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.
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