Introduction to Operation Research

Unit-1
Decision-making in today‘s social and business environment has become a complex task.
High costs of technology, materials, labour, competitive pressures and so many different
economic, social as well as political factors and viewpoints greatly increase the difficulty
of managerial decision- making. Knowledge and technology are changing rapidly, the
new problems with little or no precedents continually arise. Well-structured problems are
routinely optimized at the operational level of organizations, and increased attention is
now focused on broader tactical and strategic issues. To effectively address these
problems and provide leadership in the advancing global age, decision-makers cannot
afford to make decisions by simply applying their personal experiences, guesswork or
intuition, because the consequences of wrong decisions are serious and costly. Hence, an
understanding of the applicability of quantitative methods to decision-making is of
fundamental importance to decision-makers. For example, entering the wrong markets,
producing the wrong products, providing inappropriate services, etc., will have worst
consequences for organizations.

While solving a real-life problem, the decision-maker must examine a problem from both
quantitative as well as qualitative perspective, so that data so obtained should be analyzed
in both perspectives to suggest solution of the problem. For example, consider a problem
of an investor seeking advice for investments in three alternatives: Stock Market, Real
Estate and Bank Deposit.

To suggest an acceptable solution, we need to consider certain quantitative factors to be

examined in the light of the problem. For instance, factors like financial ratios from the
balance sheets of several companies whose stocks are under consideration; real estate
companies‘ cash flows and rates of return for investment in property; and how much the
investment will be worth in future when deposited at a bank at a given interest rate for a
certain number of years, need to be examined. However, before reaching a conclusion,
certain other qualitative factors, such as weather, state and central policies, new
technology, the political situation, etc., also need to be considered.
Operations research facilitates the comparison of every possible alternatives (courses of
action or acts) to know the potential outcomes, permits examination of the sensitivity of
the solution to changes or errors in numerical values, and encourages rational decision-
making based on the best available approaches and/or techniques. However, it must be
emphasized that, timely and competent decisions should be an aid to the decision-maker's
judgment, not a substitute for it. That is, not to say, that the management decision-making
is simply about the application of operations research techniques and/or approaches.

History of OR
Such groups were first formed by the British Air Force and later, the American armed
forces formed similar groups. One of the groups in Britain came to be known as
Blackett‘s Circus. This group, under the leadership of Prof. P M S Blackett was attached
to the Radar Operational Research unit and was assigned the problem of analysing the
coordination of radar equipment at gun sites. The efforts of such groups, especially in the
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area of radar detection are considered vital in Britain winning the air battle. Following the
success of this group, such a mixed-team approach was also adopted in other allied
nations.
After the war ended, scientists who had been active in the military OR groups
made efforts to apply the operations research approach to civilian problems, related to
business, industry, research and development, etc. There are three important factors
behind the rapid development in the use of operations research approach.

Such groups were first formed by the British Air Force and later, the American armed
forces formed similar groups. One of the groups in Britain came to be known as
Blackett‘s Circus. This group, under the leadership of Prof. P M S Blackett was attached
to the Radar Operational Research unit and was assigned the problem of analysing the
coordination of radar equipment at gun sites. The efforts of such groups, especially in the
area of radar detection are considered vital in Britain winning the air battle. Following the
success of this group, such a mixed-team approach was also adopted in other allied
nations.
After the war ended, scientists who had been active in the military OR groups made
efforts to apply the operations research approach to civilian problems, related to business,
industry, research and development, etc. There are three important factors behind the
rapid development in the use of operations research approach.

Many operations researchers continued their research after war. Consequently, some
important advancements were made in various operations research techniques. A key
person in the post-war development of OR was George B Dantzig. In 1947, he developed
the concept of linear programming and its solution by a method known as simplex
method. Besides linear programming, many other techniques of OR, such as statistical
quality control, dynamic programming, queuing theory and inventory theory were well
developed before the end of the 1950.

Analytic power was made available by high-speed computers. The use of computers
made it possible to apply many OR techniques for practical decision analysis.

In India, operations research came into existence in 1949 when an OR unit was
established at Regional Research Laboratory, Hyderabad for planning and organizing
research. At the same time Prof. R S Verma also set up an OR team at Defense Science
Laboratory to solve problems of store, purchase and planning. In 1953, Prof. P C
Mahalanobis established an OR team in the Indian Statistical Institute, Kolkata to solve
problems related to national planning and survey. The OR Society of India (ORSI) was
founded in 1957 and started publishing its journal OPSEARCH from 1964. In the same
year, India along with Japan became a member of the International Federation of
Operational Research Societies (IFORS) with its headquarters in London. The other
members of IFORS were UK, USA, France and West Germany.

After the end of the war, the same approach was used with great success in the industrial
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and commercial field, developing most rapidly in Britain and the USA, followed by
Europe and the rest of the world. This has provided the basis for the evolution of
Operational Research (OR) as a separate and independent subject of Science. It is not
based on any single academic engineering, social science, economics, statistics and
computing but is none of these. Then what is OR?

DEFINING OPERATIONS RESEARCH: OR has been defined in various ways and it

is perhaps too early to define it in some authoritative way. However given below are a
few opinions about the definition of OR which have been changed along-with the
development of the subject.

In 1946 Morse & Kimbel has defined as;

"OR is a scientific method of providing executive departments with a quantitative basis
for decision regarding the operations under their control"

In 1948 Blackett defined as;

"OR is a scientific method of providing executives with any analytical and objective basis
for decisions"

Another definition is due to Morse who defined in 1948 as;

"The term OR, has here-to fore been used to connote various attempts to study operations
of war by scientific methods. From a more general point of view, OR can be considered
to be an attempt to study those operations of modern society which involved
organizations of men or men and machines".

Later on in 1957, Churchmen Ackoff and Arnoff defined; "OR is the application of
scientific methods, techniques and tools to problems involving the operations of systems
so as to provide those in control of the operations with optimum solutions to the
problem".

In 1958 Saaty defined OR as; "The art of giving bad answer to problems to which,
otherwise, worse answers are given".

The Operational Research Society of U.K. defines OR as: "Operational Research is the
application of the methods of science to complex problems arising in the direction and
management of large systems of men, machines, materials and money in industry,
business, government and defense. The distinctive approach is to develop a scientific
model of the system, incorporating measurements of factors, such as chance and risk,
with which to compare the outcome of alternative decisions, strategies and controls. The
purpose is to help management determine its policies and actions scientifically."

In the USA, where it is called Operations Research, the OR Society of America says
more briefly; "OR is concerned with scientifically deciding how to best design and
operate man-machine systems, usually under conditions requiring the allocation of
scarce resources".
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An even briefer definition might be "Science applied to management", but

however, it might be defined, there is no doubt that OR provides the numerate scientist -
of whatever discipline-with an opportunity to apply the skills of science in the field of
Management. Before proceeding further let us define for the sake of clarity some
fundamental terms.

MANAGEMENT, MANAGEMENT SCIENCE AND OR:

MANAGEMENT may be equated with decision-making and control. Government

ministers manage the economy industrialists make decision within their companies and
individual make personal decisions.

MANAGEMENT SCIENCE is the study of problems as abstractions and the application

of the resulting theory to practical situations. Its two fundamental disciplines are
behavioral science and science and quantitative methods.

OPERATIONS RESEARCH (OR) is the application of quantitative methods to decision

making. It formulates problems incisively and assesses the possible consequence of
alternative course of action, so that informed and effective decisions can be taken.

OR APPROACH TO PROBLEM SOLVING:

OR encompasses a logical systematic approach to problem solving. This approach to

problem solving as shown in fig. 1 follows a generally recognized ordered set or steps:
(1) observation, (2) definition of the problems, (3) model construction, (4)
model solution, and (5) implementation of solution results.

Observation

The first step in a problem solving exercises in OR is the identification of a problem that
exist in the system. This requires that the system be continuously and closely observed so
that problems can be identified as soon as they occur.

Definition of the Problem

Once it has determined that a problem exists, it must be clearly and concisely defined.
The problem definition includes the limits of the problems and the degree to which it
pervades other organs of the system. A requirement of problem definition is that the goals
(or objective) must be clearly defined which helps to focus attention on what the problem
is.
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Model Construction
An OR model is an abstract representation of an existing problem situation. It can
be in the form of a graph or chart, but mostly, an OR model consists of a set of
mathematical relationship. In OR terminology, these are called objective function and
constraints.

Model Solution

Once models are constructed, they are solved using the OR techniques, presented in the
next section. Actually it is difficult to separate model construction and solution in most
cases, since OR technique usually applies to a specific type of model. Thus, the model
type and solution method are both part of the OR technique.

Implementation of Results

The results of an OR technique are information which helps in making a decision. The
beauty of OR process lies in obtaining, the results which are implement able or we call it
a feasible whole exercise will go waste.
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OR is an On-going Process

Once the five steps described above are completed, it does not necessarily mean
that OR process is completed. The model results and the decisions based on the results
provide feedback to the original model. The original OR model can be modified to test
different conditions and decisions that might occur in the future. The results may indicate
that a different problem exists that had not been thought of previously, thus the original
model is altered or reconstructed. As such, the OR process is continuous rather than
simply consisting of one solution to one problem.

Features/Characteristics of OR
Following are the salient features and characteristics of OR :

1.Inter-disciplinary Team Approach. It is one of the most important features of

operations research. What it signifies is that it is. impossible for a single individual to
have a thorough and extensive knowledge of all the aspects of a particular problem which
is to be analyzed with the help of OR. This would require a team of individuals having
varied & diverse skills & backgrounds. Such a team should be inter-disciplinary and., it
should include individuals having adequate degree of proven skills in the fields of
statistics, engineering, .computer, economies and mathematics etc. Every expert member
of this team analyses each and every aspect of the problem and determines if a similar
problem has ever been undertaken previously by him or his colleagues. By functioning in
such a manner, each member of the team suggests an approach which may be optimal for
the problem under consideration, by utilizing his experience and skills. Hence, operations
research makes optimal and most effective utilization of people from diverse disciplines
for developing latest tools and techniques applicable to the business. For example, while
working on production planning &control in an organization, one‘ may need the services
of a production engineer, who knows the functions of the production or assembly-line, a
Cost accountant and a statistician. In this manner, every member of the team so formed
benefits from the views of other member of the team. Such a solution developed through
team work and collaboration has a relatively. higher chance of acceptance by the top
management.

2.Methodological Approach. OR is a highly systematic and scientific- method. It

follows a fixed & definite pattern from the start to finish. The OR process starts with the
careful observation & formulation where the problem is broken down into various
workable and manageable parts and then carefully, observed by the OR team. The
essence of the real problem is then sought to be translated into the OR model. This model
is examined, solutions ascertained, most optimal ones applied to the model and results
examined. If the results are found to be satisfactory, these solution are applied to the real
or actual problem at hand.

3.Objectivity Approach. The primary objective of OR is to

find the best
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(optimal)solution to a problem under consideration. To achieve this goal. it is first

necessary to define a measure of effectiveness, that takes into consideration the main
objectives of the organisation. This measure can then be used as a standard or bench-
mark to compare & evaluate the alternative actions.

4.Totalistic Approach. Any action or decision within an organisation must first be

analyzed & their interactions‘ and the effect on the entire organisation carefully
considered. Under totalistic approach, any action should not be seen in isolation. Before
evaluating it, its impact on the whole organisation should always be kept in mind. For
example, to remove bottlenecks in product-ion a production manger can store large
quantity of inventories, raw materials & finished goods. While this is important from the
production manager‘s view-point. it may lead to a situation where there may arise a direct
conflict between the marketing and the finance departments of the organisation. In such a
scenario, ‗the OR team examines all the related factors such as cost of raw materials,
holding & storage costs & competitor‘s prices etc. Based on these, an appropriate OR-
model can be formulated for the solution of the problem.

5.Continuous Process. OR is a never-ending continuous process, It does not stop when a

relevant OR model is applied to the problem since this may further create new problems
in the related sectors as well as in the ‗implementation, of the decision taken. To
implement the optimal solutions (decisions), sometimes a change in the organizational
structure might be needed. This is provided again by the OR. After implementation stage,
the controlling of results is also the primary function of operations research. Therefore, it
can be considered to be a continuous process.

6.Broad Outlook. OR has a very great scope. It not only seeks to provide the most
suitable optimal solutions to a problem - but that it also uncovers new problems by study
methods.

7.Economy of Operations . The main function of OR is to provide solution to

organizational problem and to assist in decision-making. Incase of any conflict or
complexity in a situation, OR helps to minimize costs and maximize profits resulting into
―economy of operations‖. Quite often the problems are of such grave nature‘ that they
can not be solved on the basis

Scope of Operations Research OR 3 Phases of Research

The scope of operations research is very wide & depends upon the 3 key areas or phases
of OR. These are:-
1.Judgement Phase. The various components of this phase are as under:
a. Ascertaining the operation
b.Establishing the objectives.
c.Determining the appropriate effectiveness measures
d. Formulating the problem

2. Research Phase. The various components of this phase are as under

a. Observation & collection of data, to fully understand the various complex items that
form a par of the problem.
b. Hypothesis or assumptions formulation
c. Model formulation
d. Analyzing the available data
e. Testing & verifying the accuracy of the hypothesis.
f. Generalizing the results
h. Considering the alternative methods

3.Action Phase. After the above two phases are complete and an optimal solution has
been obtained, in the action phase, recommendation are made to the top management for
accepting the, proposed solutions.

O.R. Tools and Techniques

Operations Research uses any suitable tools or techniques available. The common
frequently used tools/techniques are mathematical procedures, cost analysis, electronic
computation. However, operations researchers given special importance to the
development and the use of techniques like linear programming, game theory, decision
theory, queuing theory, inventory models and simulation. In addition to the above
techniques, some other common tools are non-linear programming, integer programming,
dynamic programming, sequencing theory, Markov process, network scheduling
(PERT/CPM), symbolic Model, information theory, and value theory. There is many
other Operations Research tools/techniques also exists. The brief explanations of some of
the above techniques/tools are as follows:

Linear Programming: This is a constrained optimization technique, which optimize

some criterion within some constraints. In Linear programming the objective function
(profit, loss or return on investment) and constraints are linear. There are different
methods available to solve linear programming.

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 (for example
customers waiting for service, aircrafts waiting for landing, jobs waiting for processing in
the computer system, etc). 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.
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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. Some times this is a difficult/time
consuming procedure. Simulation is used when actual experimentation is not feasible or
solution of model is not possible.

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. For
example number or motor in an organization, number of passenger in an aircraft, number
of generators in a power generating plant, etc.

Markov Process: Markov process permits to predict changes over time information
about the behavior of a system is known. This is used in decision making in situations
where the various states are defined. The probability from one state to another state is
known and depends on the current state and is independent of how we have arrived at that
particular state.

Network Scheduling: This technique is used extensively to plan, schedule, and monitor
large projects (for example computer system installation, R & D design, construction,
maintenance, etc.). The aim of this technique is minimize trouble spots (such as delays,
interruption, production bottlenecks, etc.) by identifying the critical factors. The different
activities and their relationships of the entire project are represented diagrammatically
with the help of networks and arrows, which is used for identifying critical activities and
path. 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.

Applications of Operations Research

Today, almost all fields of business and government utilizing the benefits of Operations
Research. There are voluminous of applications of Operations Research. Although it is
not feasible to cover all applications of O.R. in brief. The following are the abbreviated
set of typical operations research applications to show how widely these techniques are
used today:
Accounting:
Assigning audit teams effectively
Credit policy analysis Cash flow planning
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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 required
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

Manufacturing:
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

Purchasing:
Optimal buying
Optimal reordering
Materials transfer

Research and Development:

R & D Projects control
R & D Budget allocation
Planning of Product introduction
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Modelling and Models in Operation Research

Models do not, and cannot, represent every aspect of reality because of the innumerable
and changing characteristics of the real-life problems to be represented. Instead, a model
is the simplified representation or abstraction (limited approximation) of reality. For
example, to study the flow of material through a factory, a scaled diagram on paper
showing the factory floor, position of equipment, tools, and workers can be constructed.
It would not be necessary to give such details as the colour of machines, the heights of
the workers, or the temperature of the building. In other words, for a model to be
effective, it must be representative of those aspects of reality that are being investigated
and have a major impact on the decision situation.
Approximation or abstraction, considering only the essential variables (or factors) and
parameters along with relationships among these in the system that are important to the
decision at hand, is called a model. In general, models attempt to describe the essence of
a situation or activity by abstracting from reality so that the decision-maker can study the
relationship among relevant variables in isolation. In order of importance, the top three
qualities of an effective model are:
• the validity of the model, i.e. how the a model will it represent the critical aspects of
the system or problem under study,
• the usability of the model, i.e. whether a model can be used for the specific purposes,
and
• the value of the model to the user.

Other factors of interest that were not identified are: the cost of the model, its
sophistication, the time involved in formulating the model and other characteristics that
might be thought to be critical to its effectiveness.

More important than the formal definition of a model is the informal one that applies to
all of us — a tool for thinking and understanding before taking action. We use models all
the time, even though most of them are subjective.

Models are formulated:

• when we think about what someone will say if we do something,

• when we try to decide how to spend our money,
• when we attempt to predict the consequences of some activity (either ours,
someone else‘s or even a natural event).

In other words, we would not be able to derive or take any purposeful action if we did not
form a model of the activity first. OR approach uses this natural tendency to create
models but forces us to think more rigorously and carefully about the models we intend
to use.
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Classification Based on Structure

Physical models: These models provide a physical appearance of the real object under
study either reduced in size or scaled up. Physical models are useful only in design
problems because they are easy to observe, build and describe. For example, in the
aircraft industry, scale models of the proposed new aircraft are built and tested in wind
tunnels to record the stresses experienced by the air frame. Since these models cannot be
manipulated and are not very useful for prediction, problems such as portfolio selection,
media selection, production scheduling, etc., cannot be analyzed with a physical model.
Physical models are classified into the following two categories.

Iconic Models: Iconic models retain some of the physical properties and characteristics
of the system they represent. An iconic model is either in an idealized form or is a scaled
version of the system. In other words, such models represent the system as it is by scaling
it up or down (i.e. enlarging or reducing the size).
Examples of iconic models are, blueprints of a home, maps, globes, photographs,
drawings, air planes, trains, etc.
Iconic models are simple to conceive, specific and concrete. An iconic model is used to
describe the characteristics of the system rather than being explanatory. This means that
such models are used to represent a static event and characteristics which are not used in
determining or predicting effects due to certain changes in the actual system. For
example, colour of an atom does not play any vital role in the scientific study of its
structure. Similarly, type of engine in a car has no role to play in the study of parking
problem.

Analogue Models: These models do not look like the real situation but represent and
behave like a system under study.
For example, the oil dipstick in a car represents the amount of oil in the oil tank; the
organizational chart represents the structure, authority and responsibilities relationship
with boxes and arrows; and maps in different colours represent water, desert and other
geographical features. Graphs of time series, stock-market changes, frequency curves,
etc., may be used to represent quantitative relationships between any two properties and
predict how a change in one property effects the other. These models are less specific and
concrete but are easier to manipulate and are more general than iconic models.

Symbolic models: These models use symbols (letters, numbers) and functions to
represent variables and their relationships to describe the properties of the system. These
models are also used to represent relationships which can be represented in a physical
form. Symbolic models can be classified into two categories.

Verbal Models: These models describe a situation in written or spoken language.

Written sentences, books, etc., are examples of a verbal model.
 .

Mathematical Models: These models involve the use of mathematical symbols, letters,
numbers and mathematical operators (+, –, ÷, ×) to represent relationships among various
variables of the system to describe its properties or behavior. The solution to such models
is then obtained by applying suitable mathematical technique.
The relationship among velocity, distance and acceleration is an example of a
mathematical model. In accounting, the cost-volume-profit model is also an example of a
mathematical model.
Symbolic models are precise and abstract and can be analyzed and manipulated by using
laws of mathematics. The models are more explanatory rather than descriptive.

Classification Based on Function or Purpose

Descriptive models:
Descriptive models characterize things as they are. The major use of these models is to
investigate the outcomes or consequences of various alternative courses of action. Since
these models check the consequence only for given condition (or alternative) rather than
for all conditions, there is no guarantee that an alternative selected with the aid of
descriptive analysis is optimal. These models are usually applied in decision situations
where optimizing models are not applicable. They are also used when the objective is to
define the problem or to assess its seriousness rather than to select the best alternative.
These models are especially used in predicting the behavior of a system under various
conditions. Simulation is an example of a descriptive technique for conducting
experiments with the systems.

Normative (or Optimization) models

These models provide the ‗best‘ or ‗optimal‘ solution to problems subject to certain
limitations on the use of resources. These models provide recommended courses of
action. For example, in mathematical programming, models are formulated for
optimizing the given objective function, subject to restrictions on resources in the context
of the problem under consideration and non-negativity of variables. These models are
also called prescriptive models because they prescribe what the decision-maker ought to
do.

Classification Based on Time Reference

Static models: Static models represent a system at some specified time and do not
account for changes over time. For example, an inventory model can be developed and
solved to determine an economic order quantity for the next period assuming that the
demand in planning period would remain the same as that for today.

Dynamic models: In a dynamic model, time is considered as one of the variables and
allows the impact of changes due to change in time. Thus, a sequence of interrelated
decisions over a period of time are made to select the optimal course of action to optimize
the given objective. Dynamic programming is an example of a dynamic model.
Classification Based on Degree of Certainty
Deterministic models: If all the parameters, constants and functional relationships are
assumed to be known with certainty when the decision is made, the model is said to be
deterministic. Thus, in such a case, the outcome associated with a particular course of
action is known. That is, for a specific set of input values, there is a uniquely determined
output which represents the solution of the model under conditions of certainty. The
results of the models assume single value. Linear programming models are examples of
deterministic models.

Probabilistic (Stochastic) models: Models in which at least one parameter or decision

variable is a random variable are called probabilistic (or stochastic) models. Since at least
one decision variable is random, therefore, an independent variable which is the function
of dependent variable(s) will also be random. This means consequences or payoff due to
certain changes in the independent variable cannot be predicted with certainty. However,
it is possible to predict a pattern of values of both the variables by their probability
distribution.Insurance against risk of fire, accidents, sickness, etc., are examples where
the pattern of events is studied in the form of a probability distribution.

Classification Based on Method of Solution or Quantification

Heuristic models: These models employ some sets of rules which, though perhaps not
optimal, do facilitate solutions of problems when applied in a consistent manner.

Analytical models: These models have a specific mathematical structure and thus can be
solved by known analytical or mathematical techniques. Any optimization model (which
requires maximization or minimization of an objective function) is an analytical model.

Advantages of Operations Research Study

Structured approach to problems: A substantial amount of time and effort can be

saved in developing and solving OR models if one uses a logical and consistent approach.
This implies that the decision-maker has to be careful while defining controllable and
uncontrollable variables, availability of resources – man, machine, material and money,
etc., functional relationships among variables in the objective function and constraints.
This will also reduce the chance of conceptual and computational errors. Any such error
can also be detected easily and corrected.

Critical approach to problem solving: The decision-maker will come to understand

various components of the problem and accordingly select a mathematical model for
solving the given problem. He will be aware of the explicit and implicit assumptions and
inherent limitations of such models. Problem solutions are examined critically and the
effect of any change and error in the problem data can be studied through sensitivity
analysis techniques. In other words, the ability to judge applicability and limitations of
solution techniques to a particular problem, as well as to critically analyze a proposed
solution and data on which they are based, is bound to be a valued skill in any business
organization.
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Limitations of Operations Research

Operations Research has number of applications; similarly it also has certain limitations.
These limitations are mostly related to the model building and money and time factors
problems involved in its application. Some of them are as given below:

1. Distance between O.R. specialist and Manager Operations Researchers job needs a
mathematician or statistician, who might not be aware of the business problems.
Similarly, a manager is unable to understand the complex nature of Operations
Research. Thus there is a big gap between the two personnel.

2. Magnitude of Calculations : The aim of the O.R. is to find out optimal solution
taking into consideration all the factors. In this modern world these factors are
enormous and expressing them in quantitative model and establishing relationships
among these require voluminous calculations, which can be handled only by
machines.

3. Money and Time Costs: The basic data are subjected to frequent changes,
incorporating these changes into the operations research models is very expensive.
However, a fairly good solution at present may be more desirable than a perfect
operations research solution available in future or after some time.

4. Non-quantifiable Factors: When all the factors related to a problem can be

quantifiable only then operations research provides solution otherwise not. The non-
quantifiable factors are not incorporated in O.R. models. Importantly O.R. models do
not take into account emotional factors or qualitative factors.

5. Implementation: Once the decision has been taken it should be implemented. The
implementation of decisions is a delicate task. This task must take into account the
complexities of human relations and behavior and in some times only the
psychological factors.