Operations Research:

Optimisation = Efficiency + Savings

Kelloggs
The largest cereal producer in the world. LP-based operational planning (production, inventory, distribution) system saved $4.5 million in 1995.

Procter and Gamble

A large worldwide consumer goods company. Utilised integer programming and network optimization worked in concert with Geographical Information System (GIS) to re-engineering product sourcing and distribution system for North America. Saved over $200 million in cost per year.

Hewlett-Packard
Robust supply chain design based on advanced inventory optimization techniques. Realized savings of over $130 million in 2004

Source: Interfaces

Mathematics in Operation
Real Practical Problem Mathematical (Optimization) Problem Mathematical Solution Method (Algorithm) Computer Algorithm Decision Support Software System Human Decision-Maker

x2

Decision Support
Interface Decision Support Tool

Information Systems

A Team Effort
Users Interface Ops Res Decision Support Tool Comp Sci

Information Systems Biz Analyst Info Sys

Staff Rostering
Allocating Staff to Work Shifts A significant role for the Team

The Staff Rostering Problem

What is the optimal staff allocation? Consider a Childcare Centre:
The childcare centre is operating 5 days/week. There are 10 staff members. Each staff member is paid at an agreed daily rate, according to the skills they possess. One shift per day Skills can be categorised into 5 types.
(Singing,Dancing) (Arts) (Sports) (Reading,Writing) (Moral Studies,Hygiene)

other information
CONSTRAINTS:
Skill Demand
The daily skill demand is met.

Equitability (breaks,salaries)
Each staff member must at least work 2 days/week and can at most work 4 days/week.

Workplace Regulation
On any day, there must be at least 4 staff members working.

OBJECTIVE:
Minimise Total Employment Cost/Week

Problem Solving Stages

Real Practical Problem Mathematical (Optimization) Problem Mathematical Solution Method (Algorithm) Computer Algorithm Decision Support Software System Human Decision-Maker
Staff Rostering at Childcare Centre Mathematical Programming

CPLEX XpressMP LINGO

Excel with VBA

Childcare Centre Manager

The Mathematical Problem

Modelled as an Integer LP
Decision variables are integers, i.e. variables can only take 0,1,2, not 0.2, 1.1, 2.4 etc. A binary variable: a decision variable that can only take 0 or 1 as a solution.

Integer LP (just for show)

Minimise s.t.

c x
i =1 k =1 5

10

i ik

1, if staff i works on day k xik = otherwise 0, 1, if staff i possesses skill j aij = otherwise 0,
ci = daily wage for staff i
d jk = requirements for skill j on day k
Skill Demand Equitability Workplace Regulation

a x
i =1 k =1 10

10

ij ik

d jk , j S , k D

2 xik 4, i E

x
i =1

ik

4, k D

xik { 0,1} , i E , k D

Xpress

MP

Large-scale optimisation software developed by Dash (http://www.dashoptimization.com) Xpress-IVE (Interactive Visual Environment)

Decision Support Software System

Excel Interface Database Management:
Staff Profile (Name, Category) Annual leave Shift preferences Reserve staff Roster etc.

Information system installed to disseminate information (shift preference, roster etc.) effectively throughout the organisation

Other Issues and Challenges

Breaks
scheduled breaks annual leave festive breaks (under-staffing issues)

Fatigue
limit to number of working hours per day/week/fortnight (Union Requirements)

Equitable roster
equitable weekend/night shifts

Motivation
skill utilisation (avoid monotonous job routine)

Training
training and development (scheduled)

Other Industry Requiring Staff Rostering

Airline (air crew and ground staff) Health (nurses and doctors) Manufacturing (operators) Transport (truck drivers) Entertainment and gaming Education (teachers, lecturers)

MORe is currently involved in several (long-term) staff rostering projects for Australia-based companies in at least one of the industries mentioned above.

Force Optimisation
A collaborative project between Melbourne Operations Research (MORe) & Defence Science and Technology Organisation (DSTO), Department of Defence, Australian Government

Project Background
DSTO LOD working with Melbourne Operations Research (MORe), The University of Melbourne Project aim: support the Army (Force Design Group) with their capability options development and analysis, seeking
What types of forces should be maintained? What force strength is required?

to ensure forces are effective in achieving defence objectives Project started in mid-2004 and successfully completed its modelling, interface design and testing phases in the beginning of year 2005 The model will be presented at the Australian Society for Operations Research 2005 Conference (26-28th September)

General Aim of Project

Forces wishlist Choose forces (STRATEGIC)

budget Force configuration

Deploy forces (TACTICAL)

e e e e e e

max effectiveness Objectives

The Mathematical Model

An integer LP-based prototype decision support tool has been developed. The support tool, ForceOp, has an Excel interface, written with VBA and optimised using XpressMP. Future directions
database management integrated military systems Military Information System

The ForceOp Tool

Before this tool,
force design was carried out manually a lengthy and laborious process, based on intuitivereasoning (no quantitative basis). difficult to assess effectiveness or compare quality of solutions

With this tool,

solutions can be obtained fast. quality of solutions can be quantified. many sets of objectives can be tested within a short period of time. many different force configurations can be tested against a given set of objectives.

Facility Location Decisions

LP as a What-If Tool

The Facility Location Problem

LP-based techniques can be used to locate
manufacturing facilities, distribution centres, warehouse/storage facilities etc.

taking into consideration factors such as

facility/distribution capacities, customer demand, budget constraints, quality of service to customers etc.

using Operations Research techniques such as

linear programming, integer linear programming, and stochastic programming.

With OR techniques, solutions for the facility location problem can be obtained fast, and hence, we are able to perform a large range of what-if scenarios.

Problem Statement
36km 10 000 W-3 Customer 180 000 W-4 36km Warehouse (W)

C
180 000

D
220 000

Assume: Transportation cost: $20/km/unit Warehouses have the same O/H cost Warehouse has very large capacity Problem modelled as an integer linear program, and solved using XpressMP.

B
10 000 units W-2

W-5

A
W-1 W-6

F
10 000

The Mathematical Model

Minimise s .t .

f x + W
i =1 i i i =1 j =1

ij

yij

y
j =1 n

ij

Ci xi , i = 1 n Dj , j = 1 d

y
i =1

ij

xi { 0 ,1} yij is int eger

yij
i

xi

Scenario 1
Scenario 1: Warehouse O/H cost is very small as compared to transportation cost
10 000 W-3 180 000 W-4

C
180 000

D
220 000

Warehouse O/H: B $6 000 000 Transportation cost: 10 000 units $20/km/unit A proximity dominates operate the W-1 warehouse closest to each customer

W-5 W-2

F
W-6 10 000

Scenario 2
Scenario 2: Warehouse O/H cost is very large as compared to transportation cost
10 000 W-3 180 000 W-4

D
220 000

Warehouse O/H: 180 000 $1 800 000 000 Transportation cost: B $20/km/unit too expensive to 10 000 units operate a warehouse hence, the most A centralised warehouse selected (based on W-1 demand & distance)

W-5 W-2

F
W-6 10 000

Scenario 3
Scenario 3: Both warehouse O/H and transportation costs are competing
10 000 W-3 180 000 W-4

C
180 000

D
220 000

Warehouse O/H: $60 000 000 B Transportation cost: 10 000 units $20/km/unit solution is not A obvious; too many possibilities
W-1

W-5 W-2

F
W-6 10 000

Scenario 4
Scenario 4: Both warehouse O/H and transportation costs are competing AND warehouse capacity limited
10 000 W-3 180 000
150 000

C
180 000
10 000

W-4

D
220 000

30 000

Warehouse O/H: W-2 10 000 units $60 000 000 70 000 Transportation cost: A $20/km/unit 10 000 Warehouse W-1 capacity: 150 000 units

110 000 150 000 70 000 10 000

W-5

W-6 10 000

Facility Location
Possible variants
closure decisions acquisition decisions

Possible extensions
limitations to the number of distribution centres warehouse-customer distance constraint complex cost functions uncertain demand

Other OR Applications
Other areas where OR techniques have been proven to be useful include
Inventory control Warehouse design, storage and retrieval, order picking Vehicle routing Delivery transport mode selection Capacity and manpower planning Production scheduling

and other resource usage and allocation decisions.