Operational Research

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APPLIED OPERATIONAL RESEARCH FOR MANAGEMENT
NOTES
1 ANNA UNIVERSITY CHENNAI
UNIT I
INTRODUCTION TO LINEAR
PROGRAMMING (LP)
INTRODUCTION
Operations Research (OR) (a term coined by McClosky and Trefthen in 1940) was a technique that evolved during World War II to effectively use the limited military resources and yet achieve the best possible results in military operations. In essence you can state that OR is a technique that helps achieve best (optimum) results under the given set of limited resources. Over the years, OR has been adapted and used very much in the manufacturing sector towards optimization of resources. That is to use minimum resources to achieve maximum output or profit or revenue.

Learning Objectives
The learning objectives in this unit are
1. To formulate a Linear programming problem (LPP) from set of statements. 2. To solve the LPP using graphical method ( For 2 variables) 3. To solve the LPP using primal simplex method ( For > 2 variables and all 2 variables and all mixed constraints)

5. To solve the LPP using dual simplex method ( For > 2 variables and the solution is infeasible)
6. We also have a look at the effect of changing the values of parameters on the decision variables (Sensitivity Analysis)
Applications of Operations Research in functional areas of Management The models of OR can be used by economists, statisticians, administrators and technicians both in defence and in business. In general OR can be applied in all the functional areas of Management namely., Accounting, Construction, Facilities Planning, Marketing, Finance, Personnel, Research and Development and Production. DBA 1701

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2 ANNA UNIVERSITY CHENNAI
Accounting
Assigning audit teams effectively
Credit policy analysis
Cash flow planning Developing standard costs
Establishing costs for byproducts
Planning of delinquent account strategy
Construction
Project scheduling,
Monitoring and control
Determination of proper work force
Deployment of work force
Allocation of resources to projects
Facilities Planning
Factory location and size decision
Estimation of number of facilities Hospital planning
International logistic system design Transportation loading and unloading Warehouse location decision
Finance
Building cash management models
Allocating capital among various alternatives
Building financial planning models Investment analysis
Portfolio analysis
Dividend policy making
Production
Inventory control
Marketing balance projection Production scheduling
Production smoothing
Marketing
Advertising budget allocation
Product introduction timing
Selection of Product mix
Deciding most effective packaging alternative
Organizational Behavior / Human Resources
Personnel planning
Recruitment of employees
Skill balancing
Training program scheduling
Designing organizational structure more effectively
APPLIED OPERATIONAL RESEARCH FOR MANAGEMENT
NOTES
3 ANNA UNIVERSITY CHENNAI
Purchasing
Optimal buying
Optimal reordering
Materials transfer
Research and Development
R & D Projects control
R & D Budget allocation
Planning of Product introduction
In general solution to an OR problem will have the following stages. 1. Formulating the problem
2. Constructing a mathematical model based on the formulation 3. Solving the problem based on the model.
4. Checking whether the solution is optimal and feasible
5. Iterate till optimal and feasible solution is reached.
We have two new terms “optimal” and “feasible”. Optimal means the best possible solution under the given conditions and feasible means a practical solution. Therefore optimal and feasible solution means that the suggested solution must be both practical to implement and the best one under the given conditions.

All types of problems in OR can be categorized as either MINIMIZING or MAXIMIZING type.
We will focus on MINIMIZING costs, time and distances while we will be interested in MAXIMIZING revenue, profits and returns. So you must...
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