CHAPTER ONE:

INTRODUCTION TO OPERATIONS RESEARCH

OPERATIONS RESEARCH MODELS
THE ART OF MODELING

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 INTRODUCTION TO OPERATIONAL
RESEARCH
British/ Europeans refer to "operational research",
 Americans to "operations research"
But both are often shortened to just "OR" - which is the
term we will use.

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 HISTORY OF OPERATIONS
RESEARCH
• Operations research is a relatively new discipline.
• It is generally agreed that operations research (OR) came into
existence as a discipline during world war II when there was a critical
need to manage scarce resources.
• World war II: British military leaders asked Scientists and Engineers
to analyze several military problems:
Deployment / positioning of radar
Management of convoy, bombing, anti-submarine, and mining operations

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CONT..
• The result was called military operations research, later operations research.
• Operations research originated in great Britain during world war II to bring
mathematical or quantitative approaches to bear on military operations.
• It is started in the UK and developed in the USA.
• Establishment of teams of scientists to study the strategic and tactical problems
involved in military operations.
• The objective was to find the most effective utilization of limited military
resources by the use of quantitative techniques.

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 CONT…
• There are three important factors behind the rapid
development in the use of OR approach:
The economic and industrial boom after world war II resulted
in continuous mechanization and automation.
Many operations researchers continued their research after
world war II.
Analytic power was made available by high-speed computers.
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CONT.…
• In 1948, OR club was formed in England which later changed its name to the
operational research society of UK.
• During or foundation, its primary applications were: to support military operations:
such as to support radar systems, against submarine, etc.
• Following the war, numerous peacetime applications emerged, leading to the use of or
and management science in many industries and occupations.
• During 1950s, there was substantial progress in the application of OR techniques for
civilian activities along with great interest in the professional development and
education in OR.

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 CONT…
• In 1952, the operations research society of America (ORSA) was founded.
• By 1960s, OR groups were formed in several organizations.
• This analytical approach is known by several different names:
 Operations research (OR)
 Operational research (UK)
 Decision sciences (DS)
 Systems science
 Mathematical modeling
 Industrial engineering
 Critical systems strategic thinking
 Success science(s), and systems analysis and design 7
DEFINITIONS OF OPERATIONS RESEARCH
It is an act of winning wars without actually fighting.-Aurther clark
It is a scientific approach to problem solving for executive management. -
H.M. Wagner
• 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.

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CONT…
• Operations research is a quantitative approach to decision
making based on the scientific method of problem solving.
Operations research is the application of scientific methods,
techniques and tools to problems involving the operations of
systems so as to provide those in control of the operations with
optimum solutions to the problems.

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 CONT…
• Operations research is the scientific approach to execute
decision making, which consists of:
• The art of mathematical modeling of complex situations
• The science of the development of solution techniques used to solve
these models
• The ability to effectively communicate the results to the decision maker

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CONT…
• OR is the application of the scientific method to the study of the operations
of large, complex organizations or activities.
• OR is the application of the scientific method to the analysis and solution
of managerial decision problems.
• OR is the application of the methods of science to complex problems in
the direction and management of large systems of men, machines,
materials, and money in industry, business, government and defense (or
society, UK).

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CONT…
• In summary, operations research incorporates the following
issues:
 Application of scientific method
Study of large and complex systems
Analysis of managerial problems
Finding optimal solution

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 OR TOOLS AND TECHNIQUES
• Operations research uses any suitable tools or techniques available.
• The common frequently used tools/techniques are mathematical procedures,
cost analysis, electronic computation.
• However, operations researchers given special importance to the
development and the use of techniques like
• Linear programming,
• Game theory,
• Decision theory,
• Queuing theory,
• Inventory models and simulation. 13
 CONT.…
• In addition to the above techniques, some other common tools are
• Non-linear programming
• Integer programming
• Dynamic programming,
• Sequencing theory,
• Markov process,
• Network scheduling
• Program evaluation and review techniques (PERT/CPM)
• Symbolic model,
• Information theory, and value theory.
There is many other operations research tools/techniques also exists.
The brief explanations of some of the above techniques/tools are as follows: 14
 CONT.…
Linear programming:
• This is a constrained optimization technique, which optimize some criterion within some
constraints.
• In linear programming the objective function (profit, loss or return on investment) and
constraints are linear.
• There are different methods available to solve linear programming.
Game theory:
• This is used for making decisions under conflicting situations where there are one or more
players/opponents. In this the motive of the players are dichotomized.
• The success of one player tends to be at the cost of other players and hence they are in conflict.
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CONT.…
Decision theory:
• Decision theory is concerned with making decisions under conditions of complete
certainty about the future outcomes and under conditions such that we can make some
probability about what will happen in future.
Queuing theory:
• This is used in situations where the queue is formed (for example customers waiting
for service, aircrafts waiting for landing, jobs waiting for processing in the computer
system, etc.). The objective here is minimizing the cost of waiting without increasing
the cost of servicing.

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CONT.…
Inventory models:
• Inventory model make a decisions that minimize total inventory cost. This model successfully
reduces the total cost of purchasing, carrying, and out of stock inventory.

Simulation:
• Simulation is a procedure that studies a problem by creating a model of the
process involved in the problem and then through a series of organized trials
and error solutions attempt to determine the best solution.
• Some times this is a difficult/time consuming procedure.
• Simulation is used when actual experimentation is not feasible or solution of
model is not possible. 17
CONT.…
Dynamic programming:
• Dynamic programming is a method of analyzing multistage decision processes. In this each
elementary decision depends on those preceding decisions and as well as external factors

Integer programming:
• If one or more variables of the problem take integral values only then dynamic
programming method is used.
• It is a technique, which ensures only integral values of variables in the problem
• For example number of motor in an organization, number of passenger in an
aircraft, number of generators in a power generating plant, etc..

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 APPLICATIONS OF OPERATIONS RESEARCH
• Operations research can be applied in every business organizations (both profit
making and non-profit making organizations), some of the application areas are listed
as follows.
Manufacturing
 Aggregate production planning, assembly line, blending, inventory control
 Employment, training, layoffs and quality control
 Transportation, planning and scheduling

Facilities planning
Location and size of warehouse or new plant
Logistics, layout and engineering design
Transportation, planning and scheduling
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CONT…

Finance and accounting

Capital budgeting, cost allocation and control, and financial planning
Marketing
Sales effort allocation and assignment
Predicting customer loyalty
Purchasing, procurement and exploration
Optimal buying and reordering with or without price quantity discount

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 MODEL AND MODELING IN OPERATIONS
RESEARCH
Definition:
• A model is an abstract description of a decision situation.
• A model is a representation of the reality that captures "the essence" of reality.
• It is a schematic description of a system, theory, or phenomenon that accounts for its
known or inferred properties and may be used for further study of its characteristics.
• A model never to be a one-to-one image of reality.
• The main characteristics of OR is to try to quantify aspects of decision problems on the
basis of models.

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 CONT…

FIGURE 1.1 LEVELS OF ABSTRACTION IN THE MODEL DEVELOPMENT

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 Classification of Model Based on Structure
•Physical model : these models provide a physical appearance of the real object under
study either reduced in size or scaled up. These models cannot be manipulated and not
very useful for prediction, therefore, problems such as portfolio section, media selection,
production scheduling, etc. Cannot be analyzed with a physical model. Physical models
are classified into the following two categories.
• Iconic models : iconic models retain some of the physical and characteristics of the
system they represent. An iconic model is either in an idealized form or a scaled version
of the system. It is said to be scaled down when the dimensions of the model are
smaller than those of the real object and model said to be scaled up when it is bigger
than the real object. In other words, it is an image.
•Examples :
 A globe representing the earth,
 Blue prints of a home.
• Model of a cell in biology.
• A baby toy car as a model of an automobile. 23
PHYSICAL MODELS
Analogue Model: These models represent a system or object by using set of properties different from the
ones, held by the original object or system. There is no ‘look-alike’ relation between the model and the
original. i.e. These models represent a system by the set of properties different from that of the original
system and does not resemble physically. After the problem is solved, the solution is re-interpreted in
terms of the original system.
Example :
 Organizational chart representthe state of formal relationships existing between members of the
organization.
 Maps in different colours may represent water, desert, mountains etc.
 Graphs of time series, stock market etc. may be used to represent

quantitative relationship between any two properties.

 Both models are easier to manipulate and can represent dynamic situations; so analogue model is more
CONT…
• The scientific approach to decision making requires the use of one or more
mathematical models.
• A mathematical model is a mathematical representation of the actual
situation that may be used to make better decisions or clarify the situation.

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CONT…
Benefits of modeling
• Economy - it is often less costly to analyze decision problems using
models.
• Timeliness - models often deliver needed information more quickly than
their real-world counterparts.
• Feasibility - models can be used to do things that would be impossible.
• Models give us insight and understanding that improves decision making

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CONT….

FIGURE 1.2 GENERAL FRAMEWORK OF OR APPLICATION

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METHODS OF OPERATIONS RESEARCH

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THE OR PROBLEM SOLVING SCHEME

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 STEPS FOR SOLVING OR PROBLEM

1. Formulate the problem to be solved

2. Build a mathematical model
3. Select appropriate tool necessary to solve the problem
4. If necessary, simplify by introducing appropriate
assumptions
5. Perform the analysis
6. Implement findings
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 TRANSFORMING MODEL INPUTS INTO
OUTPUT

Uncontrollable Inputs
(Environmental Factors)

Controllable Mathematical
Output
Inputs Model
(Projected Results)
(Decision Variables)

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EXAMPLE
Example 1.1.
• A company manufactures two products x and y, which require, the following resources.
The resources are the capacities machine M1, M2, and M3. The available capacities are
50,25,and 15 hours respectively in the planning period. Product X requires 1 hour of
machine M2 and 1 hour of machine M3. Product Y requires 2 hours of machine M1, 2
hours of machine M2 and 1 hour of machine M3. The profit contribution of products X
and Y are ETB 5/unit and ETB 4/unit respectively. Formulate the mathematical model /
representation of this problem.

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 Machines Products Availability in
hours

CONTX … Y
M1 0 2 50
M2 1 2 25
M3 1 1 15
Profit(ETB) 5 4

OBJECTIVE FUNCTION
 MAXIMIZE Z = 5X + 4Y

SUBJECTED TO CONSTRAINTS


FOR MACHINE M 0X + 2Y
1 ≤ 50
 FOR MACHINE M 1 X + 2Y ≤ 25
2


FOR MACHINE M 1 X + 1Y
3 ≤ 15
BOTH X AND Y ARE ≥ 0 . NON -NEGATIVITY CONSTRAINT.
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 EXAMPLE 1.2
• A crop farmer has to decide which crops to grow yearly on the 6 hec of
land. There are two crops; corn and potato. The yearly return per hectare
of corn is 20,000 birr and that of potato is 10,000 birr. Every hectare
grown with corn requires 20 hours of labor and every hectare potato
requires 40 hours. The available number of hours is 200. Environmental
requirements impose that at maximum two-third of the available surface
can be used for growing corn, and crop rotation requirements tell us that
only half of the area can be occupied by potato. The question is how
much corn and potato are to grow, taking the restrictions into account,
such that the return is as high as possible?
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CONT…
• Solution:
• Define decision variable
Let x1 and x2 be the number of hectors corn and potato grown respectively, the
following decision model represents the problem.
Objective functions
Max Z= 20,000X1 + 10,000X2
Subject to:
20X1 + 40X2 ≤ 200 [labor constraints)
X1 ≤ 4 [environment constraints]
X2 ≤ 3 [crop rotation constraints ]
X1 + X2 ≤ 6 [land constraints]
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 .

• THANKS FOR YOUR ATTENTION

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