CHAPTER ONE: OPERATIONS RESEARCH (OR)

Introduction to Operations Research

1.1. Definition of Operations Research

If you ask, what Operations research is? The answer depends on individual objective. Say for example
a student may say that the Operations research is technique used to obtain first class marks in the
examination. If you ask a businessman the same question, he may say that it is the technique used for
getting higher profits. Another businessman may say it is the technique used to capture higher market
share and so on. Like this each individual may define in his own way depending on his objective.
Each and every definition may explain one or another characteristic of Operations Research but none
of them explain or give a complete picture of Operations research. But in the academic interest some
of the important definitions are discussed below.
(a) Operations Research is the art of winning wars without actually fighting. – Aurther Clarke.
This definition does not throw any light on the subject matter, but it is oriented towards warfare. It
means to say that the directions for fighting are planned and guidance is given from remote area,
according to which the war is fought and won.
(b) Operations Research is the art of giving bad answers to problems where otherwise worse
answers are given. - T.L. Satty.
This definition covers one aspect of decision-making, i.e., choosing the best alternative among the list
of available alternatives. It says that if the decisions are made on guesswork, we may face the worse
situation. But if the decisions are made on scientific basis, it will help us to make better decisions.
Hence this definition deals with one aspect of decision-making and not clearly tells what operations
research is.
(c) In the USA, the OR Society of America says more briefly; "OR is concerned with scientifically
deciding how to best design and operate man-machine systems, usually under conditions requiring the
allocation of scarce resources".
(d) Operations Research is the application of scientific methods, techniques and tools to operation of
a system with optimum solution to the problem. - Churchman, Ackoff and Arnoff.
This definition clearly states that the operations research applies scientific methods to find an
optimum solution to the problem of a system. A system may be a production system or information
system or any system, which involves men, machine and other resources. We can clearly identify that
this definition tackles three important aspects of operations research i.e. application of scientific
methods, study of a system and optimal solution.
(e) Operations Research is the application of the theories of Probability, Statistics, Queuing, Games,
Linear Programming etc., to the problems of War, Government and Industry.
This definition gives a list of various techniques used in Operations Research by various managers to
solve the problems under their control. A manager has to study the problem, formulate the problem,
identify the variables and formulate a model and select an appropriate technique to get optimal
solution. We can say that operations research is a bunch of mathematical techniques to solve problems
of a system.
(f) “Operations Research is a systematic analysis of a problem through scientific methods ,carried out
by appropriate specialists, working together as a team ,constituted at the instance of management for
the purpose of finding an optimum and the most appropriate solution ,to meet the given objective
under a given set constraints.”

(g) Operations Research is the application of the methods of science to complex problems arising in
the direction and management of large systems of men, materials and money in industry, business,
Government and defense. The distinctive approach is to develop a scientific model of the system,
incorporating measurements of factors such as chance and risk, with which to predict and compare the
outcome of alternative decisions, strategies or controls. The purpose is to help management to
determine its policy and actions scientifically. - Operations Society of Great Britain.
The above definition is more elaborate and says that operations research applies scientific methods to
deal with the problems of a system where men, material and other resources are involved and the
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system under study may be industry, defense or business etc, gives this definition. It also say that the
manager has to build a scientific model to study the system which must be provided with facility to
measure the outcomes of various alternatives under various degrees of risk, which helps the managers
to take optimal decisions.
1.2. HISTORY OF OPERATIONS RESEARCH
OR is a relatively new discipline whereas 70 years ago it would have been possible to study
mathematics, physics or engineering (for example) at university it would not have been possible to
study OR, indeed the term OR did not exist then. It was really only in the late 1930's that operational
research began in a systematic fashion, and it started in the UK. As such I thought it would be
interesting to give a short history of OR and to consider some of the problems faced (and overcome)
by early OR workers.

Although a number of the mathematical techniques that make up management science date to the turn
of the twentieth century or before, the field of management science itself can trace its beginnings to
military operations research (OR) groups formed during World War II in Great Britain circa 1939.
These OR groups typically consisted of a team of about a dozen individuals from different fields of
science, mathematics, and the military, brought together to find solutions to military-related problems.
One of the most famous of these groups called "Blackett's circus" after its leader, Nobel laureate P. M.
S. Blackett of the University of Manchester. Blackett's group and the other OR teams made significant
contributions in improving Britain's early-warning radar system (which was instrumental in their
victory in the Battle of Britain), aircraft gunnery, antisubmarine warfare, civilian defense, convoy size
determination, and bombing raids over Germany. Hence, Battle of the Atlantic considers the origins
of OR in the British military and looks at how OR helped to ensure the safety of merchant ships
during the "Battle of the Atlantic" in World War II.

Operations Research is a ‘war baby’. It is because, the first problem attempted to solve in a
systematic way was concerned with how to set the time fuse bomb to be dropped from an aircraft on
to a submarine. In fact the main origin of Operations Research was during the Second World War.
At the time of Second World War, the military management in England invited a team of scientists to
study the strategic and tactical problems related to air and land defense of the country. The problem
attained importance because at that time the resources available with England was very limited and
the objective was to win the war with available meager resources. The resources such as food,
medicines, ammunition, manpower etc., were required to manage war and for the use of the
population of the country. It was necessary to decide upon the most effective utilization of the
available resources to achieve the objective. It was also necessary to utilize the military resources
cautiously. Hence, the Generals of military, invited a team of experts in various walks of life
such as scientists, doctors, mathematicians, business people, professors, engineers etc., and
the problem of resource utilization is given to them to discuss and come out with a feasible
solution. These specialists had a brain storming session and came out with a method of
solving the problem, which they coined the name “Linear Programming”. This method
worked out well in solving the war problem. As the name indicates, the word Operations is
used to refer to the problems of military and the word Research is use for inventing new
method. As this method of solving the problem was invented during the war period, the
subject is given the name ‘operations research’ and abbreviated as ‘O.R.’

Hence, the most strategic contribution to the course of the war made by OR (as the aircraft and pilots
saved were consequently available for the successful air defense of Britain, the Battle of Britain).
After the World War there was a scarcity of industrial material and industrial productivity reached the
lowest level. Industrial recession was there and to solve the industrial problem the method linear
programming was used to get optimal solution. From then on words, lot of work done in the field
and today the subject of O.R. have numerous methods to solve different types of problems.

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After World War II the contributions of the OR groups were considered so valuable that the Army,
Air Force, and Navy set up various agencies to continue research of military problems. Two of the
more famous agencies were the Navy's Operations Evaluation Group at MIT and Project RAND,
established by the Air Force to study aerial warfare. Many of the individuals who developed
operations research and management science techniques did so while working at one of these agencies
after World War II or as a result of their work there.

As the war ended and the mathematical models and techniques that were kept secret during the war
began to be released, there was a natural inclination to test their applicability to business problems. At
the same time, various consulting firms were established to apply these techniques to industrial and
business problems, and courses in the use of quantitative techniques for business management began
to surface in American universities. In the early 1950s the use of these quantitative techniques to solve
management problems became known as management science, and it was popularized by a book of
that name by Stafford Beer of Great Britain.

The successes achieved by the British OR groups were observed by two Americans working for the
U.S. military, Dr. James B. Conant and Dr. Vannevar Bush, who recommended that OR teams be
established in the U.S. branches of the military. Subsequently, both the Air Force and Navy created
OR groups.

After seeing the success of British military, the United States military management started applying
the techniques to various activities to solve military, civil and industrial problems. They have given
various names to this discipline. Some of them are Operational Analysis, Operations Evaluation,
Operations Research, System Analysis, System Evaluation, Systems Research, Quantitative methods,
Optimization Techniques and Management Science etc. But most widely used one is operations
research. In industrial world, most important problem for which these techniques used is how to
optimize the profit or how to reduce the costs. The introduction of Linear Programming and Simplex
method of solution developed by American Mathematician George B. Dontzig in 1947 given an
opening to go for new techniques and applications through the efforts and co-operation of interested
individuals in academic field and industrial field.

Today the scenario is totally different. A large number of Operations Research consultants are
available to deal with different types of problems. -The first use of OR techniques in India, was in the
year] 1949 at Hyderabad, where at the Regional Research Institute, an independent operations
research unit was set-up. To identify evaluate and solve the problems related to planning, purchases
and proper maintenance of stores, an operations research unit was also setup at the Defense Science
Laboratory use of OR tools and techniques was done during India's second five year Plan in demand
forecasting and suggesting the most suitable scheme which would lead to the overall growth and the
development of the economy. Even today, Planning Commission utilizes some of these techniques in
framing policies and sector-wise performance evaluation.

In addition, in India also, we have O.R. Society of India (1959) to help in solving various problems.
Today the Operations Research techniques are taught at High School levels. To quote some Indian
industries, which uses Operations Research for problem solving are: M/S Delhi Cloth Mills, Indian
Railways, Indian Airline, Hindustan Lever, Tata Iron and Steel Company, Fertilizers Corporation of
India and Defense Organizations? In all the above organizations, Operations Research people act as
staff to support line managers in taking decisions. In one word we can say that Operations Research
play a vital role in every organization, especially in decision-making process.
Hence, the objective of operations research is: to provide a scientific basis to the decision maker for
solving the problems involving the interaction of various components of an organization by
employing a team of scientists from various disciplines, all working together for finding a solution
which is in the best interest of the organization as a whole. The best solution thus obtained is known
as optimal decision.

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1.3 Nature and Significance of Operation Research

Operations research is inter-disciplinary in nature and requires a team approach to the solution in a
problem. In addition OR has the following merits:

o It provides a tool for scientific analysis and provides solution for various business problems.
o It enables proper deployment and optimum allocation of scarce resources.
o It helps in minimizing waiting and servicing costs.
o It enables the management to decide when to buy and how much to buy through the technique of
inventory planning.
o It helps in evaluating situations involving uncertainty.
o It enables experimentation with models, thus eliminating the cost of making errors while
experimenting with reality.
o It allows quick and inexpensive examination of large numbers of alternatives.
o In general OR facilitates and improves the decision making process.
1.4. Characteristics of Operations Research/ Salient Features of OR

(a) Operations Research is an interdisciplinary team approach.

The problems an operations research analyst face is heterogeneous in nature, involving the
number of variables and constraints, which are beyond the analytical ability of one person. Hence
people from various disciplines are required to understand the operations research problem, who
applies their special knowledge acquired through experience to get a better view of cause and
effects of the events in the problem and to get a better solution to the problem on hand. This type
of team approach will reduce the risk of making wrong decisions. It is interdisciplinary approach
for solving problems and it uses the knowledge and experience of experts in various fields.
(b) Operations Research increases the creative ability of the decision maker.
Operations Research provides manager mathematical tools, techniques and various models to
analyze the problem on hand and to evaluate the outcomes of various alternatives and make an
optimal choice. This will definitely helps him in making better and quick decisions. A manager,
without the knowledge of these techniques has to make decisions by thumb rules or by guess
work, which may click some times and many a time put him in trouble. Hence, a manager who
uses Operations Research techniques will have a better creative ability than a manager who does
not use the techniques.

(c) Operations Research is a systems approach.

A business or a Government organization or a defense organization may be considered as a system
having various sub-systems. The decision made by any sub-system will have its effect on other sub-
systems. Say for example, a decision taken by marketing department will have its effect on production
department. When dealing with Operations Research problems, one has to consider the entire system,
and characteristics or sub- systems, the inter-relationship between sub-systems and then analyze the
problem, search for a suitable model and get the solution for the problem.
(d) Operations Research uses Scientific Methods for making decisions. Operations research
provides scientific base for decision-making and provide scientific substitute for judgment and
intuition. As operations research has scientific approach, it improves the quality of answers to the
problems.
(e) OR is a management tool in the hands of a manager to take a decision: the philosophy is that
decisions have to be made.
(f) An “applied research” aims at finding a solution for an immediate problem facing a society,
industry or a business enterprise .This is not “fundamental research”

(g) A decision-oriented research, using scientific methods, for providing management a quantitative
basis for taking decision regarding operations under its control. It is applied decision theory that uses
scientific, mathematical and logical means to take decisions. In other words, OR is the application of
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scientific methods/thinking to decision making. It uses a quantitative (explicit, articulated) approach
will lead (on average) to better decisions than using non-quantitative (implicit, unarticulated)
approaches.

1.5. The Methodology of OR:-When OR is used to solve a problem of an organization; the following
seven step procedure should be followed: (1) observation, (2) definition of the problems, (3) model
construction, (4) model solution, and (5) implementation of solution results.
1. Observation- The first step in a problem solving exercises in OR is the identification of a
problem that exists in the system. This requires that the system be continuously and closely
observed so that problems can be identified as soon as they occur.
2. Definition of the Problem
Once it has determined that a problem exists, it must be clearly and concisely defined. The problem
definition includes the limits of the problems and the degree to which it pervades other organs of the
system. A requirement of problem definition is that the goals (or objective) must be clearly defined
which helps to focus attention on what the problem is.
3. Model Construction
An OR model is an abstract representation of an existing problem situation. It can be in the form of a
graph or chart, but mostly, an OR model consists of a set of mathematical relationship. In OR
terminology, these are called objective function and constraints.
4. Model Solution
Once models are constructed, they are solved using the OR techniques, presented in the next section.
Actually it is difficult to separate model construction and solution in most cases, since OR technique
usually applies to a specific type of model. Thus, the model type and solution method are both part of
the OR technique.
5. Interpret the solution and prepare the information in such a form that it is meaningful,
intelligible and quantitative. This is, translate it into a decision.
6. Implementation of Results
The results of an OR technique are information which helps in making a decision. The beauty of OR
process lies in obtaining, the results which are implement able or we call it a feasible whole exercise
will go waste.
The analyst aids in implementing the recommendations. The system must be constantly monitored
(and updated dynamically as the environment changes) to ensure that the recommendations are
enabling decision maker(s) to meet her/his/their objectives.

7. Establishing control over the results

1.6. Model and modeling in Operations Research

A model is a relationship among specified variables and parameters of the system. It is also a
representation of real objects/situations. Model is an abstract (mathematical) representation of a
problem
1.7. Types of Models
Models are also categorized depending on the structure, purpose, nature of environment, behavior, by
method of solution and by use of digital computers.
(a) Classification by Structure
(i) Iconic Models: These models are scaled version of the actual object. For example a toy of a car is
an iconic model of a real car. It explains the features of the actual object. In fact a globe is an iconic
model of the earth. These models may be of enlarged version or reduced version. In fact it is a
descriptive model giving the description of various aspects of real object. As The advantages of these
models: are It is easy to work with an iconic model in some cases, these are easy to construct. It is a
representation of the real object. Example: The structure of an atom, Model of an airplane,
Photograph of a machine, Layout drawing of a factory, Glob
(ii) Analogue Model: In this model one set of properties are used to represent another set of
properties. Say for example, blue color generally represents water. Whenever we want to show water
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source on a map it is represented by blue color. Contour line on the map is also analog model. Many a
time we represent various aspects on graph by different colors or different lines all these are analog
models. These are also not much used in operations research. The best examples are warehousing
problems and layout problems.
These are abstract models mostly showing inter and intra relationships between two or more
parameters.

For example: It may show the relationship between an independent variable (input) with that of a
dependent variable (output).

(iii) Symbolic Models or Mathematical Models: In these models the variables of a problem is
represented by mathematical symbols, letters etc. To show the relationships between variables and
constraints we use mathematical symbols. These models are used very much in operations research.
Examples of such models are Resource allocation model, transportation model etc.
(b) Classification by utility/function/purpose
Depending on the use of the model or purpose of the model, the models are classified as D escriptive,
Predictive and Prescriptive models.
(i) Descriptive model: The descriptive model simply explains certain aspects of the problem or
situation or a system so that the user can make use for his analysis. It will not give full details and
clear picture of the problem for the sake of scientific analysis.
(ii) Predictive model: These models basing on the data collected, can predict the approximate results
of the situation under question. For example, basing on your performance in the examination and the
discussions you have with your friends after the examination and by verification of answers of
numerical examples, you can predict your score or results.
(iii) Prescriptive models: We have seen that predictive models predict the approximate results. But if
the predictions of these models are successful, then it can be used conveniently to prescribe the
courses of action to be taken. Prescriptive models prescribe the courses of action to be taken by the
manager to achieve the desired goal.
(c) Classification by nature of environment
Depending on the environment in which the problem exists and the decisions are made, and
depending on the conditions of variables, the models may be categorized as Deterministic models and
Probabilistic models.
(i) Deterministic Models: In this model the operations research analyst assumes complete certainty
about the values of the variables and the available resources and expects that they do not change
during the planning horizon. All these are deterministic models and do not contain the element of
uncertainty or probability. The problems we see in Linear Programming, assumes certainty regarding
the values of variables and constraints hence the Linear Programming model is a Deterministic model.
(ii) Probabilistic or Stochastic Models: In these models, the values of variables, the pay offs of a
certain course of action cannot be predicted accurately because of element of probability. It takes into
consideration element of risk into consideration. The degree of certainty varies from situation to
situation. A good example of this is the sale of insurance policies by Life Insurance Companies to its
customers. Here the failure of life is highly probabilistic in nature. The models in which the pattern of
events has been compiled in the form of probability distributions are known as Probabilistic or
Stochastic Models.
(d) Classification depending on the behavior of the problem variables/ Time reference
Depending on the behavior of the variables and constraints of the problem they may be classified as
Static Models or Dynamic models.
(i) Static Models: These models assume that no changes in the values of variables given in the
problem for the given planning horizon due to any change in the environment or conditions of the
system. All the values given are independent of the time. Mostly, in static models, one decision is
desirable for the given planning period.
(ii) Dynamic Models: In these models the values of given variables goes on changing with time or
change in environment or change in the conditions of the given system. Generally, the dynamic
models then exist as series of interdependent decisions during the planning period.
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(e) Classification depending on the method of getting the solution
We may use different methods for getting the solution for a given model. Depending on these
methods, the models are classified as Analytical Models and Simulation Models.
(i) Analytical Models: The given model will have a well-defined mathematical structure and can be
solved by the application of mathematical techniques. We see in our discussion that the Resource
allocation model, Transportation model, Assignment model, sequencing model etc. have well defined
mathematical structure and can be solved by different mathematical techniques. For example,
Resource allocation model can be solved by Graphical method or by Simplex method depending on
the number of variables involved in the problem. All models having mathematical structure and can
be solved by mathematical methods are known as Analytical Models.
(ii) Simulation Models: The meaning of simulation is imitation. These models have mathematical
structure but cannot be solved by using mathematical techniques. It needs certain experimental
analysis. To study the behavior of the system, we use random numbers. More complex systems can be
studied by simulation. Studying the behavior of laboratory model, we can evaluate the required values
in the system. Only disadvantage of this method is that it does not have general solution method.
(iii) Heuristic models: these models employ some sets of rules which, though perhaps not optimal,
do facilitate solutions of problems when applied in a consistent manner.
1.8. Operations Research Techniques:

There are various techniques used in O.R. for the practice of management science. Some of these are
listed here:

o Probability techniques
o Linear Programming
o Transportation algorithm
o Assignment problems
o Queuing Theory
o PERT/CPM Method etc/Network techniques
o Inventory techniques
OR techniques are ’application specific’. Maximum benefit can be derived from selecting most
appropriate techniques for each specific area or problem. Appropriate selection of OR is an equally
important task. Each technique has its own advantages and limitations .In all such cases, the ability of
the Manager is tested in appropriate selection of OR technique.