PARADISE VALLEY COLLEGE SHASHEMENE CAMPUS

DEPARTMENT OF MANAGEMENT/ UNDERGRADUATE

PROGRAM
OPERATION RESEARCH
CHAPTER ONE
NAME OF INTROCTOR: BEHABTU B. /MSC in
Mathematics , MBA in Business Administration./
OPERATIONS RESEARCH

CHAPTER ONE
OVERVIEW OF OPERATIONS RESEARCH
CHAPTER CONTENTS

1.1 Origin and Development of OR

1.2 Models and Model Building
1.3 Methods and Methodology of OR
 CHAPTER OBJECTIVES
After completing this chapter, you should be able to

1.Define the term MS/OR.

2. Describe the nature of MS/OR.

3. Meaning of model

4. Model building process

5. Explain what a mathematical model is.

6. Business Usage of Quantitative Techniques

 ORIGIN AND DEVELOPMENT OF OR

The body of knowledge involving quantitative approaches to

decision making is referred to as : Management Science ,

Operations Research OR Decision Science

Definition of Operations Research

The definition of OR depends on the objective of the individuals.

Different individuals define the subject differently. But in the

academic interest some of the important definitions are discussed

below.
ORIGIN AND DEVELOPMENT
OF OR
 Operations Research is a branch of mathematics especially
applied mathematics, used to provide a scientific base for
management to take timely and effective decisions to their
problems
 It tries to avoid the dangers from taking decisions merely

by guessing or by using thumb rules

 Cont…
 Management is the multidimensional and
dynamic concept
 It is multidimensional - its problems and their
solutions have consequences in several
dimensions, such as human, economic social and
political fields
 It is dynamic in nature - the manager operates
his system in an open environment, which will
never remain static
 Hence any manager, while making decisions,
considers all aspects in addition to economic
aspect, so that his solution should be useful in all
aspects
 Cont…
 Operations Research is a ‘war baby’
 It is because, the first problem attempted to solve in a
systematic way was concerned with how to set the time
fuse bomb to be dropped from an aircraft on to a
submarine

 OR originated during Second World War

 The military management in England invited a team of
scientists to study the strategic and tactical problems
related to air and land defense of the country
 Cont…
 The problem was - the resources available in England was
very limited
 The objective was - to win the war with available insufficient
resources required to manage war and for the use of the
population of the country
 Decision was - necessary to decide upon the most effective
utilization of the available resources to achieve the objective
 Cont…
 The Generals of military, invited a team of experts in
various walks of life such as scientists, doctors,
mathematicians, business people, professors,
engineers etc.
 The problem of resource utilization is given to them to
discuss and come out with a feasible solution.
 These specialists had came out with a method of solving the
problem, which they coined the name “Linear Programming”.
 Cont..
 The word Operations is used to refer to the problems of
military and
 the word Research is use for inventing new method

 As this method of solving the problem was invented during

the war period, the subject is given the name ‘Operations
Research’ and abbreviated as ‘OR’
 Cont…
 After the Second World War;
 there was a scarcity of industrial material and industrial
productivity reached the lowest level
 The method linear programming was used to get optimal
solution to solve the industrial collapse problems
 how to optimize the profit or how to reduce the costs
 Definition of Operations Research

Definition of Operations Research

The definition of OR depends on the objective of the individuals.

Different individuals define the subject differently. But in the

academic interest some of the important definitions are discussed

below.
 Operations Research is a scientific method for providing executive
departments a quantitative basis for decisions regarding the
operations under their control (P.M. Morse and G.E. Kimball).
Definitions of OR cont..

 is a discipline that deals with the application of

advanced analytical methods (optimization, statistics,
algorithm) to help make better decisions.”

 OR: the science of better.

 It is the scientific study of operations for the purpose
of making better decision.
 CONT…
a)Operations Research is the application of scientific methods,
techniques and tools to operation of a system with optimum
solution to the problem. - Churchman, Ackoff and Arnoff.

b)Operations Research is the application of the methods of

science to complex problems arising in the direction and
management of large systems of men, materials and money
in industry, business, Government and defense.
 CONT…
The distinctive approach is to develop a scientific model of the
system, incorporating measurements of factors such as chance
and risk, with which to predict and compare the outcome of
alternative decisions, strategies or controls. The purpose is to
help management to determine its policy and actions
scientifically. - Operations Society of Great Britain

c) Operations Research is defined as Scientific method for

providing executive departments a quantitative basis for
decisions regarding the operations under their control. - P.M.
Morse and G.E. Kimball.
CONT…

d) Operations Research is concerned with scientifically

deciding how to best design and operate man-machine
system usually requiring the allocation of scare resources.”
Operations Research Society, America

e) Management science is a discipline that attempts to aid

managerial decision making by applying a scientific
approach to managerial problems that involve quantitative
factors( Hillier S. & et.al,2014 Introduction to
Management Science)
Contributors to The Development of
OR

 Linear programming was

 conceptually developed
 before World War II by the
 Soviet mathematician
Andrei Nikolaevich Kolmogorov
 (1903–1987)
Contributors to The Development of
OR CONT..,

Leonid Vitalyevich Kantorovich, another

Soviet mathematician, won the Nobel
Prize in Economics for advancing the
concepts of optimal planning.
Contributors to The Development of
OR CONT..,

In 1947, George Bernard Dantzig (Born

8.11.1914, Portland) developed the
solution procedure known as the
simplex algorithm, while working on Air
Force logistics problems.
(1914-2005)
 Silent Features of OR
 It is an interdisciplinary team approach
 Increases the creative ability of the decision maker
 It is a scientific approach
 Quantitative solution
 System orientation
 Use of information technology(IT)
 Applications of Operations
Research
1. Finance, budgeting, and investment
2. Marketing
3. Physical distribution
4. Purchasing, procurement and exploration
5. HR & Personnel assignment
6. Production planning and scheduling
7. Research and development
 MODELS AND MODEL BUILDING

 An Operations Research Model - is some sort of

mathematical or theoretical description of various variables
of a system representing some aspects of a problem on
some subject of interest or inquiry.
 The model enables to conduct a number of experiment
involving theoretical subjective manipulations to find
some optimum solution to the problem on hand.
 Types of Models

 Models are categorized depending on:

 Structure - 3
 Purpose - 3
 Nature of environment - 2
 Behavior of the problem - 2
 Method of getting Solution - 2
 I. Classification by Structure

1. Iconic Models: are scaled version of the actual object.

Example: A Globe, Photographs, Maps, blue prints, paintings,
sketches of insects, A solar system a toy of a car is an iconic
model of a real car.

 As far as operations research is concerned, is of less use.

2. Analogue or Schematic Models: In this model one set of properties

are used to represent another set of properties. Example: Many a
time we represent various aspects on graph by different colors or
different lines all these are analog models.
 Cont…
 blue color generally represents water, Graphs – they represents
properties like force, speed, age, time … in terms of distance. These
are also not much used in operations research.

3. Symbolic/Mathematical Models: the variables of a problem

is represented by mathematical symbols, letters etc.
 Mathematical symbols used to show the relationships
between variables and constraints.
 These models are widely used in operations research.
 Example: Z= 2x + 3y
 II. Classification by Utility

Depending on the use of the model or purpose of the

model, the models are classified as Descriptive,

Predictive and Prescriptive models.

1. Descriptive Model: simply explains certain aspects of the

problem or situation or a system so that the user can make use

for his analysis. E.g.: organizational chart, pie-diagram, layout

plan describes the features of their respective system

 It will not give full details and clear picture of the

problem for the sake of scientific analysis

Classification by Utility
Cont…
2. Predictive Model: basing on the data collected, can

predict the approximate results of the situation under

question

Example:

1. Predicting your score or results basing on your

performance in the examination

2. Exponential smoothing forecast model – predicts the

future demand.
 Cont…

3. Prescriptive Models: predictive models predict the

approximate results. But if the predictions of these
models are successful, then it can be used
conveniently to prescribe the courses of action to be
taken.
 used conveniently to prescribe the courses of action to be
taken

 Prescriptive models prescribe the courses of action to

be taken by the manager to achieve the desired goal
C. Classification by Nature of Environment

Depending on the environment in which the problem

exists and the decisions are made, and depending on
the conditions of variables, the models may be
categorized

1. Deterministic Models: operations research analyst

assumes complete certainty about the values of the
variables and the available resources and expects that
they do not change during the planning horizon.
 Cont…
Eg. LP, Integer programming etc.
 All these models do not contain the element of uncertainty or
probability
 Example: in Linear Programming, assumes certainty regarding
the values of variables and constraints - is a deterministic model

2. Probabilistic or Stochastic Models: the values of variables,

the pay offs of a certain course of action cannot be
predicted accurately because of element of probability
 Cont…
 It takes into consideration element of risk in model buildings

 The degree of certainty varies from situation to situation

 Example: the sale of insurance policies by Life Insurance
Companies to its customers. Here the failure of life is highly
probabilistic in nature
 The models in which the pattern of events has been compiled
in the form of probability distributions
D. Classification based on
Behavior of the Problem
Variables
1. Static Models: assumes that no changes in the
values of variables given in the problem for the
given planning horizon due to any change in the
environment or conditions of the system
 All the values given are independent of the time
 One decision is desirable for the given planning period
2. Dynamic Models: the values of given variables goes
on changing with time or change in environment or
change in the conditions of the given system
 There exists a series of interdependent decisions

during the planning period

 E. Classification depending on the Method of getting the Solution

1. Analytical Models: the given model have a well-defined

mathematical structure and can be solved by the
application of mathematical techniques
 Example: Resource allocation model, Transportation
model, Assignment model, sequencing model
 Cont…
2. Simulation Models: The meaning of simulation is imitation
 These models have mathematical structure but cannot be
solved by using mathematical techniques
 It needs certain experimental analysis to study the
behavior of the system, we use random numbers
 More complex systems can be studied by simulation
 Studying the behavior of laboratory model, we can
evaluate the required values in the system
 METHODOLOGY OF OR
Basic Phases/Steps in Operations Research

1. Observation and defining the problem

2. Formulate a mathematical model

3. Solving the mathematical model

4. Validating/Testing the model

5. Implementing the solution

6. Modifying the model

7. Establishing control over the solution

 Step 1: Defining the
Problem
 OR process begins with the identification of a problem that exists
is a system (organization)
 If a problem exists, it must be clearly and concisely defined
 Problems are not always the results of crisis; but instead
frequently involve an anticipatory or planning situation
 Step 2: Formulating a Model

The major steps which have to be taken in to consideration

for formulating the model are:
 Problem Components
 Decision environment
 Alternative courses of action
 Measure of effectiveness
 Collecting Data and Constructing a Mathematical Model
 Controllable (decision) Variables

 Uncontrollable variable

 Objective function

 Constraints or Limitations

 Functional relationships

 Parameters:
 Step 3: Solving the Mathematical Model

 Involves obtaining the numerical values of decision

variables
 Two major categories of methods used for solving an OR
model
 Optimization model
 Heuristic Model
Step 4: Validating (Testing) the Solution

 Reasons for validating the solution are:

 The mathematical model may not have enumerated all
the limitations of the problem under consideration
 Certain aspect of the problem may have been
overlooked, omitted or simplified
 The data may have been incorrect estimated or
recorded, perhaps when entered in to the computer
 Step 5: Implementing the Solution

 Selecting alternatives that are capable of being

implemented
 Continually reviewing and updating implemented solution
in the light of a changing environment
Step 6: Modifying the Model

 If during validation, the solution cannot be implemented, one needs to;

 (a) identify constraint that were omitted during the original problem

formulation or

 (b) find if some of the original constraints were incorrect and need to

be modified

 In all such cases, one must return to the model formulation step and

carefully make the appropriate modifications to represent more

accurately the given problem.

 A model should be updated from time to time, taking in to

consideration the past, present, and future aspects of the problem

Step 7: Establishing control over the
Solution
 A control procedure has to be established for detecting
significant changes in decision variables of the problem so
that suitable adjustments can be made in the solution
without having to build a model every time a significant
change occurs
Business Usage of OR
 Management science (or operations research as it is
commonly called by practitioners) has had an impressive
impact on improving the efficiency of numerous
organizations around the world. In the process,
management science has made a significant contribution
to increasing the productivity of the economies of various
countries.
Business Usage of OR
cont…
Management science can be applied in every field
of life.
1.Macro Economic Planning:
OR can be employed for Macro-Economic Planning of the
country:
a) Input / Output Analysis: by using LP models. This
input/output analysis can be of any duration.
b) Investment Planning: MS/OR can be employed in the
Investment. Integer Programming and Linear Programming
techniques can be used.
c)Choice of Projects: MS/OR can help the people in the planning
in choosing the optimal project. This sort of choice would need
Integer Programming and Quadratic Assignment techniques.
m
2) Sectoral Planning:
 OR can also be employed in a particular sector of the Economy, in
agriculture, in finance, in industry, in marketing, in production, in
management.

Scheduling all operations within a sector

 production scheduling , Distribution planning marketing , Personnel,
management, maintenance & Inventory planning in agriculture , distribution
of fertilizer.

3) Micro Economic Planning:

Planning the operations of a Company. Improving the layout of a workshop in

a company.
 Question: what are the most applications of OR
in business and industry have resulted in annual
savings in the hundreds of millions of dollars?

THE END
THANK YOU!