Unit – I

Chapter – 1 - Introduction for Operations Research

Section 1.1 – Introduction: Historical Management

In order to understand ‘What Operations Research (OR)* is today’, we must know something of
its history and evolution. The main origin of Operations Research was during the Second World-War. At
that time, the military management in England called upon a team of scientists to study the strategic and
tactical problems related to air and land defence of the country.
During World-War II, the Military Commands of U.K. and U.S.A. engaged several inter-
disciplinary teams of scientists to undertake scientific research into strategic and tactical military
operations. Their mission was to formulate specific proposals and plans for aiding the Military
Commands to arrive at the decisions on optimal utilization of scarce military resources and efforts and
also to implement the decisions effectively.
The OR teams were not actually engaged in military operations and in fighting the war. But, they
were only advisors and significantly instrumental in winning the war to the extent that the scientific and
systematic approaches involved in OR provided a good intellectual support to the strategic initiatives of
the military commands. Hence OR can be associated with “an art of winning the war without actually
fighting it”.
The work of OR team was given various names in the United States: Operational Analysis,
Operations Evaluation, Operations Research, Systems Evaluation, Systems Research, Systems
Analysis and Management Science.
Following the end of war, the success of military teams attracted the attention of Industrial
managers who were seeking solutions to their complex executive-type problems. The most common
problem was: what methods should be adopted so that the total cost is minimum or total profits
maximum?
The first mathematical technique in this field (called the Simplex Method of linear programming)
was developed in 1947 by American mathematician, George B.Dantzig.
Today, the impact of OR can be felt in many areas. A large number of management consulting
firms are currently engaged in OR activities.

Section 1.2 – The Nature and Meaning of Operations Research

OR has been defined so far in various ways and it is perhaps still too young to be defined in some
authoritative way.
1. OR is a scientific method of providing executive departments with a quantitative basis for decision
regarding the operations under their control.
– Morse and Kimbal (1946)
2. OR is a scientific method of providing executive with an analytical and objective basis for decisions.
- P.M.S.Blackett (1948)
3. The term OR has hitherto-fore been used to connate various attempts to study operations of war by
scientific methods. From a more general point of view, OR can be considered to be an attempt to study
those operations of modern society which involved organizations of men or of men and machines.
- P.M.Morse (1948)

4. OR is the application of scientific methods, techniques and tools to problems involving the operations
of systems so as to provide these in control of the operations with optimum solutions to the problem.
- Churchman, Acoff, Arnoff (1957)
5. OR is the art of giving bad answers to problems to which otherwise worse answers are given.
- T.L.Saaty (1958)
6. OR is a management activity pursued in two complementary ways-one half by the free and bold
exercise of commonsense untrammeled by any routine, and other half by the application of a repertoire
of well established precreated methods and techniques.
- Jagjit Singh (1968)
7. OR is the attack of modern methods on complex problems arising in the direction and management to
large systems of men, machines, materials and money in industry, business and defence. The
distinctive approach is to developed a scientific model of the system, incorporating measurements of
factors such as chance and risk with which to predict and compare the outcomes of alternative
decisions, strategies or controls. The purpose is to help management to determine its policy and
actions scientifically.
- Operations Research Quarterly (1971)
8. Operations Research is the art of winning war without actually fighting it.
9. OR is an applied decision theory. It uses any scientific mathematical or logical means to attempt to
cope with the problems that confront the executive when he tries to achieve a through going rationality
in dealing with his decision problems.
- Miller and Starr.
10. OR is a scientific approach to problem solving for executive management.
- H.M.Wagner
11. OR is an aid for the executive in making his decisions by providing him with the needed quantitative
information based on the scientific method of analysis.
- C.Kittel
12. OR is the systematic method oriented study of the basic structure, characteristics, functions and
relationships of an organization to provide the executive with a sound, scientific and quantitative
basis for decision making.
- E.L.Arnoff & M.J.Netzorg
13. OR is the application of scientific methods to problems arising from operations involving integrated
systems of men, machines and materials. It normally utilizes the knowledge and skill of an inter-
disciplinary research team to provide the mangers of such systems with optimum operating solutions.
- Fabrycky and Torgersen
14. OR is an experimental and applied science devoted to observing, understanding and predicting the
behaviour of purposeful man-machine systems and OR workers are actively engaged in applying this
knowledge to practical problems in business, government and society.
- OR Society of America
15. OR is the application of scientific method by inter-disciplinary teams to problems involving the
controls of organized (man-machine) systems so as to provide solutions which best serve the purpose
of the organization as a whole.
- Ackoff & Sasieni, (1968)
16. OR utilizes the planned approach (updated scientific method) and an inter-disciplinary team in order
to represent complex functional relationships as mathematical models for purpose of providing a
quantitative basis for decision making and uncovering new problems for quantitative analysis.
- Thieanf and Klekamp (1975)
Comments on definitions of OR:
A decision, which taking into account all the circumstances can be considered the best one is
called an optimal decision.

Section 1.3 – Management Applications of Operations Research

Some of the areas of management decision making, where the ‘tools’ and ‘techniques’ of OR are
applied, can be outlined as follows:
1. Finance-Budgeting and Investments
(i) Cash-flow analysis, long range capital requirements, dividend policies, investment portfolios.
(ii) Credit policies, credit risks and delinquent account procedures.
(iii) Claim and complaint procedures.
2. Purchasing, Procurement and Exploration
(i) Rules for buying, supplies and stable or varying prices.
(ii) Determination of quantities and timing of purchases.
(iii) Bidding policies.
(iv) Strategies for exploration and exploitation of raw material sources.
(v) Replacement policies.
3. Production Management
(i) Physical Distribution
(a) Location and size of warehouses, distribution centres and retail outlets.
(b) Distribution policy.
(ii) Facilities Planning
(a) Numbers and location of factories, warehouses, hospitals etc.
(b) Loading and unloading facilities for railroads and trucks determining the transport
schedule.
(iii) Manufacturing
(a) Production scheduling and sequencing.
(b) Stabilization of production and employment training, layoffs and optimum product mix.
(iv) Maintenance and Project Scheduling
(a) Maintenance policies and preventive maintenance.
(b) Maintenance crew sizes.
(c) Project scheduling and allocation of resources.
4. Marketing
(i) Product selection, timing, competitive actions.
(ii) Number of salesman, frequency of calling on accounts percent of time spent on prospects.
(iii) Advertising media with respect to cost and time.
5. Personnel Management
(i) Selection of suitable personnel on minimum salary.
(ii) Mixes of age and skills.
(iii) Recruitment policies and assignment of jobs.
6. Research and Development
(i) Determination of the areas of concentration of research and development.
(ii) Project selection.
(iii) Determination of time cost trade-off and control of development projects.
(iv) Reliability and alternative design.
 From all the above areas of applications, we may conclude that OR can be widely used in taking
timely management decisions and also used as a corrective measure. The application of this tool involves
certain data and not merely a personality of decision maker and hence we can say: OR has replaced
management by personality.

Section 1.4 – Modelling in Operations Research

Definition:
A model in the sense used in OR is defined as a representation of an actual object or situation. It
shows the relationships (direct or indirect) and inter-relationships of action and reaction in terms of
cause and effect.
The main objective of a model is to provide means for analyzing the behaviour of the system for
the purpose of improving its performance.
Models can be classified according to following characteristics:
1. Classification by Structure
(i) Iconic Models. Iconic models represent the system as it is by scaling it up or down. In other words, it
is an image.
For example, a toy airplane, photographs, drawings, maps etc.
(ii) Analogue Models. The models in which one set of properties is used to represent another set of
properties are called analogue models. After the problem is solved, the solution is reinterpreted in terms
of the original system.
For example, graphs are very simple analogues because distance is used to represent the
properties such as: time, number, percent, age, weight and many other properties.
(iii) Symbolic (Mathematical) Models. The symbolic or mathematical model is one which employs a set
of mathematical symbols (ie., letters, numbers, etc.) to represent the decision variables of the system.
These variables are related together by means of a mathematical equation or a set of equations to describe
the behavior (or properties) of the system. The solution of the problem is then obtained by applying well-
developed mathematical techniques to the model.
2. Classification by Purpose
(i) Descriptive Models. A descriptive model simply describe some aspects of a situation based on
observations, survey, questionnaire results or other available data. The result of an oppenion poll
represents a descriptive model.
(ii) Predictive Models. Such models can answer ‘what if’ type of questions, i.e. they can make
predictions regarding certain events.
 For example, based on the survey results, television networks such models attempt to explain and
predict the election results before all the votes are actually counted.
(iii) Prescriptive Models. Finally, when a predictive model has been repeatedly successful, it can be used
to prescribe a source of action.
For example, linear programming is a prescriptive (or normative) model because it prescribes
what the managers ought to do.
3. Classification by Nature of Environment
(i) Deterministic Models. Such models assume conditions of complete certainty and perfect knowledge.
For example, linear programming, transportation and assignment models are deterministic type of
models.
(ii) Probabilistic (or) Stochastic Models. These types of models usually handle such situations in which
the consequences of payoff of managerial actions cannot be predicted with certainty.
For example, insurance companies are willing to insure against risk of fire, accidents, sickness
and so on, because the pattern of events have been compiled in the form of probability distributions.
4. Classification by Behaviour
(i) Static Models. These models do not consider the impact of changes that takes place during the
planning horizon, i.e. they are independent of time. Also, in a static model only one decision is needed
for the duration of a given time period.
(ii) Dynamic Models. In these models, time is considered as one of the important variables and admit the
impact of changes generated by time. Also, in dynamic models, not only one but a series of
interdependent decisions is required during the planning horizon.
5. Classification by Method of Solution
(i) Analytical Models. These models have a specific mathematical structure and thus can be solved by
known analytical or mathematical techniques.
For example, a general linear programming model as well as the specially structured
transportation and assignment models are analytical models.
(ii) Simulation Models. They also have a mathematical structure but they cannot be solved by purely
using the ‘tools’ and ‘techniques’ of mathematics. A simulation model is essentially computer assisted
experimentation on a mathematical structure of a real time structure in order to study the system under a
variety of assumptions.
6. Classification by Use of Digital Computers
(i) Analogue and Mathematical Models Combined. Sometimes analogue models are also expressed in
terms of mathematical symbols. Such models may belong to both the types (ii) and (iii) in classification
1 above.
 For example, simulation model is of analogue type but mathematical formulae are also used in it.
Managers very frequently use this model to ‘simulate’ their decisions by summarizing the activities of
industry in a scale-down period.
(ii) Function Models. Such models are grouped on the basis of the function being performed.
For example, a function may serve to acquaint to scientist with such things as-tables, carrying
data, a blue-print of layouts, a program representing a sequence of operations.
(iii) Quantitative Models. Such models are used to measure the observations.
For example, degree of temperature, yardstick, a unit of measurement of length value, etc.
(iv) Heuristic Models. These models are mainly used to explore alternative strategies (courses of action)
that were overlooked previously, whereas mathematical models are used to represent systems possessing
well-defined strategies. Heuristic models do not claim to find the best solution to the problem.

Section 1.8 – Main Characteristics (Features) of Operations Research

The main characteristics of OR are as follows:
1. Inter-disciplinary team approach. In OR, the optimum solution is found by a team of scientists
selected from various disciplines such as mathematics, statistics, economics, engineering, physics, etc.
For example, while investigating the inventory management in a factory, perhaps we may require
an engineer who knows the functions of various items of stores. We also require a cost accountant and a
mathematician-cum-statistician. Each member of such OR team is benefitted by the view points of
others, so that the workable solution obtained through such collaborative study has a greater chance of
acceptance by management.
Furthermore, an OR team required for a big organization may include a statistician, an economist,
a mathematician, one or more engineers, a psychologist and some supporting staff like computer
programmers, etc. A mathematician or a probabilist can apply his tools in a plant problem only if he gets
to understand some of the physical implications of the plant from an engineer. Otherwise, he may give
such a solution which may not be possible to apply.
2. Wholistic approach to the system. The most of the problems tackled by OR have the characteristic
that OR tries to find the best (optimum) decisions relative to largest possible portion of the total
organization. The nature of organization is essentially immaterial.
For example, in attempting to solve a maintenance problem in a factory, OR tries to consider how
this affects the production department as a whole. If possible, it also tries to consider how this effect on
the production department in turn affects other department and the business as a whole. It may even try to
go further and investigate how the effect on this particular business organization in turn affects the
industry as a whole, etc. Thus OR attempts to consider inter-actions or chain of effects as far out as these
effects are significant.
3. Imperfectness of solutions. By OR techniques, we cannot obtain perfect answers to our problems but,
only the quality of the solution is improved from worse to bad answers.
4. Use of scientific research. OR uses techniques if scientific research to reach the optimum solution.
5. To optimize the total output. OR tries to optimize total return by maximizing the profit and
minimizing the cost or loss.

Section 1.9 – Main Phases of Operations Research Study

The procedure for an OR study generally involves the following major phases:
Phase I: Formulating the problem. Before proceeding to find the solution of a problem, first of all one
must be able to formulate the problem in the form of an appropriate model. To do so, the following
information will be required.
(i) Who has to take the decision?
(ii) What are the objectives?
(iii) What are the ranges of controlled variables?
(iv) What are the uncontrolled variables that may affect the possible solutions?
(v) What are the restrictions or constraints on the variables?
Since wrong formulation cannot yield a right decision (solution), one must be considerably
careful while execution this phase.
Phase II: Constructing a mathematical model. The second phase of the investigations is concerned
with the reformulation of the problem in an appropriate form which is convenient for analysis. The most
suitable form for this purpose is to construct a mathematical model representing the system under study.
It requires the identification of both static and dynamic structural elements. A mathematical model should
include the following three important basic factors:
(i) Decision variables and parameters
(ii) Constraints or Restrictions
(iii) Objective function
Phase III: Deriving the solutions from the model. This phase is devoted to the computation of those
values of decision variables that maximize (or) minimize the objective function. Such solution is called
an optimal solution which is always in the best interest of the problem under consideration. The general
techniques for deriving the solution of OR model are discussed in the following sections and further
details are given in the text.
Phase IV: Testing the model and its solution (updating the model). After completing the model, it is
once again tested as a whole for the errors if any. A model may be said to be valid if it can provide a
reliable prediction of the system’s performance. A good practitioner of Operations Research realizes that
his model be applicable for a longer time and thus he updates the model time to time by taking into
account the past, present and future specifications of the problem.
Phase V: Controlling the solution. This phase establishes controls over the solution with any degree of
satisfaction. The model requires immediate modification as soon as the controlled variables (one or more)
change significantly, otherwise the model goes out of control. As the conditions are constantly changing
in the world, the model and the solution may not remain valid for a long time.
Phase VI: Implementing the solution. Finally, the tested results of the model are implemented to work.
This phase is primarily executed with the cooperation of Operations Research experts and those who are
responsible for managing and operating the systems.

Section 1.10 – The Terms: Tools, Techniques and Methods

We now carefully differentiate the terms: ‘tools’, techniques’ and ‘methods’ which are frequently
used in science. It is evident that a table of random numbers is a tool of science. The way in which this
tool is used is called a technique. The research plan which involves the use of Monte-Carlo procedure
and the table of random numbers is called a method of science. Similarly, calculus is a scientific tool;
employing calculus to find an optimum value of a variable in a mathematical model of a system is a
scientific technique; and the plan of utilizing a mathematical model to optimize a system is a scientific
method.

Section 1.10.1 – Scientific Method in Operations Research

The scientific method in OR study generally involves the three phases:
(i) the judgment phase
(ii) the research phase and
(iii) the action phase
Of these three, the research phase is the largest and longest, but the remaining two are just as
important as they provide the basis for an implementation of the research.
The judgment phase includes:
(i) A determination of the operation.
(ii) The establishment of the objectives and values related to the operation.
(iii) The determination of the suitable measures of effectiveness.
(iv) Lastly, the formulation of the problems relative to the objectives.
The research phase utilizes:
(i) Observations and data collection for a better understanding of what the problem is.
(ii) Formulation of hypothesis and models.
(iii) Observation and experimentation to test the hypothesis on the basis of additional data.
(iv) Analysis of the available information and verification of the hypothesis using pre-established
measures of effectiveness.
(v) Predictions of various results from the hypothesis, generalization of the result and
consideration of alternative methods.
The action phase:
OR consists of making recommendations for decision process by those who first posed the
problem for consideration, or by anyone in a position to make a decision influencing the operation in
which the problem occurred.

Section 1.11 – Scope of Operations Research

In its recent years of organized development, OR has entered successfully many different areas of
research for military, government and industry. The basic problem in most of the developing countries in
Asia and Africa is to remove poverty and hunger as quickly as possible. So there is a great scope of
economists, statisticians, administrators, politicians and the technicians working in a team to solve this
problem by an OR approach. Besides this, OR is useful in the following various important fields.
1. In Agriculture. With the explosion of population and consequent shortage of food, every country is
facing the problem of –
(i) optimum allocation of land to various crops in accordance with the climatic conditions; and
(ii) optimum distribution of water from various resources like canal for irrigation purposes.
Thus there is a need of determining best policies under the prescribed restrictions. Hence a good
amount of work can be done in this direction.
2. In Finance. In these modern times of economic crisis, it has become very necessary for every
government to have a careful planning for the economic development of her country. OR-techniques can
be fruitfully applied:
(i) to maximize the per capita income with minimum resources;
(ii) to find out the profit plan for the company;
(iii) to determine the best replacement policies, etc.
3. In Industry. If the industry manager decides his policies (not necessarily optimum) only on the basis
of his past experience (without using OR techniques) and a day comes when he gets retirement, then a
heavy loss is encountered before the Industry. This heavy loss can immediately be compensated by newly
appointing a young specialist of OR techniques in business management. Thus OR is useful to the
Industry Director in deciding optimum allocation of various limited resources such as men, machines,
material, money, time , etc., to arrive at the optimum decision.
4. In Marketing. With the help of OR techniques a Marketing Administrator (Manager) can decide:
(i) where to distribute the products for sale so that the total cost of transportation etc. is minimum,
(ii) the minimum per unit sale price,
(iii) the size of the stock to meet the future demand,
(iv) how to select the best advertizing media with respect to time, cost, etc.
(v) how, when and what to purchase at the minimum possible cost?
5. In Personal Management. A personal manager can use OR techniques:
(i) to appoint the most suitable persons on minimum salary,
(ii) to determine the best age of retirement for the employees,
(iii) to find out the number of persons to be appointed on full time basis when the workload is
seasonal (not continuous).
6. In Production Management. A production manager can use OR techniques:
(i) to find out the number and size of the items to be produced;
(ii) in scheduling and sequencing the production run by proper allocation of machines;
(iii) in calculating the optimum product mix; and
(iv) to select, locate and design the sites for the production plants.
7. In L.I.C. OR approach is also applicable to enable the L.I.C officers to decide:
(i) what should be the premium rates for various modes of policies,
(ii) how best the profits could be distributed in the cases of with profit policies? etc.
Finally, we can say: wherever there is a problem, there is OR. The applications of OR cover the
whole extent of anything. A recent publication of the OR society contains a summary of the applications
of OR. The reader wishing more details on applications may consult the publication: ‘Progress in OR’
Vol. 2 by Hertz.D.B and R.T.Eddison.