OPERATIONS RESEARCH

AN OVERVIEW

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 Syllabus
• UNIT I Introduction to OR, Overview of OR, OR in
Managerial Decision making, QA approach to Decision
making, Different techniques of OR.
Introduction to Linear Models, Assumptions and
Formulation of LP Problems, Solutions to LPP: Graphical
method & Simplex method, Types of possible solutions to
LPP, Degeneracy, Sensitivity and Post optimality Analysis,
The dual of LPP

• UNIT II Transportation Problem, Different methods of

obtaining initial solution, Steps to the optimal solution, Post
optimality Analysis
The Transshipment model, The Assignment problem,
Hungarian method of solution
Contd..
• UNIT III Decision Analysis: Introduction, Steps in Decision
Making, Types of Decision Making Environments, Decision Making
under risk, Decision trees, Sensitivity Analysis.
Game theory: Introduction, Two Person Zero Sum Game, Solution
to Games with saddle points, Pure and Mixed Strategy Solutions,
Principles of Dominance, Graphical Method for (2 x n) and (m x 2)
games, Linear Programming Model for m x n games.
Inventory Models: Introduction, Deterministic Models, The Classical
EOQ model, Model with Price Breaks, The Production Build up
Model and Model with Planned Shortages.
Introduction to Stochastic Models, Safety Stock.

• UNIT IV Queuing models: Structure and components of a

queuing process, Examples of real queuing systems, Queuing
theory assumptions , disciplines and notations, Single and Multi
Channel queuing models.
Simulation: Introduction, Types of Simulation, Phases of
Simulation Model, Even-type Simulation, Generation of Random
Numbers, Monte-Carlo Simulation, Applications.
 Contents
1. Chapter Overview
2. Introduction
3. Various Definitions of OR
4. Quantitative approach to decision making
5. History of OR
6. Nature & Characteristic features of OR
7. Main Phases of OR
8. Major tools & techniques of OR
9. Overview of OR techniques
10. OR in Decision making
11. Scope of OR in Management
12. Limitations of OR
 Chapter Overview
• Decision making is an integral part of the process of
management
• Competence as a decision-maker distinguishes a good
manager from others
• Broadly speaking, decision making involves choosing a
course of action from various available alternatives
• Job of a manager, in the process of selecting from among
available alternatives, is facilitated by the application of
appropriate quantitative techniques when and to the extent
a problem is quantified
• This approach of decision-making is known by several
names like operations research, management science,
quantitative analysis etc
Contd…
Contents of this chapter will help a manager understand
questions like the following:

1. What is OR and how has it evolved? What are its

characteristic features?
2. What is the methodology used in OR?
3. What are the different types of models, & what is the
use of mathematical models in OR?
4. What are different classifications of solutions?
5. What is sensitivity analysis?
6. How quantitative analysis is an integral part of modern
computer-based information systems & how are
quantitative tools used in each of the subsystems?
 Introduction
• Decision making is an integral part of management
• The environment in which the management has to
operate now a days is complex & fast changing
• There is a greater need for supplementing the art of
decision making by systematic and scientific methods
• The decision makers in the business world today
must understand the scientific methodology of
making decisions. This calls for
– Defining the problem clearly
– Collecting pertinent facts
– Analyzing the facts thoroughly
– Deriving & implementing the solution
 Definitions of OR
• OR has been defined so far in various ways. Few
opinions about the definition of OR which have been
changed according to the development of the subject
has been given below:
1. OR is a scientific method of providing executive
departments with a quantitative basis for decision
regarding the operations under their control.
2. OR is a scientific method of providing executive with
an analytical and objective basis for decisions.
3. OR can be considered to be an attempt to study those
operations of modern society which involved
organizations of men or of men and machines.
4. OR is an application of Scientific methods, techniques
and tools to problems involving the operations of
systems so as to provide these in control of the
operations with optimum solutions to the problem.
5. OR is the art of giving bad answers to problems to
which otherwise worse answers are given.
6. OR is management of activity pursued in 2
complementary ways – one half by free and bold
exercise of commonsense, and other half by the
application of a repertoire or well established
precreated methods and techniques.
7. OR is the application of scientific methods,
techniques and tools to problems involving the
operations of systems so as to provide those in
control of operations with optimum solution to the
problems.
8. OR is an ART of giving BAD answers to problems
where otherwise WORSE answers are given.
Quantitative approach to Decision making: OR

• A business manager attempts to choose the most effective

course of action in the given circumstances in attaining the goals
of the organization
• Various types of decision making situations that a manager might
encounter can be listed as follows:
1. Decisions under certainty, where all facts are known fully and
for sure, where the event that actually would occur is not
known but probabilities can be assigned to various possible
occurrences
2. Decisions for one time period only, called static decisions, or a
sequence of interrelated decisions made either simultaneously
or over several time periods, called dynamic decisions
3. Decisions where the opponent is nature (digging an oil well) or
a rational opponent (setting the advertising strategy when the
actions of competitors have to be considered)
Contd…
• The elements of any decision are:
– A decision maker, who could be individual,
organization, group or society
– A set of possible actions to solve the decision
problem
– A set of possible states that might occur
– Set of consequences (pay-off) associated with various
combinations of courses of action
– Relationship between pay-off and the values of
decision maker
 History of OR
• It is difficult to mark the beginning of the OR
• But OR, as it exists today, was born during the second world war
when the British military called upon a group of scientists to
examine the strategies & tactics of various military operations,
with the intention of efficient allocation of scarce resources for the
war effort
• Among the investigations carried out by them included
determination of
– Optimum convoy size to minimize losses from submarine
attacks
– Optimal way to deploy radar units in order to maximize
potential coverage against possible enemy attacks and
– Invention of new flight patterns, & the determination of the
correct color of aircraft in order to minimize the chance of
detection by the submarines
Contd…
• After the war, OR was adopted by industry & some of the techniques
applied for war were successfully transferred & assimilated for use in
the industrialized sector
• Dramatic development and refinement of techniques of OR & advent
of digital computers contributed to growth & application of OR in post-
war period
• In 1950s, OR was mainly used to handle management problems that
were clear-cut, well-structured and repetitive in nature
– They were typically tactical & operational in nature, such as
inventory control, resource allocation, scheduling of construction
projects, & so on
• Since 1960s, however, formal approaches have been increasingly
adopted for less well-structured planning problems as well
– These problems are strategic in nature & are the ones that affect
the future of the organization like development of corporate
planning models, relating to financial aspects of business etc
• In Business & Industry, OR helps the management determine their
tactical & strategic decisions more scientifically
Nature & Characteristic Features of OR
• A classical definition of OR is given by Churchman et al., “…
OR is the application of scientific methods, techniques & tools
to problems involving the operations of systems so as to
provide those in control of operations with optimum solutions
to the problems”
• Thus, may be regarded as the scientific method employed for
problem solving & decision making by management

Significant features of OR are as follows:

1. Decision Making: OR is addressed to managerial decision

making. it can be considered a general systematic process
consisting of following steps:
a) Define the problem & establish the criterion (Maximization
of profits, utility & minimization of costs)
b) Select the alternative courses of action for consideration
c) Determine the model to be used
d) Evaluate the alternatives & choose the one that is optimal
Contd…
2. Scientific Approach: OR employs scientific methods for problem
solving. It is a formalized process of reasoning & consists of
following steps:
a) Problem to be analyzed is defined clearly & conditions for
observations are determined
b) Observations are made under varying conditions to determine
the behavior of the system
c) On the basis of observations, a hypothesis describing how the
various factors involved are believed to interact & the best
solution to the problem is formulated
d) To test the hypothesis, an experiment is designed & executed.
Observations are made and measurements are recorded
e) Finally, the results are analyzed & the hypothesis is either
accepted or rejected. If hypothesis is accepted, the best
solution to the problem is obtained
Contd…
3. Objective: OR attempts to locate the best or optimal
solution to the problem.
4. Inter-disciplinary Team approach: Managerial
problems have economic, physical, psychological,
biological, sociological & engineering aspects. This
requires blend of people with expertise in the areas of
mathematics, statistics, engineering, economics,
computer science etc
5. Digital Computer: Computer may be required due to
the complexity of the model, volume of data required
or the computations to be made
 PHASES OF
OPERATIONS RESEARCH

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 1. Recognize the Problem
• Decision making begins with a situation in which a problem is
recognized

• The problem may be

– actual or abstract
– it may involve current operations or proposed expansions or
contractions due to expected market shifts
– it may become apparent through consumer complaints or
through employee suggestions
– it may be a conscious effort to improve efficiency or a response
to an unexpected crisis

• It is impossible to circumscribe the breadth of circumstances

that might be appropriate for this discussion

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 2. Formulate the Problem

• At the formulation stage,

– statements of objectives
– constraints on solutions
– appropriate assumptions
– descriptions of processes
– data requirements
– alternatives for action and metrics for measuring progress are
introduced

• The analyst is usually not the decision maker and may

not be part of the organization, so care must be taken to
get agreement on the exact character of the problem to
be solved from those who perceive it.
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 3. Construct a Model
» A mathematical model is a collection of functional
relationships by which allowable actions are
delimited and evaluated

• A model is always an abstraction that is, by necessity, simpler than

the reality

• The statements of the abstractions introduced in the construction of

the model are called the assumptions

• The appropriateness of the assumptions can be determined only by

subsequent testing of the model’s validity

• Models must be
– tractable -- capable of being solved, and
– valid -- representative of the true situation

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 4. Find a Solution(1)
• The next step in the process is to solve the model to obtain a
solution to the problem

• Some methods can prescribe optimal solutions while others

only evaluate candidates, thus requiring a trial and error
approach to finding an acceptable course of action

• It may be necessary to develop new techniques specifically

tailored to the problem at hand

• A model that is impossible to solve may have been formulated

incorrectly or burdened with too much detail. Such a case
signals the return to the previous step for simplification or
perhaps the postponement of the study if no acceptable,
tractable model can be found
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 4. Find a Solution(2)
• Of course, the solution provided by the computer is only
a proposal. An analysis does not promise a solution but
only guidance to the decision maker

• Choosing a solution to implement is the responsibility of

the decision maker and not the analyst. The decision
maker may modify the solution to incorporate practical or
intangible considerations not reflected in the model

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 5. Establish the Procedure(1)
• Once a solution is accepted a procedure must be
designed to retain control of the implementation effort

• Problems are usually ongoing rather than unique.

Solutions are implemented as procedures to be used
repeatedly in an almost automatic fashion under perhaps
changing conditions

• Control may be achieved with a set of operating rules, a

job description, laws or regulations promulgated by a
government body, or computer programs that accept
current data and prescribe actions
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 5. Establish the Procedure(2)
• Once a procedure is established (and implemented), the
analyst and perhaps the decision maker are ready to tackle
new problems, leaving the procedure to handle the required
tasks

But what if the situation changes?

• An unfortunate result of many analysis is a remnant
procedure designed to solve a problem that no longer exists
or which places restrictions on an organization that are
limiting and no longer appropriate

• Therefore, it is important to establish controls that recognize a

changing situation and signal the need to modify or update
the solution

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 6. Implement the Solution

• Implementation of solutions is perhaps the most difficult

part of a problem solving exercise.

• Solution process itself can be designed to smooth the

way for implementation.

• Persons who are likely to be affected by the changes

should take part, or at least be consulted, during the
various stages involving problem formulation, solution
testing, and the establishment of the procedure.

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 The OR Process
• Combining the steps we obtain the complete OR
process.
• In practice, the process may not be well defined
and the steps may not be executed in a strict
order. Rather there are many loops in the process,
with experimentation and observation at each step
suggesting modifications to decisions made earlier.
• The process rarely terminates with all the loose
ends tied up. Work continues after a solution is
proposed and implemented. Parameters and
conditions change over time requiring a constant
review of the solution and a continuing repetition of
portions of the process.

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 O.R. APPROACH

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 Major Tools and Techniques of OR
• DETERMINISTIC • PROBABILISTIC
MODELS MODELS

– Queuing
– Assignment
– Replacement
– Transportation
– Inventory
– Linear Programming
– Network Analysis
– Dynamic Programming – Work Sampling
– Sequencing – Game theory
– Decision theory
– Heuristics
– Simulation
 Overview of OR Techniques
• Linear Programming: deals effectively with problems of making
optimal allocation of scarce or limited resources to competing
products or activities.
– Determination of optimal product mix, transportation
schedules, plants location, assignment of personnel and
machines, media selection, blending of materials, energy are
some of the areas whose problems can be solved using LP
model.

• Decision Models: related to decision-making under conditions of

certainty, risk and uncertainty.
– Applied to problems in controlling hurricanes, water pollution,
medicine, law, nuclear safety, space exploration, new
product decisions, research and development, and so forth.
• Network Theory: enables managers to cope with complexities
involved in projects and suggests a way to overcome them.
– CPM and PERT network techniques are extremely useful for purpose of
planning, analyzing, scheduling and controlling the progress and
completion of one time and repeated projects.

• Inventory control Models: used to determine optimal timing and

quantities for orders of resources and what quantity of a product
should be stored.
– Objective of inventory model is to minimize the negative cost trade-offs
associated with inventories.
– Helps management to determine when and how much inventory to order
and what stock of work in progress and finished products should be
maintained.

• Queuing Theory: Mathematical study of waiting lines.

– Solves problems concerned with traffic congestion, servicing machines
subject to breakdown, air traffic scheduling, design of dams, hospital
operations, receipt and withdrawal counters in a commercial bank.

• Sequencing: solves problems where effectiveness measure (cost,

time, mileage etc) depends upon the sequence of performing given
jobs.
– Objective is to minimize the total efforts.
• Game Theory: is a modeling technique for assessing the impact of
a decision on one’s competitors.
– Technique deals with situations, where 2 or more (finite) individuals are
making decisions involving conflicting interests.

• Simulation: process of designing an experiment which will

duplicate or present as nearly as possible the real situation and
then watching what does happen.
– Enables modern managers to examine the probable consequences of his
decisions without the risk of real life experimentations.

• Replacement Theory: suggested the determination of the time

when items of plant should be replaced.

• Reliability: concerned with quantifying the frequency of failures and

developing in indicator of quality and dependability of a product.
 ADVANTAGES
• Provides a tool for scientific analysis.
• Provides solution for various business problems.
• Enables proper deployment of resources.
• Helps in minimizing waiting and servicing costs.
• Enables the management to decide when to buy
and how much to buy?
• Assists in choosing an optimum strategy.
• Renders great help in optimum resource allocation.
• Facilitates the process of decision making.
• Management can know the reactions of the
integrated business systems.
• Helps a lot in the preparation of future managers.
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 LIMITATIONS
• The inherent limitations concerning mathematical
expressions
• High costs are involved in the use of O.R. techniques
• O.R. does not take into consideration the intangible
factors
• O.R. is only a tool of analysis and not the complete
decision-making process
• Other limitations
• Bias
• Inadequate objective functions
• Internal resistance
• Competence
• Reliability of the prepared solution

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 List out the applications of
Operations Research

List the uses of Operations

Research in Management
Education

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In Detail…
 Evolution of OR
Pre-World War II

• Its roots are as old as science and society.

• Though the roots of OR extend to even early 1800s, it was in 1885
when Ferderick W. Taylor emphasized the application of scientific
analysis to methods of production, that the real start took place.
– His aim was to find that weight load of ore moved by shovel
which would result in maximum of ore moved with minimum of
fatigue.
• Another scientific management procedure of this era was job-
scheduling using Gantt procedure.
– With Gantt procedure it is possible to plan machine loadings
months in advance and still quote delivery dates accurately.
• During 1930s, H. C. Levinson, an American Astronomer, applied
scientific analysis to problems of merchandising. His work included
scientific study of customers buying habits, response to advertising
and relation of environment to the type of article sold.
It was the first industrial revolution which contributed mainly towards
the development of OR.
World War II

• Main origin of OR was during the Second World war.

– During World-War II, military management in England called on
a team of scientists under the direction of Prof. PMS Blackett to
study the strategic and tactical problems of air and land defense.
– “Blackett’s Circus”, as the group was called, included 3
physiologists, 2 mathematical physicists, 1 astrophysicist, 1
army officer, 1 surveyor, 1 general physicist and 2
mathematicians.
– Objective was to find out the most effective allocation of limited
military resources to the various military operations to the
activities within each operation.
– Application included the effective use of newly invented radar,
allocation of British Air Force planes to missions and the
determination of best patterns for searching submarines.
– Name OR was apparently coined in 1940 because the team was
carrying out research on (military) operations.
– Encouraging results of these efforts led in spreading to Western
allies – the US, Canada and France.
Post World War II

• Success of military teams attracted the attention of industrial

managers seeking solution to their problems.
– In UK, the critical economic situation required drastic increase
in production efficiency and creation of new markets.
– Nationalization of few key industries further increased the
potential field for OR.
• Consequently OR soon spread from military to government,
industrial, social and economic planning.
• Progress of industrial OR in USA was due to advent of Second
Industrial Revolution which resulted in automation – replacement
of man by machine as a source of control.
• New revolution began round 1940s when electronic computers
became commercially available.
• The work of OR team was given various names in the US:
Operational Analysis, Operations Evaluation, Operations
Research, Systems Analysis, Systems Evaluation, Systems
Research and Management Science.