Ain Shams University – Faculty of Business

Pre-PHD – Production Management

Project Management and Operations Research Course

Operations Research an Overview

Introduction: -
 Operations research
1) Is an analytical method of problem-solving and decision-making that is
useful in the management of organizations?
2) In Operations Research, problems are broken down into basic components
and then solved in defined steps by mathematical analysis.
The widely used definition deifines operations research as “an analytical method
of problem-solving and decision-making that is useful in the management of
organizations. In operations research, problems are broken down into basic
components and then solved in defined steps by mathematical analysis”.
Nature and Scope of Operations Research
 Operation research is primarily concerned with breaking down complex
business issues into clearly specified mathematical constructs and with
defining desired outcomes.
 The main use of operations research is to make decision-making easier in
business areas where resource allocation is crucial, such as those involving
money, labour, time, and other resources.
The History of Operations Research: -
 After the two world wars, the tools of Operations Research were more
widely applied to problems in business, industry, and society.
 Since that time, Operational Research has expanded into a field widely used
in industries ranging from:
1) Petrochemicals to Airlines.
2) Finance.
3) Logistics.
4) Government.

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Ain Shams University – Faculty of Business
Pre-PHD – Production Management
Project Management and Operations Research Course

 Moving to a focus on the development of mathematical models that can be

used to analyze sometimes complex systems, and has become an area of
active academic and industrial research.
The Process of Operations Research can be broadly broken down:-
1) Identifying a problem that needs to be solved.
2) Constructing a model around the problem that resembles the real world and
variables.
3) Using the model to derive solutions to the problem.
4) Testing each solution on the model and analyzing its success.
5) Implementing the solution to the actual problem.
Characteristics of Operations Research: -
 Optimization: -The purpose of operations research is to achieve the best
performance under the given circumstances.
 Simulation: -This involves building models or replications in order to try out
and test solutions before applying them.
 Probability and statistics: -This includes using data to uncover helpful
insights and risks, make reliable predictions and test possible solutions.
The Techniques of Operations Research: -
1. Linear programming. 8. Integer Programming.
2. Waiting line theory. 9. Transportation Problems.
3. Inventory control models. 10. Simulation.
4. Network Analysis. 11. Markov Analysis.
5. Sequencing. 12. Game Theory.
6. Assignment problems. 13. Routing Models.
7. Decision theory.
Advantages and Limitations of Operations Research: -
Advantages: -

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Ain Shams University – Faculty of Business
Pre-PHD – Production Management
Project Management and Operations Research Course

1) Better Control.
2) Better Systems.
3) Better Decisions.
4) Better Co-ordination.
Limitations: -
1) Dependence on an Electronic Computer.
2) Non-Quantifiable Factors.
3) Money and time Costs.
4) Implementation.
Disadvantages of Operations Research: -
1. Costly.
 The first and foremost disadvantage of operations research is its high cost.
 The operations research works on mathematical equations that require
expensive technology to create them.
 All of this might provide effective solutions but at a very high cost.
 Organizations with a small budget can be adopted operations research
because of its high cost of implementation.
2. Technology dependent.
 Another limitation of operations research is its technology dependence.
 The mathematical equations can only be analyzed on computers.
 Its reliance on technology makes it a non-popular choice of managers.
3. Dependence on experts.
 A team of experts is required to perform operations research.
 There are various factors associated with this, which makes operations
research an unpopular choice for management
4. Unquantifiable factors.

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Ain Shams University – Faculty of Business
Pre-PHD – Production Management
Project Management and Operations Research Course

 The effectiveness of solutions developed using operations research largely

depends on the various factors.
 It is easy to measure quantifiable factors and use them for the operations
research, but the problem arises when important factors are in unquantifiable
form.
 Unquantifiable factors result in inaccurate solutions.
5. Difficult to implement.
 The solutions obtained from operations research are difficult to implement,
as most of them are usually unrealistic.
 Some modifications are required to make to implement the solutions which
hamper the effectiveness of the solution.
Uses of Operations Research: -
1) Scheduling and time management.
2) Urban and agricultural planning.
3) Enterprise resource planning (ERP) and supply chain management (SCM).
4) Inventory Management.
5) Network optimization and engineering.
6) Packet routing optimization.
7) Risk Management.
Different Phases of Operations Research Model: -
1. Orientation.
 In the first steps, understanding and familiarity with the system are made.
2. Defining problems.
 In the next steps, problems associated with the system are identified and
defined.
3. Data collection.
 Data required for operations research is collected.

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Ain Shams University – Faculty of Business
Pre-PHD – Production Management
Project Management and Operations Research Course

4. Identifying limitations and objectives of operations research.

 In the next step, identify all the constraints and objectives of the
organization.
5. Creating a solution.
 In the next step, develop all possible solutions for the problem.
6. Analysis of alternatives.
 In the next step, the analysis of all solutions will be done, and the best
solution will be picked among all solutions.
7. Implementation.
In the next step, the solution will be implemented and monitored for its
performance.
Importance of Operations Research: -
1) OR provides a more powerful approach to decision making than ordinary
software and data analytics tools.
2) Employing OR professionals can help companies achieve more complete
datasets,
3) OR can be tailored (selected) to specific business processes.
4) Use cases to determine which techniques are most appropriate to solve the
problem.
Methodology of Operations Research: -
1) Problem Formulation.
2) Constructing a Mathematical Model.
3) Deriving Solutions from the Model.
4) Testing the Model.
5) Establishing Controls over the Solutions.
6) Implementing the Solutions.
Simulation and Operations Research in For Practical Optimization:

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Ain Shams University – Faculty of Business
Pre-PHD – Production Management
Project Management and Operations Research Course

Area of Application for (Operations Research):-

1) Inventory Control.
2) Facility Design (Distribution Decision)
3) Product Mix Determination.
4) Portfolio Analysis.
5) Allocation of Scarce Resources.
6) Investment Decisions.
7) Project Management.
Operation research is a method for making decisions and fixing problems. It is
regarded as a collection of rational, scientific rules that can be programmed, giving
management a "quantitative foundation" for decisions involving the operation
under its control. It can be applied in different areas, such as:
1. Finance:
 Investment Analysis.
 Portfolio Analysis.
2. Manufacturing:
 Inventory Control.
 Production Scheduling.
3. Accounting:
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Ain Shams University – Faculty of Business
Pre-PHD – Production Management
Project Management and Operations Research Course

 Cash Flow Planning.

 Credit Policy Analysis.
4. Research and Development:
 R & D Budget allocation.
 R & D Projects Control.
5. Construction:
 Project Scheduling.
 Monitoring and Control.
 Allocation of Resource to Project.
6. Facilities Planning:
 Factory Location.
 Hospital Planning.
7. Marketing:
 Selection of Product Mix.
 Product introducing Timing.
8. Purchasing:
 Optimal Buying.
 Optimal Recording.
 Materials Transfer.
Some of the commonly used techniques of operation research are as follows:
1. Linear programming.
2. Waiting line theory or queuing theory.
3. Inventory control models.
4. Replacement problems.
5. Network Analysis.
6. Sequencing.
7. Dynamic programming.
8. Assignment problems.
9. Decision theory.
10. Integer Programming.
11. Transportation Problems.
12. Simulation.
13. Goal Programming.
14. Markov Analysis.
15. Game Theory.
16. Heuristic Models.
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 Ain Shams University – Faculty of Business
Pre-PHD – Production Management
Project Management and Operations Research Course

17. Routing Models.

18. Symbolic logic.
Characteristics of Operation Research
Systems orientation, the use of interdisciplinary teams, and the application of the
scientific method to the circumstances of the study are the three key components of
operations research. In the following table we list different characteristics of
operations research:
Characteristic Brief Explanation
1. Inter-disciplinary Team Operations research is performed by a team of scientists
whose individual's members have been drawn from
different scientific such as a mathematician and
physicist).
2. System Approach Operations research considers all sides of the problem
under consideration.
3. Scientific Approach Operations research uses the scientific methods,
techniques, and tools for the purpose of solving problems.

4. Objective Approach Operations research attempts to find the best solution to

the problem under consideration.

5. Quantitative Solutions Operations research provides the management with a

quantitative basis for decision making.

6. Human Factor Without human factor Operations Research study is

incomplete.

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Ain Shams University – Faculty of Business
Pre-PHD – Production Management
Project Management and Operations Research Course

Forcasting
INTRODUCTION
Forecasts are a basic input in the decision processes of operations management
because they provide information on future demand. The importance of forecasting
to operations management cannot be overstated. The primary goal of operations
management is to match supply to demand. Having a forecast of demand is
essential for determining how much capacity or supply will be needed to meet
demand.
STEPS IN THE FORECASTING PROCESS
1. Determine the purpose of the forecast.
2. Establish a time horizon. Obtain, clean, and analyze appropriate data.
3. Select a forecasting technique.
4. Make the forecast.
5. Monitor the forecast errors. FORECAST ACCURACY
Accuracy and control of forecasts is a vital aspect of forecasting, so forecasters
want to minimize forecast error.
Inventory Management
Inventory management is the process of monitoring and controlling inventory
level and ensuring adequate replenishment in order to meet customer demand.
Determining the appropriate inventory level is crucial since inventory ties up
money and affects performance.
1. The different kinds of inventories include the following:
 Raw materials and purchased parts.
 Partially completed goods, called work-in-process (WIP).
 Finished-goods inventories
 Tools and supplies.
 Maintenance and repairs (MRO) inventory.
 Goods-in-transit to warehouses
Game Theory
Gaming and Strategic Decisions
 Game theory tries to determine optimal strategy for each player
 Game: Situation in which players (participants) make strategic decisions that
take into account each other’s actions and responses.

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Ain Shams University – Faculty of Business
Pre-PHD – Production Management
Project Management and Operations Research Course

 Payoff: Value associated with a possible outcome.

 Strategy: Rule or plan of action for playing a game.
 Optimal strategy: is the strategy that maximizes a player’s expected payoff.
Common Gaming Strategies

 Dominant Strategies

 Maximin Strategies

 Pure and Mixed Strategies

Pure strategy: a strategy in which a player makes a specific choice or takes a specific
action.

Mixed strategy: a strategy in which a player makes a random choice among two or
more possible actions, based on a set of chosen probabilities.

Markov Chains Analysis

Introduction and History
Markov Analysis
• Andrey Markov studied Markov processes in the early 20th century, publishing
his first paper on the topic in 1906.
• A Markov chain or Markov process is a stochastic model describing a
sequence of possible events in which the probability of each event depends only
on the state attained in the previous event. Informally, this may be thought of as,
"What happens next depends only on the state of affairs now."
Markov applications
• A technique dealing with probabilities of future occurrences with currently
known probabilities, its numerous applications include:
– Business (e.g., market share analysis),
– Bad debt prediction,

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Ain Shams University – Faculty of Business
Pre-PHD – Production Management
Project Management and Operations Research Course

– Machine breakdown prediction,

– University enrollment predictions.
Transportation
Transportation Problem: An overview
 The transportation problem in operational research is concerned with finding
the minimum cost of transporting a single commodity from a given number
of sources (e.g. factories) to a given number of destinations (e.g.
warehouses). These types of problems can be solved by general network
methods, but here we use a specific transportation algorithm.
Applications of transportation Problem
 The transportation problem has many applications in real life such as
assigning sources and jobs to destinations and machines. It can also be used
to mitigate environmental shortcomings by considering and integrating
sustainable social, environmental, and economic goals that impact and
accelerate green and supportable development.
Assignment Problem
The assignment problem was first introduced by Koopmans and Beckmann in
19571.
The assignment problem is a special case of linear programming problem; it is
one of the fundamental combinational optimization problems in the branch of
optimization or operations research in mathematics1. Its goal consists in assigning
m resources (usually workers) to n tasks (usually jobs) on a one-to-one basis while
minimizing assignment costs.
Advantages and disadvantages of Assignment Problem
 The assignment problem is a powerful tool for solving optimization
problems.
 It is used to find the optimal assignment of agents to tasks with the minimum
cost or maximum profit.
 However, it has some disadvantages such as the inability to handle large-
scale problems and the need for a complete bipartite graph.
Decision Theory & Simulation
Introduction
• An event that drives a need for a decision
• A timeframe within which to make the decision
• Facts and information that need to be taken into account
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Ain Shams University – Faculty of Business
Pre-PHD – Production Management
Project Management and Operations Research Course

• Assumptions about
Things we don't know – what can we safely assume?
The facts themselves – are they accurate and unbiased?
The outcomes of the decision – can we predict the future accurately enough
to select the best long-term solution?
Our own objectivity The acceptability of the decision – will everyone
involved accept our decision?

Introduction
• Errors in logic
• False assumptions
• Unreliable memories
• Mistaking the symptom for the problem
• Biases

Network Technique

Network technique is a tool for planning, scheduling (programming), and

controlling the progress of projects. it is very useful for complex projects or where
activities are subject to a considerable degree of uncertainty in performance time.
Objectives of Network Technique:
1. Powerful tool for planning, scheduling, and control.
2. Shows the interrelationships of the activities of a project or a program.
3. Minimizes total cost where the cost of delays and the cost of resources required
to carry out the tasks can be measured.
4. Minimize total time where required e.g., in maintenance of production line
machinery in a factory.
5. Minimization of idle resources.
6. Minimize production delays.
7. To provide a systematic approach to planning and scheduling.
8. Follow an integrated approach and bring about better coordination between the
departments.
9. Focuses attention on critical activities of the project.
10. Provides up-to-date status information.
11. Suggest areas for increasing efficiency and reduction of cost.
Linear Programming
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Ain Shams University – Faculty of Business
Pre-PHD – Production Management
Project Management and Operations Research Course

Linear programming is a mathematical technique for finding optimal solutions to

problems that can be expressed using linear equations and inequalities. It deals
with the allocation of resources with some restrictions such as costs and
availability.

Historical Overview
The first start-up for solving optimization problems with simple equality
constraints was done by Lagrange in 1762
Linear Programming Models
 Product Mix Problem.
 Maximization Problems.
 Minimization Problems.
 Transportation Problems.
 Assignment Problems.

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