Background

In the past, managers have made decisions using individualistic

approaches which rely on
Week 1
n creativity
n judgement
INTRODUCTION TO n intuition
OPERATIONS RESEARCH n experience

More recently, they have become more analytical. Why?

n increased access to powerful computer technologies
n quantitative methods are being used to solve complex
problems with more and more success.

The OR Approach The OR Approach

The terms
n management science (MS) Observation
n operations research (OR)
n quantitative analysis Problem Definition
n decision analysis

describe an approach which Model Construction

n focuses on managerial decision-making

n is scientific Solution
n relies on formal mathematical models
n involves the extensive use of computers Implementation

Constructing & Solving OR Problems OR Techniques

Some of the best-known models in OR are mathematical n Linear programming
programs: n Data Envelopment Analysis
n Transportation and assignment problems
n Integer and zero-one linear programming
Max Z = 50x1 + 60x2
n Goal programming
s.t. 2x1 + 3x2 180 n Nonlinear programming
3x1 + 2x2 150 n Network problems
x1 0; x2 0 n Project scheduling and control problems (CPM/PERT)
n Inventory models
Many OR problems can be solved as LPs .... n Queueing theory
n Markov analysis
but there are often alternative and more convenient ways of n Forecasting
formulating and solving them. n Decision theory and games
n Simulation

Copyright 2005 by C.J. O'Donnell. All rights reserved. Page 1

 Applications Brisbane International Airport
Applications can be found in the areas of :
Redevelopment of the airport
involved dredging sand from
n transportation
Moreton Bay and using it to
n telecommunications
compress swampy ground at
n law enforcement
20 sites (e.g., runway,
n health care
terminal).
n banking
n manufacturing
n merger-growth analysis, MWP Management P/L developed a transportation model to
n oil and gas exploration minimise the costs of handling the sand. The problem was
n personnel management solved using an OR software package, LINDO.

... just about every area of business and commerce. The model yielded savings of $400,000 compared to the
original plans submitted by the project engineers.

Grape Juice Management at Welchs CITGO Petroleum

Each year, Welchs processes In the early 1980s, Citgo

300,000 tons of grapes into was making losses on a
juice, jams and frozen turnover of US$4 billion.
concentrates, with annual sales
of over US$550 million. In 1984 the company
developed a refinery LP to
The firm holds inventories of raw materials and final goods. An make decisions regarding stock acquisition, refinery run levels,
LP was developed to minimise the costs of transporting grape unit turnaround options and hydrocracker conversion
juice between plants, adjusting plant recipes, and carrying stored
grape juice. The LP helped Citgo achieve a pre-tax profit of over US$70
million in 1985.
The LP saved the company more than $130,000 in its first year.

Generator Maintenance at Entergy Continental Airlines

Entergy uses probabilistic Airlines face schedule

decision analysis to plan outage disruptions, flight delays and
periods for preventative cancellations because of
maintenance on generators. unexpected events. They must
re-assign crews to quickly cover
The model accounts for changes open flights.
in consumer demand, unexpected
generator breakdowns, and delays in returning generators from CALEM Technologies developed CrewSolver to generate
planned outages. Each week, the model is solved to determine globally-optimal or near-optimal crew recovery solutions.
the average reserve of MW for that week, and this is then used to
determine if the planned maintenance schedule is adequate. In 2001, the system helped Continental save more than $40
million from schedule disruptions.
Using the model, the time spent reviewing maintenance
schedules has fallen from several days to less than an hour.

Copyright 2005 by C.J. O'Donnell. All rights reserved. Page 2

 Other Applications Using OR in Practice
n OR allows the manager to thoroughly analyse a large number
For more OR success stories visit:
of alternative options in a way that is often quick and
inexpensive.
http://www.orchampions.org/index.htm
n The benefits from using OR are potentially enormous relative
to the amounts of time and money required

But ...

n OR is really only an aid to decision making it often tends to

evaluate decisions in terms of a somewhat over-simplified
version of reality, so the results it produces cannot always be
guaranteed.

Using OR in Practice
Solving OR problems involves the extensive use of
computers. The software that will be used in tutorials is a
user-friendly add-in for MS Excel named Excel OM/QM.

To use the software, you must purchase the Taylor textbook.

A $50 ebook version of the`` global edition is available at
http://www.pearson.com.au/9781292092935.

PC and Mac versions of the software can be accessed from

the student resources link at Pearsonhighered.com/taylor.
The download file for Macs is a ZIP file. To start Excel
OM/QM, unzip the downloaded file and open the file named
excelOMQMv5.xlam.

Copyright 2005 by C.J. O'Donnell. All rights reserved. Page 3