LANDMARKS IN THE HISTORY

OF OM
• 1900s (F.W. Taylor) Scientific analysis to
eliminate wasted effort from manual
labour; Concept of Standard Time

Std. Time = NT + Allowances x NT, where

NT denotes the Normal Time
Normal Time = Observed Time x Rating/100
(Assumption: Normal pace of working =
100)
 LANDMARKS IN THE HISTORY
OF OM cont.
• 1910s (F.W. Harris) Concept of Economic
Lot Size; Development of Economic Order
Quantity (EOQ) Model for Inventory
Control _______
EOQ = √2DA / IC
D = Annual Demand (Units)
A = Cost per Order (Rs)
I = Inv. carrying charges factor (Rs/Rs/ yr)
C = Cost per unit (Rs)
 LANDMARKS IN THE HISTORY
OF OM cont.
Basis for EOQ
Total annual cost = Annual ordering cost +
Annual inv. carrying cost
Annual ordering cost = DA/Q
Annual inv. carrying cost = ½ QIC

Total annual cost = DA/Q + ½ QIC

 LANDMARKS IN THE HISTORY
OF OM cont.
• 1920s (Elton Mayo) Hawthorne Studies;
Development of Human Relations Approach
• 1930s (W Shewhart et al) Statistical Quality
Control; (L.H.C Tippett) Work Sampling
• 1940s (ORG & G.B.Dantzig) Formalization and
Application of Operations Research as an
approach to Manufacturing Problem Solving
• 1950s Commercialization of Computers, giving
boost to OR as an approach.
 LANDMARKS IN THE HISTORY
OF OM cont.
A BRIEF ON OR
• OR as an approach to Managerial Problem
Solving involves:
3. Defining the Decision Variables
4. Articulating the Objectives and Constraints
5. Formulate the Problem by expressing the
above mathematically in terms of the Decision
Variables
6. Collect Data and Solve the Problem
7. Validate the Model
 LANDMARKS IN THE HISTORY
OF OM cont.
A BRIEF ON OR cont.
• OR may be seen as comprising of two kinds of
techniques:
3. Mathematical Programming where the
objective is to get the best solution. e.g.. Linear
Programming (LP), NLP etc.,
4. Simulation where one pursues a “good
solution” rather than the best solution in order
to reflect more of reality in the model.
 LANDMARKS IN THE HISTORY
OF OM cont.
EXAMPLE OF LP FORMULATION
You have gone to Utopia where you find two
kinds of gems, rubies and emeralds. Each
ruby and emerald weighs 3kg and 2kg
Respectively and fetches a value of Rs 4
and 3 crores, respectively. Your haversack
can carry a maximum of 12 kg. Formulate the
problem using OR.
 LANDMARKS IN THE HISTORY
OF OM cont.
FORMULATION
Step 1 Decision Variables: Let R= No. of
rubies to be carried and E= No. of emeralds
to be carried
Step 2 Objective: Maximize the value to be
Carried; Constraint: Capacity of Haversack
Step 3: Formulate: Maximize (4R + 3E)
subject to 3R + 2E ≤ 12
R,E ≥ 0
 LANDMARKS IN THE HISTORY
OF OM cont.
• 1960s (Plossl, Wight, Orlicky) Widespread use
of Computers in Business; Development of
Material Requirement Planning (MRP),
Manufacturing Resource Planning (MRPII)
• 1970s (Skinner, Wheelwright et al)
Manufacturing Strategy Paradigm
• 1980s (Ohno, Shingo) Just in Time (JIT);
(Goldratt) Theory of Constraints
• 1990s Total Quality Management (TQM), Total
Productive Maintenance (TPM), Enterprise
Resource Management (ERP)
• 2000s Supply Chain Management (SCM)
 Operations Management
versus (interface)
Production Management
• Production management was traditionally
associated with goods production.
• Operations management was created for
the management of production of services.
• Operations Management is now used for
both goods and services production.
Operations Function

• Operations
• Marketing
• Finance and
Accounting
• Human
Resources
• Outside
Suppliers