Chapter 1

INTRODUCTION TO MANAGEMENT SCIENCE/

OPERATIONS RESEARCH

By: Wendmu A.
Assistant Professor of Management
Chapter objectives

After completing this unit, you will be able to:

• Understand the history of OR • OR techniques

• Meaning and definition of OR • Quantitative Analysis and

• Features of OR Decision Making

• Identify application areas of OR • Models and Model Building

• Significance of operations
research.
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 Ch1. introduction
• Good decision-making brings about a better life.

• A good decision is never an accident since it will be the result of;

 it is always the result of high intention,

 sincere effort,
 intelligent direction and
 skillful execution.
 COUN’T….
 it represents the wise choice of many alternatives.

 A good decision is the process of optimally achieving a given objective.

 But how it is possible to make a good decision?

Management science/OR/DS
1.1. History of Operations Research

industrial revolution
History of Operations Research
arose during World War II
 History of Operations Research

Scientific Management
Operations Research (OR) in a more general sense, started with the
publication of the Principles of Scientific Management in 1911 by
Frederick W. Taylor.
 History of Operations Research
 Scientific Management

 His approach relied on the measurement of industrial productivity

and on time /motion studies in the factories.

 The goal of his scientific management was to determine the best

method for performing tasks in the least amount of time.

 What we call OR/MS/DS today is, in fact, the use of scientific

tools to aid the executives.
 History of Operations Research
 1600’s Expected Values (Blaise Pascal); Newton’s Method for finding a
minimum of a function (Isaac Newton)
 • 1700’s Bayes Rule (Thomas Bayes); Least Squares (Carl F. Gauss)
 • 1826 Solution of linear equations (Carl F. Gauss)
 • 1890 Scientific Management (Frederick W. Taylor- known as the
father of Scientific Management – always looking for the “one best
way”)
 • 1900 Gantt Charts (Henry Gantt, Frederick W. Taylor)
 • 1902 Solution of inequality systems (J. Farkas)
 Meaning and Definition of Operations Research

 Many definitions of OR/MS/DS have been offered.

 Operations Research can be defined by different scholars from
many perspectives. But, the most important comprehensive
definition is given as follows.

 Operations Research (OR):

 is the application of scientific methods
 by inter-disciplinary teams
 to problems involving the control of organized man-machine
systems
 so as to provide solutions which best serve the purposes of the
organization as a whole (Ackoff- Sasieni 1968).
 Basic Features of Operations Research

 Nowadays, the OR/MS/DS approach has been

 Interdisciplinary approach
 Scientific approach
 Systems approach

 Objective oriented approach

 Use of models

 Requires willing executives

 Reduces complexity
Application Areas of Operations Research
There are so many application areas of operations research; to mention
some of the most widely known areas:

 Manufacturing
 Transportation
 Construction
 Telecommunication
 Financial planning
 Healthcare
 Military
 Public services
 Techniques of OR
The commonly used techniques include
2. Inventory models
1. Allocation models :
3. Network models
• Linear programming
4. Waiting- line models (Queuing
• Transportation models
theory)
• Assignment models
5. Simulation

6. Decision theory

7. Game theory

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Quantitative analysis and Decision
making

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 Quantitative Analysis & the Decision Making Process

• Decision Making: is the process of selecting a feasible course of action

from a set of alternative, so as to solve problems.

• The decision making process is initiated by a problem.

• The intention of the Decision maker/manager, when making a decision,

is to solve that problem.

• In doing so, the manager first makes an analysis of the alternatives.

• There are two forms of analysis— qualitative and quantitative.

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 Decision Making Process
Qualitative analysis based
upon managerial experience
and judgment

Managerial Summary &

Decision
Problem evaluation

Quantitative analysis based

upon mathematical
techniques

Figure 1.1 The Decision Making Process

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 Coun’t…
• In qualitative analysis, intuition and the decision maker’s subjective
judgment and experience are used.

• This type of problem solving is more an art than a science.

The qualitative approach is usually used when:

• The problem is simple,

• The problem is familiar,

• The costs involved are not so great,

• Immediate decisions are needed 17

Coun’t…
The quantitative approach is used when:

• The problem is complex

• The problem is not familiar

• The costs involved are substantial

• Enough time is available to analyze the problem

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The management science approach to analyze and solve the problem
involves:

Problem Definition

Model Construction

Analysis (Model
Solution)

Implementation &
Follow-up

Figure 1.2 The management science approach

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 Models and Model Building
• A model is a selective abstraction of reality.

• Model is a representation of real objects/situations

• It is a simplified and often idealized representation of real world

problems.

• A good model should capture the important details of reality without

including minor details

• Thus, it is important to carefully decide which aspects of reality to

include in a model.
 Why Modeling?
 Complexity of real systems

 Saving money

 Saving time

 Reducing/eliminating risk

 Modeling can provide new insights into the real

system
 What is a good model?
 As simple as possible
 Easy to understand
 Relevant to the problem
 Easy to modify and update
 Types of Models

1. Models by Function:
A. Descriptive Models: explain the various operations in non-mathematical
language and try to define the functional relationships and interactions between various
operations.

Eg: organizational chart, pie-diagram, layout plan describes the features of their respective
system

B. Predictive Models: explain or predict the behavior of the system.

E.g: Exponential smoothing forecast model – predicts the future demand

C. Normative or Optimization Models: These models are designed to provide optimal

solution to the problem subject to a certain constraints on use of resources.

E.g: LP Problem
2. Models by Structure and Abstraction :
a. Physical (iconic) model
• This is the physical representation of the situation,
problem or object.
• It is also called Static Model. It is a physical replica of

the real object.

– Example:
• Model of an airplane
• Photograph of a machine
• Layout drawing of a factory
 Continued…..
b. Analog Models:
• These are mostly abstract models showing inter and
intra relationships between two or more parameters.
• Also include models that are physical in form but do
not have the same physical appearance as the object
being modeled.

– For instance; graphs, frequency table, cause-effect

diagram, flow charts, Gantt charts, speedometer,
thermometer.
 Continued…..
c. Mathematical models
• This is also an abstract model. Here a set of relations is
represented in the form of mathematical equations, using symbols
to represent various parameters.
Example:
1. (x + y)2=x2+2xy+y2
2. Max.Z=3000x1 +2500x2
Subject to:
2x1+x2 < 40
x1+3x2 < 45
x1 < 12
x1, x2 > 0
x1 and x2 are decision variables
3. Models by Nature of an Environment :
• Depending on the degree of uncertainty we have about
a problem, we can classify models as Deterministic and
Probabilistic /Stochastic models.
a. Deterministic models: all the parameters of decision variables
are constant and their functional relationship are known with
certainty.
Eg. LP, Integer programming etc.
b. Probabilistic/stochastic models: deal with problems of decision
making under uncertainty or risk and the probabilities of the
alternative states of nature are known.

 Unlike the deterministic models; here, any of the uncontrollable

inputs are uncertain and subject to variation.
4. Models by Extent of Generality :

These models can be categorized in to:

a. Specific Models: when a model presents a system at some

specific time it is known as a specific model.

b. General Models: are models applicable to all situations

without time bound. Simulation and Heuristic models fall
under this category.