.

✓ Origins and World War II (1930s-1940s): The origins of OR can be traced back to the
early 20th century when researchers began applying scientific methods to solve
operational and military problems. During World War II, OR techniques were
extensively used by the military for logistics planning, resource allocation, and
decision-making.
✓ Post-War Growth (1950s-1960s): After the war, OR gained recognition in various
industries and sectors. It expanded beyond military applications to address
operational challenges in manufacturing, transportation, and telecommunications.
Researchers developed mathematical models and optimization techniques to
improve efficiency and decision-making.
✓ Development of Optimization Techniques (1960s-1970s): The 1960s and 1970s
marked significant advancements in optimization techniques, such as linear
programming, integer programming, and dynamic programming. These
mathematical approaches provided powerful tools to solve complex problems and
optimize resource allocation.
✓ Expansion into Multiple Disciplines (1980s-1990s): OR expanded its application areas
beyond operations management and logistics to other disciplines such as finance,
marketing, healthcare, and environmental management. The focus shifted from
purely mathematical models to interdisciplinary approaches that integrated OR with
other fields.
✓ Emergence of Simulation and Stochastic Models (1980s-1990s): Simulation
techniques gained prominence during this period, allowing researchers to model and
analyze complex systems with inherent uncertainty. Stochastic programming and
queuing theory also emerged as important tools for analyzing systems with
probabilistic elements.
✓ Decision Support Systems and Analytics (2000s): With advancements in computing
technology and data availability, OR started to play a vital role in decision support
systems and business analytics. Techniques like data mining, machine learning, and
predictive analytics became integral to OR applications.
 ✓ Integration of OR with Operations Management and Supply Chain (2000s-present):
OR techniques have become essential components of modern operations
management and supply chain practices. OR models are used to optimize production
scheduling, inventory management, logistics, and supply chain network design.
✓ Emphasis on Sustainability and Green Operations (2010s-present): With the growing
concern for sustainability and environmental impact, OR has been applied to address
challenges in green operations, renewable energy integration, sustainable supply
chains, and carbon footprint optimization.
✓ Advances in Analytics and Artificial Intelligence (Present): The field of OR continues
to evolve with advancements in analytics, big data, and artificial intelligence.
Techniques like machine learning, optimization algorithms, and prescriptive analytics
are used to solve complex problems and support decision-making.
✓ Today, Operations Research is a multidisciplinary field that integrates mathematics,
statistics, computer science, and management science to optimize systems, improve
decision-making, and solve real-world problems across various industries and
domains. It continues to evolve and adapt to new challenges and emerging
technologies.

Summary

The evolution of Operations Research (OR) has been of paramount importance in shaping
the modern world by providing systematic and analytical approaches to problem-solving
across diverse domains. OR's journey from its roots in military and industrial applications to
its widespread adoption in business, healthcare, logistics, and beyond has revolutionized
decision-making processes. By utilizing mathematical and computational techniques, OR
optimizes complex systems, enhances resource allocation, minimizes costs, and maximizes
efficiency, leading to improved productivity and competitiveness. Moreover, OR's
interdisciplinary nature fosters collaboration between experts from various fields, fostering
innovation and fostering a deeper understanding of complex problems. In essence, the
evolution of OR has been a cornerstone in empowering societies and organizations to make
data-driven, informed choices for a better, more sustainable future.
 QUESTION FOR SELF ASSESSMENT

SELECT THE RIGHT OPTION.

1. Operations Research (OR) originated during which major event?

A. World War I
B. World War II
C. The Industrial Revolution
D. The Great Depression

2. OR saw rapid growth and expansion in the late 1940s and 1950s due to:
A. Advancements in computer technology
B. Emergence of the internet
C. Increase in multinational corporations
D. The space race

3. The development of linear programming, a significant OR technique, was mainly

driven by:
A. Military applications
B. Economic analysis
C. Agricultural studies
D. Medical research

4. The future of Operations Research is expected to involve:

A. More reliance on manual techniques
B. Increased interdisciplinary collaboration
C. A decline in the importance of data analytics
D. Greater reliance on traditional statistical methods

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