Small business owners are constantly making decisions that involve many factors. Most of the time, these factors are uncertain, and business managers are forced to make decisions based on their intuition and just a best guess. Operations research (OR) is a tool that helps small business owners run their companies better by taking a lot of murky factors and putting them into a manageable format.

## What is Operations Research?

Operations research quantifies the relevant factors of an issue and uses mathematical techniques to arrive at an optimal decision. That's the intimidating economic definition. For a better understanding, the following example shows a practical application of operations research techniques.

The production supervisor at The Old Tyme Toy Company is planning his schedule for the week. He has to decide how many units of wood soldiers and trains to make that maximizes profits. Each type of toy requires two types of labor: carpentry and finishing. The relevant factors that the production supervisor has to consider are as follows:

• Both types of toys make a profit of \$3 per unit.
• The carpentry crew has a total of eight man-hours available.
• The finishers have a total of nine man-hours available.
• Making a train requires two hours of carpentry and one hour for finishing.
• A soldier needs one hour of carpentry work and three hours for the intricate painting of the uniform.

Operations research solves this production dilemma with a technique known as linear programming. After setting up the formulas for the production and labor constraints, the supervisor finds that the optimal production schedule is to produce three trains and two soldiers. This product mix will yield a profit of \$15.