Introduction to Linear
Programming
Operations Research
• Definition
• Brief History
• Characteristics
• Benefits and Limitations
• Mathematical Models
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Definition of Operations Research
• Addresses problems on how to conduct and coordinate
the operations of an organization
• Applies scientific methods and techniques to problems
involving the operations of complex systems (man and
machine)
• Provides those in management with the optimal or near-
optimum solutions to the problem
• Synonymous to Management Science
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Brief History of OR
• Established as a separate discipline from Management in 1939.
• During World War II, OR was used by the British government
to assist field commanders in solving perplexing strategic and
tactical problems.
- allocation of airplanes to a mission
- determination of the best pattern to be used in searching for
submarines
• After the war, the use of OR in business and government
developed, spearheaded by OR practitioners in the
military.
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Brief History of OR …
• There was a rapid growth of OR after the war and by the
end of the 1950s, the use of OR was introduced to a
variety of organizations in business, industry, and
government.
• Development of OR was given a boost in the 1980s with
the onslaught of the computer revolution.
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Characteristics of OR
• A primary interest in managerial decision making
• The employment of the scientific approach
• An interdisciplinary framework for the different
business functions is attempted
• Mathematical models are used
• Computers are very frequently employed
• Problems and decisions are viewed from a systems
perspective
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Focus
• The main focus of most OR studies is the need to
allocate scarce/limited resources.
• OR is a decision-making tool and in the right hands, its
use could save an organization a lot of time and
resources.
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Benefits of OR Studies
• Provides a systematic and logical approach to decision-
making.
• Facilitates communication within an organization through
consultation with experts in various areas.
• Enables evaluation of situations involving uncertainty.
• OR studies has a remarkable impact in improving the
efficiency of many organizations which typically resulted in
large annual savings and other non-monetary benefits (e.g.
improved service and better managerial control.
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Benefits of OR Studies …
• Allows a rapid and inexpensive examination of a large
(sometimes infinite) number of alternatives.
• Permits a in-depth analysis of a large number of
alternatives.
• Enables experimentation with different alternatives using
models, thus eliminating the cost of making errors when
experimenting in reality.
• Increases the effectiveness of the decision.
• Enables quick identification of the best available
solution.
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Limitations of OR Studies
• Time-consuming
• Decision makers may be reluctant to accept the result of the
study.
• Assessments of uncertainties are difficult to carry out
• Makes the decision through a sometimes oversimplified
model of reality, possibly leading to erroneous
recommendations
• Can be expensive to undertake, depending on the size of the
problem
• Studies may be discontinued for various reasons,
leading to an unproductive expense
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Potential Areas for OR Applications
PRODUCTION MARKETING
• Planning and Scheduling • Allocation of Advertising
• Make or Buy Decisions Funds
• Equipment Utilization • Product Mix
• Waiting Line Problems • Pricing Schemes
• Plant Location and Layout • Bidding Strategies
• Assembly-Line Balancing • Product Positioning
• Materials & Supplies
Purchasing INVESTMENT and FINANCE
• Capital Budgeting
ORGANIZATION
• Credit Analysis
• Benefit/Compensation Plans
• Work Assignment Scheme*
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Mathematical Modelling
Definition:
A family of tools designed to help solve managerial
problems wherein the decision maker must allocate
scarce (or limited) resources among various activities to
obtain an optimal result, i.e. a result that achieves the set
goals best among all alternatives.
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Advantages of Mathematical Models
• Finds an optimal solution(s).
• Fast determination of the solution
• Finds solutions to a wide variety of problems that can be
formulated as an LP.
• Finds solutions (efficiently) to problems with a very
large or infinite number of alternatives.
• Provides a natural sensitivity analysis.
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Characteristics of a Mathematical Model
• A limited quantity of economic resources (such as labor,
capital, etc.) is available for allocation.
• The resources are used in the production of products or
services.
• There are two or more ways in which the resources can be
used. Each is called a solution, program, or alternative.
• Each activity (product or service) in which the resources are
used yields a return (or reward) in terms of the stated goal.
• The allocation is usually restricted by several limitations or
requirements called constraints.
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Assumptions for Mathematical Modelling
• Returns from different allocations can be compared; that is,
they can be measured by a common unit (such as dollars or
utility).
• All data are known with certainty.
• The resources are to be used in the most economical way.
In the case of linear programming, two additional assumptions
are:
• The return from any allocation is independent of other
allocations.
• The total return is the sum of the returns yielded by
the different activities.
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General Statement of a
Mathematical Model
• The general problem of allocating a set of limited
resources among competing activities so the total
reward is maximized.
• Allocation problems usually have many possible
alternative solutions. Depending on the underlying
assumptions, the number of solutions can either be
infinite or finite.
• Different solutions yield different rewards.
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General Statement of a
Mathematical Model …
• Of the available solutions, one (sometimes more) is/are
the best, in the sense that the degree of goal attainment
associated with it is the best (i.e., total reward is
maximized). This is called the optimal solution.
• Mathematical programming provides a relatively
unbiased approach to solving the allocation problem.
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References
Hillier, F. & Lieberman, G. (2005). Introduction to operations research. New
York, NY: McGraw-Hill Higher Education.
Taha, H. (2007). Operations research: An introduction. Upper Saddle River, NJ:
Pearson Prentice Hall.
Wayne, W. & Goldberg, J. (2004). Operations research: Applications and
Algorithms. Belmont, CA: Thomson Brooks/Cole.
For Educational Purposes Only
