Week 1 - EM 221 Introduction to Optimization and Modeling...

EMÜ 221
Introduction to Optimization and
Modeling
Ceren Tuncer Şakar
2015-2016 Fall
Week 1

OUTLINE

Introduction to Operations Research (OR)
•
Successful Applications
•
OR Characteristics
•
Methodology of OR

Introduction to Linear Programming
2

Operations Research (OR)

Operations Research is a quantitative approach
to decision making based on the scientific method.

It addresses the operations of complex
organizational systems, seeking the best way to
conduct and coordinate the activities to make best
use of limited resources.
3


OR is a major component of IE curriculums.

The mathematical models and techniques used
by IE are primarily OR models and techniques.

Management Science is another term for OR
(usually used at business schools).
4

Some successful applications of OR
Organization Nature of Application Annual
Savings
United
Airlines
(1986)
Schedule shift work at
reservations offices and
airports to meet customer
needs at minimum cost.
$6 million
IBM
(1990)
Integrate a national network
of spare parts inventories to
improve service support.
$20 million+
$250 mil. less
inventory
Delta Airlines
(1994)
Maximize the profit from
assigning airplane types to
over 2,500 domestic flights.
$100 million
5

More applications
Proctor and
Gamble
(1997)
Redesign the North
American production and
distribution system to
reduce costs and improve
speed to market.
$200 million
Taco Bell
(1997)
Optimally schedule
employees to provide
desired customer service at
a minimum cost.
$13 million
Grantham, Mayo,
Van Otterlee and
Company (1999)
Construct optimal portfolios
with a limited number of
stocks and transactions.
$4 million
6

More applications
Sears, Roebuck
(1999)
Develop a vehicle routing
and scheduling system for
delivery and home service
fleets
$42 million
Hewlett-Packard
(1998)
Redesign the sizes and
location of buffers in a
printer assembly line to
meet production goals.
$280 million
more
revenue
IBM
(2000)
Reengineer its global
supply chain to respond
quicker to customers while
holding minimum inventory.
$750 million
in the first
year
7

More Applications

LP has been used successfully by several people
(Chandy and Kharabe 1986, Interfaces) to
determine bond portfolios that maximize expected
return subject to constraints on the level of risk
and diversification on the porfolio
.

Using LP and probabilistic inventory models, Blue
Bell, manufacturers of jeans and sportswear,
reduced its average inventory level by 31%
(Edwards et al. 1985 Interfaces).
8

More Applications

LP is used to determine financial and production
plans for a high voltage transformer
manufacturer (Koksalan and Kirca 1993, IIE
Transactions).

IP is used to determine the location of new malt
plants for a beer company (Koksalan and Sural
1999, Interfaces).
9

More Applications

Using network models and DP, Powell et al. (1988,
Interfaces) developed a model that is used to
assign loads to North American Van Lines drivers.