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Beyond Bi
Driving enterprise-wide strategies
 Operations
research is the key to making informed business decisions, says Pushkar Bhat
The ever-changing marketplace is an environment of continuous
turbulence, disruptive competition with dynamic markets and demanding customers.
To lead with confidence and outpace competitors you need to make accurate decisions
faster than ever.
Enter operations research (OR), a powerful tool that may not be seen as strategic
enough to drive enterprise intelligence but continues to affect everyone in
some way or the other. It remains one of the best-kept secrets in the analytics
industry.
The widespread use of OR enhances the effectiveness of organisations and quality
of experiences all around us. OR is much like an invisible agent who simplifies
incredibly complex situations and presents the best alternatives for decision-makers
to improve the choices they make in everyday life. In a travel company, for
example, if your customer is planning a vacation online, OR can help him determine
the optimal plane schedules with the cheapest fares among thousands of options.
It can help your partner airline stay on time by determining the best schedule
possible for an airline crew. OR helps you streamline and find low-cost and
convenient hotels, and if your customers are using an online map, it can give
them the best directions possible. If you’re shipping a souvenir back to
your customers, OR tells your delivery partner which truck or plane will get
your package there the fastest, and the route it should take. It can present
the most scientific approach to resource planning.
Defining OR It is the discipline of applying advanced analytical
methods to assist the decision-making process. Applied mathematics, which follows
the “scientific method” delivers uniquely powerful enhancements to
decision-making in real life situations.
With OR, decision-makers do not need to rely on intuition. Today, OR gives executives
the power to make effective decisions and build productive systems based on:
- Rigorous mathematical models
- Consider all available options
- Careful predictions of outcomes and estimates of risk
- State-of-the-art decision tools combined with time-tested
algorithms.
What OR can do for your enterprise
It can deliver significant value to organisations and executives.
As organisations become more sophisticated, customer-centric and collect a greater
number of electronic records, the task of analysing data becomes much more daunting.
Fortunately, business intelligence software, data warehouses and OR have all
matured to the point of giving companies that employ them more precise information
and insight than they’ve ever had before. With these software resources
at their fingertips, OR professionals can overcome challenges that involve a
large number of variables, complex systems and significant risks.
The essence of OR is to deliver accurate knowledge in a timely fashion to make
confident, calculated decisions with less risk than ever before.
Today’s software technologies for optimisation and management science methods
are used to profitably tackle a wide range of business issues, including:
- Resource allocation
- Retail and inventory planning
- Product mix and blending
- Staffing allocations
- Distribution, routing, scheduling and traffic flow
- Supply chain management and logistics
- Capital budgeting, asset allocation and portfolio selection.
The case for OR
Strategic decision-making is crucial to the success of business
initiatives. It is important to ask the right questions, think out of the box,
sort through the myriad of factors and consider all potential options, before
you move forward to select your course of action in order to achieve the best
possible results.
Operations research is a proven management solution in the field of analytics
and it will continue to grow. No matter what stage of growth an organisation
falls into, OR techniques can help make dramatic improvements, decision by decision.
The sooner OR is implemented into a company’s decision-making process,
the more far-reaching its benefits will be.
| If one or more of the following applies to your organisation, OR can deliver
what you need to make better decisions:
Tackling complex issues
Perhaps you’re faced with more decision factors than
you can manually handle. Do you have competing goals or difficulty weighing
the pros and cons involved with multiple criteria? Using OR, you can analyse
complex situations and build intelligence into software systems, uncover
insights and highlight the best options.
Problems with processes
One or more of your processes is limping along and
you are not sure what to change. Many small, day-to-day decisions are
simply repeats of what has typically worked well in the past and you would
like to incorporate imaginative and creative forward-looking improvements.
OR can simulate and test proposed changes to your processes before costly
revisions in your day-to-day operating environment are implemented. With
OR, you’ll ensure that any changes you implement will be positive.
Making data count
Do you track information about your organisation and have
data that is begging to be used for decision-making? OR specialises in
working with this unused or under-used data by extracting the most valuable
information from what is currently collected, and showing additional data
you could collect to increase the value even further. OR can show you
how to make fact-based decisions by incorporating historical trends with
current driving indicators to allow you to seize the initiative and become
the leader in the marketplace.
Keeping the competition at bay
Others in your field may already be using OR to gain competitive
advantage. OR can help you get ahead and stay ahead as it provides the
big picture and can pinpoint critical interconnections to suggest innovative
sources you ought to explore to retain (or develop) a position of sustainable
superiority.
You are troubled by risk
Do you want to limit or reduce risk? Assessing the
risk of a new project or contract is often tricky. OR helps you quantify
risk, which is critical in controlling it. It assists in planning how
best to balance risk against the gains you expect. With so much on the
line, wise executives are seeing the value of leveraging the best technologies
possible with OR as a central ingredient in their recipe for success.
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Organisations that use OR have found
it to be a strategic weapon in the fight for competitive advantage. According
to the www.scienceofbetter.org website, the following are good examples
of OR in action:
- Continental Airlines applied OR to revise crew schedules during the
September 11 terrorist crisis. Savings were estimated at $40 million
in 2001 alone.
- AT&T used OR to plan emergency re-routing of voice, data, wireless
and satellite communication systems. Efficient allocation of resources
won customer loyalty, upped revenue and saved hundreds of millions of
dollars.
- Samsung reduced manufacturing time to capture an additional $1 billion
in sales of semiconductor devices.
- UPS redesigned its overnight delivery network, saving $87 million
and projecting an additional $189 million savings over the following
decade.
- NBC improved its advertising sales plans and increased revenues by
more than $200 million.
- Ford optimised the way it designs and tests vehicle prototypes, saving
$250 million.
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This is the first in a series of articles on Business Intelligence
from SAS India. The author of this feature is Manager, SAS India.
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