Introduction to Operation Research

Operation research was born during Second World War in U.K., and was used for military strategy. A group
of scientists from the field of mathematics, statistics, physical and social sciences planned various military
operations. This team successfully handled many operations entirely and solved related problems of the
operation. This team accomplished the military operation economically successful.
After the World War II, it was started applying in the fields of industry, trade, agriculture, planning and
various other fields of economy.
1. Definitions of operations research
i. Operations research (OR) is an analytical method of problem-solving and decision-making that is
useful in the management of organizations. In operations research, problems are broken down into
basic components and then solved in defined steps by mathematical analysis.
ii. O.R. is the application of modern methods of mathematical science to complex problems involving
management of large systems of men, machines, materials, and money in industry, business,
government and defence. The distinctive approach is to develop a scientific model of the system
incorporating measurement of factors such as chance and risk, to predict and compare the outcome
of alternative decisions, strategies or controls.
iii. It is the application of the scientific methods by scientists and subject specialists to the study of the
given operation. Its purpose is to give administration, a basis for predicting quantitatively the most
effective results of an operation under given set of variable conditions and thereby to provide a
sound basis for “decision-making”.
iv. O.R. is a scientific method of providing executive department with a quantitative basis of decisions
regarding the operations under their control.
v. O.R. is a scientific approach that offers alternative plans to problem solving for management
decisions.
vi. O.R. is a tool for executives in making his decisions by providing him with the needed quantitative
information based on the scientific method of analysis.
vii. O.R. is the application of scientific methods, techniques and tools to problems involving the
operations of a system so as to provide optimum solutions to the problems of the control of the
system.
viii. O.R. is a tool for taking decisions which searches for the optimum results in parity with the overall
objectives and constraints of the organization.
2. Features of O.R.
It can be used for solving different types of problems, such as:
i. Problems dealing with the waiting line, the arrival of units or persons requiring ser-vice.
ii. Problems dealing with the allocation of material or activities among limited facilities.
iii. Equipment replacement problems.
iv. Problems dealing with production processing i.e., production control and material ship-ment.
3. Approach to problem solving
A. Inter-Disciplinary Team Approach:
This requires an inter-disciplinary team including individuals with skills in mathematics, statistics,
economics, engineering, material sciences, computer etc.
B. Wholistic Approach to the System:
While evaluating any decision, the important interactions and their impact on the whole organization against
the functions originally involved are reviewed.
C. Methodological Approach:
O.R. utilizes the scientific method to solve the problem
D. Objective Approach:
O.R. attempts to find the best or optimal solution to the prob-lem under consideration, taking into account
the goals of the organization.
4. Models in Operational Research
Operation Research model is an ideal representation of the real life situation and represents one or more
aspects of reality. Examples of operation research models are: a map, activity charts balance sheets, etc.
Objective of the model is to provide a means for analyzing the behavior of the system for improving its
performance.
Classification of Models:
Models can be classified based on following factors:
A. By degree of Abstraction:
i. Mathematical models.
ii. Language models.
B. By Function:
i. Descriptive models.
ii. Predictive models.
iii. Normative models for repetitive problems.
C. By Structure:
i. Physical models.
ii. Analogue (graphical) models.
iii. Symbolic or mathematical models.
D. By Nature of Environment:
i. Deterministic models.
ii. Probabilistic models.
E. By the Time Horizon:
i. Static models.
ii. Dynamic models.
Characteristics of a Good Model:
 i. Assumptions should be simple and few.
ii. Variables should be as less as possible.
iii. It should be able to integrate the system environmental changes without change in its framework.
iv. It should be easy to construct.
5. Modelling in Operational Research
Operation Research, is a scientific approach for decision-making, and therefore must follow following
steps:
A. Formulating the Problem:
The problem must be first clearly defined. It is common to start the O.R. study with tentative formulation
of the problem, which is reformulated over and again during the study. The study must also consider
economical aspects.
While formulating the O.R. study, analyists must analyse following major components:
i. The environment: Environment involves physical, social and economical factors which are likely
to affect the problem under consideration. O.R. team or analysts must study the organisation
contents including men, materials, machines, suppliers, consumers, competitors, the government
and the public.
ii. Decision-makers: Operation analyst must study the decision-maker and his rela-tionship to the
problem at hand.
iii. Objectives: Considering the problem as whole, objectives should be defined.
iv. Alternatives: The O.R. study determines as to which alternative course of action is most effective
to achieve the desired objectives. Expected reactions of the competitors to the alternative must also
be considered.
B. Deriving Solution:
Models are used to determine the solution either by simulation or by mathematical analysis. Mathematical
analysis for deriving optimum solution includes ana-lytical or numerical procedure, and uses various
branches of mathematics.
C. Testing the Model and Solution:
A properly formulated and correctly manipulated model is useful in predicting the effect of changes in
control variables on the overall system effectiveness. The validity of the solution is checked by comparing
the results with those ob-tained without using the model.
D. Establishing Controls over the Solution:
The solution derived from a model remains effective so long as the uncontrolled variables retain their values
and the relationship. The solution goes out of control, if the values of one or more variables vary or
relationship between them undergoes a change. In such circumstances the models need to be modified to
take the changes into account.
E. Implementing the Solution:
Solution so obtained should be translated into operating procedure to make it easily understandable and
applied by the concerned persons. After apply-ing the solution to the system, O.R. group must study the
response of the system to the changes made.
6. Methods for simplifying Operation Research Models:
While constructing the model, efforts should be made to simplify them, but only up to the extent so that
there is no significant loss of accuracy.
Some of the commonly used steps are:
i. Omitting certain variables.
ii. Aggregating (or grouping) variables.
iii. Changing the nature of variables e.g., considering variables as constant or continuous.
iv. Changing relationship between variables i.e., considering them as linear or straight line.
v. Modify constraints.
Methods of solving Operation Research:
A. Inventory Control Models: Operation Research study involves balancing inventory costs against one
or more of the following costs:
i. Shortage costs.
ii. Ordering costs.
iii. Storage costs.
iv. Interest costs.
This study helps in taking decisions about:
i. How much to purchase.
ii. When to order.
iii. Whether to manufacture or to purchase i.e., make and buy decisions.
The most well-known use is in the form of Economic Order Quantity equation for finding economic lot
size.
B. Waiting Line Models:
C. These models are used for minimising the waiting time and idle time together with the costs associated
therewith.
Waiting line models are of two types:
i. Queuing theory, which is applicable for determining the number of service facilities and/or the
timing of arrivals for servicing.
ii. Sequencing theory which is applicable for determining the sequence of the servicing.
D. Replacement Models:
These models are used for determining the time of replacement or maintenance of item, which may either:
i. Become obsolete, or
ii. Become inefficient for use, and
iii. Become beyond economical to repair or maintain.
 E. Allocation Models:
These models are used to solve the problems arising when:
i. There are number of activities which are to be performed and there are number of alternative ways
of doing them,
ii. The resources or facilities are limited, which do not allow each activity to be performed in best
possible way. Thus these models help to combine activities and available resources so as to
optimise and get a solution to obtain an overall effectiveness.
F. Competitive Strategies:
Such type of strategies are adopted where, efficiency of deci-sion of one agency is dependent on the decision
of another agency. Examples of such strategies are game of cards or chess, fixing of prices in a competitive
market where these strategies are termed as “theory”.
G. Linear Programming Technique:
These techniques are used for solving operation problems having many variables subject to certain
restrictions. In such problems, objectives are—profit, costs, quantities manufactured etc. whereas
restrictions may be e.g. policies of government, capacity of the plant, demand of the product, availability
of raw materials, water or power and storage capacity etc.
H. Sequencing Models:
These are concerned with the selection of an appropriate sequence of performing a series of jobs to be done
on a service facility or machine so as to optimise some efficiency measure of performance of the system.
I. Simulation Models:
Simulation is an experimental method used to study behaviour over time.
J. Network Models:
This is an approach to planning, scheduling and controlling complex projects.
7. Phases in Operation Research Study
The procedure for making decisions with the OR study generally involves the following phases:
A. Judgment Phase
i. Determination of operation.
ii. Determination of objectives.
iii. Determination of effectiveness of measures.
iv. Determination of type of problem, its origin and causes.
B. Research Phase:
i. Observation and data collection for better understanding of the problem.
ii. Formulation of relevant hypothesis and models.
iii. Analysis of available information and verification of hypothesis.
iv. Production and generation of results and consideration of alternatives.
C. Action Phase:
 i. Recommendations for remedial action to those who first posed the problem, this includes the
assumptions made, scope and limitations, alternative courses of ac-tion and their effect.
ii. Putting the solution to work: implementation.9
8. Application Areas of O.R.
A. Finance, Budgeting and Investment:
i. Cash flow analysis, long range capital requirement, investment portfolios, divi-dend policies,
ii. Claim procedure, and
iii. Credit policies.
B. Marketing:
i. Product selection, competitive actions,
ii. Number of salesmen, frequencies of calling on, and
iii. Advertising strategies with respect to cost and time.
C. Purchasing
i. Buying policies, varying prices,
ii. Determination of quantities and timing of purchases,
iii. Bidding policies,
iv. Replacement policies, and
v. Exploitation of new material resources.

D. Production Management:
i. Physical distribution: Location and size of warehouses, distribution centres and retail outlets,
distribution policies.
ii. Facilities Planning: Number and location of factories, warehouses etc. Loading and unloading
facilities.
iii. Manufacturing: Production scheduling and sequencing stabilisation of produc-tion, employment,
layoffs, and optimum product mix.
iv. Maintenance policies, crew size.
v. Project scheduling and allocation of resources.
E. Personnel Management:
i. Mixes of age and skills,
ii. Recruiting policies, and
iii. Job assignments.
F. Research and Development:
i. Areas of concentration for R&D.
ii. Reliability and alternate decisions.
iii. Determination of time-cost trade off and control of development projects.
9. Application areas of Operation Research:
A. Distribution or Transportation Problems:
In such problems, various centres with their demands are given and various warehouses with their stock
positions are also known, then by using linear programming technique, we can find out most economical
distribution of the products to various centres from various warehouses.
B. Product Mix:
These techniques can be applied to determine best mix of the products for a plant with available resources,
so as to get maximum profit or minimum cost of produc-tion.
C. Production Planning:
These techniques can also be applied to allocate various jobs to different machines so as to get maximum
profit or to maximise production or to minimise total production time.
D. Assignment of Personnel:
Similarly, this technique can be applied for assignment of different personnel with different aptitude to
different jobs so as to complete the task within a minimum time.
E. Agricultural Production:
We can also apply this technique to maximise cultivator’s profit, involving cultivation of number of items
with different returns and cropping time in different type of lands having variable fertility.
F. Financial Applications:
Many financial decision making problems can be solved by using linear programming technique.
Some of them are:
i. To select best portfolio in order to maximise return on investment out of alternative investment
opportunities like bonds, stocks etc. Such problems are generally faced by the managers of mutual
funds, banks and insurance companies.
ii. In deciding financial mix strategies, involving the selection of means for financing firm, projects,
inventories etc.
10. Limitations of Operations Research:
i. These do not take into account qualitative and emotional factors.
ii.These are applicable to only specific categories of decision-making problems.
iii.
These are required to be interpreted correctly.
iv.Due to conventional thinking, changes face lot of resistance from workers and some-times even
from employer.
v. Models are only idealised representation of reality and not be regarded as absolute.