IND508 Operations Research I

Lecture 01
Introduction to Operations Research
Operations Research (OR) has its roots in WWII. Procedures & Methods ere used !" #i$itar".
%&ter the ar' so#e o& these #ethods #i(rated to industria$ use.
)o$ution #ethods are co#putation intensi*e and hence not practica$ to so$*e $ar(e pro!$e#s.
+oe*er' due to e,p$osion in co#putin( poer' OR #ethods are no used to so$*e a$$ -inds o&
pro!$e#s.
Operations research in*o$*es .research on operations/. 0hus' operations research is app$ied to
pro!$e#s that concern ho to conduct and coordinate the operations (acti*ities) ithin an
or(ani1ation.
0he research part o& the na#e #eans that OR uses an approach that rese#!$es the a" research is
conducted in esta!$ished scienti&ic &ie$ds.
2ses si#i$ar concepts as scienti&ic #ethod3
1. O!ser*e process and &or#u$ate pro!$e#4h"pothesis
5. 6ather data
7. 8onstruct scienti&ic4#athe#atica$ #ode$ to a!stract the essence o& the .rea$ or$d/ pro!$e#
9. )o$*e #ode$ *ia OR techni:ues
5. Dra conc$usions
;n(ineerin( )choo$ ca$$s this &ie$d o& stud" Operations Research hi$e <usiness )choo$ ca$$s it
Management Science.
OR is used in areas such as3 #anu&acturin(' supp$" chain #ana(e#ent' re*enue #ana(e#ent'
te$eco##unications' &inance' #ar-etin(' hea$thcare' #i$itar"' and #uch #ore.
Popular OR / Management Science Techniques used to solve problems
Linear Pro(ra##in(
Inte(er Linear Pro(ra##in(
P;R048PM
In*entor" Mode$s
Waitin( Line Mode$s
)i#u$ation
Decision %na$"sis
6oa$ Pro(ra##in(
%na$"tic +ierarch" Process
=orecastin(
Mar-o*>Process Mode$s
D"na#ic Pro(ra##in(
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Canadian Operational Research Society (www.cors.ca)
O&&ers a 8OR) Dip$o#a
%nnua$ con&erence he$d in 8anada
Institute for Operations Research & Management Science (www.informs.org)
8erti&ied %na$"tics Pro&essiona$ (8%P) e,a#s
)prin( & =a$$ 8on&erences in 2)%
International Federation of Operational Research Societies (www.ifors.org )
%nnua$ con&erence he$d in di&&erent countries
Example - Emploee scheduling
!pproach "
% )tore Mana(er needs to co#e up ith a schedu$e &or hich e#p$o"ee is or-in( on hich
da" &or ne,t ee-.
I& the Mana(er has !een or-in( in the store &or $on( ti#e' he4she #a"!e a!$e to co#e up ith
a schedu$e !ased on e,perience.
Mana(er ou$d -no to #a-e sta&&in( ad?ust#ents due to specia$ ho$ida"s.
!pproach #
% )tore Mana(er de*e$ops a #athe#atica$ #ode$ to deter#ine ho to schedu$e e#p$o"ees &or
the store ne,t ee-.
0he Mana(er input data such as3 sa$es &orecast &or the ne,t @ da"s into the #ode$' e#p$o"ee
a*ai$a!i$it" and paid rates.
0he #ode$ i$$ inc$ude constraints such as3 &u$$ ti#e e#p$o"ees need to !e assi(ned at $east 70
hours 4 ee-' Aohn and Mar" donBt $i-e each other so donBt schedu$e the# on sa#e shi&t.
Potentia$ Reasons &or the need to de*e$op #ode$ to so$*e pro!$e#
0he pro!$e# is co#p$e,
0he pro!$e# is *er" i#portant
0he pro!$e# is ne
0he pro!$e# is repetiti*e
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Model $evelopment/!dvantages o% Models
% #ode$ is a representation o& a rea$ s"ste# in another #ediu#' in a si#p$i&ied &or#.
.The effective modeler builds a mathematical model of the system,
uses it to understand the important factors in the real system,
finds a good solution to the model,
modifies it with knowledge of relevant externalities not included in the model
to find a very good solution to the real system./
Mathematical models > represent rea$ or$d pro!$e#s throu(h a s"ste# o& #athe#atica$ &or#u$as and
e,pressions !ased on -e" assu#ptions' esti#ates' or statistica$ ana$"ses
$eterministic Model C i& a$$ uncontro$$a!$e inputs to the #ode$ are -non and cannot *ar"
;(. %ssu#e de#and &or "our product is 70 units
Stochastic &or Probabilistic' Model C i& an" uncontro$$a!$e inputs are uncertain and su!?ect to
*ariation. )tochastic #ode$s are o&ten #ore di&&icu$t to ana$"1e.
;(. %ssu#e de#and &or "our product is a Nor#a$ distri!uted rando# *aria!$e ith a #ean o& 70
units and standard de*iation o& 5 untis.
6enera$$"' e,peri#entin( ith #ode$s (co#pared to e,peri#entin( ith the rea$ situation)3
o re:uires $ess ti#e
o is $ess e,pensi*e
o in*o$*es $ess ris-
0he #ore c$ose$" the #ode$ represents the rea$ situation' the accurate the conc$usions and
predictions i$$ !e.
8ost4!ene&it considerations #ust !e #ade in se$ectin( an appropriate #athe#atica$ #ode$.
=re:uent$" a $ess co#p$icated (and perhaps $ess precise) #ode$ is #ore appropriate than a #ore
co#p$e, and accurate one due to cost and ease o& so$ution considerations.
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(inear Programming Model )ormulation
Example " * Operations Management+ production planning
6iapetto #anu&actures 5 t"pes o& ooden to"s3 so$diers and trains. % so$dier se$$s &or D5@' uses D10
ra #ateria$s' D19 *aria!$e & o*erhead costs. % train se$$s &or D51' uses DE o& ra #ateria$s' D10
*aria!$e $a!or and o*erhead. % so$ider re:uires 5hrs o& &inishin( $a!or and 1hr o& carpentr" $a!or. %
train re:uires 1hr o& &inishin( $a!or and 1hr carpentr" $a!or. ;ach ee-' there is on$" 100hrs &inishin(
and 80hrs carpentr" $a!or !ut an un$i#ited a#ount o& ra #ateria$ is a*ai$a!$e. %t #ost 90 so$diers can
!e so$d so donBt produce #ore than 90. =or#u$ate a $inear pro(ra##in( #ode$ to he$p 6iapetto
#a,i#i1e ee-$" pro&its.
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Example # * Operations Management+ production planning
M & D 8he#ica$s produces 5 products that are so$d as ra #ateria$s to co#panies #anu&acturin( !ath
soaps and $aundr" deter(ents. <ased on an ana$"sis o& current in*entor" $e*e$s and potentia$ de#and
&or the co#in( #onth' M&DBs #ana(e#ent speci&ied that the co#!ined production &or the products %
and < #ust at $east 750 (a$$ons. )eparate$"' a #a?or custo#erBs order &or 155 (a$$ons o& product %
#ust a$so !e satis&ied. Product % re:uires 5 hours o& processin( ti#e per (a$$on and product < re:uires
1 hour4(a$$on4. =or the co#in( #onth' F00 hours o& processin( ti#e are a*ai$a!$e. M&DBs o!?ecti*e is
to satis&" these re:uire#ents at a #ini#u# tota$ production cost. Production costs are D54(a$$on &or
product % and D74(a$$on &or product <. =ina$$"' &or e*er" (a$$on o& % produced at $east 7 (a$$ons o& <
#ust !e produced.
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Example , * Mar-eting+ advertising
Dorian %uto #anu&actures $u,ur" cars and truc-s. 0he co#pan" !e$ie*es that its #ost $i-e$"
custo#ers are hi(h>inco#e o#en and #en. 0o reach these (roups' Dorian %uto has e#!ar-ed on an
a#!itious 0% ad*ertisin( ca#pai(n and has decided to purchase 1>#inute co##ercia$ spots on 5 t"pes
o& pro(ra#s3 co#ed" shos and &oot!a$$ (a#es. ;ach co#ed" co##ercia$ is seen !" @ #i$$ion hi(h>
inco#e o#en and 5 #i$$ion #en. ;ach &oot!a$$ co##ercia$ is seen !" 5 #i$$ion o#en and 15
#i$$ion #en. % 1>#inute co#ed" ad costs D50'000 and a 1>#inute &oot!a$$ ad costs D100'000. Dorian
ou$d $i-e the co##ercia$s to !e seen !" at $east 58 #i$$ion o#en and 59 #i$$ion #en. De*e$op an
LP #ode$ to deter#ine ho Dorian %uto can #eet its ad*ertise#ent re:uire#ents at #ini#u# cost.
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Example . * )inance+ !sset !llocation
<ruce Lee recent$" inherited a $ar(e su# o& #one" and ants to in*est in a !ond &und' a stoc- &und and
a #one" #ar-et &und ith pro?ected returns FG' 10G and 5G respecti*e$". +e ants at $east 70G o&
the tota$ a#ount in*ested to !e in !ond &unds. +e ants to !e a!$e to o!tain a tota$ return o& at $east
@.5G. 0he a#ount in*ested in stoc- &und shou$d !e at $east 7 ti#es a#ount in #one" #ar-et &und.
0he G in*ested in !ond &und #ust !e ithin p$us or #inus 8G o& percent in #one" #ar-et &und.
=or#u$ate a LP #ode$ to deter#ine the percenta(e o& <ruceBs #one" that shou$d !e a$$ocated to each
&und to #a,i#i1e pro?ected returns.
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