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Operations research for small business

University of British Columbia

This study is concerned with the practicability of using operations research in a small business. For purposes of the study, operations research is regarded as a separate management function for applying scientific methods to the understanding of the operations of goal-directed organizations. A small business is defined with regard to the size of its operations as having a value added of less than five million dollars per year. An examination of recent surveys demonstrates that operations research is a prevalent, growing and valuable management aid in large and medium sized companies. They also provide evidence that OR is not used extensively in small business. On the other hand, statistics on business failures and reports of research on the management of small companies provide evidence that small businesses have management problems which possibly could be solved by operations research. A survey of local small business management was conducted principally to determine the extent to which operations research is used by small companies, the reasons for non-use of OR by most small businesses and the existence of operating problems which might be effectively solved by operations research. This survey, as well as other evidence indicates that operations research is used to a very limited extent by small business. The reasons for non-use are: 1) the non-analytical approach of small business management, 2) the managers' lack of familiarity with operations research, 3) the lack of trained personnel, 4) the unavailability of accurate, relevant data, 5) the high cost of leasing and operating electronic computers and 6) the opinion that OR is not economical for small business. This survey and other research has identified small business problems to which OR might effectively be applied. Retaining consultants is a means of overcoming the lack of trained personnel especially if the small business maintains a continuing relationship with a consultant who has a small, flexible operation and the ability to assist in other management functions. Computer time-sharing and computer service bureaus are inexpensive means of obtaining the computer capability which is often necessary for operations research. Small computers may also be feasible for a small business if it has enough other data processing work. A case study of a local small business identified sales forecasting, capital budgeting, production scheduling and inventory control as areas in which operations research could possibly contribute towards the Company's goals. Formulation and testing of decision rules for inventory management and estimation of the costs of an inventory control system for the Company demonstrate that operations research is practical for this small business.

Text

2011-07-16

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http://hdl.handle.net/2429/36104

Business Administration

University of British Columbia

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