Introduction

Optimization is the act of obtaining the best result under

any given circumstance. In various practical problems we
may have to take many technical or managerial decisions at
several stages.
The ultimate goal of all such decisions is to either maximize
the desired benefit or minimize the effort required.
We make decisions in our every day life without even
noticing them.
Decision making is one of the main activity of a manager or
executive.
In simple situations decisions are taken simply by common
sense, sound judgment and expertise without using any
mathematics.

Introduction

But here the decisions we are concerned with are rather complex
and heavily loaded with responsibility.
Examples of such decision are finding the appropriate product
mix when there are large numbers of products with different profit
contributions and productional requirement or planning public
transportation network in a town having its own layout of
factories, apartments, blocks etc.
The search of a decision may also be done by trial and error but
such a search may be cumbersome and costly.
Preparative calculations may avoid long and costly research.
Doing preparative calculations is the purpose of Operations
research.
Operations research does mathematical scoring of consequences
of a decision with the aim of optimizing the use of time, efforts and
resources and avoiding blunders.

Introduction

Learning objectives:
After studying this unit, you should be able to understand
the following.
1. Know the significant features in O.R.
2. Understand the Methodology of O.R.
3. Define the structure of a mathematical model in O.R.
4. Know the significance of the Objective function

Historical Background

During Second World War in United Kingdom a team of scientists

from different disciplines studied the strategic and tactical
problems associated with air and land defence of the country.
Their objective was to determine the most effective utilization of
limited military resources to win the battle and the technique they
developed was named as Operations research.
After the war, Operations research techniques rapidly developed in
the fields of industrial, academic and government organizations.
The main objective of Operations research is to provide a
scientific basis to the decision makers
for solving the
problems involving the interaction of various components of
organization, by employing a team of scientists from
different disciplines, all working together for finding a
solution which is the best in the interest of the organization
as a whole.

Historical Background

Definition of Operations Research: Churchman,

Ackoff and Aruoff have defined Operations research
as the application of scientific methods, techniques
and tools to operation of a system with optimum
solutions to the problems.
Optimum implies the one, which is best of all possible
alternatives.
Another definition is that, Operations research is the
use of scientific methods to provide criteria for
decisions regarding man, machine, systems involving
repetitive operations.

Scope of Operations
Research (OR)

In general, whenever there is any problem simple or complicated,

the OR techniques may be applied to find the best solution.
In Defence Operations: In modern warfare the defence
operations are carried out by a number of independent
components namely Air Force, Army and Navy. The activities in each
of these components can be further divided in four subcomponents
viz.: administration, intelligence, operations and training, and
supply. The application of modern warfare techniques in each of the
components of military organizations requires expertise knowledge
in respective fields. Further more, each component works to drive
maximum gains from its operations and there is always a possibility
that strategy beneficial to one component may have an adverse
effect on the other. Thus in defence operations there is a necessity to
coordinate the activities of various components which gives
maximum benefit to the organization as a whole, having maximum
use of the individual components.

Scope of Operations
Research (OR)

The final strategy is formulated by a team of scientists drawn

from various disciplines who study the strategies of different
components and after appropriate analysis of the various
courses of actions, the best course of action, known as
optimum strategy, is chosen.
In Industry: The system of modern industries are so
complex that the optimum point of operation in its various
components cannot be intuitively judged by an individual. The
business environment is always changing and any decision
useful at one time may not be so good some time later. There
is always a need to check the validity of decisions continually,
against the situations. The industrial revolution with increased
division of labour and introduction of management
responsibilities has made each component an independent
unit having their own goals.

Scope of Operations
Research (OR)

For example: Production department minimize cost of

production but maximizes output. Marketing department
maximizes output but minimizes cost of unit sales. Finance
department tries to optimize capital investment and personnel
department appoints good people at minimum cost. Thus each
department plan their own objectives and all these objectives
of various department or components come to conflict with
each other and may not conform to the overall objectives of
the organization. The application of OR techniques helps in
overcoming this difficulty by integrating the diversified
activities of various components so as to serve the interest of
the organization as a whole efficiently.
OR methods in industry can be applied in the fields of
production, inventory controls and marketing, purchasing,
transportation and competitive strategies etc.

Scope of Operations
Research (OR)

Planning: In modern times it has become necessary

for every government to have careful planning, for
economic development of the country. OR techniques can
be fruitfully applied to maximize the per capita income,
with minimum sacrifice and time. A government can thus
use OR for framing future economic and social policies.
Agriculture: With increase in population there is a
need to increase agriculture output. But this cannot be
done arbitrarily. There are a number of restrictions under
which agricultural production is to be studied. Therefore
there is a need to determine a course of action, which
serves the best under the given restrictions. The problem
can be solved by the application of OR techniques.

Scope of Operations
Research (OR)

In Hospitals: The OR methods can be used to solve

waiting problems in outpatient department of big
hospitals. The administrative problems of hospital
organization can also be solved by OR techniques.
In Transport: Different OR methods can be applied to
regulate the arrival of trains and processing times,
minimize the passengers waiting time and reduce
congestion, formulate suitable transportation policy,
reducing the costs and time of transshipment.
Research and Development: Control of R and D
projects, product introduction planning etc. and many
more applications.

Features of OR

i.

ii.

iii.
iv.

v.
vi.
vii.

Important features of OR are:

It is System oriented: OR studies the problem from over all point
of view of organizations or situations since optimum result of
one part of the system may not be optimum for some other part.
It imbibes Inter disciplinary team approach. Since no single
individual can have a thorough knowledge of all fast developing
scientific knowhow, personalities from different scientific and
managerial cadre form a team to solve the problem.
It makes use of Scientific methods to solve problems.
OR increases the effectiveness of a management Decision
making ability.
It makes use of computer to solve large and complex problems.
It gives Quantitative solution.
It considers the human factors also.

Phases of OR

a)
b)
c)
d)

a)

b)
c)

The scientific method in OR study generally involves the following

three phases:
1. Judgment Phase: This phase consists of
Determination of the operation.
Establishment of the objectives and values related to the operation.
Determination of the suitable measures of effectiveness and
Formulation of the problems relative to the objectives
2. Research Phase: This phase utilizes
Operations and data collection for a better understanding of the
problems.
Formulation of hypothesis and model.
Observation and experimentation to test the hypothesis on the
basis of additional data.

Phases of OR
d)

e)

Analysis of the available information and verification

the
hypothesis
using
reestablished
measure
effectiveness.
Prediction of various results and consideration
alternative methods.

of
of
of

3.
Action Phase: It consists of making
recommendations for the
decision process by those who first posed the
problem for consideration
or by anyone in a position to make a decision,
influencing the operation in
which the problem is occurred.

Types of OR Models

1.

A model is a representation of the reality.

It is an idealized representation or abstraction of a real life system.
The objective of the model is to identify significant factors and their
interrelationship.
A model is helpful in decision making as it provides a simplified
description of complexities and uncertainties of a problem in logical
structure.
Major advantage of models is it does not interfere with real system.
A broad classification of OR models
1. Physical Model
2. Mathematical or symbolic model
3. Models by nature of Environment
4. Models by the extent of generality

Types of OR Models
1. Physical Modes include all form of diagrams, graphs
and charts.
- They are designed to deal with specific problems. They
bring out significant factors and interrelationship in pictorial
firm so as to facilitate analysis. There are two types i) Iconic
models and ii) Analog models. Iconic model is an image of
an object or system, represented on a small scale. These
models can simulate the actual performance of a product.
2. Mathematical Model or symbolic models employ a set
of mathematical
symbols to represent
- The decision variable of the system. The variables are
related by mathematical system Eg: Allocation, sequencing,
replacement models etc.

Methodology of OR
Models

The OR approach to problem solving consists of the following steps:

1. Definition of the problem.
2. Construction of the model.
3. Solution of the model.
4. Validation of the model.
5. Implementation of the final result.

1. Definition of the problem

-The first and the most important requirement is that the root
problem should
be identified and understood.
-The problem should be identified properly, this indicates three
major aspects: (1) a description of the goal or the objective of the
study, (2) an identification of the decision alternative to the system,
and (3) a recognition of the limitations, restrictions and
requirements of the system.

Methodology of OR
Models

2. Construction of the model

- Depending on the definition of the problem, the operations research
team
should decide on the most suitable model for representing the system.
- Such a model should specify quantitative expressions for the objective
and the constraints of the problem in terms of its decision variables.
- A model gives a perspective picture of the whole problem and helps
tackling
it in a well organized manner.
- If the resulting model fits into one of the common mathematical
models, a
convenient solution may be obtained by using mathematical
techniques.
- If the mathematical relationships of the model are too complex to allow
analytic solutions, a simulation model may be more appropriate.

Methodology of OR
Models

3. Solution of the model

- Once an appropriate model has been formulated, the next stage in
the analysis calls for its solution and the interpretation of the
solution in the context of the given problem.
- A solution to a model implies determination of a specific set of
decision variables that would yield an Optimum solution.
- An Optimum solution is one which maximize or minimize the
performance of any measure in a model subject to the conditions
and constraints imposed on the model.
4. Validation the model
-A model is a good representative of a system, then the Optimal
solution must improve the systems performance.
- A common method for testing the validity of a model is to compare
itsperformance with some past data available for the actual system.

Methodology of OR
Models

-The model will be valid if under similar conditions of inputs, it

can reproduce the past performance of the system.
- The problem here is that there is no assurance that future
performance will continue to duplicate past behavior.
-Also, since the model is based on careful examination of past data,
the comparison should always reveal favorable results. In some
instances this problem may be overcome by using data from trial
runs of the system
- It must be noted that such a validation method is not appropriate
for non
existent systems, since data will not be available for comparison.
5. Implementation of the final result
-The optimal solution obtained from a model should be applied
practice to improve the performance of the system and the validity
of the solution should be verified under changing conditions.

Methodology of OR
Models

-It involves the translation of these results into detailed

operating instructions
issued in an understandable form to the individuals who
will administer and
operate the recommended system.
-The interaction between the operations research team and
the operating
personnel will reach its peak in this phase.

Techniques of OR
1. Linear Programming:
It is used to find a solution for optimizing a given objective.
Objectives may be to maximize profit or minimize cost.
Both objective function and constraints must be capable of
being expressed as linear expression of decision variables.
Its various use will be seen in Chapter2.
2. Inventory control Methods:
The production, purchasing and material managers are
always confronted with question of when to buy, how much
to buy and how much to keep in stock. Inventory models
aims at optimizing inventory levels.

Techniques of OR
3. Goal Programming:
Single
objective function is taken in the linear
programming and all other factors are considered as
constraints, but in actual practice there may be number of
important objective functions. Goal programming has
several objective functions, each having a target value and
programme models are developed to minimize deviation
from these targets.
4. The tools, namely, queuing model, sequence model,
transportation and assignment model, network analysis
are discussed in detail in later chapters.

Structure of
Mathematical Model

Many industrial and business situations are concerned with planning

activities. In each case of planning, there are limited sources, such as
men, machines, material and capital at the disposal of the planner.
One has to make decision regarding these resources in order to
either maximize production, or minimize the cost of production or
maximize the profit etc. These problems are referred to as the
problems of constrained optimization. Linear programming is a
technique for determining an optimal schedule of interdependent
activities, for the given resources. Programming thus means planning
and refers to the process of decision making regarding particular
plan of action amongst several available alternatives.
Any business activity of production activity to be formulated as a
mathematical model can best be discussed through its constituents
they are:
1. Decision Variables and parameters,
2. Objective functions,
3. Constraints.

Structure of
Mathematical Model

1. Decision variables and parameters

The decision variables are the unknowns to be determined
from the solution of the model. The parameters represent
the controlled variables of the system.
2. Objective functions
This defines the measure of effectiveness of the system as
a mathematical function of its decision variables. The
optimal solution to the model is obtained when the
corresponding values of the decision variable yield the
best value of the objective function while satisfying all
constraints. Thus the objective function acts as an
indicator for the achievement of the optimal solution.

Structure
Mathematical Model

of

While formulating a problem the desire of the decision

maker is expressed as a function of n decision variables.
This function is essentially a linear programming problem
(i.e., each of its item will have only one variable raise to
power one). Some of the Objective functions in practice
are:
- Maximization of contribution or profit
- Minimization of cost
- Maximization of production rate or minimization of
production time
- Minimization of labour turnover
- Minimization of overtime
- Maximization of resource utilization
- Minimization of risk to environment or factory etc.

Structure
Mathematical Model

of

3. Constraints
To account for the physical limitations of the system, the
model must include constraints, which limit the decision
variables to their feasible range or permissible values.
These are expressed in the form of constraining
mathematical functions.
For example, in chemical industries, restrictions come
from the government about throwing gases in the
environment. Restrictions from sales department about the
marketability of some products are also treated as
constraints. A linear programming problem then has a set
of constraints in practice.

Structure
Mathematical Model

of

The mathematical models in OR may be viewed generally

as determining the values of the decision variables x J, J =
1, 2, 3, n, which will optimize
Z = f (x_ 1, x_ 2, x_ n).
Subject to the constraints:
g i (x 1, x 2 x n) ~ b i, i = 1, 2, m and xJ 0 j = 1, 2, 3 n
where ~ is , or =.
The function f is called the objective function, where X j ~
b i, represent the
i th constraint for i =1, 2, 3 m where b i is a known
constant. The constraints x j 0 are called the nonnegative
condition, which restrict the variables to zero or positive
values only.

Limitations of OR

The limitations are more related to the problems of model building,

time and money factors.
i) Magnitude of computation: Modern problem involve large number
of
variables and hence to find interrelationship, among makes it
difficult.
ii) Non quantitative factors and Human emotional factor cannot be
taken
into account.
iii) There is a wide gap between the managers and the operation
researches.
iv) Time and Money factors when the basic data is subjected to
frequent
changes then incorporation of them into OR models is a costly
affair.
v) Implementation of decisions involves human relations and
behavior.

Summary

The OR approach needs to be equally developed in various

agricultural problems on a regional or international basis.
With the explosion of population and consequent shortage
of food, every country faces the problem of optimum
allocation of land in various crops in accordance with
climate conditions and available facilities.
The problem of optimal distribution of water from a
resource like a reservoir for irrigation purposes is faced by
each developing country, and a good amount of scientific
work can be done in this direction.

OR Journals

Operations Research
Management Science
MS/OR Today (Management Science/Operations Res.)
European Journal of Operational Research
Journal of the Operational Research Society
Mathematical Programming
Journal of Optimization Theory and Applications
Interfaces
OR - Spektrum
International Transactions in Operational Research
Annals of Operations Research
Central European Journal of Operations Research