FMP-709 3(2-1)

OPERATIONS RESEARCH

1
 Course Objectives

Acquaint students with the use of

quantitative methods and techniques
for effective decisions making
[model formulation and their
applications for decision making]

2
 Course outlines
Theory - Introduction to Operations Research (OR);
Decision making process; Inventory management;
Forecasting; Capacity planning; Linear Programming (LP)
– graphical method and Simplex method - Sensitivity
Analysis; Transportation problems; Project management;
Queuing theory problems; Design of work system; Total
Quality Management.
Practical - The assignments that have work to be assessed
will be given to the students in separate documents
including the due date and appropriate reading material.

3
 Suggested Readings
• Taha, H.A. 2016. Operations Research (9th ed.),
Macmillan Publishing Company, USA.
• Craven, B.D. and S.M.N. Islam. 2005. Operations
Research Methods. Victoria University.
• Kumar, S.A. and N.S. Uresh. Production and Operations
Management. New Age International (P) LiLimited,
Publishers, New Delhi.
• Stenvenson, W.J. 2005. Production Operations
Management (5th ed.). USA
• ICMA. Quantitative Techniques

4
 Technique and method?
Technique and method can sometimes be used interchangeably. 
Method: a settled kind of procedure, usually according to a
definite, established, logical, or systematic plan: one method of
solving a problem.
Technique: the manner and ability with which an artist, writer,
athlete, lawyer, or the like employs the technical skills of a
particular art or field of endeavor so as to effect a desired result
Alternatively
A technique is a man made strategy or tactic,
A method is an approach or pathway.
Example: Education is a method of developing individuals
intellectually, while the teachers specific approach to delivering
that education is a technique he/she has acquired or developed.
5
 Introduction
• Before the advent of industrial revolution in
Europe, business organizations and industrial
enterprises were very small in size.
• There was no management problem of considerable
magnitude as are faced today.
• Each enterprise had a single boss to direct all the
activities of business single – handed.
• The boss used to do purchase, plan and supervise
production, sell the product, hire and fire the
personnel etc.

6
• The rapid scientific invention led to mechanize
production process which increased the growth in
magnitude of industrial enterprise. Therefore, it
became impossible for one man to perform all the
managerial functions.
• A division of management function with a reasonable
head (HoD) of each division took place.
• The ever – increasing spiral of continued
mechanization supported by automation resulted in
faster industrial growth.
• Faster industrial growth necessitated further
decentralization of operation and division of the
management function(Divide & Rule principal).

7
• The decentralization process resulted in “Executive
Type Problems” that needs organized activity.
• For smooth and efficient working of an organization,
each function unit (division, department) had to
perform its function as a single unit.
• Each part had to perform its functions efficiently in a
manner so as to accomplish the overall objectives of
the entire organization.
• Each functional units had to develop objectives of its
own.

8
• These objectives are not often consistent.
Frequently they come into direct conflict with one
another.
• A policy, which is most favorable to one
department, may not be favorable for the other.
• The questions then arise, what is the best policy
for the whole organization as one single unit?

This is the “executive type problem” having the

following characteristics:

9
Executive type problem characteristics:
• To divide and sub-divide functions for the
effectiveness of the organization as a whole.
• Solve conflicting interest of the functional
units of the organization.

A scientific base for solving problems

involving the interaction of components of
the organization in the best interest of the
organization as a whole has been solved with
the development of “Operations Research”
10
 Historical background and development
• Operations research (OR) is derived from that of
“Operational Radar” with its origin in the military
activities of the 2nd world war.
• During 2nd world war, urgently needed to allocate scares
resources to the various military operational activities
within each operation in an effective manner.
• The birth of the OR began with the assignment to the
University Teachers in United Kingdom from all areas
of science to assist the military in solving the
management problems of using their scarce / limited
resources.

11
Problems facing the English people were:
 How to face German air raids with the limited equipment
1. How to fight the U – boat attacks
2. How to deploy the armed forces in the most efficient
manner
• Great faith was placed in the scientific method and the
research approach.
• Different teams were constituted. The most prominent team
headed by Professor P.M.S Blcakett dealt essentially with
the problems of antiaircraft defense, especially in the
London area. The studies of the group were devoted to the
operational use of Radar, the activity then came to be
known as “OPERATIONAL RESEARCH”.

12
• The early work of UK operational researchers was
later supported by U.S.A, who latter joined the war.
• Armed forces were successful in using the
Operations Research (OR) personal in such activities:
1. Developing strategies for mining operations
2. Improving bombing accuracy
3. Determining the best research patterns for submarines.
• After the war, OR groups were maintained in all
branches of the U.S. forces. Interest in applying the
OR approach in military activities grew
tremendously.

13
The brief history in developments of OR:
• 1950 – OR approach began to be taken seriously by
American industry. Numerous industrial and business
applications have been made since then.
• 1953 – American society of operational research
(ASOR) came into being.
• The success of OR in military and non – military
activities caused not only the formation of the ASOR,
but also the development of educational program in
many universities throughout the USA (in engineering
colleges, Industrial and Systems Engineering
departments)

14
• 1957 – The American Management Association
(AMA) conducted a study among 631 companies
about their involvement with OR.
324 were then using OR techniques
144 were considering OR adoption in the future
163The left over did not still think about OR

15
• The OR societies have been developed in Argentina,
Australia, Belgium, Brazil, Canada, Denmark, France,
Germany, Greece, Ireland, Israel, Italy, Japan, Mexico,
The Netherlands, Norway, Spain Sweden, Switzerland,
and Thailand.
• 1959 – Industrial federations of operations research
societies (IFORS) came into being. Its main objective was
to develop operational research as a unified science and to
advance it in all nations of the world.
• At present, the Operations Research is being taught in all
the engineering, industrial, management departments of
universities with different names as: Operations Research,
Production Operations management, Industrial
Management etc.
16
 What is operations research?
According to he professor Arnold Kaufmanns:
It is the body of TOOLS and METHODS which
makes possible strong confidence upon the rational
determination of the most efficient and economical
solution in policy – decision problems concerning
the management of economic or human
phenomenon, drawing upon statistical,
mathematical procedure which sometimes require
the use of high – speed computers.

17
• Alternatively
It is the application of scientific methods to deal
with management so as to provide executives in
controlling system with a sound quantitative basis
for making decision regarding such problems.
• Alternatively
Operations research is research on problems for
optimality

18
Applications of Operations Research
• Problems may be considered from two aspects,
“Type” and “Contents”.
– Content aspect - Problems according to the area
of the business in which the problems occur, that
is, their content (Textile, Construction, Medicine
etc.)
– Type aspect - Type of problems with their
underlying logical structure. Almost all the
decision problems appear as one of a few different
types.

19
 Types of problems
• Management decision problems include the following
six types:
1. Allocation type problem
2. Inventory type problem
3. Replacement type problem
4. Waiting line type problem
5. Competition type problem
6. Sequencing type problem
 

20
 1. Allocation type Problems
• Decision problems involving allocation of scare
resources to various activities in such a way so as to
optimize the objective function. They can arise
whenever one has to select the level of certain
activities that must complete for certain scarce
resources necessary to perform those activities.
• Techniques to solve allocation problem include;
Linear Programming (LP), Dynamic Programming
(DP) and other kinds of Non – Linear Programming.

21
 2. Inventory type problems
• Inventory analysis deals with the control and
maintenance of quantities of useable but idle resources
like; Material, Manpower, Money, or Water in a
reservoir.
• The decision problem concerned with the frequency of
useful addition and quantity acquired so that minimum
total cost can be attained.
– The total cost = holding cost + ordering cost + stock
cost + shortage costs
• Tools to solve such type of problems include: calculus,
probability theory, and dynamic programming.

22
3. Replacement type problems

23
4. Waiting Line / queuing theory type Problems

24
 5. Competition type problems
Problems of making decisions between two or more individuals
or organizations in situation that involve a conflict of interest.
1. Decision making under certainty (DMUC)- The competitors
course of action is known in advance with certainty.
2. Decision making under risk (Intuitive approach)- The
competitors choice is not known with certainty but can be
predicted subject to error.
3. Decision making under uncertainty (DMUU)- Nothing is
known in advance concerning the alternatives of competitors
but previous sales data can help for probability evaluations.
The application of statistical decision theory has proved to be
successful in most situations, both simple and complex.

25
 6- Sequencing type problems
• Determining the optimal sequence to perform a set of jobs /
activities in order to minimize the time required. In general,
the number of alternative to be considered is so high that it
will not be practical to examine them completely. In view of
such time consuming matter, most sequencing problems are
approached by the Simulation Method.
• To solve such problems Program Evaluation Review
Technique (PERT) and Critical Path Method (CPM) are
used.

26
 Y = a+bx

y= Yield

X Fertilizer

The Methodology of
Operations Research

27
 Today’s Lecture
• Operation management
• Business Operation Overlap
• Types of operation
• Value addition
• Operation interfaces
• Decision Making
• Classification of manufacturing system
• Responsibilities of operation management
28
 Operations Management?
The management of systems / processes creating goods
and / or providing services

Organization

Finance Operations Marketing

Operations Management includes:
1. Forecasting
2. Capacity planning
3. Scheduling
4. Managing inventories
5. Assuring quality
6. Motivating employees
Business Operations Overlap

Operations

Marketing Finance
Types of Operations
 Food Processing

Inputs Processing Outputs

Raw Vegetables Cleaning Canned
Metal Sheets Making cans vegetables
Water Cutting
Energy Cooking
Labor Packing
Building Labeling
Equipment
 Hospital Process
Inputs Processing Outputs

Doctors, nurses Examination Healthy

Hospital Surgery patients
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy
 Operations Interfaces
Industrial Maintenance
Engineering
MIS( Management Info.
System)

Distribution Public Relations

Operations

Purchasing Personnel
Accounting
 Decision Making Process
1. System Design
– capacity
– location
– arrangement of departments
– product and service planning
– acquisition and placement of
equipment
Keeping in view Environmental Protection Agency
(EPA) rules and regulations
Location of facilities for operations is a long-term capacity decision
which involves a long term commitment about the geographically static
factors that affect a business organization [An important strategic level
decision-making for an organization]
 Cont’d

2. System operation
– personnel
– inventory
– scheduling
– project
management
– quality assurance
Classification of Production System

39
 1. Job Shop Production- black smith job
•Manufacturing one or a few quantity of products as per design and specification
of customers within prefixed time and cost.
•Production of low volume and high variety of products.
•Each job demands unique technological requirements, demands processing on
machines in a certain sequence.
Characteristics
The Job-shop production system is followed when there is:
1. High variety of products but low volume.
2. Use of general purpose machines and facilities.
3. Highly skilled operators who can take up each job as a challenge because
of
uniqueness.
4. Large inventory of materials, tools, parts etc.

Limitations
1. Higher cost due to frequent set up changes.
2. Higher level of inventory at all levels and hence higher inventory cost.
3. Production planning is complicated.
4. Larger space requirements.
 2. Batch Production
The job passes through the functional departments in lots or batches
and each lot may have a different routing.” It is characterized by the
manufacture of limited number of products produced at regular
intervals and stocked awaiting sales.
Characteristics
1. Shorter production runs.
2. Flexible plant and machinery.
3. Plant / machinery set up used for the production of item in a
batch and change of set up for processing the next batch.
Limitations
1. Material handling is complex because of irregular and longer
flows.
2. Production planning and control is complex.
3. Higher set up costs due to frequent changes in set up
 3. Mass Production
Manufacture of discrete parts or assemblies using a continuous
process are called mass production.
This production system is justified by very large volume of
production. The machines are arranged in a line or product layout.
Characteristics
1. Standardization of product and process sequence.
2. Large volume of products.
3. Shorter cycle time of production.
4. Flow of materials, components and parts is continuous
8. Easy production planning and control
9. Automatic material handling
10. Manufacturing cost per unit is low.
Limitations
1. Breakdown of one machine stops entire production line.
2. High investment in production facilities.
42
 4. Continuous Production
Production facilities are arranged as per the sequence of production
operations from the first operations to the finished product.
Characteristics
1. Material handling is fully automated.
2. Process follows a predetermined sequence of operations.
3. Standardization of product and process sequence.
4. Higher rate of production with reduced cycle time.
5. Higher capacity utilization due to line balancing.
6. Low manpower for material handling as it is completely
automatic.
7. Unit cost is lower due to high volume of production.
Limitations
1. Flexibility to accommodate and process number of products does
not exist.
2. Very high investment for setting flow lines.
3. Product differentiation is limited.
43
 Manufacturing vs Service
Characteristic Manufacturing Service
Output Tangible Intangible
Customer contact Low High
Uniformity of input High Low
Labor content Low High
Uniformity of output High Low
Measurement of productivity Easy Difficult
Opportunity to correct High Low
Responsibilities of Operations Management

1.Planning 2.Organizing
– Capacity – Degree of centralization
– Location – Subcontracting
– Products & services 4. Staffing
– Make or buy – Hiring/laying off
– Layout – Use of Overtime
– Projects 5. Directing
– Scheduling – Incentive plans
3.Controlling – Issuance of work orders
– Inventory – Job assignments
– Quality
1. Planning
•Activities to establish a course of action and guide
future decision-making
•The operations manager defines the objectives for the
operations subsystem of the organization, and the
policies, and procedures for achieving the objectives.
•Clarifying the role and focus of operations in the
organization’s overall strategy.
•It also involves product planning, facility designing
and using the conversion process.

46
2. Organizing
•Activities to establish a structure of tasks and
authority.
•Operation managers establish a structure of roles and
the flow of information within the operations
subsystem.
•Operation managers determine the activities required
to achieve the goals and assign authority and
responsibility for carrying them out.

47
3. Controlling
•Activities to ensure the actual performance in
accordance with planned performance.
•To ensure that the plans for the operations
subsystems are accomplished.
•Operations manager must exercise control by
measuring actual outputs and comparing them to
planned operations management.
•Controlling costs, quality, and schedules are the
important functions here.

48