2. Major topics of the chapter
What is operations research?
Where and when the Origin of OR?
What are models, and why are they
used?
What are Features of OR?
What are the major areas of application?
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3. What is operations research?
Operations Research (OR): applies
analytical methods to help organizations
make better decisions when solving
complex problems.
Managers use Operations Research to
make their organizations more
productive and efficient.
According Robert Penn, Operations
Research is “the application of scientific
principles to business management,
providing a quantitative basis for
complex decisions”.11/9/2018
4. Operational Research: is the application of
the methods of science to complex problems
arising in the direction and management of
large number of men, machines, materials and
money, in industry, business, government and
defense.
OR is the application of scientific methods,
techniques & tools to the problems involving
the operations of a system so as to provide
those in control of the system with optimum
solution to the problem.
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5. Origin / Evolution of Operations Research
Operations research was born during the 2nd
World War mainly to deal with the problem of
allocation of scarce military resources for their
optimal utilization.
British and American military strategists jointly
delegated the task of applying scientific
approach to military problems to a selected
team of eminent scientists.
The name operations research (OR) is taken
directly from the context in which it was
developed and applied.
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6. Cont…
Subsequently, it came to be known by
several other names such as:-
◦ Management science,
◦ Decision science,
◦ Quantitative methods and
◦ Operational analysis
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7. Nature of Operations Research
The operations research approach is
particularly useful in balancing conflicting
objectives (goals or interests) where there
are many alternative courses of action
available to the decisions –makers.
In theoretical sense, the optimum decision
must be one that is best for the organization
as a whole. It is often called the global
optimum
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8. Cont…
A decision that is best for one or more
sections of the organization is usually called
suboptimum decision.
The OR approach attempts to find global
optimum by analyzing inter-relationships
among the system components involved in the
problem.
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9. Cont…
Further, OR is concerned with
providing the decision-maker with
decision aids derived from:
◦ A total system orientation,
◦ Scientific methods of investigation, and
◦ Models of reality, generally based on
quantitative measurement and
techniques
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10. Significance of OR
OR could be very effective in handling issues of inventory
planning and scheduling, production planning, transportation,
financial and revenue management and risk management.
…………….
Basically, OR could be used in any situation where improvements
in the productivity of the business are of paramount importance.
a. Control: With OR, organizations are greatly relieved from the
burden of supervision of all the routine and everyday tasks. The
problem areas are identified analytically and quantitatively.
Tasks such as scheduling and replenishment of inventories-------
----------etc. benefit immensely from OR.
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11. b. Decision Making: OR is used for analyzing
problems of decision making in a superior
fashion. c. Coordination: Various
departments in the organization can be
coordinated well with suitable OR. This
facilitates smooth functioning for the entire
organization.
d. Systems: With OR, any organization
follows a systematic approach for the conduct
of its business. OR essentially emphasizes the
use of computers in decision making; hence
the chances of errors are minimum
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12. Features of operations research
OR uses an Inter-disciplinary Team Approach,
It is one of the most important features of
operations research
OR Uses Scientific Methodological Approach
OR is a highly systematic and scientific- method
OR is an Objective-oriented Approach
The primary objective of operations research is
to find the best (optimal) solution to a problem
under consideration.
OR Uses Totalistic/Holistic Approach
Any action or decision within an organization
must first be analyzed its interactions’ and effect on
the entire organization carefully considered
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13. Creating a Model: OR first makes a
model. A model is a logical representation
of a problem. It shows the relationships
between the different variables in the
problem. It is just like a mathematical
formula.
Shows Important Variables: OR shows
the variables which are important for
solving the problem.
Symbolizes the Model: The OR model, its
variables and goals are converted into
mathematical symbols. These symbols can
be easily identified, and they can be used
for calculation.
Achieving the Goal: The main goal of OR
is to select the best solution for solving the
problem. 11/9/2018
14. Quantifying the Model: All variables in
the OR model are quantified. That is,
they are converted into numbers. This is
because only quantified data can be put
into the model to get results.
Use of Computer: The main focus is
on decision-making and problem
solving. For this purpose computers are
widely used.
Interdisciplinary: OR is
interdisciplinary, because it uses
techniques from economics,
mathematics, chemistry, physics, etc.11/9/2018
15. steps/stages involved in OR
1. Defining and Formulating the Problem
2. Developing and Constructing a Model
A mathematical model has three important
constituents
Decision Variables and Parameters
Constraints
Objective Function
3. Solving the Model
4. Solution-Testing
5. Implementation Stage
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16. Models in Operations
Research
A model is an abstraction of reality.
It is a simplified and often idealized
representation of reality.
A good model will capture important
details of reality without including
innumerable minor details that would
obscure rather than illuminate
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17. Classifications of Models
I. By Degree of Abstraction
a. Mathematical Models and language
models are considered the most abstract
models by their complexity.
b. Construction models such as buildings,
dams, etc are among the least abstract as
they represent shapes and characteristics that
a human brain can easily understand.
II. By Structure
a. Iconic or Physical models are physical
representation of a real situation but with a
different scale.
Example: map, model of a car, etc.
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18. b. Analogue or Schematic Models are
models which can represent dynamic
situations.
Example graphs that represent growth of
population, flow diagram, organizational
chart, etc.
c. Symbolic or mathematical models are
also OR models which represent the
decision variables under study using
mathematical symbols such as numbers,
letters, etc.
These symbols are then related together
using equations, which describes the
properties of the system. Eg: Linear
Programming. 11/9/2018
19. III. By Function
a. Descriptive models explain various
operations in non-mathematical language
and try to define the functional relationship
between various or operations. Eg:
Organizational charts, market share
diagrams, etc.
b. Predictive models explain or predict the
behavior of a system. For example, we use
trend analysis for forecasting future sales of
a product.
c. Normative or Prescriptive models are
used to prescribe certain rules or optimal
solutions for problems. Eg: Linear
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20. IV. By Nature of Environment
a. Deterministic models use variables
which are completely defined and the
outcomes are certain. Eg: Linear
Programming, Transportation Problems, etc.
b. Probabilistic models use semi-closed
variables which take values or support from
a probabilistic environment. Eg: Exponential
smoothing models, trend analysis, etc.
V. By the Extent of Generality
a. General Models are models which can
be applicable for more than one problem.
b. Specific Models are models which can
be used only on a specific situation.
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21. VI. By the Time Horizon
a. Static Models which are used only
for a single time (one time decision-
supports).
b. Dynamic models can be used for
multiple times on similar problems.
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22. Main Application Areas/ Scope of
Operations Research
Military Applications
Agriculture
Environmental Protection
Facilities Location
Product-Mix
Production
Mixing or Blending
Transportation and Trans-Shipment
Portfolio Selection
Profit Planning and Contract
Media Selection/Evaluation
Staffing
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