OPERATIONAL RESEARCH & BUSINESS ANALYSIS

Operational Research & Business Analysis

Operational Research & Business Analysis

Introduction

The term Operations Research (OR) relates to military operations during the second World War Scientists used various techniques to deal with strategic and tactical problems during the war. After the war military OR group scientists tried to apply OR techniques to civilian problem relating to business, industry, and research development (Rosenzweig 1992). During the 1950s educational institutions introduced OR in their curricula. Today service organizations such as airlines, railways, hospitals, libraries and banks employ OR to improve their efficiency. OR is a science which provides mathematical techniques and algorithms for solving decision problems. It is also an art in the sense that it deals with collecting data of model construction, validation of the model and implementation of the solution obtained. In other words, OR is a scientific approach to problem solving for executive management. The problems involve integrated systems of men, machines and materials (Yu 2006). Today operation research is an important component and basic tool of solving many operational problems faced by the organisations.

Successful examples of OR innovations in information technology companies include SAP's Advanced Planning & Optimization (APO) decision support tool and i2's production planning and scheduling software in supply-chain management practice at the enterprise level with its suite of products for production and supply chain planning. Similarly, Manugistics' Enterprise Profit Optimization decision support tool uses OR/MS to improve pricing (Sharma 2006).

Phases of Operation Research (OR)

The first step is formulation of the problem. We have to identify the objective, the decision variables and the constraints involving the variables. After that a mathematical model has to be constructed, with an objective function to be optimized and constraints in the form of equalities or inequalities. The solution of the model can be obtained by analytic, iterative or Monte-Carlo method depending on the structure of the model (Barry et al 2001). These mathematical models are absolutely free from the influence of qualitative or emotional human factors which affect decision-making.

Characteristic of Good Operation Research

Operational research activity is characterized by being reflective, systematic and methodical aims to gain knowledge and solve problems scientifically and philosophically, through use of quantitative techniques and models developed through a process.

Scientific method: An effective marketing research uses the principles of scientific method: careful observation, hypothesis formulation, prediction and verification v (Scheurich 1997).

Creativity Research: Ideally, market research to develop innovative ways to solve a problem. For example, a clothing company for young adolescents provided video cameras and then used the videos that they made to put them on the premises to customers attending these ages (Barry et al 2001).

Using multiple methods: Market researchers fleeing exclusive reliance on one method. They also recognize the coexistence of two or three methods used to obtain a higher degree of confidence.

Value and cost of information: Market researchers are interested in comparing the value of information to its cost. Research costs are easy to quantify, but its value is more difficult to determine because it depends on the validity and reliability of available data and address to accept and ...