INTRODUCTION TO OPERATIONS RESEARCH – PREVIOUS YEAR QUESTIONS GNDU
Define Operations research and explain its main characteristics? Also give examples to highlight the scope of the operations research?
Answer:
OPERATIONS RESEARCH
Operations research is the application of scientific method to problem arising from operation involving integrated system of men, machine and material. It normally utilises the knowledge and skills of an inter-disciplinary research team to provide the management of such system with optimum operating solution.
ACCORDING TO HM WAGNER
“Operations Research is a scientific approach to problem solving for execution management.”
ACCORDING TO THOMAS L SATTY
“Operations research is the art of giving bad answers to problems to which, otherwise worst answers are given.”
Thus, Operations research is the application of modern methods of mathematical science to complex problems involving management of large system of man, machines and money in industry, business, government, and defence.
CHARACTERISTICS OF OPERATIONS RESEARCH
System Orientation: Operations research is a system oriented scientific approach. It studies the problem as a whole and provides the solution that is to be applied on whole system or organisation. But in real world, the one thing optimum for one department may not be optimum for another department. So while deriving at the solution, one must take into account all possible interactions of all the departments.
Inter-disciplinary Team approach: According to Ackoff and Saieni “Operations research is the application of scientific method by inter-disciplinary team’s problems involving the control of organised system as to provide solutions which best serve the purpose of the organisation as a whole.”
So, Operations research is inter-disciplinary in approach. It requires the knowledge of allied discipline like statistics, engineering, economics, management, computer science and so on. Operations research’s team brings the latest scientific know how to analyse the problems and helps in providing better results.
Scientific Approach: According to morse and Kimball, “Operations Research is a scientific method of providing executive departments with a quantitative basis for decisions regarding the operations under their control.”
So, operations research is a proper scientific approach to solve the complex business problems. The scientific methods in Operations Research consists of three phases:
Judgement Phase: This phase consists of:
- Determination of operations
- Establishment of objective and values related to the business.
- Determination of the suitable measures of effectiveness.
- Formulation of the problems relative to the objectives.
Research Phase: This phase utilises:
- Operations and data collection for a better understanding of the problem.
- Formulation of hypothesis and model.
- Observation and experimentation to test the hypothesis of the available information and verification of the hypothesis using pre-established measure of effectiveness.
- Prediction of various results from the hypothesis.
- Generalisation of the various results and consideration of alternative methods.
Action Phase: It consists of making recommendations for the decision process by those who first posed the problem for consideration or by anyone in a position to make a decision influencing the operation in which the problems occurred.
Decision Making: Operations Research is an optimal decision-making science which helps the management to make better decisions in time. Decision making can be improved and in fact the headache of management can be cured by using the scientific methods of the Operations research to take the decisions. The main features of all decisions are:
- Objectives
- Alternatives
- Constraints
The objective should be clear and un-ambiguous. This helps to take proper decisions. Next, various possible alternatives should be studied along with the constraints imposed on each alternative. The scientific operation research methods helps to take best possible action.
Use of Computer: Operation research often requires a computer to solve the complex mathematical model or to perform large number of computations that are involved.
Use of a digital computer has become an integral part of the Operations Research approach to decision-making.
Objectives: The goals or objectives of the organisation provides a base to the future course of action. Operations research attempts to find out the best and optimal solution to the problem on the basis of the objectives set. The proper analysis of objectives helps in deciding the best alternatives.
Quantitative Solution: According to EL Arnoff and MJ Netzong, “ Operations Research is the systematic method oriented study of the basis structure, characteristics, functions and relationships of the organization decision making to provide the executive with sound, scientific and quantitative basis for decision making.
The above definition clearly states that the solutions derived by applying the Operations methods and techniques are quantitative in nature as all the techniques applied are mathematical.
Operations research attempts to provide a systematic and rational approach for quantitative solutions to the various managerial problems.
SCOPE OF OPERATIONS RESEARCH
Wherever there is a problem of optimization, there is a scope of operations research. It is as follows:
- Finance, budgeting and investments:
- Cash flow analysis, long range capital requirements, investment portfolios, dividend policies etc.
- Credit policies, credit risks and the delinquent account produces- claim and complaint procedures.
- Break even analysis, capital budgeting, cost allocation and control and financial planning.
- Establishing costs for by-products and developing standard costs.
- Purchasing, procurement and exploration:
- Determining the quantity and timing of purchases of raw materials, machinery etc.
- Rules for buying and supplying under varying prices.
- Bidding policies.
- Equipment replacement policies.
- Determination of quantities and timings of purchase.
- Strategies for exploration and exploitation of new material sources.
- Vendor analysis
- Transportation planning
- Production management:
- Physical distribution:
- Location and size of warehouse distribution centres, retail outlets etc.
- Distribution policy.
- Manufacturing and facility planning:
- Production scheduling and sequencing.
- Project scheduling and allocation of resources.
- Number and location of factories, warehouses, hospitals, and their sizes.
- Determining the optimum product mix.
- Manufacturing:
- Maintenance policies and preventive maintenance.
- Maintenance of new sizes.
- Physical distribution:
- Marketing management:
- Product selection, timing, competitive actions.
- Advertising strategy and choice of different media of advertising.
- Number of salesmen, frequency of calling of accounts etc.
- Effectiveness of market research.
- Size and the stock to meet the future demand.
- Personnel management:
- Recruitment policies and assignment of job.
- Negotiation in bargaining situation.
- Skills and wages balancing.
- Wage/ salary administration.
- Designing organisation structure more effectively.
- Techniques and general management:
- Decision support system and MIS (Management Information System) forecasting.
- Making quality control more effective.
- Project management and strategic planning.
- Government:
- Economic planning, natural resource, social planning, and energy.
- Urban and rural housing problems.
- Military, police, pollution control etc.
- Research and development
- Determination of areas of concentration of research and development.
- Reliability and evaluation of alternative designs.
- Control of developed projects.
- Coordination of multiple research projects.
- Determination of time and cost requirements
EXAMPLES/ CASES
- In 2013, Dutch Delta Program Commission used mixed integer programming to derive an optimal investment strategy for strengthening dikes for protection against high water and keeping freshwater supplies up to standard resulting in savings of 8 billion euros in investment costs.
- In 2012, TNT Express developed a portfolio of multi-commodity and vehicle routing models for package and vehicle routing and scheduling, planning to pick-up and delivering and supply chain optimization for its operations across 200 countries using 2600 facilities, 30,000 road vehicles and 50 aircrafts resulting in the savings of 207 million euros over the period of 2008-2011 and reduction in the carbon emissions by 283 million kilograms.
- In 2010, Mexico’s Central Security Depository, INDEVAL, used linear programming to develop a secure and automatic clearing and settlement engine to determine the set of transactions that can settled to maximize the number of traded securities, thereby efficiently processing transactions averaging 250 billion dollars daily and optimally using available cash and security balance.