An Introduction to Operations Research – Benefits, Methods & Application
Introduction The term Operations Research (OR) describes the discipline that is focused on the application of information technology for informed decision-making. In other words, OR represents the study of optimal resource allocation. Thegoal of OR is to provide rational bases for decision making by seeking to understand and structure complex situations, and to utilize this understanding to predict system behavior and improve system performance. Much of the actual work is conducted by using analytical and numerical techniques to develop and manipulate mathematical models of organizational systems that are composed of people,machines, and procedures. This article introduces some of the methods and application that are affiliated with OR, and elaborates on some of the benefits that may be gained by incorporating OR into the actual business framework. OR Activities OR’s role in both, the public and the private sectors is increasing rapidly. In general, OR addresses a wide variety of issues in transportation, inventoryplanning, production planning, communication operations, computer operations, financial assets, risk management, revenue management, and many other fields where improving business productivity is paramount. In the public sector, OR studies may focus on energy policy, defense, health care, water resource planning, design and operation of urban emergency systems, or criminal justice. To reiterate, ORreflects an analytical method of problem solving and decision-making that is useful in the management of organizations. In OR, problems are (1) decomposed into basic components and (2) solved via mathematical analysis. Some of the analytical methods used in OR include mathematical logic, simulation, network analysis, queuing theory, and game theory. The actual OR process can in general be described viathree steps. (1) A set of potential solutions to a problem is identified and developed (the set may be rather large). (2) The alternatives derived in the first step are analyzed, and reduced to a smaller set of solutions (the solutions have to be feasible and workable). (3) The alternatives derived in the second step are subjected to simulated implementation and, if feasible, exposed to an actualanalysis in a real-world environment. It has to be pointed out that in the final step, psychology and management sciences often play a rather important role. Generally speaking, OR improves the effectiveness and the efficiency of an institution, hence some of the benefits offered by OR include: • • • • • • • • Decrease Cost or Investment Increase Revenue or Return on Investment Increase MarketShare Manage and Reduce Risk Improve Quality Increase Throughput while Decreasing Delays Achieve Improved Utilization form Limited Resources Demonstrate Feasibility and Workability
OR Functions and Methods OR may assist decision-makers in almost any management function. To illustrate, OR supports the key decision making process, allows to solve urgent problems, can be utilized to design improvedmultistep operations (processes), setup policies, supports the planning and forecasting steps, and measures actual results. OR can be applied at the non-manager levels as well, as engineers or consumers alike can benefit from the improved and streamlined decision-making process. When first encountered, the methods commonly utilized in OR may seem obscure. Technical labels such as multi-criteriadecision analysis, linear and non-linear programming, discrete-event
Dominique A. Heger, Fortuitous Technology, (firstname.lastname@example.org), Austin, TX, 2006
simulation, queuing and stochastic process modeling, conjoint analysis, or neural networking further foster this general impression. Despite the wealth of labels available in the filed of OR, most projects apply one of three broad groups of...