CHAPTER ONE
Introduction to Operations Research
1.1. Historical Development of Operations Research
Operations Research originated in Great Britain during World War II to bring mathematical or
quantitative approaches to bear on military operations. The main objective was to allocate the
scarce resources in an effective manner to the various military operations and to the activities
within each operation.
The effectiveness of operations research in military area spread into other government department
and industry. Due to the availability of faster and flexible computing facilities and the number of
qualified OR professionals, it is now widely used in military, business, industry, transportation,
public health etc. Since its birth in the 1940's, Operations Research has been widely recognized
as an important approach to decision-making in the management of all aspects of any organization.
1.2. Definitions of Operations Research
o Operations Research is a scientific method of providing executive departments with a
quantitative basis for decisions regarding the operations under their control (Morse &
Kimball, 1948).
o Operations research is a scientific approach to problem solving for executive management
(H.M. Wagner, unknown).
o Operations research is an aid for the executive in making these decisions by providing him
with the needed quantitative information based on the scientific method of analysis
(C. Kittel, unknown).
o It is a discipline devoted to solving certain managerial type problems using quantitative
models (Stevenson )
Working definitions
Operations Research is a systematic analysis of a problem through scientific methods, carried
out by appropriate specialists, working together as a team, constituted at the instance of
management for the purpose of finding an optimum and the most appropriate solution, to meet
the given objective under a given set of constraints.
Key points
From the concept and definition given above, Operations Research is:
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1. The application of scientific methods, techniques and tools to find an optimal solution
to a problem.
2. A management tool in the hands of a manager to take a decision
3. A scientific approach to decision making process
4. An “applied research” aims at finding a solution for an immediate problem facing a
society, industry or a business enterprise .This is not “fundamental research”
5. A decision-oriented research, using scientific methods, for providing management a
quantitative basis for taking decision regarding operations under its control
6. Applied decision theory uses scientific, mathematical and logical means to take
decisions.
The Five functions of Operations Research
A. objective: helps managers to make objective decision
B. scientific approach: helps decision makers to follow scientific approach to olve
managerial problems
C. inter disciplinary team work: it allows for team work
D. digital computers: over reliance on scientific calculators and other computing
machines
E. decision making : helps decision makers to solve managerial problems
1.3 Decision Making
Making appropriate decision is the most vital aspect in management .Every one of us takes a number
of decisions every day. Some are important; some are trivial. Some decisions initiate a set of activities;
some put an end to a certain activities. In business environment right decisions at the right times ensure
success. This shows the importance of decision making.
❖ Problem is any variation between what was planned and what is actually have/produced.
❖ Problem solving can be defined as the process of identifying a difference between some actual and
some desired states of affairs and then taking action to resolve the difference.
❖ Decision making defined as the process of selecting or choosing based on some criteria, the best
alternative among alternatives.
❖ It requires for all human being because each of us make decision every day in our life. Thus,
decision making is universal.
❖ Decision making is a rational selection among alternatives.
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The Decision Making Process:
Steps in the process of rational decision making:
1. Identify and define the problem
Problem is a necessary condition for a decision. i.e.: There would be no need for decisions if
problems did not exist.
2. Determine the set of alternative solutions.
3. Determine the criteria to evaluate alternatives: (Identifying those characteristics that are
important for making the decision)
4. Analyze the alternatives: (The advantages and disadvantages of each alternative)
5. Select the best alternative: (Select the best alternative that suits to solve our decision problem.
In selecting the best alternative, factors such as risk, timing and limiting factors should be
considered adequately)
6. Implement the solution: (Putting the decision into action)
7. Establishing a control and evaluation system :( Ongoing actions need to be monitored,
following the decision, evaluate the results and determine if a satisfactory solution has been
obtained.
1.3.1 The Decision-Making Environment
Decisions are made under the following three basic conditions:
• Decision under certainty
• Decision under risk
• Decision under uncertainty
i. Decision making under conditions of certainty
The decision maker has perfect knowledge about the outcome.
In this situation, we are reasonably sure what will happen when we make a decision. The
information is available and is considered to be reliable and we know the cause & effect
relationships.
Example: If you decide to invest your money in saving account in the commercial Bank of
Ethiopia, You are certain that you will earn stated five or other amount percent interest.
ii. Decision making under condition of risk
Usually, decision makers cannot have a precise knowledge about the outcome of a decision.
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Decision makers may only be able to attach a probability to the expected outcomes of each
alternative.
Under this situation, one may have factual information, but it may be incomplete.
Example: If we gamble by tossing a fair coin, the probability that a tail will turn up is 50%.
iii. Decision making under conditions of uncertainty
It is a case where neither there is complete data nor probabilities can be assigned to the
surrounding condition. It is the most difficult for a manager.
Some conditions that are uncontrollable by management include competition, government
regulations, technological advances, the overall economy, & the social & cultural tendencies of
society.
Example: A corporation that decides to expand its operation, launching a new product, or developing of
a new technology in a foreign country may know little about its culture, laws, economic environment, or
politics. The political situation may be so volatile that even experts cannot predict a possible change in
government.
1.3.2 Decision Making Approach
Decision making can be either quantitative or qualitative. In qualitative decision making
intuitions and subjective judgments are used. Past experience with similar problems is often an
important factor in choosing a qualitative approach, as in the complexity and importance of a
problem. Managers tend to use a qualitative approach to problem solving when:
➢ The problem is fairly simple
➢ The problem is familiar
➢ The cost involved are not great
➢ Immediate decisions are not needed
In quantitative decision making, managers use mathematical methods to solve the problem.
Conversely, managers generally prefer to use a quantitative approach when one or more of the
following conditions exist:
➢ The problem is complex
➢ The problem is not familiar
➢ The costs involved are substantial
➢ Enough time is available to analyze the problem
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1.4 MODEL
Model is an abstraction of a reality. It is a simplified and often an idealized representation of real
objects/situations. By its very nature a model is incomplete. A good model will capture the
important details of reality without including innumerable minor details that would obscure rather
than illuminate
Models can be classified in the following ways:
a. Physical (iconic) Model
Iconic models are the least abstract; they are physical models that look like the reality.
It is also called Static Model. It is given in two or three dimensions. It is a representation of the real
object as it is.
Example:
• Model of an airplane
• Photograph of a machine
• Layout drawing of a factory
• Glob
b. Analogue Models:
They are also physical models but they are more abstract than iconic models. Instead of replicating
physical appearance as iconic models do, these models substitute some physical analogy for
important aspects of the reality. These models mostly showing inter and intra relationships
between two or more parameters. It may show the relationship between an independent variable
(input) with that of a dependent variable (output). It is two dimensional
Example:
Histogram,
Frequency table,
Cause-effect diagram,
Flow chart,
Gantt charts,
Price-demand graph,
World map with different colors,
Organizational chart.
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C. Mathematical Models (Symbolic Models)
These are the most abstract models. They incorporate numbers and algebraic symbols to represent
important aspects of a problem often in equation form. Here a set of relations is represented in the
form of mathematical equations, using symbols to represent various parameters.
Example:
Max Z=3000x1 +2500x2
Subject to:
2x1+x2 < 40
x1+3x2 < 45
x1 < 12
x1 , x2 > 0
Where:
The first line represents the objective function - A mathematical statement of the goal of an
organization, stated as intent to maximize or to minimize some important quantity such as profits
or costs.
Max Z=3000x1 +2500x2 is the objective function
❖ Lines three to five represent constraints - A restriction on the resources available to a firm
(stated in the form of an inequality or an equation.)
2x1+x2 < 40
x1+3x2 < 45 Are constraints
x1 < 12
x1, x2 > 0 x1, x2 > 0 is non-negativity constraint
❖ x1 and x2 are decision variables
1.5 Management, Management Science and Operations Research
o Management may be equated with decision-making and control. Government Ministers
manage the economy, industrialists make decision within their companies and individual make
personal decisions.
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o Management science: Are the study of problems as abstractions and the application of the
resulting theory to practical situations. Its two fundamental disciplines are behavioural science
and quantitative methods.
o Operations Research: is the application of quantitative methods to decision making. It
formulates problems incisively and assesses the possible consequence of alternative course of
action, so that informed and effective decisions can be taken.
• Operations: The activities carried out in an organization related to attaining its goals and
objectives.
• Research: The process of observation and testing characteristics by the scientific method.
The steps of the process include observing the situation and formulating a problem
statement, constructing a mathematical model, hypothesizing that the model represents the
important aspects of the situation, and validating the model through experimentation.
1.6 Operations Research Approach to Problem Solving
Operations Research encompasses a logical systematic approach to problem solving. This
approach to problem solving as shown in fig. 1 follows a generally recognized ordered set or steps:
Operation Research Process/Techniques
Observation
Problem Definition
OR Techniques
Model Construction
Feedback Solution
Information
Implementation
Figure 1: Operations Research Process
[Link]: The first step in a problem solving exercises in Operations Research is the
identification of a problem that exists in the system.
[Link] of the problem: Once it has determined that a problem exists, it must be clearly and
concisely defined. The problem definition includes the limits of the problems and the degree to
which it pervades other organs of the system.
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[Link] Construction: An Operations Research model is an abstract representation of an existing
problem situation. It can be in the form of a graph or chart, but mostly, an Operations Research
model consists of a set of mathematical relationship. In Operations Research terminology, these
are called objective function and constraints.
[Link] Solution: Once models are constructed, they are solved using the OR techniques,
presented in the next section. Actually it is difficult to separate model construction and solution
in most cases, since OR technique usually applies to a specific type of model.
[Link] of Results: The results of an Operations Research technique are information
which helps in making a decision.
N.B: Operations Research is an On-going Process: Once the five steps described above are
completed, it does not necessarily mean that Operations Research process is completed. The model
results and the decisions based on the results provide feedback to the original model. In general,
the Operations Research process is continuous rather than simply consisting of one solution to one
problem.