By SEB HARGREAVES
OPERATIONAL research (OR) is a hidden gem for competitiveness in an evolving business landscape.
Sometimes termed “the art and science of decision-making”, it combines advanced maths, data analytics and human insights to tackle intricate challenges.
Operational Research goes back to World War II, when scientists and engineers were innovating strategies to optimise military operations. Analysis of data, mapping processes, scenario simulation and the planning of optimal routes became pivotal in mission success.
Today, executives from large, small, public, private, and non-profit organisations are using it to extract value from data, model intricate systems, and make better decisions with reduced risks.
Specialists collaborate to optimise things like delivery routes, considering variables such as traffic, fuel costs, and delivery deadlines; OR can equally be used to analyse sales data and predict stock needs while balancing customer demand and inventory expenses.
Glass manufacturer Pilkington UK deployed it to streamline manufacturing and reduce waste. It redefined its manufacturing processes to align with specific orders, cutting costs and enhancing customer service.
Tesco, Britain’s largest grocer, has used OR solutions to meet the daily challenge of managing expiring stock. A key step in the value chain is what happens at the end of a product’s lifecycle. This is the final opportunity to sell an item — or donate it to the community. Tesco discounts items close to being removed from the shelves. The process is applied across the product range, from general merchandise and clothing to fresh produce.
Finding an optimal reduction strategy is a major challenge in retail: by how much should the price be cut?
There are two conflicting objectives: to increase revenue and reduce waste. Finding a solution is a non-trivial task, and Tesco’s data science team used OR to crack the nut.
A multi-stage clearance-pricing optimisation system was applied to thousands of products across all Tesco stores. The chain has cut food waste by five percent while boosting revenue by up to 13 percent.
Almost any organisation can deploy Operational Research to cut costs and improve decision-making; it can be a genuine game-changer.
Seb Hargreaves is executive director of The OR Society.
