Chapter 1.

Origin and Development

of Operations Research
THE ORIGINS OF OR
• Since the advent of the industrial revolution, the
world has seen a remarkable growth in the size
and complexity of organizations.

• One problem is a tendency for the many

components of an organization to grow into
relatively autonomous empires with their own
goals and value systems, thereby losing sight of
how their activities and objectives mesh with
those of the overall organization.
THE ORIGINS OF OR
• What is best for one component frequently is
detrimental to another, so the components may
end up working at cross purposes.

• A related problem is that as the complexity and

specialization in an organization increase, it
becomes more and more difficult to allocate the
available resources to the various activities in a
way that is most effective for the organization as
a whole.
THE ORIGINS OF OR

• These kinds of problems and the need to find a

better way to solve them provided the
environment for the emergence of operations
research (commonly referred to as OR).

• The roots of OR can be traced back many

decades, when early attempts were made to use a
scientific approach in the management of
organizations.
THE ORIGINS OF OR

• However, the beginning of the activity called

operations research has generally been
attributed to the military services early in World
War II.

• Because of the war effort, there was an urgent

need to allocate scarce resources to the various
military operations and to the activities within
each operation in an effective manner.
THE ORIGINS OF OR

• Therefore, the British and then the U.S. military

management called upon a large number of
scientists to apply a scientific approach to
dealing with this and other strategic and tactical
problems.

• In effect, they were asked to do research on

(military) operations. These teams of scientists
were the first OR teams.
NATURE OF OR
• 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.

• The nature of the organization is essentially

immaterial, and, in fact, OR has been applied
extensively in such diverse areas as manufacturing,
transportation, construction, telecommunications,
financial planning, health care, the military, and
public services, to name just a few.
NATURE OF OR
• The research part of the name means that operations
research uses an approach that resembles the way
research is conducted in established scientific fields.

• In a certain sense, operations research involves

creative scientific research into the fundamental
properties of operations. However, there is more to it
than this.

• Specifically, OR is also concerned with the practical

management of the organization.
NATURE OF OR

• Therefore, to be successful, OR must also

provide positive, understandable conclusions
to the decision maker(s) when they are
needed.

• OR adopts an organizational point of view.

Thus, it attempts to resolve the conflicts of
interest among the components of the
organization in a way that is best for the
organization as a whole.
NATURE OF OR
• An additional characteristic is that OR frequently
attempts to find a best solution (referred to as an
optimal solution) for the problem under
consideration.

• Rather than simply improving the status quo, the goal

is to identify a best possible course of action.
Although it must be interpreted carefully in terms of
the practical needs of management, this “search for
optimality” is an important theme in OR.
APPLICATIONS OF OR
• O.R. is a problem solving and decision-making
technique. It is considered a kit of scientific and
programmable rules which provides the management
a “quantitative basis” for decisions concerning the
operation under its control. Some areas of
management where O.R techniques have been
successfully utilized are as follow:
APPLICATIONS OF OR
1. Allocation and Distribution in Projects:
• (i) Optimal allocation of resources such as men
materials machines, time and money to projects.
• (ii) Determination and deployment of proper
workforce.
• (iii) Project scheduling, monitoring and control.
APPLICATIONS OF OR
2. Production and Facilities Planning:
• (i) Factory size and location decision.
• (ii) Estimation of number of facilities required.
• (iii) Preparation of forecasts for the various inventory
items and computation of economic order quantities
and reorder levels.
• (iv) Scheduling and sequencing of production runs by
proper allocation of machines.
• (v) Transportation loading and unloading,
• (vi) Warehouse location decision.
• (vii) Maintenance policy decisions.
APPLICATIONS OF OR
3. Programmes Decisions:
• (i) What, when and how to purchase to minimize
procurement cost.
• (ii) Bidding and replacement policies.

4. Marketing:
• (i) Advertising budget allocation.
• (ii) Product introduction timing.
• (iii) Selection of advertising media.
• (iv) Selection of product mix.
• (v) Customer’s preference of size, colour and
packaging of various products.
APPLICATIONS OF OR
5. Organization Behaviour:
• (i) Selection of personnel, determination of
retirement age and skills.
• (ii) Recruitment policies and assignment of jobs.
• (iii) Recruitment of employees.
• (iv) Scheduling of training programs.

6. Finance:
• (i) Capital requirements, cash flow analysis.
• (ii) Credit policies, credit risks etc.
• (iii) Investment decision.
• (iv) Profit plan for the company.
APPLICATIONS OF OR
7. Research and Development:
• (i) Product introduction planning.
• (ii) Control of R&D projects.
• (iii) Determination of areas for research and
development.
• (iv) Selection of projects and preparation of their
budgets.
• (v) Reliability and control of development projects
thus it may be concluded that operation research can
be widely utilized in management decisions and can
also be used as corrective measure.
OR METHODOLOGY

• Quantitative techniques form the main part of

what is known about OR. However, it does not
imply that practical OR studies are primarily
mathematical exercises.

• As a matter of fact, the mathematical analysis

often represents only a relatively small part of
the total effort required.
OR METHODOLOGY
• One way of summarizing the usual (overlapping)
phases of an OR study is the following:

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.
DEFINING THE PROBLEM AND GATHERING
DATA
• In contrast to textbook examples, most practical
problems encountered by OR teams are initially
described to them in a vague, imprecise way.

• Therefore, the first order of business is to study the

relevant system and develop a well-defined statement
of the problem to be considered.

• This process of problem definition is a crucial one

because it greatly affects how relevant the conclusions
of the study will be. It is difficult to extract a “right”
answer from the “wrong” problem!
FORMULATING A MATHEMATICAL MODEL

• After the decision maker’s problem is defined, the

next phase is to reformulate this problem in a form
that is convenient for analysis.

• The conventional OR approach for doing this is to

construct a mathematical model that represents the
essence of the problem.

• Models play an important role in science and

business. Such models are invaluable for abstracting
the essence of the subject of inquiry, showing
interrelationships, and facilitating analysis.
DERIVING SOLUTIONS 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 for deriving solutions
to the problem from this model.

• For experienced OR practitioners, finding a solution

is the fun part, whereas the real work comes in the
preceding and following steps, including the post-
optimality analysis.
DERIVING SOLUTIONS FROM THE MODEL

• A common theme in OR is the search for an optimal,

or best, solution. Indeed, many procedures have been
developed for finding such solutions for certain kinds
of problems.

• Since the model necessarily is an idealized rather

than an exact representation of the real problem,
there cannot be any utopian guarantee that the
optimal solution for the model will prove to be the
best possible solution that could have been
implemented for the real problem.
TESTING THE MODEL
• Developing a large mathematical model is analogous
in some ways to developing a large computer
program.

• Similarly, the first version of a large mathematical

model inevitably contains many flaws.

• Some relevant factors or interrelationships

undoubtedly have not been incorporated into the
model, and some parameters undoubtedly have not
been estimated correctly.
TESTING THE MODEL
• This is inevitable, given the difficulty of
communicating and understanding all the aspects
and subtleties of a complex operational problem as
well as the difficulty of collecting reliable data.

• Therefore, before you use the model, it must be

thoroughly tested to try to identify and correct as
many flaws as possible.

• This process of testing and improving a model to

increase its validity is commonly referred to as model
validation.
PREPARING TO APPLY THE MODEL

• If the model is to be used repeatedly, the next step is

to install a well-documented system for applying the
model as prescribed by management.

• This system will include the model, solution

procedure (including post-optimality analysis), and
operating procedures for implementation.

• After a solution procedure (another program) is

applied to the model, additional computer programs
may trigger the implementation of the results
automatically.
PREPARING TO APPLY THE MODEL

• In other cases, an interactive computer-based system

called a decision support system is installed to help
managers use data and models to support their
decision making as needed.

• In major OR studies, several months (or longer) may

be required to develop, test, and install this computer
system. Part of this effort involves developing and
implementing a process for maintaining the system
throughout its future use.
IMPLEMENTATION
• After a system is developed for applying the model,
the last phase of an OR study is to implement this
system as prescribed by management.

• This phase is a critical one because it is here, and only

here, that the benefits of the study are reaped.

• Therefore, it is important for the OR team to

participate in launching this phase, both to make sure
that model solutions are accurately translated to an
operating procedure and to rectify any flaws in the
solutions that are then uncovered.
IMPLEMENTATION
• The implementation phase involves several steps.
First, the OR team gives operating management a
careful explanation of the new system to be adopted
and how it relates to operating realities.

• Next, these two parties share the responsibility for

developing the procedures required to put this
system into operation.

• Operating management then sees that a detailed

indoctrination is given to the personnel involved, and
the new course of action is initiated.
IMPLEMENTATION
• If successful, the new system may be used for years to
come. With this in mind, the OR team monitors the
initial experience with the course of action taken and
seeks to identify any modifications that should be
made in the future.

• Throughout the entire period during which the new

system is being used, it is important to continue to
obtain feedback on how well the system is working
and whether the assumptions of the model continue
to be satisfied.
IMPLEMENTATION
• When significant deviations from the original
assumptions occur, the model should be revisited to
determine if any modifications should be made in the
system.

• Upon culmination of a study, it is appropriate for the

OR team to document its methodology clearly and
accurately enough so that the work is reproducible.

• Replicability should be part of the professional ethical

code of the operations researcher.