Introduction to
Operations
Research
Introduction to Operations Research
The British/Europeans refer to "operational research", the
Americans to "operations research" - but both are often shortened to just
"OR" - which is the term we will use.
Another term which is used for this field is "management
science" ("MS"). The Americans sometimes combine the terms OR and
MS together and say "OR/MS" or "ORMS". Yet other terms sometimes
used are "industrial engineering" ("IE") and "decision science" ("DS").
In recent years there has been a move towards a standardization upon a
single term for the field, namely the term "OR".
2
The contents and the boundaries of the OR are not yet fixed.
Therefore, to give a formal definition of the term Operations Research
is a difficult task. The OR starts when mathematical and quantitative
techniques are used to substantiate the decision being taken. The main
activity of a manager is the decision making. In our daily life we make
the decisions even without noticing them. The decisions are taken
simply by common sense, judgment and expertise without using any
mathematical or any other model in simple situations. But the decision
we are concerned here with are complex and heavily responsible.
Examples are public transportation network planning in a city having its own layout
of factories, residential blocks or finding the appropriate product mix when there
exists a large number of products with different profit contributions and production
requirement etc.
Operations Research tools are not from any one discipline. Operations Research
takes tools from different discipline such as mathematics, statistics, economics,
psychology, engineering etc. and combines these tools to make a new set of
knowledge for decision making.
The main purpose of O.R. is to provide a rational basis for decisions making in the
absence of complete information.
O.R. is an interdisciplinary discipline which provided solutions to problems
of military operations during World War II, and also successful in other
operations. Today business applications are primarily concerned with O.R.
analysis for the possible alternative actions. The business and industry
befitted from O.R. in the areas of inventory, reorder policies, optimum
location and size of warehouses,
advertising policies, etc.
It was really only in the late 1930's that operational research began in a
systematic fashion, and it started in the UK.
Definition of Operations Research
According to the Operational Research Society of Great Britain (OPERATIONAL
RESEARCH QUARTERLY, l3(3):282, l962), Operational Research is the attack of
modern science on complex problems arising in the direction and management of
large systems of men, machines, materials and money in industry, business,
government and defence. Its distinctive approach is to develop a scientific model of
the system, incorporating measurements of factors such as change and risk, with
which to predict and compare the outcomes of alternative decisions, strategies or
controls. The purpose is to help management determine its policy and actions
scientifically.
Definition of Operations Research
Randy Robinson stresses that Operations Research is the application of
scientific methods to improve the effectiveness of operations,
decisions and management. By means such as analyzing data, creating
mathematical models and proposing innovative approaches,
Operations Research professionals develop scientifically based
information that gives insight and guides decision making. They also
develop related software, systems, services and products.
Definition of Operations Research
Morse and Kimball have stressed O.R. is a quantitative approach and
described it as “ a scientific method of providing executive
departments with a quantitative basis for decisions regarding the
operations under their control”.
Saaty considers O.R. as tool of improving quality of answers. He says,
“O.R. is the art of giving bad answers to problems which otherwise
have worse answers”.
The Process of Operations Research
Defining the problem
Developing a model
Acquiring input data
Developing a solution
Testing the solution
Analyzing the results
Implementing the results
Phases of Operations Research
• Identification of problem
Judgement • Selection of appropriate goal
phase • Measurement
• Formulation of model
• Observation & Data collection
Research • Formulation of hypothesis
phase • Experimentation
• Analysis
• Generalisation
Action • Recommendations for decision
phase
Applicatios of Operations Research
Finance,
Budgeting
&
Investment
Research &
Marketing
Developme
nt
OR
Production Physical
distribution
Purchasing,
Procurement
Personnel &
Exploration
Applications of Operations Research
Today, almost all fields of business and government utilizing the benefits of
Operations Research. Although it is not feasible to cover all applications of O.R. in
brief. The following are the abbreviated set of typical operations research
applications to show how widely these techniques are used today:
Accounting:
Assigning audit teams effectively
Credit policy analysis
Cash flow planning
Developing standard costs
Establishing costs for by-products
Planning of delinquent account strategy
Applications of Operations Research
Construction:
Project scheduling, monitoring and control
Determination of proper work force
Deployment of work force
Allocation of resources to projects
Facilities Planning:
Factory location and size decision
Estimation of number of facilities required
Hospital planning
International logistic system design
Transportation loading and unloading
Warehouse location decision
Applications of Operations Research
Finance:
Building cash management models
Allocating capital among various alternatives
Building financial planning models
Investment analysis
Portfolio analysis
Dividend policy making
Manufacturing:
Inventory control
Marketing balance projection
Production scheduling
Production smoothing
Applications of Operations Research
Marketing:
Advertising budget allocation
Product introduction timing
Selection of Product mix
Deciding most effective packaging alternative
Organizational Behavior / Human Resources:
Personnel planning
Recruitment of employees
Skill balancing
Training program scheduling
Designing organizational structure more effectively
Applications of Operations Research
Purchasing:
Optimal buying
Optimal reordering
Materials transfer
Research and Development:
R & D Projects control
R & D Budget allocation
Planning of Product introduction
Benefits of Operations Research
Ability to deal in a Use of objective
quantitative manner methods to sort out in
with conditions of complex situations
uncertainty
Capacity to illustrate Assist managers in
the likely outcomes of understanding many
alternative courses inter-related factors
Provision of various Ability to handle
logical approaches to masses of data with
make decisions help of computer
Limitations of Operations Research
Operations Research has number of applications; similarly it also has certain limitations.
These limitations are mostly related to the model building and money and time factors
problems involved in its application. Some of them are as given below:
Distance between O.R. specialist and Manager
Operations Researchers job needs a mathematician or statistician, who might not be
aware of the business problems. Similarly, a manager is unable to understand the complex
nature of Operations Research. Thus there is a big gap between the two personnel.
Magnitude of Calculations
The aim of the O.R. is to find out optimal solution taking into consideration all the
factors. In this modern world these factors are enormous and expressing them in
quantitative model and establishing relationships among these require voluminous
calculations, which can be handled only by machines.
Limitations of Operations Research
Money and Time Costs
The basic data are subjected to frequent changes, incorporating these changes into
the operations research models is very expensive. However, a fairly good solution at
present may be more desirable than a perfect operations research solution available in
future or after some time.
Non-quantifiable Factors
When all the factors related to a problem can be quantifiable only then operations
research provides solution otherwise not. The non-quantifiable factors are not incorporated
in O.R. models. Importantly O.R. models do not take into account emotional factors or
qualitative factors.
Implementation
Once the decision has been taken it should be implemented. The implementation of
decisions is a delicate task. This task must take into account the complexities of human
relations and behavior and in some times only the psychological factors.
Scope of Operations Research
National Plan and Budget
Health Care Services and National Health Program
Government development and public sector unit
Industrial establishment and private sector unit
National defense services
Research and development in engineering
Public works department
Business management
Agriculture and irrigation projects
Education and Training
Transport and Communication
