Lect 1- Introduction to OR

C.M. Pascual
Lecture 1 – Operations Research
Topics
• What is OR?
• Modeling and the problem solving process
• Deterministic vs. stochastic models
• OR techniques
• Using the Excel add-ins to find solutions
• Solving real problems
 What is Operations Research?
Operations
The activities carried out in an organization.

Research
The process of observation and testing characterized
by the scientific method. Situation, problem
statement, model construction, validation,
experimentation, candidate solutions.

Model
An abstract representation of reality. Mathematical,
physical, narrative, set of rules in computer program.
Systems Approach
Include broad implications of decisions for the
organization at each stage in analysis. Both quantitative
and qualitative factors are considered.

Optimal Solution
A solution to the model that optimizes (maximizes or
minimizes) some measure of merit over all feasible
solutions.

Team
A group of individuals bringing various skills and
viewpoints to a problem.

Operations Research Techniques

A collection of general mathematical models, analytical
procedures, and algorithms.
 Definition of OR
 OR professionals aim to provide a rational
basis for decision making by seeking to
understand and structure complex situations
and to use this understanding to predict
system behavior and improve system
performance.

 Much of this work is done using analytical

and numerical techniques to develop and
manipulate mathematical and computer
models of organizational systems composed
of people, machines, and procedures.
 Problem Solving Process
Formulate the
Problem
Situation Problem
Implement a Solution Statement
Goal: solve a problem
• Model must be valid
Data
• Model must be Construct
a Model
tractable
Implement
• Solution must be the Solution

useful Model

Procedure
Find
a Solution
Establish
a Procedure

Test the Model

and the Solution Solution Tools
 The Situation
• May involve current operations
or proposed developments due to
expected market shifts
Situation
• May become apparent through
consumer complaints or through
employee suggestions
Data • May be a conscious effort to
improve efficiency or respond to
an unexpected crisis

Example: AE staff not happy with their schedules; AE agency

using too many external agr. engineers.
 Problem Formulation
Formulate the
Problem
Situation Problem
Statement

Data

• Describe system • Define variables

• Define boundaries • Define constraints
• State assumptions • Identify data requirements
• Select performance measures
Example: Maximize individual AE preferences subject
to demand requirements, or minimize AE
dissatisfaction costs.
 Personnel Planning and Scheduling:
Example of Bounding a Problem
Long-term planning
– Full & part-timers
– Shifts
– Days off

Weekly scheduling
– Vacations, leave
– Overtime
– Part-timers, casuals
– Task assignments

Real-time control
– Emergencies
– Daily adjustments
– Sick leave
– Overtime
 Constructing a Model
Situation Problem
• Problem must be translated Formulate the
statement

from verbal, qualitative terms to Problem

logical, quantitative terms Data

• A logical model is a series of Construct

a Model
rules, usually embodied in a
computer program
Model
• A mathematical model is a collection of
functional relationships by which allowable
actions are delimited and evaluated.

Example: Define relationships between individual AE assignments and

preference violations; define tradeoffs between the use of
internal and external resources.
 Solving the Mathematical Model
• Many tools are available as
Model
discussed in this course
Find a • Some lead to “optimal”
solution solutions
• Others only evaluate
candidates  trial and
Solution Tools error to find “best” course
of action

Example: Collect input data – AE profiles and demand

requirements; apply algorithm; post-process results to
get monthly schedules.
 Implementation
• A solution to a problem usually implies
Situation changes for some individuals in the
organization
• Often there is resistance to change,
making the implementation difficult
Imple me nt • A user-friendly system is needed
the Proce du re
• Those affected should go through
training
Procedure

Example: Implement AE scheduling system in one unit at a

time. Integrate with existing HR and other systems.
Provide training sessions during the workday.
 Components of OR-Based
Decision Support System
• Database (AE profiles, external
resources, rules)
• Graphical User Interface (GUI);
web enabled using java or VBA
• Algorithms, pre- and post-
processors
• “What-if” analysis capability
• Report generators
Problems, Models and Methods

Real W orld
Real World
Situation
Situation

Problems TP LP DS
Problems

Models
Models LP NFP TP

Methods
Methods interior
simplex
 Operations Research Models

Deterministic Models Stochastic Models

• Linear Programming • Discrete-Time Markov Chains
• Network Optimization • Continuous-Time Markov Chains
• Integer Programming • Queuing
• Nonlinear Programming • Decision Analysis
 Deterministic vs. Stochastic Models
Deterministic models – 60% of course

Stochastic (or probabilistic) models – 40% of course

Deterministic models
assume all data are known with certainty
Stochastic models
explicitly represent uncertain data via
random variables or stochastic processes

Deterministic models involve optimization

Stochastic models characterize / estimate

system performance.
 Examples of OR Applications
• Rescheduling aircraft in response to
groundings and delays
• Planning production for printed circuit board
assembly
• Scheduling equipment operators in mail
processing & distribution centers
• Developing routes for propane delivery
• Adjusting nurse schedules in light of daily
fluctuations in demand
 1
Problem formulation

Steps in OR 2
Study Model building

3
Data collection

4
Data analysis

5
Coding

Model No
6 Fine-tune
verification and model
validation

Yes

7
Experimental design

8
Analysis of results
Activate Excel Add-ins

Tools Menu:
Add ORMM
or
Individual Add-ins
Available OR_MM Add-ins
LiPS software
 What You Should Know About
Operations Research
• Components of the decision-making process
• OR terminology
• What a model is and how to assess its value
• How to go from a conceptual problem to a
quantitative solution
• How to load or locate the Excel add-ins
 Sample Problem
• Two Mines Example
• The Two Mines Company own two different mines that produce an ore
which, after being crushed, is graded into three classes: high, medium
and low-grade. The company has contracted to provide a smelting
plant with 12 tons of high-grade, 8 tons of medium-grade and 24 tons
of low-grade ore per week. The two mines have different operating
characteristics as detailed below. Consider that mines cannot be
operated in the weekend. How many days per week should each mine
be operated to fulfill the smelting plant contract? Formulate
mathematical model.
Mine Cost per day (Php'000) Production (tons/day)
High Medium Low
X 180 6 3 4
Y 160 1 1 6
 Answer
• Variables These represent the "decisions that have to be
made" or the "unknowns". We have two decision variables
in this problem:
•
• x = number of days per week mine X is operated
• y = number of days per week mine Y is operated
• Note here that x ≥ 0 and y ≥ 0.
 Answer
• Constraints It is best to first put each constraint into words
and then express it in a mathematical form.
• ore production constraints -balance the amount produced
with the quantity required under the smelting plant contract
• High 6x + 1y ≥ 12
• Medium 3x + 1y ≥ 8
• Low 4x + 6y ≥ 24
• days per week constraint -we cannot work more than a
certain maximum number of days a week e.g. for a 5 day
week we have
• x≤5 ; y≤5
 Answer
• Objective Again in words our objective is (presumably) to
minimize cost which is given by
180x + 160y
 Answer
• Mathematical representation of the problem:
• minimize 180x + 160y

• subject to:
• 6x + y ≥ 12
• 3x + y ≥ 8
• 4x +6y ≥ 24
• x≤5
• y≤5
• x, y ≥ 0
 Giapetto example
• Giapetto's wooden soldiers and trains. Each soldier sells for $27, uses $10 of
raw materials and takes $14 of labor & overhead costs. Each train sells for
$21, uses $9 of raw materials, and takes $10 of overhead costs. Each soldier
needs 2 hours finishing and 1 hour carpentry; each train needs 1 hour finishing
and 1 hour carpentry. Raw materials are unlimited, but only 100 hours of
finishing and 80 hours of carpentry are available each week. Demand for trains
is unlimited; but at most 40 soldiers can be sold each week. How many of each

toy should be made each week to maximize profits ?

 solution
Decision Finishing Carpentry Demand
Variables
soldier (x1) 2 1 40
trains (x2) 1 1 Unlimited
100 80

Profit = Revenue – cost – other variable cost

Profit (x1) = 27 – 10 – 14 = 3
Profit (x2) = 21 -9 – 10 = 2
 solution
• max z = 3x1+ 2x2 (The Objective function)
• s.t.
• 2x1+ x2 ≤ 100 (Finishing constraint)
• x1+ x2 ≤ 80 (Carpentry constraint)
• x1 ≤ 40 (Constraint on demand for
soldiers)
• x1, x2 > 0 (Sign restrictions)
• The Graphical Solution
• Any LP with only two variables can be
solved graphically
The optimal
solution of this
LP is point G
where (x1, x2)
= (20, 60)
giving z = 180.
 Example 2. Advertisement
• Dorian makes luxury cars and jeeps for high-income men
and women. It wishes to advertise with 1 minute spots in
comedy shows and football games. Each comedy spot
costs $50K and is seen by 7M high-income women and
2M high-income men. Each football spot costs $100K and
is seen by 2M high-income women and 12M high-income
men. How can Dorian reach 28M high-income women and
24M highincome men at the least cost?
 solution
Decision cost HIW HIM
Variables
comedy 50 7 2
(x1)
Football 100 2 12
(x2)
28 24
 Example 2. Advertisement
• The feasible region is the set of all points
satisfying the constraints.
• min z = 50x1 + 100x2
• s.t.
• 7x1 + 2x2 ≥ 28 (high income women)
• 2x1 + 12x2 ≥ 24 (high income men)
• x1, x2 ≥ 0
the optimal solution
to the problem is the
point in the feasible
region with the
smallest z value.
An isocost line with
the smallest z value
passes through point
E and is the optimal
solution at
x1 = 3.6 and
x2 = 1.4
giving z = 50*3.6 +
100*1.4
= 320.