Operations Research (O.R.)

In the last lecture, madam has mention about operating research (OR). So this time i would like to learn together with you all what actually the operating research are and what is the functions of using operating research.

Operations research (O.R.) is the discipline of applying advanced analytical methods to help make better decisions. OR will use the mathematical modeling to analyze complex situations, operations research gives executives the power to make more effective decisions and build more productive systems based on:

• More complete data
• Consideration of all available options
• Careful predictions of outcomes and estimates of risk
• The latest decision tools and technique

To achieve these results, O.R. professionals draw upon the latest analytical technologies, including:

• Simulation==>Giving you the ability to try out approaches and test ideas for improvement
• Optimization==>Narrowing the choices to the very best when there are virtually innumerable feasible options and comparing them is difficult
• Probability and Statistics==> Helping to measure risk, mine data to find valuable connections and insights, test conclusions, and make reliable forecasts

There are several advantages when we are using OR to analyze:

• Better Control: The management of large organizations recognize that it is a difficult and costly affair to provide continuous executive supervision to every routine work. An O.R. approach may provide the executive with an analytical and quantitative basis to identify the problem area. The most frequently adopted applications in this category deal with production scheduling and inventory replenishment.
• Better Systems: Often, an O.R. approach is initiated to analyze a particular problem of decision making such as best location for factories, whether to open a new warehouse, etc. It also helps in selecting economical means of transportation, jobs sequencing, production scheduling, replacement of old machinery, etc.
• Better Decisions: O.R. models help in improved decision making and reduce the risk of making erroneous decisions. O.R. approach gives the executive an improved insight into how he makes his decisions.

Besides of the advantages offer by OR, there is also a limitation of OR:

• Dependence on an Electronic Computer: O.R. techniques try to find out an optimal solution taking into account all the factors. In the modern society, these factors are enormous and expressing them in quantity and establishing relationships among these require voluminous calculations that can only be handled by computers.
  
• Non-Quantifiable Factors: O.R. techniques provide a solution only when all the elements related to a problem can be quantified. All relevant variables do not lend themselves to quantification. Factors that cannot be quantified find no place in O.R. models.
• Distance between Manager and Operations Researcher: O.R. being specialist's job requires a mathematician or a statistician, who might not be aware of the business problems. Similarly, a manager fails to understand the complex working of O.R. Thus, there is a gap between the two.
• Money and Time Costs: When the basic data are subjected to frequent changes, incorporating them into the O.R. models is a costly affair. Moreover, a fairly good solution at present may be more desirable than a perfect O.R. solution available after sometime.
• Implementation: Implementation of decisions is a delicate task. It must take into account the complexities of human relations and behavior.

OR have a different functions according to a particular field, such as finance, marketing, purchasing, production, human resources and also R&D department.

1. Finance, Budgeting and Investments

• Credit policy analysis.
• Cash flow analysis.
• Dividend policies.
• Investment portfolios.

2. Marketing

• Product selection, timing, etc.
• Advertising media, budget allocation.
• Number of salesman required.
• Selection of product mix.

3. Purchasing, Procurement and Exploration

• Optimal buying and reordering.

• Replacement policies

4. Production Management

• Location and size of warehouses, factories, retail outlets, etc.
• Distribution policy.
• Loading and unloading facilities for trucks, etc.
• Production scheduling.
• Optimum product mix.
• Project scheduling and allocation of resources.

5. Personnel Management

• Selection of suitable personnel.
• Recruitment of employees.
• Assignment of jobs.
• Skills balancing.

6. Research and Development

• Project selection.
• Control of R&D projects.
• Reliability and alternative design.

After understand (a bit only actually) i feel that OR is an uniquely powerful approach to decision making . Furthermore, it's able to use for every department in an organization. In my opinion, it would help the organization to save more money in term of purchase a different software to different department. Not only that, using one type of analytical software will make the organization to manage their data in more consistence way. It’s powerful, using advanced tools and technologies to provide analytical power that no ordinary software or spreadsheet can deliver out of the box.


Sources retrieved from:
http://www.scienceofbetter.org/what/index.htm
http://www.universalteacherpublications.com/univ/ebooks/or/Ch1/advlim.htm