Chapter one
Introduction to Operations Research
1.1 Definitions of Operations Research (OR)
Quantitative approach to management problems requires that decision problems be defined, analyzed, and
solved in a conscious, rational, logical and systematic and scientific manner - based on data, facts,
information and logic, and not on mere guess work or thumb rules. It needs objectively measured decision
criteria.
Operations research is the body of knowledge, which uses mathematical techniques to solve management
problems and make timely optimal decisions.
Operation Research is a systematic application quantitative methods, techniques and tools to the analysis
of problems involving the operation of systems.
Operations Research is a scientific method and an interdisciplinary team represents complex functional
relationships as mathematical models for the purpose of providing a quantitative basis for decision-
making and uncovering new problems for quantitative analysis.
Operation Research is a systematic application of quantitative methods, techniques and tools to the
analysis of problems involving the operation of systems. Operations Research utilizes the planned
approach (updated scientific method) and an interdisciplinary team in order to represent complex
functional relationships as mathematical models for the purpose of providing a quantitative basis for
decision-making and uncovering new problems for quantitative analysis.
1.2 Significance of Operations Research
Generally the significance of OR can be summarized as
• It provides a tool for scientific analysis and provides solution for various business problems.
• It enables proper deployment and optimum allocation of scarce resources.
• It helps in minimizing waiting and servicing costs.
• It enables the management to decide when to buy and how much to buy through the technique of
inventory planning.
• It helps in evaluating situations involving uncertainty.
• It enables experimentation with models, thus eliminating the cost of making errors while
experimenting with reality.
• It allows quick and inexpensive examination of large numbers of alternatives.
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1.3 Features of OR
The following are some of the important characteristics of operations research.
A. System orientation: OR study the situation or problem as a whole. The optimum result of one
part of a system may not be optimum for some other part. Therefore, to evaluate any decision one
must identify all possible interactions & determine their impact on the organization as a whole. It
attempts to resolve the conflicts of interest among the components of the organization in a way
that is best for the organization as a whole.
B. Inter- disciplinary team approach: OR is inter disciplinary in nature and is performed by a
team of scientist whose individual members have been drawn from different scientific and
engineering disciplines. No single individual can have a thorough knowledge of all aspects of
the undertaking. Managerial problems have economic, physical, psychological, biological,
sociological and engineering aspects. This requires a number of people who expertise in the area
of mathematics, statistics, engineering, economics, management, computer science and so on.
C. Scientific Approach: OR is a formalized process of reasoning. Under OR the problem is to be
analyzed & defined clearly. Observation is made under different conditions to study the behavior
of the system. On the basis of this observations, a hypothesis describing how the various
factor involved are believed to interact & the best solution to the problem is formulated. To
test the hypothesis, experiment is designed and executed. Observations are made and
measurements are recorded. Finally results of the experiments are studied and the hypothesis is
accepted or rejected. So, OR is the use of scientific method to solve the problem understudy.
D. Quantitative Decision Making: It provides the management with a quantitative basis for
decision making. Decision making is a systematic process & consist of the following steps:
1. Identify and define the problem
2. Determine the set of alternative course of actions.
3. Determine criteria to evaluate the alternatives
4. Evaluation of various alternatives
5. Selecting the best & the optimum alternative.
E. Use of computers: OR often require a computer to solve complex mathematical model or to
perform a large number of computations that are involved. Use of a digital computer has become
an integral part of the operations research to decision making.
F. Human Factor: Human factor is an important component of the Operations Research study.
Without human factor Operations Research study is incomplete.
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1.4 Operation Research Models
A model is a representation of the reality. Most of our thinking of OR in business takes place in the
context of models. A model is a general term denoting any idealized representation or abstraction of a
real life system or situation.
The objective of the model is not to identify all aspects of the situation but to identity significant
factors and their interrelationship. A model can be useful in decision making as it provides a
simplified description of complexities & uncertainties of a problem in hand in logical structure.
A major advantage of modeling is that it permits the decision maker to examine the behavior of a
system without interfering with an going operations.
Broader classification of models
1. Physical Model
These models provide a physical appearance of the real object under the study of either reduced in size or
scaled up. Physical models are useful only in design problems because they are easy to observe, build and
describe. Physical models are classified into the following two categories.
A. Iconic Models: These models represents the system as it is but in different size. Thus, Iconic
Models are obtained by enlarging or reducing the size of the system. examples of iconic models
are blueprints of a home, maps, globes, photographs, drawings, air planes, trains, etc.
B. Analogy Models: These models do not look like the real situation but represent and behave like a
system under study. For example, the organization chart represents the structure, authority and
responsibilities relationship with boxes and arrows and maps in different colors represent water,
desert and other geographical features.
2. Mathematical and Symbolic Model: symbolic model employs a set of mathematical symbols to
represent the decision variable of the system under study. These variables are related to gather by
mathematical equation.
Simple demand curve in economics is a symbolic model predicting buyers’ behavior at different
price levels. Similarly profit & loss statement & budget for next year are both symbolic models.
Profit & loss account is just reproduced on one sheet paper, and it summarizes the result of
a year but does not recreate every action, which took place during the year.
3. Deterministic models: in this model everything is defined and the results are certain. Certainty is
the state of nature assumed in these models. For every given input variable there shall be the same
output variable, E.g. in EOQ models, one easily determines economic lot size
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4. Probabilistic model: In case of risk & uncertainty, the input and output variable take the form
of probability distribution. In fact they reveal the complexity of the real world & uncertainty
prevailing in it. Example, in a game theory where saddle points or equilibrium points of the
player does not exist, we apply probabilistic model.
5. General models: This is one which is not applied in one situation only but has got general
applications. E.g LPM is known as a general model since it can be used for product mix, production
scheduling, marketing, transportation, assignment problems.
6. Specific model: it is applicable under specific condition only e.g. sales resource curve, or
equation as a function of advertising is applicable in the marketing function alone.