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Operation Management

Introduction

the design and operation of the man-machine system

scientifically, usually under conditions requiring the

optimum allocation of limited resources.

Operational research is a scientific approach to

problem solving for executive decision making which

requires the formulation of mathematical, economic

and statistical models for decision and control

problems to deal with situations arising out of risk and

uncertainty.

Definition

science to complex problems in the direction and

management of large systems of men, machines, materials

and money in the industry, business, government and

defence. The distinctive approach is to develop a scientific

model of the system incorporating measurements of

factors such as chance and risk, with which to predict and

compare the outcomes of alternative decisions.

History

to analyze several military problems: developing effective

methods of using the newly invented radar, how to better

manage convoy and antisubmarine, bombing and military

operations. The applications of mathematics and

scientific methods to military operations was called

Operations Research (OR).

OR During World War II

Scientists in the United Kingdom including Patrick

Blackett, Cecil Gordon, C. H. Waddington, Owen

Wansbrough-Jones and Frank Yates, and in the United

States with George Dantzig looked for ways to make

better decisions in such areas as logistics and training

schedules.

Britain introduced the convoy system to reduce

shipping losses, but while the principle of using

warships to accompany merchant ships was generally

accepted, it was unclear whether it was better for

convoys to be small or large. Convoys travel at the

speed of the slowest member, so small convoys can

travel faster. It was also argued that small convoys

would be harder for German U-boats to detect.

On the other hand, large convoys could deploy more

warships against an attacker. It turned out in OR analysis

that the losses suffered by convoys depended largely on

the number of escort vessels present, rather than on the

overall size of the convoy. The conclusion, therefore, was

that a few large convoys are more defensible than many

small ones.

History Cont.

teams attracted the attention of industrial managers who

were asking solutions to their complex executive-type

problems. In 1950 OR achieved recognition as a subject in

academics.

History Cont.

of OR unit in Hyderabad. In 1953, an OR unit was

established ISI, Kolkatta by Prof. Mahalonobis. He

formulated OR techniques to forecast the trends of

demand, availability of resources and for scheduling the

complex schemes necessary for developing our country’s

economy.

History Cont.

of OR unit in Hyderabad. In 1953, an OR unit was

established ISI, Kolkatta by Prof. Mahalonobis. He

formulated OR techniques to forecast the trends of

demand, availability of resources and for scheduling the

complex schemes necessary for developing our country’s

economy.

Professor Mahalonobis made the first important

application of OR in preparation of second Five Year Plan.

It was estimated that India could become self-sufficient in

food by reducing its wastage by 15%.

Operation Research(OR) or Operation Management January 10, 2018 10 / 31

Examples

tellers’ salaries while still maintaining an adequate

level of customer service.

O.R. IN TRANSPORT

Starting with the whole booking process where OR is

involved in helping to set the ticket prices and

calculate the seat availability through to the flights

logistics on the day. OR has a massive part to play in

a whole range of day to day decisions.

TICKET PRICING

any flight are perishable – once the plane has taken off,

there is no possibility of selling any empty seats. This

being so, it pays an airline to fill a seat, even at a very low

fare, rather than have it take off empty. But obviously it

is not viable to sell every seat at a low price, so a ‘model’

has to be found for selling seats at different prices.

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. Unfortunately they

can not do it that way because the kind of people who are

willing to pay the higher fares often want to book at the

last minute. So the airline usually sells the cheaper tickets

first and holds back some places at the higher prices. The

problem is knowing how many seats to hold back.

This is where the airline uses O.R. By observing the

day to day variations in the number of high priced

tickets sold, the number of seats that need to be

reserved to give high fare passengers the best chance

of being able to get on the flight can be estimated. In

addition the profile of bookings – 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.

Operation Research(OR) or Operation Management January 10, 2018 15 / 31

Manufacturing

a business run efficiently. In a manufacturing plant,

everything must be planned and timed precisely to avoid

bottlenecks.

At Crown Paints there are literally hundreds of

different colours made and well over a hundred

varieties of paint. So knowing what colours can be

made where and when and how many of each variety

will be needed is crucial to the success of the business.

OR IN SPORT

Operational Research might be used. Yet, many of our

much loved activities rely on O.R. – in fact, without O.R.

some of the games we know and love wouldn’t be

recognizable.

For example, in limited-overs cricket, when weather

interrupts play, an OR model- the Duckworth Lewis

method- is used to calculate the fairest run target for

the team batting second.

OR is also behind football’s Actim Index stats that

help calculate the best player in each position. O.R.

had a big part to play in the design of the magnificent

Emirates Stadium in North London – home of Arsenal

F.C.

O.R. IN SUPPLY CHAINS

available. That means shelves to be always stocked and

deliveries to arrive on time.

Sales in large grocery retailers in the UK follow a

weekly cycle – more is sold on Fridays and Saturdays

than on other days of the week. So, on Thursdays and

Fridays their distribution centers supplying stores have

to work very hard. In fact, they often have to employ

temporary staff and sub-contract trucks to cope with

the peaks.

More Examples

Formula 1 race;

Football mixtures;

At retail mall;

In satellite navigation;

In gas cylinder deliveries.

Example

company, who wants to travel from place Banglore to

Mumbai and back to Banglore every week for a project in

system analysis and program developement. He must

attend a business review meeting in Banglore on all

Monday and Wednesday evenings, which means that he

has to travel to Mumbai on Monday evening and return

latest by Wednesday afternoon. He has to do this for five

weeks. The price for round trip is Rs. 4000 and that of

one way ticket is 3000. The airlines offers a discount of

20 % on the round trip fare if the travel spans a weekend.

Operation Research(OR) or Operation Management January 10, 2018 23 / 31

Take five Banglore - Mumbai- Banglore tickets

Take one Banglore - Mumbai ticket for a week one

along with Mumbai- Banglore and 4 Mumbai-

Banglore-Mumbai

Take one Banglore - Mumbai- Banglore ticket with

return journey date in the fifth week and 4 as in

option 2

Seven Steps of OR Study

The OR analyst first defines the organization’s

problem. This includes specifying the organization’s

objectives and the parts of the organization (or

system) that must be studied before the problem can

be solved.

Step 2: Observe the system

Next, the OR analyst collects data to estimate the

values of the parameters that affect the organization’s

problem. These estimates are used to develop (in Step

3) and to evaluate (in Step 4) a mathematical model

of the organization’s problem.

Step 3: Formulate a mathematical model of the

problem

The OR analyst develops an idealized representation

i.e. a mathematical model of the problem.

Step 4: Verify the model and use it for

prediction

The OR analyst tries to determine if the mathematical

model developed in Step 3 is an accurate

representation of the reality. The verification typically

includes observing the system to check if the

parameters are correct.

Operation Research(OR) or Operation Management January 10, 2018 27 / 31

Step 5: Select a suitable alternative

Given a model and a set of alternatives, the analyst

now chooses the alternative that best meets the

organization’s objectives.

Step 6: Present the results and conclusions

The OR analyst presents the model and

recommendations from Step 5 to the organization’s

decision makers.

Step 7: Implement and evaluate

recommendation

Finally, when the organization has accepted the study,

the OR analyst helps in implementing the

recommendations.

Linear Programming problem (LPP)

variables in model. LPP refers to linear objective function

with linear constraints.

Basic structure of LPP

Objective To maximize or to minimize

Constraints Conditions

Feasibility

Assumptions of LPP

such as availability of resources, profit, cost per unit

of decision variables are constant and must be known.

Assumptions of LPP

such as availability of resources, profit, cost per unit

of decision variables are constant and must be known.

Additivity: The value of objective function and the

total amount of resource used must be additive in

nature.

Assumptions of LPP

such as availability of resources, profit, cost per unit

of decision variables are constant and must be known.

Additivity: The value of objective function and the

total amount of resource used must be additive in

nature.

Linearity

Assumptions of LPP

such as availability of resources, profit, cost per unit

of decision variables are constant and must be known.

Additivity: The value of objective function and the

total amount of resource used must be additive in

nature.

Linearity

Divisibility: The solution values must be continuous.

Assumptions of LPP

such as availability of resources, profit, cost per unit

of decision variables are constant and must be known.

Additivity: The value of objective function and the

total amount of resource used must be additive in

nature.

Linearity

Divisibility: The solution values must be continuous.

Finite choices

Operation Research(OR) or Operation Management January 10, 2018 31 / 31

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