Features - Enterprise Data Insights:

MAKING THE MOST OUT OF MOUNDS OF DATA
By Mary Crissey, SAS

It's true. Most people have never heard of "Operations Research" (O.R.), yet virtually everyone is affected by it in some way. O.R. has been one of the analytics industry's best-kept secrets.

Not any more. Widespread use of O.R. enhances effectiveness of organizations and quality of experiences all around us. O.R. applied is much like an invisible agent that simplifies incredibly complex situations and presents the best alternatives for any decision maker to improve the choices they make in everyday life. To bring an O.R. example home, if you're planning a vacation online, O.R. can help you determine optimal plane schedules at the cheapest fares among thousands of options. It helps the airlines stay on time by determining the most reliable scheduling possible for airline crews. O.R. helps you find low-cost and convenient hotels, and if you use an online map, it gives you the best directions possible. If you're shipping a souvenir back home, O.R. tells the delivery company which truck or plane will get it there fastest, and exactly what route the driver should follow. O.R. even enables the Disney theme parks to help you avoid long lines at their most popular attractions.

O.R. is used in both commercial and government decision making. It helps stock grocery store shelves to ensure inventory levels satisfy shoppers demand. O.R. provides professional sports leagues the capability to design their game schedules systematically by sorting through tens of millions of possible combinations. It shows city police units where to locate dispatch headquarters and lays out best routes for ambulances to navigate thru traffic. O.R. helps Pentagon officials devise military policies and compensation benefits for the troops defending our nation.

What Exactly Is Operations Research?

Basically, operations research (O.R.) is the discipline of applying advanced analytical methods to help make better decisions. It is applied mathematics that follows the "scientific method" to deliver uniquely powerful enhancements to decisions made in real life human situations.

O.R. was born during World War II, when executive departments were given a quantitative basis for making decisions that resulted in winning the Battle of Britian. What began with the studying of radar signals in 1936 has yet to reach its full potential. Since the 1990s, when numerical processing became faster and more widely available, O.R. has joined forces with digital high speed computer technology, mathematics and industrial engineers to pursue new ways to apply mathematics with far reaching impacts.

With O.R., decision makers need no longer rely solely on intuition. Today, O.R. gives executives the power to make effective decisions and build productive systems based on:

• Rigorous mathematical models.
• Consideration of all available options.
• Careful predictions of outcomes and estimates of risk.
• State-of-the-art decision tools combined with time-tested algorithms.

Articles and ads about software solutions that claim to enhance decision-making capabilities are commonplace. O.R. is not a buzz word for a "fad" with a short lived claim to fame, so you won't find O.R. listed under the "what's hot in technology" section. Operations Research is best of breed, employing highly developed methods practiced by specially trained professionals. It's powerful, using advanced tools and technologies to provide analytical power that no ordinary software or spreadsheet can deliver out of the box. And it can be tailored to you, because an O.R. professional can define your specific challenge in ways that make the most of your data and uncover your most beneficial options.

To achieve these results, O.R. professionals draw upon the latest analytical technologies, including simulation, optimization, visualization, queuing theory, scheduling, game theory, and probability and statistics.

What Operations Research Can Do For Your Enterprise

O.R. delivers significant value to the organizations and executives who take advantage of it. As organizations continue to become more sophisticated and collect more electronic records, the task of analyzing data becomes much more daunting. Fortunately, business intelligence software, data warehouses and O.R. 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, O.R. professionals confront and overcome challenges that involve large numbers of variables, complex systems and increasing demands to respond quicker, be more efficient and productive than ever before.

In fact, the essence of O.R. 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 optimization 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.

Organizations that use O.R. have found it to be a strategic weapon in the fight for competitive advantage. According to the www.scienceofbetter.org Web site, here are a few examples:

• Continental Airlines applied O.R. to revise crew schedules during the Sept. 11 terrorist crisis. Savings were estimated at $40 million in 2001 alone.
• AT&T applied O.R. to plan emergency rerouting 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 applied O.R. to reduce manufacturing times to capture an additional $1 billion in sales of semiconductor devices.
• UPS applied O.R. to redesign its overnight delivery network, saving $87 million and projecting an additional $189 million savings over the following decade.
• NBC applied O.R. to improve advertising sales plans, increasing revenues by more than $200 million.
• Ford applied O.R. to optimize the way it designs and tests vehicle prototypes, saving $250 million.

Five Sure Signs That You Could Benefit From Operations Research

According to, the Institute for Operations Research and the Management Sciences (INFORMS), if one or more of the following applies to your organization, O.R. can deliver what you need to confidently make better decisions:

• You face complex decisions. 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 multi-criteria? O.R. professionals can analyze complex situations and build intelligence into software systems, to uncover insight and highlight the best options. Before you act, consult with an O.R. professional to see how taking an O.R. approach will pay dividends.
• You're having problems with processes. One or more of your processes is limping along and you aren't sure what exactly to change. Many small, day-to-day decisions are simply repeats of what's typically worked well in the past and you'd like to incorporate imaginative creative forward-looking improvements. O.R. can simulate and test proposed changes to your processes before costly revisions in your day-to-day operating environment are implemented. With O.R. you'll ensure that any changes you implement will be positive.
• Your organization is not making the most of its data. Do you track information about your organization and have data that is begging to be used for decision making? O.R. specializes in working with this unused or under-used data -- extracting the most valuable information from what's currently collected, and showing what additional data you could collect to increase the value even further. O.R. professionals can show you how to make fact based decisions by incorporating historical trends in with current driving indicators to allow you to seize the initiative and become the leader in the marketplace.
• You need to beat the competition. Others in your field may already be using O.R. to gain competitive advantage. An O.R. professional can help you get ahead and stay ahead -- because O.R provides a big picture view of the world and can pinpoint critical interconnections to suggest innovative new sources you ought to explore to retain (or develop) a position of sustainable superiority.
• You're troubled by risk. Do you want to limit or reduce risk? Assessing the risk of a new project or contract is often tricky. O.R. helps you quantify risk, which is critical to controlling it. O.R. 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 O.R. as a central ingredient in their recipe for success.

Conclusion

Decision Making is crucial to the success of business initiatives and entire organizations. It's 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 a successful strategy.

O.R. is a proven management solution in the analytics field today and it will continue to grow exponentially from its World War II roots. No matter what stage of growth an organization falls into, O.R. techniques can help make dramatic improvements, decision by decision. The sooner O.R. is implemented into a company's decision-making process, the more far-reaching the benefits will be.

About Mary Crissey

Mary Crissey is world wide strategist of advanced analytics at SAS, and a chapter officer for the Institute of Operations Research and the Management Sciences (INFORMS). For those desiring further information, you may view a free Webcast (now archived) at
www.bettermanagement.com/seminars/details.aspx?libraryid=10058. Mary can be reached at mary.crissey@sas.com.