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operations research (OR)

Operations research (OR) is an analytical method of problem-solving and decision-making that is useful in the management of organizations. In operations research, problems are broken down into basic components and then solved in defined steps by mathematical analysis.

The process of operations research can be broadly broken down into the following steps:

  1. Identifying a problem that needs to be solved.
  2. Constructing a model around the problem that resembles the real world and variables.
  3. Using the model to derive solutions to the problem.
  4. Testing each solution on the model and analyzing its success.
  5. Implementing the solution to the actual problem.

Disciplines that are similar to, or overlap with, operations research include statistical analysis, management science, game theory, optimization theory, artificial intelligence and network analysis. All of these techniques have the goal of solving complex problems and improving quantitative decisions.

The concept of operations research arose during World War II by military planners. After the war, the techniques used in their operations research were applied to addressing problems in business, the government and society.

Characteristics of operations research

There are three primary characteristics of all operations research efforts:

  1. Optimization- The purpose of operations research is to achieve the best performance under the given circumstances. Optimization also involves comparing and narrowing down potential options.
  2. Simulation- This involves building models or replications in order to try out and test solutions before applying them.
  3. Probability and statistics- This includes using mathematical algorithms and data to uncover helpful insights and risks, make reliable predictions and test possible solutions.

Importance of operations research

The field of operations research provides a more powerful approach to decision making than ordinary software and data analytics tools. Employing operations research professionals can help companies achieve more complete datasets, consider all available options, predict all possible outcomes and estimate risk. Additionally, operations research can be tailored to specific business processes or use cases to determine which techniques are most appropriate to solve the problem.

Uses of operations research

Operations research can be applied to a variety of use cases, including:

  • Scheduling and time management.
  • Urban and agricultural planning.
  • Enterprise resource planning (ERP) and supply chain management (SCM).
  • Inventory management.
  • Network optimization and engineering.
  • Packet routing optimization.
  • Risk management.
This was last updated in September 2019

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