OPERATIONS RESEARCH

Module 1
Introduction to OR
 Contents
• Definitions of Operations Research
• Features of OR and its approach to problem
solving; Models and modeling in OR
• Methods for solving OR models
• Phases of OR approach to problem solving
• Application areas of OR

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 Historical Perspective
• During WW II, Allied forces were facing limited military
resources to various military operations.

• British & American military management invited various

scientists to apply scientific approach to many strategic &
tactical problems, codenamed as “Operations Research”.

• Its usage led to winning of various wars, such as “Air Battle

of Britain”, “Island Campaign in the Pacific"," Battle of the
North Atlantic”.

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 Stock Market

Investor
Real Estate

Bank Deposit

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• Factors to be examined
• Financial ratios from balance sheets of several
companies
• Cash flows
• Rates of return for investment in property
• Weather
• State and central policies

The study of these factors and how decision makers use them in
decision process is the essence of Operations Research

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 Historical Perspective (Continued)
• Industries adopted these techniques after WW II as
it was realized that industrial operations can be
analyzed scientifically to arrive at optimum decision
making process.
• OR practices started in India in 1949 at Regional
Research Laboratory Hyderabad.
• OR Society of India was formed in 1957.

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 Decision Making
• An effective decision depends on many factors which may be
economic, social and political.
• IN business, the decision maker is not only faced with large
number of interacting variables but has to take into account
the actions of other competitors over which he has no
control.

• The decisions taken with the help of past experience and

intuitions is often misleading in such complex situations. So,
the formal system is required to determine an effective
course of action.

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 What is OR?

• Operations Research provides a Quantitative Technique or a scientific

approach to the executives for making better decisions for operation
under their control.

• Operations research is also known as quantitative methods,

Management Science, Decision Science.

• Operations Research is not a fixed formula which can be applied to all

types of problems. This requires that the problems be defined, analyzed
and solved in a rational, logical, systematic and scientific manner based
on data.

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 Growth of OR in Different Sectors
• Production Industries such as Steel & Heavy
Engineering Industries, Chemical & Fertilizers,
Textiles.
• Transportation & Distribution
• Banking & Finance
• Agriculture
• Defence
• Marketing
• Research & Development

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 Definitions Of Operations Research

• Operations Research is concerned with scientifically deciding how to best

design and operate man machine systems usually requiring the
allocation of scarce resources.
Operations Research Society, America

• This new decision making field has been characterized by the use of
scientific knowledge through interdisciplinary team effort for the
purpose of determining the best utilization of limited resources.
H. A. Taha, 1976

• Operations Research, in the most general sense, can be characterized as

the application of scientific methods, techniques and tools, to problems
involving the operations of system so as to provide those in control of
operation with optimum solutions to the problems.
Chrchman, Ackoff and Arnoff, 1957

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• O.R is an applied decision theory. It uses any scientific,
mathematical or logical means to attempt to cope with
problems that confront the executive when he tries to
achieve a thorough going rationality in dealing with his
decision problems.
Miller and Starr
• Operations Research is the art of finding bad answers to
problems where otherwise worse answers are given.
T. L. Satty
• Operations Research is the scientific approach to problem
solving for executive management
H. M. Wagner

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 Characteristics Of Operations Research
1. Systems Approach – This implies that each problem is
examined in its entirety to the extent possible and
economically feasible from the point of view of the overall
system of which the problem under consideration is one
part.
2. Inter disciplinary Team approach – A team comprising
experts from different disciplines such as mathematics,
Statistics, Economics, Management etc. determines the
solution to the problem by utilizing the diverse background
and skills.
3. Methodological Approach – O.R utilizes scientific methods
for solving a problem. Specifically, the process begins with
the careful observation and formulation of the problem.
4. Operations Economy – O.R helps to reduce costs and
improve profits.
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 Scope of OR

• 1. Finance, Budgeting & Investments

(a) Cash flow analysis, long range capital
requirement, investment portfolios.
(b) Credit policies, credit risks.
(c) Claim & complaint procedures.

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 Scope of OR
• 2. Purchasing, Procurement & Exploration
(a) Quantity & timings of purchase of raw materials
& machinery.
(b) Bidding Policies
(c) Equipment Replacement Policies
(d) Strategies for exploration and exploitation of
new material sources.

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 Scope of OR
• 3. Production Management

(a) Production Scheduling & Sequencing

(b) Optimal production mix.
(c) Location & size of warehouses, distribution
centers, retail outlets.
(d) Distribution Policy.

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 Scope of OR
• 4. Marketing Management
(a) Production selection, timing, competitive
actions.
(b) Advertising Strategy & choice of different media
of advertising.
(c) Effectiveness of Market research
(d) No. of Sales men

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 Scope of OR
• 5. Personnel Management
(a) Recruitment policies & assignment of
jobs.
(b) Selection of suitable personnel.
(c) Establishing equitable bonus systems.

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 Scope of OR
• 6. Research & Development
(a) Reliability & evaluation of alternative
designs.
(b) Determination of time & cost
requirements.
(c) Control of multiple research projects.

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 Methodology of OR
• Formulation & definition of the problem.
• Construction of the mathematical model.
• Deriving solutions from the model.
• Testing the model.
• Establishing controls over the solutions.
• Validation of the model.
• Implementation of the results.

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 What is Mathematical Model?

• A mathematical model is an abstract model

that uses mathematics language to describe a
system

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 Example of Mathematical Model
• A manufacturing company produces three
types of products; A,B,C. The profit
contribution per unit of product is Rs 12, 20,
45 respectively.
• Write the mathematical equation for profit
contributed by all the products.
z = 12x1 + 20x2 + 45x3

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 Advantages & Drawbacks of OR Models

Advantages • Models are only an attempt

• Provides a logical, to represent the system.
scientific,systematic • Construction of models
approach. require services of experts.
• Model provides economic • Results of models are to be
details of the system. validated by experiment &
• Indicate the scope & data.
limitations.

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 Limitations of OR
• OR model may not incorporate all the factors affecting the
problem.
• Intangible factors, like human relations, can not be
expressed in mathematical model.
• Requires good knowledge of mathematics & statistics.
• Data incorporation would be costly.
• Factors like complacency, lack of awareness, pre conceived
notion, lack of management commitment lead to slow
implementation of decisions.

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 An overview of O.R. Techniques

• Linear Programming
• Decision models
• Network theory
• Inventory Control Models
• Queueing Theory
• Sequencing
• Game Theory
• Simulation

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 End of Module 1

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