OPERATION RESEARCH

MKT-505

S@hani

OPERATION RESEARCH:
ART OR SCIENCE?

Operations Research problem

solving steps

Real-World
Problem

Implementation

Recognition
and Definition
of the Problem

Interpretation
Validation and
Sensitivity
Analysis
of the Model

Formulation and
Construction of
the Mathematical
Model

Solution
of the Model

WHAT IS OR
Operations

The

activities carried out in an organization

relation, strategy, marketing, HR).

(stakeholder

Research
The

process of observation and testing characterized by the scientific

method. Situation problem statement model construction
validation experimentation candidate solutions.

Operations

Research is a quantitative approach to

decision making based on the scientific method of problem
solving. CAN IT BE QUALITATIVE?

Primary

applications areas of Operations Research include

forecasting, production scheduling, inventory control, capital
budgeting, and transportation

I say: Operations Research is

Application of SCIENTIFIC METHOD
Study of LARGE & COMPLEX SYSTEMS
Analysis of MANAGERIAL PROBLEMS
Finding OPTIMAL SOLUTION
Use of MATHEMATICAL MODELS
Use of COMPUTERS & SPECIAL SW

TERMINOLOGY
The British/Europeans refer to Operational Research",
the Americans to Operations Research" - but both are
often shortened to just "OR".
Another term used for this field is Management Science"
("MS"). In U.S. OR and MS are combined together to form
"OR/MS" or "ORMS".
Yet other terms sometimes used are Industrial
Engineering" ("IE") and Decision Science" ("DS").

NAME AND TOOLS

Alternative Names

operational research
operations analysis
quantitative
analysis
quantitative
methods
systems analysis
decision analysis
decision science

Software for OR

Lingo (LINDO)
MPL for Windows
XPRESS (FICO)
CPLEX (IBM ILOG)
AIMMS
AMPL
Gurobi
NEOS
MS Excel (FRONTLINE
SOLVERS)
SIMPROCESS
SIMUL 8
Matlab

Operations Research Models

Deterministic Models

Stochastic Models

Linear Programming Discrete-Time Markov Chains

Network Optimization Continuous-Time Markov Chains
Integer Programming Queuing Theory (waiting lines)
Nonlinear Programming Decision Analysis
Inventory Models

Game Theory
Inventory models
Simulation

Deterministic vs. Stochastic Models

Deterministic models
assume all data are known with certainty (HR
payroll _ current); NO randomness
Stochastic models
explicitly represent uncertain data via
random variables or stochastic processes.
Space ship project, insurance

Deterministic models involve optimization

Stochastic models
characterize / estimate system performance.

ORIGIN & HISTORY

During WW II, Britain engaged more than 1000

worker in OR and 200 OR scientists.
Circus team by Patric Blakeckt in Royal Aircraft
Establishment (RAE) helped to reduce the number of
Anti-Aircraft Artillery to shot down enemy aircraft
(avg. 20,000 to 4,000).

1890
Frederick Taylor
Scientific
Management
[Industrial
Engineering]

1900
Henry Gannt
[Project Scheduling]
Andrey A. Markov
[Markov Processes]
Assignment
[Networks]

1910
F. W. Harris
[Inventory Theory]
E. K. Erlang
[Queuing Theory]

1920
William Shewart
[Control Charts]
H.Dodge H.Roming
[Quality Theory]

1960
John D.C. Litle
[Queuing Theory]
Simscript - GPSS
[Simulation]

1950
H.Kuhn - A.Tucker
[Non-Linear Prog.]
Ralph Gomory
[Integer Prog.]
PERT/CPM
Richard Bellman
[Dynamic Prog.]
ORSA and TIMS

1940
World War 2
George Dantzig
[Linear
Programming]
First Computer

1930
Jon Von Neuman
Oscar Morgenstern
[Game Theory]

1970
Microcomputer

1980
H. Karmarkar
[Linear Prog.]
Personal computer
OR/MS Softwares

1990
Spreadsheet
Packages
INFORMS

2006-14
You are here

DEFINITION(S)
OR

is the art of winning the war without

actually fighting them.
-Aurther Clark
OR is a scientific approach of problem
solving for executive management. H.M. Wagner

WHY OR IS FOR?
Simulation:Gives the ability to try out
approaches and test ideas for improvement- space
science
Optimization:Narrows down choices to the very
best when there are virtually innumerable
feasible options and comparing them is difficulttransportation, flight schedule.
Probability and Statistics:Helps in measuring
risk, mine data to find valuable connections and
insights, test conclusions, and make reliable
forecasts- GDP growth.

CHARACTERISTICS OF OR

Use of interdisciplinary teams:

analyze problem

from different angle (social, economic )

Application of scientific methods: CPM (critical
Path
Measurement),
PERT
(Project
Evaluation & Review Technique)

Improvement in quality of decision making process:

bus/train schedule

Quantitative precision: aerospace,

space ship.

System Orientation: grocery shop to mega shop

New form of Problem identification:

demand & supply?

oil price-

AREAS OR DEALS WITH

Project Management
Floor Planning: Factory
Equipment layout
Network Optimization:
Telecomm Industry
SCM: flow of raw
materials & product
based on uncertainty
Automation

Scheduling:

Pricing

Routing: Bus/Train to minimize no. of trip to serve

max. passengers

Turning the color

from Black to
White increased
its camouflage
by 20% & 30%
frigates would be
attacked.

PHASES OF OR

Judgment Phase:
Determination

of Operation: assembling of engine

associated with many (sub) assembling. Any conceivable
operation will be associated with problem.
Determination of value/objective: manufacturing, tactical,
engineering (type of situation). Objective- social, economic,
aesthetic. Magnitude of risk and time limit etc.
Determination of Effectiveness: link between objective &
analysis required for corrective action.

CONT.
Formulation
Remedial-

of problem relative to objective:

plane crash, health hazard

Optimization: train schedule, product line efficiency
Transference: use of venom in Cancer medication
Prediction: forecasting (El-nino)

CONT.

Research Phase:
Observation & Data Collection: trend analysis
Formulation of hypothesis: 0 or 1, true/false. Good
hypothesis depends on sound knowledge and
accumulated data.
Info. and verification of hypothesis: analyze &
interpret info
Prediction & generalized result: run the model,
obtain a complete description.
Action Phase:

GET THE WORK TO ROLL ON!!!

NECESSITY OF OR
Complexity: oil production
Customer demand: call center
Raw material:
Equipment capacity & probability of failure: BAT
Risk/uncertainty: space craft.

Knowledge Explosion: Sony simultaneously in cell

phone, TV, play station business

Diverse Footprint: Walmart has its brunches in 11137

location

SCOPE OF OR

Industry: Management looks ultimately for

PROFIT! OR team fosters alternatives.
Defence: varieties of activities to be inter

linked i.e. operation, training, intelligence

Planning: both economic & social (education
to administration)
Public Utilities: how premium for car to be
decided? On what basis new sale girls would be
appointed? Cost optimization?

OPTIMIZE YOUR COST

You need to travel DHK-CTG a 5-week

business plan. Each round trip ticket costs
$400. You fly out Tuesday and get back
Thursday.
20%

discount for round trip if tickets are purchased

in weekends
25% discount (one way either)

What are the alternatives to optimize your cost?

Case #1: 5*DHK-CTG-DHK: 5*$400= $2000
Case#2: 1*DHK-CTG PLUS 4* CTG-DHK-CTG @
weekend PLUS CTG-DHK:
0.75*$400+4*(0.8*$400)+0.75*$400= 1880

Case#3 : 1* DHK-CTG-DHK (to cover 1st week and

last week) PLUS 4* CTG-DHK-CTG (@ weekend)=
5*(0.8*400)= $1600