Operation Research is a systematic application of quantitative methods, techniques, and tools to the analysis of problems involving the operation of systems. – Daellenbach and George, 1978
Operation research as one of the quantitative aid to decision making offers the decision-maker a method of evaluating every possible alternative (act or course of action) by using various techniques to know the potential outcomes.
In general, while solving a real-life problem, the decision-maker must examine it both from a quantitative as well as qualitative perspective. Therefore we can say that Quantive methods are more inclined towards decision making.
Nature of Quantitative Method:
The Nature of the Quantitative method is very scientific and goal-oriented. Quantitative methods always have a systematic approach to problem-solving which always leads to good results.
There is a number of techniques that are available depending upon the conditions of the environment. So it is the responsibility of the researcher to choose the best one as per the situation and need for the better output.
Role of Quantitative methods:
There are many roles for which Quantative Methods are used but these 2 are the most important and they are as follows:
- Profit Maximization – Every organization’s main objective is profit maximization no matter what the situation is. For-Profit Maximization we need to have a proper road map and this can be best done with the help of quantitative methods.
- Cost Reduction- In cost reduction, quantitative methods play a major role due to its working. We can easily analyze the trend of our product and the reasons why it is not working in the market and then we can set the goal accordingly.
Scope of Quantitative Method:
Finance and Accounting
- Dividend Policies, investment and portfolio management, auditing, balance sheet, and cash flow analysis.
- Claim and complaint procedure and public accounting
- Break-even analysis, capital budgeting, cost allocation, and control, financial planning
- Establishing costs for by-products and developing standard costs
Example: A Automobile company who manufactures car.
- Selection of product mix, marketing and export planning
- Sales effort allocation and assignment
- Advertising, media planning, selection, and effective packing alternatives
- Best time to launch a new product
- Predicting customer loyalty
- Purchasing, Procurement, and Exploration
- Optimal buying and reordering with or without price quantity discount
Example: Ads Campaigns by various FMCG company’s
- Replacement policies
- Bidding Policies
- Vendor analysis
Example: Online Shopping Platform like Amazon and Flipkart
- Economic planning, Natural Resources, Social planning, and energy
- Urban and housing problems
- Military, Police, Pollution control, etc.
Example – Every government has its own modus operandii
- Manpower planning, wage/salary administration
- Negotiation in a bargaining situation
- Skills and waging balancing
- Designing organization structures more efficiently
- Scheduling of training programs to maximize skill development and retention.
- Location and size of warehouse or a new plant, distribution centers, and retail outlets
- Logistics, layout, and engineering design
- Transportation, planning, and scheduling
- Aggregate production planning, assembly line, blending, purchasing, and inventory control
- Employment, training, layoffs, and quality control
- Allocating R&D budgets most effectively
Maintenance and Project Scheduling
- Maintenance policies and preventive maintenance
- Maintenance crew size and scheduling
- Project scheduling and allocation of resources