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Management Science

Introduction
Manageme nt
Sci ence/ Operat ions Research
Synonyms: Operations Research, Management
Science, Quantitative Analysis,
Decision Science
History:
Early 1900s:Frederic Taylor provided the
foundation for the use of quantitative
methods in management.

About 1947: Modern development of OR/MS


during world war II

Summer 1947: George Dantzig developed the


simplex method to solve linear programming
problems.
First conference on linear programming
First book of operations research

Management Science: is a scientific


approach for solving management
problems.
:A ppli cations
Organization Nature of Annual Saving
Application
United Airlines Schedule shift work $6 millions
at reservation
offices and airports
to meet customer
needs with
minimum cost
Caltrans Used operations
research to
complete the repair
process of the 405
freeway in shorter
time after the 1994
earthquake
San Francisco A system was 11 millions +
Police Department designed to $3 millions increase
schedule police in the traffic citation
officers in such a revenue
way that minimize
the cost of police
operation, and
maintain a high level
of citizen safety.

IBM Develop a Spare $750 millions


parts inventory
system to improve
service support
Citgo Petroleum Optimize refinery $70 millions
Corp. operations and the
supply distribution
HP Redesign the sizes $280 millions
and locations of
buffers in a printer
production line to meet
production goals

Research work Determining the


optimal fiber
orientations that
maximizes the
strength of a
composite material

Taco Bell Schedule employees $13 millions


to provide desired
customer service at
minimum cost
Cur rent Profes si onal
:Organi zat io ns
• The Institute for Operations Research and
Management Science (Informs)
• The Decision Science Institute (DSI)

• Colleges offering degrees in Operations


Research/Management Science

Jobs available for the graduates of OR/MS:


• Operations Research analyst is one of the
fastest growing occupations for careers
requiring B.Sc. degrees. The Bureau of
Labor Statistics predicts growth from 57,000
jobs in 1990 to 100,000 in 2005, i.e. 73%
increase.
What can management Science
Techniques do?
1. System Design
– capacity
– location
– arrangement of departments
– product and service planning
– acquisition and placement of
equipment
Decision Making
2. System operation
– personnel
– Inventory
– Scheduling
– Project management
– Quality assurance
Models

A model is an abstraction of reality.

– Iconic
– Analog
– Mathematical Tradeoffs

What are the pros and cons of models?


Types of Models

Iconic Models: Examples - scale model of


airplane, toy truck etc.

Analog Models: models do not have the same


physical appearance of the object.
Examples – The speedometer is an analog
model representing the speed of the
automobile, a thermometer is an analog model
representing temperature.

Mathematical Model: A system of mathematical


relationships.
Models Are Beneficial
• Easy to use, less expensive
• Increase understanding of the problem
• Enable “what if” questions
• Consistent tool
• Power of mathematics
Quantitative Approaches

• Linear programming
• Integer programming
• Nonlinear programming
• Goal programming
• Queuing Techniques
• Project models
• Statistical models
Systems Approach

“The whole is greater than


the sum of the parts.”

Suboptimization
Pareto Phenomenon

• A few factors account for a high


percentage of the occurrence of some
event(s).
• 80/20 Rule - 80% of problems are caused
by 20% of the activities.

How do we identify the vital few?


Quanti tative Anal ysi s
Approach
1. Identify Problem
2. Problem definition/Problem
Statement
3. Model development (Problem
Formulation)
4. Model Solution
5. Data Preparation
Qu antitative A naly sis Ap proach
))c ontin ued

6. Model Solution
-Graphical Approach
-Computer Approach

7. Report Generation

8. Result implementation
Mathemati cal M odel
:Devel opment
• Step 1: Understand the problem.
• Step 2: Define the controllable
inputs (decision variables)
• Step 3: Identify and model the
Criterion (objective function)
• Step 4: Identify and model the
restrictions (constraints)
• Step 5: Identify the upper/lower
bounds.
Product Mix
Example- Problem # 13- Pg. 41
The Electrotech Corporation manufactures twoindustrial-
sized electrical devices: generators and alternators. Both
of the products require wiring and testing during the
assembly process. Each generator requires 2 hours of
wiring and 1 hour of testing and can be sold for a $250
profit. Each alternator requires 3 hours of wiring and 2
hours of testing and can be sold for a $150 profit. There
are 260 hours of wiring time and 140 hours of testing time
available in the next production period and Electrotech
would like to maximize profit.
a) Formulate an LP model for this problem.
b) Sketch the feasible region for this problem.
c) Determine the optimal solution to this problem.
Example – 2.5 – Pg. 20
Blue Ridge Hot Tubs manufactures and sells two models
of hot tubs: the Aqua-Spa and the Hydro-Lux. Howie
Jones, the owner and manager of the company, needs to
decide how many of each type of hot tub to produce
during his next production cycle. Howie buys
prefabricated fiberglass hot tub shells form a local
supplier and adds the pump and tubing to the shells to
create his hot tubs. (This supplier has the capacity to
deliver as many hot tub shells as Howie needs.) Howie
installs the same type of pump into both hot tubs. He will
have only 200 pumps available during his next production
cycle. From a manufacturing standpoint, the main
difference between two models of hot tubs is the amount
of tubing and labor required. Each Hydro-Lux requires 6
hours of labor and 16 feet of tubing available during the
next production cycle. Howie earns a profit of $350 on
each Aqua-Spa he sells and $350 on each Aqua-Spa he
sells and $300 on each Hydro-Luxes should Howie
produces if he wants to maximize his profits during the
next production cycle?
Example 3-1/Practical MSCI
The Monet Company produces
four type of picture frames,
which we label 1, 2, 3, 4.
• The four types of frames differ
with respect to size, shape and
materials used.
• Each type requires a certain
amount of skilled labor, metal,
and glass as shown in this
table. The table lists the unit
selling price Monet charges for
each type of frame.
Example 3-1/Practical MSCI
Labor Metal Glass Sale
hr ounces Ounces Price

Frame 1 2 4 6 28.50

Frame 2 1 2 2 12.50

Frame 3 3 1 1 29.25

Frame 4 2 2 2 21.50
Example 3-1/Practical MSCI
• During the coming week Monet can
purchase up to 4000 hours of skilled
labor, 6000 ounces of metal, and
10,000 ounces of glass.
• The unit costs are $8.00 per labor
hour, $0.50 per ounce of metal, and
$0.75 per ounce of glass.
• Also, market constraints are such
that it is impossible to sell more than
1000 type 1 frames, 2000 type 2,
frames, 500 type 3 frames, and 1000
type 4 frames.
• The company wants to maximize its
weekly profit.
Example 3-1/Practical MSCI
• In the traditional algebraic solution
method we first identify the decision
variables.
• In this problem they are the number
of frames of type 1, 2, 3, and 4 to
produce. We label these x1, x2, x3, x4.
• Next we write total profit and the
constraints in terms of the x’s.
• Finally, since only nonnegative
amounts can be produced, we add
explicit constraints to ensure that the
x’s are nonnegative.
Example 3-1/Practical MSCI
• The resulting algebraic formulation is
shown below:
Maximize 6x1 + 2x2 + 4x3 + 3x4 (profit
objective)
Subject to 2x1 + x2 + 3x3 + 2x4 ≤ 4000 (labor
constraint)
4x1 + 2x2 + x3 + 2x4 ≤ 10,000
(glass constraint)
x1 ≤ 1000 (frame
1 sales constraints)
x2 ≤ 2000 (frame
2 sales constraints)
x3 ≤ 500 (frame
3 sales constraints)
x4 ≤ 1000 (frame
4 sales constraints)
x1, x2, x3, x4 ≥ 0
(nonnegativity constraint)
A Multiperiod Production Problem

Example 3.3 Winston/Albright Page 91

• The Pigskin Company produces footballs.


• Pigskin must decide how many footballs to
produce each month. It has decided to use a
6-month planning horizon.
• The forecasted demands for the next 6
months are 10,000, 15,000, 30,000, 35,000,
25,000 and 10,000.
• Pigskin wants to meet these demands on
time, knowing that it currently has 5000
footballs in inventory and that it can use a
given month’s production to help meet the
demand for that month.
Example 3.3
• During each month there is enough
production capacity to produce up to
30,000 footballs, and there is enough
storage capacity to store up to
10,000 footballs at the end of the
month, after demand has occurred.
• The forecasted production costs per
football for the next 6 months are
$12.50, $12.55, $12.70, $12.80,
$12.85, and $12.95, respectively.
• The holding cost per football held in
inventory at the end of the month is
figured at 5% of the production cost
for that month.
Example 3.3
• In the traditional algebraic
formulation, the decision variables
are the production quantities for the
6 months, labeled P1 through P6.
• It is convenient to let I1 through I6 be
the corresponding end-of-month
inventories (after the demand has
occurred).
• For example, I3 is the number of
footballs left over at then end of
month 3. Therefore, the obvious
constraints are on production and
inventory storage capacities: Pj ≤
300 and Ij ≤ 100 for each month j, 1 ≤
j ≤ 6.
Example 3.3
• In addition to these constraints,
we need balance constraints
that relate the P ’s and I ’s.
• In any month the inventory from
the previous month plus the
current production must equal
the current demand plus
leftover inventory.
• If Dj is the forecasted demand
for month j, then the balance
equation for month j is Ij-1 + Pj
= Dj + Ij.
Example 3.3
• The first of these constraints, for
month j = 1, uses the known
beginning inventory, 50, for the
previous inventory (the Ij-1 term)
• By putting all variables (P’s and I’s)
on the left and all known values on
the right (a standard LP convention),
these balance constraints become
P1 – I1 = 100-50
I1 + P2 – I2 = 150
I2 + P3 – I3 = 300
I3 + P4 – I4 = 350
I4 + P5 – I5 = 250
I5 + P6 – I6 = 100
Employee Scheduling
Example 4.1 Winston/Albright

• A post office requires different numbers of full-


time employees on different days of the week.
• The number of full-time employees required each
day is given in this table.
Employee Requirements for
Post Office
Monday 17
Tuesday 13
Wednesday 15
Thursday 19
Friday 14
Saturday16
Sunday 11
Example 4.1 Winston/Albright
• Union rules state that each full-
time employee must work 5
consecutive days and then
receive 2 days off.
• For example, an employee who
works Monday to Friday must
be off Saturday and Sunday.
• The post office wants to meet
its daily requirements using
only full-time employees.
• Its objective is to minimize the
number of full-time employees
that must be hired.
• To model the Post Office problem
with a spreadsheet, we must keep
track of the following:
– Number of employees starting
work on each day of the week
– Number of employees working
each day
– Total number of employees
• It is important to keep track of the
number of employees starting work
each day, because this is the only
way to incorporate the fact that
workers work 5 consecutive days.
Aggregate Planning Models

Example 4.2 Winston/Albright

• During the next four months the SureStep


Company must meet (on time) the following
demands for pairs of shoes: 3,000 in month
1; 5,000 in month 2; 2,000 in month 3; and
1,000 in month 4.
• At the beginning of month 1, 500 pairs of
shoes are on hand, and SureStep has 100
workers.
• A worker is paid $1,500 per month. Each
worker can work up to 160 hours a month
before he or she receives overtime.
• A worker is forced to work 20 hours of
overtime per month and is paid $13 per hour
for overtime labor.
Example 4.2 Winston/Albright
• It takes 4 hours of labor and $15 of
raw material to produce a pair of
shoes.
• At the beginning of each month
workers can be hired or fired. Each
hired worker costs $1600, and each
fired worker cost $2000.
• At the end of each month, a holding
cost of $3 per pair of shoes left in
inventory is incurred.Production in a
given month can be used to meet
that month’s demand.
• SureStep wants to us LP to
determine its optimal production
schedule and labor policy.
Example 4.2 Winston/Albright
• To model SureStep’s problem
with a spreadsheet, we must
keep track of the following:
– Number of workers hired, fired,
and available during each month.
– Number of pairs of shoes
produced each month with regular
time and overtime labor
– Number of overtime hours used
each month
– Beginning and ending inventory of
shoes each month
– Monthly costs and the total costs

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