INSTITUT SUPERIEUR DE GESTION

Course Title: Operations Research

Course Lecturer: Mr. Akum
Level: HND 2
Specialties: Accountancy, MTS, HRM, LTM

COURSE CONTENT

1) Introduction to Operation Research

- Rational of Operation Research

2) Model formulation

3) Concepts of the combinational optimization

4) Decision theory

a) Decision making under conditions of Certainty

i) Using Common Sense in Decision Making

ii) Using Linear Programming

- Introduction

- Formulation

- Solving using graphical method

- Solving using Simplex Tableau

b) Decision making under conditions of Certainty

- Maximax criterion

- Maximin Criterion

- Minimax Criterion

- Minimax Regret
 Lesson One

Introduction to Operations Research

Operations research originated during the world war era where executive decisions in the military were

undertaken using quantitative parameters. Modern basis of operations research is to sort operational

efficiency in decision making in the daily activities of individuals, corporate bodies and even governments.

Definition of Operations Research

It is the management science that deals with the various problems solving techniques that can be used for

the determination of the optimum condition during resource allocation so as the make the best use of

available resources. The main goal of Operations research is Optimization.

Rational of Operations Research

Operations research is important because it addresses several problems and it’s a discipline with growing

awareness. Its important can be seen in the following domains:

- Critical path analysis or project planning

- Allocation Problems (answer questions concerning which activity should an organization

undertake)

- Assignment problems (answers questions concerning what quantity of the activity or product to be

undertaken or produced)

- Optimal Search (answers questions concerning the best production mix of optimum point of

production)

- Etc.

Optimization

Optimization is all about making the best use out of available resources or following the best possible

course of action compatible with stated objectives.

Optimization considerations are particularly important because we all accept that very often enough

resources are not available and the available resources have conflicting uses which requires that the

resources be directed to that use that will give maximum benefits. Optimization can be seen as the next
best option when there are not enough resources for example, consider your situation as a student at ISG

university where to pass in good grade requires that: you attend every lecture, buy all text books, have

pocket allowance of at least 30,000frs per month, have constant electricity in your house, study each day

for at least 6hours. Does it mean that if you can’t afford the above requirements you shouldn’t pass in good

grade? Certainly No. What is required is that you make the best use out of your available resources,

prioritize certain activities and leave out certain others so as to gain more time for studies. If you do this

then you have just optimized our available resources.

Optimization is done within the constraints of available resources. In organizations, it can be done at

corporate levels and at departmental levels (sub optimization in which resources are optimized at

departmental levels)

Models Formulation

A model simply, is a simplified version of a real-world situation or an abstraction of reality.

Ways through which a real-world situation can be simplified

- By holding other relatively unimportant variables constant

- By changing the nature of relationships between variables

- By changing the nature of some variables

- By imposing simplifying assumptions

- By modifying constraints

Types of Models

There are 3types of models and they include:

- Iconic Models

- Analogous Models

- Symbolic models.

1) Iconic Models

They look exactly like the real-world situation they are representing except for the fact that they have a

reduced size e.g pictures

2) Analogous Models

They use similar characteristics to represent similar features e.g the use of contour lines in

geographical maps

3) Symbolic Models

They use symbols and mathematical signs to represent variables and the relationships between

variables respectively. These are the types of models used in operations research e.g linear

programming models.

Consider the model, X + Y = Z

X, Y and Z are variables and +, = are mathematical signs.

Decision theory

This is concerned with making a choice from amongst the various alternatives. This is necessary

because at any given point in time, our wants are unlimited while our means are limited. Usually,

decision makers need to prioritize their needs based of a scale of preference.

Decision Making Conditions

Decisions are made under two conditions: under conditions of certainty (where the decision-making

environment is well known) and under conditions of uncertainty (where the decision-making

environment is not well known).

Decision making under conditions of certainty

i) Using Common Sense

Common sense can be defined as the use of sound judgement or logical thinking in solving societal or

organizational problems. It is mostly applicable where there exists no valid or reliable model to follow.

It is essentially an intuitive process that depends on inherent traces within an individual. Generally

speaking, common sense is not common because it depends on the following factors:

Factors influencing the use of common sense

 - Level of education and training

- Environment

- Experience of the individual

- Availability of resources

- Self -esteem (self -confidence)

Pre conditions for the usage of common sense

To use common sense, four preconditions must prevail

1) There must be a problem that needs to be solved

2) Be able to accurately identify the various alternative ways of getting the problem solved

3) Logically evaluate the various alternative ways of getting the problem solved

4) Have the self-confidence to act on the best alternative

A) Using common sense where there exists a single limiting factor and single activity

The following terminologies are useful

- Limiting Factor: A limiting factor is that resource that inhibits an organization’s ability to produce

or undertake a certain activity above a certain limit or its ability to maximize output or activity.

- Activity: What the organization delivers it could be a product or a service

- Constraints: They restrictions or conditions that must be satisfied and also available resources

The starting point in using common sense in the case of a single limiting factor and single activity, will be

the identification of the limiting factor also called the key factor.

Example: A company produces a single product called product A which requires the use of 2 resources –

material and labour. To produce a unit of product A 5kgs of material and 2hours of labour are needed.

There are 500kgs of material and 120hours of labour available during the period.

a) Determine the maximum production level of this company identifying the limiting and the

unlimiting factors and the unused capacity.

b) If a unit of product A is sold at 10,000fcfa, what is the maximum revenue that the company can

generate.
c) Give an advice to this company concerning their resource allocation during the subsequent

production period.

Solution

Solve with students

Lesson Two

B) Using common sense where there exists a single limiting factor and multiple activities