Management Science and Operational Research Blog

Despite Operational Research’s success stories in business process optimization, it is lesser known than Management Practices like Lean or Six Sigma. Once I decided to leave my industry job in order to study Operational Research (OR), many of my colleagues needed a thorough explanation before they understood what I was going to study. Intriguingly, most of them were considering the implementation of Six Sigma or discussed the development of a Lean Management system (i.e. MyCompany Production System) or just read Goldratt’s Book about the Theory of Constraints¹ (TOC).

Why are these techniques so popular? Why do most companies Lean Management or Six Sigma instead of Operational Research? How does Operational Research differ from these Management Practises? And how might OR contribute to them?

Lean Management vs. Six Sigma vs. Theory of Constraints

Lean, Six Sigma and TOC are the very popular approaches if it comes to the enhancement of operational efficiency and effectiveness. They all have different starting points. Lean Management looks for waste reductions and value flows. Six Sigma measures statistical variances and aims at their reduction. Theory of Constrains focuses on bottlenecks, which subordinate all other processes.

These approaches also use different techniques and vary significantly in the social dimension during implementation. Lean Management is a very decentralised concept and does most of the implementation right at the bottom of the organisational pyramid. Employees are trained in the use of simple but effective heuristics and and visual tools in order to improve their own workplace. Most of the Six Sigma implementation occurs in the middle of the pyramid. A body of specially trained employees, the black- and green-belts, are in charge of devising and coordinating improvement projects. Theses employees need a lot of special training because Six Sigma uses advanced statistical methods. Theory of Constrains occurs more at the top of the pyramid. A few competent managers with a systems perspective identify the bottlenecks within the workflow. Subsequently they apply a couple of standard techniques in order to reduce the system’s dependency on them.

Despite their differences, all approaches end more or less in the same place: A levelled flow between workstation with minimal variances, reduced waste and lesser inventory.

A more complete comparison between these management practises can be found in Dave Nave’s article².

Hard vs. Soft Operational Research

Traditional Operational Research, also called Hard Operational Research, improves a the efficiency and effectiveness differently. It abstracts a system (i.e. a assembly plant) by generating mathematical or computational model. The model builds the basis for analysis and optimisation. A whole battery of different methods has been developed to do so. Mathematical Programming, Discrete Event Simulation, Dynamic Programming and Markov Chains are some examples.

The limits of this approach are known and have been widely discussed for a long time³. Hard OR fails if uncertainty can’t be expressed statistically, if the current state of the system is not known exactly, if the aim is not clear, if there are conflicts or if there might be a lack of commitment. These problems gave rise to the development of the so called Soft Operational Research Methods⁴. These techniques aim at the understanding of a problem situation, the accommodation of conflicts and creation of commitment. They borrow heavily from Psychology and Sociology. Quantitative analysis and optimisation are not of importance.

Both kinds of Operational Research also differ in regard to the interaction with the system. Hard OR is formalised by creating an abstract model of the system, which will be analysed and optimised. The result of such analysis must then be implemented. Soft OR formalises the interaction with the system, hoping that this interaction will lead to some kind of improvement.

The contribution of Operational Research

Why are Management Practises much more popular than Operational Research? What do have Operational Research and Management Practices in common? How they might complement each other?

I believe that the success of Management Practises lies in their holistic approach. The philosophy of implementation is very much like Soft OR. The interaction with the system is formalised, not the analysis. I also believe that the popularity of Lean Management and Six Sigma is based on their participative approach, which creates commitment and might accommodate conflicts. This also could explain the lesser popularity of Theory of Constraints.

But if you look closer how Management Practices work, you encounter the application of scientific methods a whole battery of quantitative tools. So it seems that such practices appear as a Soft OR methodology from the distance but carry a lot of Hard OR in the inside. So a well chosen blend of Hard and Soft Methods might be the one of their success factors. Sadly, such mixing and combining isn’t very popular in the OR community⁵.

So one obvious contribution of Operational Research to Management Practices would be the development of its very own Methodology, a successful blend of Hard and Soft OR. Besides that, Operational Research can also enhance current Management Practices.

One possibility might be the development of new quantitative tools. Operational Research is known for its strengths in model building. Such models are simplified versions of reality and help to think through a tactical problem. OR has been developing such tools and thought about their visualisation and implementation for decades. This experience might enrich and expand the Six Sigma and Lean Management toolboxes. For example, the application of Game Theory could be of assistance during the analysis of competitive situations in sales.

Another route might be the refinement of Management Practice’s ’soft side’. Soft Operational Research knows a lot about the how and why of participative methods, due to its academic origin. This applied knowledge in psychology and sociology might also serve for the improvement of Management Practices’ frameworks. The use of Cognitive Psychology in order to guide employees through a change process might be one example.

And finally Operational Research could bring its system perspective into Management Practices. One strong point about Hard Operational Research is its attempt to get a grasp of the whole system, and therefore avoids that local improvements might lead to suboptimal results. For example, employees could create a System Dynamics model of their workplace, which then links to the models or their ’suppliers’ and ‘clients’. That way each employee understands better the influence of his doing on the internal and external dynamics of the entire company.

Conclusion

Operational Research could be a serious competition to current Management Practices, if it only overcame internal rivalry between the Hard and Soft OR. It also could contribute to current Management Practices by complementing their toolboxes and refining their frameworks. And finally, OR could bring a better system’s perspective to Management Practices.

The big questions is: Does all this already happen? If not, what is missing?

1. Goldratt, Eliyahu M.; Jeff Cox. The Goal: A Process of Ongoing Improvement. Great Barrington, MA.: North River Press. [↩]
2. Nave, D. How to compare six sigma, lean and the theory of constraints. Quality Progress, p. 73-78, Mar. 2002. [↩]
3. Ackoff, R. L.: 1979, The future of operational research is past, The Journal of the Operational Research Society 30(2), 93–104. [↩]
4. Mingers, J. and Rosenhead, J.: Rational Analysis for a Problematic World Revisited, John Wiley & Sons, Chichester. [↩]
5. Munro, I. and Mingers, J.: 2002, The use of multimethodology in practice-results of a survey of practitioners, The Journal of the Operational Research Society 53(4), 369–378. [↩]