OPERATIONS RESEARCH

CONTEXT:
 What is O.R. ?
 History of Operation Research
 Basic Properties of O.R.
 The Seven Steps To A Good OR Analysis
 Applications of O.R.
 First Establisment of O.R.
Quantitative Techniques

 Statistical Techniques Programming Techniques

Operation Research
What is O.R. ?

Operations research (O.R.) is the

discipline of applying advanced
analytical methods to help make
better desicions.
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.
 
Definition of OR
• It is an Act of winning wars without actually fighting.
• -Aurther Clark

• “Scientific approach to decision making that involves

the operations for organized systems. O.R. is
concerned with optimal decision making in and
modelling of deterministic and probabilistic systems that
originate from real life,” – Hillier & Lieberman,
Introduction to Operations Research, 8th Ed., Holden-
Day, 2005.

• “Operations Research is the application of scientific

methods to decision problems. It has found wide use
and acceptance in all areas of business, government
and industry.” –
Saul L. Gass, College of Business & Management,
University of Maryland, 1979.
 HISTORY of O.R.
 Operation research origins in World War II for military
services
 Urgent need to allocate resources at efficient
manner.
 British and US called large number of scientists from
discipline were asked to do research on military
operation.
 Developed effective method to locate radar (Britain
Air Battle). Developed a better method to manage
convoy and antisubmarine operation(North Atlantic).
Developed a method to utilize resources
efficiently( resource cost reduced one half).
 Development of OR

 Success of OR in the war spurred interest in outside

the military (business, industry and government)
 Two factors played a major for rapid growth of
OR :
i) Continuous contribution by scientist's to improve
the techniques of OR
ii) Computer Revolution
BASIC PROPERTIES OF O.R.

 USE THE SYSTEM APPROACH

 IS AN INTERDISCIPLINARY APPROACH

 USE OF SCIENTIFIC METHODS

The Seven Steps to A Good OR Analysis :
OR ANALYSIS

1) IDENTIFY THE PROBLEM 2) UNDERSTAND

OR OPPORTUNITY THE SYSTEM

3) FORMULATE A
4) VERIFY THE PROBLEM
MATHEMATICAL MODEL

6) PRESENT THE RESULTS

5) SELECT THE BEST
OF THE ANALYSIS
ALTERNATIVE

7) IMPLEMENT AND
EVALUATE
 1) IDENTIFY & DEFINE HE PROBLEM OR
OPPORTUNITY

 WHAT ARE THE OBJECTIVES ?

 IS THE PROPOSED PROBLEM

TOO NARROW ?

 IS IT TOO BROAD ?
2) UNDERSTAND THE SYSTEM

 What Data Should be Collected ?

 How will Data be Collected ?

 How Do Dıfferent Components of the

System Interact with Each Other ?
3) FORMULATE A MATHEMATICAL MODEL

 What Kind of Models Should

be Used ?

 Is the Model Accurate ?

 Is the Model too Complex ?

4) VALIDATE THE MODEL

 Do Outputs Match Current

Observations for Current Inputs ?

 Are Outputs Reasonable ?

 Could the Model Be Erroneous ?

5) SELECT THE BEST ALTERNATIVES

 what if analysis: what would

happen to optimal solution if
different assumptions are
made about future conditions
 Inherently the Most Difficult
Step.
 This is where Software Tools
Will Help Us !!
6)PRESENT THE RESULTS OF THE ANALYSIS

 The Outputs of the Model Do

Fit Within the Output from the
System Itself ?

 Are the Outputs of the Model

Reasonable ?

 The Model May Be Wrong ?

7) IMPLEMENTATION AND EVALUATE

 Users must be trained on

the new system.

 System must be observed

over time to ensure it
works properly.
 Operations Research Models
Deterministic Models Stochastic Models
• Linear Programming • Discrete-Time Markov Chains
• Network Optimization • Continuous-Time Markov Chains
• Integer Programming • Queuing Theory (waiting lines)
• Nonlinear Programming • Decision Analysis
• Dynamic Programming Game Theory
• Inventory Models Inventory Models
Simulation
19
 SCOPE OF
OPERATIONS RESEARCH

 Not to any specific agency like defense 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.
APPLICATIONS OF O.R.
FIELDS
 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.
 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 Defense Projects
 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.
 TRANSPORTATION and TRAVEL

 Yield management: setting the prices of airline seats and

hotel rooms to reflect changing demand and the risk of no
shows. Airline and Hotel companies offer varying fares and
make higher revenues by filling more seats at different
prices.
 RETAILING

In supermarkets, data from store loyalty card schemes

is analyzed by OR groups to advise on merchandising
policies and profitability improvement. OR methods are
also used to decide when and where new store
developments should be made.
Marketing

 Advertising budget allocation.

 Product introduction timing.
 Selection of advertising media.
 Selection of product mix.
 Customer’s preference of size, color and packaging
of various products.
 HEALTH

Hospital managers use OR to

make decisions such as
determining the optimal
utilization of operating rooms
and personnel, assessing the
risks posed by patients with
various medical conditions, and
deciding necessary levels of
perishable medicine in stock.
FINANCIAL SERVICES

OR practitioners address issues such

as portfolio and risk management,
planning and analysis of
customer service. They are widely
employed in Credit Risk
Management—a vital area for
lenders needing to ensure that they
find the optimum balance of risk and
revenue.
 Capital requirements, cash flow
analysis.
 Investment decision.
GOVERNMENT

OR is a key contributor in modernizing government

services and making them more efficient. Some OR
applications include modeling the impact of performance
related paying for teachers, evaluating government call-
centers,national budgeting, and national defense.
Production/Operations
 (i) Distribution or Transportation Problems:
In such problems, various centers with their demands are given and
various warehouses with their stock positions are also known, then by
using linear programming technique, we can find out most
economical distribution of the products to various centers from
various warehouses.
 iii) Production Planning:
These techniques can also be applied to allocate various jobs to
different machines so as to get maximum profit or to maximize
production or to minimize total production time.
 (iv) Assignment of Personnel:
Similarly, this technique can be applied for assignment of
different personnel with different aptitude to different jobs so
as to complete the task within a minimum time.

 (v) Agricultural Production:

We can also apply this technique to maximize cultivator’s
profit, involving cultivation of number of items with different
returns and cropping time in different type of lands having
variable fertility.
 Limitations of Operations Research:
 i. These do not take into account qualitative and
emotional factors.
 ii. These are applicable to only specific categories of
decision-making problems.
 iii. These are required to be interpreted correctly.
 iv. Due to conventional thinking, changes face lot of
resistance from workers and some­times even from
employer.
 v. Models are only idealized representation of reality and
not be regarded as absolute
THE FIRST ESTABLISMENT OF O.R.
 The first operations
research organization
founded in 1952 in the
United States has
been ORSA(The
Operational Research
Society of America).
 The first team of operation
research in our country
was founded in 1965,
TUBITAK.