June 2000 Welcome to Our World An open invitation to the 10,000 executives picked to receive this special issue of OR/MS Today By Richard Larson How would you like to add $500 million to your bottom line? American Airlines has accomplished this, using tools and techniques discussed in this special issue of OR/MS Today. Operations research is your secret weapon for profit improvement. Born in World War II for military operations, OR -- as operations research is called -- has silently but relentlessly invaded many corners of corporate America. OR is the science and technology of decision-making. When you, as a business executive, make a decision, you have allocated scarce corporate resources. Putting people or capital assets here rather than there implies that you believe you have achieved optimal return on those assets for your company. Making decisions with the aid of OR assures optimal decisions and certifies that you have not missed another opportunity to get even bigger returns on your assets. Where does OR have significant impact in corporate America? The answer is just about in every sector. One of my challenge questions to live audiences is this: Name a sector of the economy, and I will give an example of OR in action. You will see many examples of successful use of OR in this issue of OR/MS Today, an issue dedicated to corporate executives. Why is OR something you cannot afford to ignore? Because its application in your business means either more profits or better customer service, and usually both. Here's how it works: The science part of OR constructs a computer-based mathematical model of important parts of your firm. This may be one model or a family of models. These models may cover many aspects of operations: production processes, asset routing and scheduling, customer responses to marketing campaigns, queueing-type congestion and demand forecasting, to name a few. You might think of the science of OR as creating a "physics" of your business. OR derives the equivalent of F = ma, "force equals mass times acceleration," for your firm. Often the equations are much more complex and numerous, sometimes numbering in the tens of thousands. OR was founded by physicists, and it is appropriate that the paradigm of physics-type modeling still prevails. The technology of OR works on the physics equations to configure your assets in the best possible way. This technology uses state-of-the-art mathematical algorithms to find the "optimal" configurations for your firm. This is how American Airlines and virtually all other major airlines work, as do many manufacturing processes and numerous service industries. Examples of such decisions involve personnel scheduling, vehicle routing and scheduling, facility location and capacity planning. The decisions that are made in this process need not focus only on physical assets. They can also include prices and policies of your firm, such as best discount values for weekend rental cars or the number of airline seats to designate for discount leisure travelers. OR was born in the pre-computer era. Computations were done on sliderules and desk calculators. Even in those primitive times, the return on use of OR was tremendous. Now, in the 21st century, data collection and storage and computer-based computation are amazingly inexpensive. Extracting useful information from all these data is now a necessity for corporate survival. OR provides the integrating framework for doing just that. The OR models of your firm require accurate and timely data. The definitions of the parameters and variables of these equations -- the equivalent of force, mass and acceleration -- tell us how to manipulate the collected data in order to feed the models and obtain the best possible decisions. The more timely and accurate and complete the data, the better are the decisions. The better the decisions, the more profitable the firm. Please, join us in spending a few moments reading through this special issue of OR/MS Today, an issue designed for you, the corporate executive. You will see the incredible number of ways that OR can be used (and is being used) by corporations to improve their performance. Richard Larson is Professor of Electrical Engineering and Director of the Center for Advanced Educational Services at MIT. He served as co-director of the MIT Operations Research Center for more than 10 years. This special issue of OR/MS Today was suggested by Dr. Larson when he was co-chair of the INFORMS Public Information Committee. For More Information Executives interested in finding out more about INFORMS, operations research or this special issue, visit: www.informs.org/Executives. Table of Contents OR/MS Today Home Page OR/MS Today copyright © 2000 by the Institute for Operations Research and the Management Sciences. All rights reserved. Lionheart Publishing, Inc. 506 Roswell Street, Suite 220, Marietta, GA 30060, USA Phone: 770-431-0867 | Fax: 770-432-6969 E-mail: lpi@lionhrtpub.com URL: http://www.lionhrtpub.com Web Site © Copyright 1999, 2000 by Lionheart Publishing, Inc. All rights reserved.