Module 1.

1: Operations Research
Introduction to Operations Research
Learning objectives

To understand the concept of Operations Research and how it can improve managerial
decision making
To understand the importance of OR in business environment
To understand the characteristics of Operations Research
To identify the problem areas in business management to be addressed by Operations
Research
Enhancing effectiveness and efficiency of operations to achieve organisational objectives

1. INTRODUCTION
Operations research (also referred to as decision science, or management science) is an
interdisciplinary mathematical science that focuses on the effective use of technology by
organizations. In contrast, many other science & engineering disciplines focus on technology
giving secondary considerations to its use.
Employing techniques from other mathematical sciences such as mathematical modeling,
statistical analysis, and mathematical optimization operations research arrives at optimal or
near-optimal solutions to complex decision-making problems. Because of its emphasis on
human-technology interaction and because of its focus on practical applications, operations
research has overlap with other disciplines, notably industrial engineering and operations
management, and draws on psychology and organization science. Operations Research is often
concerned with determining the maximum (of profit, performance, or yield) or minimum (of
loss, risk, or cost) of some real-world objective. Originating in military efforts before World War
II, its techniques have grown to concern problems in a variety of industries.
In a nutshell operations research is the art and science of applying advanced analytical
techniques to solve real practical business problems. Operations research helps managers make
the most of their resources and opportunities that they have.
2. SCOPE
Operational research (OR) encompasses a wide range of problem-solving techniques and
methods applied in the pursuit of improved decision-making and efficiency. Some of the tools
used by operational researchers are statistics, optimization, probability theory, queuing theory,
game theory, graph theory, decision analysis, mathematical modeling and simulation. Because of
the computational nature of these fields, OR also has strong ties to computer science and
analytics. Operational researchers faced with a new problem must determine which of these
techniques are most appropriate given the nature of the system, the goals for improvement, and
constraints on time and computing power.

Work in operational research and management science may be characterized as one of three
categories:

Fundamental or foundational work takes place in three mathematical disciplines:

probability theory, mathematical optimization, and dynamical systems theory.
Modeling work is concerned with the construction of models, analyzing them
mathematically, implementing them on computers, solving them using software tools,
and assessing their effectiveness with data. This level is mainly instrumental, and driven
mainly by statistics and econometrics.
Application work in operational research, like other engineering and economics'
disciplines, attempts to use models to make a practical impact on real-world problems.

3.HISTORY
As a formal discipline, operational research originated in the efforts of military planners during
World War II. In the decades after the war, the techniques began to be applied more widely to
problems in business, industry and society. Since that time, operational research has expanded
into a field widely used in industries ranging from petrochemicals to airlines, finance, logistics,
and government, moving to a focus on the development of mathematical models that can be used
to analyze and optimize complex systems, and has become an area of active academic and
industrial research.
4.NEED FOR OPERATIONS RESEARCH
Organizations and the world in which they operate continue to become more complex. Huge
numbers of choices and relentless time pressures and margin pressures make the decisions you
face more daunting and more difficult. Meanwhile, new enterprise applications and software are
generating massive amounts of data and it can seem like an overwhelming task to turn that data
into insight and answers.
But all that data and the availability of more and cheaper computing power are creating an
important opportunity for decision makers one O.R. is ideally designed to help you take
advantage of. O.R. professionals thrive on challenges that involve large numbers of variables,
complex systems, and significant risks.
As a result, O.R. can help todays executives with many of the specific challenges they face,
such as:

Deciding where to invest capital in order to grow

Getting more value out of ERP, CRM, and other software systems
Figuring out the best way to run a call center
Locating a warehouse or depot to deliver materials over shorter distances at reduced cost
Forecasting sales for a new kind of product that has never been marketed before
Solving complex scheduling problems
Planning for a potential terrorist attack
Deciding when to discount, and how much

Getting more cycles out of manufacturing equipment

Optimizing a portfolio of investments, whether it contains financial securities or
pharmaceutical product inventory
Deciding how large a budget to devote to Internet vs. traditional sales
Planting crops in the face of uncertainty about weather and consumer demand
Speeding up response time, whether selling a product or responding to a call

5. PROBLEMS ADDRESSED WITH OPERATIONAL RESEARCH

critical path analysis or project planning: identifying those processes in a complex project
which affect the overall duration of the project
floor planning: designing the layout of equipment in a factory or components on a
computer chip to reduce manufacturing time (therefore reducing cost)
network optimization: for instance, setup of telecommunications networks to maintain
quality of service during outages
Allocation problems
Facility location
routing, such as determining the routes of buses so that as few buses are needed as
possible
supply chain management: managing the flow of raw materials and products based on
uncertain demand for the finished products
efficient messaging and customer response tactics
automation: automating or integrating robotic systems in human-driven operations
processes
globalization: globalizing operations processes in order to take advantage of cheaper
materials, labor, land or other productivity inputs
transportation: managing freight transportation and delivery systems (Examples: LTL
Shipping, intermodal freight transport)
scheduling:
a) personnel staffing
b) manufacturing steps
c) project tasks
d) network data traffic: these are known as queuing models or queuing systems.
e) sports events and their television coverage
blending of raw materials in oil refineries
determining optimal prices, in many retail and B2B settings, within the disciplines of
pricing science
Airline flights have unexpected delays
Voting lines are too long
Budget cuts in schools require consolidating school bus schedules
Its hard to determine how much money to save for retirement.
New pediatric vaccines require new schedules, prices, and stockpiles
How police officers are scheduled can increase or decrease certain types of crimes (such
as random gunfire).
Too much time stuck in traffic.

6. WHAT IS OPERATIONS RESEARCH?

Operations Research (OR) started just before World War II in Britain with the establishment of
teams of scientists to study the strategic and tactical problems involved in military operations.
The objective was to find the most effective utilization of limited military resources by the use of
quantitative techniques.
Following the war, numerous peacetime applications emerged, leading to the use of OR and
management science in many industries and occupations.
By using techniques such as mathematical modeling to analyze complex situations, operations
research gives executives the power to make more effective decisions and build more productive
systems based on:

More complete data

Consideration of all available options
Careful predictions of outcomes and estimates of risk
The latest decision tools and techniques

O.R. professionals draw upon the latest analytical technologies, including:

Simulation Giving you the ability to try out approaches and test ideas for improvement
Optimization Narrowing your choices to the very best when there are virtually
innumerable feasible options and comparing them is difficult
Probability and Statistics Helping you measure risk, mine data to find valuable
connections and insights, test conclusions, and make reliable forecasts

7. THE OPERATIONS RESEARCH VALUE PROPOSITION

O.R. consistently delivers significant value strategic to tactical, top-line to bottom-line to the
organizations and executives who use it. Organizations worldwide in business, the military,
health care, and the public sector are realizing powerful benefits from O.R., including:

Business insight providing quantitative and business insight into complex problems
Business performance improving business performance by embedding model-driven
intelligence into an organizations information systems to improve decision making
Cost reduction Finding new opportunities to decrease cost or investment
Decision making Assessing the likely outcomes of decision alternatives and uncovering
better alternatives
Forecasting Providing a better basis for more accurate forecasting and planning
Improved scheduling Efficiently scheduling staff, equipment, events, and more
Planning, applying quantitative techniques to support operations, tactical planning, and
strategic planning
Pricing dynamically pricing products and services

Productivity helping organizations find ways to make processes and people more
productive
Profits Increasing revenue or return on investment; increasing market share
Quality improving quality as well as quantifying and balancing qualitative considerations
Recovery gaining greater control and
achieving turn-around
Resources gaining greater utilization from limited equipment, facilities, money, and
personnel
Risk measuring risk quantitatively and uncovering factors critical to managing and
reducing risk
Throughput Increasing speed or throughput and decreasing delays

8. INDUSTRY APPLICATIONS

Agriculture Planting, procurement, distribution

Airlines Revenue management and pricing, network planning, crew scheduling,
maintenance planning, parts inventory and fuel management
Health care Design of medical informatics, emergency room scheduling, resource
modeling
Manufacturing Optimize factory operations, warehouse optimization, supply chain
optimization
Transportation Air traffic control, trucking, railroad logistics ; real-time dispatching and
delivery truck routing; international freight scheduling and container pricing.

9. APPLICATIONS OF OPERATIONS RESEARCH

Today, almost all fields of business and government utilizing the benefits of Operations
Research. There are voluminous of applications of Operations Research. Although it is not
feasible to cover all applications of O.R. in brief. The following are the abbreviated set of typical
operations research applications to show how widely these techniques are used today:
Accounting:
Assigning audit teams effectively
Credit policy analysis
Cash flow planning
Developing standard costs
Establishing costs for byproducts
Planning of delinquent account strategy
Construction:
Project scheduling, monitoring and control
Determination of proper work force
Deployment of work force
Allocation of resources to projects
Facilities Planning:

 Factory location and size decision

Estimation of number of facilities required
Hospital planning
International logistic system design
Transportation loading and unloading
Warehouse location decision
Finance:
Building cash management models
Allocating capital among various alternatives
Building financial planning models
Investment analysis
Portfolio analysis
Dividend policy making
Manufacturing:
Inventory control
Marketing balance projection
Production scheduling
Production smoothing
Marketing:
Advertising budget allocation
Product introduction timing
Selection of Product mix
Deciding most effective packaging alternative
Organizational Behavior / Human Resources:
Personnel planning
Recruitment of employees
Skill balancing
Training program scheduling
Designing organizational structure more effectively
Purchasing:
Optimal buying
Optimal reordering
Materials transfer
Research and Development:
R & D Projects control
R & D Budget allocation
Planning of Product introduction
10. SUMMARY
Operations Research is relatively a new discipline, which originated in World War II, and
became very popular throughout the world. India is one of the few first countries in the world
who started using operations research. Operations Research is used successfully not only in
military/army operations but also in business, government and industry. Now a days operations
research is almost used in all the fields.

Proposing a definition to the operations research is a difficult one, because its boundary and
content are not fixed. The tools for operations search is provided from the subjects viz.
economics, engineering, mathematics, statistics, psychology, etc., which helps to choose possible
alternative courses of action. The operations research tool/techniques include linear
programming, non-linear programming, dynamic programming, integer programming, Markov
process, queuing theory, etc.
Operations Research has a number of applications. Similarly it has a number of limitations,
which is basically related to the time, money, and the problem involves in the model building.
Day-by-day operations research gaining acceptance because it improve decision making
effectiveness of the managers. Almost all the areas of business use the operations research for
decision making.

References:
1. Hamdy A Taha, 1999. Introduction to Operations Research, PHI Limited, New Delhi.
2. Sharma, J.K., 1989. Mathematical Models in Operations Research, Tata McGraw Hill
Publishing Company Ltd., New Delhi.
3. Beer, Stafford, 1966. Decision and Control, John Wiley & Sons, Inc., New York.Levin,
Rubin, Stinson, Gardner, 1992. Quantitative Approaches to Management, Tata McGraw
HillPublishing Company Ltd. New Delhi.
4. Wagner, Harvery M., 1975. Principles of Operations Research, PHI, Egnlewood Cliffs,
N.J.