Operational Research: What it is and why you need it
Entrepreneurs should always be looking to improve their skills.
The one I'd recommend? Mastering Operational Research. It's the most powerful, yet most overlooked, tool in the business arsenal.
OR combines advanced mathematics, data analytics, and human insights to provide a toolkit for businesses. The discipline goes beyond data analytics, taking data insights and turning them into real-world solutions that solve complex problems.
OR specialists work closely with businesses to understand their challenges and goals. They create mathematical models, algorithms, and customise tools to address specific problems. An OR expert might work with a logistics company to optimise their delivery routes, considering factors like traffic, fuel expenses and delivery deadlines or a retailer might use OR to analyse retail and sales data to decide how much stock they should need, balancing customer demand with inventory costs through data analysis and predictions.
A historical look
The roots of OR lie in World War II when scientists and engineers developed innovative ways to improve military operations. By analysing military data, mapping processes, simulating scenarios, and devising strategies for optimal routes and logistics for merchant ships OR played a crucial role in reducing military losses and ensuring the success of missions. Today executives in every kind of organisation – large and small, private, and public and not-for-profit – are using operational research (OR) to unlock value in their data, model complex systems, and make better decisions with less risk.
Applications across industries
In Wales, OR interventions have led to significant improvements in cancer survival rates. Wales faced a significant challenge with cancer survival rates lagging other developed nations. The complexity of having two distinct diagnosis and treatment pathways for cancer patients led to bottlenecks and delays for patients, sometimes with fatal consequences. OR specialist Paul Harper, a Professor of Operational Research at Cardiff University, likened the system to a "bowl of spaghetti," where patients followed different routes and underwent various diagnostic tests, often without timely treatment.
Professor Paul's team of specialists embarked on a project with Wales Cancer Network to implement a Single Cancer Pathway (SCP). By modelling the resources required to meet SCP waiting time targets and identifying optimal diagnostic pathways, they proposed a 20% increase in diagnostic resources and the establishment of "rapid diagnostic hubs." This modelling led to a breakthrough when Welsh Government Minister for Health and Social Services, Vaughan Gething, released £3 million in funding to implement the SCP. Wales became the first UK nation to introduce a single waiting time target for cancer patients, ensuring timely access to the right resources and the best outcomes for patients.
Manufacturer Pilkington UK, part of the NSG Group has also used OR techniques to improve its business performance. The company wanted to optimise its manufacturing processes and reduce the amount of glass waste. OR techniques were used to analyse and interpret order data and with the insights, the company could better plan the manufacturing processes and align it with specific customer orders. This led to varied sizes of glass to be cut for certain orders which reduced waste, made cost savings, and improved customer satisfaction.
Netherlands' transition to electric buses by 2030
When RET, Rotterdam’s public transport operator wanted to switch to electric buses there were several challenges to address. These included the limited electric bus range and long charging times, that would affect the regular service and any potential delays could leave buses stranded with insufficient charge.
RET turned to the Rotterdam School of Management, Erasmus University (RSM) to use operational research to find a solution. RSM developed a simulation model to assess the impact of electrification on RET's scheduling considering factors including battery capacity, energy consumption patterns, and the capacity of the charging infrastructure.
The simulation revealed existing schedules couldn't accommodate electric buses without major planning adjustments.
RET adapted its planning, and the simulation model was used to optimise the charging strategy, accounting for bus delays. The model revealed a real-time charging approach to reduce charging moments and maintain the bus service reliability.
With the initial deployment of 50 electric buses in December 2019, attention shifted to introducing electric buses in the South side of Rotterdam. Clustering charging activities at common terminal stations presented opportunities for local renewable energy generation. The RSM team then did a feasibility study of a having solar park at the bus station, which would allow for energy generation uncertainties. Results showed that up to 70% of energy for charging could come directly from solar panels during the summer, with the potential for a 7% increase in renewable energy use through energy storage.
The key learnings were that:
The electrification of the bus network required significant operational changes and real time adjustments were essential to handle delays and ensure buses had adequate charge. They also learned that hub-based charging networks were ideal for local renewable energy usage.
The collaboration between RSM and RET and the use of operational research has enabled a smooth transition to electrics buses. The model was integrated into RET's day-to-day planning software, contributing to the successful electrification of Rotterdam's bus fleet.
A growing field with enormous potential
The digital age has accelerated the adoption of OR, with advancements in AI and data analytics driving its relevance. OR professionals are at the forefront of addressing critical challenges, such as climate change, healthcare delivery, and transportation congestion. It has evolved from its military origins to become an essential tool across diverse sectors. It offers solutions to complex problems, cost savings, and improved decision-making, making it a well-kept secret no longer.