Operations research (O.R.) is the discipline of applying advanced analytical methods to help make better decisions.

By using techniques such as mathematical modelling to analyze complex situations, operations research gives executives the power to make more effective decisions and build more productive systems based on:

More complete data Consideration of all available options Careful predictions of outcomes and estimates of risk The latest decision tools and techniques

The essential characteristics of OR are: Inter-disciplinary team approach: The optimum solution is found by a team of scientists selected from various disciplines. Holistic approach to the system: OR takes into account all significant factors and finds the best optimum solution to the total organization.

Imperfections of solution: Improves the quality of solution Use of scientific research: Uses scientific research to reach optimum solutions

To optimize the total output: It tries to optimize by maximizing the profit and minimizing the loss

It is concerned with co-ordinating and controlling the operations or activities within an organization. Operations Research can be regarded as use of mathematical and quantitative techniques to substantiate the decision making problems. It takes tools from subjects like mathematics, statistics, engineering, economics, psychology, etc and uses them to know the consequences of possible alternative actions.

ADVANTAGES Better control: An O.R approach may provide executive with an analytical and quantitative basis to identify the problem area. Better system: Often an O.R is initiated to analyze a particular problem of decision making such as best location for factories, whether to open a new warehouse, etc. It

also helps in selecting economical means of transportation, jobs sequencing, production scheduling, and replacement of old machinery. Better decisions: O.R models help in improved decision making and reduce the risk of making erroneous decisions. O.R approach gives the executive an improved insight into how he makes his decisions. Better Co-ordination: An operation research-oriented planning model helps in coordinating different divisions of a company.

Some problems that can be analyzed by operations research approach are classified as follows: Finance, Budgeting and Investments o Credit policy analysis o Cash flow analysis o Dividend policies o Investment portfolios Marketing o Product selection, timing etc o Advertising media, budget allocation o Number of salesman required o Selection of product mix Purchasing, Procurement and Exploration o Optimal buying and reordering o Replacement policies Production Management o Location and size of warehouses, factories, retail outlets o Distribution policy o Loading and unloading facilities for trucks o Production scheduling o Optimum Product Mix o Project scheduling and allocation of resources Personnel Management o Selection of suitable personnel

Applications by Industry:

Agriculture and food: are discovering operations research applications for planting, procurement, and distribution.

Airline industry: Revenue management and pricing, airline network planning, crew scheduling, maintenance planning, parts inventory management, and fuel management are various functions that utilize the application of operations researcher in the airline industry. Much O.R. work in the industry is outsourced, but several airlines are reviving their internal O.R. department. A new source of opportunities: fractional fleet services that allow corporations to dispense with corporate planes by purchasing a set number of hours per year of contracted private planes. With providers obligated to supply airplanes in the face of variable demand, operations researchers are finding growing opportunities. Energy: The oil industry was one of the first users of operations research techniques to help manage their refinery operations, and operations research technologies are heavily used by all the major oil companies. Electrical and hydro-electric companies use operations research to determine how to efficiently produce power as well as trade power among their partners. With the deregulation of the power industry, numerous opportunities for operations research are bound to arise.

Forestry uses O.R. in harvesting and at timber mills. Timber is a strong application area.

Health care: Health care continues to offer a variety of uses for operations research, including quality assurance, the design of medical informatics, emergency room scheduling, resource modelling, and, in some cases, diagnosis. Emergency services like 9-1-1 and air ambulances rely on operations researchers to keep response times quick and determine fleet levels. A recent application of revenue management by a hospital for the purpose of contract negotiation with vendors may point to a new way of containing medical costs. As the health care system and hospitals in particular seek to reduce costs and make better use of resources, operations researchers can model better systems as hospital staffers and as consultants.

Manufacturing: Manufacturing organizations continue to use operations research to optimize factory operations. One category of manufacturing, semiconductor optimization, is seeing a vital use of O.R. professionals. O.R. professionals may also offer guidance in technology adoption. Warehouse optimization, tied to manufacturing, is a potential growth area. Supply chain planning, a key aspect of any manufacturing operation, is driven by operations research technologies.

Marketing: Marketing departments use operations research to determine the best ways to target their diversified customer bases. Operations researchers can offer guidance on what are the right offers to give to the right customers, and when it is no longer profitable to target certain segments of the market.

Mining and similar sectors working with natural resources may rely on the lessons of the forestry industry, offering a potential growth area.

Pharmaceuticals: Pharmaceutical companies continue to use O.R. professionals in the manufacture and development of products, and in the management of drug portfolios representing the assortment of different drugs maintained by companies. Retailing: Although retailing companies don't currently use O.R. heavily, clothing manufacturers and stores are exploring O.R. applications to forecast sales, plan purchasing and production, do pricing, and improve supply chain management. Telecommunications although experiencing difficult financial times, may again rely on operations researchers in various areas as the economy and the field stabilize.

Transportation: Operations researchers perform logistics for air traffic control, trucking, and railroads. Real-time dispatching and delivery truck routing are important O.R. areas. The healthy package delivery field is one that continues to rely heavily on the work of O.R. Another important area for operations researchers is international freight, including the scheduling and pricing of containers.

Applications In The Public Sector

Homeland security: Homeland security and related interstate and federal systems may represent opportunities for operations researchers, who can advise planners about where to spend and place resources within the system. O.R. can help the fight against terror via routing and rerouting traffic in case of terrorist attack, and the improvement of systems like the electrical grid.

Military: Conceived during war, operations research remains strong in the military, where the services use O.R. for personnel force management, logistics, transportation, war gaming, strategic planning, tactical planning, and war theatre optimization. Consultants to the military employ operations researchers, as well. The U.S. Bureau of Labor Statistics reports that in the United States, the military remains the largest employer of operations researchers in the Federal Government, and that many operations research analysts in private industry work directly or indirectly on national defence.

Municipalities and states: These levels of government rely more on operations researchers to deal with highway traffic delays and the development of intelligent traffic systems.

Public health: In public health, operations researchers have made recommendations in drug treatment, AIDS prevention, and organ donation.

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Trends by application
Data mining: With the widespread emergence of very large databases, many different organizations are finding vital help from O.R. professionals in extracting the information they really want. O.R.'s data mining methods, whose use is growing rapidly, give superior solutions in diverse database-plumbing applications such as predicting purchasing behaviour, segmenting customers, detecting fraud, assessing credit risk, and anticipating customer attrition.

E-commerce: Even after the dot.com bust, E-commerce offers opportunities in business-tobusiness and consumer areas of online purchasing, vendor purchasing models, online auctions, and supply procurement. In addition to sellers, bidders are looking to O.R. models for decision support on how to bid intelligently. Online grocers that make home delivery are another area of opportunity for operations researchers.

Environmental applications: Operations researchers offer aid in pollution control and the design of systems to prevent shipping accidents.

Financial engineering: Financial engineering and related work is seeing some instances of growth for operations researchers, with work in portfolio selection, portfolio models, and hedge fund strategies. Banks rely on risk management modelling, among other applications. Insurers rely heavily on operations researchers to do risk analysis and pricing. Some credit card companies use operation researchers to work on credit scoring.

Marketing: Direct marketing models, customer segmentation, Customer Relations Management (CRM) all rely on the service of operations researchers, both at the businessto-business and consumer level.

Revenue management: The practice of retail management has extended from the airlines to hotels, cruises, car rental operations, and even gas pipeline operations.

Scheduling: Scheduling continues to offer employment for operations researchers, with O.R. being used for sales forces, call centers, air traffic control, bus crewing, retail staffing, and hospital nurses.

Strategic planning: This remains an area where operations researchers offer great potential. Some large companies rely extensively on operations researchers before introducing new product lines or services. Some large and mid-size companies use O.R.-based forecasting systems to plan sales and growth. Operations researchers have also been instrumental in turning around ailing companies.

Supply chain management: SCM continues to rely heavily on operations researchers, particularly those optimizing the supply chain. Operations researchers in the field work for major software companies and consultants, as well as major manufacturers and mid-sized companies.

Applications of management science

Applications of management science are abundant in industry as airlines, manufacturing companies, service organizations, military branches, and in government. The range of problems and issues to which management science has contributed insights and solutions is vast. It includes:

scheduling airlines, including both planes and crew, deciding the appropriate place to site new facilities such as a warehouse, factory or fire station, managing the flow of water from reservoirs, identifying possible future development paths for parts of the telecommunications industry, establishing the information needs and appropriate systems to supply them within the health service, and identifying and understanding the strategies adopted by companies for their information systems

Limitations of Operations Research

Dependence on an Electronic Computer: O.R techniques try to find out an optimal solution taking into account all the factors. In the modern society, these factors are enormous and expressing them in quantity and establishing relationship among these require voluminous calculations that can only be handled by computers.

Non- Quantifiable Factors: O.R techniques provide a solution only when all the elements related to a problem can be quantifies. All relevant variables do not lend themselves to quantification. Factors that cannot be quantified find no place in O.R models

Distance between Manager and Operations Researcher: O.R being specialists job requires a mathematician or a statistician, who might not be aware of the business problems. Similarly, a manager fails to understand the complex working of O.R models Money and Time Costs: When the basic data are subject to frequent changes, incorporating them into the O.R models is a costly affair. Moreover, a fairly good solution at present may be more desirable than a perfect O.R solution available after sometime Implementation: Implementation of decisions is a delicate task. It must take into account the complexities of human relations and behaviour.