OPERATIONS RESEARCH: An IntroductionArriane Alhambra Palisoc

OutlineIntroduction to Operational ResearchHistory of Operational ResearchDefinition of Operational ResearchFeatures of Operational ResearchScope of Operational ResearchMethodology/Approaches of Operational ResearchTools/Techniques of Operational ResearchOperational Research and Management Decision-MakingLimitations of Operational ResearchSteps in OR StudyApplication Areas of ORShort List of Successful Stories

Introduction to Operations ResearchOperational 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.

History of Operations ResearchThere 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 Englands 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 UKs Early Warning Rador System.

History of Operations ResearchDuring 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.

History of Operations ResearchOR 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.

History of Operations Research1890: 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 Computer1930: Jon Von Neuman Oscar Morgenstern - [Game Theory]

Definitions of Operations ResearchIt is an Act of winning wars without actually fighting. -Aurther ClarkIt is a Scientific Approach to problem solving for executive management. -H.M. WagnerIt is Art of giving bad answers to problem which otherwise have worse answers. -T.L. Saaty

Features of Operations ResearchDecision-MakingScientific ApproachInter-Disciplinary Team ApproachSystem ApproachUse of ComputersObjectivesHuman Factors

Decision MakingEvery 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 ApproachOR 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 ApproachBasically 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 ApproachThe 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 ComputersThe 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.

ObjectiveOperational 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 FactorsIn 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 ResearchThe 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 ORNational Planning and BudgetingDefense ServicesIndustrial Establishment and Private Sector UnitsR & D and Engineering

National Planning and Budgeting OR is used for the Preparation of-

Five Year PlansAnnual Budgets Forecasting of Income and ExpenditureScheduling of Major Projects of National ImportanceEstimation of GNPGDPPopulationEmployment and Generation of Agriculture Yields, etc.

Defense ServicesBasically formulation of OR started from USA Army, so it has wide application in the areas such as:

Development of New TechnologyOptimization of Cost and TimeSetting and Layouts of Defense ProjectsAssessment of Threat AnalysisStrategy of BattleEffective Maintenance and Replacement of EquipmentInventory Control,TransportationSupply Depots, etc.

Industrial Establishment and Private Sector Units OR can be effectively used in-

Plant Location and Setting Finance PlanningProduct and Process PlanningFacility Planning and ConstructionProduction Planning and ControlPurchasing 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. ORIENTATION2. PROBLEM DEFINITION3. DATA COLLECTION4. MODEL FORMULATION5. SOLUTION6. ANALYSES AND INFORMATION7. IMPLEMENTATION AND MONITORING

Tools and Techniques of ORLinear ProgrammingQueuing TheorySequencingTransportation ProblemsInteger ProblemsAssignment ProblemsDecision Theory and Games TheorySymbolic Logic

Operations Research and Management Decision MakingOperation 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 ResearchMagnitude of ComputationNon-Quantifiable FactorsDistance between User and AnalystTime and Money CostsImplementation

*Steps in OR Study

*Success Stories of OR

*Application AreasStrategic planningSupply chain managementPricing and revenue managementLogistics and site locationOptimizationMarketing research

*Applications Areas (cont.)SchedulingPortfolio managementInventory analysisForecastingSales analysisAuctioningRisk analysis

*ExamplesBritish 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

ExamplesUPS 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.

*Air New Zealand Air New Zealand Masters the Art of Crew SchedulingAT&T NetworkDelivering Rapid Restoration Capacity for the AT&T NetworkBank Hapoalim Bank Hapoalim Offers Investment Decision Support for Individual CustomersBritish Telecommunications Dynamic Workforce Scheduling for British TelecommunicationsCanadian Pacific Railway Perfecting the Scheduled Railroad at Canadian Pacific RailwayContinental Airlines Faster Crew Recovery at Continental AirlinesFAACollaborative Decision Making Improves the FAA Ground-Delay ProgramA Short List of Successful Stories (1)

*Ford Motor CompanyOptimizing Prototype Vehicle Testing at Ford Motor CompanyGeneral MotorsCreating a New Business Model for OnStar at General MotorsIBM MicroelectronicsMatching Assets to Supply Chain Demand at IBM MicroelectronicsIBM Personal Systems GroupExtending Enterprise Supply Chain Management at IBM Personal Systems GroupJan de Wit CompanyOptimizing Production Planning and Trade at Jan de Wit CompanyJeppesen Sanderson Improving Performance and Flexibility at Jeppesen SandersonA Short List of Successful Stories (2)

*Mars Online Procurement Auctions Benefit Mars and Its SuppliersMenlo Worldwide Forwarding Turning Network Routing into Advantage for Menlo ForwardingMerrill Lynch Seizing Marketplace Initiative with Merrill Lynch Integrated ChoiceNBC Increasing Advertising Revenues and Productivity at NBCPSA Peugeot CitroenSpeeding Car Body Production at PSA Peugeot CitroenRhenaniaRhenania Optimizes Its Mail-Order Business with Dynamic Multilevel ModelingSamsung Samsung Cuts Manufacturing Cycle Time and Inventory to CompeteA Short List of Successful Stories (3)

*A Short List of Successful Stories (4)Spicer Spicer Improves Its Lead-Time and Scheduling PerformanceSyngentaManaging the Seed-Corn Supply Chain at SyngentaTowers Perrin Towers Perrin Improves Investment Decision MakingU.S. ArmyReinventing U.S. Army RecruitingU.S. Department of Energy Handling Nuclear Weapons for the U.S. Department of EnergyUPS More Efficient Planning and Delivery at UPSVisteon Decision Support Wins Visteon More Production for Less

Some of the PRIMARY TOOLS used by operation researchers are-STATISTICSGAME THEORYPROBABILITY THEORY, etc.

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