Models in Operations

Research
Models in OR
• It is a simplified representation of Operation or process
• Model describe certain aspects (key features) of a system for the
purpose of improving its performance
• It cannot, represent every aspect of a real-life problem because of its
changing characteristics
A good model must possess the following characteristics:
• It should be capable of taking into account, new formulation without
having any changes in its frame.
• Assumptions made in the model should be as small as possible.
• Variables used in the model must be less in number ensuring that it is
simple and coherent.
• It should be open to parametric type of treatment.
• It should not take much time in its construction for any problem.
ADVANTAGES OF MODEL BUILDING
• Problems under consideration become controllable.
• It provides a logical and systematic approach to the problem.
• It provides the limitations and scope of an activity.
• It helps in finding useful tools that eliminate duplication of methods
applied to solve problems.
• It helps in finding solutions for research and improvements in a
system.
• It provides an economic description and explanation of either the
operation, or the systems it represents.
Classification of Models
• Models by function
• Descriptive models:
• They describe and predict facts and relationships among the various activities
of the problem.
• These models do not have an objective function as part of the model to
evaluate decision alternatives.
• In these models, it is possible to get information as to how one or more
factors change as a result of changes in other factors.
• Normative or optimization models:
• They are prescriptive in nature and develop objective decision-rule for
optimum solutions.
• Models by structure
• Iconic or physical models:
• They are pictorial representations of real systems and have the appearance of the real thing.
• Examples of iconic model are, blueprints of a home, maps, globes, photographs, drawings, air
planes, trains, etc.
• Analog models:
• These are more abstract than the iconic ones
• organizational chart represents the structure, authority, responsibilities and relationship,
with boxes and arrows;
• maps in different colours represent water, desert and other geographical features,
• Graphs of time series, stock-market changes, frequency curves, etc., represent quantitative
relationships between any two variables and predict how a change in one variable effects the
other, and so on.
• Mathematic or symbolic models: They are most abstract in nature. They employ a
set of mathematical symbols to represent the components of the real system.
• Models by nature of an environment
• Deterministic models:
• They are those in which all parameters and functional relationships are
assumed to be known with certainty when the decision is to be made.
• Linear programming and break-even models are the examples of
deterministic models.
• Probabilistic or stochastic models:
• These models are those in which atleast one parameter or decision variable is
a random variable.
• These models reflect to some extent the complexity of the real world and the
uncertainty surrounding it.
METHODS FOR SOLVING OPERATIONS RESEARCH MODELS

• Analytical (or deductive) method

• In this method, classical optimization techniques such as calculus, finite difference
and graphs are used for solving an OR model.
• The analytical methods are non-iterative methods to obtain an optimal solution of a
problem
• Numerical (or iterative) method
• When analytical methods fail to obtain the solution of a particular problem, a
numerical (or iterative) method is used to find the solution.
• In this method, instead of solving the problem directly, a general algorithm is applied
for obtaining a specific numerical solution.
• The numerical method starts with a solution obtained by trial and error, and a set of
rules for improving it towards optimality.
• The solution so obtained is then replaced by the improved solution
• The process of getting an improved solution is repeated until such improvement is
not possible or the cost of further calculation cannot be justified.
• Monte Carlo method
• This method is based upon the idea of experimenting on a mathematical
model by inserting into the model specific values of decision variables for a
selected period of time under different conditions and then observing the
effect on the criterion chosen.
• Random samples of specified random variables are drawn to know how the
system is behaving for a selected period of time under different conditions.
• The random samples form a probability distribution that represents the real-
life system
• From this probability distribution, the value of the desired random variable
can then be estimated.
METHODOLOGY OF OPERATIONS RESEARCH
• Step 1: Defining the problem
• Step 2: Formulating a mathematical model
• Step 3: Solving the mathematical model
• Step 4: Validating the solution
• Step 5: Implementing the solution
• Step 6: Modifying the model
• Step 7: Establishing controls over the solution
Step 1: Defining the problem
• Problem definition involves the process of identifying, understanding,
and describing the problem being faced by an organization.
• It helps to define the objective(s) to be achieved, and the alternative
courses of action
• The major components involved in problem formulation are as under:
• Decision-maker’s Point of View
• Decision Environment
• Alternative Courses of Action
• Measure of Effectiveness
Step 2: Formulating a mathematical model
• The second step consists in constructing the model by which we
mean that appropriate mathematical expressions are formulated
which describe the interrelations of all variables and parameters.
Components of a decision model
• Controllable (Decision) Variables
• variables associated with the problem
• values are to be determined by solving the model.
• The possible values assigned to these variables are called decision alternatives
• Uncontrollable (Exogenous) Variables
• values of these variables are not under the control of the decision-maker
• Objective Function
• the criterion of evaluating alternative courses of action in terms of value of decision variables
so as to optimize (minimized or maximized) the desired performance.
• Policies and Constraints
• limitations on the use of resources
• arise due to organizational policy, legal restraints or limited resources such as space, money,
manpower, material
• expressed either in the form of equations or inequalities.
Components of a decision model
• Functional Relationships
• Decision variables in the objective function and in the constraints are
connected by a specific functional relationship.
A general decision problem model :
Optimize (Max. or Min.) Z = f (x)
subject to the constraints gi (x) {≤, =, ≥} bi ; i = 1, 2, . . ., m
and x ≥ 0
x = a vector of decision variables (x1, x2, . . ., xn)
f (x) = criterion or objective function to be optimized
gi (x) = the ith constraint
bi = fixed amount of the ith resource
Step 3: Solving the mathematical model
• obtain numerical values of decision variables.
• two categories of methods are used for solving an OR model
• Analytical Methods
• applied to solve both constrained and unconstrained mathematical models.
• constrained problems:
• value of decision variables satisfy all the constraints simultaneously
• provide an optimal value for the objective function.
• unconstrained problems: value of decision variables provide an acceptable value for the
objective function.
• Heuristic Methods (also referred as rules of thumb which work).
• used when obtaining optimal solution is either very time consuming
• Used when the model is too complex.
Step 4: Validating the solution
• review the solution to see whether
• value of variables make sense
• resulting decisions can be implemented
• Some of the reasons for validating the solution are:
• Mathematical model may not have considered all constraints present in study
because few constraints may either be omitted or incorrect.
• Certain aspects of the problem may have been overlooked, omitted or
simplified.
• The data may have been incorrectly estimated or recorded.
Step 5: Implementing the solution
• ensure to select alternatives that are capable of being implemented.
• ensure that any solution implemented is continuously reviewed and
updated in the light of a changing environment.
Step 6: Modifying the model
• If during validation the solution cannot be implemented, then
• identify the constraint(s) that were omitted during the mathematical model
formulation
• find out whether some of the original constraints were incorrect.
• make the appropriate modifications to represent the given problem
more accurately.
Step 7: Establishing controls over the solution
• changes within the environment (society or business) influence the
continuing validity of models and their solutions.
• control procedure needs to be developed for detecting significant
changes in decision variables of the problem, without having to build
a model every time a significant change occurs.
Opportunities And Shortcomings Of The Operations
Research Approach
Opportunities
The OR approach of problem solving facilitates.
• decision-maker to define explicitly his/her objectives, assumptions
and constraints.
• decision-maker to identify variables that might influence decisions
• in identifying gaps in the data required to support solution to a
problem.
• the use of computer software to solve a problem
Shortcomings
• The solution to a problem is often derived by simplifying
assumptions. Consequently, such solutions are not optimal.
• Models may not represent the realistic situations in which decisions
are made.
• Often the decision-maker is not fully aware of the limitations of the
models.
OPERATIONS RESEARCH MODELS
• Allocation models
• used to allocate resources to activities so as to optimize measure of effectiveness
(objective function).
• Game Theory:
• Used for making decisions under conflicting situations where there are one or more
players/opponents.
• Network models
• These models are applied to the management (planning, controlling and scheduling)
of large-scale projects.
• Inventory Models:
• Makes decisions that minimize total inventory cost.
• Reduces the total cost of purchasing, carrying, and out of stock inventory
• Decision Theory:
• Concerned with making decisions under conditions of complete certainty about the
future outcomes and under conditions such that we can make some probability
about what will happen in future.
• Queuing Theory:
• This is used in situations where the queue is formed (for example customers waiting
for service, aircrafts waiting for landing, jobs waiting for processing in the computer
system, etc).
• The objective here is minimizing the cost of waiting without increasing the cost of
servicing.
• Sequencing models
• These models are used to determine the sequence (order) in which a number of
tasks can be performed by a number of service facilities such as hospital, plant, etc.,
in such a way that some measure of performance (such as total time to process all
the jobs on all the machines) is optimized
• Linear Programming:
• This is a constrained optimization technique, which optimize some criterion within
some constraints.
• In Linear programming the objective function (profit, loss or return on investment)
and constraints are linear.
• There are different methods available to solve linear programming.
• Simulation:
• Simulation is a procedure that studies a problem by creating a model of the process
involved in the problem and then through a series of organized trials and error
solutions attempt to determine the best solution.
• Some times this is a difficult/time consuming procedure.
• Simulation is used when actual experimentation is not feasible or solution of model
is not possible.
• Dynamic Programming:
• Dynamic programming is a method of analyzing multistage decision
processes.
• Each elementary decision depends on those preceding decisions and as well
as external factors.