Management Science/ Operation Research: The Quantitative Approach To Management Decision Making

MANAGEMENT
SCIENCE/
OPERATION RESEARCH
The Quantitative Approach to
Management Decision Making
INTRODUCTION
INTRODUCTION
 British/Europeans refer to
“operational research”, the
Americans to “operations
research”(“OR")
 Another term used for this

field is “management
science”("MS")
INTRODUCTION
 OR starts when mathematical and quantitative techniques

are used to substantiate the decision being taken.
 The decision we are concerned here with are complex and
heavily responsible.
INTRODUCTION
 Operations Research takes tools from different discipline such as

mathematics, statistics, economics, psychology, engineering etc. and
combines these tools to make a new set of knowledge for decision
making.
 Its main purpose is to provide a rational basis for decisions making in
the absence of complete information, because the systems composed
of human, machine, and procedures may do not have complete
information.
INTRODUCTION
 Thus O.R. specialists are involved in

three classical aspect of science, they
are as follows:
i) Determining the systems behaviour
ii) Analyzing the systems behaviour
by developing appropriate models
iii) Predict the future behaviour using
these models
INTRODUCTION
 OR provided solutions to problems of

military operations during World War
II, and also successful in other
operations.
 Today business applications are

primarily concerned with O.R.
analysis for the possible alternative
actions.
HISTORY OF
OPERATIONS RESEARCH
HISTORY OF OPERATIONS RESEARCH
“Ever wondered where operational research came

from?”
The history of OR began in the world wars, when

scientific research was used to improve military
operations – with huge success. The most famous
two examples are OR's impact on combating
Germany's u-boats and Hitler's Luftwaffe.
STAGES OF DEVELOPMENT OF
OPERATIONS RESEARCH
STAGES OF DEVELOPMENT OF OPERATION RESEARCH
Stage 1 : Observe the problem environment

Stage 2 : Analyze & define the problem
Stage 3 : Develop a model
Stage 4 : Select appropriate data input
Stage 5 : Provide a solution & test its reasonableness
Stage 6 : Implementation of solution
Stage 1 Stage 2 Stage 3

ACTIVITIES: Site visits, ACTIVITIES: Define ACTIVITIES: Define
Conferences, the uses, objectives interrelationships,
Formulate equations,
Observations, and limitations of Use known OR model,
Research problem Search alternate model
OUTPUT: Sufficient OUTPUT: Clear grasp OUTPUT: Models that

information and of need for and work under stated
support to proceed nature of solution environmental
requested constraints
Stage 4 Stage 5 Stage 6

ACTIVITIES: Analyze: ACTIVITIES: Test the ACTIVITIES: Resolve
internal-external data & model, Find behavioral issues, Sell
facts, Collects options, the idea, Give
Use computer data
limitations, Update explanations,
banks the model Management
involvement
OUTPUT: Sufficient OUTPUT: Solution(s) OUTPUT: Improved
inputs to operate and that support current working & management
test model organizational goals support for longer run
of operation
RELATIONSHIP BETWEEN
MANAGER & OR SPECIALIST
Relationship of Manager and Operational Research Specialist
Steps in Problem Recognition,

Formulation and Solution Involvement
Recognize from organizational  Manager

symptoms that a problem exists
Decide what variables are

involved; state the problem in  Manager and O.R. Specialist
quantitative relationships among
the variables.

Investigate methods for solving O.R. Specialist

the problems as stated above;
determine appropriate quantitative
tools to be used
Attempt solutions to the problems;

find various solutions; state O.R. Specialist
assumptions underlying these
solutions; test alternative
solutions.

Determine which solution is most Manager and O.R. Specialist
effective because of practical
constraints within the organization;
decide what the solution means
for the organization.
Choose the solution to be used. Manager
‘Sell’ the decision to operating Manager and O.R. Specialist
managers; get their understanding
and cooperation
OPERATIONAL RESEARCH
TOOLS AND TECHNIQUES
Operational Research Tools and Techniques
Linear Programming Non-linear Programming

Game Theory Dynamic Programming
Decision Theory Integer Programming
Queuing Theory Markov Process
Inventory Models Network Scheduling
Simulation Information Theory
Linear Programming
This is a constrained optimization

technique, which optimize some
criterion within some constraints. In
Linear programming the objective
function and constraints are linear.
Game Theory
This is used for making decisions under
conflicting situations where there are one
or more players/opponents. In this the
motive of the players are dichotomized.
The success of one player tends to be at
the cost of other players and hence they
are in conflict.
Decision Theory
Decision theory is concerned with making decisions
under conditions of complete certainty about the future
outcomes and under conditions such that we can make
some probability about what will happen in future.
Queuing Theory
This is used in situations where

the queue is formed The objective
here is minimizing the cost of
waiting without increasing the cost
of servicing.
Inventory Models
Inventory model make a decisions that minimize total inventory
cost. This model successfully reduces the total cost of
purchasing, carrying, and out of stock inventory.
Simulation
Simulation is a procedure that

studies a problem by creating a
model of the process involved in
the problem and then through a
series of organized trials and
error solutions attempt to
determine the best solution.
Non-linear Programming
This is used when the objective
function and the constraints are not
linear in nature. Linear
relationships may be applied to
approximate non-linear constraints
but limited to some range, because
approximation becomes poorer as
the range is extended. Thus, the
non-linear programming is used to
determine the approximation in
which a solution lies and then the
solution is obtained using linear
methods.
Dynamic Programming
Dynamic programming is a method of analyzing
multistage decision processes. In this each
elementary decision depends on those preceding
decisions and as well as external factors.
Integer Programming
If one or more variables of the problem take integral values
only then dynamic programming method is used.
Markov Process
Markov process permits to predict changes over time
information about the behavior of a system is known.
Network Scheduling
 This technique is used extensively to plan, schedule, and monitor large
projects
There are two main types of technique in network scheduling, they are:
 Program Evaluation and Review Technique (PERT) – is used when
activities time is not known accurately/ only probabilistic estimate of time
is available.
 Critical Path Method (CPM) – is used when activities time is know
accurately.
Information Theory
This analytical process is transferred from the electrical
communication field to O.R. field.
APPLICATIONS OF
OPERATIONS RESEARCH
ALLOCATION and DISTRIBUTION IN PROJECTS
 Optimal allocation of resources

 Determination and deployment of proper work force
 Project scheduling monitoring and Control
PRODUCTION and FACILITIES PLANNING
 Factory size and location decision

 Estimation of number of facilities required
 Transportation loading and unloading
PROGRAMME DECISION
 What, When and How to purchase to minimize

procurement cost.
 Bidding and replacement policies
MARKETING
 Advertising budget allocation

 Product introduction timing
 Selection of advertising media
ORGANIZATION BEHAVIOR
 Recruitment of employees
 Personnel Planning
 Recruitment policies and assignment of jobs
FINANCE
 Investment decision
 Profit plan for the company
 Capital requirements, cash flow analysis
RESEARCH AND DEVELOPMENT
 Product Introduction planning

 Selection of projects and preparation of their
budgets
LIMITATIONS OF
OPERATION RESEARCH
Limitations of Operations Research
 Distance between O.R specialist and Manager

 Magnitude of Calculations
 Money and Time Costs
 Non-quantifiable Factors
 Implementation
THANK YOU!

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MANAGEMENT

 Another term used for this

 OR starts when mathematical and quantitative techniques

 Operations Research takes tools from different discipline such as

 Thus O.R. specialists are involved in

 OR provided solutions to problems of

 Today business applications are

“Ever wondered where operational research came

The history of OR began in the world wars, when

Stage 1 : Observe the problem environment

Stage 1 Stage 2 Stage 3

OUTPUT: Sufficient OUTPUT: Clear grasp OUTPUT: Models that

Stage 4 Stage 5 Stage 6

Steps in Problem Recognition,

Recognize from organizational  Manager

Decide what variables are

Steps in Problem Recognition,

Investigate methods for solving O.R. Specialist

Attempt solutions to the problems;

Steps in Problem Recognition,

Linear Programming Non-linear Programming

This is a constrained optimization

This is used in situations where

Simulation is a procedure that

 Optimal allocation of resources

 Factory size and location decision

 What, When and How to purchase to minimize

 Advertising budget allocation

 Product Introduction planning

 Distance between O.R specialist and Manager

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