Operational Research in Decision Making - Report Example

Operational Research & the Decision Sciences Defining Operational research Operational research is a tool to help make better decisions by using modern concepts and advanced analytical methods. Most of the executives, who are responsible for formulating corporate decisions, use mathematical models for the analysis of complex situations, while working on the operational research theories, to achieve the desired results. The decision making and building of the systems, which can give more productive output, use operation research techniques that involve accurate prediction of outcome and risks involved, as well as the total compilation of the data available. While this will be based on the latest decision making tools and methods, all available options should be considered as input to the operation research model adopted for a particular case.......................(1) Operational research leads to decision making All business organizations would expect their executives to have enhanced decision-making capability to lead the business from the front on a gainful and productive basis. Operation research is the powerful tool to achieve this. While there are many professional tools and software available to help the business leaders for better decision making, Operation research is unique as it considers only the specific inputs and data that is applicable for a particular challenging problem, while considering the best options and information which is most beneficial for the organization. Hence, the operation research professionals customize each solution, that is unique and tailor made for the imposing challenge. Various analytical technologies are employed for achieving optimum results while using the tools for operational research. Some of these are: Simulation This method works under simulated conditions, on various theories, ideas and factors that may result in optimization of operations on cost effective basis. Optimization When the available choices are many and it is difficult to work on a particular option, the optimization technology is adopted for minimizing the risks involved, eliminating the unworkable options, while finding the best choice available. Statistics This relates to the collection of huge data concerned with the imposing challenge; categorize this data into various degrees of risk involving groups, while finding the connected information, about each group. Probability This method helps in comparing the risk management of the data collected and comparing each group This leads to testing of many options and conclusions for reaching the best solution possible...............(2) Why operational research tools are needed Business executives look out for certain signs that could tell them about an impending challenge in the organization. Some of such symptoms include: Having processing problems When a process is not working efficiently due to non decision making ability at the ground level for day to day operations, there is a need to employ operational research techniques for improving the overall efficiency of the effected process, which in turn can result in better functioning of related processes in the operational chain. This will finally help in the improvement of company bottom line. Risk troubles The assessment of risks involved while handling new projects is a very delicate job and operational research tools can help the executives to evaluate risks in terms of quantity and value. This will result in comparing the risks with the gains expected, so that a balanced output is derived that would mean minimum risk with maximum benefits. Challenges faced by the market competition While everyone in the industry would like to remain on the top by beating the stiff competition, most of the business houses in the same industry group may be already using the operational research techniques to move ahead. The use of modern technologies relevant to the market conditions while working on an O. R module can help in this direction. Complex situations pose difficult decision making challenges When the situation is so complicated that it goes beyond the control of the responsible business head, the software tools available do not help much. The operational research certainly helps in building more intelligence into the computer system and software, while tackling different aspects of the situation, in a logical manner. Operational information data is not optimized If the data covered from various sources for the operations on daily basis is not processed correctly and effectively, it is a waste of effort. Hence operational research tools guide for optimization of the data collected as well as the presentation of such data on a daily basis, to identify the flaws and errors, for their rectification.......(3) Some of the areas that can benefit from operational research Decision making Operational research helps in arriving at the most accurate and logical decision, while eliminating various options available for this purpose. Rescheduling and forecasting, with reduced costs This will mean scheduling on a fresh basis the sequence of operations, staff placement and equipment operations, within the production facility of any business unit. However, this cannot be done in an isolated manner. The rescheduling should result in cost reduction and efficient planning as well as forecasting for the future business operations. Quality improvement The quality improving techniques should be properly balanced with the cost increase to achieve the final optimization of profits. O. R helps in finding such a balance solution for the manufacturing plants. Maximum use of available resources with increased profits O.R. helps in greater utilization of resources of all kinds that include the plant equipment, work force, money and raw material etc. The resource allocation in each case is done in such a manner that it increases the product value and the profits thus obtained, while maintaining the proper quality standards. Operational research can help the business executives to take best decisions, in several ways. Some of these can be: Investment decisions Optimizing use of SAP, CRM., ERP and other software systems. Launching a new product and forecasting its sales. Planning cost effective marketing and pricing strategies. Optimizing production cycles from the same plant and equipment. Deciding on conventional sales as compared to the net based selling.....(3) Here are some of the examples of operational research tools as applied to various industrial and business functions. Resource allocation The solution for finding resource allocation to each job or function within an organization is a challenging job, which involves competitive alternatives to allocate the resources in such a manner that gives maximum profits at minimum costs. The input components for finding the O.R. solution t such problems will include the following: 1. The data on resources available, mentioned in exact figures. 2. The data on the jobs to be done, with the resources consumption demand for each job. 3. Return on the costs of resources made for each job. In case the resources available do not match with the jobs to be finished, then the cost consideration will exercise the decision fro leaving out certain unproductive jobs, due to resources crunch. Similarly, if the available resources are more than what is needed, certain portion of the funds will not be allocated after considering the cost returns. This is a rough sketch of the O.R. solution needed for resources allocation......(4) Inventory control In any industrial finance module, inventory plays the most important part, as holding of unnecessary inventory over a long time may prove hazardous to the company. Inventory includes raw materials, consumable goods, and finished products, packaging and other materials, component parts etc.. During the days of market or economic slump, there is a tendency to hold finished goods in the inventory for a longer period. However, this proves to be counter productive, quite often, as the cost of inventory control and finished goods goes higher with returns taking a plunge. Operational research solutions generally take into account the following for the effective management of inventory control. Twine bin system of controls This is also called a mi-max control system. Under this system, one bin is to accommodate the inventory for supply of current demand, while the other bin holds inventory for the replenishment demand. Whenever the first bin stocks are reduced, the order for the given quantity is automatically generated. It can also have a fixed period replenishment system, or a cyclic review system or a reorder cycle system, as all of these consist of ordering at fixed intervals to furnish the first bin. The O. R. solutions consider various combinations and permutations of the above system, keeping in view the market conditions, the financial holding capacity of the company, the cyclic production requirement etc......................(5) Manufacturing functions The operational research tools have established “manufacturing progress functions’ module and application that takes into account the qualitative and quantitative theories of mass production for any plant that produces goods in bulk. For most of the mass production lines, it has been observed that the cost of production declines with the increase in the production quantity. While, this decline is steep in the beginning of a graph thus plotted for such production pattern, the decline rate decreases until it reaches a peak from where the reversal begins. O.R. solutions take into account various factors including the inventory control, market conditions and equipment cost etc. to determine the ideal manufacturing functional pattern for any mass production unit.......(6) ________________________________________________ BIBLIOGRAPHY In-text citation references (1)Operation research, the science of better------“What Operations Research Is “ http://www.scienceofbetter.org/what/index.htm(accessed on 6th April, 2009) (2)Operation research, the science of better------“ 5 Signs You Could Benefit from Operations Research available at“ http://www.scienceofbetter.org/can_do/five_signs.htm (accessed on 6th April, 2009) (3)Operation research, the science of better------“ The Operations Research Value Proposition--Operations Research available at http://www.sThe Operations Research Value Proposition (accessed on 6th April, 2009) (4)Ackoff L Russell Operations research, Industrial engineering-- Examples of operations research models and applications » Resource allocation Available at http://www.britannica.com/EBchecked/topic/682073/operations-research/68185/New-software-tools-for-decision-making# (accessed on 9th. April,2009) (5)Eilon Samuel Operations research, Industrial engineering-- Examples of operations research models and applications » Inventory control Available at http://www.britannica.com/EBchecked/topic/682073/operations-research/68185/New-software-tools-for-decision-making# (accessed on 9th. April,2009) (6)Holstein K. William Operations research, Industrial engineering-- Examples of operations research models and applications » Manufacturing progress function Available at http://www.britannica.com/EBchecked/topic/682073/operations-research/68185/New-software-tools-for-decision-making# (accessed on 9th. April,2009) Sources used http://www.britannica.com/EBchecked/topic/682073/operations-research/68185/New-software-tools-for-decision-making# (accessed on 9th. April,2009) Operation research, the science of better------“ 5 Signs You Could Benefit from Operations Research available at“ http://www.scienceofbetter.org/can_do/five_signs.htm (accessed on 6th April, 2009) Read More