Origin and development of Operation Research
The main origin of Operation Research (OR) was during the world war ll . At that time, the military management in UK called upon a team of scientists to study the strategic and tactical military problems . The OR team were not actually engaged in military operations and in fighting the war. But , their scientific and systematic approaches involved in OR provided a good intellectual support to the strategic initiatives of the military commands. In other words , they were only advisors and significantly instrumental in winning the war . Hence , OR can be associated with 'an art of winning the war without actually fighting the war '.
Motivated and encouraged by the results obtained by the British OR teams, the United States military management engaged in such activities . Successful applications of the U.S. teams included the invention of new fight patterns , planning sea mining and effective utilization of electronic equipments . Similar OR teams also started functioning in Canada and France.
Following the end of the war , the success of military teams attracted the attention of Industrial Managers . The most common problem of them was - what method should be adopted so that the total cost is minimum or total profit is 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. Since then , new technologies and applications have been developed through the efforts and cooperation of individuls in academic institutions and industry both.
Now-a-days , a large number of management consulting firms are engaged in OR activities . Apart from military and business applications , the OR activities include transportation system , libraries , hospitals , city planning , financial institutions , etc.
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Design of Operation Research
The procedure for conducting OR project about forty years ago was not too much systematic as compared to the present procedure . The present procedure of OR study involves in the following major heads :
i) Formulating the problem : In this phase , the given problem is formulated in the form of an appropriate model . The formulation should include -the decision to be taken , the objective , the controlled variables , the uncontrolled variables that may affect the possible solution , constraints on the variables.
ii) Constructing a mathematical model : In this phase , the mathematical model representing the system under study is constructed . the mathematical model should include -decision variables and parameters and objective functions.
iii) Deriving the solution from the model : This phase is devoted to the computation of those values of the decision variables that maximize (or minimize ) the objective function.
iv) Testing the model and the solution : After completing the model , it is once again tested as a whole for the error if any.
v) Controlling the solution : This phase establishes control over the solution with any degree of satisfaction.
vi) Implementing the solution : Finally , the tested result of the model is implemented to work.
Limitations of Operation research
The important limitations of OR are given below :
i) The inherent limitations concerning mathematical expressions : Assumptions are made for the models , equations and similar other mathematical expressions in OR and these are used to solve the business problems . If due care is not given in such cases then there is every possibility of wrong application in OR.
ii) High costs are involved in the use of OR techniques : OR techniques are usually very expensive due to the specialized persons to be deployed and also due to the use and maintenance of computers . Thus , the use of OR is costlier affair and this constitute an important limitation .
iii) OR does not take into consideration the intangible factors : The success and failure of a management may depend upon intangible factors such as skill , attitude , vigour of the management . But , OR does not take into account such non-measurable intangible factors.
iv) OR is only a tool of analysis and not the complete decision making process : OR simply suggests best alternative. It alone cannot make the final decisions.
v) Other limitations : The other limitations include - bias of the operational researches , inadequate single objective function , ignorance of internal resistance , reliability of the prepared solution , etc.
Scope(use)of operation research in managerial decisions
OR has entered successfully in different areas of research for military , government and industry . The basic problem in the most of the developing countries is to remove poverty and hunger as quickly as possible . The economists , statisticians , administrators , politicians and the technicians working in a team to solve this problem by using OR approach. OR is useful in the following important fields in taking managerial decisions -
i) Agriculture : In case of agricultural production , we always face the following two situations -
a) optimum allocation of land to various crops in accordance with the climatic conditions and
b) optimum allocation of water from various resources like canal for irrigation purposes.
In such cases , OR can determine the best policies under prescribed restrictions.
ii) Finance : OR techniques can be fruitfully applied -
a)to determine the per capita income with minimum resources.
b)to find out the profit plan for the country.
c)to determine the best replacement policies.
iii) Industry : OR is useful to industry in checking optimum allocation of various limited resources such as men, machine , material , capital, time etc, to arrive at optimum decisions.
iv) Marketing : With the help of OR technique , a Marketing Manager can decide -
a) where to distribute the products for sale so that the total cost of transportation , etc is minimum.
b) the minimum per unit sale price.
c) the size of the stock to meet the future demand.
d) how to select the best advertising media with respect to time , cost etc.
e) how, when and what to purchase at the minimum possible cost .
v) Personnel management : A personnel manager can use OR techniques -
a) to appoint the most suitable person on minimum salary.
b) to determine the best stage of retirement for the employees.
c) to find out the number of persons to be appointed on full time basis when the workload is seasonal.
vi) Production management : A production manager can use OR techniques :
a) to find out the number and size of the items to be produced.
b) in scheduling and sequencing the production run by proper allocation of machines.
c) in calculating the optimum production mix.
d) to select, locate and design the sites for the production plants.
Role of OR in management
The role of OR in management is discussed as below -
i) OR provides a tool for scientific analysis : OR replaces the intuitive and subjective approach of decision making by an analytical and objective approach . It also encourages and enforces disciplined thinking about organizational problem.
ii) OR provides solution for different business problems : OR techniques are used in production , procurement , marketing , finance and other allied fields . Its techniques are used by the managers and the executives to allocate the available resources to various products so that at a given time the profit is maximum or the cost is minimum. Again, OR can be used in the problem of uncertainity over future sales and demands to generate 'a least risk plan'.
iii) OR enables proper deploument of resources : OR renders valuable help in proper deployment of resources . Example - Program Evaluation and Review Technique (PERT) is used to determine the probability of completing an event or project within a specified date.
iv) OR helps in minimizing waiting and servicing costs : The queuing theory helps management in minimizing the total waiting and servicing costs.
v) OE enables management to decide when to buy and how much to buy : The main objective of inventory planning is to make a balance between the cost of holding stock and the benefit from the cost handling.
vi) OR assists in choosing an optimum strategy : Game theory is used in competitive situations to maximize profit and minimize loss by adopting the optimal strategy.
vii) OR renders great help in optimum resource allocation : Linear Programming technique is used to allocate scarce resources in an optimum manner in the problem of scheduling , product-mix and so on.
viii) OR facilitates the process of decision making : Decision theory enables businessman to select the best course of action when the information is given in a probabilistic form.
ix) Through OR management can know the reactions of the integrated business system : The Integrated Production Model technique is used to minimize cost with respect to work force , production and inventory . This technique is designed to investigate how the integrated business system would react to the variations in its component elements or external factors.
x) OR technique helps a lot in the preparation of future managers : OR techniques substitute means for improving the knowledge and skill of youngsters in the field of management.
Q. State whether the following statement is TRUE or FALSE
Model building is the essence of operation research.
Ans. True.
i) Formulating the problem : In this phase , the given problem is formulated in the form of an appropriate model . The formulation should include -the decision to be taken , the objective , the controlled variables , the uncontrolled variables that may affect the possible solution , constraints on the variables.
ii) Constructing a mathematical model : In this phase , the mathematical model representing the system under study is constructed . the mathematical model should include -decision variables and parameters and objective functions.
iii) Deriving the solution from the model : This phase is devoted to the computation of those values of the decision variables that maximize (or minimize ) the objective function.
iv) Testing the model and the solution : After completing the model , it is once again tested as a whole for the error if any.
v) Controlling the solution : This phase establishes control over the solution with any degree of satisfaction.
vi) Implementing the solution : Finally , the tested result of the model is implemented to work.
Limitations of Operation research
The important limitations of OR are given below :
i) The inherent limitations concerning mathematical expressions : Assumptions are made for the models , equations and similar other mathematical expressions in OR and these are used to solve the business problems . If due care is not given in such cases then there is every possibility of wrong application in OR.
ii) High costs are involved in the use of OR techniques : OR techniques are usually very expensive due to the specialized persons to be deployed and also due to the use and maintenance of computers . Thus , the use of OR is costlier affair and this constitute an important limitation .
iii) OR does not take into consideration the intangible factors : The success and failure of a management may depend upon intangible factors such as skill , attitude , vigour of the management . But , OR does not take into account such non-measurable intangible factors.
iv) OR is only a tool of analysis and not the complete decision making process : OR simply suggests best alternative. It alone cannot make the final decisions.
v) Other limitations : The other limitations include - bias of the operational researches , inadequate single objective function , ignorance of internal resistance , reliability of the prepared solution , etc.
Scope(use)of operation research in managerial decisions
OR has entered successfully in different areas of research for military , government and industry . The basic problem in the most of the developing countries is to remove poverty and hunger as quickly as possible . The economists , statisticians , administrators , politicians and the technicians working in a team to solve this problem by using OR approach. OR is useful in the following important fields in taking managerial decisions -
i) Agriculture : In case of agricultural production , we always face the following two situations -
a) optimum allocation of land to various crops in accordance with the climatic conditions and
b) optimum allocation of water from various resources like canal for irrigation purposes.
In such cases , OR can determine the best policies under prescribed restrictions.
ii) Finance : OR techniques can be fruitfully applied -
a)to determine the per capita income with minimum resources.
b)to find out the profit plan for the country.
c)to determine the best replacement policies.
iii) Industry : OR is useful to industry in checking optimum allocation of various limited resources such as men, machine , material , capital, time etc, to arrive at optimum decisions.
iv) Marketing : With the help of OR technique , a Marketing Manager can decide -
a) where to distribute the products for sale so that the total cost of transportation , etc is minimum.
b) the minimum per unit sale price.
c) the size of the stock to meet the future demand.
d) how to select the best advertising media with respect to time , cost etc.
e) how, when and what to purchase at the minimum possible cost .
v) Personnel management : A personnel manager can use OR techniques -
a) to appoint the most suitable person on minimum salary.
b) to determine the best stage of retirement for the employees.
c) to find out the number of persons to be appointed on full time basis when the workload is seasonal.
vi) Production management : A production manager can use OR techniques :
a) to find out the number and size of the items to be produced.
b) in scheduling and sequencing the production run by proper allocation of machines.
c) in calculating the optimum production mix.
d) to select, locate and design the sites for the production plants.
Role of OR in management
The role of OR in management is discussed as below -
i) OR provides a tool for scientific analysis : OR replaces the intuitive and subjective approach of decision making by an analytical and objective approach . It also encourages and enforces disciplined thinking about organizational problem.
ii) OR provides solution for different business problems : OR techniques are used in production , procurement , marketing , finance and other allied fields . Its techniques are used by the managers and the executives to allocate the available resources to various products so that at a given time the profit is maximum or the cost is minimum. Again, OR can be used in the problem of uncertainity over future sales and demands to generate 'a least risk plan'.
iii) OR enables proper deploument of resources : OR renders valuable help in proper deployment of resources . Example - Program Evaluation and Review Technique (PERT) is used to determine the probability of completing an event or project within a specified date.
iv) OR helps in minimizing waiting and servicing costs : The queuing theory helps management in minimizing the total waiting and servicing costs.
v) OE enables management to decide when to buy and how much to buy : The main objective of inventory planning is to make a balance between the cost of holding stock and the benefit from the cost handling.
vi) OR assists in choosing an optimum strategy : Game theory is used in competitive situations to maximize profit and minimize loss by adopting the optimal strategy.
vii) OR renders great help in optimum resource allocation : Linear Programming technique is used to allocate scarce resources in an optimum manner in the problem of scheduling , product-mix and so on.
viii) OR facilitates the process of decision making : Decision theory enables businessman to select the best course of action when the information is given in a probabilistic form.
ix) Through OR management can know the reactions of the integrated business system : The Integrated Production Model technique is used to minimize cost with respect to work force , production and inventory . This technique is designed to investigate how the integrated business system would react to the variations in its component elements or external factors.
x) OR technique helps a lot in the preparation of future managers : OR techniques substitute means for improving the knowledge and skill of youngsters in the field of management.
Q. State whether the following statement is TRUE or FALSE
Model building is the essence of operation research.
Ans. True.
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