Operations Research: An Introduction

Introduction What is Operations Research (Management Science)?

A Scientific Approach of applying advanced analytical methods to help make better decisions.

It is concerned with the development and application of quantitative analyses to the solution of problems faced by the managers

Management decision making

An emerging retail giant has to decide on size and location of its proposed grocery Malls. A portfolio manager is debating on the amount of investment to be made on various instruments A marketing media planner has to decide how many advertisements to be given in different media slots The head of a large Chinese telecom component manufacturer is planning to expand his market beyond Asia in a big scale. He is contemplating on the appropriate production-storage-distribution architecture A project head of IT company has to assign his software executives to various team leads An BPO firm manager is planning to restructure the routing of calls across the various levels of employees A logistics manager of a beverage company is wondering what should be the ideal dispatch plan for the various products from plants to demand points

Motivation & Overview

Managerial Decision making process

Finding the best solution for a problem Within the limitations posed by environment, resources etc

Alternatives CONSTRAINTS Problem Objective How to find best?

Decision Making situations

Production Decisions
Routing Decisions

Location Decisions

Product Mix Decisions

Decision Making situations

Production Decisions Marketing Decisions ..

Routing Decisions

Location Decisions

Product Mix Decisions

Decision Making situations

Production Decisions Marketing Decisions Financial Decisions

Routing Decisions

Location Decisions

Product Mix Decisions

Decision Making situations

Production Decisions Marketing Decisions Financial Decisions etc/.. Etc..

HR Decisions Routing Decisions

Location Decisions

Product Mix Decisions

Decision Making situations

Production Decisions Marketing Decisions Routing Decisions Financial Decisions HR Decisions etc/.. Etc.. What is common in all these?
Location Decisions

Product Mix Decisions

Decision Problems

Objective(s) Decision(s) Constraint(s)

Example

Maximise Utility Which Marbles to pick? Capacity of Container

How to DECIDE? Quantitative Approach Qualitative Approach

Problem Solving
Managers tend to use a qualitative approach to problem solving 1.The problem is fairly simple. 2.The problem is familiar. 3.The costs involved are not great.
Managers tend to use a quantitative approach to problem solving
1. The problem is complex. 2. The problem is not familiar. 3. The costs involved are substantial. 4. Enough time is available to analyze the problem.

Why Quantitative Approach?

Directs attention to the essence of an analysis: to solve a specific problem. Improves planning which helps prevent future problems Results in more objective decisions than purely qualitative analysis. Incorporates advances in computational technologies to managerial problem-solving.

Models
A Model An abstraction of reality. It is a simplified, and often idealized, representation of reality. Examples : an equation, an outline, a diagram, and a map

Models
A Model An abstraction of reality. It is a simplified, and often idealized, representation of reality. Examples : an equation, an outline, a diagram, and a map

Models
A Model An abstraction of reality. It is a simplified, and often idealized, representation of reality. Examples : an equation, an outline, a diagram, and a map

Models
A Model An abstraction of reality. It is a simplified, and often idealized, representation of reality. Examples : an equation, an outline, a diagram, and a map By its very nature a model is incomplete. Provides an alternative to working with reality Symbolic models Use numbers and algebraic symbols Mathematical models Decision variables Uncontrollable variables

How to Solve
Problem Definition
Assumptions

MODEL

Finding Solution Testing Solution Analysing soln.

Analysis

Implementation Evaluation

Problem-solving Process
Pre-modeling function

Recognition of a need

Criteria or objectives Surrogates

Problem Formulation

Define objective function, variables, parameters and constraints

The Modeling function

Model Construction: Role of Criteria, Level of Aggregation

Data collection: MIS, Scale and measurement, Estimation & Forecasting Model solution: LPP, Queuing Models, Dynamic Programming etc. Model validation and sensitivity analysis:

Verify whether the solution is better than other alternatives Degree of stability in the results

Problem-solving Process
The post-modeling function

Interpretation of results and Implications Decision making, Implementation and Control

Type of Models

Deterministic models
Used for problems in which information is known with a high degree of certainty. Used to determine an optimal solution to the problem.

Probabilistic models
Used when it cannot be determined precisely what values (requiring probabilities) will occur (usually in the future).

Solution Approaches
OR/MS Models

Appl. Unconstrained DM Models Transportaion Assignment Network Soft OR

Linear

Non Linear

Heuris tics

LPP

UNCERTAINTY
ILP/BLP

UNCERTAINTYUnimodal
Unconstrained Multi modal

Dynamic

Multiobjective

Markov Simul.

TIME

COST

Composition of OR

Tools Techniques Methodology

Choice depends on the complex nature of the problem

Key Drivers for Implementing OR Models

Selection of an Appropriate Methodology in Modeling a Situation An optimal mix of contextual relevance, user sophistication, and professional satisfaction of OR Practitioners would maximize the chances of model implementation. Top management involvement is critical to implementation

Key Drivers for Implementing OR Models

The implementation pace and its impact is strongly influenced by the training and orientation of the mid-level executives in the organization.
The intensity of competition accelerates the adoption of effective management models. The managements effective handling of the perceived fear and anticipated accountability by the middle management in the context of the proposed new solution is a facilitator for implementation.

Any Questions?

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