ആരാമം

Applications of Operational Research

13 min read

Why Operation Research

As we know, decision making in today’s social and economic environment has become a very complex task and high cost and rapid changes of tech , materials, labor along with competitive pressure and so many similar factors and viewpoints in social, political and economical fields greatly increased the difficulty in managerial decision making. Knowledge and technology are rapidly changing and different problems with very little or no precedence continuously arises, well structured problems are routinely optimized at the operational level of org and increased attention is now focused on broader strategic issues.

To sufficiently address these problems,and provide leadership in global age, decision makers can not rely only upon experience, guess work or intuition because a single wrong decision may have costly consequences. Hence an understanding of applicability of quantitative methods to decision making is of great importance. For example , entering into the wrong market, producing wrong type of product , providing inappropriate services will have worst case problems per industry.

A decision maker while solving a real life problem should examine the problem in the perspectives of both quantitative and qualitative sides so that the data so obtained from both sides should be considered for the optimal solution of the problem.

Consider a problem where an investor seeking advice for investments in three alternatives: Stock Market, Real Estate, and Bank Deposit.

To suggest an acceptable solution, we have to consider certain quantitative factors like financial ratios from the balance sheets of several firms whose stock are under consideration; real estate companies’ cash flows and rates of return for the investment property; how much the investment will be worth in future when deposited at a bank at a given interest rate for certain number of years, need to be examined.

However, along with these quantitative factors, qualitative factors like weather, state and central policies, new technology , the political situation etc.. also need to be considered before suggesting a solution.

How Operations Research approach works

Operation Research facilitates the comparison of every possible alternatives(course of actions) to know the potential outcomes, permits the examination of the sensitivity of the solution to changes or errors in numerical values, and encourages rational decision making based on the best available approaches and/or techniques.

However it must be emphasized that, timely and competent decisions should be an aid to the decision-maker’s judgment, not a substitute for it.

That is, not to say, that the management decision making is simply about the application of operations research techniques and/or approaches.

History of Operations Research

The term ‘Operations Research’ was coined as a result of research on military operations during world war II.

Since the war involved in strategic and tactical problems which are greatly complicated, to expect adequate solutions for the management of resources and manpower, from individuals or specialists in a single discipline was unrealistic.

Hence, groups of individuals who collectively were considered specialists in mathematics, economics, statistics and probability theory, engineering, behavioral and physical science were formed as special units within the armed forces to deal with strategic and tactical problems of various military operations.

Such groups were first formed by the British Air Force and later, the American armed forces formed similar groups.

One of the groups in Britain came to be known as Blackett’s Circus.This group, under the leadership of prof. PMS Blackett was attached to the Radar Operational Research unit and was assigned the problem of analyzing the co ordination of radar equipment at gun sites.

The effort of such groups, especially in the area of radar detection are considered vital in Britain winning the air battle. Following the success of this group, such a mixed-team approach was also adopted in other allied nations.

After the war ended, scientists who had been active in the military OR groups made effort to apply the operations research approach to civilian problems, related to business, industry, research and development, etc.

As a result of the continued research efforts in the OR, some important advancements were made in various op techniques.

A key person in the post war development of OR was George B Dantzig. In 1947, he developed the concept of linear programming and its solution by a method known as simplex method.

Besides linear programming, many other techniques of OR such as statistical quality control, dynamic programming, queuing theory and inventory theory were all developed before the end of 1950.

In India, operations research came into existence in 1949 when an OR unit was established at Regional Research Laboratory, Hyderabad for planning and organizing research.

At the same time, prof RS Verma, also set up an OR team at Defense Science Laboratory to solve problems of store, purchase and planning.

In 1953, prof.PC Mahalanobis established and OR team in Indian Statistical Institute, Kolkata to solve problems related to national planning and survey.

The OR Society of India (ORSI) was founded in 1957 and started publishing its journal OPSEARCH from 1964.

In the same year, India along with Japan became a member of the International Federation of Operational Research Societies(IFORS) with its headquarters in London.

“O.R. is the art of giving bad answer to problems which otherwise have worse answer” - T.L Saaty

Scope of Operational Research

  • Agriculture : O.R. Methodologies can be used to manage different problems in agriculture field and to maximize agriculture output of a country since population is increasing day by day. Different problems like climate conditions, optimal water distribution form different resources etc can be managed by O.R. models.

  • Finance Planning : planning for economic development of a firm , or a nation itself can be managed using O.R. techniques.

  • Industry : Different departments of companies uses different strategies to acquire maximum benefits in their fields.

    • product department: O.R. techniques can be implemented to minimize cost of production.

    • marketing department : O.R. is useful in marketing field for maximizing the sales and minimize the cost of sales.

    • financial department : O.R. is utilized to minimize the capital requirement and maintain any level of business.

  • Personal Management

  • Research and Development

The basis for any research is a problem. Every problem can be converted into a mathematical form and hence we can create a model out of it. Implementing an O.R. model in a problem can give an optimal solution for a problem.

  • Traffic

  • Defense : Today’s technology allows the possibility of war via air, land and water. Hence it is necessary to formulate the optimum approaches for maximum benefit. O.R. helps military personals to select best strategies or course of actions to win the battle.

  • Hospitals

  • In life Insurance Policies : O.R. methodologies are useful to L.I.C to decide the premium rates of various policies

Operation Research and Decision Making

  • Rapid Changing Tech
  • High Degree of Uncertainty
  • High Competence Pressure
  • Business constraints
  • Increased Penalty
  • Rapid rising of Cost of Input

Applications of O.R.

Personal Management

  1. Study Labor turn over rate and accident rate.
  2. Determine optimum manpower planning
  3. Decide the number of person to be put on the permanent roll and the number of persons to be kept as standby to meet absenteeism.
  4. For modeling various job profile elements like independence, sense of responsibility, human relationships, school background etc. via statistical methods called factor analysis.
  5. Generation of recruitment policies

Production management

  1. Decide the number of machines that can be manned by a single operator.
  2. Study time lost due to various causes- waiting time, hunting time, queue time, transit time and the like.
  3. Decide optimum allocation of job to the facilities and the optimum sequence in which jobs should be performed.
  4. Physical distribution
  5. Facility planning

Quality Control

  1. To see whether the manufacturing process is under control and thereby the presence of assignable cause.
  2. Measure natural tolerance (process capability) of machine
  3. Decide , at the reduced cost of inspection, the fate of the incoming lot in the company’s inward inspection (acceptance sampling)

Marketing Management

  1. Determine optimum product mix and product selection.
  2. Fix up location of distribution points and warehouse for least cost of transportation of units from warehouse to customer.
  3. Choose between different medias of advertising.
  4. Draw sales forecast and determine number of salesman.

Finance Management

  1. Interpret financial statements of business or industrial concern to have an idea of its growth potential, profitability, financial stability, liquidity etc..
  2. Develop capital invest plans and evaluate the proposal(s) for its vaiability.
  3. Determine optimum Replacement policies and dividend policies.
  4. Cash flow analysis
  5. Long range capital requirement analysis and investment portfolio generation

Research and Development

  1. Determination of area of concentration
  2. Project selection
  3. Time and cost management for project.

Real Life Scenarios

  1. Assess the vulnerabilities in energy and utility systems, also creating prediction models for future vulnerabilities. Tools like ‘@risk’ can be used for the assessment. An example is using simulation model to find potential output results of impact of storm, thunder like phenomenons on electricity.

  2. NCAA predictive models developed using Bayesian probability, Markov chain models and logistic regression like methods. The model can effectively predict which team will advance forward in tournament at each stage even before the start of the tournament.

  3. Used in supply chain optimization, that is trying to understand how to choose the best ways to acquire low cost, but quality materials a firm can use for the manufacture of a product. For example, when building a laptop, a company has to decide the best suited components, when they should be purchased, what quantities should they purchased keeping an objective of making maximum economic benefit,

  4. Used in Computational sustainability issues. For example, developing quantitative models for allocation of funds, buying of lands for preservation of endangered species.Use of Deterministic integer program and network design programs consisting of millions of nodes are extensively used for this type of projects.

  5. Used in scheduling manufacturing operations involving tens of machines and more than one tool systems in each machines. Order of manufacturing a product is also determined. For example, consider a laundry basket of five different colors , the order of producing these different colored baskets on different machines should be determined. In a real world situation, more than one product of different colors are being produced concurrently, hence the order is important.

  6. Used in vehicle dynamics. Creating terrain models so that suspension system, fuel handling etc in vehicles are managed in an optimum way. Used in military operations where we use different vehicles, like tanks and develop a target terrain model and appropriately incorporate fuel, suspension and other aspect of vehicle according to that model.

  7. Action research projects to provide sustained energy access to rural communities through localization of solar Off grid technologies and energy efficient devices. Effective scheduling, manufacture, and implementation strategies can be developed via combining techniques in industrial engineering and O.R. AN ecosystem consisting of retailers, manufacturers, financial institutions, infrastructure that are owned and managed by local rural communities can be developed. Example project is ‘Solar Oorja’, implemented by Dept. of IEOR, IIT, Bombay

  8. In healthcare management, in the problem of kidney exchange, where incompatible receiving pair can exchange their donors kidney to find a compatible match for them.

  9. IMPReSS, an automated production planning and delivery management system for the entire production network of a company. The system is developed as a combination of heuristics as well as optimization-based techniques. It works by breaking up the overall problem into smaller, more manageable problems by using a heuristic decomposition approach.. The system interfaces with sophisticated databases allowing for forecasting, quotation and order entry, materials and dynamic information on capacities.

Successful implementation on : Harris Corporation - Semiconductor Section, Melbourne, Florida, U.S.

  1. A system called OMEGA, implemented in Texaco, refinery is a model based on non linear optimization. It helps for optimally blending gasoline.The optimizer uses an algebraic modeling language called GAMS and a nonlinear solver called MINOS, along with a relational database system for managing data.

O.R. Techniques and Applications.

Linear Programming Problem

LP is a mathematical modeling technique, used for planning and decision making in the case of formulating an optimal usage of scarce resources.

L.P. is used in agriculture, military, production management, financial management, marketing management, personal management etc.

The applications include:

  • Product mix problems
  • Production planning problems
  • Product portfolio management
  • Longevity of product life cycle
  • Line Balancing problems
  • Blending problems
  • Portfolio selection
  • Profit planning
  • Alternative capital investment decisions
  • Salary management
  • Employee benefits and welfare
  • Job evaluation and allocation
  • Media selection in marketing
  • Traveling salesman approach in marketing

etc..

Transportation Problems

T.P. helps to identify optimal transportation routes along with units of commodities to be transported in order to minimize total transportation cost.

The applications include:

  • minimization of shipping costs
  • Low cost location identification
  • Minimum cost production schedule identification
  • Military distribution systems

Assignment Problems

A.P. deals with optimal assignment of one set of items like machines or resources to another set like people or tasks with an objective to minimize total time and cost or to maximize profit or returns.

The applications include:

  • Assignment of employees to machines.
  • Assignment of operators to jobs.
  • Effectiveness of teachers and subjects.
  • Allocation of machines for optimum utilization of space
  • Allocation of salesmen to different sales areas.
  • Allocation of clerks to various counters etc.

Game Theory

Game Theory is concerned with the study of decision-making in situations where two or more rational opponents are involved under conditions of competition and conflicting interest.

Examples of competitive situations are:

  • Firms trying to snatch each other’s market share.
  • Selection of best advertising media
  • Military attacks.

Game theory can be applied in situations like:

  • Price related issues between an equipment dealer and customer for a profitable deal for both the parties.
  • Bidding of government contracts that result into price war between contractors.
  • Issues between trade union and management of a company.
  • A firm wishes to introduce a new product in the market, to get a bigger share in the market, the marketing manager of the firm should come up with possible strategies of a competitor who is also trying to introduce product with different strategies e.g.price reduction, better quality, etc

Replacement Theory

R.T. is required in order to determine the age at which replacement of job performing units such as men, machines, equipment etc is economical.

Some application scenarios include:

  • when items such as machines, vehicles etc whose efficiency deteriorates with age and constant usage. Here increased maintenance or Operational cost can be selected as indicator.
  • Items such as light bulbs, electric motors,radio, Television parts, etc. fail suddenly. Here sudden failure is the indication and probability techniques can be used.
  • Existing working staff in a company gradually reduces due to retirement or any other reasons etc.

Limitations of Operations research

  1. OR involve the use of mathematical model
  2. Over use of assumption to simplify Mathematical model.
  3. Consider only tangible factors, some of the intangible factors which are not given due weight age like background, past experience etc..
  4. Usually associated with high cost, specialized persons and computers may needed, such expenditure usually discourages small firms in adopting operational research techniques.

references:

Graph View