Operations Research

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 What is Operations Research?
Operations
The activities carried out in an organization.

Research
The process of observation and testing characterized
by the scientific method. Situation, problem
statement, model construction, validation,
experimentation, candidate solutions.

Model
An abstract representation of reality. Mathematical,
physical, narrative, set of rules in computer program.
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Optimal Solution
A solution to the model that optimizes (maximizes
or minimizes) some measure of merit over all
feasible solutions.

Operations Research Techniques

A collection of general mathematical models,
analytical procedures, and algorithms.

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 Operations Research
• O.R involves creative scientific research into
the fundamental properties of operations.

• O.R is also concerned with the practical

management of the organization. Therefore
O.R. must provide positive understandable
conclusions to the decision maker(s) when
they are needed.

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 Operations Research
• O.R frequently attempts to find a best
solution (optimal solution) for the
problem under consideration.(a best
not “the” best , multiple solution tied as
best).
• Management Science

Operations Research
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Problems, Models and Methods

Rea l Worl d
Real World
Si tu a ti o n
Situation

Prob l ems TP LP DS
Problems

Mo de l s
Models LP NFP TP

Me tho ds
Methods interior
simplex

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 Operations Research Models

Deterministic Models Stochastic Models

• Linear Programming • Discrete-Time Markov Chains
• Network Optimization • Continuous-Time Markov Chains
• Integer Programming • Queuing
• Nonlinear Programming • Decision Analysis or Game Theory

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 Deterministic vs. Stochastic Models

Deterministic models
assume all data are known with certainty.

Stochastic models
explicitly represent uncertain data via
random variables or stochastic processes.

Deterministic models involve optimization

Stochastic models
characterize / estimate system performance.

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 Application Details
• Accounting: • Manufacturing
– Cash flow planning – Production scheduling
– Credit policy – Production-marketing
– Strategy planning balance
• Facilities Planning • Organization Behavior
– Location & size – Employee recruiting
– Logistics systems – Skills balancing
– Transportation – Training programs
Planning scheduling
– Hospital planning – Manpower justification
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\ planning
 Application Details
• Construction • Marketing
– Project scheduling – Product mix analysis
– maintenance crew – Product introduction
scheduling timing
– Resources allocation – Advertising allocation
• Finance • Purchasing
– Investment analysis – Optimal buying
– Portfolio analysis – Optimal reordering
– Policy making material transfer
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 1
Problem formulation

Steps in OR 2
Study M odel building

3
Data collection

4
Data analysis

5
Coding

M odel No
6 Fine-tune
verification and model
validation

Yes

7
Experimental design

8
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 Optimization is Everywhere
• It is embedded in language, and part of the way we think.
– firms want to maximize value to shareholders

– people want to make the best choices

– We want the highest quality at the lowest price

– When playing games, we want the best strategy

– When we have too much to do, we want to optimize the use of

our time

– etc.
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Mathematical Optimization is nearly
everywhere
• Finance
• Marketing
• E-business
• Telecommunications
• Games and Sports
• Operations Management
• Production Planning
• Transportation Planning
• Logistics and Supply Chain
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 What you should know about
Operations Research
• How decision-making problems are characterized

• OR terminology

• What a model is and how to assess its value

• How to go from a conceptual problem to a quantitative

solution

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