INTRODUCTION TO

OPERATIONS RESEARCH
Definition of OR

 “Operations Research is a scientific method of providing executive

departments with a quantitative basis for decisions regarding the operations
under their control.”- Morse & Kimball.
 “Operations Research is the systematic, method-oriented study of the basic
structure, characteristics, functions, and relationships of an organization to
provide the executive with a sound, scientific, and quantitative basis for
decision making.”- E. L. Arnoof & M. J. Netzorg.
 “Operations Research is an experimental and applied science devoted to
observing, understanding, and predicting the behaviour of purposeful man-
machine systems; and Operations Research workers are actively engaged in
applying this knowledge to practical problems in business, government, and
society.”- Operations Research Society of America.
Characteristics of OR

 i) OR uses scientific methods to arrive at the optimum solution.

 ii) OR takes into account all significant factors and evaluates them as a whole, i.e., OR
considers the wholistic approach. As such OR is said to be system oriented.
 iii) OR tries to optimize the total output by maximizing the profit and minimizing the loss
or cost.
 iv) OR is the inter-disciplinary team approach to find out the optimum solution. For
example, one may find a mathematician, statistician, physicist, psychologist, economist,
and an engineer working together on an OR problem.
 v) OR 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.
 vi) OR approach provides the management with a quantitative basis for decision making.
For example, it will give answers like, “The cost to the company, if decision A is taken is
Tk. X; if decision B is taken is Tk. Y, etc.”
Limitations of OR

 i) Mathematical models which are essence of OR, do not take into account
qualitative factors or emotional factors which are quite real. All influencing
factors which cannot be quantified, find no place in mathematical models.
 ii) Mathematical models are applicable to only specific categories of
problems.
 iii) Management, which has to implement the advised proposals, may itself
offer a lot of resistance due to conventional thinking.
 iv) OR methods do not give perfect results at all times.
 v) Young enthusiasts, overtaken by its advantages and exactness, generally
forget that OR is meant for men and not that men are meant for OR.
Phases of OR

 i) Formulating the problem.

 ii) Constructing a model to represent the system under study.
 iii) Deriving a solution from the model.
 iv) Testing the model and the solution derived from it.
 v) Establishing controls over the solution.
 vi) Putting the solution to work, i.e., implementation.
Formulating the problem
It is very essential that the problem at hand be clearly defined. It is almost impossible to get the
‘right’ answer from a ‘wrong’ problem. In formulating a problem for OR study, analysis must be made
of the following four major components:
the environment.
the decision maker or research consumer or system operator.
the objectives.
alternative courses of action and constraints.
Out of the four components, environment is most comprehensive since it embraces and provides a
setting for the other three. It is the framework within which a system of organized activity is
directed to attain the prescribed objectives and goals.
Decision maker is the person who is in control of the operations (system) under study.
Objectives are the third component of the problem to which analysis must be made and should be
defined by taking into account the system (problem) as a whole.
The research problem is to determine which alternative course of action is most effective to achieve
a certain set of objectives.
Constructing a model to represent the system under study

 After formulating the problem, the next step is to construct a mathematical

model which consists of a set equations. These equations describe the system
or problem and represent : (1) the effectiveness function, and (2) constraints.
 The effectiveness function, usually called the objective function which is a
mathematical expression of the objectives, i.e., mathematical expression of
the cost or profit of the operation.
 Constraints or restrictions are mathematical expressions of the limitations on
the fulfilment of the objectives.
Deriving a solution from the model

 A solution may be extracted from a model either by conducting experiments

on it, i.e., by simulation or by mathematical analysis. Some cases may require
the use of a combination of simulation and mathematical analysis. This
depends upon the nature and complexity of the system under study.
 Mathematical analysis for deriving an optimum solution from a model consists
of two types of procedures: (1) analytical, and (2) numerical. Analytical
procedures make use of the various branches of mathematics such as calculus
or matrix algebra. Numerical procedure consists of trying various values of
controllable variables in the model, comparing the results obtained, and
selecting that set of values of these variables which gives the best solution.
 Simulation or Monte-Carlo method is used when the above methods do not
help. Here an experiment is simulated to get the values of a variable which is
only probabilistically known. Statistical sampling techniques are used to
obtain a probabilistic approximation of the solution.
Testing the model and the solution
derived from it
 The usefulness of a model is tested by determining how well it predicts the
effect of changes in control variables on the overall system effectiveness.
Such an analysis is usually called sensitivity analysis.
Establishing controls over the solution

 A solution derived from a model remains a solution only so long as the

uncontrolled variables retain their values and the relationship between the
variables does not change. Therefore, control must be established to indicate
the limits within which the model and its solution can be considered as
reliable.
Putting the solution to work

 Finally the results of the research must be implemented. The success of an

OR study depends upon the co-operation received from the management at
the implementation stage. It is also necessary to monitor the environment
within which a system operates.
Operations Research and Decision Making

Operations Research is the science of managing. It is a decision science which helps

management to make better decisions, as management is most of time making decisions.
Decision making can be improved and, in fact, there is a scope of large scale improvement.
The essential features of all decisions are:
Objectives.
Alternatives.
Influencing factors (constraints).
Once these characteristics are known, one can think of improving the characteristics so as to
improve the decision itself.
In OR, the essential features of decisions are expressed in terms of scientific quantifications
or mathematical equations through mathematical models. Thus, OR is a decision science
which helps management to make the best decision from available alternatives.
Application Areas of OR

Sequencing Problems.
Allocation Problems.
Replacement Problems.
Inventory Problems.
Routing Problems.
Queuing Problems.
Dynamic Programming.
Simulation Techniques.
Decision Theory.
Heuristic Models.
Goal Programming.
PERT/CPM etc.
Scope of OR in Modern Management

Allocation & Distribution:

Optimal allocation of limited resources.
Location and size of warehouses, distribution centers etc.
Distribution policy.
Production & Facility Planning:
Selection, location and design of production plants.
Project scheduling.
Preparation of forecasts for various inventory items and computing economic order quantity and reorder levels.
Maintenance policy.
Scheduling and sequencing of production runs .
Procurement:
What, how and when to purchase at the minimum procurement cost.
Bidding and replacement policies.
Scope of OR in Modern Management

Marketing:
Product selection and timing.
Selection of advertising media.
Demand forecasts and stock levels.
Customer preference for size, colour, and packing of various products.
Finance:
Capital requirements and cash flow analysis.
Credit policies, credit risks etc.
Profit plan.
Personnel:
Selection of personnel.
Assignment of jobs.
Research & Development:
Determination of areas for R & D.
Reliability and control of development projects.
Origin and Development of OR

 Pre- World War II

 World War II
 Post- World War II
Origin and Development of OR (Pre- World
War II)

 In 1885, Ferderick W. Taylor conducted scientific experiments in connection

with a simple shovel. His aim was to find that weight load of material moved
by shovel which would result in maximum of material moved with minimum of
fatigue. After many experiments with varying weights, he obtained the
optimum weight load.
 Another man of early scientific management era was Henry L. Gantt who
conducted experiments for minimizing the delay in processing of the jobs on
various machines.
 During 1930s H. C. Levinson applied scientific analysis to the problems of
merchandising. His work included scientific study of consumer’s buying habits,
response to advertising and relation of environment to the type of article
sold.
Origin and Development of OR (Pre-
World War II)
 However, it was the First industrial Revolution which contributed mainly towards
the development of OR. Before this revolution, most of the industries were small
and a single man performed all the managerial functions. As a result of the
revolution division and subdivision of management functions took place. For
example, production department was sub-divided into sections like maintenance,
quality control, procurement, production planning etc.
 All these departments needed OR as a result of the followings:
The production department wants to have maximum production with the lowest
possible cost.
The marketing department wants a large but diverse inventory for immediate
delivery.
The finance department wants to minimize inventory to minimize the
unproductive investments ‘tied-up’ in it.
The personnel department wants to hire good labour and to retain it.
Origin and Development of OR (World
War II)
 During World War II, the military management in England called on a team of
scientists to study the strategic and tactical problems of air and land defense with a
view to determining the most effective utilization of limited military resources. This
team of scientists included physicists, psychologists, engineers, mathematicians, and
others. This group of scientists formed the first OR team. The name Operations
Research was apparently coined because the team was carrying out research on
(military) operation.
 The encouraging results of these efforts led to the formation of more such teams in
the United States, Canada and France.
Origin and Development of OR (Post-
World War II)
 Immediately after the war, the success of military teams attracted the
attention of industrial managers who were seeking solutions to their problems
in UK and USA. OR soon spread from military to government, industrial, social
and economic planning.
 During 1940s electronic computers became commercially available. These
electronic brains enhanced computational speed and information storage.
This innovation speed up the development of OR.