INTRODUCTION

TO
OPERATIONS RESEARCH
Evaluation Scheme
Number of credits : 3
Component Assignment slot Marks
Individual Assignments End of sessions 10 and 15 15 + 15
and case analysis (group work) - 2

Quiz (moodle) End of Session 20 10

Class Test End of Session 25 30

Project work & presentation (group 30th Session 20
work)
End Exam End of semester 60

Total Marks 150

What is Operational Research ?
 Origin of Operational Research
 Concept of Operational Research was originated during World war II, when British
Military Management called a group of scientist to study their operations and develop
strategies and tactics for military operations.
 The objective was efficient allocation of scarce resources for the war efforts.
 During the war time many scientific and quantitative techniques were developed to assist
military operations.
• Optimum convoy size
• Optimal way to deploy radar units
• Develop new flight patterns
• Minimize submarine attacks
 The term ‘Operational Research’ was derived directly from the context in which it was
used
 After the war, the operations research tools and techniques were adopted by industry, in
the field of business management.
 OR helps the managers determine tactical and strategic decisions more scientifically
Operations Research / Management Science / Decision Science/ Quantitative Analysis / OR

 Decision making is an essential part of management process

1. Decision under certainty – All facts are known fully and for sure, or
under uncertainty where the event that actually occur is not known but the probabilities can
be assigned to various possible occurrences

1. Decision for one time period only - Static decisions, or

2. a sequence of interrelated decisions made either simultaneously or over several time
periods, called Dynamic decision.

3. Rational opponent decision – decisions made considering actions of the competitors.

 Decision making situations are not mutually exclusive and complexities arise in decision
making due to several factors,
• political, economic, social, technological ethical, limitation of resources, values system,
risk attitudes and knowledge of decision maker etc.
 Approach to decision making

 Inductive - Heuristic
• Rule of thumb
• Common sense
• Snap judgement
• Gut Feeling

 Deductive – Analysis / algorithm

1. Define the problem in a clear manner
2. Collect relevant data / facts
3. Analyse the data thoroughly and
4. Derive and implement a solution
Operational Research
 Operational Research is the application of scientific methods of problem solving of the
operations of systems to provide optimum solutions to the problem.
 The basic characteristic feature of operations research is that, it employs mathematical
representation or models to analyze problems.
 The significant features of operations research are;
• Decision-Making – evaluating the alternatives and choosing the best available alternatives
• Scientific Approach – observations are made under varying conditions to determine the
behavior of the system
• Inter-Disciplinary Team Approach
• System Approach
• Use of Computers
• Objectives
• Human Factors
Scope of Operational Research
 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.
 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.

Area of OR Application
 National Planning and Budgeting
 Defense Services
 Industrial Establishment and Private Sector Units
 R & D and Engineering
 Business Enterprise
Operational Research Methodology
 OR approach to problem solving consists of six steps
1. Formulate the problem
2. Determine the assumptions (model building) and formulate the problem in mathematical
framework
3. Acquire the input data
4. Solve the model formulated and interpret the results
5. Validate the model
6. Implement the solution obtained
1. Formulate the problem
 The first step in OR is to develop a clear and concise statement of the problem.
 Logically, we cannot expect to get a right answer if the problem is identified incorrectly
 One problem may be related to other problem, therefore an analysis be made as to how the
solution to one problem is likely to affect the problem or situation in general
 Usually, we cannot deal with all the problems and has to focus only on few of them, that
whose solutions are likely to result in greatest profit increase or least cost
 once the problem has been identified, it is categorized as being standard or special problem
 The standard problems are known as programmed problems
 Programmed problems are well structured in their solution strategy, ex. assignment of
workers to jobs, fixing product mix,
 Special problems are unique and non recurrent in nature
2. Model Building
 Once the problem is defined, the next step is to build a suitable model.
 A model is a theoretical abstract or simplified representation of a real life problem
 Models can be classified as: physical models and symbolic models
a) Physical models – Is a physical or schematic representation of the real thing. There are two
types of physical models : Iconic and Analogue
• Iconic Models - Are scaled up or scaled down version of a particular thing that the represent.
ex. A model aeroplane in a wind tunnel, model sun and its planets in a planetarium, maps,
drawings,
• Analogue Models – The analogue models use one set of properties to represent another set.
ex, an electrical network model may be used as an analogue model to study the flows in
transportation system.
b) Symbolic Model – Many real life problems can be described by symbolic models or
mathematical forms.
• These are most general and abstract type of models and OR uses symbolic models
• Symbolic models can be verbal or mathematical. ex. perimeter: p = 2L+2W
2. Model Building (cont.)
• Mathematical models can be broadly classified as;
• Deterministic models – In which all parameters in the mathematical formulation are fixed
at predetermined values so that no uncertainty exists
a) Probabilistic models – Some or all the basic characteristics may be random variables
(capable of assuming different values with a given probabilities)
• Probabilistic models are also termed as stochastic or chance models.
• Mathematical models comprise three basic components :
1. Decision variables – Represents those factors where a choice could be made. Variables can
be manipulated and therefore are controllable by the decision maker.
2. The result Variables – Indicates level of effectiveness of a system, or out put of the system,
termed as dependent variables, are beyond the control of decision maker
3. Un-controllable variables – ex. profit function of a firm making two products can be stated
as:
P = p1x1+p2x2 , P = total profit, x1 and x2 are the number of units sold (independent
variables), p1 and p2 is the profit per unit of the product respectively (un-controllable
variable)
3. Obtain in-put data
 Once an appropriate model has been formulated, the next step is to obtain the data to
be used in the model as in-put
• A number of sources, including company reports and documents, interviews with the
company personnel etc.

4. Solution of Model
 Solution to a model implies determination of a specific set of decision variables that
would yield a desired level of output.

 The out-put in turn is determined by the principle of ‘optimization’

• Optimization might mean, maximizing the goal attainment from a given set of
resources or minimization of cost as will satisfy the required level of goal attainment
• The solution can be classified as;
a. feasible or infeasible
b. Optimal or non-optimal and
c. Unique or multiple
4. Solution of Model cont.
a. Feasible and Infeasible Solution
• A solution which satisfies all the constraints of the problem is called a feasible solution.

• A solution, which does not satisfy all the constraints. Since an infeasible solution fails to
to meet one or more system requirements, it is an unacceptable one.
• Only feasible solutions are of interest to the decision maker

b. Optimal and Non Optimal Solution

• An optimal solution is one of the feasible solutions to a problem that optimizes and is,
therefore the best among them.
• ex. for a multi product firm working under given constraints of capacity, marketing,
finance etc. the optimal solution would be that product mix which would meet all the
constraints and yield the maximum contribution margin towards profits.
• The feasible solutions other than optimal solution are called non- optimal solution.
c. Unique and Multiple Optimal Solution
• If only one optimal solution to a given problem exists, it is called a unique solution
• If two or more equally efficient solutions exist, then multiple optimal solution exist
5. Model validation
 The validation of a model require determining whether the model can adequately and
reliably predict the behaviour of the real system that it seeks to represent

 It involves testing the structural assumptions of the model to ascertain their validity

 Usually validity of the model is tested by comparing its performance with the past data
available in respect of the actual system.
6. Implementation
 The final step is implementation of results.

 The impact of decision may cut across various segments of the organization, and factors
like resistance to change, desired to be consulted and informed, motivation so on may
come in the way of implementation.
 Skills and expertise is needed to tackle the implementation issues.
Tools / Techniques of Operational Research

1. Linear Programming
2. Transportation Problems
3. Assignment Problems
4. Decision Theory
5. Markov Chain
6. Queuing Theory
7. Simulation Models
8. Games Theory
9. Sequencing
10. Replacement Problems
11. CPM and PERT Analysis
12. Forecasting Techniques
 1.Linear Programming (LP)
 This technique is used to find a solution for optimizing a given objective.
• Objective may be maximizing profits or minimizing costs.
 Objective function and boundary conditions are linear in nature.
 LP techniques solve Product-Mix and Distribution problems of enterprise.
 Its also used to allocate scarce resources in optimum manner in problems of scheduling,
product mix, etc.
2.Transportation Problems
Transportation problems deals with transportation of a product
 From a number of sources to number of destinations
 With limited supplies
 With specified demands
 At the total transportation cost.
 The main objective of transportation is to schedule shipment from sources to
destinations in such a way so as to Minimize the Total Transportation Cost.
3. Assignment Problems
It is a special type of linear programming problem.
It deals in allocating various resources or items to various activities in a one to one basis in
such a way that the time or cost involved is minimized and the sale or profit is maximized.
e.g. Manager may like to know which job should be assigned to which person so that
all jobs can be completed in the shortest possible time.

4.Decision Theory
Decision Theory is primarily considered with decision making under the conditions of:
• Risk and
• Uncertainty
5. Queuing Theory
 This theory deals with the situations in which queue is formed, e.g. customers waiting for
services, machines waiting for repairmen, and aircrafts waiting for landing strips, etc.
 If the Queue will be long the cost will be high due to long waiting hour.
 This technique is used to analyze the feasibility of adding facilities and to access the
amount and cost of waiting time.
 This calculations can then be used to determine the desirable number of service facilities
6. Simulation Model
A simulation model is a mathematical model that calculates the impact of uncertain inputs
and decisions we make on outcomes that we care about, such as profit and loss,
investment returns, environmental consequences, and the like. Basic building blocks are,
a. State of the system (e.g No of customers in a queue)
b. Possible state that can occur
c. Possible events (arrival rate and service rate)
d. Simulation clock (records the passage of time)
e. State transition (generated by various kinds of events)
7. Markov Chain
Formally, a Markov chain is a probabilistic automaton. The probability distribution of state
transitions is typically represented as the Markov chain’s transition matrix. If the Markov
chain has N possible states, the matrix will be an N x N matrix, such that entry (i, j) is the
probability of transitioning from state i to state j. Additionally, the transition matrix must be
a stochastic matrix, a matrix whose entries in each row must add up to exactly 1
8. Game Theory
Game theory attempts to take into consideration the interactions between the
participants and their behavior to study the strategic decision-making between rational
individuals.
It tries to find out the actions that a “player” should perform which would maximize
his chances of success mathematically and logically.
Actions by everyone involved directly alter dynamics of the game, and hence the
players are all interdependent.
The games can be broadly classified into two categories: zero-sum and non-zero-sum.
In zero-sum games, the loss of one is gain of another.
9. Sequencing
Models have been developed to find a sequence for Processing Jobs so that the total
elapsed time for all the jobs will be minimum.
 The models also help to resolve the conflict between the objectives of maximizing
machines utilization and complying with predetermined delivering rates.
10. Replacement Problems
This Theory is concerned with situations that arise when some items such as machines,
men, etc. require replacement due to their decreasing efficiency, failure or break-down.
• Sooner or later all the equipment are required to be replaced because of:
• Obsolescence
• Discovery of New Technology
• Better Design of Equipment

 In Replacement Decisions we consider:

• Cost of Equipment to be Installed
• Cost of Equipment Replaced, etc.
Hence, this theory helps to solve all Replacement Problems.
11..CPM PERT Analysis
Basically, CPM (Critical Path Method) and PERT (Programme Evaluation Review
Technique) are project management techniques, which have been created out of the need
of Western industrial and military establishments to plan, schedule and control complex
projects.
1.Define the Project and all of it’s significant activities or tasks.
2.Develop the relationships among the activities.
3.Draw the "Network" connecting all the activities. Assign time and/or cost estimates to
each activity
4.Compute the longest time path through the network.
5.Use the Network to help plan, schedule, monitor and control the project.
12.Forecasting Techniques
Limitations of Operational Research
Magnitude of Computation
 Operations research 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
1.OR provides solution only when all elements related to a problem can be quantified.
2.All relevant variables do not lend themselves to quantification.
3.Factors which cannot be quantified, find no place in OR study.
4.Models in OR do not take into account qualitative factors or emotional factors which may
be quite important.
 Distance between user and analyst
 OR being specialist’s job requires a mathematician or statistician, who might not be
aware of the business problems.

 Similarly, a manager 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 cost

 When basic data are subjected to frequent changes, incorporating them into the OR
models is a costly proposition.

 Moreover, a fairly good solution at 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.
Next Topic Linear Programming