CHAPTER ONE

OVERVIEW OF OPERATIONS

RESEARCH

Hawassa University, 2021

 Contents of Chapter One

1.1 Operations Research as Quantitative approach for

decision making

1.2 Origin and Development of OR

1.3 Features, Nature and Significance of Operations

Research

1.4 Models and Model Building

1.5 Approaches of OR
 1.1Definition of Operations Research

 Operations Research (OR) is an approach to

managerial decision making, which is based on
scientific method and uses extensive quantitative
analysis.
 Operations Research, in general, can be
characterized as an application of scientific
methods, tools and techniques to problems involving
the operations of systems.
 It tries to avoid the dangers from taking decisions
merely by guessing or by using thumb rules.
 Cont…
Before discussing about the application of quantitative
analysis (OR) to decision making and problem
solving, we would see the difference between
problem solving and decision making.
 Problem Solving and Decision Making

Problem solving can be defined as the process of

identifying a difference between some actual and
some desired stage of affairs and then taking action to
resolve the difference.
 Cont…
 The problem solving process involves the following seven
steps:-
i. Identify and define the problem.
ii. Determine the set of alternative solutions.
iii. Determine the criterion or criteria that will be used to
evaluate the alternatives.
iv. Evaluate the alternatives.
v. Choose an alternative
vi. Implement the selected alternative.
vii. Evaluate the results, and determine if a satisfactory
solution has been obtained.
 Cont…
 Decision making is the term generally associated with
the first five steps of the problem solving process.
Thus, decision making starts from identification and
definition of the problem and ends with the choosing
of an alternative, which is the act of making decision.
Decision making and problem solving is a core function
of management because:
 It is an integral part of all other managerial functions such
as planning, organizing, directing and controlling, and
 It is also an integral part of life because life cannot be
managed without making decision.
 Cont…
 In general, while decision making results in a choice from
many alternative courses of action, problem solving results
in resolving the disparities between the desired performance
and the performance that is actually obtained.
Thus, the decision making process involves only five steps:
 Identify and define the problem.

 Determine the set of alternative solutions.

 Determine the criterion or criteria that will be used to

evaluate the alternatives.

 Evaluate the alternatives.

 Choose an alternative
 Cont..
 Let us consider the following example of a decision
making process. Assume that you will be
graduating after 8 months from now and you are an
exceptionally good student in your discipline and
three general managers of reputable companies in
the Country have offered you attractive positions in
their companies. You are not sure which offer leads
to a satisfying career.
 To make a decision of such kind you have to use
the decision making processes.
 Cont…
 Define the problem
You want an offer that leads to a satisfying career.
 Identify the alternative

The alternatives for your decision problem can be stated as

follows:
 Accept the position offered by company A located in Gedeb.
 Accept the position offered by company B located in A.A.
 Accept the position offered by company C located in Hawassa.
 Determine the criterion or criteria that will be used to
evaluate the three alternatives.
 Starting salary, Potential for advancement and Location
 Cont…
 Evaluate each of the alternatives with respect to
each criterion. (Qualitative & Quantitative
Analysis)
Alternative Starting salary in Potential for Job
Birr (annual) Advancement Location
Company A, Gedeb 30,000 Average Fair
Company B, A.A 25,000 Good Excellent
Company C, Hawassa 28,000 Excellent Good

 Make a choice from the available alternatives.

 Accept the offer of company C.
 At this point, the decision making process is complete.
 Cont…
The analysis phase of the decision making process may take on
two basic forms: Qualitative and Quantitative.
Qualitative analysis is used when:
 The problem is fairly simple.
 The problem is familiar.
 The costs involved are not great.
 Immediate decisions are needed.
Quantitative approach (such as OR) is used when:
 The problem is complex.
 The problem is not familiar.
 The costs involved are substantial.
 Enough time available to analyze the problem.
 1.2 ORIGIN AND DEVELOPMENT OF OR

The roots of OR can be traced back many decades, it has been

attributed to the military services early in World War II.
 British and then the U.S. military management called upon a

large number of scientists to apply a scientific approach to

dealing with allocation of scarce resources and other strategic
and tactical problems. In effect, they were asked to do
research on (military) operations.
 When the war ended, the success of OR in the war effort

spurred interest in applying OR in business, industry, and

government. The rapid spread of OR soon followed.
At least two other factors:
1. Research in the field (Simplex by G. Dantzig in 1947)
2. Onslaught of the computer revolution
 1.2 ORIGIN AND DEVELOPMENT OF OR

Since the advent of the industrial revolution, the world has seen a
remarkable growth in the size and complexity of organizations. An
integral part of this revolutionary change has been a tremendous
increase in the division of labor and segmentation of management
responsibilities in these organizations.
Problems:
1. 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.
2. Difficulty in allocating the available resources to the various
activities in a way that is most effective for the organization as a whole
 Silent Features of OR
As its name implies, operations research involves “research on
operations.” 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.
The research part of the name means scientific method is used to
investigate the problem
1. System (or executive) Orientation of OR

2. The Use of Interdisciplinary Teams

3. Application of Scientific Method

4. Improvement in the Quality of Decisions

5. Use of computer
 1.2 MODELS AND MODEL BUILDING

 We can define an operations research model as

some sort of mathematical or theoretical
description of various variables of a system
representing some aspects of a problem on some
subject of interest or inquiry.
 Models provide a manager with an alternative to
working directly with reality. This allows greater
freedom in terms of experimenting with different ideas,
controlling certain aspects of the situation, and
investigating alternative solutions. It also reduces the
cost of mistakes.
 1.2 MODELS AND MODEL BUILDING

Assumptions of Models
 All models are based on assumptions (i.e., conditions that

are assumed to exist). Some of the assumptions will be

technical, such as “the relationship is linear”, and others
will be operational, such as, “the budget is Birr 25,000”
and still others may be political, such as “marketing will
support the proposal”.
 It is very important to determine the assumptions that can

be identified before developing the model. This will

increase the chances of developing workable and
acceptable model.
 Types of Models

 Models are categorized depending on:

 Structure
 Purpose
 Nature of Environment
 Behavior of the problem and
 Method of Solution
 A. Classification by Structure

1. Iconic Models: These models are scaled version of

the actual object.
 For example: a toy of a car is an iconic model of a real
car. In fact it is a descriptive model giving the description
of various aspects of real object.
 As far as operations research is concerned, is of less use.
2. Analogue Model: one set of properties are used to
represent another set of properties.
 For example: blue color generally represents water. Many
a time we represent various aspects on graph by different
colors or different lines all these are analog models.
 These are also not much used in operations research.
 Cont…

3. Symbolic Models or Mathematical Models:

In these models the variables of a problem is
represented by mathematical symbols, letters
etc.
 To show the relationships between variables

and constraints we use mathematical

symbols.
 These models are used very much in

operations research.
 B. Classification by Utility

1. Descriptive Model: simply explains certain aspects of the

problem or situation or a system so that the user can make
use for his analysis.
 It will not give full details and clear picture of the
problem for the sake of scientific analysis.
2. Predictive Model: basing on the data collected, can predict
the approximate results of the situation under question.
 For example: basing on your performance in the
examination and the discussions you have with your friends
after the examination and by verification of answers of
numerical examples, you can predict your score or results.
This is one type of predictive model.
 Cont…

3. Prescriptive Models: it can be used

conveniently to prescribe the courses
of action to be taken. In such case
we call it as Prescriptive model.
 Prescriptive models prescribe the
courses of action to be taken by the
manager to achieve the desired goal.
 C. Classification by Nature of Environment

1. Deterministic Models: In this model the operations

research analyst assumes complete certainty about the
values of the variables and the available resources and
expects that they do not change during the planning
horizon.
 All these models do not contain the element of
uncertainty or probability.
 Example: in Linear Programming, assumes certainty
regarding the values of variables and constraints hence
the Linear Programming model is a Deterministic model.
 Cont…
2. Probabilistic or Stochastic Models: In these models,
the values of variables, the pay offs of a certain course of
action cannot be predicted accurately because of element of
probability.
 It takes into consideration element of risk into consideration.
 The degree of certainty varies from situation to situation.
 A good example: is the sale of insurance policies by Life
Insurance Companies to its customers. Here the failure of life
is highly probabilistic in nature.
 The models in which the pattern of events has been compiled
in the form of probability distributions are known as
Probabilistic or Stochastic Models.
 D. Classification depending on Behavior of the
Problem Variables

1. Static Models: assumes that no changes in the values of

variables given in the problem for the given planning
horizon due to any change in the environment or conditions
of the system.
 All the values given are independent of the time.

 Mostly, in static models, one decision is desirable for the

given planning period.

2. Dynamic Models: the values of given variables goes on
changing with time or change in environment or change in
the conditions of the given system.
 Generally, the dynamic models then exists a series of

interdependent decisions during the planning period.

 E. Classification depending on the Method of getting the Solution

1. Analytical Models: The given model will

have a well-defined mathematical structure
and can be solved by the application of
mathematical techniques.
 Example: Resource allocation model,

Transportation model, Assignment model,

sequencing model etc. have well defined
mathematical structure and can be solved
by different mathematical techniques.
 Cont…
2. Simulation Models: The meaning of simulation is
imitation. These models have mathematical
structure but cannot be solved by using
mathematical techniques.
 It needs certain experimental analysis to study the
behavior of the system, we use random numbers.
 More complex systems can be studied by
simulation.
 Studying the behavior of laboratory model, we
can evaluate the required values in the system.
Methodology of Operations Research

 Step 1: Observation and defining a problem

 Step 2: Formulating a model

 Step 3: Solving the Mathematical Model

 Step 4: Validating (Testing) the solution

 Step 5: Implementing the solution

 Step 6: Modifying the Model

Step 7: Establishing control over the solution
Benefits Risks

Allow an analyst to strip away many One or more of the important aspects of a
unimportant details of reality and there problem may be inadvertently left one. Hence, it
by focus attention on a small number of is highly unlikely that the analyst will be able to
important aspects of a problem. successfully solve the real world using the model.

Quantitative models force the analyst to Non quantitative information may be ignored
quantity information. because it is difficult or impossible to include that
type of information in a quantitative model.
The structure of the models provide for An inexperienced analyst may attempt to force a
analyzing a problem in terms of what problem to fit the model. In effect, the model is
information is needed and how to inappropriate for the problem.
organize information.

Models are usually also less costly than a Models sometimes do not adequately portray
real-life situation and they permit users relationships that exist in reality
the luxury of experimentation without
dangers that would be inherent in a real-
life setting.
End of the Chapter

Thank You!