Operations Research

The ambiguous term operations research

(O.R.) was coined during World War II , when
the British military management called upon
a group of scientists together to apply a
scientific approach in the study of military
operations to win the battle. The main
objective was to allocate scarce resources in
an effective manner to various military
operations and to the activities within each
operation. The effectiveness of operations
research in military spread interest in it to
other government departments and industry.
 What is Operations Research?
 Operations

The activities carried out in an organization.

Research
The process of observation and testing
characterized by the scientific method.
Situation, problem statement, model
construction, validation, experimentation,
candidate solutions.
 Definition of OR
 O.R. is concerned with scientifically
deciding how to best design and operate
man-machine systems usually under
conditions requiring the allocation of
scarce resources.

 O.R. is applied decision theory. It uses any

scientific, mathematical or logical means to
attempt to cope with the problems that
confront the executive, when he tries to
achieve a thorough-going rationality in
dealing with his decision problems
 Definition of OR
 O.R. is the application of scientific
methods, techniques and tools to
problems involving the operations of a
system so as to provide those in control
of the system with optimum solution to
the problem.

 O.R. is the use of scientific methods to

provide criteria for decisions regarding
man machine systems involving
 Phases and Processes of O.R.
 Formulate the problem
 Develop a model
 Select appropriate data input
 Solution of the model
 Validation of the model
 Implement the solution
 Formulate the problem

This is the most important process, it is

generally lengthy and time consuming.
The activities that constitute this step are
visits, observations, research, etc. With the
help of such activities, the O.R. scientist
gets sufficient information and support to
proceed and is better prepared to
formulate the problem. This process starts
with understanding of the organizational
climate, its objectives and expectations.
Further, the alternative courses of action
are discovered in this step.
 Develop a model
Once a problem is formulated, the next step
is to express the problem into a mathematical
model that represents systems, processes or
environment in the form of equations,
relationships or formulas. We have to identify
both the static and dynamic structural
elements, and device mathematical formulas
to represent the interrelationships among
elements. The proposed model may be field
tested and modified in order to work under
stated environmental constraints. A model
may also be modified if the management is
not satisfied with the answer that it gives.
 Select appropriate data
input
Garbage in and garbage out is a
famous saying. No model will
work appropriately if data input
is not appropriate. The purpose
of this step is to have sufficient
input to operate and test the
model.
 Solution of the
model
After selecting the appropriate
data input, the next step is to
find a solution. If the model is
not behaving properly, then
updating and modification is
considered at this stage.
 Validation of the model
A model is said to be valid if it can
provide a reliable prediction of the
system’s performance. A model
must be applicable for a longer
time and can be updated from
time to time taking into
consideration the past, present
and future aspects of the problem.
 Implement the solution
The implementation of the solution
involves so many behavioral issues and
the implementing authority is responsible
for resolving these issues. The gap
between one who provides a solution and
one who wishes to use it should be
eliminated. To achieve this, O.R. scientist
as well as management should play a
positive role. A properly implemented
solution obtained through O.R.
techniques results in improved working
and wins the management support.
 Techniques of Operations
Research
 Linear Programming
 Transportation Problem
 Assignment Problem
 Queuing Theory
 Game Theory
 Inventory Control Models
 Simulation
 Sequencing Theory
 Replacement Models
 Network Scheduling-PERT and CPM
 Role of Operations Research in
Decision making
Better Control
 The management of big concerns finds
it much costly to provide continuous
executive supervision over routine
decisions. An OR approach directs the
executives to devote their attention to
more pressing matters. For example,
OR approach deals with production
scheduling and inventory control.
 Better Co-ordination
 Sometimes, OR has been very
useful in maintaining law and
order situation. For example, an
OR based planning model
becomes a vehicle for co-
ordinating marketing decisions
with the limitations imposed on
manufacturing capabilities.
 Better System
 OR study is also initiated to analyse
a particular problem of decision
making such as establishing a new
firm, best location of warehouse etc.
Later Operations research approach
can further be developed into a
system to be employed repeatedly.
Consequently, the cost of
undertaking the first application
may improve the profit.
 Better Decision
 Sometimes, a situation may be
so complicated that it is almost
impossible for the human being
to comprehend and assimilate
all important factors. OR
techniques can be very useful
in such situations. OR models
frequently produce actions that
do improve an intuitive
Limitations of Operations Research

 Dependence on an Electronic
Computer
 Non-Quantifiable Factors
 Distance between Manager and
Operations Researcher
 Money and Time
 Implementation
Problems That Can Be Analyzed By Operations Research
Approach

 Finance, Budgeting and

Investments
 Marketing
 Purchasing, Procurement and
Exploration
 Production Management
 Personnel Management
 Research and Development
Finance, Budgeting and Investments

 Credit policy analysis.

 Cash flow analysis.
 Dividend policies.
 Investment portfolios.
 Marketing

 Product selection, timing,

etc.
 Advertising media, budget
allocation.
 Number of salesman
required.
 Selection of product mix.
 Purchasing, Procurement
and Exploration

 Optimal buying and

reordering.
 Replacement policies
 Production Management

 Location and size of warehouses,

factories, retail outlets, etc.
 Distribution policy.
 Loading and unloading facilities for
trucks etc.
 Production scheduling.
 Optimum product mix.
 Project scheduling and allocation of
resources.
 Personnel Management

 Selection of suitable
personnel.
 Recruitment of employees.
 Assignment of jobs.
 Skills balancing.
Research and Development

 Project selection.
 Control of R&D projects.
 Reliability and alternative
design.
 Operations Research Models
A model is defined as a
representation or abstraction of an
actual object or situation. It shows
the relationships (direct or indirect)
and interrelationship of action and
reaction in terms of cause and
effect. Quantitative techniques are
utilized to investigate the
relationship that exists among the
variables in a model.
 Types of Mathematical Models

 Quantitative versus qualitative

 Standard versus custom made
 Probabilistic versus
deterministic
 Descriptive versus optimizing
 Static versus dynamic
 Simulation versus non-
simulation
 Quantitative versus qualitative

 Most business problems start with

qualitative type models and then
develop to a point where quantitative
models can be used. The qualitative
model treats only qualities of problem
components
 While quantitative model requires
numerical definition of the problem.
Operations research deals with
systematizing qualitative models and
developing them to the point where
 Standard versus custom made

 Standard models are used to describe

those techniques that have become
associated with operations research. To use
these techniques, insert the proper
numbers from a specific business problem
into the standard model for an answer.
 A custom made model results from using
the basics of various disciplines, like
mathematics, statistics and economics to
build a model that fits the particular
situation.
 Probabilistic versus deterministic

 Models based on probability and concerned with

future uncertainties are called probabilistic models.

 Those quantitative models that do not contain

probabilistic considerations are termed deterministic
models.

 Linear programming models are said to be

deterministic models, while waiting lines are an
example of probabilistic model.
 Descriptive versus optimizing
 In some situations, a model is developed simply to be a
mathematical description of a real situation. These are
called descriptive models and help us to understand more
about the problem.
 In an optimizing model, a concerted attempt is made to
reach an optimum solution when presented with
alternatives. An optimization, when solved, yields the
best alternative according to the input criteria.
 An optimization model, thus, is concerned at arriving an
optimum solution, whereas the descriptive model does
not attempt to select the best alternative, but only to
describe the choices that are open to the decision maker.
 Static versus dynamic
 Static models are concerned with determining an
answer for a particular set of fixed conditions that
will probably not change significantly in the short
run. Linear programming models are static models.

 Dynamic model is subject to the time factor which

plays an essential role in the sequence of decisions.
Regardless of what the prior decisions have been,
the dynamic model helps one to find the optimal
decisions for the future time periods. Dynamic
programming is an example of dynamic model.
Simulation versus non-simulation
 The development of computers has helped to the
development of simulation models in operations
research. Simulation is a method involving step-by-
step calculations where the workings of large-scale
problems or systems can be reproduced.

 However, there are situations where the problem is

less complicated which lend themselves to non-
simulation models. Linear programming and
transportation problems can be considered as non-
simulation models.