Introduction to Operations Research

Dr. Suhas Ambekar

SCMHRD
 COURSE OVERVIEW
1. Introduction to OR
2. Linear Programming
3. Transportation and Assignment Problems
4. Decision Theory
5. Queuing Theory
6. Simulation Model
7. CPM and PERT Analysis
8. Forecasting Techniques
 Course Learning Outcomes
• At the end of the course you would
• Develop a general understanding of the Operational
Research (OR) approach to decision making.
• Model a real-world problem, given in words, into a
mathematical formulation.
• Solve larger problems, communicate technical knowledge,
partition a problem into smaller tasks, and complete tasks
on time.
• Analyse decision environment and propose the best
strategy using decision making methods under uncertainty
and risk
• Demonstrate analytical approach to decision making
 Evaluation plan
• Credits = 2
• Total marks = 100
• End-sem marks component = 40
• Continuous evaluation components = 60
– Case analysis
– Class test
– Mid-term test
– Quiz
Mapping to learning goals and traits
• LG 2 : Critical and Reflective Thinking
Ability
2.1 Ability to identify, analyze and interpret
relevant issues
2.2 Ability to demonstrate skills of analysis
and synthesis of relevant Data
Session Precap …..
• What is OR ?
• Historical Perspective
• Definitions of OR
• Why O.R.?
• Phases of O.R.
You work as a sales manager for a toy manufacturer, and you currently
have three salespeople on the road meeting buyers. Your salespeople
are in Austin, Boston, and Chicago. You want them to fly to three other
cities: Denver, Edmonton, and Fargo. The table below shows the cost
of airplane tickets in
dollars between these cities.
From \To Denver Edmonton Fargo
Austin 250 400 350
Boston 400 600 350
Chicago 200 400 250

Where should you send each of your salespeople in order to

minimize airfare?
• Infoway Company manufactures a printer and keyboard.
The contribution margins of the printer and keyboard are
$30 and $20, respectively. Two types of skilled labor are
required to manufacture these products: soldering and
assembling. A printer requires 2 hours of soldering and I
hour of assembling. A keyboard requires 1 hour of
soldering and 1 hour of assembling. Infoway has 1,000
soldering hours and 800 assembling hours available per
week. There are no constraints on the supply of raw
materials. Demand for keyboards is unlimited, but at
most 350 printers are sold each week. Infoway wishes to
maximize its weekly total contribution margin.
• A grocery receives its weekly supply of eggs every Thursday morning.
This shipment must last until the following Thursday when a new
shipment is received. Any eggs left unsold by Thursday are destroyed.
Eggs sell for $10 per hundred and cost $8 per hundred. The weekly
demand for eggs at this grocery varies from week to week. From past
experience, the following probability distribution is assigned to weekly
demand:
• Demand(hundreds of eggs): 10 11 12 13 14
• Probability: 0.1 0.2 0.4 0.2 0.1
• This pattern of demand remains stable throughout the year - the
demand for eggs is not seasonal, and the trend is flat. The problem is:
How many eggs should be ordered for delivery every Thursday?
 What is OR?
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 What is OR? Continued...
• A systematic and analytical approach to decision
making and problem solving.
• Branch of applied mathematics
• Optimal solutions to solve complex problems
• Maximum profit, sale, output, and efficiency
• Minimum losses, risks, cost, and time
• Team approach
 History
• Originated during the World War II
• Industrial boom resulted in complex decision making
• Other factors supplemented the growth of OR
– Advanced research in the field (LPP – George Dantzig - 1947)
– Computer revolution
• 1948 – Operational Research Society of UK (OR Quarterly)
www.theorsociety.com
• 1950 – The Operations Research Society of America (Currently
INFORMS – Institute for OR and MS)
• 1957 – OR society of India (OPSEARCH) www.orsi.in
• 1965 – Project scheduling techniques
 Definitions of OR
• A discipline that deals with the application of
advanced analytical methods to help make better
decisions. The terms management science and
analytics are sometimes used as synonyms for
operations research.
• “ a scientific method of providing executive
departments with a quantitative basis for decisions
regarding the operations under their control”. - Morse
and Kimball
• “O.R. is the art of giving bad answers to problems
which otherwise have worse answers”.- T. L. Saaty
 FEATURES OF
OPERATIONAL RESEARCH

Decision-Making
Scientific Approach – No personal bias
Inter-Disciplinary Team Approach
System Approach - inter-relationship
and interaction of each sub-system
Use of Computers
Objectives
Human Factors
 Simplifying
Complexity

Quick Maximizing
response to use of Data
environment
WHY
OR ?
It supports decisions…… does not force decisions
Accuracy
Adding
of
Value
decisions
 Models of O. R.
• Decision analysis • Inventory models
models • Queuing models
• Linear programming • Dynamic programming
models • Integer programming
• Game theory models • Non-linear
• Simulation models programming models
• Network optimization • Forecasting models
models • Markov decision
• Project management models
models
Operations Research Phases

Judgment • Define Problem and Gather

Relevant data
Phase • Formulate a mathematical model

Research • Appropriate data input

• Derive solution
Phase • Test the model and refine (validation)

Action • Prepare to apply the model

(software)
Phase • Implementation
 Problem Solving Process
• current operations or proposed developments
The • May become apparent Or May be a conscious effort to
Situation improve

Problem • Describe system, Define variables, constraints

Formulation • Data requirements and performance measurements

Constructing a • logical, quantitative terms

Model • a collection of functional relationships

Solving the • “optimal” solutions

Mathematical Model • Evaluate candidates
Operations Research Models
• Deterministic models
assume all data are known with certainty
• Stochastic models
explicitly represent uncertain data via random
variables or stochastic processes

• Deterministic models involve optimization

• Stochastic models characterize / estimate

system performance
Operations Research Models
Deterministic Models Stochastic Models
•Linear Programming Discrete-Time Markov Chains
Network Optimization Queuing
Integer Programming Decision Analysis
Nonlinear Programming
Inventory models
 Common terminologies used…
• Model : An abstract representation of reality.
Mathematical, physical, narrative, set of rules in
computer program
• Decision variables: whose values are to be
determined
• Objective Function: Measure of performance
expressed as mathematical function of decision
variables
• Constraints: Restrictions on values assigned to
decision variables
 Common terminologies used…
• Feasible solution: Any non-negative values
of decision variables that satisfies all the
constraints
• Optimal Solution : A solution to the model
that optimizes (maximizes or minimizes)
some measure of merit over all feasible
solutions.
• Model validation: Testing and improving the
model
 Some areas of application
• Product mix selection
• Advertising / Media planning
• Purchase / Procurement
• Transportation planning
• Vendor analysis
• Project scheduling
• Manpower planning
• Negotiations
• Training program scheduling
Questions??