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1 PRESENTATION ON CHARACTERISTICS OF OPERATION RESEARCH AND APPLICATION OF OPERATION RESEARCH IN INDUSTRIES PRESENTED BY: 1. Preeti Abhilasha Minz11 2.Ankita12 3.Namrata Makhija13 4.Sneha14 5.Aditi15 6.Sumit Ekka16 7.Neha17 8.Ravi Kumar18 9.Adhir19 10.Promod Kumar20 XAVIER INSTITUTE OF SOCIAL SERVICE

2 C. W. Churchman who is considered one of the pioneers of O.R. defined it as the application of scientific methods, techniques and tools to problems involving the operations of a system so as to provide those in control of the system with optimum solutions to problems. Sometimes O.R. is referred to as Management Science (M.S.) in order to better reflect its role as a scientific approach to solving management problems

3 A common misconception held by many is that O.R. is a collection of mathematical tools. While it is true that it uses a variety of mathematical techniques, operations research has a much broader scope. It is in fact a systematic approach to solving problems, which uses one or more analytical tools in the process of analysis. Perhaps the single biggest problem with O.R. is its name; to a layperson, the term operations research does not conjure up any sort of meaningful image! O.R. does not preclude the use of human judgment or non-quantifiable reasoning; rather, the latter are viewed as being complementary to the analytical approach. One should thus view O.R. not as an absolute decision making process, but as an aid to making good decisions. O.R. plays an advisory role by presenting a manager or a decision-maker with a set of sound, scientifically derived alternatives. However, the final decision is always left to the human being

4 Tools Decision Theory Linear Programming Dynamic Programming Sequencing Game Theory Inventory Control And Management Queuing Theory Network analysis (PERT/CPM)

5 1. Increases Creative Ability of Decision Maker 2. Inter-Disciplinary approach 3. Application of Scientific Method 4. Uncovering of New Problems 5. Improvement in Quality of Decisions

6 6.Decision making science 7.Adopts planned approach 8.Finds Best or Optimal solution 9.Continuing Process 10. Increases Creative Ability

7 1.Transport and Travel OR techniques are used by airlines and rail companies to offer varying fares and make higher revenues by filling more seats at different prices - an OR technique known as Yield Management. All airlines depend on the effective use of OR techniques to make them operate at a profit.

8 2.Retailing In supermarkets, data from store loyalty card schemes is analyzed by OR groups to advise on merchandising policies and profitability improvement. OR methods are also used to decide when and where new store developments should be made.

9 3.Health. Hospital managers use OR to make decisions such as determining the optimal utilization of operating rooms and personnel, assessing the risks posed by patients with various medical conditions, and deciding necessary levels of perishable medicine in stock. APPLICATIONS OF OR

10 4.Financial Services OR practitioners address issues such as portfolio and risk management, planning and analysis of customer service. They are widely employed in Credit Risk Managementa vital area for lenders needing to ensure that they find the optimum balance of risk and revenue. APPLICATIONS OF OR

11 5.Government OR is a key contributor in modernizing government services and making them more efficient. Some OR applications include modeling the impact of performance related pay for teachers, evaluating government call-centers, projecting the size of the prison population, and national defense. APPLICATIONS OF OR


13 1.The semi conductor section of Harris Corporation was for a no.of years for a fairly small business 2.In 1988 it acquired GEs semiconductor product lines and manufacturing facilities. 3.Thus the size of the operations increased by roughly three times and catapulted Harris Corporations into market areas such as automobiles and telecommunications where the competition was stiff. 4.The corporation was having a hard time meeting delivery schedules and in staying competitive.

14 5.In the orientation phase it was decided that to develop a planning system that would meet Harriss unique needs- the result was IMPReSS- an automated production planning and delivery quotation system for the entire production network. 6.This system has increased on-time deliveries from 75% to 95% with no increase in inventories and helped it to move from $75 million in losses to $ 40 million in profits annually and allowed it to plan its capital investments more efficiently.

15 1.Simulation model was applied to derive schedules for a flexible manufacturing (FMS) at Caterpillar. 2.FMS provide tremendous increase in capacity and productivity. 3.A detailed simulation model was then constructed using a specialized language SLAM. 4.Machine utilization reached to 85%. 5.System starts to get more and more stable and schedule start to fall behind due dates. 6.Company suspend production over weekend and replace work out tools. 7.Simulation models could be used to analyze a highly complex system for a number.

16 1.One of the most challenging as well as rewarding application areas of OR has been Airline industry. 2.The problem solved is often referred as the fleet assignment problem. 3.Delta flies over 2500 domestic flight legs each day and uses about 450 aircrafts from 10 different fleets. 4.The objective was to assign : Aircraft to flight legs in such a way that revenues from seat are maximized. To ensure that large aircraft the correct size be available when required and where required.

17 5.The problem is modeled by a very large mixed-integer linear program. 6.The primary objective of the problem is to maximize the sum of operating costs and cost from lost passenger revenues. 7.OR has developed to point that it is now feasible to solve complex models. 8.The system at Delta called COLDSTART and uses highly sophisticated implementation of linear and integer programming solvers. 9.A/c to Delta, the saving during the period from June 1 to Aug were estimated $220,000 per day over old schedule.

18 Faced with increasing competition from nontraditional sources and rapid consolidation within the banking industry, KeyCorp's aim was to provide a suite of world-class financial products and services as opposed to being a traditional bank. The key element in being able to do this effectively is high-quality customer service and a natural trade-off faced by a manager was in terms of staffing and service - better service in the form of shorter waiting times required additional staffing which came at a higher cost. The objective of the project was to provide managers with a complete decision support system which was dubbed SEMS (Service Excellence Management System). The system was gradually rolled out to all of KeyCorp's branches and the results were very impressive. For example, on average, customer processing times were reduced by 53% and customer wait times dropped significantly with only four percent of customers waiting more than five minutes. The resulting savings over a five year period were estimated at $98 million.

19 One of the major applications of O.R. is in the area of gasoline blending at petroleum refineries, and virtually all major oil companies use sophisticated optimization models in this area. As some background, the distillation of crude petroleum produces a number of different products at different distillation temperatures. Each of these may be further refined through cracking (where complex hydrocarbons are broken into simpler ones) and recombination. These various output streams are then blended together to form end-products such as different grades of gasoline (leaded, unleaded, super-unleaded etc.), jet fuel, diesel and heating oil. The planning problem is very complex, since different grades of crude yield different concentrations of output streams and incur different costs, and since different end-products fetch different revenues and use different amounts of refinery resources.

20 Texaco developed a system called OMEGA which is a nonlinear optimization model which supported an interactive decision support system for optimally blending gasoline; which saves about $ 30 million annually. The optimizer uses an algebraic modeling language called GAMS and a nonlinear solver called MINOS, along with a relational database system for managing data. The whole system resides within a user-friendly interface and in addition to immediate blend planning it can also be used to analyze various "what-if" scenarios for the future and for long-term planning.

21 ABSTRACT Operations research (OR) focuses on the application of analytical methods to facilitate better decision-making. Despite its usefulness and proliferation of papers in the academic literature, there are still major issues around getting OR models widely accepted and used as part of mainstream decision-making by clinicians, health managers and policy- makers.

22 BACKGROUND Operations Research, also known as Operational Research (OR) or Management Science, existed as a scientific discipline since the 1930s. OR has been studied in healthcare settings since Many OR papers on healthcare subjects have been published in both Operations Research and healthcare journals, including Operations Research, Journal of the Operations Research Society, Management Science, INTERFACES, Healthcare Management Science, British Medical Journal, Clinical and Investigative Medicine, and Journal of Nursing Management The topics range from clinical areas such as choosing beams of radiation for intensity modulated radiotherapy treatment (IMRT) in the cancer treatment process, simulation for public health, to operations management such as resource utilization and bed management.

23 i.Low levels of engineering/mathematical background in the healthcare sector ii.OR scholarly papers written for OR professionals, focusing on specialized and technical topics, and not reaching healthcare professionals iii.Lack of process-related data for modeling iv.Lack of in-house OR expertise v.High cost of engaging external OR consultants Translation from theory to practice is never easy. In our local context, based on the published work, we feel that the awareness and usage of healthcare OR is probably lower compared to other developed countries. In addition, while OR may require a fair bit of mathematical background, OR is also about using common sense.

24 Problem: Overflow (i.e. patients lodging at another specialty) of patients in wards. The demand of hospitals inpatient-beds by medical specialties changes according to patients volume over time. With no adjustments to the allocation of beds, the growing mismatch will result in unnecessary patients overflow. This will lead to poorer patient care. Solution:-Bed managers can fine-tune this first-cut allocation for specific specialties. For example, specialties with higher projected growth rates should be given more beds for their future needs. Pediatrics will also probably need more beds than average as it does not share beds with other specialties.

25 Problem: Long waiting time at outpatient clinics before consultation. In theory, an appointment system reduces patient waiting time. In practice, the waiting time can still be substantial. OR researchers use techniques such as queuing theory and discrete event simulation to propose various appointment strategies under different clinics settings.

26 Several practical OR applications have been described in this topic. There are other healthcare areas where OR techniques will be useful, such as reducing delay in healthcare delivery, smoothing of elective admissions to reduce peak bed occupancy, and optimal deployment of ambulances. Decision-making is complex especially when it involves a group of stakeholders. Using quantitative (OR) techniques and data help to present objective argument. Expert opinions, such as judgment on future healthcare disease burden, could then be used to fine-tune the quantitative models. In our view, there is room for more OR work to be done in the healthcare settings.

27 The optimization techniques of OR can be applied to many different challenges in the Petroleum and Chemicals industries, such as: 1.Crude oil scheduling: Crude oil scheduling covers the allocation, timetabling, crude blending and sequencing activities from the waterfront (arrival of crude ships) through the crude pipelines to the crude distillation units. 2.Refinery blending: An OR application for refinery blending can include blend scheduling and mix optimization. It can handle the complete pooling and blending problem, and optimize both the blend schedules and the mixes under a complete set of real-life operational constraints. 3.Catalytic cracker optimization: OR can be used very effectively to optimize the steady-state setpoints of a chemical process. A good example is catalytic cracking, which refers to a refining process in which hydrocarbons are converted into products with a lower molecular mass. 4.Data reconciliation: Data reconciliation is the process of making the smallest possible adjustment to a collection of measurements within a system such that the adjusted data values satisfy all the balance constraints applicable to the system.

28 Operation Research (OR) applications can bring benefits in many areas in Manufacturing, such as: 1.Cutting stock Materials such as paper and textiles are often produced in long rolls, the length of a truck trailer for instance. These long rolls are referred to as raws. These raws are subsequently cut into smaller portions called finals, with their sizes specified by customers. A raw can be sliced all the way through so that the diameter of each final has the same diameter as the original raw. This is usually what happens when rolls of paper are cut. Assume that a production scheduler has a list which specifies the required number of each final size. He must then develop a production schedule detailing the number of rolls and how they should be cut to meet demand. An OR application can help the scheduler to minimize the total number of rolls required to make the finals.

29 2.Liquor production planning and liquidation The liquidation system covers the production, storage and liquidation of several kinds of whisky. Depending on the age and properties of a barrel in the warehouse its content can be used to produce a certain brand of whisky. Given the current contents of the whisky warehouse as well as a long term demand scenario the system determines a cost optimal production plan. By introducing penalties in the model, the end-user is able to identify demand shortages and production schedules that slightly violate certain quality conditions.

30 3.Transport scheduling in breweries The transport scheduling system for breweries allows end-users to interactively steer the flow of products through all phases of the brewery process from hops to bottled beer. The application can be used either in an automatic mode, in which the flow of products is totally determined by the system, or it can be used in a manual mode where the user can set or alter this flow using a Gantt chart. The system can also be used in a simulation mode to evaluate the response of the entire brewery to varying demands over a longer period of time.

31 Operation Research (OR) can bring benefits in many areas in the Power (Electricity), Gas and Water industries, sometimes also referred to as Utilities. Applications are for example: 1.Competitive Electricity Markets:Mathematical optimization is widely applied in systems that are used by Regional Transmission Organizations (RTOs) to manage competitive electricity markets worldwide. Mathematical optimization provides a formal framework that enables systematic and transparent decision making.Most market rules require that RTOs: i.Provide a reliable grid and coordinate grid operation to minimize costs consistent with secure operation of the grid; ii.Schedule and dispatch generation to satisfy market demand for electricity at minimum price while taking into account the security of the grid; iii.Purchase for the benefit of grid reliability the ancillary services and resources that are necessary for economic and secure delivery of electricity; iv.Provide information to participants in an open, non-discriminatory manner to help them make consumption and production decisions. 2.Power System Expansion: OR can help making better decisions when considering new investments in power system design capacity in order to meet an increase in electricity demand. The demand is uncertain since actual demand will be strongly influenced by actual weather and economic factors.

32 O.R. consistently delivers significant value – strategic to tactical, top-line to bottom- line – to the organizations and executives who use it. Organizations worldwide in business, the military, health care, and the public sector are realizing powerful benefits from O.R., including: i.Business insight ii.Business performance iii.Cost reduction iv.Decision making v.Forecasting vi.Improved scheduling vii.Planning viii.Pricing ix.Productivity x.Profits xi.Quality xii.Recovery xiii.Resources xiv.Risk xv.Throughput

33 Organizations and the world in which they operate continue to become more complex. Huge numbers of choices and relentless time pressures and margin pressures make the decisions you face more daunting and more difficult.

34 As a result, O.R. can help todays executives with many of the specific challenges they face, such as: i.Deciding where to invest capital in order to grow ii.Getting more value out of ERP, CRM, and other software systems iii.Figuring out the best way to run a call centre iv.Locating a warehouse or depot to deliver materials over shorter distances at reduced cost v.Forecasting sales for a new kind of product that has never been marketed before vi.Solving complex scheduling problems vii.Planning for a potential terrorist attack (-ve). viii.Deciding when to discount, and how much ix.Getting more cycles out of manufacturing equipment x.Optimizing a portfolio of investments, whether it contains financial securities or pharmaceutical product inventory xi.Deciding how large a budget to devote to Internet vs. traditional sales xii.Planting crops in the face of uncertainty about weather and consumer demand

35 5 Signs You Could Benefit from Operations Research If one or more of the following signs applies to your situation, an O.R. professional may offer the insight you and your organization need. 1.You face complex decisions. 2.You're having problems with processes 3.You're troubled by risk 4.Your organization is not making the most of its data 5.You need to beat stiff competition.

36 Robert C. Wright Vice Chairman & Executive Officer, General Electric Chairman & CEO, National Broadcasting Company Operations research and management science techniques have given us a significant competitive advantage during the 'Up Front Market.' All the hard work and creativity that went into this project definitely has paid off. In fact, these new systems have an impact of over $50 million in annual revenues and have greatly boosted the productivity of the NBC sales staff. Thanks to GE's corporate research and development centre, our network sales organization has seen firsthand how operations research methodologies can revolutionize how we work. We will continue to deploy these technologies across all functions as we grow and improve our business."

37 Nick Donofrio Senior Vice President, Technology and Manufacturing IBM Operations research professionals are the key to harnessing the opportunity created by e-business and deep computing. I'm convinced that organizations that make the best use of decision technology [operations research] are those that will be the most successful from now on."

38 Robert Ritchie President & CEO Canadian Pacific Railroad We have developed the best scheduled railway model in the industry.... The result has been huge gains in efficiency and productivity and better service for our customers. Our job, however, is never over...I learned that an awful lot of opportunities still exist for us in the area of revenue management and contract negotiations. We're continuously looking for new ways to improve, and operations research... [is] going to be crucial to our success in the future."



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