OPERATION RESEARCHMKT-505

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OPERATION RESEARCH:ART OR SCIENCE?

Operations Research – problem solving steps

Real-WorldProblem

Recognition and Definition

of the Problem

Formulation and Construction of

the Mathematical

Model

Solutionof the Model

InterpretationValidation and

Sensitivity Analysis

of the Model

Implementation

WHAT IS OR … Operations The activities carried out in an organization

(stakeholder relation, strategy, marketing, HR). Research The process of observation and testing characterized by the

scientific method. Situation problem statement model construction validation experimentation candidate solutions.

Operations Research is a quantitative approach to decision making based on the scientific method of problem solving. CAN IT BE QUALITATIVE?

Primary applications areas of Operations Research include forecasting, production scheduling, inventory control, capital budgeting, and transportation

I say: Operations Research is

Application of SCIENTIFIC METHOD

Analysis of MANAGERIAL PROBLEMS

Study of LARGE & COMPLEX SYSTEMS

Finding OPTIMAL SOLUTION

Use of MATHEMATICAL MODELS Use of COMPUTERS & SPECIAL SW

TERMİNOLOGY

The British/Europeans refer to “Operational Research", the Americans to “Operations Research" - but both are often shortened to just "OR".

Another term used for this field is “Management Science" ("MS"). In U.S. OR and MS are combined together to form "OR/MS" or "ORMS".

Yet other terms sometimes used are “Industrial Engineering" ("IE") and “Decision Science" ("DS").

NAME AND TOOLS

operational research

operations analysis quantitative

analysis quantitative

methods systems analysis decision analysis decision science

Lingo (LINDO) MPL for Windows XPRESS (FICO) CPLEX (IBM ILOG) AIMMS AMPL Gurobi NEOS MS Excel (FRONTLINE

SOLVERS) SIMPROCESS SIMUL 8 Matlab

Alternative Names Software for OR

Operations Research Models

Deterministic Models Stochastic Models

• Linear Programming • Discrete-Time Markov Chains

• Network Optimization • Continuous-Time Markov Chains

• Integer Programming • Queuing Theory (waiting lines)

• Nonlinear Programming • Decision Analysis

• Inventory Models Game Theory

Inventory models

Simulation

Deterministic vs. Stochastic Models

Deterministic models assume all data are known with certainty

(HR payroll _ current); NO randomness Stochastic models

explicitly represent uncertain data via

random variables or stochastic processes. Space ship project, insurance

Deterministic models involve optimization

Stochastic models characterize / estimate system

performance.

ORIGIN & HISTORY

During WW II, Britain engaged more than 1000 worker in OR and 200 OR scientists.

‘Circus’ team by Patric Blakeckt in Royal Aircraft Establishment (RAE) helped to reduce the number of Anti-Aircraft Artillery to shot down enemy aircraft (avg. 20,000 to 4,000).

1890Frederick TaylorScientific Management[Industrial Engineering]

1900•Henry Gannt[Project Scheduling]•Andrey A. Markov[Markov Processes]•Assignment[Networks]

1910•F. W. Harris[Inventory Theory]•E. K. Erlang[Queuing Theory]

1920•William Shewart[Control Charts]•H.Dodge – H.Roming[Quality Theory]

1930Jon Von Neuman – Oscar Morgenstern[Game Theory]

1940•World War 2•George Dantzig[Linear Programming]•First Computer

1950•H.Kuhn - A.Tucker[Non-Linear Prog.]•Ralph Gomory[Integer Prog.]•PERT/CPM•Richard Bellman[Dynamic Prog.]ORSA and TIMS

1960•John D.C. Litle[Queuing Theory]•Simscript - GPSS[Simulation]

1970•Microcomputer

1980•H. Karmarkar[Linear Prog.]•Personal computer•OR/MS Softwares

1990•Spreadsheet Packages•INFORMS

2006-14•You are here

DEFINITION(S)…

OR is the art of winning the war without actually fighting them. -Aurther Clark

OR is a scientific approach of problem solving for executive management. -H.M. Wagner

WHY OR IS FOR? Simulation: Gives the ability to try out

approaches and test ideas for improvement- space science

Optimization: Narrows down choices to the very best when there are virtually innumerable feasible options and comparing them is difficult- transportation, flight schedule.

Probability and Statistics: Helps in measuring risk, mine data to find valuable connections and insights, test conclusions, and make reliable forecasts- GDP growth.

CHARACTERISTICS OF OR Use of interdisciplinary teams: analyze problem

from different angle (social, economic …)

Application of scientific methods: CPM (critical Path Measurement), PERT (Project Evaluation & Review Technique)

Improvement in quality of decision making process: bus/train schedule

Quantitative precision: aerospace, space ship. System Orientation: grocery shop to mega

shop New form of Problem identification: oil price-

demand & supply?

AREAS OR DEALS WITH…

Project Management Floor Planning: Factory

Equipment layout Network Optimization:

Telecomm Industry SCM: flow of raw

materials & product based on uncertainty

Automation

Scheduling: Pricing Routing: Bus/Train to

minimize no. of trip to serve max. passengers

Turning the color from Black to

White increased its camouflage by 20% & 30%

frigates would be attacked.

PHASES OF OR Judgment Phase:

Determination of Operation: assembling of engine associated with many (sub) assembling. Any conceivable operation will be associated with problem.

Determination of value/objective: manufacturing, tactical, engineering (type of situation). Objective- social, economic, aesthetic. Magnitude of risk and time limit etc.

Determination of Effectiveness: link between objective & analysis required for corrective action.

CONT. Formulation of problem relative to

objective: Remedial- plane crash, health hazard Optimization: train schedule, product line efficiency Transference: use of venom in Cancer medication Prediction: forecasting (El-nino)

CONT.

Research Phase: Observation & Data Collection: trend analysis Formulation of hypothesis: 0 or 1, true/false.

Good hypothesis depends on sound knowledge and accumulated data.

Info. and verification of hypothesis: analyze & interpret info

Prediction & generalized result: run the model, obtain a complete description.

Action Phase: GET THE WORK TO ROLL ON!!!

NECESSITY OF OR Complexity: oil production Customer demand: call center Raw material: Equipment capacity & probability of failure: BAT Risk/uncertainty: space craft. Knowledge Explosion: Sony simultaneously in

cell phone, TV, play station business Diverse Footprint: Walmart has its brunches in

11137 location

SCOPE OF OR Industry: Management looks ‘ultimately’

for PROFIT! OR team fosters alternatives.

Defence: varieties of activities to be inter linked i.e. operation, training, intelligence

Planning: both economic & social (education to administration)

Public Utilities: how premium for car to be decided? On what basis new sale girls would be appointed? Cost optimization?

OPTIMIZE YOUR COST…

You need to travel DHK-CTG a 5-week business plan. Each round trip ticket costs $400. You fly out Tuesday and get back Thursday. 20% discount for round trip if tickets are

purchased in weekends 25% discount (one way either)

What are the alternatives to optimize your cost?• Case #1: 5*DHK-CTG-DHK: 5*$400= $2000 Case#2: 1*DHK-CTG PLUS 4* CTG-DHK-CTG @

weekend PLUS CTG-DHK: 0.75*$400+4*(0.8*$400)+0.75*$400= 1880

Case#3 : 1* DHK-CTG-DHK (to cover 1st week and last week) PLUS 4* CTG-DHK-CTG (@

weekend)= 5*(0.8*400)= $1600