PHARMA COLLEGE

HAWASSA CAMPUS

Operations Research

Target Group: 4th year Management Students

Instructor:
Dr. Sintayehu Assefa (Ph.D.)
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 Chapter One

INTRODUCTION TO OPERATIONS RESEARCH

Time allotted: 4hrs

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 INTRODUCTION TO OPERATIONS
RESEARCH
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OBJECTIVES

After studying this chapter, you should be able to:

 Define operations research

 Describe the history of Operations research

LEARNING

 Explain the scope of Operations research

 Identify nature and significance and features of operations

research

 Understand models and modeling in operation research

Introduction to operations research
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 Decision-making in today’s social and business environment has

become a complex task. The uncertainty of the future and the
nature of competition and social interaction greatly increase the
difficulty of managerial decision-making.

 Operations Research as one of the quantitative aid to decision-

making, offers the decision maker a method of evaluating every
possible alternative (act or course of action) by using various
techniques to know the potential outcomes.
Conti…
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Conti…
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 Operations research is essentially a collection of mathematical

techniques and tools which in conjunction with systems
approach, is applied to solve practical decision problems of an
economic or engineering nature.
Conti…
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 “… Operations Research is often an experimental science as well

as an observational one.”
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 “Operations Research” is the application of scientific methods,

techniques and tools to problems involving the operations of
systems so as to provide those in control of operations with
optimum solution to the problems. CHURCHMAN

 OR is a scientific method of providing executive departments

with a quantitative basis for decisions under their control. P.M.
MORSE & G.E. KIMBAIL
Conti…
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 OR is the art of winning wars without actually fighting them.

AUTHER CLARK

 OR is the systematic application of quantitative methods,

techniques and tools to the analysis of problems involving the
operation of systems. DAELLENBACK & GEORGE

 Thus, we can conclude by saying OR arrives at optimal or near

optimal solutions to complex decision making problems.
History of Operations Research
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 Many experts consider the start of OR in the III century B.C,

during the II Punie War, with analysis and solution that
Archimedes named for the defense of the city of Syracuse,
besieged by the Romans.

 In 1503, Leonardo Da Vinci took part in the war against Prisa

because he knew the techniques to accomplish bombardments, to
construct ships, armored vehicles, cannons, catapults, and
another warlike machines.
Conti…
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 In 1885 Ferderick W. Taylor emphasized the application of

scientific analysis to methods of production.

 In 1917, A. K. Erlang, a Danish mathematician, published his

work on the problem of congestion of telephone traffic.

 In 1930, H.C. Levinson, an American astronomer, applied

scientific analysis to the problem of merchandising.
Conti…
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 However, the development of OR started during the Second

World War.

 The name was also derived from its use for research on Military
Operations during the war.

 Since strategic and tactical decisions during the war are very
complicated with time horizon for such decisions being
comparatively small, the necessity for group analysis and use of
mathematical, economic and statistical theories along with
engineering, behavioral and physical sciences was felt and
utilized.
Conti…
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 American and British groups worked on various research

projects.

 Success and usefulness of these projects led to the development

of various techniques for decision making and later the results
prompted their uses in business applications and civilian
problems.

 Hence, when the war ended, an effort was made to apply the OR
techniques to other areas of business and industry.
Scope of operations research
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 The scope of OR is not only confined to any specific agency like

defense services but today it is widely used in all industrial
organizations

 It can be used to find the best solution to any problem be it

simple or complex. It is useful in every field of human activities.

 Thus, it attempts to resolve the conflicts of interest among the

components of organization in a way that is best for the
organization as a whole.
The main fields where OR is extensively used are
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 1. National Planning and Budgeting

 2. Defense Services

 3. Industrial establishment and private sector units

 4. R&D and engineering

 1. National Planning and Budgeting
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 OR is used for the preparation of:

 Five year plans,

 Annual budgets,
 Forecasting of income and expenditure,
 Scheduling of major projects of national importance,
 Estimation of GNP,
 GDP,
 Population,
 Employment and generation of agriculture yields, etc.
2. Defense Services
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 Basically formulation of OR started from USA army, so it has

wide application in the areas such as:

 Development of new technology,

 Optimization of cost and time,
 Tender evaluation,
 Setting and layouts of defense projects,
 Assessment of “Threat Analysis”,
 Strategy of battle,
 Effective maintenance and replacement of equipment,
 Inventory control,
 Transportation, supply depots, etc.
3. Industrial establishment and private sector units
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 OR can be effectively used in:

 Plant location and setting finance planning,

 Product and process planning,
 Facility planning and construction,
 Production planning and control,
 Purchasing,
 Maintenance management,
 Personnel management, etc.
4. R&D and engineering
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 Research and development being the heart of technological

growth, OR has wide scope and can be applied in:

 Technology forecasting and evaluation,

 Technology and project management,
 Preparation of tender and negotiation,
 Value engineering,
 Work or method study and so on.
Nature and significance of operations research
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 The job of OR is to examine, formulate, analyze, treat, solve the

problems of management in a scientific way.

 OR study is always rooted in mathematical analysis.

 OR is also an interdisciplinary mathematical sciences employing

techniques from other mathematical sciences - such as
mathematical modeling, statistical analysis and mathematical
optimization - OR arrives at optimal or near-optimal solutions to
complex decision making problem.
Conti…
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 OR has overlap with other disciplines, notably industrial

engineering, management science, psychology and economics.

 Some of the tools used in OR are statistics, optimization,

probability theory, game theory, decision analysis, mathematical
modeling and simulation.

 Because of the computational nature of these fields, OR has also

strong ties to computer science and analytics.
The principal phases for implementing OR
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a) Definition of the problem:

 It involves defining the scope of the problem under investigation
which is carried out by the entire OR team.

 The end result of the investigation is to identify three principal

elements of the problem:

1) Description of decision alternatives.

2) Determination of the objective of the study and
3) Specification of the limitations under which the modeled
system operates.
Conti…
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b) Model Construction:
 Here the problem is translated into mathematical relationship.

c) Model Solution:
 Model is solved using various mathematical and statistical tools

using the input data.

d) Implementation of the solution of a model:

 It involves the translation of the results into operating
instructions.
Features of operations research approach
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 1. Inter-disciplinary team approach - The optimum solution is

found by a team of scientists selected from various disciplines.

 2. Methodological Approach - It is the application of scientific

methods, techniques and tools to problems involving the
operations of systems so as to provide those in control of
operations with optimum solutions to the problems.

 3. Holistic approach to the system - OR takes into account all

significant factors and finds the best optimum solution to the total
organization.
Conti…
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 4. Objectivistic Approach - It seeks to obtain an optimal solution

to the problem under analysis.

 For this, a measure of desirability (or effectiveness) is defined,

based on objective(s) of the organization.

 A measure of desirability so defined is then used to compare

alternative courses of action with respect to their outcomes.
Conti…
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 5. Decision Making - OR increases the effectiveness of

management decisions.

 It is the decision science which helps management to make

better decisions.

 So the major premise of OR is decision making, irrespective of

the situation involved.
Conti…
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 Use of computers - OR often requires a computer to solve the

complex mathematical model or to perform a large number of
computations that are involved.

 Use of scientific research - OR uses scientific research to reach

optimum solution.

 Human factors - In deriving quantitative solution, we do not

consider human factors which doubtlessly play a great role in the
problems. So study of the OR is incomplete without a study of
human factors.

 Optimize the total output - It tries to optimize by maximizing the

profit and minimizing the loss.
Techniques or tools of Operations research
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 Linear programming
 Queuing theory
 Transportation problems
 Integer programming
 Assignment problems
 Decision theory and Games theory
 Replacement problems
 Symbolic logic
Model and modeling in operations research
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 A model in OR is a simplified representation of an operation, or

is a process in which only the basic aspects or the most important
features of a typical problem under investigation are considered.

 The objective of a model is to identify significant factors and

interrelationships. The reliability of the solution obtained from a
model depends on the validity of the model representing the real
system.

 Both simple and complex systems can easily be studied by

concentrating on some portion or key features instead of
concentrating on every detail of it.
Conti…
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 Models can be constructed in various forms by establishing

relationships among specified variables and parameters of the
system, is called a model.

 Models do not, and cannot, represent every aspect of reality

because of the innumerable and changing characteristics of the
real life problems to be represented.

 For a model to be effective, it must be representative of those

aspects of reality that are being investigated and have a major
impact on the decision situation.
A good model must possess the following characteristics
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 It should be capable of taking into account, new formulation

without having any changes in its frame
 Assumptions made in the model should be as small as possible
 Variables used in the model must be less in number ensuring that
is simple and coherent
 It should be open to parametric type of treatment
 It should not take much time in its construction for any problem
Classification of OR Model
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 OR model is an abstract representation of an existing problem

situation. It can be in the form of a graph or chart, but most
frequently an OR model consist of a set of mathematical
relationships.
Based Based on function Based on time Based on Degree Based
on structure or purpose of certainty on method of
solution
Physical Descriptive models Static models Deterministic Heuristic
models models

Symbolic Predictive models Dynamic models Probabilistic Analytical

models models

Normative Simulation
(Optimization)
Classification based on structure
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Physical (Iconic) models Symbolic models

 They are pictorial representations of  These models use symbols (letters,
real systems and have the appearance numbers) and functions to represent
of the real thing variables and their relationships to
describe the properties of the system.
 These models is said to be scaled down
or scaled up according to the  They employ a set of mathematical
dimensions of the model which may be symbols to represent the components of
smaller or greater than that of the real the real system.
item. Example, city maps, houses
blueprints, globe, and so on  These variables are related together by
means of mathematical equations to
 Physical models are easy to observe, describe the behavior of the system
build, and describe, but are difficult to
manipulate and are not very useful for  The solution of the problem is then
the purpose of prediction obtained by applying well developed
mathematical techniques to the model
Classification based on function or purpose
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Descriptive models Predictive Models Normative

(Optimization)
models
It describe some aspects of It indicate “If this occurs, These models provide the
a situation. It is based on then that follow”. “best” or “Optimal”
observation, survey, solution to problems
questionnaire results or They relate dependent subject to certain
other available data. and independent limitations on the use of
variables and permit resources.
Example: trying out, “what if”
Organizational chart, plant questions.
layout diagram, etc.
Classification Based on Time Reference
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Static Models Dynamic models

 Static models represent a system at  In dynamic models, time is
some specified time and do not considered as one of the variables
account for changes over time. and allows the impact of changes
due to change in time.
 For example, an inventory model
can be developed to determine an  Thus, sequences of interrelated
economic order quantity for the next decisions over a period of time are
period assuming that the demand in made to select the optimal course of
planning period would remain the action to optimize the given
same as that for today. objective.

 Dynamic programming is an
example of a dynamic model.
Classification based on Degree of certainty
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Deterministic Models Probabilistic (Stochastic) models

 If all the parameters, constants and  Models in which at least one

functional relationships are assumed parameter or decision variable is a
to be known with certainty when the random variable are called
decision is made, the model is said to probabilistic (or stochastic).
be deterministic.
 These models reflect to some extent
 Thus, in such a case, the outcome the complexity of the real world
associated with a particular course of and the uncertainty surrounding it.
action is known.

 The results of the models assume

single value. Linear programming
and break-even models are examples
of deterministic models.
Classification Based on Method of solution
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Heuristic Models Analytical Models Simulation Models

These models employ some These models have a specific Is essentially computer-
sets of rules which, though mathematical structure and thus assisted experimentation
perhaps not optimal, do can be solved by known on a mathematical
facilitate solutions of analytical or mathematical structure of a real time
problems when applied in a techniques. structure in order to study
consistent manner. the system under a
variety of assumptions
For example, a general linear
programming model as well as Computer-assisted
the specially structured experimentation on a
transportation and assignment mathematical structure of
models are analytical models a real-life problem
Limitations of OR
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 Magnitude of computation
 Non-quantifiable factors
 Distance between user and analyst
 Time and money costs
 Implementation
 Magnitude of computation
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 OR models try to find out optimal solution taking into account all
the factors.

 But, these factors are enormous and, expressing them in

quantity, and establishing relationships among these, require
voluminous calculations which can be handled only by
computers
Non-quantifiable factors
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 OR provides solution only when all elements related to a

problem can be quantified.

 All relevant variables do not lend themselves to quantification.

Factors which cannot be quantified, find no place in OR study.

 Models in OR do not take into account qualitative factors or

emotional factors which may be quite important.
 Distance between user and analyst
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 OR being specialist’s job requires a mathematician or

statistician, who might not be aware of the business problems.

 Similarly, a manger fails to understand the complex working of

OR.

 Thus there is a gap between the two. Management itself may

offer a lot of resistance due to conventional thinking.
Time and money costs
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 When basic data are subjected to frequent changes, incorporating

them into the OR models is costly proposition.

 Moreover, a fairly good solution art present may be, more

desirable than a perfect OR solution available after sometime.

 The computational time increases depending upon the size of the

problem and accuracy of results desired.
Implementation
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 Implementation of any decision is a delicate task. It must take

into account the complexities of human relations and behavior.

 Sometimes, resistance if offered due to psychological factors

which may not have any bearing on the problem as well as its
solution.
 End of Chapter 1
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