This document provides an introduction to operations research and linear programming. It defines operations research as applying scientific methods to organizational problems involving complex systems. The brief history outlines how operations research developed from its use in World War II to help various organizations. Key characteristics of operations research include using mathematical models and computers to take a systems perspective on decision making problems. Potential applications are in production, marketing, organization, and finance.
This document provides an introduction to operations research and linear programming. It defines operations research as applying scientific methods to organizational problems involving complex systems. The brief history outlines how operations research developed from its use in World War II to help various organizations. Key characteristics of operations research include using mathematical models and computers to take a systems perspective on decision making problems. Potential applications are in production, marketing, organization, and finance.
This document provides an introduction to operations research and linear programming. It defines operations research as applying scientific methods to organizational problems involving complex systems. The brief history outlines how operations research developed from its use in World War II to help various organizations. Key characteristics of operations research include using mathematical models and computers to take a systems perspective on decision making problems. Potential applications are in production, marketing, organization, and finance.
• Definition • Brief History • Characteristics • Benefits and Limitations • Mathematical Models
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Definition of Operations Research • Addresses problems on how to conduct and coordinate the operations of an organization • Applies scientific methods and techniques to problems involving the operations of complex systems (man and machine) • Provides those in management with the optimal or near-optimum solutions to the problem • Synonymous to Management Science
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Brief History of OR • Established as a separate discipline from Management in 1939. • During World War II, OR was used by the British government to assist field commanders in solving perplexing strategic and tactical problems. - allocation of airplanes to a mission - determination of the best pattern to be used in searching for submarines • After the war, the use of OR in business and government developed, spearheaded by OR practitioners in the military.
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Brief History of OR … • There was a rapid growth of OR after the war and by the end of the 1950s, the use of OR was introduced to a variety of organizations in business, industry, and government. • Development of OR was given a boost in the 1980s with the onslaught of the computer revolution.
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Characteristics of OR • A primary interest in managerial decision making • The employment of the scientific approach • An interdisciplinary framework for the different business functions is attempted • Mathematical models are used • Computers are very frequently employed • Problems and decisions are viewed from a systems perspective
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Focus • The main focus of most OR studies is the need to allocate scarce/limited resources. • OR is a decision-making tool and in the right hands, its use could save an organization a lot of time and resources.
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Benefits of OR Studies • Provides a systematic and logical approach to decision- making. • Facilitates communication within an organization through consultation with experts in various areas. • Enables evaluation of situations involving uncertainty. • OR studies has a remarkable impact in improving the efficiency of many organizations which typically resulted in large annual savings and other non-monetary benefits (e.g. improved service and better managerial control.
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Benefits of OR Studies … • Allows a rapid and inexpensive examination of a large (sometimes infinite) number of alternatives. • Permits a in-depth analysis of a large number of alternatives. • Enables experimentation with different alternatives using models, thus eliminating the cost of making errors when experimenting in reality. • Increases the effectiveness of the decision. • Enables quick identification of the best available solution. For Educational Purposes Only Limitations of OR Studies • Time-consuming • Decision makers may be reluctant to accept the result of the study. • Assessments of uncertainties are difficult to carry out • Makes the decision through a sometimes oversimplified model of reality, possibly leading to erroneous recommendations • Can be expensive to undertake, depending on the size of the problem • Studies may be discontinued for various reasons, leading to an unproductive expense For Educational Purposes Only Potential Areas for OR Applications PRODUCTION MARKETING • Planning and Scheduling • Allocation of Advertising • Make or Buy Decisions Funds • Equipment Utilization • Product Mix • Waiting Line Problems • Pricing Schemes • Plant Location and Layout • Bidding Strategies • Assembly-Line Balancing • Product Positioning • Materials & Supplies Purchasing INVESTMENT and FINANCE • Capital Budgeting ORGANIZATION • Credit Analysis • Benefit/Compensation Plans • Work Assignment Scheme* For Educational Purposes Only Mathematical Modelling Definition:
A family of tools designed to help solve managerial
problems wherein the decision maker must allocate scarce (or limited) resources among various activities to obtain an optimal result, i.e. a result that achieves the set goals best among all alternatives.
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Advantages of Mathematical Models • Finds an optimal solution(s). • Fast determination of the solution • Finds solutions to a wide variety of problems that can be formulated as an LP. • Finds solutions (efficiently) to problems with a very large or infinite number of alternatives. • Provides a natural sensitivity analysis.
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Characteristics of a Mathematical Model • A limited quantity of economic resources (such as labor, capital, etc.) is available for allocation. • The resources are used in the production of products or services. • There are two or more ways in which the resources can be used. Each is called a solution, program, or alternative. • Each activity (product or service) in which the resources are used yields a return (or reward) in terms of the stated goal. • The allocation is usually restricted by several limitations or requirements called constraints.
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Assumptions for Mathematical Modelling • Returns from different allocations can be compared; that is, they can be measured by a common unit (such as dollars or utility). • All data are known with certainty. • The resources are to be used in the most economical way. In the case of linear programming, two additional assumptions are: • The return from any allocation is independent of other allocations. • The total return is the sum of the returns yielded by the different activities. For Educational Purposes Only General Statement of a Mathematical Model • The general problem of allocating a set of limited resources among competing activities so the total reward is maximized. • Allocation problems usually have many possible alternative solutions. Depending on the underlying assumptions, the number of solutions can either be infinite or finite. • Different solutions yield different rewards. For Educational Purposes Only General Statement of a Mathematical Model … • Of the available solutions, one (sometimes more) is/are the best, in the sense that the degree of goal attainment associated with it is the best (i.e., total reward is maximized). This is called the optimal solution. • Mathematical programming provides a relatively unbiased approach to solving the allocation problem.
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References Hillier, F. & Lieberman, G. (2005). Introduction to operations research. New York, NY: McGraw-Hill Higher Education.
Taha, H. (2007). Operations research: An introduction. Upper Saddle River, NJ:
Pearson Prentice Hall.
Wayne, W. & Goldberg, J. (2004). Operations research: Applications and