• Modern technological advance growth of

scientific techniques
• Operations Research (O.R.) recent addition
to scientific tools
• O.R. outlook to many
conventional management problems
• Seeks the determination of best
(optimum)
course of action of a decision problem
under the limiting factor of limited
resources
•Developed in military context during world war II,
pioneered by the British scientists
– Research on military operations
• US military management was motivated by
– Development of new flight pattern
– Planning sea mining
– Effective utilization of electronic equipment
• Similar operations in Canada and France
• Till 50’s: use of O.R. confined to military
purposes
•After World War II: success attracted industrial managers to
solve complex managerial problems
•1950: O.R. began to develop in industrial field in US
•1953: Operations Research Society of America was formed
•1957:International Federation of Operational
Research Society
•Operational Research can be considered as being the
application of scientific method by inter-disciplinary
teams to solve problems involving the control of organized
(man-machine systems) so as to provide solutions which
best serve the purposes of the organization as a whole.
• Inter-disciplinary team approach
• Systems approach
• Helpful in improving the quality of
solution
• Scientific method
• Goal oriented optimum solution
• Use of models
• Require willing executives
• Reduces complexity by use of computers
 SCOP
E

Purchasing
Finance Procuremen Production
Budgeting t and Management
and Exploration
investments

Marketing Personal
Management Management
SCOP
E
 Better Better Co-
Control ordination
Role in
Managerial
Decision
Making
Better Better
Decisions Systems
• Judgment phase
– Determination of the problem
– Establishment of the objectives and values
– Determination of suitable measures of effectiveness
• Research phase
– Observation and data collection
– Formulation of hypothesis and models
– Observation and experimentation to test the hypothesis
- – Prediction of various results, generalization,
consideration of alternative method
• Action phase
– Implementation of the tested results of
the model
METHODOLOGY
• Formulating the problem
• Constructing the model
• Deriving the solution
– Analytical methods
– Heuristic methods
– Simulation method
• Testing the validity
• Implementing the solution
• Modifying the model
I. BASED ON
STRUCTURE
(1) Physical Models: These models give a physical appearance of
real object in reduced or scaled up form .These are further divided
into two categories:
a) Iconic Models: Physical or Pictorial representaion of the
various aspects of the system. Ex. Blue Prints, Globe, Templates
etc.
b) Analogue Models:These models represent a system by a set of
proerties different from the original system. Ex. .Ex: A network of
water pipes to show flow of current in electrical network. Level
Indicator in a automobile petrol tank

(2) Symbolic Models : These models use symbols either in the form
of letters or mathematical operators to represent the properties of the
system. These are further classified into two types:
c) Verbal Models: These models used to describe a situation in written
or spoken language in form of letters , words or symbols. Ex:
Differential Equations representing a Dynamic system.
d) Mathematical Models: The decision variables of the system
under consideration are represented by mathematical equations or
inequations. Ex. Linear programming model to decide Product –Mix
problem in manufacturing.
II. BASED ON PURPOSE AND NATURE
(1)Descriptive Models: These models use
surveys , questionnaire results, inference of of
observations to
describe the situation. Ex. Plant Layout diagram. Block
diagram of an algorithm.
(2)Predictive Models : These models are the
results of query: “ What will follow if this occurs or
does not occur?”. Ex. Preventive Maintenance Trouble
Shooting chart or procedures.
(3)Normative Model or Optimisation Models: These
models are designed to provide optimal solution
to the problem subject to a certain limitations or
constraints on use of resources. Ex. LP Problem
III. BASED ON CERTAINITY
(1)Deterministic Models: If all the parameters of
decision variables, constants and their functional
relationship are known with certainity, then the model is
said to be deterministic. Eg. Games with saddle points
(2)Probabilitic or Stochastic Models: This is the model
in which atleast one of the decision variable or
parameter is random in nature.Ex. Queuing Models;
Games without saddle points.
IV. BASED ON TIME REFERENCE
(1)Static Models: These models present a system at a
specfied time, which do not account for changes over a
certain period of time.Ex. Replacement of Machines when
money value is not changing with time.
(2)Dynamic Model: Time is considered as one of the
variables and impact of changes generated by time is .
accounted while selecting optimal course of action.
Ex. Replacement Models where money value changes
with time.
V. BASED ON METHOD OF SOLUTION
(1)Analytical Model: These have a specific mathematical
structure and can be solved by analytical and
mathematical techniques. Ex. Any optimisation model
such as inventory models, waiting lines etc.
(2)Iterative or Heuristic Model: In these models
solution is obtained from the conclusion of
previous step.Ex. Simplex Method for LPP.
(3)Simulation Models: A computer assisted mathematical
representation of real life problem under certain
assumptions. Ex. Monte-Carlo Simulation , Use of
Random Numbers, Forecasting Models.
 Examples of where OR has been successful in
recent years are the following;
1. Airline Industry (routing and flight plans, crew
scheduling, revenue management);
2. Telecommunications (network routing, queue
control);
3. Manufacturing Industry (system throughput and
bottleneck analysis, inventory control, production
scheduling, capacity planning);
4. Healthcare (hospital management, facility design);
and
5. Transportation (traffic control, logistics, network flow)
stics, network flow,
CON
T.. British Airlines transportation.
One of the most challenging as well as rewarding
application areas of O.R. has been the airline industry.
Never before have so many people or products needed to
be moved around the world. As passengers and
consumers we expect everything to run smoothly whether
we are flying on holiday or travelling to school, university
or work.

Operational Research gets involved in a whole range of

decisions here starting with the whole booking process
where O.R. is involved in helping to set the ticket prices
and calculate the seat availability through to the flights
logistics on the day. O.R. has a massive part to play in
CON
T..
Ticket pricing.
There’s one challenge that every airline faces: Seats on any
flight are perishable – once the plane has taken off, there is
no possibility of selling any empty seats. This being so, it
pays an airline to fill a seat, even at a very low fare, rather
than have it take off empty. But obviously it isn’t viable to
sell every seat at a low price, so a ‘model’ has to be found
for selling seats at different prices.
The real skill comes in working out how many tickets to sell
at each fare. Ideally, on any flight, the airline would first like
to see how many people are willing to pay the highest
price, sell as many tickets as possible to them, then sell as
many as possible at the next highest pricece,
CON
T..
This is where the airline uses O.R. By observing the
day to day variations in the number of high priced
tickets sold, the number of seats that need to be
reserved to give high fare passengers the best chance
of being able to get on the flight can be estimated. In
addition the profile of bookings – how bookings come in
over time - is monitored on a continuous basis,
compared with the typical profile for the flight, and the
number of seats held back is adjusted according to
whether bookings are heavier or lighter than the typical
profile
• Provides a tool for scientific analysis
• Provides solution for various business problems
• Enables proper deployment of resources
• Helps in minimizing waiting and servicing costs
• Enables the management to decide when to buy
and how much to buy?
• Assists in choosing an optimum strategy
• Renders great help in optimum resource allocation
• Facilitates the process of decision making
• Management can know the reactions of the
integrated business systems
• Helps a lot in the preparation of future managers
• The inherent limitations concerning mathematical expressions
• High costs are involved in the use of O.R. techniques
• O.R. does not take into consideration the intangible factors
• O.R. is only a tool of analysis and not the
complete decision-making process
• Other limitations
– Bias
– Inadequate objective functions
– Internal resistance
– Competence
– Reliability of the prepared solution