Lecture 1: Introduction#
Origins of Applied Optimisation#
Human civilization witnessed a tremendous growth in size and complexity during the Industrial Revolution leading to segmentation of labor and management responsibilities in:
Public organisations (e.g., national government)
Private organisations (e.g., tech companies)
Core Question: How to allocate the available resources to various operations and activities in a way that is optimal for the organization as a whole?
Examples of Applied Optimisation#
A scientific approach to decision-making applied to sectors like:
1. Construction#
Bechtel: Engineering, Construction & Project Management
Optimisation: Given construction activity specifications (timeline, material requirements, and equipment constraints) and labour regulations (working hours and rest time), Bechtel optimised the scheduling of the construction activities for an oil refinery.
Impact: By optimising construction scheduling, Bechtel minimised delays and resource using leading to reduction in the overall project time by 18% and saved $10 million in operational costs.
2. Financial Planning#
JP Morgan: Investment Banking Company, USA
Optimisation: Given market uncertainties and client risk preferences, JP Morgan optimized portfolio allocation (stocks, bonds, real estate, and cash).
Impact: By optimising financial planning of investment portfolios, JP Morgan improved risk-adjusted returns and reduced portfolio volatility for their clients.
3. Manufacturing#
Samsung Electronics: RAM Fabrication Unit, South Korea
Optimisation: Given machine specifications (production cost, time, and volume) and customer demand characteristics, Samsung RAM fabrication unit optimised RAM inventory levels.
Impact: By optimising manufacturing processes, Samsung reduced its fulfilment/service time from 80 days to 30 days, thus increasing its annual sales revenue by $200 million.
4. Health Care#
Memorial Sloan-Kettering Cancer Center (MSKCC), USA
Optimisation: Given tumour cell characteristics, MSKCC optimized radiotherapy application to maximize its effectiveness while minimizing damage to healthy tissue.
Impact: By optimising health care treatment, MSKCC saved $500 million annually from reduced pre-treatment planning and post-treatment procedures.
5. Human Resource#
Taco Bell: Mexican Fast-Food Chain, USA
Optimising Human Resources: Given customer demand characteristics and labour regulations (working hours and rest time), Taco Bell optimised number of employees for each shift.
Impact: By optimising human resource management, Taco Bell saved $13 million annually in labor costs.
6. Telecommunications#
AT&T: Telecommunications Service, USA
Optimisation: Given customer call characteristics, AT&T developed a call processing simulator to optimise call handling (immediate answering or busy signal) and work-load distribution across call-agents.
Impact: By optimising telecommunications services, AT&T secured over $750 million in annual profit for its business customers and earned the prestigious 1993 Franz Edelman Award for OR excellence.
7. Transportation#
Sears: Multi-Line Retailer, USA
Optimisation: Given customer demand specifications and vehicle fleet characteristics, Sears optimised home-delivery service including customers assigned to each vehicle-route and the order in which the customers were served on each vehicle-route.
Impact: By optimising transportation services, Sears saved over $42 million in annual savings with improved service to customers.