PRINCIPLES AND APPLICATIONS OF OPERATIONS RESEARCH

(From Maynard's Industrial Engineering Handbook, 5th Edition, pp. 11.2!11.""#

Jayant Rajgopal
$epartment o% Industrial Engineering, &ni'ersity o% (ittsburgh, (ittsburgh,
(ennsyl'ania
ABSTRACT
)his *hapter +ill pro'ide an o'er'ie+ o% ,perations -esear*h (,.-.# %rom the
perspe*ti'e o% an industrial engineer. )he %o*us o% the *hapter is on the basi*
philosophy behind ,.-. and the so!*alled .,.-. approa*h. to sol'ing design and
operational problems that industrial engineers *ommonly en*ounter. In its most basi*
%orm, ,.-. may be 'ie+ed as a s*ienti%i* approa*h to sol'ing problems/ it abstra*ts
the essential elements o% the problem into a model, +hi*h is then analy0ed to yield an
optimal solution %or implementation. )he mathemati*al details and the spe*i%i*
te*hni1ues used to build and analy0e these models *an be 1uite sophisti*ated and are
addressed else+here in this handbook/ the emphasis o% this *hapter is on
the approach. 2 brie% re'ie+ o% the histori*al origins o% ,.-. is %ollo+ed by a detailed
des*ription o% its methodology. )he *hapter *on*ludes +ith some e3amples o%
su**ess%ul real!+orld appli*ations o% ,.-.
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(roblem $e%inition
$ata 5olle*tion
Model Formulation
Model 6olution
8alidation and 2nalysis
Implementation and Monitoring
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1.1 INTRODUCTION
2lthough it is a distin*t dis*ipline in its o+n right, ,perations -esear*h (,.-.# has
also be*ome an integral part o% the Industrial Engineering (I.E.# pro%ession. )his is
hardly a matter o% surprise +hen one *onsiders that they both share many o% the same
ob=e*ti'es, te*hni1ues and appli*ation areas. ,.-. as a %ormal sub=e*t is about %i%ty
years old and its origins may be tra*ed to the latter hal% o% 9orld 9ar II. Most o% the
,.-. te*hni1ues that are *ommonly used today +ere de'eloped o'er (appro3imately#
the %irst t+enty years %ollo+ing its in*eption. $uring the ne3t thirty or so years the
pa*e o% de'elopment o% %undamentally ne+ ,.-. methodologies has slo+ed
some+hat. Ho+e'er, there has been a rapid e3pansion in (1# the breadth o% problem
areas to +hi*h ,.-. has been applied, and (2# in the magnitudes o% the problems that
*an be addressed using ,.-. methodologies. )oday, operations resear*h is a mature,
+ell!de'eloped %ield +ith a sophisti*ated array o% te*hni1ues that are used routinely to
sol'e problems in a +ide range o% appli*ation areas.
)his *hapter +ill pro'ide an o'er'ie+ o% ,.-. %rom the perspe*ti'e o% an Industrial
Engineer. 2 brie% re'ie+ o% its histori*al origins is %irst pro'ided. )his is %ollo+ed by
a detailed dis*ussion o% the basi* philosophy behind ,.-. and the so!*alled .,.-.
approa*h.. )he *hapter *on*ludes +ith se'eral e3amples o% su**ess%ul appli*ations to
typi*al problems that might be %a*ed by an Industrial Engineer. >roadly speaking, an
,.-. pro=e*t *omprises three steps? (1# building a model, (2# sol'ing it, and (@#
implementing the results. )he emphasis o% this *hapter is on the %irst and third steps.
)he se*ond step typi*ally in'ol'es spe*i%i* methodologies or te*hni1ues, +hi*h *ould
be 1uite sophisti*ated and re1uire signi%i*ant mathemati*al de'elopment. 6e'eral
important methods are o'er'ie+ed else+here in this handbook. )he reader +ho has an
interest in learning more about these topi*s is re%erred to one o% the many e3*ellent
te3ts on ,.-. that are a'ailable today and that are listed under .Further -eading. at
the end o% this *hapter, e.g., Hillier and 7ieberman (1AA5#, )aha (1AA# or 9inston
(1AA"#.
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1.2 A HISTORICAL PERSPECTIVE
9hile there is no *lear date that marks the birth o% ,.-., it is generally a**epted that
the %ield originated in England during 9orld 9ar II. )he impetus %or its origin +as
the de'elopment o% radar de%ense systems %or the -oyal 2ir For*e, and the %irst
re*orded use o% the term ,perations -esear*h is attributed to a >ritish 2ir Ministry
o%%i*ial named 2. (. -o+e +ho *onstituted teams to do .operational resear*hes. on
the *ommuni*ation system and the *ontrol room at a >ritish radar station. )he studies
had to do +ith impro'ing the operational e%%i*ien*y o% systems (an ob=e*ti'e +hi*h is
still one o% the *ornerstones o% modern ,.-.#. )his ne+ approa*h o% pi*king an
.operational. system and *ondu*ting .resear*h. on ho+ to make it run more
e%%i*iently soon started to e3pand into other arenas o% the +ar. (erhaps the most
%amous o% the groups in'ol'ed in this e%%ort +as the one led by a physi*ist named (.
M. 6. >la*kett +hi*h in*luded physiologists, mathemati*ians, astrophysi*ists, and
e'en a sur'eyor. )his multi%un*tional team %o*us o% an operations resear*h pro=e*t
group is one that has *arried %or+ard to this day. >la*kettBs biggest *ontribution +as
in *on'in*ing the authorities o% the need %or a s*ienti%i* approa*h to manage *omple3
operations, and indeed he is regarded in many *ir*les as the original operations
resear*h analyst.
,.-. made its +ay to the &nited 6tates a %e+ years a%ter it originated in England. Its
%irst presen*e in the &.6. +as through the &.6. 4a'yBs Mine 9ar%are ,perations
-esear*h <roup/ this e'entually e3panded into the 2ntisubmarine 9ar%are ,perations
-esear*h <roup that +as led by (hillip Morse, +hi*h later be*ame kno+n simply as
the ,perations -esear*h <roup. 7ike >la*kett in >ritain, Morse is +idely regarded as
the .%ather. o% ,.-. in the &nited 6tates, and many o% the distinguished s*ientists and
mathemati*ians that he led +ent on a%ter the end o% the +ar to be*ome the pioneers o%
,.-. in the &nited 6tates.
In the years immediately %ollo+ing the end o% 9orld 9ar II, ,.-. gre+ rapidly as
many s*ientists reali0ed that the prin*iples that they had applied to sol'e problems %or
the military +ere e1ually appli*able to many problems in the *i'ilian se*tor. )hese
ranged %rom short!term problems su*h as s*heduling and in'entory *ontrol to long!
term problems su*h as strategi* planning and resour*e allo*ation. <eorge $ant0ig,
+ho in 1A" de'eloped the simple3 algorithm %or 7inear (rogramming (7(#, pro'ided
the single most important impetus %or this gro+th. )o this day, 7( remains one o% the
most +idely used o% all ,.-. te*hni1ues and despite the relati'ely re*ent de'elopment
o% interior point methods as an alternati'e approa*h, the simple3 algorithm (+ith
numerous *omputational re%inements# *ontinues to be +idely used. )he se*ond ma=or
impetus %or the gro+th o% ,.-. +as the rapid de'elopment o% digital *omputers o'er
the ne3t three de*ades. )he simple3 method +as implemented on a *omputer %or the
%irst time in 1A5C, and by 1ADC su*h implementations *ould sol'e problems +ith about
1CCC *onstraints. )oday, implementations on po+er%ul +orkstations *an routinely
sol'e problems +ith hundreds o% thousands o% 'ariables and *onstraints. Moreo'er,
the large 'olumes o% data re1uired %or su*h problems *an be stored and manipulated
'ery e%%i*iently.
,n*e the simple3 method had been in'ented and used, the de'elopment o% other
methods %ollo+ed at a rapid pa*e. )he ne3t t+enty years +itnessed the de'elopment
o% most o% the ,.-. te*hni1ues that are in use today in*luding nonlinear, integer and
dynami* programming, *omputer simulation, (E-)E5(M, 1ueuing theory, in'entory
models, game theory, and se1uen*ing and s*heduling algorithms. )he s*ientists +ho
de'eloped these methods *ame %rom many %ields, most notably mathemati*s,
engineering and e*onomi*s. It is interesting that the theoreti*al bases %or many o%
these te*hni1ues had been kno+n %or years, e.g., the E,F %ormula used +ith many
in'entory models +as de'eloped in 1A15 by Harris, and many o% the 1ueuing
%ormulae +ere de'eloped by Erlang in 1A1. Ho+e'er, the period %rom 1A5C to 1AC
+as +hen these +ere %ormally uni%ied into +hat is *onsidered the standard toolkit %or
an operations resear*h analyst and su**ess%ully applied to problems o% industrial
signi%i*an*e. )he %ollo+ing se*tion des*ribes the approa*h taken by operations
resear*h in order to sol'e problems and e3plores ho+ all o% these methodologies %it
into the ,.-. %rame+ork.
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1. !HAT IS OPERATIONS RESEARCH"
2 *ommon mis*on*eption held by many is that ,.-. is a *olle*tion o% mathemati*al
tools. 9hile it is true that it uses a 'ariety o% mathemati*al te*hni1ues, operations
resear*h has a mu*h broader s*ope. It is in %a*t a systemati* approa*h to sol'ing
problems, +hi*h uses one or more analyti*al tools in the pro*ess o% analysis. (erhaps
the single biggest problem +ith ,.-. is its name/ to a layperson, the term .operations
resear*h. does not *on=ure up any sort o% meaning%ul imageG )his is an un%ortunate
*onse1uen*e o% the %a*t that the name that 2. (. -o+e is *redited +ith %irst assigning
to the %ield +as someho+ ne'er altered to something that is more indi*ati'e o% the
things that ,.-. a*tually does. 6ometimes ,.-. is re%erred to as Management 6*ien*e
(M.6.# in order to better re%le*t its role as a s*ienti%i* approa*h to sol'ing management
problems, but it appears that this terminology is more popular +ith business
pro%essionals and people still 1uibble about the di%%eren*es bet+een ,.-. and M.6.
5ompounding this issue is the %a*t that there is no *lear *onsensus on a %ormal
de%inition %or ,.-. For instan*e, 5. 9. 5hur*hman +ho is *onsidered one o% the
pioneers o% ,.-. de%ined it as the application of scientific methods, techniques and
tools to problems involving the operations of a system so as to provide those in
control of the system with optimum solutions to problems. )his is indeed a rather
*omprehensi'e de%inition, but there are many others +ho tend to go o'er to the other
e3treme and de%ine operations resear*h to be that which operations researchers do (a
de%inition that seems to be most o%ten attributed to E. 4addor#G -egardless o% the
e3a*t +ords used, it is probably sa%e to say that the moniker .operations resear*h. is
here to stay and it is there%ore important to understand that in essen*e, ,.-. may
simply be 'ie+ed as a systematic and analytical approach to decision-making and
problem-solving. )he key here is that ,.-. uses a methodology that is ob=e*ti'e and
*learly arti*ulated, and is built around the philosophy that su*h an approa*h is
superior to one that is based purely on sub=e*ti'ity and the opinion o% .e3perts,. in
that it +ill lead to better and more *onsistent de*isions. Ho+e'er, ,.-.
does not pre*lude the use o% human =udgement or non!1uanti%iable reasoning/ rather,
the latter are 'ie+ed as being *omplementary to the analyti*al approa*h. ,ne should
thus 'ie+ ,.-. not as an absolute de*ision making pro*ess, but as an aid to making
good de*isions. ,.-. plays an ad'isory role by presenting a manager or a de*ision!
maker +ith a set o% sound, s*ienti%i*ally deri'ed alternati'es. Ho+e'er, the %inal
de*ision is al+ays le%t to the human being +ho has kno+ledge that *annot be e3a*tly
1uanti%ied, and +ho *an temper the results o% the analysis to arri'e at a sensible
de*ision.
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1.# THE OPERATIONS RESEARCH APPROACH
<i'en that ,.-. represents an integrated %rame+ork to help make de*isions, it is
important to ha'e a *lear understanding o% this %rame+ork so that it *an be applied to
a generi* problem. )o a*hie'e this, the so!*alled O.R. approach is no+ detailed. )his
approa*h *omprises the %ollo+ing se'en se1uential steps? (1# ,rientation, (2# (roblem
$e%inition, (@# $ata 5olle*tion, ("# Model Formulation, (5# 6olution, (D# Model
8alidation and ,utput 2nalysis, and (# Implementation and Monitoring. )ying ea*h
o% these steps together is a me*hanism %or *ontinuous %eedba*k/ Figure 1 sho+s this
s*hemati*ally.
F$g%&' 1? T(' Op'&at$on) R')'a&*( App&oa*(
9hile most o% the a*ademi* emphasis has been on 6teps ", 5 and D, the reader should
bear in mind the %a*t that the other steps are e1ually important %rom a pra*ti*al
perspe*ti'e. Indeed, insu%%i*ient attention to these steps has been the reason +hy ,.-.
has sometimes been mistakenly looked upon as impra*ti*al or ine%%e*ti'e in the real
+orld.
Ea*h o% these steps is no+ dis*ussed in %urther detail. )o illustrate ho+ the steps
might be applied, *onsider a typi*al s*enario +here a manu%a*turing *ompany is
planning produ*tion %or the up*oming month. )he *ompany makes use o% numerous
resour*es (su*h as labor, produ*tion ma*hinery, ra+ materials, *apital, data
pro*essing, storage spa*e, and material handling e1uipment# to make a number o%
di%%erent produ*ts +hi*h *ompete %or these resour*es. )he produ*ts ha'e di%%ering
pro%it margins and re1uire di%%erent amounts o% ea*h resour*e. Many o% the resour*es
are limited in their a'ailability. 2dditionally, there are other *ompli*ating %a*tors su*h
as un*ertainty in the demand %or the produ*ts, random ma*hine breakdo+ns, and
union agreements that restri*t ho+ the labor %or*e *an be used. <i'en this *omple3
operating en'ironment, the o'erall ob=e*ti'e is to plan ne3t month's produ*tion so that
the *ompany *an reali0e the ma3imum pro%it possible +hile simultaneously ending up
in a good position %or the %ollo+ing month(s#.
2s an illustration o% ho+ one might *ondu*t an operations resear*h study to address
this situation, *onsider a highly simpli%ied instan*e o% a produ*tion planning problem
+here there are t+o main produ*t lines (+idgets and gi0mos, say# and three ma=or
limiting resour*es (2, > and 5, say# %or +hi*h ea*h o% the produ*ts *ompete. Ea*h
produ*t re1uires 'arying amounts o% ea*h o% the resour*es and the *ompany in*urs
di%%erent *osts (labor, ra+ materials et*.# in making the produ*ts and reali0es di%%erent
re'enues +hen they are sold. )he ob=e*ti'e o% the ,.-. pro=e*t is to allo*ate the
resour*es to the t+o produ*ts in an optimal %ashion.
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Orientation+ )he %irst step in the ,.-. approa*h is re%erred to as problem orientation.
)he primary ob=e*ti'e o% this step is to *onstitute the team that +ill address the
problem at hand and ensure that all its members ha'e a *lear pi*ture o% the rele'ant
issues. It is +orth noting that a distinguishing *hara*teristi* o% any ,.-. study is that it
is done by a multi%un*tional team. )o digress slightly, it is also interesting that in
re*ent years a great deal has been +ritten and said about the bene%its o% pro=e*t teams
and that almost any industrial pro=e*t today is *ondu*ted by multi!%un*tional teams.
E'en in engineering edu*ation, team+ork has be*ome an essential ingredient o% the
material that is taught to students and almost all a*ademi* engineering programs
re1uire team pro=e*ts o% their students. )he team approa*h o% ,.-. is thus a 'ery
natural and desirable phenomenon.
)ypi*ally, the team +ill ha'e a leader and be *onstituted o% members %rom 'arious
%un*tional areas or departments that +ill be a%%e*ted by or ha'e an e%%e*t upon the
problem at hand. In the orientation phase, the team typi*ally meets se'eral times to
dis*uss all o% the issues in'ol'ed and to arri'e at a %o*us on the *riti*al ones. )his
phase also in'ol'es a study o% do*uments and literature rele'ant to the problem in
order to determine i% others ha'e en*ountered the same (or similar# problem in the
past, and i% so, to determine and e'aluate +hat +as done to address the problem. )his
is a point that o%ten tends to be ignored, but in order to get a timely solution it is
*riti*al that one does not rein'ent the +heel. In many ,.-. studies, one a*tually adapts
a solution pro*edure that has already been tried and tested, as opposed to de'eloping a
*ompletely ne+ one. )he aim o% the orientation phase is to obtain a *lear
understanding o% the problem and its relationship to di%%erent operational aspe*ts o%
the system, and to arri'e at a *onsensus on +hat should be the primary %o*us o% the
pro=e*t. In addition, the team should also ha'e an appre*iation %or +hat (i% anything#
has been done else+here to sol'e the same (or similar# problem.
In our hypotheti*al produ*tion planning e3ample, the pro=e*t team might *omprise
members %rom engineering (to pro'ide in%ormation about the pro*ess and te*hnology
used %or produ*tion#, produ*tion planning (to pro'ide in%ormation on ma*hining
times, labor, in'entory and other resour*es#, sales and marketing (to pro'ide input on
demand %or the produ*ts#, a**ounting (to pro'ide in%ormation on *osts and re'enues#,
and in%ormation systems (to pro'ide *omputeri0ed data#. ,% *ourse, industrial
engineers +ork in all o% these areas. In addition, the team might also ha'e shop%loor
personnel su*h as a %oreman or a shi%t super'isor and +ould probably be led by a mid!
le'el manager +ho has relationships +ith se'eral o% the %un*tional areas listed abo'e.
2t the end o% the orientation phase, the team might de*ide that its spe*i%i* ob=e*ti'e is
to ma3imi0e pro%its %rom its t+o produ*ts o'er the ne3t month. It may also spe*i%y
additional things that are desirable, su*h as some minimum in'entory le'els %or the
t+o produ*ts at the beginning o% the ne3t month, stable +ork%or*e le'els, or some
desired le'el o% ma*hine utili0ation.
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Problem Definition+ )his is the se*ond, and in a signi%i*ant number o% *ases, the most
di%%i*ult step o% the ,.-. pro*ess. )he ob=e*ti'e here is to %urther re%ine the
deliberations %rom the orientation phase to the point +here there is a *lear de%inition
o% the problem in terms o% its s*ope and the results desired. )his phase should not be
*on%used +ith the pre'ious one sin*e it is mu*h more %o*used and goal oriented/
ho+e'er, a *lear orientation aids immeasurably in obtaining this %o*us. Most
pra*ti*ing industrial engineers *an relate to this distin*tion and the di%%i*ulty in
mo'ing %rom general goals su*h .in*reasing produ*ti'ity. or .redu*ing 1uality
problems. to more spe*i%i*, +ell!de%ined ob=e*ti'es that +ill aid in meeting these
goals.
2 *lear de%inition o% the problem has three broad *omponents to it. )he %irst is the
statement o% an unambiguous ob=e*ti'e. 2long +ith a spe*i%i*ation o% the ob=e*ti'e it
is also important to de%ine its s*ope, i.e., to establish limits %or the analysis to %ollo+.
9hile a *omplete system le'el solution is al+ays desirable, this may o%ten be
unrealisti* +hen the system is 'ery large or *omple3 and in many *ases one must then
%o*us on a portion o% the system that *an be e%%e*ti'ely isolated and analy0ed. In su*h
instan*es it is important to keep in mind that the s*ope o% the solutions deri'ed +ill
also be bounded. 6ome e3amples o% appropriate ob=e*ti'es might be (1# .to ma3imi0e
pro%its o'er the ne3t 1uarter %rom the sales o% our produ*ts,. (2# .to minimi0e the
a'erage do+ntime at +ork*enter H,. (@# .to minimi0e total produ*tion *osts at (lant
;,. or ("# .to minimi0e the a'erage number o% late shipments per month to
*ustomers..
)he se*ond *omponent o% problem de%inition is a spe*i%i*ation o% %a*tors that +ill
a%%e*t the ob=e*ti'e. )hese must %urther be *lassi%ied into alternati'e *ourses o% a*tion
that are under the *ontrol o% the de*ision maker and un*ontrollable %a*tors o'er +hi*h
he or she has no *ontrol. For e3ample, in a produ*tion en'ironment, the planned
produ*tion rates *an be *ontrolled but the a*tual market demand may be unpredi*table
(although it may be possible to s*ienti%i*ally %ore*ast these +ith reasonable a**ura*y#.
)he idea here is to %orm a *omprehensi'e list o% all the alternati'e a*tions that *an be
taken by the de*ision maker and that +ill then ha'e an e%%e*t on the stated ob=e*ti'e.
E'entually, the ,.-. approa*h +ill sear*h %or the parti*ular *ourse o% a*tion that
optimi0es the ob=e*ti'e.
)he third and %inal *omponent o% problem de%inition is a spe*i%i*ation o% the
*onstraints on the *ourses o% a*tion, i.e., o% setting boundaries %or the spe*i%i* a*tions
that the de*ision!maker may take. 2s an e3ample, in a produ*tion en'ironment, the
a'ailability o% resour*es may set limits on +hat le'els o% produ*tion *an be a*hie'ed.
)his is one a*ti'ity +here the multi%un*tional team %o*us o% ,.-. is e3tremely use%ul
sin*e *onstraints generated by one %un*tional area are o%ten not ob'ious to people in
others. In general, it is a good idea to start +ith a long list o% all possible *onstraints
and then narro+ this do+n to the ones that *learly ha'e an e%%e*t on the *ourses o%
a*tion that *an be sele*ted. )he aim is to be *omprehensi'e yet parsimonious +hen
spe*i%ying *onstraints.
5ontinuing +ith our hypotheti*al illustration, the ob=e*ti'e might be to ma3imi0e
pro%its %rom the sales o% the t+o produ*ts. )he alternati'e *ourses o% a*tion +ould be
the 1uantities o% ea*h produ*t to produ*e ne3t month, and the alternati'es might be
*onstrained by the %a*t that the amounts o% ea*h o% the three resour*es re1uired to
meet the planned produ*tion must not e3*eed the e3pe*ted a'ailability o% these
resour*es. 2n assumption that might be made here is that all o% the units produ*ed *an
be sold. 4ote that at this point the entire problem is stated in words/ later on the ,.-.
approa*h +ill translate this into an analyti*al model.
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Data Collection+ In the third phase o% the ,.-. pro*ess data is *olle*ted +ith the
ob=e*ti'e o% translating the problem de%ined in the se*ond phase into a model that *an
then be ob=e*ti'ely analy0ed. $ata typi*ally *omes %rom t+o sour*es I obser'ation
and standards. )he %irst *orresponds to the *ase +here data is a*tually *olle*ted by
obser'ing the system in operation and typi*ally, this data tends to deri'e %rom the
te*hnology o% the system. For instan*e, operation times might be obtained by time
studies or +ork methods analysis, resour*e usage or s*rap rates might be obtained by
making sample measurements o'er some suitable inter'al o% time, and data on
demands and a'ailability might *ome %rom sales re*ords, pur*hase orders and
in'entory databases. ,ther data are obtained by using standards/ a lot o% *ost related
in%ormation tends to %all into this *ategory. For instan*e, most *ompanies ha'e
standard 'alues %or *ost items su*h as hourly +age rates, in'entory holding *harges,
selling pri*es, et*./ these standards must then be *onsolidated appropriately to
*ompute *osts o% 'arious a*ti'ities. ,n o**asion, data may also be soli*ited e3pressly
%or the problem at hand through the use o% sur'eys, 1uestionnaires or other
psy*hometri* instruments.
,ne o% the ma=or dri'ing %or*es behind the gro+th o% ,.-. has been the rapid gro+th
in *omputer te*hnology and the *on*urrent gro+th in in%ormation systems and
automated data storage and retrie'al. )his has been a great boon, in that ,.-. analysts
no+ ha'e ready a**ess to data that +as pre'iously 'ery hard to obtain.
6imultaneously, this has also made things di%%i*ult be*ause many *ompanies %ind
themsel'es in the situation o% being data!ri*h but in%ormation!poor. In other +ords,
e'en though the data is all present .some+here. and in .some %orm,. e3tra*ting use%ul
in%ormation %rom these sour*es is o%ten 'ery di%%i*ult. )his is one o% the reasons +hy
in%ormation systems spe*ialists are in'aluable to teams in'ol'ed in any nontri'ial
,.-. pro=e*t. $ata *olle*tion *an ha'e an important e%%e*t on the pre'ious step o%
problem de%inition as +ell as on the %ollo+ing step o% model %ormulation.
)o relate data *olle*tion to our hypotheti*al produ*tion e3ample, based upon 'ariable
*osts o% produ*tion and the selling pri*e o% ea*h o% the produ*ts, it might be
determined that the pro%it %rom selling one gi0mo is J1C and one +idget is JA. It might
be determined based on time and +ork measurements that ea*h gi0mo and ea*h
+idget respe*ti'ely re1uires E1C unit and 1 unit o% resour*e 1, 1 unit and 2E@ unit o%
resour*e 2 and 1E1C unit and 1E" unit o% resour*e @. Finally, based upon prior
*ommitments and histori*al data on resour*e a'ailability, it might be determined that
in the ne3t month there +ill be D@C units o% resour*e 1, CK units o% resour*e 2 and
1@5 units o% resour*e @ a'ailable %or use in produ*ing the t+o produ*ts.
It should be emphasi0ed that this is only a highly simpli%ied illustrati'e e3ample and
the numbers here as +ell as the suggested data *olle*tion methods are also 'astly
simpli%ied. In pra*ti*e, these types o% numbers *an o%ten be 'ery di%%i*ult to obtain
e3a*tly, and the %inal 'alues are typi*ally based on e3tensi'e analyses o% the system
and represent *ompromises that are agreeable to e'eryone on the pro=e*t team. 2s an
e3ample, a marketing manager might *ite histori*al produ*tion data or data %rom
similar en'ironments and tend to estimate resour*e a'ailability in 'ery optimisti*
terms. ,n the other hand, a produ*tion planner might *ite s*rap rates or ma*hine
do+ntimes and *ome up +ith a mu*h more *onser'ati'e estimate o% the same. )he
%inal estimate +ould probably represent a *ompromise bet+een the t+o that is
a**eptable to most team members.
ba*k to top
Model Formulation+ )his is the %ourth phase o% the ,.-. pro*ess. It is also a phase
that deser'es a lot o% attention sin*e modeling is a de%ining *hara*teristi* o% all
operations resear*h pro=e*ts. )he term .model. is misunderstood by many, and is
there%ore e3plained in some detail here. 2 model may be de%ined %ormally as a
sele*ti'e abstra*tion o% reality. )his de%inition implies that modeling is the pro*ess o%
*apturing sele*ted *hara*teristi*s o% a system or a pro*ess and then *ombining these
into an abstra*t representation o% the original. )he main idea here is that it is usually
%ar easier to analy0e a simpli%ied model than it is to analy0e the original system, and
as long as the model is a reasonably a**urate representation, *on*lusions dra+n %rom
su*h an analysis may be 'alidly e3trapolated ba*k to the original system.
)here is no single .*orre*t. +ay to build a model and as o%ten noted, model!building
is more an art than a s*ien*e. )he key point to be kept in mind is that most o%ten there
is a natural trade!o%% bet+een the a**ura*y o% a model and its tra*tability. 2t the one
e3treme, it may be possible to build a 'ery *omprehensi'e, detailed and e3a*t model
o% the system at hand/ this has the ob'iously desirable %eature o% being a highly
realisti* representation o% the original system. 9hile the 'ery pro*ess o% *onstru*ting
su*h a detailed model *an o%ten aid immeasurably in better understanding the system,
the model may +ell be useless %rom an analyti*al perspe*ti'e sin*e its *onstru*tion
may be e3tremely time!*onsuming and its *omple3ity pre*ludes any meaning%ul
analysis. 2t the other e3treme, one *ould build a less *omprehensi'e model +ith a lot
o% simpli%ying assumptions so that it *an be analy0ed easily. Ho+e'er, the danger here
is that the model may be so la*king in a**ura*y that e3trapolating results %rom the
analysis ba*k to the original system *ould *ause serious errors. 5learly, one must
dra+ a line some+here in the middle +here the model is a su%%i*iently a**urate
representation o% the original system, yet remains tra*table. :no+ing +here to dra+
su*h a line is pre*isely +hat determines a good modeler, and this is something that
*an only *ome +ith e3perien*e. In the %ormal de%inition o% a model that +as gi'en
abo'e, the key +ord is .sele*ti'e.. Ha'ing a *lear problem de%inition allo+s one to
better determine the *ru*ial aspe*ts o% a system that must be sele*ted %or
representation by the model, and the ultimate intent is to arri'e at a model that
*aptures all the key elements o% the system +hile remaining simple enough to analy0e.
Models may be broadly *lassi%ied into %our *ategories?
(hysi*al Models? )hese are a*tual, s*aled do+n 'ersions o% the original. E3amples
in*lude a globe, a s*ale!model *ar or a model o% a %lo+ line made +ith elements %rom
a toy *onstru*tion set. In general, su*h models are not 'ery *ommon in operations
resear*h, mainly be*ause getting a**urate representations o% *omple3 systems through
physi*al models is o%ten impossible.
2nalogi* Models? )hese are models that are a step do+n %rom the %irst *ategory in
that they are physi*al models as +ell, but use a physi*al analog to des*ribe the
system, as opposed to an e3a*t s*aled!do+n 'ersion. (erhaps the most %amous
e3ample o% an analogi* model +as the AN!A" model (the a*ronym stood %or anti-
automati*!c