Developed during World War II, operations research helped take the guesswork out of deploying radar, searching for enemy submarines, and getting supplies where they were most needed. Following the war, numerous peacetime applications emerged.

Manufacturers used operations research to make products more efficiently, schedule equipment maintenance, and control inventory and distribution. Success in these areas led to expansion into strategic and financial planning and later into a variety of industries. Some examples of practical applications of operations research are listed below, many of which were taken from the journal Interfaces.

Yield Management at American Airlines

Critical to an airline's operation is the effective use of its reservations inventory. In the early 1960's American Airlines began research on managing revenue from its reservations inventory. Because of the project's size and difficulty, over the next few decades, American Airlines Decision Technologies developed a series of operations research models that effectively reduce the one large problem to three much smaller and far more manageable sub-problems: overbooking, discount allocation, and traffic management. The solutions to the sub-problems are combined to determine the final inventory levels. American Airlines estimates the quantifiable benefit at $1.4 billion over a three-year evaluation period and expects an annual revenue contribution of over $500 million to continue into the future.

Package Routing and Aircraft Scheduling at United Parcel Service (UPS)

Several years ago, UPS began using a computerized tool to optimize package routing and aircraft scheduling, which had previously been done by hand. Before implementing this new system, the Atlanta-based shipping company was planning to buy 30 jets to handle a predicted increase in package volume. After solving its scheduling problem, UPS determined it could get by with just 18 to 26 new jets. At $60 million a jet, UPS saved between $240 and $720 million, estimates Keith Ware, Operations Research Manager at UPS Airways.

Interactive Optimization System for GTE Telephone Network Planning

With operations extending from the east coast to Hawaii, GTE (now known as Verizon) is the largest local telephone company in the United States. Even before its 1991 merger with Contel, GTE maintained more than 2,600 central offices serving over 15.7 million customer lines. It does extensive planning to ensure that its $300 million annual investment in customer access facilities is well spent. To help GTE Corporation in a very complex task of planning the customer access network, GTE Laboratories developed a decision support tool called Netcap that is used by nearly 200 GTE network planners. Netcap improved productivity by more than 500% and saved GTE an estimated $30 million per year in network construction costs.

Managing Consumer Credit Delinquency in the US Economy

GE Capital provides credit card services for a consumer credit business exceeding $12 billion in total outstanding dollars. GE Capital's objective is to optimally manage delinquency by improving the allocation of limited collection resources to maximize net collections over multiple billing periods. The company developed a probabilistic account flow model and statistically designed programs to provide accurate data on collection resource performance. A linear programming formulation produced optimal resource allocations that have been implemented across the business. operations research application has permanently changed the way GE Capital manages delinquent consumer credit, reduced annual losses by approximately $37 million, and improved customer goodwill.

Industrial Gas Inventory Management & Customer Service

For Air Products and Chemicals, Inc., inventory management of industrial gases at customer locations is integrated with vehicle scheduling and dispatching. Their advanced operations research-based decision support system includes online data entry functions, customer usage forecasting, a shortest path algorithm to compute travel times and distances, a mathematical optimization module to produce daily delivery schedules, and an interactive schedule change interface. The optimization module uses a sophisticated Lagrangian relaxation algorithm to solve mixed integer programs with up to 800,000 variables and 200,000 constraints to near optimality. The system, first implemented in October 1981, has been saving between 6 and 10% of operating costs.

Route Planning

A mini-computer-based information system with online optimal route planning capability was developed to assist dispatchers on the complex northern portion of The Southern Railway's Alabama Division. The routing plan is revised automatically as conditions change. Since implementation in September 1980, train delay has been more than 15 % lower, reflecting annual savings of $316,000. The dispatching support system is now being expanded to all other Southern Railway operating divisions with $3,000,000 annual savings expected from reduced train delay.

New Product Market Assessment

An integrated modeling and measurement system, Assessor provides management with forecasts and diagnostic information about the sales potential of new packaged goods before they are test marketed. Over the past decade, Management Decision Systems has applied the methodology to 450 new products. A study indicates that Assessor has helped reduce the failure rate of new products in test markets by almost half and saved the 100 client firms an estimated $120 million.