THE IMPACT OF OPERATIONS RESEARCH

THE IMPACT OF OPERATIONS RESEARCH

Operations research has had an impressive impact on improving the efficiency of numerous organizations around the world. In the process, OR has made a significant contribution to increasing the productivity of the economies of various countries. There now are a few dozen member countries in the International Federation of Operational Research Societies (IFORS), with each country having a national OR society. Both Europe and Asia have fed- erations of OR societies to coordinate holding international conferences and publishing international journals in those continents. In addition, the Institute for Operations Research and the Management Sciences (INFORMS) is an international OR society that is headquar- tered in the United States. Just as in many other developed countries, OR is an important profession in the United States. According to projections from the U.S. Bureau of Labor Statistics for the year 2013, there are approximately 65,000 individuals working as opera- tions research analysts in the United States with an average salary of about $79,000.

Because of the rapid rise of analytics described in the preceding section, INFORMS has embraced analytics as an approach to decision making that largely overlaps and further enriches the OR approach. Therefore, this leading OR society now includes an annual Conference on Business Analytics and Operations Research among its major conferences. It also provides a Certified Analytics Professional credential for those individuals who sat- isfy certain criteria and pass an examination. In addition, INFORMS publishes many of the leading journals in the field, including one called Analytics, and another, called Interfaces, regularly publishes articles describing major OR studies and the impact they had on their organizations.

To give you a better notion of the wide applicability of OR, we list some actual appli- cations in Table 1.1 that have been described in Interfaces. Note the diversity of organiza- tions and applications in the first two columns. The third column identifies the section where an “application vignette” devotes several paragraphs to describing the application and also references an article that provides full details. (You can see the first of these appli- cation vignettes in this section.) The last column indicates that these applications typi- cally resulted in annual savings in the many millions of dollars. Furthermore, additional benefits not recorded in the table (e.g., improved service to customers and bet- ter managerial control) sometimes were considered to be even more important than these financial benefits. (You will have an opportunity to investigate these less tangible bene- fits further in Probs. 1.3-1, 1.3-2, and 1.3-3.) A link to the articles that describe these applications in detail is included on our website, www.mhhe.com/hillier.

Although most routine OR studies provide considerably more modest benefits than the applications summarized in Table 1.1, the figures in the rightmost column of this table do accurately reflect the dramatic impact that large, well-designed OR studies occasionally can have.

An Application Vignette

FedEx Corporation is the world’s largest courier delivery services company. Every working day, it delivers many millions of documents, packages, and other items through- out the United States and hundreds of countries and terri- tories around the world. In some cases, these shipments can be guaranteed overnight delivery by 10:30 A.M. the next morning.

The logistical challenges involved in providing this service are staggering. These millions of daily shipments must be individually sorted and routed to the correct gen- eral location (usually by aircraft) and then delivered to the exact destination (usually by motorized vehicle) in an amazingly short period of time. How is all this possible?

Operations research (OR) is the technological engine that drives this company. Ever since its founding in 1973, OR has helped make its major business decisions, including equipment investment, route structure, scheduling, finances, and location of facilities. After OR was credited with literally saving the company during its early years, it became the custom to have OR represented at the weekly

senior management meetings and, indeed, several of the senior corporate vice presidents have come up from the outstanding FedEx OR group.

FedEx has come to be acknowledged as a world- class company. It routinely ranks among the top compa- nies on Fortune Magazine’s annual listing of the “World’s Most Admired Companies and this same maga- zine named the firm as one of the top 100 companies to work for in 2013.” It also was the first winner (in 1991) of the prestigious prize now known as the INFORMS Prize, which is awarded annually for the effective and repeated integration of OR into organizational decision making in pioneering, varied, novel, and lasting ways. The company’s great dependence on OR has continued to the present day.