Chapter 1: Introduction to Operations

Research
¨ Introduction
¨ The Model
¨ Procedures in OR
¨ Develop the solution for decision making
 What is operation research?
¨ Operations Research (OR)
¨ OR searches for
optimal or best solutions
in the presence of resources constraints. (money,
human, physical, info, time).
¨ OR uses mathematical techniques to model and
analyze issues related to decision making
processes.

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 ART AND SCIENCE

In OR:
¨ Science: OR provides mathematical
techniques, algorithms, and procedures to
solve problems.
¨ Art: before and after the searching for
solution are the creativity, reasoning ability,
and personal ability of the person who
analyze and build the model for the problem.

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 2. THE MODEL

¨ Models are brief reflections of the real world.

¨ Types of models:
¨ Mathematical model,
¨ Physical model,
¨ Simulation model
¨ …

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 Question

¨ What items are the models?

A. A map
B. A House
C. A Design Drawing
D. A car
E. A chemical equation: CH4+ O2  CO2 + H2O
 3. Problem Solving Process
Goal: solve a problem Define Problem
 Model must be valid
 Model must be tractable Formulate a
mathematical model
 Solutions must be useful
Formulate the
Problem Develop a procedure
Situation Problem
Implement a Solution Statement for solutions

Data
Construct
a Model
Test Model and Refine
Implement
the Solution
Model
Prepare for application
Solution
Find
a Solution
Establish
a Procedure Implementation
Test the Model 6
and the Solution Solution Tools
 Example
¨ How to make a cup of coffee?
¨ What are key steps ?
¨ Define problem:
¨ Inputs: instant coffee, hot water, cup, spoon, sugar,
condensed milk, electrical pot
¨ Steps: check rms  buy coffee  boil water  pour
coffee/sugar/milk in cup  pour hot water in  mix 
drink
¨ Output(s): hot milk coffee

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Problem Definition/Description/Statement
¨ Define the decision maker’s problem: clearly,
correctly
¨ Advisory capacity, appropriate objectives: who
make the decisions, long-run, satisfactory
profits.. find out outputs for what?
¨ Look through the symptoms to find exactly the
“true” problem
¨ Focus to solve few problems  assumptions.

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 Formulate a Mathematical Model
¨ Types of Model: physical model, pilot, schematic, mathematical
model
¨ Define variables  outputs
¨ Define constraints  inputs (available resources, input
parameters)
¨ Objective function: tractable model.
¨ Data requirements: data collection Complete, accurate, reliable
¨ Deterministic data: solid, unchanged over time deterministic
models.
¨ Stochastic/probabilistic data: change randomly probabilistic
models.
¨ Example: Inventory model  demand rate, lead time
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 Example
¨ Suppose your have 3 routes to go from your house to IU, How do you
plan for that job ?
¨ xi ={0,1} = 1 if I choose route i to go; 0, otherwise; i =1,2,3
¨ Objective function: minimize time z=ax1+bx2+cx3
¨ Constraints:
¨ HR: No
¨ Physical item: no
¨ Facility: yes. Bus, motocycle, taxi
¨ Time: a,b,c: ax1+bX2+cx3<= 30 min
¨ Money: Ba,Bb, Bc

Bax1+BbX2+BcX3 <=20k

¨ Information: relationship choose 1 route: x1+x2+x3 =1

¨ X1=1, X2 =0, x3=0
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 Model Developing
¨ Decision variables
¨ Objective function
¨ Constraints

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 An Example of a Linear
Programming model
¨ ABC company manufactures two products: Item A and Item B :x1, x2
¨ Each Item A:
¨ Sell for $27 and uses $19 worth of raw materials.
¨ Increase ABC’s variable labor/overhead costs by $5.
¨ Requires 2 hours of finishing labor.
¨ Requires 1 hour of carpentry labor.
¨ Each Item B:
¨ Sell for $21 and used $9 worth of raw materials.
¨ Increases ABC’s variable labor/overhead costs by $10.
¨ Requires 1 hour of finishing labor.
¨ Requires 1 hour of carpentry labor.
 An Example of an Linear
Programming (LP) model
¨ Each week ABC can obtain:
¨ All needed raw material.
¨ Only 100 finishing hours.
¨ Only 80 carpentry hours.
¨ Demand for the Item B is unlimited.
¨ At most 40 Item A are bought each week.
¨ ABC wants to maximize weekly profit (revenues – costs).
Total profit =(revenue of product A – RM cost of A – labor cost of A) + (revenue of
product B – RM cost B –labor B) = (27x1 – 19x1 – 5x1) + (21x2 – 9x2 – 10x2) = 3x1
+ 2x2
Finishing hour 2x1 + 1 x2 <= 100
Carpentry hour 1x1 + 1x2 <= 80
x2>=0
0<=x1<=40
 ABC’s LP model
¨ Variables:
¨ x1 = number of item A produced each week
¨ x = number of item B produced each week
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¨ Objective function: Max z = 3x1 + 2x2 (1)

(Weekly profit = weekly revenue – weekly raw material costs – the weekly variable costs)
¨ Constraints: Subject to (s.t.)
¨ Each week, no more than 100 hours of finishing time may be used.
2 x1 + x2 ≤ 100 (finishing constraint) (2)
¨ Each week, no more than 80 hours of carpentry time may be used.
x1 + x2 ≤ 80 (carpentry constraint) (3)
¨ Because of limited demand, at most 40 item A should be produced.
x1 ≤ 40 (constraint on demand for Item A) (4)
x1 ≥0 (sign restriction) (5)
x2 ≥ 0 (sign restriction) (6)
 MATHEMATICAL MODEL
¨ Models are categorized by:
¨ Single vs. multi-objective function
¨ Constraints: linear or non-linear
¨ Variables:
¨ Deterministic vs. Probabilistic (Stochastic)
¨ Discrete vs. Continuous
¨ Others: fuzzy, fuzzy stochastic…
¨ Parameters:
¨ Deterministic vs. Probabilistic (Stochastic)
¨ Discrete vs. Continuous
¨ Others: fuzzy, fuzzy stochastic…
Example:
¨ Linear programming. - Integer programming
¨ Non-linear programming - Markov chains 15
 Solution Development
Solution:
¨ Multi-equation solving
¨ Trial and errors
¨ Enumeration
¨ Algorithm

Trial solutions:
¨ before and after apply solution
¨ precision and tractability of model
¨ robustness
¨ model validation

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 Results Analysis
Result Analysis :
¨ Sensitivity analysis
¨ postoptimality analysis: what-if analysis

Test the Model:

¨ model validation
¨ retrospective test

Implementation
¨ Simulation necessary
¨ Phase-by-phase: careful explanation, obtain feedback
¨ Experiments: clear and accurate methodology : reproducible ,
replicability
 “Wrong” application leads to terrible results

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 4. DEVELOPING SOLUTIONS & MAKING
DECISIONS
Decision making is tough, challenging, but
interesting.
Decision making includes:
¨ Quantitative approach
¨ Qualitative approach
¨ Objectives of organizations
¨ Constraints
¨ Priority rules

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 Example 1
Select the optimal solution based on some criteria – available
alternatives
A senior manager of an organization wants to recruit a fresh
graduate to the position of demand planner. There are 3
candidates A, B, and C.
Question:
Give three main criteria to select the best candidate?

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 Example 2
Find the optimal combination of products to earn highest profit.
A company which produces office furniture whose main
products are tables and chairs. The production process
requires specific working hours for carpentry and paint. Data
of profit, required working hours of each product are
available.
Question:
What is the optimal combination of products for the company to
earn highest profit?

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