Assignment # 2 Operation Research

nCHARACTERISTICS OF OPERATIONS RESEARCH

1. Its system orientation

2. The use of interdisciplinary teams
3. application of scientific method
4. uncovering of new problems
5. improvement in the quality of decisions
6. use of computers
7. quantitative solutions
8. human factors

1). Its system orientation

This means that an activity by any part of an organization has some effect on the activity of
every other part.
Therefore, to evaluate any decision, one must identify all possible interactions and determine
their impact on the organization as a whole.

Example,
Production department is interested in long, uninterrupted production runs since they reduce the
set-up and cleanup costs.
To solve the problem with this viewpoint is simple.

However, these long runs will result in large raw material, in process and finished product
inventories in relatively few product lines.
This will result in bitter conflict with finance, marketing and personnel departments.
As already discussed finance department wants to have the minimum possible inventory;
marketing department, a large but diversified inventory, while personnel department wants
continuous production during slack periods also, resulting in large inventories.

2). The use of interdisciplinary teams

that i t is performed by a team of scientists whose individual members have been drawn from
different scientific and engineering disciplines.
For example,
one may find a mathematician, statistician, physicist, psychologist, economist and an engineer
working together on an OR problem.

Huda Gul(1951-2016) Instructor: Sir Shad

Assignment # 2 Operation Research

Another reason for the existence of OR teams is that knowledge is increasing at a very fast rate.
No single person can collect all the useful scientific information from all disciplines.

Different members of the OR team bring that latest scientific know-how in different disciplines
to analyse the problem and help in providing better results

3). Application of Scientific Method

Operation research and characteristics the use of scientific method to solve the problem under
study.
Most scientific research, such as chemistry and physics can be carried out well in the
laboratories, under controlled conditions, without much interference from the outside world.

It is a formulized process of reasoning and consists of the following steps:

(i) Defining: The problem to be analyzed clearly and defining the conditions for
observations.
(ii) Observing: Observations are made under different conditions to determine the
behavior of the system.
(iii) Formulating: A hypothesis describing how the various factors involved are believed
to interact and the best solution to the problem is formulated on the basis of above
observations.
(iv) Testing: Finally, the result of experiment is design and executed, observations are
made and measurements are recorded.
(v) Analyzing: Finally, the result of experiment are analysis and check weather
hypothesis is accepted or not. Of the hypothesis is accepted it means the solution
obtained is optimum

4). Uncovering of New Problems

fourth operation research characteristics.
which is often overlooked, is that solution of an OR problem may uncover a number of new
problems.
these uncovered problems need not be solved at the same time.

However, in order to derive maximum benefit, each one of them must be solved.
The results of Operation research study pertaining to a particular problem need not wait until all
the connected problems are solved.

5). improvement in the quality of decisions

Huda Gul(1951-2016) Instructor: Sir Shad

Assignment # 2 Operation Research

OR gives bad answers to problems, to which, otherwise, worse answers are given.
It implies that by applying its scientific approach, it can only improve the quality of solution but
it may not be able to give perfect solution.

6). Use of computers

Another characteristics of OR is that it often requires a computer to solve the complex
mathematical model or to manipulate a large amount of data or to perform a large number of
computations that are involved.

7). Quantitative solutions

OR approach provides the management with a quantitative basis for decision-making.
For example,
it will give answer like, “the cost to the company, if decision A is taken is X; if decision B is
taken is Y, etc.”

8). human factors

In deriving quantitative solutions we do not consider human factors, which doubtlessly play a
great role in the problems posed.
Definitely an Operation research study is incomplete without a study of human factors.

9). Optimizing Nature

OR ties to optimize total return by maximizing the profit and minimizing the cost or loss.

Scope of Operations Research

The scope of OR is not only confined to any specific agency like defence services but today it is

widely used in all industrial organisations. It can be used to find the best solution to any problem
be

it simple or complex. It is useful in every field of human activities, where optimisation of

resources is

required in the best way. Thus, it attempts to resolve the conflicts of interest among the
components
of organization in a way that is best for the organisation as a whole. The main fields where OR is
extensively used are given below, however, this list is not exhaustive but only illustrative.

(i) National Planning and Budgeting

Huda Gul(1951-2016) Instructor: Sir Shad

Assignment # 2 Operation Research

OR is used for the preparation of Five Year Plans, annual budgets, forecasting of income and
expenditure, scheduling of major projects of national importance, estimation of GNP, GDP,
population, employment and generation of agriculture yields etc.

(ii) Defence Services

Basically formulation of OR started from USA army, so it has wide application in the areas such
as:

development of new technology, optimization of cost and time, tender evaluation, setting and
layouts

of defence projects, assessment of “Threat analysis”, strategy of battle, effective maintenance

and
replacement of equipment, inventory control, transportation and supply depots etc.

(iii) Industrial Establishment and Private Sector Units

OR can be effectively used in plant location and setting finance planning, product and process
planning, facility planning and construction, production planning and control, purchasing,
maintenance management and personnel management etc. to name a few.

(iv) R & D and Engineering

Research and development being the heart of technological growth, OR has wide scope for and
can
be applied in technology forecasting and evaluation, technology and project management,
preparation of tender and negotiation, value engineering, work/method study and so on.

(v) Business Management and Competition

OR can help in taking business decisions under risk and uncertainty, capital investment and
returns,
business strategy formation, optimum advertisement outlay, optimum sales force and their
distribution, market survey and analysis and market research techniques etc.

(vi) Agriculture and Irrigation

In the area of agriculture and irrigation also OR can be useful for project management,
construction
of major dams at minimum cost, optimum allocation of supply and collection points for

Huda Gul(1951-2016) Instructor: Sir Shad

Assignment # 2 Operation Research

fertilizer/seeds and agriculture outputs and optimum mix of fertilizers for better yield.

(vii) Education and Training

OR can be used for obtaining optimum number of schools with their locations, optimum mix of

Students/teacher student ratio, optimum financial outlay and other relevant information in
training of
graduates to meet out the national requirements.

(viii) Transportation
Transportation models of OR can be applied to real life problems to forecast public transport
requirements, optimum routing, forecasting of income and expenses, project management for
railways, railway network distribution, etc. In the same way it can be useful in the field of
communication.

(ix) Home Management and Budgeting

OR can be effectively used for control of expenses to maximize savings, time management, work

study methods for all related works. Investment of surplus budget, appropriate insurance of life
and
properties and estimate of depreciation and optimum premium of insurance etc.

Phases Of Operation Research

1. Formulating the Problem:
O.R. is a research into the operation of a man, machine, organization and must consider the
economics of the operation.

In formulating a problem for O.R. study analysis must be made of the following major
components:
(i) The environment

(ii) The objectives

(iii) The decision maker

(iv) The alternative courses of action and constraints.

Out of the above four components environment is most comprehensive as it provides a setting
for the remaining three. The operation researcher shall attend conferences, pay visits, send

Huda Gul(1951-2016) Instructor: Sir Shad

Assignment # 2 Operation Research

observation and perform research work thus succeeds in getting sufficient data to formulate the
problems.

2. Constructing a Model to Represent the System under Study:

Once the project is approved by the management, the next step is to construct a model for the
system under study. The operation researcher can now construct the model to show the relations
and interrelations between a cause and effect or between an action and a reaction.

Now the aim of operation researcher is to develop a model which enables him to forecast the
effect of factors crucial to the solution of given problem. The proposed model may be tested and
modified in order to work under stated environmental constraints. A model may also be modified
if the management is not satisfied by its performance.

3. Deriving Solution from the Model:

A solution may be extracted form a model either by conducting experiments on it i.e. by
simulation or by mathematical analysis. No model will work appropriately if the data is not
appropriate. Such information may be available from the results of experiments or from hunches
based on experience.

The date collection can clearly effect the models output significantly. Operation researcher
should not assume that once he has defined his objective and model, he has achieved his aim of
solving the problem. The required data collection consumes time to prepare if data collection
errors are to be minimized.

4. Testing the Model and the Solution Derived from it:

As has been pointed out earlier a model is never a perfect representation of reality. But if
properly formulated and correctly manipulated, it may be useful in providing/predicting the
effect of changes in control variables on overall system effectiveness.

The usefulness or utility of a model is checked by finding out how well it predicts the effect of
these changes. Such an analyze is usually known as sensitivity analysis. The utility or validity of
the solution can be verified by comparing the results obtained without applying the solution with
the results obtained when it is used.

5. Establishing Controls over the Solution:

The next phase for the operation researcher is to explain his findings to the management. It may
be pointed out that he should specify that condition under which the solution can be utilized.

He should also point out weaknesses if any so that management will know what risks they are
taking while employing the model to generate results. Thus he should also specify the limits with

Huda Gul(1951-2016) Instructor: Sir Shad

Assignment # 2 Operation Research

in which the results obtained from using the model are valid. He should also define those
conditions under which the model will not work.

6. Implementation of the Solution:

The last phase of the operation research methodology is implementation of solutions obtained in
the previous steps. In operation research though decision making is scientific but its
implementation involves so many behavioral issues. Therefore, the implementing authority has
to resolve the behavioral issues. He has to sell the idea of utility of O.R not only to the workers
but also to superiors.

Linear Programming In Operation Research

Linear Programming (LP) is a widely used mathematical techniques designed to help
managers in planning and decision making relative to resource allocations. It is a
mathematical method for determining a way to achieve the best outcome in a given
mathematical model for some list of requirements represented as linear relationships.
Many management decisions involve trying to make the most effective use of organization
resources. These resources include Machinery, Labors, Money, Time,
Warehouse space or Raw materials to produce goods (machinery, furniture, food or cooking) or
service (schedules for machinery and production advertising policies or investment decision).
More formally, linear programming is a technique for the optimization of a linear
objective function, subject to linear equality and linear inequality constraints. Given a
polytope and a real-valued affine function defined on this polytope, a linear
programming method will find a point on the polytope where this function has the
smallest (or largest) value if such point exists, by searching through the polytope
vertices.

Transportation Problem
The transportation problem is a distribution-type problem, the main goal of which is to decide
how to transfer goods from various sending locations (also known as origins) to various
receiving locations (also known as destinations) with minimal costs or maximum profit. As long
as the number of origins and destinations is low, this is a relatively easy decision. But as the
numbers grow, this becomes a complicated linear programming problem.

Types
Transportation problems can be classified into different groups based on their main objective and
origin supply versus destination demand. Transportation problems whose main objective is to
minimize the cost of shipping goods are called minimizing. An alternative objective is to
maximize the profit of shipping goods, in which case the problems are called maximizing.

Huda Gul(1951-2016) Instructor: Sir Shad

Assignment # 2 Operation Research

In a case where the supply of goods available for shipping at the origins is equal to the demand
for goods at the destinations, the transportation problem is called balanced. In a case where the
quantities are different, the problem is unbalanced.
NORTH WEST CORNER METHOD:
Step1: Construct an empty m*n matrix, completed with rows & columns.
Step2: Indicate the rows and column totals at the end.

Step3: Starting with (1,1) cell at the north west corner of the matrix, allocate maximum possible
quantity keeping in view that allocation can neither be more than the quantity required by the
respective warehouses nor more than quantity available at the each supply center.
Step 4: Adjust the supply and demand nos. in the rows and columns allocations.

Step5: If the supply for the first row is exhausted then move down to the first cell in the second
row and first column and go to the step 4.

Step 6: If the demand for the first column is satisfied, then move to the next cell in the second
column and first row and go to step 4.

Step 7: If for any cell, supply equals demand then the next allocation can be made in cell either
in the next row or column.

Step 8: Continue the procedure until the total available quantity is fully allocated to the cells as
required.

Huda Gul(1951-2016) Instructor: Sir Shad

Assignment # 2 Operation Research

Huda Gul(1951-2016) Instructor: Sir Shad

Assignment # 2 Operation Research

Huda Gul(1951-2016) Instructor: Sir Shad

Assignment # 2 Operation Research

LEAST COST ENTRY METHOD:

This method takes into consideration the lowest cost and therefore takes less time to solve the
problem.

Step1: Select the cell with the lowest transportation cost among all the rows and columns of the
transportation table. If the minimum cost is not unique then select arbitrarily any cell with the
lowest cost.
Step2: Allocate as many units as possible to the cell determined in step 1 and eliminate that row
in which either capacity or requirement is exhausted.
Step3: Adjust the capacity and the requirement for the next allocations.
Step4: Repeat the steps1to3 for the reduced table until the entire capacities are exhausted to fill
the requirements at the different destinations.

Huda Gul(1951-2016) Instructor: Sir Shad

Assignment # 2 Operation Research

Huda Gul(1951-2016) Instructor: Sir Shad

Assignment # 2 Operation Research

Huda Gul(1951-2016) Instructor: Sir Shad

Assignment # 2 Operation Research

PERT VS CPM

BASIS FOR
PERT CPM
COMPARISON

Meaning PERT is a project management CPM is a statistical technique of

technique, used to manage project management that manages
uncertain activities of a project. well defined activities of a project.

What is it? A technique of planning and A method to control cost and time.
control of time.

Orientation Event-oriented Activity-oriented

Evolution Evolved as Research & Evolved as Construction project

Development project

Model Probabilistic Model Deterministic Model

Focuses on Time Time-cost trade-off

Estimates Three time estimates One time estimate

Appropriate for High precision time estimate Reasonable time estimate

Management of Unpredictable Activities Predictable activities

Huda Gul(1951-2016) Instructor: Sir Shad

Assignment # 2 Operation Research

BASIS FOR
PERT CPM
COMPARISON

Nature of jobs Non-repetitive nature Repetitive nature

Critical and Non- No differentiation Differentiated

critical activities

Suitable for Research and Development Non-research projects like civil

Project construction, ship building etc.

Crashing concept Not Applicable Applicable

Techniques of Operations Research

The operations research expert has a wide array of methods and techniques available for solving
problems.

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.

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.

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.

Huda Gul(1951-2016) Instructor: Sir Shad

Assignment # 2 Operation Research

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.

Non-linear Programming: This is used when the objective function and the constraints are not
linear in nature. Linear relationships may be applied to approximate non-linear constraints but
limited to some range, because approximation becomes poorer as the range is extended. Thus,
the nonlinear programming is used to determine the approximation in which a solution lies and
then the solution is obtained using linear methods.

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. For example number or motor in an
organization, number of passenger in an aircraft, number of generators in a power generating
plant, etc.

Markov Process: Markov process permits to predict changes over time information about the
behavior of a system is known. This is used in decision making in situations where the various
states are defined. The probability from one state to another state is known and depends on the
current state and is independent of how we have arrived at that particular state.
Network Scheduling: This technique is used extensively to plan, schedule, and monitor large
projects (for example computer system installation, R & D design, construction, maintenance,
etc.). The aim of this technique is minimize trouble spots (such as delays, interruption,
production bottlenecks, etc.) by identifying the critical factors. The different activities and their
relationships of the entire project are represented diagrammatically with the help of networks and
arrows, which is used for identifying critical activities and path. There are two main types of
technique in network scheduling, they are: Program Evaluation and Review Technique (PERT) –
is used when activities time is not known accurately/ only probabilistic estimate of time is
available. Critical Path Method (CPM) – is used when activities time is know accurately.

Information Theory: This analytical process is transferred from the electrical communication
field to O.R. field. The objective of this theory is to evaluate the effectiveness of flow of
information with a given system. This is used mainly in communication networks but also has
indirect influence in simulating the examination of business organizational structure with a view
of enhancing flow of information.

Huda Gul(1951-2016) Instructor: Sir Shad