Operations Research

Unit 1

Unit 1

Introduction to Operations Research

Structure: 1.1 Introduction Learning objectives 1.2 Historical Background Definitions of Operations Research 1.3 Scope of Operations Research 1.4 Features of Operations Research 1.5 Phases of Operations Research 1.6 Types of Operations Research models 1.7 Operations Research Methodology Definition Construction Solution Validation Implementation 1.8 Operations Research Techniques and Tools 1.9 Structure of the Mathematical Model 1.10 Limitations of Operations Research 1.11 Summary 1.12 Terminal Questions 1.13 Answers to SAQs and TQs Answers to Self Assessment Questions Answers to Terminal Questions 1.14 References

1.1 Introduction
Welcome to the unit on Operations Research Management. Operations Research Management focuses on the mathematical scoring of consequences of a decision aiming to optimise the use of time, effort and resources, and avoid blunders. The act of obtaining the best results under any given circumstances is known as optimising. The key purpose of Operations Research (OR) is to do preparative calculations that aid the decision-making process.

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Now, you will agree that decision-making is a key part of our daily life. The ultimate goal of all decisions is to maximise benefits and minimise effort and time. OR gives decision makers the power to make effective decisions and improve day-to-day operations. Decision makers consider all the available options, study the outcomes and estimate the risks. In simple situations, you use your common sense and judgement to take decisions. For example, if you are buying a microwave or washing machine, the decision-making process is not very complicated. You can simply compare the price, quality and durability of the well known brands and models in the market and take a decision based on it. However, in complex situations, although it is possible to take decisions based on ones common sense, a decision backed by mathematical calculations reduces the risk factor and increases the probability of success. Some such situations, where decision-makers have to reply on mathematical scoring and reasoning, are finding an appropriate product mix amidst competitors products or planning a public transportation network in a city. Learning Objectives By the end of this unit, you should be able to: List the significant features of Operations Research Describe the methodology of Operations Research Define the structure of a mathematical model in Operations Research Describe the significance of the function of Operations Research

1.2 Historical Background

During the World War II, scientists from United Kingdom studied the strategic and tactical problems associated with air and land defense of the country. The aim of this study was to determine the effective utilisation of limited military resources to win the battle. The technique was named Operations Research. After World War II, Operations Research techniques were developed and deployed in the decision making process in complicated situations in various fields, such as industrial, academic and government organisations.

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1.2.1 Definitions of operations research Churchman, Aackoff and Aruoff defined Operations Research as: the application of scientific methods, techniques and tools to operation of a system with optimum solutions to the problems, where 'optimum' refers to the best possible alternative. The objective of Operations Research is to provide a scientific basis to the decision-makers for solving problems involving interaction of various components of the organisation. You can achieve this by employing a team of scientists from different disciplines, to work together for finding the best possible solution in the interest of the organisation as a whole. The solution thus obtained is known as an optimal decision. You can also define Operations Research as The use of scientific methods to provide criteria for decisions regarding man, machine, and systems involving repetitive operations. Self Assessment Questions Fill in the blanks: 1. The main objective of OR is to provide a _______ ________ to the decision-makers.
2. OR employs a team of _________ from _________ __________.

1.3 Scope of Operations Research

Any problem, simple or complicated, can use OR techniques to find the best possible solution. This section will explain the scope of OR by seeing its application in various fields of everyday life. i) In Defense Operations: In modern warfare, the defense operations are carried out by three major independent components namely Air Force, Army and Navy. The activities in each of these components can be further divided in four sub-components namely: administration, intelligence, operations and training and supply. The applications of modern warfare techniques in each of the components of military organisations require expertise knowledge in respective fields. Furthermore, each component works to drive maximum gains from its operations and there is always a possibility that the strategy beneficial to one component may be unfeasible for another component. Thus in
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defense operations, there is a requirement to co-ordinate the activities of various components, which gives maximum benefit to the organisation as a whole, having maximum use of the individual components. A team of scientists from various disciplines come together to study the strategies of different components. After appropriate analysis of the various courses of actions, the team selects the best course of action, known as the optimum strategy. ii) In Industry: The system of modern industries is 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 continuously 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. For example: production department minimises the cost of production but maximises output. Marketing department maximises the output, but minimises cost of unit sales. Finance department tries to optimise the capital investment and personnel department appoints good people at minimum cost. Thus each department plans its own objectives and all these objectives of various department or components come to conflict with one another and may not agree to the overall objectives of the organisation. The application of OR techniques helps in overcoming this difficulty by integrating the diversified activities of various components to serve the interest of the organisation 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. iii) 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 maximise the per capita income, with minimum sacrifice and time. A government can thus use OR for framing future economic and social policies. iv) Agriculture: With increase in population, there is a need to increase agriculture output. But this cannot be done arbitrarily. There are several restrictions. Hence the need to determine a course of action serving the
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best under the given restrictions. You can solve this problem by applying OR techniques. v) In Hospitals: OR methods can solve waiting problems in out-patient department of big hospitals and administrative problems of the hospital organisations. vi) In Transport: You can apply different OR methods to regulate the arrival of trains and processing times minimise the passengers waiting time and reduce congestion, formulate suitable transportation policy, thereby reducing the costs and time of trans-shipment. vii) Research and Development: You can apply OR methodologies in the field of R&D for several purposes, such as to control and plan product introductions. Self Assessment Questions 3. Mention two applications of OR. 4. How can a hospital benefit from the application of OR methods?

1.4 Features of Operation Research

Some key features of OR are as follows: 1. OR is system oriented. OR scrutinises the problem from an organisations perspective. The results can be optimal for one part of the system, while the same can be unfavourable for another part of the system. 2. OR imbibes an interdisciplinary team approach. Since no single individual can have a thorough knowledge of all fast developing scientific know-how, personalities from different scientific and managerial cadre form a team to solve the problem. 3. OR makes use of scientific methods to solve problems. 4. OR increases effectiveness of the managements decision-making ability. 5. OR makes use of computers to solve large and complex problems. 6. OR offers a quantitative solution. 7. OR also takes into account the human factors.
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Self Assessment Questions Fill in the blanks: 5. OR ________ inter-disciplinary approach. 6. OR increases the effectiveness of ________ ability.

1.5 Phases of Operations Research

The scientific method in OR study generally involves the following three phases.

Figure 1.1: Phases of operations research

1. Judgment Phase: This phase includes the following activities: a) Determination of the operations b) Establishment of the objectives and values related to the operations c) Determination of the suitable measures of effectiveness d) Formulation of the problems relative to the objectives 2. Research Phase: This phase utilises the following methodologies: a) Operations and data collection for a better understanding of the problems b) Formulation of hypothesis and model c) Observation and experimentation to test the hypothesis on the basis of additional data d) Analysis of the available information and verification of the hypothesis using pre-established measure of effectiveness e) Prediction of various results and consideration of alternative methods 3. Action Phase: The action phase involves making recommendations for the decision process. The recommendations can be made by those who
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identified and presented the problem or anyone who influences the operation in which the problem has occurred. Self Assessment Questions State True/False: 7. OR gives qualitative solution 8. One of the OR phases is Action phase

1.6 Types of OR Models

A model is an idealised representation or abstraction of a real-life system. The objective of a model is to identify significant factors that affect the reallife system and their interrelationships. A model aids the decision-making process as it provides a simplified description of complexities and uncertainties of a problem in a logical structure. The most significant advantage of a model is that it does not interfere with the real-life system. 1.6.1 A broad classification of OR models You can broadly classify OR models into the following types.
Models

Physical Models

Mathematic al Models

Models by Nature of Environment

Models by Extent of Generality

Iconic Models

Analog Models

Deterministi c Models

Probabilistic Models

General Models

Specific Models

Figure 1.2: Classification of models

a. Physical Models include all form of diagrams, graphs and charts. They are designed to tackle specific problems. They bring out significant factors and interrelationships in pictorial form to facilitate analysis. There are two types of physical models: a. Iconic models
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b. Analog models Iconic models are primarily images of objects or systems, represented on a smaller scale. These models can simulate the actual performance of a product. Analog models are small physical systems having characteristics similar to the objects they represent, such as toys. b. Mathematical or Symbolic Models employ a set of mathematical symbols to represent the decision variable of the system. The variables are related by mathematical systems. Some examples of mathematical models are allocation, sequencing, and replacement models. c. By nature of Environment: Models can be further classified as follows: a. Deterministic model in which everything is defined and the results are certain, such as an EOQ model. b. Probabilistic Models in which the input and output variables follow a defined probability distribution, such as the Games Theory. d. By the extent of Generality Models can be further classified as follows: a. General Models are the models which you can apply in general to any problem. For example: Linear programming. b. Specific Models on the other hand are models that you can apply only under specific conditions. For example: You can use the sales response curve or equation as a function of only in the marketing function. Self Assessment Questions State True/False 9. Diagram belongs to the physical model 10. Allocation problems are represented by iconic model

1.7 OR Methodology
The basic dominant characteristic feature of operations research is that it employs mathematical representations or models to analyse problems. This distinct approach represents an adaptation of the scientific methodology used by the physical sciences. The scientific method translates a real given
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problem into a mathematical representation which is solved and retransformed into the original context. The OR approach to problem solving consists of the following steps: Defining the problem, Constructing the model, Solving the model, Validating the model and Implementing the final result.

Figure 1.3: Steps in the OR methodology

1.7.1 Definition The first and the most important step in the OR approach of problem solving is to define the problem. You need to ensure that the problem is identified properly because this problem statement will indicate 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 3) The recognition of the limitations, restrictions and requirements of the system. 1.7.2 Construction Based on the problem definition, you need to identify and select the most appropriate model to represent the system. While selecting a model, you need to ensure that the model specifies 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-organised manner. Therefore, if the resulting model fits into one of the common mathematical models, you can obtain a convenient solution by using mathematical techniques. If the mathematical relationships of the model are too complex to allow analytic solutions, a
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simulation model may be more appropriate. There are various types of models which you can construct under different conditions. 1.7.3 Solution After deciding on an appropriate model you need to develop a solution for the model and interpret 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 maximises or minimises the performance of any measure in a model subject to the conditions and constraints imposed on the model. 1.7.4 Validation A model is a good representation of a system. However, the optimal solution must work towards improving the systems performance. You can test the validity of a model by comparing its performance with some past data available from the actual system. If under similar conditions of inputs, your model can reproduce the past performance of the system, then you can be sure that your model is valid. However, you will still have no assurance that future performance will continue to duplicate the past behaviour. Secondly, since the model is based on careful examination of past data, the comparison should always reveal favourable results. In some instances, this problem may be overcome by using data from trial runs of the system. Note that such validation methods are not appropriate for non-existent systems, since data will not be available for comparison. 1.7.5 Implementation You need to apply the optimal solution obtained from the model to the system and note the improvement in the performance of the system. You need to validate this performance check under changing conditions. To do so, you need to translate 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 reaches its peak in this phase.

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1.8 OR Techniques and Tools

The different techniques and tools used in OR are as follows: 1. Linear programming: You can use linear programming to find a solution for optimising a given objective. The objective may be to maximise profit or to minimise cost. You need to ensure that both the objective function and the constraints can be expressed as linear expressions of decision variables. You will learn about the various uses of linear programming in Chapter-2. 2. Inventory control methods: The production, purchasing and material managers are always confronted with questions, such as when to buy, how much to buy and how much to keep in stock. The inventory model aims at optimising these inventory levels. 3. Goal programming: In linear programming, you take a single objective function and consider all other factors as constraints. However, in real life there may be number of important objective functions. Goal programming has several objective functions, each having a target value Programme models are developed to minimise deviations from these targets. 4. Queuing model: The queuing theory is based on the concept of probability. It indicates the capability of a given system and the changes possible in the system when you modify the system. In formulating a queuing model you need not take into account all the constraints. There is no maximisation or minimisation of an objective function. Therefore, the application of queuing theory cannot be viewed as an optimisation process. You can use the queuing theory to estimate the required balance between customer waiting time and the service capability of the system. You need to first consider several alternatives, evaluate them through queuing models, study their effect on the system, and then make a choice. The criteria for evaluation will be measures of efficiency of the system, such as the average length of a queue, expected waiting time of a customer and the average time spent by the customer in the system. In this approach, your success primarily depends on the alternatives considered and not so much on the queuing models developed.

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5. Transportation model: The transportation model is an important class of linear programs. The model studies the minimisation of the cost of transporting a commodity from a number of sources to several destinations. The supply at each source and the demand at each destination are known. The objective of the model is to develop an integral transportation schedule that meets all demands from the inventory at a minimum total transportation cost. The transportation problem involves m sources, each of which has available ai (i = 1, 2, ..,m) units of homogeneous product and n destinations, each of which requires bj (j = 1, 2., n) units of products. Here ai and bj are positive integers. The cost cij of transporting one unit of the product from the ith source to the jth destination is given for each i and j. It is assumed that the total supply and the total demand are equal.

i 1

ai

bj

j 1

(1)

The condition (1) is guaranteed by creating either a fictitious destination with a demand equal to the surplus if total demand is less than the total supply or a (dummy) source with a supply equal to the shortage if total demand exceeds total supply. The cost of transportation from the fictitious destination to all sources and from all destinations to the fictitious sources are assumed to be zero so that total cost of transportation will remain the same. 6. In addition to the above there are tools, such as the sequence model, the assignment model, and network analysis which you will learn in detail in later units. Self Assessment Questions State True/False 11. OR methodology consists of definition, solution and validation only. 12. The interaction between OR team and Management reaches peak level in implementation phase.

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1.9 The Structure of the 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 take decision regarding these resources to either maximise production, or minimise the cost of production or maximise the profit. These problems are referred as the problems of constrained optimisation. Linear programming is a technique for determining an optimal schedule of interdependent activities, for the given resources. Therefore, you can say that programming refers to planning and the process of decision-making about a particular plan of action from a given set of alternatives. Any business activity or production activity to be formulated as a mathematical model can best be discussed through its parts which are as follows: 1. Decision variables 2. Objective function 3. Constraints 4. Diet problem Decision variables Decision variables are the unknowns, which you need to determine from the solution of the model. The parameters represent the controlled variables of the system. Objective function The objective function 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 whilst satisfying all constraints. Therefore, you can say that the objective function acts as an indicator for the achievement of the optimal solution. While formulating a problem, the desire of the decision-maker is expressed as a function of n decision variables. This function is a linear programming problem that is each of its items will have only one variable raised to the power one). Some of the objective functions in practice are: Maximisation of contribution or profit
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Minimisation of cost Maximisation of production rate or minimisation of production time Minimisation of labour turnover Minimisation of overtime Maximisation of resource utilisation Minimisation of risk to environment or factory

Constraints To account for the physical limitations of the system, you need to ensure that the model includes constraints, which limit the decision variables to their feasible range or permissible values. These are expressed as 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. 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 xj bi, represent the ith constraint for i = 1, 2, 3 ---- m where b i is a known constant. The constraints x j 0 are called the non-negativity condition, which restrict the variables to zero or positive values only. Diet problem Formulate the mathematical model for the following: Vitamin A and Vitamin B are found in food 1 and food 2. One unit of food 1 contains 5 units of vitamin A and 2 units of vitaminB. One unit of food 2 contains 6 units of vitamin A and 3 units of vitaminB. The minimum daily requirement of a person is 60 units of vitamin A and 80 units of Vitamin B.
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The cost per one unit of food 1 is Rs. 5/- and one unit of food2 is Rs. 6/-. Assume that any excess units of vitamins are not harmful. Find the minimum cost of the mixture (of food1 and food2) which meets the daily minimum requirements of vitamins. Mathematical Model of the Diet Problem: Suppose x1 = the number of units of food1 in the mixture and x2 = the number of units of food2 in the mixture. Lets formulate the constraint related to vitamin-A. Since each unit of food1 contains 5 units of vitamin A, we have that x1 units of food1 contains 5x1 units of vitamin A. Since each unit of food 2 contains 6 units of vitaminA, we have that x2 units of food2 contains 6x2 units of vitaminA. Therefore, the mixture contains 5x1 + 6x2 units of vitamin-A. Since the minimum requirement of vitamin A is 60 units, you can say that 5x1 + 6x2 60. Now lets formulate the constraint related to vitaminB. Since each unit of food1 contains 2 units of vitaminB we have that x1 units of food1 contains 2x1 units of vitamin-B. Since each unit of food2 contains 3 units of vitaminB, we have that x2 units of food2 contains 3x2 units of vitaminB. Therefore the mixture contains 2x1 + 3x2 units of vitaminB. Since the minimum requirement of vitaminB is 80 units, you can say that 2x2 + 3x2 80 Next lets formulate the cost function. Given that the cost of one unit of food1 is Rs. 5/- and one unit of food 2 is Rs. 6/-. Therefore, x1 units of food1 costs Rs. 5x1, and x2 units of food 2 costs Rs. 6x2. Therefore, the cost of the mixture is given by Cost = 5x1 + 6x2. If we write z for the cost function, then you can write z = 5x1 + 6x2. Since cost is to be minimised, you can write min z = 5x1 + 6x2. Since the number of units (x1 or x2) are always non-negative, therefore, you have x1 0, x2 0. Therefore, the mathematical model is: 5x1 + 6x2 60 2x1 + 3x2 80 x1 0, x2 0, min z = 5x1 + 6x2.

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1.10 Limitations of OR
The limitations are more related to the problems of model building, time and money factors. i. Magnitude of computation: Modern problems involve a large number of variables. The magnitude of computation makes it difficult to find the interrelationship. ii. Intangible factors: Non quantitative factors and human emotional factor cannot be taken into account. iii. Communication gap: There is a wide gap between the expectations of managers and the aim of research professionals. iv. Time and Money factors: When you subject the basic data to frequent changes then incorporation of them into OR models becomes a costly affair. v. Human Factor: Implementation of decisions involves human relations and behaviour. Self Assessment Questions Fill in the blanks: 13. 14. 15. 16. 17. 18. OR imbibes _________ team approach. Linear programming is tool of _______. The three phases of OR are ________. To solve any problem through OR approach the first step is _______. _________ represents a real life system. _________ represents the controlled variables of the system

1.11 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.
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1.12 Terminal Questions

1. Define OR. 2. What are the characteristic features of OR? 3. What is a model in OR? Discuss different models available in OR. 4. Write short notes are different phases of OR. 5. What are the limitations of OR?

1.13 Answers to SAQs and TQs

Answers to Self Assessment Questions 1. Scientific basis 2. Scientists, different disciplines 3. Industry Planning 4. To solve waiting problems 5. Imbibes 6. Decision making 7. True 8. True 9. True 10. False 11. False 12. False 13. Inter-disciplinary 14. OR 15. Judgement phase, Research phase & Action phase 16. Define the problem 17. Model 18. Parameters

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Answers to Terminal Questions 1. 2. 3. 4. 5. Refer to 1.2.1 Refer to 1.4 Refer to 1.6 Refer to 1.5 Refer to 1.10

1.14 References
No external sources have been referred for this unit.

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