Unit-1 (Notes)

Why We Study Operations Research

We study Operations Research (OR) because managers today face complex, dynamic, and
multidimensional problems. Decisions in management not only have economic implications but also
affect social, human, and political aspects. Traditional methods of decision-making, such as
guesswork or thumb rules, are often inadequate in such situations.

In a highly competitive environment, managers must deal with systems that involve interrelated factors
and multiple performance criteria. Operations Research provides a scientific and systematic approach
to handling these complexities. It helps managers to:

• Make rational, data-driven decisions.

• Analyse problems logically and objectively.

• Find optimal solutions within given constraints.

• Improve efficiency and effectiveness in operations.

What is Operations Research

Operations Research (OR) is a branch of applied mathematics that uses scientific methods,
mathematical models, and analytical techniques to solve management and decision-making problems.

It provides a quantitative approach to problem-solving by:

• Defining and analysing problems systematically.

• Using data, facts, and objective criteria rather than intuition.

• Developing mathematical models to represent real-world situations.

• Applying optimization techniques to arrive at the best possible solution.

In short, Operations Research is the science of decision-making, concerned with helping managers
and executives choose the most effective course of action in complex and uncertain environments.

History of Operations Research

Operations Research (OR) began during the Second World War (1939–1945). At that time, England
faced many war-related problems but had very limited resources such as food, medicines, weapons,
and manpower. The military leaders wanted to use these resources in the best possible way to win the
war. To solve this, they invited a team of scientists, engineers, doctors, professors, and business
experts to study the problems of defense and resource management. These experts worked together
and developed systematic and mathematical methods to make better decisions. One of the first
methods they created was Linear Programming, which gave effective solutions for military
problems. Because of its success, this new way of solving problems was named Operations Research,
where “Operations” referred to military operations and “Research” meant developing new methods.

After the war ended, industries also started facing shortages of materials and economic problems. The
same OR techniques were applied to industrial and business problems to reduce costs and increase
profits. In 1947, the American mathematician George B. Dantzig developed the Simplex Method,
which made Linear Programming easier to use and opened the way for many new applications.

Seeing its usefulness, the United States and other countries adopted OR for both military and civil
purposes. Later, it spread to industries like transportation, airlines, railways, manufacturing, and even
government planning.

In India, the Operations Research Society of India was formed in 1959, and many organizations
such as Indian Railways, Indian Airlines, Tata Steel, Hindustan Lever, Fertilizer Corporation of
India, and Defense organizations began using OR techniques. Today, Operations Research has grown
into a vast field with many methods and applications. It is no longer limited to war but is widely used
in business, industry, transportation, healthcare, education, and government planning to make
better and faster decisions.

Characteristics of Operations Research

Operations Research (OR) is a scientific approach to problem-solving and decision-making. It
considers all aspects of a problem, analyses them systematically, and provides an optimal solution
instead of depending on guesswork or intuition. Some important characteristics of OR are:

1. Interdisciplinary Team Approach

➢ The problems in OR are often complex and involve many variables and constraints.

➢ A single person may not have expertise in all the areas needed to solve such problems.

➢ Therefore, OR relies on a team of specialists from different fields (mathematics, economics,

engineering, management, etc.) who bring their knowledge together.

➢ This teamwork ensures a better understanding of the problem and reduces the risk of wrong
decisions.

2. Enhances the Creative Ability of Decision-Makers

➢ OR provides managers with mathematical tools, models, and techniques to analyse problems and
evaluate different alternatives.

➢ This scientific support helps managers make better and quicker decisions, rather than relying only
on thumb rules or guesswork.

➢ A manager using OR techniques is more confident and creative compared to one who does not
use them.

3. Systems Approach

➢ Every organization (business, government, or defense) can be seen as a system made up of many
sub-systems (e.g., production, marketing, finance, HR).

➢ A decision taken in one sub-system affects the others. For example, a marketing decision directly
influences production requirements.

➢ OR considers the entire system and the inter-relationships among sub-systems before arriving
at a solution.

➢ This ensures that the decision benefits the whole organization rather than just one part of it.
Scope of Operations Research

The scope of Operations Research (OR) is very wide. Its techniques can be applied to solve problems
in almost every field, whether it is related to an individual, a group, business, agriculture, government,
or defense. In simple terms, whenever there is a problem, whether simple or complex, OR methods
can be used to find the best solution.

Some important areas where OR is applied are:

1. Defense Operations

• OR was born during World War II to solve military problems.

• It helps in resource allocation, strategy planning, coordination between Army, Navy, and Air
Force, and in predicting enemy moves.

• Techniques like Linear Programming, Game Theory, and Inventory Models are used to make
better decisions in competitive war situations.

2. Industry

❖ After the war, industries faced problems of low productivity and high costs.

❖ OR techniques such as Decision Trees, Inventory Models, Linear Programming,

Transportation, Sequencing, Assignment, and Replacement Models are used to:

o Minimize production costs

o Increase productivity

o Use resources efficiently

❖ With the help of computers and software packages, industrial problems can now be solved
quickly and accurately.

3. Economic Planning

• In countries like India, OR is used in Five-Year Plans and other growth strategies.

• It helps in determining future needs of manpower (engineers, doctors, IT professionals, etc.) and
in planning balanced growth across different sectors.

4. Agriculture

• With increasing population and limited land, OR is useful in planning agriculture efficiently.

• It helps in selecting the best crops, seeds, and land use to maximize yield and minimize losses.

5. Traffic Control

• With the rise in vehicles, traffic management has become a major issue.

• OR techniques, especially Queuing Theory, are applied to design proper traffic signal timings
and to manage traffic flow effectively.
6. Hospitals and Healthcare

• Hospitals often face problems like long queues of patients, a shortage of beds, ambulances, or
medicines.

• OR helps in planning and allocating resources efficiently so that more patients can get treatment
on time.

Real Life Example: Production Planning in a Factory

Suppose a company produces two products: Chairs and Tables.

❖ Each Chair requires 2 hours of carpentry and 3 hours of painting.

❖ Each Table requires 4 hours of carpentry and 1 hour of painting.

❖ The factory has only 100 hours of carpentry and 60 hours of painting available per week.

❖ The profit is ₹200 per Chair and ₹150 per Table.

The manager wants to know: How many Chairs and Tables should be produced to maximize profit?

Steps In Solving Operations Research Problems

Step 1: Formulate the Problem
✓ Objective: Maximize profit.

✓ Decision Variables:

o Let x = number of Chairs

o Let y = number of Tables

Step 2: Construct the Mathematical Model

Constraints (resources available):

✓ Carpentry: 2x + 4y ≤100…………1

✓ Painting: 3x + 1y ≤60 ………...2

✓ Non-negativity: x, y ≥ 0………3

Objective Function (profit):

✓ Z = 200x + 150y

Step 3: Derive a Solution Method

This is a Linear Programming Problem (LPP). We can solve it using:

✓ Graphical Method (if only 2 variables)

✓ Simplex Method (for more variables)

Step 4: Find the Optimal Solution (Graphical Method/Simplex Method)

✓ Plot the constraints on a graph.

✓ Feasible region = area satisfying all constraints.

✓ Check the profit Z at the corner points of the feasible region.

✓ The corner with maximum Z gives the best solution.

Step 5: Test the Model and Solution

❖ If the solution is x=20 chairs and y=15y tables (for example), check:

o Carpentry used = 2 (20) + 4 (15) =100

o Painting used = 3 (20) + 1 (15) = 75 (exceeds 60 → not feasible).

❖ So, try another corner point until you find the feasible maximum profit.

Step 6: Implement the Solution

✓ Suppose the feasible optimal solution comes as x =10x chairs and y = 20y tables.

✓ Profit = 200(10) + 150(20) = 2000+3000 =₹5000

✓ Management decides to produce 10 chairs and 20 tables per week.

Linear Programming method
Why We Study Linear Programming

In real life, managers and decision-makers often face situations where resources are limited, such as
money, manpower, materials, machines, or time. At the same time, many competing activities or
products need these resources.

The key challenge is: How can we use the available resources in the best possible way to achieve
the maximum benefit, like maximum profit, minimum cost, or optimal efficiency?

This is where Linear Programming (LP) becomes important.

✓ LP provides a scientific and systematic method of decision-making instead of relying on

guesswork or trial-and-error.

✓ It helps in allocating scarce resources optimally while considering various restrictions or

constraints.

✓ It is widely applied in business, government, industry, health, transportation, education, and

research for planning and scheduling.

✓ By using LP, organizations can achieve better efficiency, lower costs, higher productivity, and
improved decision-making.

In short, we study Linear Programming because it equips us with a powerful mathematical tool to solve
real-world problems of allocation and optimization.

Example 1. A company manufactures two products X and Y, which require, the following resources.
The resources are the capacities machine M1, M2, and M3. The available capacities are 50,25, and 15
hours respectively in the planning period. Product X requires 1 hour of machine M2 and 1 hour of
machine M3. Product Y requires 2 hours of machine M1, 2 hours of machine M2 and 1 hour of machine
M3. The profit contribution of products X and Y are Rs.5/ and Rs.4/- respectively.

Solution.

A company makes two products, X and Y, using three machines (M1, M2, M3).
Available machine hours in the planning period: M1 = 50, M2 = 25, M3 = 15.
Processing times (hours per unit) and profits:

Machine / Profit Product X Product Y Availability (hrs)

M1 0 2 50

M2 1 2 25

M3 1 1 15
Machine / Profit Product X Product Y Availability (hrs)

Profit (₹/unit) 5 4 —

In the above problem, Products X and Y are competing candidates or variables.

Machine capacities are available resources. Profit contribution of products X and Y are given. Now let
us formulate the model.

Let the company manufactures x units of X and y units of Y. As the profit contributions of X and Y are
Rs.5/- and Rs. 4/- respectively. The objective of the problem is to maximize the profit Z, hence
objective function is:

Maximize Z = 5x + 4y OBJECTIVE FUNCTION.

This should be done so that the utilization of machine hours by products x and y should not exceed the
available capacity. This can be shown as follows:

For Machine M1 0x + 2y ≤ 50

For Machine M2 1x + 2y ≤ 25 LINEAR STRUCTURAL CONSTRAINTS.

For machine M3 1x + 1y ≤ 15

But the company can stop production of x and y or can manufacture any amount of x and y. It cannot
manufacture negative quantities of x and y.

Hence, we have written, both x and y are ≥ 0. NON -NEGATIVITY CONSTRAINT.