INDIAN INSTITUTE OF PLANNING AND MANAGEMENT NEW DELHI

OPERATION RESEARCH (OR)

UNDER THE GUIDANCE OF: PROF. SREY AGGARWAL

SUBMITTED BY: SAURABH KHARBANDA BATCH: PGP/FW/2009-11

OPERATIONAL RESEARCH
Operational Research (OR) is the use of advanced analytical techniques to improve decision making. It is sometimes known as Operations Research, Management Science or Industrial Engineering. People with skills in OR hold jobs in decision support, business analytics, marketing analysis and logistics planning as well as jobs with OR in the title. Why is OR needed? Because it makes sense to make the best use of available resources. Todays global markets and instant communications mean that customers expect high-quality products and services when they need them, where they need them. Organisations, whether public or private, need to provide these products and services as effectively and efficiently as possible. This requires careful planning and analysis the hallmarks of good OR. This is usually based on process modelling, analysis of options or business analytics. Examples of OR in action

Scheduling: of aircrews and the fleet for airlines, of vehicles in supply chains, of orders in a factory and of operating theatres in a hospital.

Facility planning: computer simulations of airports for the rapid and safe processing of travellers, improving appointments systems for medical practice.

Planning and forecasting: identifying possible future developments in telecommunications, deciding how much capacity is needed in a holiday business.

Yield management: setting the prices of airline seats and hotel rooms to reflect changing demand and the risk of no shows.

Credit scoring: deciding which customers offer the best prospects for credit companies.

Marketing: evaluating the value of sale promotions, developing customer profiles and computing the life-time value of a customer. 2

Defence and peace keeping: finding ways to deploy troops rapidly.

Some OR methods and techniques

Computer simulation: allowing you to try out approaches and test ideas for improvement.

Optimisation: narrowing your choices to the very best when there are so many feasible options that comparing them one by one is difficult.

Probability and statistics: helping you measure risk, mine data to find valuable connections and insights in business analytics, test conclusions, and make reliable forecasts.

Problem structuring: helpful when complex decisions are needed in situations with many stakeholders and competing interests.

Operational research (OR) encompasses a wide range of problem-solving techniques and methods applied in the pursuit of improved decision-making and efficiency, such as simulation, mathematical optimization, queueing theory and other stochastic-process models, Markov decision processes, econometric methods, data envelopment analysis, neural networks, expert systems, decision analysis, and the analytic hierarchy process.[6] Nearly all of these techniques involve the construction of mathematical models that attempt to describe the system. Because of the computational and statistical nature of most of these fields, OR also has strong ties to computer science and analytics. Operational researchers faced with a new problem must determine which of these techniques are most appropriate given the nature of the system, the goals for improvement, and constraints on time and computing power. The major subdisciplines in modern operational research, as identified by the journal Operations Research, are: Computing and information technologies Environment, energy, and natural resources Financial engineering Manufacturing, service sciences, and supply chain management

Marketing Engineering Policy modeling and public sector work Revenue management Simulation Stochastic models Transportation. The field of Operations Research (called operational research in Great Britain) has its roots in the years just prior to World War II as the British prepared for the anticipated air war. In 1937 field tests started on what was later to be called radar. In 1938 experiments began to explore how the information provided by radar should be used to direct deployment and use of fighter planes. Until this time, the word experiment conjured up the picture of a scientist carrying out a controlled experiment in a laboratory. In contrast, the multi-disciplinary team of scientists working on this radar-fighter plane project studied the actual operating conditions of these new devices and designed experiments in the field of operations and the new term operations research was born. The team's goal was to derive an understanding of the operations of the complete system of equipment, people, and environmental conditions (e.g. weather, nighttime) and then improve upon it. Their work was an important factor in winning the Battle of Britain and operations research eventually spread to all of the military services. Several of the leaders of this effort were Nobel laureates in their original fields of study. Similar groups of interdisciplinary scientists were later established in the US at the various branches of the armed services. They worked to protect convoys, search for enemy convoys, enhance anti-submarine warfare and improve the effectiveness of bombers. Common elements of their many studies were: data collection, direct observation of operations, a mathematical model, recommendations for improvements and feedback on the impact of the changes. It was this emphasis on seeing how things actually operated in the real-world and applying a scientific approach to improving performance that gave rise to the term operations research. Currently, every branch of the military has its own operations research group that

includes both military and civilian personnel. They play a key role in both longterm strategy and weapons development, as well as directing the logistics of actions such as Operation Desert Storm. In addition, the National Security Agency has its own Center for Operations Research. In the 1950s operations research evolved into a profession with the formation of national societies, establishment of journals and academic departments in universities. The use of operations research expanded beyond the military to include both private companies and other governmental organizations. The petrochemical industry was one of the first to broadly embrace operations research to improve the performance of plants, develop natural resources and plan strategy. Today, operations research plays important roles in a variety of industries such as:

airline - scheduling planes and crews, pricing tickets, taking reservations, and planning the size of the fleet,

pharmaceutical - R& D management, logistics companies - routing and planning, financial services - credit scoring, marketing, and internal operations, lumber and wood products - managing forests and cutting timber, local government - deployment of emergency services, and policy studies and regulation - environmental pollution, air traffic safety, AIDS, and criminal justice policy.

As the field evolved, the core moved away from interdisciplinary teams to a focus on the development of mathematical models that can be used to model, improve, and even optimize real-world systems. These mathematical models include both deterministic models such as mathematical programming, routing or network flows and probabilistic models such as queuing, simulation and decision trees. These mathematical modeling techniques form the core curriculum of masters degree and doctoral programs in operations research which can be found in either engineering or business schools. Most mathematics departments also offer one or more introductory operations research courses at the junior or senior undergraduate level.