Introduction to operation

research

Ha Thi Xuan Chi, PhD

1
General information
q Textbook: Introduction to Operations Research.
FREDERICK S. HILLIER and GERALD J.
LIEBERMAN, 9th edition.
q Reference book: Introduction to Mathematical
Programming- Wayne L. Winston, Munirpallam
Venkataramanan , 4th Edition
q Grading:
§ Midterm examination 30%
§ Homework/ quiz/project: 30%
§ Final examination: 40%

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Learning objectives
q Introduction to OR
§ What is OR?
§ History of OR
§ Applications in OR
§ How does OR impact the world?
q Modeling and the problem solving process
q Deterministic vs. stochastic models

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Introduction to OR
q What is Operational Research?
§ A scientific approach to the solution of problems in the
management of complex systems that enables decision
makers to make better decisions.
q Operations
§ The activities carried out in an organization.
q 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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 Introduction to OR

q History of OR
§ World War II : British military
leaders asked scientists and
engineers to analyze several
military problems

§ Deployment of radar
§ Management of convoy
§ Bombing
§ Antisubmarine

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History of OR
q The result was called Military Operations
Research, later Operations Research
q Let see the video for more information:

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 History of OR

q OR Over the Years

1950's 1970's 1990's

Mathematical Improved
NP-
developments use of O.R.
completeness.
queuing theory,
systems.
More realistic
mathematical expectations.
programming .

1947 1960's 1980's

Simplex More
excitement Easy access
method
more to data
development and
grand plans
managers to use
models..
Introduction to OR
q Today:
§ The use of mathematical models in providing guidelines to
managers for making effective decisions within the state of the
current information, or in seeking further information if current
knowledge is insufficient to reach a proper decision
q Let see the video

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Introduction to OR

Applications of OR

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Introduction to OR
q Applications of OR
Scheduling:
Manufacturing machines,
workers,

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Introduction to OR
q Applications of OR

Football

Racing: fuel, risk, forecast

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Introduction to OR
q Applications of OR

Warehouse management

Distribution
Transportation
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Introduction to OR
q Applications of OR

Check-in

Queuing

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Introduction to OR
q Applications of OR

Scheduling 14
Introduction to OR
q How does OR impact the world?
q Let see the video

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Introduction to OR
q Applications of OR
§ Firms want to maximize value to shareholders
§ People want to make the best choices
§ We want the highest quality at the lowest price
§ When playing games, we want the best strategy
§ When we have too much to do, we want to optimize the use of
our time
§ etc.

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Problem Solving Process (video)
Formulate the
q Model : Situation
Problem
Problem
Implement a Solution Statement
§ valid
§ tractable Data

Solution: Construct
q a Model
Implement
§ useful the Solution

Model

Procedure
Find
a Solution
Establish
a Procedure

Test the Model

and the Solution Solution Tools
Problem Solving Process
q The Situation
q Example:
§ Internal nursing staff not happy with
their schedules; hospital using too
many external nurses.
Problem Solving Process
q Problem Formulation
§ Define variables
§ Define constraints
§ Identify data requirements
§ Describe system
§ Define boundaries
§ State assumptions
§ Select performance measures
 Problem Solving Process
q Constructing a Model
q Example: Problem
Formulate the statement
§ Maximize individual nurse
preferences subject to Problem
demand requirements, or
minimize nurse Construct
dissatisfaction costs. a Model
Model
Problem Solving Process
q Solving the
Mathematical Model Model
q Example: Find a
§ Collect input data -- nurse solution
profiles and demand
requirements; apply
algorithm; post-process
results to get monthly
schedules.
Solution Tools
Problem Solving Process
q Implementation
q Example:
§ Implement nurse
scheduling system in one
unit at a time. Integrate
with existing HR and T&A
systems. Provide training
sessions during the
workday.
 Problem Solving Process

https://www.researchgate.net/publication/283805990_Why_No_Difference_
A_Controlled_Flipped_Classroom_Study_for_an_Introductory_Differential_
Equations_Course/figures?lo=1 23
Deterministic vs. stochastic models
q Deterministic Models Stochastic Models
§ Linear Programming • Discrete-Time Markov Chains
§ Network Optimization • Continuous-Time Markov Chains
§ Integer Programming • Queuing
§ Nonlinear Programming • Decision Analysis

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Deterministic vs. Stochastic Models

q Deterministic models
§ assume all data are known with certainty
q Stochastic models
§ explicitly represent uncertain data via random variables or
stochastic processes
q Deterministic models involve optimization
q Stochastic models characterize / estimate
system performance.
Steps on OR

Start
Yes
Problem statement Analysis results
No
Model Building Yes
No Implement results
Data analysis
Model verification
and evaluation
End
Coding
Linear Programming
q Minimize /Maximize: a linear objective
q Subject to: linear equalities and inequalities

max Z= 3x + 4y
subject to 5x + 8y £ 24
x, y ³ 0
q A feasible solution satisfies all of the constraints

x = 1, y = 1 is feasible; x = 1, y = 3 is infeasible.
q An optimal solution is the best feasible solution.

q The optimal solution is x = 4.8, y = 0.

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Terminology
q Decision variables: e.g., x and y.
§ In general, there are quantities you can control to improve your
objective which should completely describe the set of
decisions to be made.

q Constraints: e.g., 5x + 8y £ 24 , x ³ 0 , y ³ 0
§ Limitations on the values of the decision variables.
q Objective Function. e.g., 3x + 4y
§ Value measure used to rank alternatives
§ Seek to maximize or minimize this objective
§ examples: maximize NPV, minimize cost

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MSR Marketing Inc.
adapted from Frontline Systems

q Need to choose ads to reach at least 1.5 million

people
§ Minimize Cost
§ Upper bound on number of ads of each type

TV Radio Mail Newspaper

Audience Size 50,000 25,000 20,000 15,000

Cost/Impression $500 $200 $250 $125

Max # of ads 20 15 10 15

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Formulating as a math model
q Work with your partner
§ How many decision variables?

§ What is the objective? Express the objective in terms of the

decision variables.

§ What are the constraints? Express these in terms of the decision

variables.

§ If you have time, try to find the best solution.

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The MSR Marketing Problem

Minimize 500 x1 + 200 x2 + 250 x3 + 125 x4

subject to 50 x1 + 25 x2 + 20 x3 + 15 x4 ³ 1,500
0 £ x1 £ 20
0 £ x2 £ 15
0 £ x3 £ 10
0 £ x4 £ 15

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Gemstone Tool Company

q Privately-held firm, headquartered in Seattle

q Consumer and industrial market for construction
tools
q Simplifying assumptions, for purposes of
illustration:
§ Winnipeg, Canada plant
§ Wrenches and pliers.
§ Made from steel
§ Injection molding machine
§ Assembly machine
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Data for the GTC Problem
Wrenches Pliers Available
Steel 1.5 1.0 15,000 pounds
Molding 1.0 1.0 12,000 hrs
Machine
Assembly .4 .5 5,000 hrs
Machine
Demand Limit 8,000 10,000
Contribution $.40 $.30
($ per item)
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q Work with your partner to formulate the GTC
problem as a linear program.
q Let P = number of pliers made
q Let W = number of wrenches made

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Formulating the GTC Problem
q Step 1: Determine Decision Variables
§ W = number of wrenches manufactured
§ P = number of pliers manufactured

q Step 2: Determine Objective Function

§ Maximize Profit = 0.4 W + 0.3 P

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The Formulation Continued

Step 3: Determine Constraints

Steel: 1.5 W + P £ 15,000

Molding: W + P £ 12,000

0.4 W + 0.5 P £ 5,000

Assembly:
0 £ W £ 8,000
Wrench Demand:
Plier Demand: 0 £ P £ 10,000

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Addressing managerial problems: A
management science framework

q 1. Determine the problem to be solved

q 2. Observe the system and gather data
q 3. Formulate a mathematical model of the
problem and any important subproblems
q 4. Verify the model and use the model for
prediction or analysis
q 5. Select a suitable alternative
q 6. Present the results to the organization
q 7. Implement and evaluate
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Dealing with very large versions of the
problem

q Suppose that there are 10,000 products and 100

raw materials and processes that lead to
constraints.
q Old technique used: write a Fortran program
that generates the linear program
q New technique used: write an “algebraic version
of the model”

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Formulation
q n = number of items that are manufactured
§ e.g., in the previous example, n = 2;
q m = number of resource constraints
§ e.g., m = 2, {molding, and assembly}
q pj = unit profit from item j, e.g., p1 = .3;
q dj = maximum demand for item j; e.g.,
q xj = number of units of item j manufactured
q bi = amount of resource i available
q aij = amount of resource i used in making item j
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Formulation
n
Maximize pjxj
j 1
n

subject to aij x j bi for i 1 to m

j 1

xj d j for j 1 to n

xj 0 for j = 1 to n

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Linear Programs
q Linear function :
§ f(x1, x2, . . . , xn) = c1x1 + c2x2 + . . . + cnxn
§ E.g., 3x1 + 4x2 - 3x4.
q A mathematical program is a linear program (LP)
§ objective: a linear function
§ constraints : linear equalities or inequalities.
E.g. 3x1 + 4x2 - 3x4 ³ 7
x1 - 2x5 = 7
q LP has non-negativity constraints.

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Some Success Stories
q Optimal crew scheduling saves American Airlines $20 million/yr.
q Improved shipment routing saves Yellow Freight over $17.3 million/yr.
q Improved truck dispatching at Reynolds Metals improves on-time delivery
and reduces freight cost by $7 million/yr.
q GTE local capacity expansion saves $30 million/yr.

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Other Success Stories (cont.)
q Optimizing global supply chains saves Digital
Equipment over $300 million.
q Restructuring North America Operations, Proctor
and Gamble reduces plants by 20%, saving $200
million/yr.
q Optimal traffic control of Hanshin Expressway in
Osaka saves 17 million driver hours/yr.
q Better scheduling of hydro and thermal
generating units saves southern company $140
million.
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Success Stories (cont.)

q Improved production planning at Sadia

(Brazil) saves $50 million over three years.
q Production Optimization at Harris
Corporation improves on-time deliveries
from 75% to 90%.
q Tata Steel (India) optimizes response to
power shortage contributing $73 million.
q Optimizing police patrol officer scheduling
saves police department $11 million/yr.
q Gasoline blending at Texaco results in
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Summary

q Answered the question: What is

Operations Research & Management
Science? and provided some historical
perspective.
q Introduced the terminology of linear
programming
q Two Examples:
1. MSR Marketing
2. Gemstone Tool Company
§ Small (2-dimensional) Linear Program, non-obvious 45
solution