Operations Management: An Integrated Approach, 5th Edition

OPTIMIZATION WITHIN OM: HOW IT ALL FITS TOGETHER

As we discussed in the opening paragraphs of this chapter, everyone uses informal optimization thinking to make many routine decisions. However, formal optimization is used in all types of decisions in organizations. On a large scale, Continental Airlines recently developed an optimization-based system to better recover from unexpected events such as inclement weather, aircraft mechanical problems, and crew (pilots and flight attendants) availability. Disruptions in one part of the flight network cause ripple effects throughout, because planes and crews do not get where they need to go. CALEB Technologies developed a system called CrewSaver that has already helped Continental recover from major disruptions ranging from weather delays to the September 11, 2001 terrorist attacks. Since 2000, CALEB estimates it has saved Continental $40 million due to more effective recovery procedures.

On a smaller scale, but no less significant to the organization, Welch's has developed a spreadsheet-based optimization tool to help it develop the optimal recipes for fruit juices. Since raw ingredient supplies and prices vary and demand also changes, management must have a tool that will provide the optimal allocation of the raw materials to the products. The tool is used each month to aid management in the logistics plan. The savings during the first year (1994) were between $130,000 and $170,000.