Course title : MAN 305 -Operations Research

Unit -1
Introduction of Operation Research
Syllabus
• Introduction
• Nature and meaning of Operations Research,
• Management applications of Operations Research,
• Main characteristics of Operations Research,
• Scope of Operations Research,
• Role of Operations Research in decision making.
Introduction to Operations Research:
• Operational research is a systematic and analytical
approach to decision-making and problem-solving.
• O.R . is a branch of applied mathematics that uses
techniques and statistics to arrive at optimal solutions
to solve complex problems.
• It is typically concerned with determining the
maximum profit, sale, output, crop yield, and efficiency
and minimum losses, risks, costs, and time of some
objective function.
• Some of the tools and techniques used by Operation
Researchers are Linear programming
Waiting line theory or queuing theory, Inventory
control models, Network Analysis,
Dynamic programming, Assignment problems,
Decision theory, Integer Programming,
Transportation Problems, Simulation, Goal
Programming, Networking, Markov Analysis and
Game Theory.
Operational research is the discipline of applying
appropriate analytical methods to help make better
decisions.
Operations research :The application of methods of
science to complex problems arising in the direction
and management of large number of men , machine ,
materials , and money , in industry business
government , and defense .
Operations research is the systematic application of
quantitative methods ,techniques and tools to the
analysis of problem involving the operations of
systems.
History of OR :
• The name was derived from its use for research on
military operations during second world war.
• After the war , the OR approach is used in other
areas like business and industry .
• In 1947 ,George B.Dantzig developed linear
programming and simplex methods later some more
techniques are developed in OR.
Significant features/Nature/Characteristics of
Operations Research:
Systematic orientation
OR tries to identify all possible interactions in the activities of an
organization & studies their impact.
Interdisciplinary team approach
OR is performed by a team of scientists drawn from different facilities,
statistics, economics, engineering, management, physics, etc
Scientific approach
It is a formalized process of reasoning where the problems are defined
&analyzed scientifically.
Decision making
OR is a science that helps management to take a better
decisions.
Optimization objective
It attempts to find the best and optimal solution to a problem
using OR techniques.
Mathematical models & Quantitative solution
OR use models build by quantitative measurement of variable
concerning a given problem & derives a quantitative solution
from the model.
Imperfectness of solutions :
By OR techniques, we cannot obtain perfect answers to our
problems but, only the quality of the solution is improved from
worse to bad answers.
Use of digital computer:
The model of OR needs a lot of computation and therefore, the
use of computers becomes necessary. With the use of
computers, it is possible to handle complex problems requiring,
a large number of calculations.
Scope/ Application of Operations Research in Management :
Today, almost all fields of business and government utilize the
benefits of Operations Research. There are voluminous
applications of Operations Research.
In Agriculture :
• Optimum allocation of land to various crops in accordance
with the climate conditions; and
• Optimum distribution of water from various resources for
irrigation purposes.
In Finance:
• Building cash management models
• Allocating capital among various alternatives
• Building financial planning models
• Investment analysis
• Portfolio analysis
• Dividend policymaking
In Industry:
• OR is useful to the industry director in deciding the optimum
allocation of various limited resources such as men, machines,
materials, money, time, etc., to arrive at the optimum decision.
In Marketing :
With the help of OR techniques a marketing administrator
(manager) can decide:
• Where to distribute the produces for sale so that the total
cost of transportation etc. is minimum ;
• The minimum per unit sale price;
• The size of the stock to meet future demand.
• How to select the best advertising media with respect to time,
cost, etc.
• how, when, and what to purchase at the minimum possible
cost?
In Personal Management:
A personal manager can use OR techniques:
• To appoint the most suitable persons on minimum salary,
• to determine the best age of retirement for the employees,
• To find out the number of persons to be appointed on a full–
time basis when the workload is seasonal (not continuous ).
In Production Management
A production manager can use OR techniques:
• To find out the number and size of the items to be produced ;
• In scheduling and sequencing the production is run by proper
allocation of machines;
• In calculating the optimum product mix; and
• To select, locate, and design the sites for the production
plants.
In Research and Development :
• Determination of the areas of concentration of Research
and Development.
• Reliability & control of the development of projects.
• Selection of projects &preparation of their budgets.
In Accounting:
• Assigning audit teams effectively
• Credit policy analysis
• Cash flow planning
• Developing standard costs
• Establishing costs for by-products
Construction :
• Project scheduling, monitoring, and control
• Determination of proper workforce
• Deployment of workforce
• Allocation of resources to projects
Manufacturing :
• Inventory control
• Marketing balance projection
• Production scheduling
• Production smoothing
Organizational Behavior / Human Resources:
• Personnel planning
• Recruitment of employees
• Skill balancing
• Training program scheduling
• Designing organizational structure more effectively
Purchasing:
• Optimal buying
• Optimal reordering
• Materials transfer
Scope of Operations Research:
There is a great scope for economists, statisticians,
administrators and technicians working as a team to
solve the problem of defense by using the OR
approach. OR is useful in various other important
fields like:
• Agriculture, Finance, Industry, Marketing, Personal
management, Production management , Research
and Development and Military Operations.
Characteristics of Operations research:
Decision making
• OR is a decision science which helps management to
make better decisions.
Use of Information Technology (IT)
• O.R. often requires a computer to solve the complex
mathematical model. Use of digital computer has
become an integral part of the operations research
approach to decision making.
Quantitative solution
• Operations research provides the managers with a
quantitative basis for decision making.
Scientific approach:
• O.R use the scientific methods, techniques and tools
for the purpose of analyzing and solving problems.
Role of Operations Research in decision making:
• OR provides a tool for scientific analysis
• OR offers solutions for various business problems
• OR enables proper deployment of resources.
• OR supports in minimising waiting and servicing
costs.
• OR helps the management to decide when to buy
and what is the procedure of buying .
• OR helps in reducing the total processing time
necessary for performing a set of jobs.
 Modelbuilding: This includes determination
of assumptions , decision variables or
parameters , constraints or restrictions ,
objective functions.
Models& Modeling in OR :
Classification based on structure
Physical model :
An iconic model is a scaled (small or big in
size) version of the system.
An analogue model does not resemble
physically the system they represent but retain
a set of characteristics of the system.
Mathematical model : These models use mathematical
symbols, letters, numbers and mathematical operators (+, –,
÷, ×) to represent relationships among variables of the
system to describe its properties or behavior.
Classification based on purpose or function:
Descriptive models: These models are used to investigate
the outcomes or consequences of various alternative courses
of action (strategies, or actions).
Predictive models :These models represent a relationship
between dependent and independent variables and hence
measure ‘cause and effect’ due to changes in independent
variables.
Normative (optimization )model: These models provide the ‘best’ or
‘optimal’ solution to problems using an appropriate course of action
(strategy) subject to certain limitations on the use of resources.
Classification based on time reference:
Static models represent a system at a particular point of time and do
not take into account changes over time
Dynamic models take into account changes over time, i.e., time is
considered as one of the variables while deriving an optimal solution
Classification based on degree of certainty :
Deterministic models :If all the parameters, constants and functional
relationships are assumed to beknown with certainty when the
decision is made, the model is said to be deterministic.
Probabilistic models: If at least one parameter or decision variable is
random (probabilistic or stochastic) variable, then the model is said
to be probabilistic.
Classification based on methods of solution:
Analytical models :These models have a specific mathematical
structure and thus can be solved by the known analytical or
mathematical techniques.
Simulation models: These models have a mathematical structure but
cannot be solved by the known mathematical techniques.
Explain the various steps in the O.R.
Step I: Observe the problem environment
The first step in the process of O.R. development is the problem
environment observation. This step includes different activities; they
are conferences, site visit, research, observations etc.
Step II: Analyze and define the problem
This step is analyzing and defining the problem. In this step-in addition
to the problem definition the objectives, uses and limitations of O.R.
and its nature understanding.
Step III: Develop a model
This step develops a model; a model is a representation of some abstract or
real situation. The models are basically mathematical models, which
describes systems processes in the form of equations, formula/relationships.
Step IV: Select appropriate data input
A model works appropriately when there is appropriate data input. Hence,
selecting appropriate input data is important step in the O.R. development
stage or process. The activities in this step include internal/external data
analysis, fact analysis, and collection of opinions and use of computer data
banks.
Step V: Test the solution
This step is to get a solution with the help of model and input data. This
solution is not implemented immediately, instead the solution is used to test
the model and to find there is any limitations.
Step VI: Implement the solution
 At this step the solution obtained from the previous step is
implemented. The implementation of the solution involves mo many
behavioural issues. Therefore, before implementation the
implementation authority has to resolve the issues.
Explain any eight techniques of OR.
Operations Research uses any suitable tools or techniques available.
The common frequently used tools/techniques are mathematical
procedures, cost analysis, electronic computation. However,
operations researchers given special importance to the development
and the use of techniques like linear programming, game theory,
decision theory, queuing theory, inventory models and simulation. In
addition to the above techniques, some other common tools are non-
linear programming, integer programming, dynamic programming,
sequencing theory, Markov process, network scheduling (PERT/CPM),
symbolic Model, information theory, and value theory.
Linear Programming:
This is a constrained optimization technique, which optimize some
criterion within some constraints. In Linear programming the
objective function (profit, loss or return on investment) and
constraints are linear.
Game Theory:
This is used for making decisions under conflicting situations where
there are one or more players/opponents.
Decision Theory:
Decision theory is concerned with making decisions under conditions
of complete certainty about the future outcomes and under
conditions such that we can make some probability about what will
happen in future.
Queuing Theory:
This is used in situations where the queue is formed (for example
customers waiting for service, aircrafts waiting for landing, jobs waiting
for processing in the computer system, etc).
Inventory Models:
Inventory model make a decisions that minimize total inventory cost.
This model successfully reduces the total cost of purchasing, carrying,
and out of stock inventory.
Information Theory:
This analytical process is transferred from the electrical communication
field to O.R. field. The objective of this theory is to evaluate the
effectiveness of flow of information with a given system .
 
Network Scheduling:
 This technique is used extensively to plan, schedule, and monitor large
projects (for example computer system installation, R & D design,
construction, maintenance, etc.).
Program Evaluation and Review Technique (PERT) – is used when activities
time is not known accurately/ only probabilistic estimate of time is
available.
 Critical Path Method (CPM) – is used when activities time is know accurately
Simulation:
Simulation is a procedure that studies a problem by creating a model of the
process involved in the problem and then through a series of organized trials
and error solutions attempt to determine the best solution.
Dynamic Programming:

Dynamic programming is a method of analyzing multistage decision

Integer Programming:
If one or more variables of the problem, take integral values only then
dynamic programming method is used. For example, number or motor
in an organization, number of passenger in an aircraft, number of
generators in a power generating plant, etc.