Profitability on Operations Research

Management science (MS) or operations research, is an interdisciplinary branch of

applied mathematics, engineering and sciences that uses various scientific research-based
principles, strategies, and analytical methods including mathematical modeling, statistics and
algorithms to improve an organization's ability to enact rational and meaningful management
decisions. The discipline is typically concerned with maximizing profit, assembly line
performance, crop yield, bandwidth, etc or minimizing expenses, loss, risk, etc.
One of the fields that are included in Management Science are is optimization which is
synonymous to profitability. In mathematics, computer science, economics, or management
science, mathematical optimization, alternatively, optimization or mathematical programming is
the selection of a best element with regard to some criteria from some set of available
alternatives. In the simplest case, an optimization problem consists of maximizing or
minimizing a real function by systematically choosing input values from within an allowed set
and computing the value of the function. The generalization of optimization theory and
techniques to other formulations comprises a large area of applied mathematics. More
generally, optimization includes finding "best available" values of some objective function given
a defined domain or a set of constraints, including a variety of different types of objective
functions and different types of domains.
The field that uses optimization techniques extensively is operations research.
Operations research also uses stochastic modeling and simulation to support improved
decision-making. Increasingly, operations research uses stochastic programming to model
dynamic decisions that adapt to events; such problems can be solved with large-scale
optimization and stochastic optimization methods. To expound in more details, in the field
of mathematical
optimization, stochastic
programming is
a
framework
for modeling optimization problems that involve uncertainty. Whereas deterministic optimization
problems are formulated with known parameters, real world problems almost invariably include
some unknown parameters. When the parameters are known only within certain bounds, one
approach to tackling such problems is called robust optimization. Here the goal is to find a
solution
which
is
feasible
for
all
such
data
and optimal in
some
sense. Stochastic programming models are similar in style but take advantage of the fact
that probability distributions governing the data are known or can be estimated. The goal here is
to find some policy that is feasible for all (or almost all) the possible data instances and
maximizes the expectation of some function of the decisions and the random variables. More
generally, such models are formulated, solved analytically or numerically, and analyzed in order
to provide useful information to a decision-maker. As an example, consider two-stage linear
programs. Here the decision maker takes some action in the first stage, after which a random
event occurs affecting the outcome of the first-stage decision. A recourse decision can then be
made in the second stage that compensates for any bad effects that might have been
experienced as a result of the first-stage decision. The optimal policy from such a model is a
single first-stage policy and a collection of recourse decisions (a decision rule) defining which
second-stage action should be taken in response to each random outcome. Stochastic
programming
has
applications
in
a
broad
range
of
areas
ranging

from finance to transportation to energy optimization.[2][3] We present an example of optimizing

an investment portfolio over time.
Profit maximization is the most important objective of a business entity. Every business,
in addition to striving for the attainment of other objectives, does its best with special importance
to make profits. Profit is to be regarded as a yardstick against which are assessed or measured
the quality and value and the success of a business. Profit, in general, is the money that a
business makes when it sells something for more than it paid for it. It is the income from an
investment or transaction. It helps to run a business smoothly and successfully and survive
continuously while making profits and staying solvent at the same time as providing various
benefits. Considering the merits of profit maximization, more than anything else, the first and
foremost benefit is that the profit becomes a benchmark against which the efficiency and the
success of a business are to be judged so as to take necessary steps for the enhancement of
profits in case there is no profit generation in a business entity. On the basis of evidences
showing the failure of various businesses, it thus may be rightly said that a business without
profit maximization cannot survive. Even though, at the initial stages, some businesses try to
maintain their working capital, but since there are no constant measures towards the profit
maximization, the situation eventually compels to close down the business. Hence, profit
maximization is the basic objective of any business to survive and to remain in the money. It is
to be noted that the business that generates high level of profitability will not only gather
sufficient funds to be employed for the business expansions or new business avenues but also
increases the return of its shareholders.

Every business needs to maintain sufficient funds for its day-to-day requirements while
safeguarding the business against the possibility of insolvency. Moreover, there are times when
some contingencies or unseen emergencies arise that may necessitate the money to be set
aside. The business must be prepared for it. Hence, the term working capital refers to the
excess of the current assets over the current liabilities is very much useful in this way. Thus a
business which fulfills the objective from the perspective of profit maximization, can maintain
sufficient funds at all times while maintaining working capital effectively and efficiently. If a
business does not generate profits it is as though no business is being done. As David Stout
points out, Money is very tight right now.. You cant go to a bank and ask for a commercial
loan if you dont have a business to show them, no profit and loss statements because you are
not doing any business. Hence, striving towards the fulfillment of the objective of profit
maximization is leading the business organization in the direction of profitability and prosperity
while safeguarding against the possibility of insolvency. If a business wills itself to stay in this
dynamic world must not be static with no thought of profit maximization, but must be moving
ahead strengthening the objective of profit maximization while implementing special plans,
objectives and strategies.