Introduction of Operations Research-1

Introduction of Operations
Research
(Lecture 1)
Operations
Research
Content
Outline
What is Operations
Research?
Operations
The activities carried out in an organization.

Research
The process of observation and testing characterized
by the scientific method. Situation, problem
statement, model construction, validation,
experimentation, candidate solutions.

Model
An abstract representation of reality. Mathematical,
physical, narrative, set of rules in computer program.
Prepared by : Maricar M. Navarro
What is Operations
Research?
• It is a Process
• It assists Decision Makers
• It has a set of Tools
• It is applicable in many
Situations

What is Operations
Research?
Systems Approach
Include broad implications of decisions for the
organization at each stage in analysis. Both quantitative
and qualitative factors are considered.
Optimal Solution
A solution to the model that optimizes (maximizes or
minimizes) some measure of merit over all feasible
solutions.
Team
A group of individuals bringing various skills and
viewpoints to a problem.
Operations Research Techniques
A collection of general mathematical models, analytical
procedures, and algorithms.
Definition of OR
● OR professionals aim to provide a rational basis

for decision making by seeking to understand
and structure complex situations and to use this
understanding to predict system behavior and
improve system performance.
● Much of this work is done using analytical and
numerical techniques to develop and manipulate
mathematical and computer models of
organizational systems composed of people,
machines, and procedures.

The Goal is to Solve the
Problem
• The model must be

valid
tractable
• The solution must be
useful

The Situation
• May involve current operations or
proposed developments due to expected
market shifts
• May become apparent through
consumer complaints or through
employee suggestions
• May be a conscious effort to improve
efficiency or respond to an unexpected
crisis
Example: Internal nursing staff not happy with their schedules; hospital
using too many external nurses.

The Process: Recognize the
Problem
• Manufacturing
– Planning
– Design
– Scheduling
– Dealing with Defects
– Dealing with Variability
– Dealing with Inventory

Problem Formulation
• Describe system • Define variables

• Define boundaries • Define constraints
• State assumptions
• Select performance measures • Identify data requirements
Example: Maximize individual nurse preferences subject to

demand requirements, or minimize nurse
dissatisfaction costs.

Constructing a Model
Problem
statement
Formulate the
Problem
• Problem must be translated from

Construct
verbal, qualitative terms to logical,
a Model
quantitative terms
• A logical model is a series of rules,
usually embodied in a computer Mode
program
l
• A mathematical model is a collection of functional
relationships by which allowable actions are delimited and
evaluated.
Example: Define relationships between individual nurse

assignments and preference violations; define tradeoffs
between the use of internal and external nursing
resources.
Construct a Model
• Math. Programming
Model
• Stochastic Model
• Statistical Model
• Simulation Model

Solving the Mathematical
Model
• Many tools are available as
Model
discussed in this course
Find a (Excel Solver, Linggo,
solution Microsoft Excel
Operations , etc
• Some lead to “optimal”
solutions
Solution Tools
• Others only evaluate
candidates 🡪 trial and error
to find “best” course of
action
Example: Collect input data -- nurse profiles and demand requirements;
apply algorithm; post-process results to get monthly schedules.
Find a Solution
• Linear Programming
• Nonlinear Programming
• Regression
• Direct Search
• Stochastic Optimization
• Trial and Error

Establish a Procedure
• Production
software
• Easy to use
• Easy to maintain
• Acceptable to
the user

Implement the Solution
• Change for the

organization
• Change is difficult
• Establish controls to
recognize change in
the situation
Implementation
• A solution to a problem usually implies
changes for some individuals in the
organization
• Often there is resistance to change,
making the implementation difficult
• A user-friendly system is needed
• Those affected should go through
training
Example: Implement nurse scheduling system in one unit at a time.

Integrate with existing HR and T&A systems. Provide training
sessions during the workday.

OR PROCESS

valid
tractable
• The solution must be
useful

Components of OR-Based
Decision Support System
• Database (nurse profiles,

external resources, rules)
• Graphical User Interface (GUI);
web enabled using java or VBA
• Algorithms, pre- and post-
processors
• “What-if” analysis capability
• Report generators

Problems, Models and
Methods
Real World
Situation
Problems
Models
Methods

Operations Research Models
Deterministic Models Stochastic Models

• Linear Programming • Discrete-Time Markov Chains
• Network Optimization• Continuous-Time Markov Chains
• Integer Programming • Queuing
• Nonlinear Programming • Decision Analysis

Deterministic vs. Stochastic Models
Deterministic models
assume all data are known with certainty
Stochastic models
explicitly represent uncertain data via
random variables or stochastic processes
Deterministic models involve optimization
Stochastic models characterize / estimate

system performance.

Examples of OR Applications
• Rescheduling aircraft in response to

groundings and delays
• Planning production for printed circuit board
assembly
• Scheduling equipment operators in mail
processing & distribution centers
• Developing routes for propane delivery
• Adjusting nurse schedules in light of daily
fluctuations in demand
Introduction to Operations Research
What is Operations 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, and efficiency
• And minimum losses, risks, cost, and time of some
objective function. It have also become an
important part of INDUSTRIAL ENGINEERING
PROFESSION.
What is Operations Research?
• the discipline which apply advanced

analytical methods to help make better
decisions.
• How?
– A better understanding of the problems
– More complete data
– Consideration of all available options
– Careful predictions of outcomes and
estimates of risk
– The latest decision tools and techniques
History of Operations 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 Rador 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 Defense with expanded
techniques and graving awareness.

• OR is a relatively new discipline.
• 70 years ago it would have been possible to
study mathematics, physics or engineering at
university it would not have been possible to
study OR.
• It was really only in the late 1930's that
operationas research began in a systematic
way.

• 1890: Frederick Taylor - Scientific Management [Industrial
Engineering]
• 1900: Henry Gannt - [Project Scheduling], and Andrey A. Markov -
[Markov Processes], Assignment [Networks]
• 1910: F. W. Harris - [Inventory Theory], and E. K. Erlang -
[Queuing Theory]
• 1950: H.Kuhn - A.Tucker - [Non-Linear Prog.], Ralph Gomory -
[Integer Prog.] & PERT/CP, and Richard Bellman - [Dynamic
Prog.]
• 1940: World War 2, George Dantzig - [Linear Programming], First
Computer
• 1930: Jon Von Neuman – Oscar Morgenstern - [Game Theory]

Definitions of Operations 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

Features of Operations Research
❖Decision-Making
❖Scientific Approach
❖Inter-Disciplinary Team Approach
❖System Approach
❖Use of Computers
❖Objectives
❖Human Factors

Decision Making
• Every industrial organization faces multi-facet
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, analyze 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 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 other professionals. Who jointly use the OR
tools to obtain a optimal solution of the problem.
• They tries to analyze 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 organization are
defined and analyzed. 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 Operations Research
• Finance & Accounting

• Marketing
• Purchasing, Procurement
• Production Management
• Personnel Management
• Government
• General Management

Scope of Operations 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 organizations.
• 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 organization as a whole.
• The main fields where OR is extensively used are
given in next slide.

Fields of OR
❖National Planning and Budgeting
❖Defense 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.

Defense 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
❖ Setting and Layouts of Defense Projects
❖ Assessment of “Threat Analysis”
❖ Strategy of Battle
❖ Effective Maintenance and Replacement of Equipment
❖ Inventory Control,
❖ Transportation
❖ Supply Depots, etc.

Industrial Establishment 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.
Methodologies/Approaches of OR
1. ORIENTATION
2. PROBLEM DEFINITION
3. DATA COLLECTION
4. MODEL FORMULATION
5. SOLUTION
6. ANALYSES AND INFORMATION
7. IMPLEMENTATION AND
MONITORING
Tools and Techniques of OR
❖Linear Programming
❖Queuing Theory
❖Sequencing
❖Transportation Problems
❖Integer Problems
❖Assignment Problems
❖Decision Theory and Games Theory
❖Symbolic Logic

Operations Research 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 Operations Research
❖Magnitude of Computation
❖Non-Quantifiable Factors
❖Distance between User and Analyst
❖Time and Money Costs
❖Implementation

Steps in OR Study
50
7 Signs that management could benefit from OR
• face complex decisions

• isn't sure what the main problem is
• uncertain about potential outcomes
• is having problems with processes
• is troubled by risk
• is not making the most of its data
• needs to be at stiff competition

Application Areas of O.R
EXAMPLES

Samsung - 1995
• Objective: To Cut Manufacturing Cycle Time
and Inventory
• Required Production Scheduling techniques
• Solution
– SLIM (short cycle time and low inventory
in manufacturing).
• Result - additional $1 billion in sales revenue

Cricket
• Duckworth/Lewis method
• Requires a single page table of percentages
and a pocket calculator,
• Uses mathematical models of the
relationship between average runs scored
and over's left and also the relationship to
the number of wickets that have been lost
when a stoppage occurs.

Application Areas
• Strategic planning
• Supply chain management
• Pricing and revenue management
• Logistics and site location
• Optimization
• Marketing research
55
Applications Areas (cont.)
• Scheduling
• Portfolio management
• Inventory analysis
• Forecasting
• Sales analysis
• Auctioning
• Risk analysis
56
Football
⚫Actim Index
⚫How the ranking is done?
⚫Uses six key factors for calculations
⚫Implemented in 2003-04 season
⚫Thierry Henry – first player identified by
Actim

Satellite Navigation
• Satellite navigation systems in vehicles allow
the driver to enter destination details into a
small on-board computer that calculates the
optimum route.
• In just a few seconds, the route is
downloaded and clear verbal turn by turn
instructions are provided throughout the
journey and a route map is also displayed.

Satellite Navigation Contd…..
• The more sophisticated systems constantly
monitor the journey and provide the driver
with delays and instantly recalculate the new
optimum route.
• They use optimization algorithms and
heuristic techniques to calculate routes along
known highways.

Airlines
• How the low cost carriers manage to offer
such surprisingly low fares?
• Seats on any flight are perishable - once the
plane has taken off, there is no possibility of
selling any empty seats

Airlines – Contd…
• some passengers want the lowest price and
to get it are prepared to book well in
advance,
• others want the flexibility to book at the last
minute, and perhaps to switch flights, and
are prepared to pay more - for the
convenience.

Airlines – Contd….
• Ideally, on any flight, the airline would first
like to see how many people are willing to
pay the highest price, sell as many tickets as
possible to them, then sell as many as
possible at the next highest price, and so on,
filling up any remaining seats at the
cheapest price.

Airlines – Contd….
• How bookings come in over time - is
monitored on a continuous basis, compared
with the typical profile for the flight, and the
number of seats held back is adjusted
according to whether bookings are heavier
or lighter than the typical profile.
• Sophisticated analysis is provided by the OR.

Car Manufacturing
• In the 1980s when Rover Cars (now MG
Rover) were developing the Metro at their
Longbridge plant, they used OR in the
manufacturing process by inventing visual
interactive modelling.

Car Manufacturing – Contd….
• Cars move along a production line and various
processes - welding, painting, trim etc Designing
such a plant is a complex business –
• A lot of different processes and pieces of plant
have to be married together, ideally in such a
way that every operation takes the same time
to perform.
• If that's not the case then a bottleneck will
occur
• Should we install three robots instead of two?

Car Manufacturing – Contd….
• Once in a while, a piece of plant will break
down or there will be a shortage of some
component. Such problems can quickly shut
down the entire line, unless adequate
buffers are provided
• where should we provide buffers, and how
big should they be?

Visual Interactive Model
• The OR team built the first ever visual
interactive model which simulated the
working of the plant, including breakdowns
and component shortages, and displayed the
results on a computer screen in the form of
an animated diagram of the plant.
• Visual Part- see where bottlenecks were
occurring, and how quickly the effects of a
breakdown spread to other parts of the
plant.

Visual Interactive Model - 2
• Interactive Part- the model enabled the
designers to ask what if? Questions like what
if we installed three robots instead of two?
What if we provided a buffer here?
• By asking such questions and re-running the
model, they could see which design gave the
best results.
Railway – Canadian Pacific
• Canadian Pacific providing rail and inter-modal
freight transportation services in Canada and the
Eastern and Midwestern U.S.
• “Used tonnage-based dispatching," in which trains
are only run when enough traffic has accumulated.
• Although this approach attempts to minimize the
total number of trains needed by maximizing their
size, in practice it disrupts the efficient utilization of
crews, locomotives, and equipment.
• Although this approach attempts to minimize the
total number of trains needed by maximizing their
size, in practice it disrupts the efficient utilization of
crews, locomotives, and equipment.
Solution
• Working with Multi-Modal Applied Systems, the
railway developed an operating plan that was tightly
matched to traffic patterns.
• The model optimized the routing and classification

plan for each rail car movement and determined
which trains to run.
• It tailored the contingency plans for high and low-

volume days.
• Shortest-path-based algorithms reduced operating

cost and transit time, and improving service
reliability for shippers.
Worcester Bosch
• Worcester Bosch manufacturer of high efficiency
heating and hot water systems for the home.
• Worcester Bosch holding around 4,000 lines of
stock, ranging from complete boiler assemblies to
the most miniscule of system parts.
• 95% of its parts were ex-stock, but, the customers
demanded higher levels of stock supply, typically of
the order 98%.
• To reduce the dissatisfied customers they set a
target of 100% stock availability.
• Achieving such may not seem realistic.

Solution
• A solution came to hand from INFORM UK - add*ONE, a
system with O.R. inside.
• It could maintain optimum inventory levels by applying
advanced mathematical techniques for demand forecasting,
purchase order call off and in freight cost minimisation.
• The add*ONE system enhanced the efficiency & 100% stock
availability became a reality.
• It not only created forecasts, but also had the ability to state
how accurate the forecasts were.
• The system was equipped with an inventory optimiser -
recalculating every single stock forecast every night.
• It replaced three operative personnel to one.
• Worcester Bosch now ranks as Number One in customer
satisfaction.
Examples
• British Telecom used OR to schedule
workforce for more than 40,000filed engineers.
The system was saving $150 million a year
from 1997~ 2000. The workforce is projected
to save $250 million.
• Sears Uses OR to create a Vehicle Routing

and Scheduling System which to run its
delivery and home service fleet more
efficiently -- $42 million in annual savings
73
Examples
• UPS use O.R. to redesign its overnight
delivery network, $87 million in savings
obtained from 2000 ~ 2002; Another $189
million anticipated over the following decade.
• USPS uses OR to schedule the equipment

and workforce in its mail processing and
distribution centers. Estimated saving in $500
millions can be achieve.

A Short List of Successful Stories (1)
• Air New Zealand
– Air New Zealand Masters the Art of Crew Scheduling
• AT&T Network
– Delivering Rapid Restoration Capacity for the AT&T Network
• Bank Hapoalim
– Bank Hapoalim Offers Investment Decision Support for Individ
ual Customers
• British Telecommunications
– Dynamic Workforce Scheduling for British Telecommunication
s
• Canadian Pacific Railway
– Perfecting the Scheduled Railroad at Canadian Pacific Railway
• Continental Airlines
– Faster Crew Recovery at Continental Airlines
• FAA
– Collaborative Decision Making Improves the FAA Ground-Dela
y Program
75
• Ford Motor Company
– Optimizing Prototype Vehicle Testing at Ford Motor Compa
ny
• General Motors
– Creating a New Business Model for OnStar at General Mot
ors
• IBM Microelectronics
– Matching Assets to Supply Chain Demand at IBM Microele
ctronics
• IBM Personal Systems Group
– Extending Enterprise Supply Chain Management at IBM Pe
rsonal Systems Group
• Jan de Wit Company
– Optimizing Production Planning and Trade at Jan de Wit Co
mpany
• Jeppesen Sanderson
– Improving Performance and Flexibility at Jeppesen Sanders
on
76
• Mars
– Online Procurement Auctions Benefit Mars and Its Supplier
s
• Menlo Worldwide Forwarding
– Turning Network Routing into Advantage for Menlo Forwar
ding
• Merrill Lynch
– Seizing Marketplace Initiative with Merrill Lynch Integrated
Choice
• NBC
– Increasing Advertising Revenues and Productivity at NBC
• PSA Peugeot Citroen
– Speeding Car Body Production at PSA Peugeot Citroen
• Rhenania
– Rhenania Optimizes Its Mail-Order Business with Dynamic
Multilevel Modeling
• Samsung
– Samsung Cuts Manufacturing Cycle Time and Inventory to
Compete 77
• Spicer
– Spicer Improves Its Lead-Time and Scheduling Performanc
e
• Syngenta
– Managing the Seed-Corn Supply Chain at Syngenta
• Towers Perrin
– Towers Perrin Improves Investment Decision Making
• U.S. Army
– Reinventing U.S. Army Recruiting
• U.S. Department of Energy
– Handling Nuclear Weapons for the U.S. Department of Ene
rgy
• UPS
– More Efficient Planning and Delivery at UPS
• Visteon
– Decision Support Wins Visteon More Production for Less
78
END

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Introduction of Operations

Prepared by : Maricar M. Navarro

● OR professionals aim to provide a rational basis

Prepared by : Maricar M. Navarro

• The model must be

Prepared by : Maricar M. Navarro

Prepared by : Maricar M. Navarro

Prepared by : Maricar M. Navarro

• Describe system • Define variables

Example: Maximize individual nurse preferences subject to

Prepared by : Maricar M. Navarro

• Problem must be translated from

Example: Define relationships between individual nurse

Prepared by : Maricar M. Navarro

Prepared by : Maricar M. Navarro

Prepared by : Maricar M. Navarro

• Change for the

Example: Implement nurse scheduling system in one unit at a time.

Prepared by : Maricar M. Navarro

• The model must be

Prepared by : Maricar M. Navarro

• Database (nurse profiles,

Prepared by : Maricar M. Navarro

Prepared by : Maricar M. Navarro

Deterministic Models Stochastic Models

Prepared by : Maricar M. Navarro

Deterministic models involve optimization

Stochastic models characterize / estimate

Prepared by : Maricar M. Navarro

• Rescheduling aircraft in response to

• Operational Research is a systematic and analytical

• the discipline which apply advanced

Prepared by : Maricar M. Navarro

Prepared by : Maricar M. Navarro

Prepared by : Maricar M. Navarro

Prepared by : Maricar M. Navarro

Prepared by : Maricar M. Navarro

Prepared by : Maricar M. Navarro

Prepared by : Maricar M. Navarro

Prepared by : Maricar M. Navarro

Prepared by : Maricar M. Navarro

Prepared by : Maricar M. Navarro

Prepared by : Maricar M. Navarro

Prepared by : Maricar M. Navarro

Prepared by : Maricar M. Navarro

• Finance & Accounting

Prepared by : Maricar M. Navarro

Prepared by : Maricar M. Navarro

Prepared by : Maricar M. Navarro

❖ Five Year Plans

Prepared by : Maricar M. Navarro

Prepared by : Maricar M. Navarro

OR can be effectively used in-

❖ Plant Location and Setting Finance Planning

Prepared by : Maricar M. Navarro

❖ Technology Forecasting and Evaluation,

Prepared by : Maricar M. Navarro

• Operation Research increases the creative capabilities of a

Prepared by : Maricar M. Navarro

Prepared by : Maricar M. Navarro

• face complex decisions

Prepared by : Maricar M. Navarro