Operations Research:

Making More Out of

Information Systems
Dr Heng-Soon GAN
Department of Mathematics and Statistics
The University of Melbourne

This presentation has been made in accordance with the provisions of Part VB of the copyright
act for the teaching purposes of the University.
Copyright 2005 by Heng-Soon Gan
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
Mathematical Solution Method (Algorithm)
Real Practical Problem
Mathematical (Optimization) Problem
x
2

Computer Algorithm
Human Decision-Maker
Decision Support Software System
Decision Support
Decision Support Tool
Interface
Information Systems
A Team Effort
Interface
Information Systems
Users
Comp Sci Ops Res
Decision Support Tool
Info Sys Biz Analyst
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
Mathematical Solution Method (Algorithm)
Real Practical Problem
Mathematical (Optimization) Problem
Computer Algorithm
Human Decision-Maker
Decision Support Software System
Staff Rostering at
Childcare Centre
Mathematical
Programming
CPLEX
Xpress
MP
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)
{ } D k E i x
D k x
E i x
D k S j d x a t s
x c Minimise
ik
i
ik
k
ik
jk
i
ik ij
i k
ik i
e e e
e >
e s s
e e >

=
=
=
= =
, , 1 , 0
, 4
, 4 2
, , . .
10
1
5
1
10
1
10
1
7
1

=
otherwise , 0
day on works staff if , 1 k i
x
ik

=
otherwise , 0
skill possesses staff if , 1 j i
a
ij
i c
i
staff for daily wage =
k j d
jk
day on skill for ts requiremen =
Skill Demand
Equitability
Workplace Regulation
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 (26-28
th
September)
General Aim of Project
Forces wishlist
$ $ $ $
Choose forces
(STRATEGIC) s budget
Objectives
Deploy forces
(TACTICAL)
e e e e e e e max effectiveness
Force
configuration
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 Xpress
MP
.

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 intuitive-
reasoning (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.
36km
W-4
Problem Statement
A
F
D
C
W-1
W-2
W-3
W-5
W-6
Customer
Warehouse
(W)
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 Xpress
MP
.
10 000 units
180 000
10 000
180 000
220 000
10 000
B E
36km
The Mathematical Model
{ }
eger int is y
, x
d j , D y
n i , x C y
. t . s
y W x f Minimise
ij
i
j
n
i
ij
i i
d
j
ij
n
i
d
j
ij ij
n
i
i i
1 0
1
1
1
1
1 1 1
e
= >
= s
+

=
=
= = =

j
ij
y
i
i
x
Scenario 1
Scenario 1:
Warehouse O/H
cost is very small
as compared to
transportation cost
Warehouse O/H:
$6 000 000
Transportation cost:
$20/km/unit
proximity dominates
operate the
warehouse closest
to each customer
W-4
A
F
D
C
W-1
W-2
W-3
W-5
W-6
10 000 units
180 000
10 000
180 000
220 000
10 000
B E
Scenario 2
Scenario 2: Warehouse
O/H cost is very large
as compared to
transportation cost
Warehouse O/H:
$1 800 000 000
Transportation cost:
$20/km/unit
too expensive to
operate a warehouse
hence, the most
centralised warehouse
selected (based on
demand & distance)
W-4
A
F
D
C
W-1
W-2
W-3
W-5
W-6
10 000 units
180 000
10 000
180 000
220 000
10 000
B E
Scenario 3
Scenario 3: Both
warehouse O/H and
transportation costs
are competing
Warehouse O/H:
$60 000 000
Transportation cost:
$20/km/unit
solution is not
obvious; too many
possibilities

W-4
A
F
D
C
W-1
W-2
W-3
W-5
W-6
10 000 units
180 000
10 000
180 000
220 000
10 000
B E
Scenario 4
Scenario 4: Both
warehouse O/H and
transportation costs
are competing AND
warehouse capacity
limited
Warehouse O/H:
$60 000 000
Transportation cost:
$20/km/unit
Warehouse
capacity: 150 000
units
W-4
A
F
D
C
W-1
W-2
W-3
W-5
W-6
10 000 units
180 000
10 000
180 000
220 000
10 000
B E
10 000
70 000
10 000
30 000
110 000
150 000
150 000
70 000
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.