Decision Modeling and Optimization: DR - Srilakshminarayana, G. December 25, 2011

Decision Modeling and Optimization
Dr.Srilakshminarayana,G. December 25, 2011
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Operations Research/ Management Science
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Introduction to Operations Research (OR)/Management Science (MS).

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Origins of Operations Research.
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Origins of Operations Research. The nature and impact of OR.
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Origins of Operations Research. The nature and impact of OR. Phases of OR.
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Origins of Operations Research. The nature and impact of OR. Phases of OR. The structure of Mathematical Models.
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Origins of Operations Research. The nature and impact of OR. Phases of OR. The structure of Mathematical Models. Business and Management Science.
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Origins of Operations Research. The nature and impact of OR. Phases of OR. The structure of Mathematical Models. Business and Management Science. Management Science Applications.
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Origins of Operations Research. The nature and impact of OR. Phases of OR. The structure of Mathematical Models. Business and Management Science. Management Science Applications.
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1.Origins of Operations Research
Need for Operations Research.
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Need for Operations Research. Operations Research during World War-II.
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Need for Operations Research. Operations Research during World War-II. Post World War-II (Much of the postwar development of OR took place in the United States).
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Operations Research as a subject in Universities.
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Operations Research as a subject in Universities. Rapid growth after the introduction of electronic computers.
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Operations Research as a subject in Universities. Rapid growth after the introduction of electronic computers.
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Operations Research Society of America (ORSA) formed in the year 1952.
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In 1953, a national society called The Institute of Management Sciences (TIMS) was formed in U.S. to promote scientic knowledge in the understanding and practice of management.
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In 1955 ORSA and TIMS were merged to form the Institute of Operations Research and Management Sciences (INFORMS).
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By mid-1960, many theoretical advances had been made: Linear Programming, Network analysis, Integer Programming, Non-Linear Programming, Dynamic Programming, Inventory Theory etc.
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Applications: Banks, Health, Communications, Libraries, Transportation etc.
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Local, State and Federal Governments in their planning and policy-making activities.
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Local, State and Federal Governments in their planning and policy-making activities.
What is Operations Research?

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A common denition OR is a scientic method for providing a quantitative basis for decision making that can be used in almost any eld of endeavor.
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Mathematics VS OR.
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Mathematics VS OR. Most often mathematics problems can be clearly stated and have a specic answer.
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OR problems are frequently poorly posed: they arise when someone has the vague feeling that the established way of doing things can be improved.
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A Central problem in OR is the optimal allocation of scarce resources.


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A Central problem in OR is the optimal allocation of scarce resources.

Scarce resources include raw materials, labor, capital, energy, and processing time.
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Scarce resources include raw materials, labor, capital, energy, and processing time.
A manufacturer could consult an operations research analyst to determine which combination of production techniques should be used to meet market demands and minimize costs.
In 1975, Nobel Prize in Economics was awarded to T.C.Koopmans and L.V.Kantorovich for their contribution to the theory of optimum allocation of resources.
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OR encompasses many scientic disciplines, such as Mathematics, Statistics, Computer Science, Physics, Engineering, Economics, and Social Sciences, and has been successful in providing a systematic approach to complex decisions in manufacturing, service, military, and nancial operations.
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One of the reason for the appeal and success of operations research is that it draws on basic mathematical principles and uses them in clever and novel ways to solve all kinds of real-world problems.
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One of the reason for the appeal and success of operations research is that it draws on basic mathematical principles and uses them in clever and novel ways to solve all kinds of real-world problems.
Many of the applications make use of handy analytical results and formulas derived from system models, and can reveal how system performance varies with model parameters.
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When an approximate estimate is all that is needed, or all there is time for, in the many real-world situations where decisions must be made quickly.
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When an approximate estimate is all that is needed, or all there is time for, in the many real-world situations where decisions must be made quickly.
In situations where there is more time, and many alternatives are to be evaluated, such initial analyses can provide focus as to where more detailed numerical analyses are warranted.
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Other notions of OR
To some, OR is that certain body of problems, techniques, and solutions that has been accumulated under the name of OR over the past 50 years and apply OR when we recognize a problem of that certain genre.
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Other notions of OR
To some, OR is that certain body of problems, techniques, and solutions that has been accumulated under the name of OR over the past 50 years and apply OR when we recognize a problem of that certain genre.
To others, it is an activity or process, which by its very nature is applied.
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Denition by The Operational Research Society of Great Britain

Operational research is the application of the methods of science to complex problems arising in the direction and management of large systems of men, machines, materials and money in industry, business, government, and defense. The distinctive approach is to develop a scientic model of the system, incorporating measurement of factors such as chance and risk, with which to predict and compare the outcomes of alternative decisions, strategies or controls. The purpose is to help management determine its policy and actions scientically.
The Operations Research Society of America has oered a shorter, but similar, description: Operations research is concerned with scientically deciding how to best design and operate manmachine systems, usually under conditions requiring the allocation of scarce resources.
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2. The nature and Impact of OR

As its name implies, operations research involves research on operations. Thus, operations research is applied to problems that concern how to conduct and coordinate the operations (i.e., the activities) within an organization. The nature of the organization is essentially immaterial, and, in fact, OR has been applied extensively in such diverse areas as manufacturing, transportation, construction, telecommunications, nancial planning, health care, the military, and public services, to name just a few. Therefore, the breadth of application is unusually wide.
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The research part of the name means that operations research uses an approach that resembles the way research is conducted in established scientic elds. To a considerable extent, the scientic method is used to investigate the problem of concern.
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Specically, OR is also concerned with the practical management of the organization. Therefore, to be successful, OR must also provide positive, understandable conclusions to the decision maker(s) when they are needed.
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Another characteristic of OR is its broad viewpoint. As implied in the preceding section, OR adopts an organizational point of view. Thus, it attempts to resolve the conicts of interest among the components of the organization in a way that is best for the organization as a whole. This does not imply that the study of each problem must give explicit consideration to all aspects of the organization; rather, the objectives being sought must be consistent with those of the overall organization.
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An additional characteristic is that OR frequently attempts to nd a best solution (referred to as an optimal solution) for the problem under consideration. (We say a best instead of the best solution because there may be multiple solutions tied as best.) Rather than simply improving the status quo, the goal is to identify a best possible course of action. Although it must be interpreted carefully in terms of the practical needs of management, this search for optimality is an important theme in OR.
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Important Point
All these characteristics lead quite naturally to still another one. It is evident that no single individual should be expected to be an expert on all the many aspects of OR work or the problems typically considered; this would require a group of individuals having diverse backgrounds and skills. Therefore, when a full-edged OR study of a new problem is undertaken, it is usually necessary to use a team approach.
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Such an OR team typically needs to include individuals who collectively are highly trained in mathematics, statistics and probability theory, economics, business administration, computer science, engineering and the physical sciences, the behavioral sciences, and the special techniques of OR. The team also needs to have the necessary experience and variety of skills to give appropriate consideration to the many ramications of the problem throughout the organization.
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Phases of an Operations Research Study

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Problem denition and formulation.
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Problem denition and formulation. Authorization to model.
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Problem denition and formulation. Authorization to model. Model building and data collection.
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Problem denition and formulation. Authorization to model. Model building and data collection. Solution of the Model.
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Problem denition and formulation. Authorization to model. Model building and data collection. Solution of the Model. Model Validation.
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Problem denition and formulation. Authorization to model. Model building and data collection. Solution of the Model. Model Validation. Model presentation.
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Problem denition and formulation. Authorization to model. Model building and data collection. Solution of the Model. Model Validation. Model presentation. Model evaluation.
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Problem denition and formulation. Authorization to model. Model building and data collection. Solution of the Model. Model Validation. Model presentation. Model evaluation. Implementation of the study.
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Problem denition and formulation. Authorization to model. Model building and data collection. Solution of the Model. Model Validation. Model presentation. Model evaluation. Implementation of the study. Monitoring and Control.
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Problem denition and formulation. Authorization to model. Model building and data collection. Solution of the Model. Model Validation. Model presentation. Model evaluation. Implementation of the study. Monitoring and Control. Conclusion.
The structure of mathematical models

Mathematical models represent objects by symbols. The variables in the model represent the decision alternatives or items that can be varied in the real-life situation. There are two types of mathematical models: deterministic and probabilistic. Suppose the process described by the model is repeated many times. A deterministic model will always yield the same set of output values for a given set of input values, whereas a probabilistic model will typically yield many dierent sets of output values according to some probability distribution. The mathematical models that will be considered in this book are structured to include the following four basic components:
(a) Decision variables or unknowns. Typically we are seeking values for these unknowns, which describe an optimal allocation of the scarce resources represented by the model. For example, decision variables might represent purchase lot size, number of hours to operate a machine, or which of several alternatives to choose. (b) Parameters. These are inputs that may or may not be adjustable by the analyst, but are known either exactly or approximately. For example, purchase price, rate of consumption, and amount of spoilage could all be parameters.
(c) Constraints. These are conditions that limit the values that the decision variables can assume. For example, a variable measuring units of output cannot be negative; a variable measuring the amount to be stored cannot have a value greater than the available capacity.
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(d) Objective function. This expression measures the eectiveness of the system as a function of the decision variables. The decision variables are to be determined so that the objective function will be optimized. It is sometimes dicult to determine a quantitative measure of the performance of a system. Consequently, several objective functions may be tried before choosing one that will reect the goals of the client.
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Decision Modeling and Optimization: DR - Srilakshminarayana, G. December 25, 2011

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Decision Modeling and Optimization

Dr.Srilakshminarayana,G. December 25, 2011