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OPERATIONS RESEARCH:

THE SCIENCE OF BETTER.

OPERATIONS RESEARCH (ALSO KNOWN AS MANAGEMENT SCIENCE ) THE APPLICATION OF SCIENTIFIC METHODS, TECHNIQUES AND TOOLS TO PROBLEMS INVOLVING THE OPERATIONS OF A SYSTEM SO AS TO PROVIDE THOSE IN CONTROL OF THE SYSTEM WITH OPTIMUM SOLUTIONS TO PROBLEMS.
Operations Research is the discipline of applying advanced analytical methods to help make better decisions.

By using techniques such as mathematical modelling to analyze complex situations, operations research gives executives the power to make more effective decisions and build more productive systems based on: More complete data Consideration of all available options Careful predictions of outcomes and estimates of risk The latest decision tools and techniques

** Industrial engineering takes more of an engineering point of view, and industrial engineers typically consider OR techniques to be a major part of their tool set.

OPERATIONS RESEARCH:
BETTER DECISION MAKING.

WHY OPERATIONS RESEARCH NEEDED?


UNIQUELY POWERFUL APPROACH TO DECISION MAKING IN A COMPLEX WORLD

You face complex decisions


Youre having problems with processes. Youre troubled by risk. Your organization is not making the most of its data. You need to beat stiff competition.

OR CONSISTENTLY DELIVERS SIGNIFICANT VALUE STRATEGIC TO TACTICAL, TOP-LINE TO BOTTOM-LINE TO THE ORGANIZATIONS AND EXECUTIVES WHO USE IT. A FEW EXAMPLES: 1 SEARS USED O.R. TO CREATE A VEHICLE ROUTING AND SCHEDULING SYSTEM TO RUN ITS DELIVERY AND HOME SERVICE FLEETS MORE EFFICIENTLY FOR $42 MILLION IN ANNUAL SAVINGS. 2 THE PENTAGON USED O.R. TO SOLVE THE MASSIVE LOGISTICAL PROBLEMS OF SUPPLYING OPERATION DESERT STORM, AND TO PLAN THE SUCCESSFUL LIBERATION OF KUWAIT. 3 FORD USED O.R. TO OPTIMIZE THE WAY IT DESIGNS AND TESTS VEHICLE PROTOTYPES, SAVING $250 MILLION. VEHICLE PROTOTYPES, SAVING $250 MILLION.

4 DIRECTV USED O.R. TO ACCURATELY FORECAST CONSUMER ADOPTION OF SATELLITE TELEVISION.


5 UPS USED O.R. TO REDESIGN ITS OVERNIGHT DELIVERY NETWORK, FOR $87 MILLION IN SAVINGS BETWEEN 2000 AND 2002 AND ANOTHER $189 MILLION ANTICIPATED OVER THE FOLLOWING DECADE. 6 NBC USED O.R. TO IMPROVE ADVERTISING SALES PLANS, INCREASING REVENUES BY MORE THAN $200 MILLION. 7 THE CITY OF NEW HAVEN, CONNECTICUT USED O.R. TO DETERMINE DEFINITIVELY IF ITS NEEDLE EXCHANGE PROGRAM WAS REDUCING HIV INFECTION RATES.

OPERATIONS RESEARCH:
INNOVATION OF THE 20TH CENTURY.

Charles Babbage

Circa 1937, World War II a team of British scientists in England

Phillip Morse

TO CIVIL SECTOR

DIFFERENCE BETWEEN OR AND IT


IT
Focuses on data as a corporate resource Stores, retrieves, formats, displays data Understands business process and transactions

OR
Uses data as input Provides improved solutions Gives global focus
Multiple objectives Multiple criteria

OR ACTIVITIES

OR ADDRESSES A WIDE VARIETY OF ISSUES IN:


Transportation inventory planning production planning communication operations computer operations financial assets risk management revenue management improving business productivity

ANALYTICAL METHODS USED IN OPERATIONS RESEARCH:


Mathematical logic, Simulation Network analysis Queuing theory Game theory

3 STEPS IN OPERATIONS REASERCH PROCESS


(1)A set of potential solutions to a problem is identified and developed (the set may be rather large). (2)The alternatives derived in the first step are Analyzed, and reduced to a smaller set of solutions (the solutions have to be feasible and workable). (3)The alternatives derived in the second step are subjected to simulated implementation and, if feasible, exposed to an actual analysis in a real-world environment. It has to be pointed out that in the final step, psychology and management sciences often play a rather important role.

Generally speaking, OR improves the effectiveness and the efficiency of an institution.

METHODS IN OPERATIONS RESEARCH

Simulation Method Simulation is a modeling and analysis tool widely used for the purpose of designing, planning, and control of manufacturing systems. Simulation in general is to pretend that one deals with a real thing while really working with an imitation. Goal: Is to develop simulators that provide the decision maker with the ability to conduct sensitivity studies to (1) search for improvements, and (2) to test and benchmark the improvement ideas that are being made Optimization Method Optimization is the act of obtaining the best result under given circumstances. In design, construction, and maintenance of any engineering system, engineers have to take many technological and managerial decisions at several stages. Goal: Is to identify and locate the very best choice based on certains criteria Is either to minimize the effort required or to maximize the desired benefit.

Probability and Statistics Method The most important single mathematical tool of operations research is probability and statistical theory. Goal: Is to measure risk, mine data to find valuable connections and insights in business analytics, test conclusions, and make reliable forecasts.

Data Analysis Method This method is rather useful in numerous applications including forecasting and data mining based business environments. Goal: Is to aid the decision maker in detecting actual patterns and interconnections in the data set.

MODELS IN OPERATIONS RESEARCH

LINEAR PROGRAMMING Typically, a single objective function, representing either a profit to be maximized or a cost to be minimized, and a set of constraints that circumscribe the decision of variables. NETWORK FLOW PROGRAMMING A special case of the more general linear program. Includes such problem as the transportation problem, the assignment problem, the shortest path problem, the maximum flow problem, and the minimum cost flow problem. INTEGER PROGRAMMING Some of the variables are required to take on discrete values.

NON-LINEAR PROGRAMMING The objective and/or any constraints is non-linear. In general, much more difficult to solve than linear.

DYNAMIC PROGRAMMING
A DP models describe a process in terms of states, decisions, transition and returns. The process begin in some initial state where a decision is made. The decision causes a transition to a new state. Based on the starting state, ending state and a decision a return id realized. STOCHASTIC PROCESS In many practical situations the attributes of a system randomly change over time.

MARKOV PROCESS A continuous time stochastic process in which the duration of all state changing activities are exponentially distributed. Time is a continuous parameter. SIMULATION A general technique for estimating statistical measures of complex systems. A system is modeled as if the random variables are drawn randomly from their known probability distributions. Each replication gives one observation of the system response.

TIME-SERIES AND FORECASTING


A Time Series is a sequence of observations of a periodic random variable. Typically serve as input to OR decision models.

INVENTORY THEORY
Inventories are materials stored, waiting for processing. oWhen and how much raw material should be ordered? oWhen should a production order should be released to the plant? oWhat level of safety stock should be maintained at a retail outlet? oHow is in-process inventory maintained in a production process? RELIABILITY THEORY Attempts to assign numbers to the propensity of systems to fail. Estimating reliability is essentially a problem in probability modeling. Extremely important in the telecommunications and networking industry.

ICE BREAKER!!!!
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OPERRATONS RESEARCH IN MANUFACTURING

APPLICATIONS OF OR IN MANUFACTURING Scheduling Routing Workflow improvements Elimination of bottlenecks Inventory control Business process reengineering Site selection, or facility Selection General operational planning Revenue management entails first to accurately forecasting the demand, and secondly to adjust the price structure over time to more profitably allocate fixed capacity. Supply chain decisions describe the who, what, when, and where abstractions from purchasing and transporting raw materials and parts to the costumers. The prime management goal here may be to reduce overall cost while processing customer orders more efficiently than before.

INTRODUCTION TO LINEAR PROGRAMMING


LINEAR PROGRAMMING (LP) A technique used in the optimization of a linear objective function , subject to linear quality and linear inequality constraints. - Determines the best way to achieve the best outcome ( e.g. maximum profit or lowest cost ). In a given mathematical model and given some list of requirements represented as linear equations. LP is the ORists favorite tool because it is _ Simple, _ Easy to understand, _ Robust. Simple means easy to implement, easy to understand means easy to explain (to your boss), and robust means that its like the Swiss Army Knife: perfect for nothing, but good enough for everything.

MATHEMATICAL FORMULATION OF LINEAR PROGRAMMING MODEL


STEP 1 Study the given situation Find the key decision to be made Identify the decision variables of the problem STEP 2 Formulate the objective function to be optimized STEP 3 Formulate the constraints of the problem STEP 4 Add non-negativity restrictions or constraints The objective function, the set of constraints, and the nonnegativity restrictions together form an LP model

Pedro and Maria are in a Part-time business. Pedro must work for 4 hours to complete 1 case of TV set and 2 hours for Maria to complete a set of TV case. Pedro must work for 3 hours to complete a case of stereo set and 4 hours for Maria to complete a set. They are not to work for more than 20 hours. The price for each TV set and Stereo set are P80.00 and P64.00, respectively. Maximize the Profit.

OR PROBLEMS

CRITICAL PATH ANALYSIS A project-management technique that lays out all the activities needed to complete a task, the time it will take to complete each activity and the relationships between the activities The critical path refers to the way the diagram shows those activities that must be completed, and complete in a specific order, so that the project can be completed successfully and on time. FLOORPLANNING Designing the layout of equipment in a factory or components on a computer chip to reduce manufacturing cost. NETWORK OPTIMIZATION It is a special type of linear programming model. Network models have three main advantages over linear programming: 1. They can be solved very quickly. 2. They have naturally integer solutions. 3. They are intuitive.

FACILITY LOCATION The success of the organization is also depends on the decision of facility location It refers to selection of specific site for establishment of the physical unit of production process. Refers to the location of service organization NEED OF FACILITY LOCATION Selection of the location is long term decision of organization One selection of facility location is very expensive and some infeasible to alter the location It plays a vital role in the organization SELECTING A WRONG FACILITY LOCATION RESULTS: Low profit margin High cost of production Poor production efficiency High distribution cost Labor trouble Closure of organization

BAYESIAN SEARCH THEORY LOOKING FOR A TARGET Is the application of Bayesian statistics to the search for lost objects. It has been used several times to find lost sea vessels, for example the USS Scorpion. It also played a key role in the recovery of the flight recorders in the Air France Flight 447 disaster of 2009. OPTIMAL SEARCH Sometimes it's OK to find just ANY path to the goal as long as you get there. But sometimes you want to find the BEST path to the goal. The fastest, cheapest, or easiest route to take is oftentimes more important than finding SOME path. Thats where optimal search comes in. ROUTING

Is the process of selecting paths in a network along which to send network traffic. Routing is performed for many kinds of networks, including the telephone network (circuit switching), electronic data networks (such as the Internet), and transportation networks.

SUPPLY CHAIN MANAGEMENT Managing the flow of raw materials and products based on uncertain demand for the finished products.

TRANSPORTATION Managing freight transportation and delivery systems SCHEDULING

AUTOMATION
Automating or integrating robotic systems in human-driven operations processes. GLOBALIZATION Globalizing operations processes in order to take advantage of cheaper materials, labor land, or other productivity inputs. Personnel Staffing Manufacturing Steps Project Tasks Network Data Traffic Sports events and their television coverage

Optimizing Production Planning and Trade at Jan de Wit Company Problem: The company had to split the planning to control the productive process The OR solution: Jan de Wit implemented a decision support system based on linear programming as a production-planning and trade tool. Transportation: managing freight transportation and delivery systems (Examples: LTL Shipping, intermodal freight transport)

Perfecting the Scheduled Railroad at Canadian Pacific Railway


Problem: Finding a better alternative in handling the many details and constraints of scheduling. The OR solution: Canadian Pacific turned to the concept of operating every aspect of the railway on a fixed schedule. Working with Multi-Modal Applied Systems, the railway developed an operating plan that was tightly matched to traffic patterns.

Manufacturing steps Samsung Cuts Manufacturing Cycle Time and Inventory to Compete Problem: Need to reduce cycle time. The huge work-in-process inventory was expected to lose value rapidly. And a survey finding that Samsung's cycle times were noncompetitive implied that customers might be enticed to switch to vendors offering shorter lead times. The OR solution: The project was named SLIM (short cycle time and low inventory in manufacturing). SLIM delivered a set of methodologies and scheduling applications for managing cycle time, including: Methodology for calculating target cycle times and target work in process levels for individual manufacturing steps

OPERATIONS RESEARCH IN ACTION

Scheduling ex. Aircrews & the fleet for airlines Facility Planning ex. Warehouse, Factory or Fire station Planning and Forecasting ex. Telecommunication Industry

Yield Management The changing of supply and demand


Credit Scoring The credibility of the person to pay Marketing Evaluating the value of sale promotions Defense and Peace Keeping Finding ways to deploy troops rapidly

OR BENEFITS
Decrease cost or Investment Increase Revenue or Return on Investment Increase Market Share Manage & Reduce Risk

Improve Quality
Increase through output while decreasing delays Achieve Improve Utilization from limited resources Demonstrate Feasibility & Workability

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