System Engineering 3(3+0)

LESSON 2. Methodology- Uses and Limitations

2.2 Methodology of Operations Research

It is essential to follow some steps that everybody agrees as being helpful in planning, organizing, directing and controlling Operations Research activities within an organization.  The steps are listed below :

1. Formulation of the problem : It involves analysis of the physical system, setting-up of objectives, determination of restriction constraints against which decision should be adopted, alternative courses of action and measurement of effectiveness.

 

2. Construction of a Mathematical model : After formulation of the problem, the next step is to express all the relevant variables (activities) of the problem into a mathematical model.  A generalized mathematical model might take the form :

E = f(x_i, y_j )

 Where f represents a system of mathematical relationships between the measures of effectiveness of the objective and the variables, both controllable and uncontrollable (y_j ).

 

3. Deriving the solution from the model : Once the mathematical model is formulated, the next step is to determine the values of decision variables that optimize the given objective function.  This deals with the mathematical calculations for obtaining the solution to the model.

 

4. Validity of the model : The model should be validated to measure its accuracy.  A model is valid or accurate if (a) it contains al the objectives, constraints, and decision variables relevant to the problem,(b) the objectives, constraints, and decision variables included in the model are all relevant to, or actually part of the problem, and (c) the functional relationships are valid.

 

5. Establishing control over the solution : After testing the model and its solution, the next step of the study is to establish control over the solution, by proper feedback of the information on variables which deviated significantly, the solution goes out of control.  In such situation the model may accordingly be modified.

 

6. Implementation of the final results :  Finally, the tested results of the model are implemented to work.  This would basically involve a careful explanation of the solution to be adopted and its relationship with the operating realities.  This stage of Operations Research investigation is executed primarily through the cooperation of both the operations Research experts and those who are responsible for managing and operating the system.

 

2.3 Applications of Operations Research

Operations Research is mainly concerned with the techniques of applying scientific knowledge, besides the development of science.  It provides an understanding which gives the expert/manager new insights and capabilities to determine better solutions in his decision-making problems, with great speed, competence and confidence.  In recent years, Operations Research has successfully entered many different areas of research in Defence, Government, Service Organizations and Industry.  We briefly describe some applications of Operations Research in the functional areas of management:

Finance, Budgeting and Investment

1. Cash flow analysis, long range capital requirements, dividend policies, investment portfolios.
2. Credit policies, credit risks and delinquent account procedures.
3. Claim and complain procedure.

Marketing

1. Product selection, timing, competitive actions.
2. Advertising media with respect to cost and time.
3. Number of salesmen, frequency of calling of account etc.
4. Effectiveness of market research.

Physical Distribution

1. Location and size of warehouses, distribution centres, retail outlets etc.
2. Distribution policy.

Purchasing, Procurement and Exploration

1. Rules for buying.
2. Determining the quantity and timing of purchase.
3. Bidding policies and vendor analysis.
4. Equipment replacement policies

Personnel

1. Forecasting the manpower requirement, Recruitment policies and assignment of jobs.
2. Selection of suitable personnel with due consideration for age and skills, etc.
3. Determination of optimum number of persons for each service centre.

Production

1. Scheduling and sequencing the production run by proper allocation of machines.
2. Calculating the optimum product mix.
3. Selection, location and design of the sites for the production plant.

Research and Development

1. Reliability and evaluation of alternative designs.
2. Control of developed projects.
3. Co-ordination of multiple research projects.
4. Determination of time and cost requirements.

Besides the above mentioned applications of Operations Research in the context of modern management, its use has now extended to a wide range of problems, such as the problems of communication and information, socio-economic fields and national planning.

 

2.4 Uses and Limitations of Operations Research

Uses

1. Optimum use of production factors.  Linear programming techniques indicate how a manager can most effectively employ his production factors by more efficiently selecting and distributing these elements.
2. Improved quality of decision.  The computation table gives a clear picture of the happenings within the basic restrictions and the possibilities of compound behavior of the elements involved in the problem.  The effect on the profitability due to changes in the production pattern will be clearly indicated in the table, e.g., simplex table.
3. Preparation of future managers. These methods substitute a means for improving the knowledge and skill of young managers.
4. Modification of mathematical solution.  Operations Research presents a possible practical solution when one exists, but it is always a responsibility of the manager to accept or modify the solution before its use.  The effect of these modifications may be evaluated from the computational steps and tables.
5. Alternative solutions.  Operations Research techniques will suggest all the alternative solutions available for the same profit so that the management may decide on the basis of its strategies.

Limitations of Operations Research

Operations Research has certain limitations.  However, these limitations are mostly related to the time and money factors involved in its applications rather than its practical utility.  These limitations are as follows :

a) Magnitude of computation. Operations Research tries to find out the optimal solution taking all the factors into account.  In the modern society, these factors are numerous and expressing them in quantity and establishing relationship among these, requires huge calculations.  All these calculations cannot be handled manually and require electronic computers which bear very heavy cost.  Thus, the use of Operations Research is limited only to very large organizations.

b) Absence of quantification. Operations Research provides solution only when all the elements related to a problem can be quantified.  The tangible factors such as price, product, etc., can be expressed in terms of quantity, but intangible factors such as human relations etc, cannot be quantified.  Thus, these intangible elements of the problem are excluded from the study, though these might be equally or more important than quantifiable intangible factors as far as possible.

c) Distance between managers and Operations Research.  Operations Research, being specialists’ job, requires a mathematician or a statistician, who might not be aware of the business problems.  Similarly, a manager may fail to understand the complex working of Operations Research.  Thus, there is a gap between one who provides the solution and one who uses the solution.