Introduction

To
Management Science

Prof.(Dr.) Jagathy Raj V. P.

What is Management Science?

Management Science is a “discipline” that attempts to aid managerial

decision making by applying a scientific approach for problem solving
to help managers make informed decisions to managerial problems
that involve quantitative factors.

The goal of management science is to recommend the course of action

that is expected to yield the best outcome with what is available.
Why Study Management Science?
Gain an appreciation for the relevance and power
of MS.
Learn to recognize when MS can (and cannot) be
fruitfully Applied
Learn how to apply the major techniques of MS to
analyze a variety or managerial problems.
Develop an understanding of how to interpret the
results of a MS study.
The Management Science Approach

Management science uses a scientific approach to

solving management problems.
It is used in a variety of organizations to solve many
different types of problems.
It encompasses a logical mathematical approach to
problem solving.
Management science, also known as operations
research, quantitative methods, etc., involves a
philosophy of problem solving in a logical manner.
The basic steps in the management science
problem solving process

Analyzing business situations (problem definition);

Building mathematical models to describe the business

situation(Mathematical Modelling);

Solving the mathematical models;

Communicating/implementing recommendations based on the

models and their solutions.
Origin of Management Science
The body of knowledge involving quantitative approaches
to decision making is referred to as
 Management Science
 Operations Research
 Decision Science
It had its early roots in World War II and is flourishing in
business and industry due, in part, to: numerous
methodological developments (e.g. simplex method for
solving linear programming problems) a virtual explosion in
computing power
Keys to Management Science
It is a discipline –There is a body of knowledge that is built upon a scientific
foundation. –There are professional societies that meet about management
science topics.
 Institute for Operations Research and the Management Sciences
 (INFORMS) International Federation of Operational Research Societies (IFORS)
 Operations Research Society of India

Aids managerial decision making:

 It is meant to provide an analysis and recommendations to solving a problem
based on quantitative factors.
 Management science is not well suited for examining intangible issues.
Management needs to incorporate the quantitative results from a management
science study with the intangible considerations.
 Management science can flush out solutions that management may not have been
able to fathom.
Keys to Management Science Cont.

 Uses a scientific approach

 Step 1: Define the problem and gather data
 Step 2: Formulate a model (typically a mathematical model) to
represent the problem
 Step 3: Develop a computer-based procedure for deriving solutions to
the problem from the model.
 Step 4: Test the model and refine it as needed.
 Step 5: Apply the model to analyze the problem and develop
recommendations for management.
 Step 6: Help to implement the team’s recommendations that are
adopted by management.
Decision Making & Problem Solving

Identify and define the problem

Determine the set of alternative solutions

Determine the criteria to evaluate alternatives

Evaluate the alternatives

Choose an alternative

Implement the selected alternative

Evaluate the results to determine whether a satisfactory solution has been

obtained
 Decision

A decision is the choice out of several

options made by the decision maker to

achieve some objective in a given

situation
 Decision ?

 A settlement
 A fixed intention bringing to a
conclusive result
 A judgment
 A resolution
Decision Making

Decision making is a process of choosing among alternative courses

of action for the purpose of attaining a goal or goals.

The first five steps of Problem Solving constitute the Decision Making
process:
 Identify and define the problem
 Determine the alternatives
 Determine the criteria
 Evaluate the alternatives
 Choose an alternative

The choice of an alternative is the Decision

 Importance of
Effective Decision-Making

New technologies and better information distribution have resulted in more

alternatives for management.

Complex operations have increased the costs of errors, causing a chain reaction
throughout the organization.

Rapidly changing global economies and markets are producing greater uncertainty
and requiring faster response in order to maintain competitive advantages.

Increasing governmental regulation coupled with political destabilization have

caused great uncertainty.
 Cognitive Limits

The human mind has limited processing and storage capabilities.

Any single person is therefore limited in their decision making abilities.

Collaboration with others allows for a wider range of possible answers,

but will often be faced with communications problems.

Computers improve the coordination of these activities.

This knowledge sharing is enhanced through the use of DSS, KMS,

and EIS.
Phases of Decision Making
Intelligence: Collect information, identify problem

Design: Conceive alternative solution to a problem

Choice: Select among the alternative solutions

Implementation: Put decision into effect and provide

report on the progress of solution
Decision-Making Process
The Stages in the Decision Making Process

 Structuring the Problem

 Define the Problem

 Identify the Alternatives

 Determine the Criteria

 Analyzing the Problem

 Evaluate the Alternatives

 Choose an Alternative
Nature of Decision Depends on

 Decision makers
 Variety of information
 improves representation of an entity
 updates the level of knowledge
 has surprise value
 reduces uncertainty
 aids in decision making
Types of Information

Internal Information
External Information
 Types of Decisions

 Structured, Semi-Structured and

Unstructured

 Programmable and Non-Programmable

Structured, Semi-Structured and Unstructured

Structured decision: Well-defined decision-making

procedure exists. Structured decisions can be left to a
clear or a computer.

Unstructured decision: All three decision phases are

unstructured. Don’t know how to specify at least one
aspect of each phase. So new or so rare. Help but with a
lower level support

Semi-structured decision: Some structured aspects

cannot be completely structured. Computer great help.
Most common.
Structured vs. Unstructured
They are not bipolar concepts

decisions range in a continuum from

structured to unstructured ..…

In between you might have decisions

called semi-structured.
Programmed Decisions
they are repetitive and routine

follow a preset definite procedure each time they

occur

programmable is a better concept

Non programmed Decisions
they are novel, unstructured

no cut-and-dried method for handling the

problem exists

calls for intelligent, adaptive, problem-

oriented action

nonprogrammable is a better concept

Types of Management Decisions

 Strategic

 Tactical

 Operational
 Strategic Decisions

Long term business decisions

Mainly external information

Very diffused, unstructured and often uncertain

No way getting precise information

Tactical decisions

Medium to long term impact

Internal and External Information

Mainly summarized
Operational decisions

Do not have long term implication

Well structured problems
Accuracy and speed
Major emphasis on the efficiency of
Data Processing
Internal Information
Information Requirements by Management Level

Characteristics Operational Management Strategic

of Information Control Control Planning
Source Largely Internal Internal and
Largely External
Scope Well defined, Very wide
narrow
Level of Detailed Aggregate
Aggregation
Time Horizon Historical Future

Currency Highly current Need not be up to

the minute
Required High Lower, Estimates
Accuracy are acceptable
Frequency of Use Very frequent Infrequent, ad-hoc
Examples of nine decision types

1. Structure/operational:
- Cut a log into boards -> minimize waste
- Inventory re-ordering (mathematics models)
2. Structure/tactical:
- Depreciate corporate assets (straight-lne depreciation or various
accelerate depreciation formulas)
- Resource allocation (linear programming)
3. Structure/strategic:
Rare combination. Because of its size
- Proceed with R&D based on ROI (80% of R&D)
- A plant location decision (all known cost)
4. Semi structure/operational:
- Deciding to accept or reject an applicant to a selective
college. Some structured. Balance class (sports etc.). Not
quantitative evaluation.
Examples of nine decision types- contd……of nine
decision types
5. Semistructure/tactical:
- Choosing an insurance carrier for employee health program.
cost/employee/deductable/acceptability.
6. Semistructure/strategic:
- Whether to enter new market segment. Sales projection/
marketplace growth data, development cost estimate,
marketing expense forecast. Profit & loss forecast.
Judgement of experienced managers.
7. Unstructure/operational:
- Dealing with machine breakdown. If rare case.
8. Unstructure/tactical:
- Hiring decisions for some jobs
9. Unstructure/strategic:
- How to response to unfriendly takeover by competitors
 TYPES of Decisions
OPERATIONAL TACTICAL STRATEGIC

STRUCTURED Should I buy another How should I budget What student loans
campus meal card? for expenses next should I take out?
Month?

SEMI- How should I travel Which section of Which job offer

to class today? macroeconomics should I take offer
STRUCTURED
should I take? graduation?

UNSTRUCTURED What should I Who should I room What should I major

choose for lunch at with next year? in next year?
the dinner today?
 Decision Examples

Top Middle First line

Warehouse Payroll
Structured location
Budgeting
preparation
Semi- Take over and Sales Purchasing
structured Merger forecasting decisions
Steps to
Employee Customer
Unstructured increase motivation waiting line
market share
 Decision Examples

Production Finance Personnel Marketing

New Plant Alternative Welfare Competitor
Strategic Location Financial Policy Survey

Production Variance Performance

Tactical Bottlenecks analysis appraisals
Advertising

Daily Payroll Sales

Operational Scheduling preparation
Leave records
analysis
Classes of Decision Makers
Decision Maker Classifications

Individual decision makers can be a single person or

a computer system.

Multiple decision makers can be:

groups where all members have a say in the
decisions,
teams where members support a single decision
maker, or
organizational where global agreement is needed.
 Decision Styles

Style is the manner in which a manager makes

decisions

The effect of a particular style depends on problem

context, perceptions of the decision maker, and his
own set of values.

The complexity of these intertwine in the formation of

decision style. The basic classes of styles are
illustrated on the next slide.
Four Decision-Making Styles
Four choices on how to make decisions and when to involve others.

1. Autocratic (Independent)/Directive: You make the decision on your

own without input from your team.

2. Consultative: You ask your team for information that would be helpful

and for their opinions, either individually or as a group, but you make
the final decision.

3. Team/Consensus: You pull your team together to discuss the situation

and decide as a team. You facilitate their reaching consensus, where
everyone agrees to support the decision. As a member of the group,
you must be willing to support the decision as well.

4. Delegating: You are not part of the decision-making process. You

might ask to be informed of the decision (or not), but you will not
change the decision.
 Group leader solves the problem,
using the information he possesses
He/she does not consult with anyone
else
nor seek information in any form.

This style assumes that

the leader has sufficient information
to
make an effective decision
The leader doesn’t possess sufficient information
To make effective decisions He/she need to
obtain information from others.

They may not tell them what the problem is,

simply evaluates the information
And make the decision.
The leader explains the situation
to the group And together they
generate and evaluate many
possible solutions.
This style tends to be,
A long term perspective,
Will be more creative and expansive,
Entailing a higher level of risk for
The long term benefit of organization.
 People with this style work well,
Although they like to hold meetings,
but they have tendency to avoid conflicts and
are concerned about others.

Here they makes decision based on what feels right,

and what will motivate the team members.
Example of a Decision-Making Process
Problem Solving and Decision Making

7 Steps of Problem Solving (First 5 steps are the process of

decision making)

1. Identify and define the problem.

2. Determine the criteria for evaluating alternatives.

3. Determine the set of alternative solutions.

4. Evaluate the alternatives.

5. Choose an alternative (make a decision)

6. Implement the selected alternative.

7. Evaluate the results.

Problem Analysis and Decision Making
Decision-Making Process

 Structuring the Problem

 Define the Problem
 Determine the Criteria
 Identify the Alternatives

 Analyzing the Problem

 Identify the Alternatives
 Choose an Alternative
Problems in which the objective is to find the best solution with respect to one
criterion are referred to as single-criterion decision problems.
Problems that involve more than one criterion are referred to as multi-criteria
decision problems.
Qualitative vs. Quantitative Analysis

Analysis Phase of Decision-Making Process

 Qualitative Analysis
 based largely on the manager’s judgment and experience
 includes the manager’s intuitive “feel” for the problem
 is more of an art than a science
 Quantitative Analysis
 concentrate on the quantitative facts or data associated with the
problem
 analyst will develop mathematical expressions that describe the
objectives, constraints, and other relationships that exist in the
problem
 analyst will use one or more quantitative methods to make a
recommendation
Quantitative Analysis

Potential Reasons for a Quantitative Analysis Approach to

Decision Making
 The problem is complex.
 The problem is very important.
 The problem is new, i.e., no previous experience.
 The problem is repetitive.
 Quantitative Analysis
Process Model Development
 Data Preparation
 Model Solution
 Report Generation
What is Decision Modelling?

A scientific approach to managerial decision

making
 The development of a (mathematical) model of a
real-world scenario
 The model provides insight into the solution of the
managerial problem
Why Study Modelling?
Models generate insight which leads to better decisions.

Modelling improves thinking skills: –

 Break problems down into components –

 Make assumptions explicit

Modelling improves quantitative skills:

 Ballpark estimation, number sense, sensitivity analysis

Modelling is widely used by business analysts:

 Finance
 Marketing
 Operations
Model
Models are idealised representations of real objects or situations

Creating a simplified version of reality Working with this version to

understand or control some aspect of the world

A model is constructed to analyze & understand the given system for

the purpose of improving its performance.

Benefits of Modelling:
 Modelling allows us to make inexpensive errors.
 Allows exploration of the impossible
 Improves business intuition
 Provides timely information
 Reduces costs
Advantages of Models
 Generally, experimenting with models (compared to experimenting
with the real situation) because it requires less time, is less
expensive, and involves less risk.

 The more closely the model represents the real situation, the more
accurate the conclusions and predictions will be.

 Cost/benefit considerations must be made in selecting an

appropriate model.

 Frequently a less complicated (and perhaps less precise) model is

more appropriate than a more complex and accurate one due to
cost and ease of solution considerations.
The benefits of models
 Model manipulation is much easier than manipulating a real system
 Models enable the compression of time
 The cost of modelling analysis is much lower
 The cost of making mistakes during a trial-and-error experiment is
much lower when models are used than with real systems
 With modelling, a manager can estimate the risks resulting from
specific actions within the uncertainty of the business environment
 Mathematical models enable the analysis of a very large number of
possible solutions
 Models enhance and reinforce learning and training
 Models and solution methods are readily available on the Web
Classification of Models
Classification based on Structure 

 Iconic models - physical replicas (scalar representations) of real objects

 Analog models - physical in form, but do not physically resemble the

object being modelled

 Mathematical models - represent real world problems through a system

of mathematical formulas and expressions based on key assumptions,
estimates, or statistical analyses
Classification based on degree of Certainty:

Deterministic vs. Stochastic Models

 Deterministic Model – if all uncontrollable inputs to the model are
known and cannot vary.

 Stochastic (or Probabilistic) Model – if any uncontrollable are

uncertain and subject to variation. Stochastic models are often
more difficult to analyze.

In our simple production example, if the number of hours of

production time per unit could vary from 3 to 6 hours depending
on the quality of the raw material, the model would be stochastic.
Classification Based on Time Reference”

Static models
Models that describe a single interval of a situation

Dynamic models
Models whose input data are changed over time
(e.g., a five-year profit or loss projection)
Classification of Models – contd.....

Classification based on Purpose or Function:

 Descriptive Models
 Predictive Models
 Normative (Optimization) Models

Classification based on Method of Solution

 Heuristic Models
 Analytical Models
 Simulation Models
 OR - TOPICS
 Introduction to Operational Research
 History of Operational Research
 Operational Research in India
 Definition of Operational Research
 Features of Operational Research
 Scope of Operational Research
 Methodology/Approaches of Operational Research
 Tools/Techniques of Operational Research
 Operational Research and Management Decision-Making
 Limitations of Operational Research
 Introduction To Operational Research
Operational Research is a systematic and analytical approach to
decision making and problem solving.
O.R. as termed in USA, Canada, Africa, Australia and
Operational Research as termed in Europe, is an Branch of applied
mathematics that uses techniques and statistics to arrive at Optimal
solutions to solve complex problems.

It is typically concerned with determining the maximum profit,

sale, output, crops yield and efficiency

And minimum losses, risks, cost, and time of some objective function.
It have also become an important part of INDUSTRIAL ENGINEERING
PROFESSION.

Some of the PRIMARY TOOLS used by operation researchers

are-
STATISTICS
GAME THEORY
PROBABILITY THEORY, etc.
Operations Research\History

The formal activities of Operations Research (OR) were initiated in

England during World War II when a team of British scientists set
out to make decisions regarding the best utilization of war
material.

Following the end of the war, the ideas advanced in military

operations were adapted to improve efficiency and productivity in
the civilian sector.

Today, OR is a dominant and indispensable decision making tool.

HISTORY OF OPERATIONAL RESEARCH
There is no clear history that marks the Birth if O.R., it is generally
accepted that the field originated in England during the World War II.
Some say that Charles Babbage (1791-1871) is the Father of O.R
because his research into the cost of transportation and sorting of
mail led to England’s University Penny Post in 1840.

Modern Operations Research originated at the Bowdsey Research

Station in U.K. in 1937 to analyse and improve the working of the
UK’s Early Warning Radar System.

During the Second World War about 1000 Men and Women were
engaged to work for British Army.

After World War II, Military Operational Research in U.K. became

Operational Analysis (OA) within the U.K. Ministry of Defence with
expanded techniques and graving awareness.
Operations Research & Management?
World War II : British military leaders asked scientists and engineers
to analyze several military problems:
 Deployment of radar
 Management of convoy,
 bombing,
 antisubmarine, and mining operations.
The result was called Military Research on Operations, later
Operations Research

Today: Operations Research and Management mean:

“the use of mathematical models and statistical techniques in providing

guidelines to managers for making effective decisions within the state
of the current information to reach a proper decision.”
Operations Research
"OR is a scientific method of providing executive departments with a
quantitative basis for decision regarding the operations under their
control "

"OR is concerned with scientifically deciding how to best design and

operate man-machine systems, usually under conditions requiring the
allocation of scarce resources".

Operational Research is the application of the methods of science to

complex problems arising in the direction and management of large
systems of men, machines, materials and money in industry, business,
government and defense.

The purpose is to help management determine its policies and actions

scientifically
DEFINITION OF OPERATIONAL RESEARCH

 It is an Act of winning wars without actually

fighting.
-Aurther Clark
 It is a Scientific Approach to problem solving for
executive management.
-H.M. Wagner
 It is Art of giving bad answers to problem which
otherwise have worse answers.
-T.L. Saaty
What is OR?
“Application of scientific methods to decision making in complex real world
problems which are concerned with coordination and execution of the
operations within an organization”
Goal = find a best possible solution to improve performance of the
organization

Other Definitions
“a scientific approach to decision making, which seeks to determine how
best to design and operate a system, usually under conditions requiring
the allocation of scarce resources.”

“a scientific method of providing executive departments with a quantitative

basis for decisions regarding the operations under their control”.
Operations ?
What is Operations?
 A function or system that transforms inputs into outputs of greater value.
 An operation is a series of tasks that are routine, repetitive and ongoing throughout the
life of an organization.

 Operations Sectors
Industrial Sector
Agriculture Sector
Construction
Transport Sector
Banking Sector
Communication Sector
Computer Design and Working
Airlines Business
Army Projects
Examples of Operations in Various Sectors
Industrial Manufacturing
 Scheduling production
 Process control
Logistics
 Distribution network
 Center location
 Transportation plan
Telecommunication
 Network design
 Traffic routing
 Base station location
Air Line Industry
 Plane scheduling
 Crew scheduling
Why Focusing on Operations?

 Maximize Production Capacity

 Minimize Cost of Production
 Increase the Speed of Operations
 Increase the efficiency of the operations
 Increase the Quality of the operations and
product
 Bring Flexibility in the operations
 Gain greater Control over the operations
Operations Research

"OR is the application of scientific methods, techniques and tools to

the problems involving the operations of systems so as to provide
those in control of the operations with optimum solutions to the
problem".

Characteristics:
 Use of Scientific Methods
 Provide quantitative basis for decision making
 Requires Construction of Model
 Interdisciplinary Team work
 Require the use of Computer applications
FEATURES OF OPERATIONAL RESEARCH

Decision-Making
Scientific Approach
Inter-Disciplinary Team Approach
System Approach
Use of Computers
Objectives
Human Factors
 DECISION MAKING and OR
Every industrial organisation faces multifaceted
problems to identify best possible solution to their
problems.

OR aims to help the executives to obtain optimal

solution with the use of OR techniques.

It also helps the decision maker to improve his

creative and judicious capabilities, analyse and
understand the problem situation leading to better
control, better co-ordination, better systems and
finally better decisions.
 SCIENTIFIC APPROACH

OR applies scientific methods, techniques and tools for

the purpose of analysis and solution of the complex
problems.

In this approach there is no place for guesswork and

the person bias of the decision maker.
 INTER-DISCIPLINARY TEAM APPROACH

Basically the industrial problems are of complex nature

and therefore require a team effort to handle it.

This team comprises of scientist, mathematician and

technocrats. Who jointly use the OR tools to obtain a
optimal solution of the problem.

They tries to analyse the cause and effect relationship

between various parameters of the problem and
evaluates the outcome of various alternative strategies.
 SYSTEM APPROACH

The main aim of the system approach is to trace out all

significant and indirect effects for each proposal on all
sub-system on a system and to evaluate each action in
terms of effects for the system as a whole.

The inter-relationship and interaction of each sub-

system can be handled with the help of
mathematical/analytical models of OR to obtain
acceptable solution.
 USE OF COMPUTERS

The models of OR need lot of computation and

therefore, the use of computers becomes necessary.
With the use of computers it is possible to handle
complex problems requiring large amount of
calculations.
The objective of the operations research models is to
attempt and to locate Best or Optimal Solution.
 OBJECTIVE

Operational Research always try to find the best and

optimal solution to the problem.
For this purpose objectives of the organisation are
defined and analysed.
These objectives are then used as the basis to compare
the alternative courses of action.
 HUMAN FACTORS
In deriving, Quantitative Solutions we do not
consider human factors, which doubtlessly play a
great role in the problems.
So, study of O.R. is incomplete without study of
human factors.
 SCOPE OF OPERATIONAL RESEARCH

The scope of OR is not only confined to any specific

agency like defence services but today it is widely used in
all industrial organisations.
It can be used to find the best solution to any problem be
it simple or complex.
It is useful in every field of human activities.
Thus, it attempts to resolve the conflicts of interest
among the components of organization in a way that is
best for the organisation as a whole.

The main fields where OR is extensively used are given in

next slide.
FIELDS

 National Planning and Budgeting

 Defence Services
 Industrial Establishment and Private Sector Units
 R & D and Engineering
 NATIONAL PLANNING AND BUDGETING

OR is used for the Preparation of :-

 Five Year Plans
 Annual Budgets
 Forecasting of Income and Expenditure
 Scheduling of Major Projects of National Importance
 Estimation of GNP
 GDP
 Population
 Employment and Generation of Agriculture Yields, etc.
DEFENCE SERVICES

Basically formulation of OR started from USA Army,

so it has wide application in the areas such as:-

 Development of New Technology

 Optimization of Cost and Time
 Tender Evaluation
 Setting and Layouts of Defence Projects
 Assessment of “Threat Analysis”
 Strategy of Battle
 Effective Maintenance and Replacement of Equipment
 Inventory Control,
 Transportation
 Supply Depots, etc.
Industrial Establishments and Private Sector Units

OR can be effectively used in-

 Plant Location and Setting Finance Planning

 Product and Process Planning
 Facility Planning and Construction
 Production Planning and Control
 Purchasing
 Maintenance Management
 Personnel Management, etc.
R&D AND ENGINEERING

Research and development being the heart of

technological growth, OR has wide scope and can be
applied in-
 Technology Forecasting and Evaluation,
 Technology and Project Management,
 Preparation of Tender and Negotiation,
 Value Engineering,
 Work/Method Study and so on.
Scope of Operations Research
In Agriculture Optimum allocation of land to various crops in
accordance with the climate conditions. Optimum distribution of water
from various resources like canal for irrigation purposes.
In Finance to maximize the per capita income with minimum resources.
To find out the profit plan for the company to determine the best
replacement policies
In Industry for deciding optimum allocation of various limited resources
such as men, machines, material, money, time etc. Complexity,
Scattered Responsibility Knowledge Explosion
In Marketing- Where to distribute the products for sale so that the total
cost of transportation is minimum the minimum per unit sale price ? the
size of the stock to meet the future demand ? how to select best adv.
media w.r.t. time, cost etc. ? how, when & what to purchase at the
minimum possible cost ?
Scope of Operations Research – contd…
In Personnel Management to appoint the most suitable person on
minimum salary. to determine the best age of retirement for the
employees. to find out the no. of persons to be appointed on full time
basis when the workload is seasonal.

In production Management to find out the no. & size of items to be

produced. in scheduling & sequencing the production run by proper
allocation of machines. in calculating the optimum product mix. to
select, locate & design the sites for the production plants.

In L.I.C. What should be the minimum premium rates for various modes
of policies ? How best the profit could be distributed in the cases of with
profit policies ?
Methodologies/Approaches of Operational Research

1. Orientation F
2. Problem Definition E
3. Data Collection E
4. Model Formulation D
5. Solution B
6. Analyses and Information A
7. Implementation and Monitoring C
K
Techniques/Tools of Operational Research
 Linear Programming
 Queuing Theory
 Sequencing
 Transportation Problems
 Integer Problems
 Assignment Problems
 Decision Theory
 Games Theory
 Replacement Problems
 Inventory Problems
 Network Problems
LINEAR PROGRAMMING
This technique is used to find a solution for optimising a
given objective.
Objective may be maximizing profits or minimising costs.
Objective function and Boundary conditions are linear in
nature.
LPP techniques solve Product-Mix and Distribution
problems of enterprise.
Its also used to allocate Scarce Resources in optimum
manner in problems of scheduling, product mix, etc.
QUEUING THEORY
This theory deals with the situations in which queue is
formed, e.g. customers waiting for services, machines
waiting for repairmen, and aircrafts waiting for landing
strips, etc.
If the Queue will be long the cost will be high due to
long waiting hour.
This technique is used to analyse the feasibility of
adding facilities and to access the amount and cost of
waiting time.
This calculations can then be used to determine the
desirable number of service facilities.
SEQUENCING

Models have been developed to find a sequence for

Processing Jobs so that the total elapsed time for all the
jobs will be minimum.

The models also help to resolve the conflict between the

objectives of maximizing machines utilization and
complying with predetermined delivering rates.
TRANSPORTATION PROBLEMS

Transportation problems deals with transportation of a product

 From a number of sources
 With limited supplies
 To number of destinations
 With specified demands
 At the total transportation cost.

The main objective of transportation is to Schedule Shipment from

sources to destinations in such a way so as to Minimize the Total
Transportation Cost.
INTEGER PROGRAMMING

Integer means complete or whole number.

By using the Integer Programming Algorithm a series of
continuous linear programming problem are solved in
such a way that the solution containing un-acceptable
non-integer value are ruled out and the best higher
programming solution is obtained.
ASSIGNMENT PROBLEMS
It is a special type of linear programming problem.

It deals in allocating the various resources or items to various

activities in a one to one basis in such a way that the time or
cost involved in minimised and the sale or profit is maximized.
E.g. Manager may like to know which job should be assigned
to which person so that all jobs can be completed in the
shortest possible time.
DECISION THEORY AND GAME THEORY
Decision Theory is primarily considered with decision
making under the conditions of:
 Risk
 Uncertainty
 Certainty
Game Theory is concerned with:
 Decision Making under Conflict

Hence, both Decision Theory and Game Theory assist the

Decision-Maker in analysing Problems with numerous
alternative course of action and consequences.
 REPLACEMENT PROBLEMS
This Theory is concerned with situations that arise when
some items such as machines, men, etc. require replacement
due to their decreasing efficiency, failure or break-down.
Sooner or later all the equipments are required to be replaced
because of:
 Obsolescence
 Discovery of New Technology
 Better Design of Equipment

In Replacement Decisions we consider:

 Cost of Equipment to be Installed
 Cost of Equipment Replaced, etc.

Hence, this theory helps to solve all Replacement Problems.

SYMBOLIC LOGIC

Symbols are more meaningful and accurate. Everything

is Symbolic in this world.
Words, classes of things, functional systems and rules
are substituted with symbols.
The whole problem is converted into algebraic equations
and propositions.
Business Problems are not commonly converted into
symbols but calculations are done on computers, that is
why symbols have extensive applications.
OR and Management Decision-making
Operation Research increases the creative capabilities of a decision
maker.
It increases the effectiveness of mgt. decisions.
Management is most of the time making decisions.
It is thus a decision science which helps mgt. to take better
decisions.
Nowadays, business problems have become so complex that it is
almost impossible for a human being to comprehend all important
factors, OR Techniques can be helpful in such situations.
It also helps in ascertaining best locations for factories and
warehouses, project scheduling as well as most economic means
of transportation.
OR study approach in business decisions leads to better control,
better co-ordination, better system and at the end better decision.
Limitations of Operational Research

 Magnitude of Computation
 Non-Quantifiable Factors
 Distance between User and Analyst
 Time and Money Costs
 Implementation
Magnitude of Computation
Operations research models try to find out optimal
solution taking into account all the factors. But, these
factors are enormous and, expressing them in quantity,
and,
establishing relationships among these, Require
voluminous calculations which can be handled only by
computers.
Non-quantifiable Factors

OR provides solution only when all elements related to a

problem can be quantified.
All relevant variables do not lend themselves to
quantification.
Factors which cannot be quantified, find no place in OR
study.
Models in OR do not take into account qualitative factors
or emotional factors which may be quite important.
Distance between User and Analyst

OR being specialist’s job requires a mathematician

or statistician, who might not be aware of the
business problems.

Similarly, a manager fails to understand the

complex working of OR.
Thus there is a gap between the two.
Management itself may offer a lot of resistance due
to conventional thinking.
Time and Money Cost
When basic data are subjected to frequent changes,
incorporating them into the OR models is a costly
proposition.
Moreover, a fairly good solution at present may be,
More desirable than a perfect OR solution available
after sometime.
The computational time increases depending upon the
size of the problem and accuracy of results desired.
IMPLEMENTATION

Implementation of any decision is a delicate task.

It must take into account the complexities of human

relations and behaviour.

Sometimes, resistance is offered due to

psychological factors which may not have any
bearing on the problem as well as its solution.
Any Questions ?
THANK YOU 