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Optimal Results

IT-powered advances in operations research can enhance business processes and boost the corporate bottom line.

By Gary Anthes
November 20, 2000 12:00 PM ET

Computerworld - When you walked into the supermarket recently, you may not have noticed right away that you were in a Markov process with a 3-D state space.
But you surely noticed those long lines at the checkout counters, and so have operations research (OR) specialists. They use queuing theory, Monte Carlo simulations, linear programming and other esoterica to shorten customer lines and delivery times, minimize inventories and wring more revenue out of airplane seats, rental cars and hotel rooms. And they depend on information technology to do it.
Today more than ever, OR techniques are impacting the corporate bottom line. And IT managers can deliver the technology to make it happen.

OR Software Sources
Just where do you get operations research software?
A big company might just roll its own. In fact, IBM developed a system that optimizes inventory levels in its PC manufacturing supply chain, saving the company $750 million in 1998.
IBM now sells the system as its Asset Management Tool. But implementing that product is no slam dunk, says Brenda Dietrich, a senior manager at the IBM Research Division's Optimization Center. "You need some expertise in OR. . . . I'd say someone with a master's degree in OR could use it very effectively."
Supply-chain software from the major enterprise resource planning (ERP) vendors has some OR capabilities. "Some are integrated, so you don't even see it," says John Birge, president of the Institute for Operations Research and the Management Sciences in Linthicum, Md. "It might just tell you, 'Route your trucks this way,' and you have no idea it's optimizing in the background."
But Birge, who is also dean of the McCormick School of Engineering and Applied Science at Northwestern University in Evanston, Ill., says standard ERP packages can make unrealistic assumptions, such as unlimited parts access. So users may want to use an OR software specialty company, he says.
For example, Ilog Inc., Manugistics Group Inc. and Aspen Technology Inc. have supply-chain optimization packages, some tailored for specific industries.
"They have some general-purpose tools that you have to be fairly expert in to use," Birge says. "But they . . . can develop more application-specific tools for you."
"IT managers should know what OR can do for them," Birge says. "They should know what applications have been developed by the specialized software houses and then decide if they need those capabilities." If they do, he says, they should consider having an OR-trained consultant install them and train users.

The term operations research dates to the late 1930s, when British and U.S. mathematicians developed ways to conduct research on


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