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Introduction to Operations Research (OR) - Chapter 1 & 2

Origins and Nature of OR. Impact of OR. The Rise of Analytics Together with OR. Overview of the OR
Modeling Approach: (i) Defining the Problem and Gathering Data; (ii) Formulating a Mathematical Model;
(iii) Deriving Solutions from the Model; (iv) Testing the Model; (v) Preparing to apply, and Implementation
of, the Model.

Operations Research (OR) is known by different names in different organizations:

OR =

= Analytics (since 2006),

= Systems Analysis,

= Systems Engineering,

= Industrial Engineering,

= Information Engineering,

= (Operations Management),

= Management Science, and

= Decision Science

(among them.)

For HW # 1:

Article A10 for assignment problem 2.1-4 is attached as well.


Article A14 for assignment problem 2.1-3 is attached as well.


The beginning of the activity called operations research has generally been attributed to the military
services early in World War II.

After the war, many of the scientists who had participated on OR teams or who had heard about this work
were motivated to pursue research relevant to the field; important advancements in the state of the art
resulted. A prime example is the simplex method for solving linear programming problems, developed by
George Dantzig in 1947.


As its name implies, operations research involves “research on operations.” Thus, operations research is
applied to problems that concern how to conduct and coordinate the operations (i.e., the activities) within
an organization.


There has been great buzz throughout the business world in recent years about something called analytics
(or business analytics) and the importance of incorporating analytics into managerial decision making. The
primary impetus for this buzz was a series of articles and books by Thomas H. Davenport, a renowned
thought-leader who has helped hundreds of companies worldwide to revitalize their business practices.
He initially introduced the concept of analytics in the January 2006 issue of the Harvard Business Review
with an article, “Competing on Analytics,” that now has been named as one of the ten must-read articles
in that magazine’s 90-year history.

Analytics is the scientific process of transforming data into insight for making better decisions.


According to projections from the U.S. Bureau of Labor Statistics for the year 2013, there are
approximately 65,000 individuals working as operations research analysts in the United States with an
average salary of about $79,000.

Overview of the Operations Research Modeling Approach

1. Define the problem of interest and gather relevant data.

2. Formulate a mathematical model to represent the problem.

3. Develop a computer-based procedure for deriving solutions to the problem from the model.

4. Test the model and refine it as needed.

5. Prepare for the ongoing application of the model as prescribed by management.

6. Implement.

In this course, and in this textbook, we will deal with items:

2. Formulate a mathematical model to represent the problem.

3. Develop a computer-based procedure for deriving solutions to the problem from the model.

4. Test the model and refine it as needed.

Specifically, about

2. Formulate a mathematical model to represent the problem:

If there are n related quantifiable decisions to be made, they are represented as decision variables (say,
x1, x2, ..., xn) whose respective values are to be determined. The appropriate measure of performance
(e.g., profit) is then expressed as a mathematical function of these decision variables (for example, P = 3x1
+2 x2 + . . . + 5 xn). This function is called the objective function. Any restrictions on the values that can be
assigned to these decision variables are also expressed mathematically, typically by means of inequalities
or equations (for example, x1 +3 x1x2 +2 x2 ≤ 10). Such mathematical expressions for the restrictions
often are called constraints. The constants (namely, the coefficients and right hand sides) in the
constraints and the objective function are called the parameters of the model. The mathematical model
might then say that the problem is to choose the values of the decision variables so as to maximize the
objective function, subject to the specified constraints. Such a model, and minor variations of it, typifies
the models used in OR.

3. Develop a computer-based procedure for deriving solutions to the problem from the model.

After a mathematical model is formulated for the problem under consideration, the next phase in an OR
study is to develop a procedure (usually a computer-based procedure) for deriving solutions to the
problem from this model. You might think that this must be the major part of the study, but actually it is
not in most cases. Sometimes, in fact, it is a relatively simple step, in which one of the standard algorithms
(systematic solution procedures) of OR is applied on a computer by using one of a number of readily
available software packages.

OR teams occasionally use only heuristic procedures (i.e., intuitively designed procedures that do not
guarantee an optimal solution) to find a good suboptimal solution. This is most often the case when the
time or cost required to find an optimal solution for an adequate model of the problem would be very

Postoptimality analysis (analysis done after finding an optimal solution) is a very important part of most
OR studies. This analysis also is sometimes referred to as what-if analysis because it involves addressing
some questions about what would happen to the optimal solution if different assumptions are made
about future conditions.

For a mathematical model with specified values for all its parameters, the model’s sensitive parameters
are the parameters whose value cannot be changed without changing the optimal solution.

4. Test the model and refine it as needed.

The process of testing and improving a model to increase its validity is commonly referred to as model

A more systematic approach to testing the model is to use a retrospective test. When it is applicable, this
test involves using historical data to reconstruct the past and then determining how well the model and
the resulting solution would have performed if they had been used.