Operations Research:

Making More Out of

Information Systems
Dr Heng-Soon GAN
Department of Mathematics and Statistics
The University of Melbourne

This presentation has been made in accordance with the provisions of Part VB of the copyright
act for the teaching purposes of the University.
Copyright© 2005 by Heng-Soon Gan
 Optimisation = Efficiency + Savings
• Kellogg’s
– The largest cereal producer in the world.
– LP-based operational planning (production, inventory, distribution)
system saved $4.5 million in 1995.
• Procter and Gamble
– A large worldwide consumer goods company.
– Utilised integer programming and network optimization worked in
concert with Geographical Information System (GIS) to re-engineering
product sourcing and distribution system for North America.
– Saved over $200 million in cost per year.
• Hewlett-Packard
– Robust supply chain design based on advanced inventory optimization
techniques.
– Realized savings of over $130 million in 2004

Source: Interfaces
Mathematics in Operation
Real Practical Problem


Mathematical (Optimization) Problem
x2

Mathematical Solution Method (Algorithm)

Computer Algorithm

Decision Support Software System

Human Decision-Maker
Decision Support

Interface

Decision Support Tool

Information Systems
 A Team Effort
Users

Interface

Ops Res Decision Support Tool Comp Sci

Information Systems

Biz Analyst Info Sys

 Staff Rostering

Allocating Staff to Work Shifts

A significant role for the “Team”

 The Staff Rostering Problem
• What is the optimal staff allocation?
• Consider a Childcare Centre:
– The childcare centre is operating 5 days/week.
– There are 10 staff members.
– Each staff member is paid at an agreed daily rate,
according to the skills they possess.
– One shift per day
– Skills can be categorised into 5 types.
• (Singing,Dancing)
• (Arts)
• (Sports)
• (Reading,Writing)
• (Moral Studies,Hygiene)
 …other information
• CONSTRAINTS:
– Skill Demand
• The daily skill demand is met.
– Equitability (breaks,salaries)
• Each staff member must at least work 2 days/week and
can at most work 4 days/week.
– Workplace Regulation
• On any day, there must be at least 4 staff members
working.
• OBJECTIVE:
– Minimise Total Employment Cost/Week
 Problem Solving Stages
Staff Rostering at
Real Practical Problem Childcare Centre

Mathematical
Mathematical (Optimization) Problem Programming

Mathematical Solution Method (Algorithm) CPLEX

XpressMP

Computer Algorithm LINGO

Decision Support Software System Excel with VBA

Childcare Centre
Human Decision-Maker Manager
 The Mathematical Problem

• Modelled as an Integer LP

– Decision variables are integers, i.e. variables can

only take 0,1,2,… not 0.2, 1.1, 2.4 etc.

– A binary variable: a decision variable that can only

take 0 or 1 as a solution.
 Integer LP (just for show…)
10 7 1, if staff i works on day k
Minimise  c x
i 1 k 1
i ik
xik  
0, otherwise
10
1, if staff i possesses skill j
s.t. a x
i 1
ij ik  d jk , j  S , k  D aij  
0, otherwise
5
ci  daily wage for staff i
2   xik  4, i  E
k 1 d jk  requirements for skill j on day k
10

x
i 1
ik  4, k  D Skill Demand

xik   0,1 , i  E , k  D Equitability

Workplace Regulation
 Xpress MP

• Large-scale optimisation software developed

by Dash (http://www.dashoptimization.com)

• Xpress-IVE (Interactive Visual Environment)

 Decision Support Software
System
• Excel Interface

• Database Management:
– Staff Profile (Name, Category)
– Annual leave
– Shift preferences
– Reserve staff
– Roster
– etc….

• Information system installed to disseminate

information (shift preference, roster etc.) effectively
throughout the organisation
 Other Issues and Challenges
• Breaks
– scheduled breaks
– annual leave
– festive breaks (under-staffing issues)
• Fatigue
– limit to number of working hours per day/week/fortnight
(Union Requirements)
• Equitable roster
– equitable weekend/night shifts
• Motivation
– skill utilisation (avoid monotonous job routine)
• Training
– training and development (scheduled)
 Other Industry Requiring Staff
Rostering
• Airline (air crew and ground staff)
• Health (nurses and doctors)
• Manufacturing (operators)
• Transport (truck drivers)
• Entertainment and gaming
• Education (teachers, lecturers)

MORe is currently involved in several (long-term) staff

rostering projects for Australia-based companies in
at least one of the industries mentioned above.
 Force Optimisation
A collaborative project between
Melbourne Operations Research (MORe)
&
Defence Science and
Technology Organisation (DSTO),
Department of Defence,
Australian Government
 Project Background
• DSTO LOD working with Melbourne Operations Research
(MORe), The University of Melbourne

• Project aim: support the Army (Force Design Group) with their
capability options development and analysis, seeking
– What types of forces should be maintained?
– What force strength is required?
to ensure forces are effective in achieving defence objectives

• Project started in mid-2004 and successfully completed its

modelling, interface design and testing phases in the
beginning of year 2005

• The model will be presented at the Australian Society for

Operations Research 2005 Conference (26-28th September)
 General Aim of Project
Forces “wishlist”

Choose forces
(STRATEGIC) $ $ $ $  budget

Force
configuration
Deploy forces e e e e e e e max effectiveness
(TACTICAL)

Objectives
 The Mathematical Model
• An integer LP-based prototype decision
support tool has been developed.

• The support tool, ForceOp, has an Excel

interface, written with VBA and optimised
using XpressMP.

• Future directions
– database management
– integrated military systems – Military Information
System
 The ForceOp Tool
• Before this tool,
– force design was carried out manually
– a lengthy and laborious process, based on intuitive-
reasoning (no quantitative basis).
– difficult to assess effectiveness or compare quality of
solutions

• With this tool,

– solutions can be obtained fast.
– quality of solutions can be quantified.
– many sets of objectives can be tested within a short period
of time.
– many different force configurations can be tested against a
given set of objectives.
Facility Location Decisions

LP as a “What-If” Tool
 The Facility Location Problem
• LP-based techniques can be used to locate
– manufacturing facilities,
– distribution centres,
– warehouse/storage facilities etc.
taking into consideration factors such as
– facility/distribution capacities,
– customer demand,
– budget constraints,
– quality of service to customers etc.
using Operations Research techniques such as
– linear programming,
– integer linear programming, and
– stochastic programming.

• With OR techniques, solutions for the facility location problem

can be obtained fast, and hence, we are able to perform a
large range of “what-if” scenarios.
 Problem Statement
36km

Customer
10 000 W-3
180 000 36km
Warehouse
W-4 (W)
C D
220 000 Assume:
180 000
• Transportation cost:
$20/km/unit
B W-5
E
• Warehouses have the same
10 000 units W-2
O/H cost
A • Warehouse has very large
F capacity
W-1 W-6 Problem modelled as an
integer linear program, and
10 000
solved using XpressMP.
 The Mathematical Model
n n d
Minimise  f x  W
i 1
i i
i 1 j 1
ij yij

s .t .
d

y
j 1
ij  Ci xi , i  1 n

y
i 1
ij  Dj , j  1 d

xi   0 ,1
yij is int eger

yij
j
i
xi
 Scenario 1
• Scenario 1: 10 000 W-3
180 000
Warehouse O/H W-4
cost is very small as C D
compared to 220 000
180 000
transportation cost
– Warehouse O/H:
B W-5
E
$6 000 000
W-2
– Transportation cost:
10 000 units
$20/km/unit
– proximity dominates
A
F
– operate the
W-1 W-6
warehouse closest
to each customer 10 000
 Scenario 2
• Scenario 2: Warehouse 10 000 W-3
O/H cost is very large 180 000
as compared to W-4
transportation cost C D
– Warehouse O/H: 220 000
180 000
$1 800 000 000
– Transportation cost:
$20/km/unit
B W-5
E
– too expensive to 10 000 units W-2
operate a warehouse
– hence, the most A
centralised warehouse F
selected (based on
demand & distance) W-1 W-6

10 000
 Scenario 3
• Scenario 3: Both 10 000 W-3
180 000
warehouse O/H and W-4
transportation costs C D
are competing 220 000
180 000
– Warehouse O/H:
$60 000 000
B W-5
E
– Transportation cost:
$20/km/unit 10 000 units W-2
– solution is not
obvious; too many A
possibilities
F
W-1 W-6

10 000
 Scenario 4
• Scenario 4: Both 10 000 W-3
180 000
warehouse O/H and W-4
transportation costs C 150 000
D
are competing AND 220 000
180 000 10 000
warehouse capacity 30 000

limited 110 000

B W-5
E
– Warehouse O/H: 150 000
10 000 units W-2
$60 000 000
– Transportation cost: 70 000 70 000
$20/km/unit
A
10 000 10 000 F
– Warehouse
W-1 W-6
capacity: 150 000
units 10 000
 Facility Location
• Possible variants
– closure decisions
– acquisition decisions

• Possible extensions
– limitations to the number of distribution centres
– warehouse-customer distance constraint
– complex cost functions
– uncertain demand
 Other OR Applications
• Other areas where OR techniques have been proven
to be useful include
– Inventory control
– Warehouse design, storage and retrieval, order picking
– Vehicle routing
– Delivery transport mode selection
– Capacity and manpower planning
– Production scheduling

…and other resource usage and allocation decisions.