THE RELEVANCE AND APPLICATION OF OPERATIONS RESEARCH IN MANAGERIAL IN MANAGERIAL DECISION MAKING (A CASE STUDY OF NIGERIA MANUFACTURING ORGANIZATION)

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ABSTRACT

Operations research is one of the most comprehensive research and analysis approaches to decision making.  It is a product of World War II.  Although its antecedents in scientific method, higher mathematics, and such tools as probability theory go back far beyond that period.  There is extensive empirical evidence on its successful application in solving problems in American industries and across Europe.  But not much has been heard of its usefulness in Nigeria.  This research study is therefore a move toward this direction.  The study is focused at findings out the relevance and the extent of application of Operations Research techniques in the decision-making process of managers in manufacturing firms across the South Eastern zone of Nigeria. To realize the objective of this study, the quasi-experimental design was employed, likewise, the descriptive research was used because it allows the researcher to look for fresh ideas and insight which helps to explain what was seen and how the identified variables inter-relate.  Employing the simple random sampling technique, a sample size of 133 (determined through Saunders formula) out of the 1,482 workers in the six (6) manufacturing firms selected from Abia, Anambra and Imo States was used for this study.  Primary data was collected through the administration of structured questionnaire validated by experts to ascertain the appropriateness of the items. Oral interviews were conducted as appropriate simple percentages were also used for data analyses.  The Chi-square formula was to test the research hypothesis. The findings of the study showed that Basic statistics, inventory control techniques forecasting technique, Break-even analysis and decision analyses are the most frequently applied operations Research techniques in decision-making process of Nigerian managers in manufacturing firms.  Only very few (23% or 31%) managers are familiar with the use of transportation technique, linear programming, computer simulation and PERT/CPM.  It was further revealed that these techniques have been successfully applied by Nigerian managers in decision concerning the selection of building sites of plants, pricing, advertising and bidding procedures, development of quantity discount schedules, compatibility analysis for new products, and in locating points of distribution and warehousing. We  strongly recommend the formation of Operations Research associations among Nigeria managers in public and private sectors and practitioners for there is none existing for now.  This, we feel will encourage the floating of more operations Research journals, and regular mounting of seminars and workshops, thereby improving on the awareness level of the existence and relevance of Operations Research in Nigeria.

 

 

 

TABLE OF CONTENTS

Title page                                                                                          i

Certification                                                                                                ii

Dedication                                                                                         iii

Acknowledgement                                                                                       iv

Abstract                                                                                            vi

Table of contents                                                                               vii

List of Figures                                                                                   xi

List of Tables                                                                                    xii

CHAPTER ONE:  INTRODUCTION

1.1     Background of the study                                                                   1

1.2     Statement of problem                                                              3

1.3     Objective of the study                                                              3

1.4     Research Hypotheses                                                               4

1.5     The Significance of the study                                                   5       

1.6     The Organization of the study                                                 6

1.7     Assumptions of the study                                                                 6

1.8     Scope and Limitations of the study                                         7

1.9   The Historical Background of the Study Area                                    8

          References                                                                               9

CHAPTER TWO:  REVIEW OF RELATED LITERATURE

2.1     Introduction                                                                                      10

2.2     Historical Development of Operations Research                    11

2.1.2  Essential Characteristics of Operations Research                             13

2.1.3  Operations Research Methodology                                          16

2.2       Operations Research Techniques Used in Managerial Problems         26

2.2.1  Linear programming                                                                27

2.2.2  Transportation, Assignment, and Transshipment problems                      29     

2.2.3 Network Models                                                                      33     

2.2.4  Project Management:  PERT/CPM                                          38

2.2.5  Inventory Models                                                                    44

2.2.6  Waiting Line Models                                                                49

2.2.7  Computer Simulation                                                              55

2.2.8  Decision Analysis                                                                   59

2.2.9  Forecasting Techniques                                                            64

2.3     Areas of Application of Operations Research                         65

2.3.1  Utilization of Operations Research Techniques in Europe                71

          References                                                                                77

CHAPTER THREE:  RESEARCH METHODOLOGY

3.1     Introduction                                                                                      78

3.2     Research Design                                                                      78

3.3     Data Collection                                                                       79

3.3.1  Desk Survey:  Secondary Source                                            79

3.3.2  Field survey:  Primary Source                                                 80

3.3     The population of the study                                                    80

3.4     Sampling Criteria                                                                    81

3.5     Sampling Size                                                                          82

3.6     Data Processing                                                                       84

3.7     Data Analysis                                                                         85

CHAPTER FOUR:  DATA PRESENTATION ANALYSIS AND

INTERPRETATION

4.0     Introduction                                                                                      86

4.1     Data Presentation                                                                    86

4.2     Data Analysis                                                                          88

4.3     Testing of Hypotheses                                                             89

CHAPTER FIVE: SUMMARY OF FINDING, CONCLUSIONS

AND RECOMMENDATIONS

5.0     Introduction                                                                                       117

5.1     Summary of Findings                                                              118

5.2     Recommendation                                                                     123   

5.3     Conclusion                                                                               125

          Bibliography                                                                           126

          Questionnaire                                                                          129

 

CHAPTER ONE

INTRODUCTION

    1. BACKGROUND OF THE STUDY

The necessity for business enterprises to make effective decision has never been more apparent than it is now.  Pressures, primary of an economic nature dictate that business must be run effectively and this can only be done by rational decision making based on the best available approaches and techniques.

Manufacturing industries exist to create products and services that are satisfying to customers at a profit.  Thus, the ultimate goal of any concern is to maximize profit by satisfying customer’s want.  This however, carries with it a lot of cost implications.  According to Ackoff and Arnoff (1980:21) “It will therefore, be proper if the main objective of business as given above is re-stated as to maximize cost and maximize profit effectively and efficiently by satisfying consumer’s want”.  This objective cannot be achieved without adequate information, facts and figures upon which decision is based.  The provision of the necessary facts, information’s and figures are often seen to be provided by the tool, and technique called Operations Research or Management Science.

Operations Research is one of the most comprehensive research and analysis approaches to decision making.  It is a world War II, although its antecedents in scientific method, higher mathematics and such tools as probability theory go back far beyond has followed the whole trend of applying the methods of the physical scientist and the engineer to economic and political problems.  It has also been made possible by the development of rapid computing machines.

Fundamentally, decision-making involves the choice between alternative actions.  In many cases, alternatives will involve the determination of special numerical values.  While in other cases, alternatives may appear to strictly a qualitative nature.  Often however, one or more of these alternatives involves taking decisions, which are definitely quantitative.  For the mathematically minded manager with an extensive academic background, according to Anderson, et al (1991:40) the use of analytical techniques such as Operation Research present little in the form of problems, but for his more practitioners contemporary whose time and efforts have been more directed towards doing job than researching it, it is totally different matter.

Operations research has been extensively applied in solving completely managerial problems in industries in America and Europe.  But not much has been heard of any successful application of this tool in Nigeria.  The research study is therefore, an attempt to investigate the relevance and the extent of the application of Operations Research techniques in managerial decisions, using so (6) manufacturing firms selected from Abia, Enugu, Anambra and Imo State as case study.

    1. STATEMENT OF THE PROBLEM

The importance of manufacturing organizations in nation building cannot be over-emphasized.  Their contributions to job creation, wealth creation, national.  Income industrialization and government’s foreign reserve make them a significant catalyst for economic growth and development.  But the Nigeria manufacturing firms have not done much in this direction to the extent showing any appreciable improvements in our march toward industrialization.  This, many attribute to:

  • Persistent High Operating Cost and Expenses
  • Gross Under – Utilization of installed capacity.
  • Regular shutting down of the production plants, among others.

This research study is however, structured to specifically find out how the application of Operation Research in managerial decisions could assist in reducing or eliminating these problems.

1.3    OBJECTIVES OF THE STUDY

          The main objective of this study is to investigate the relevance and the extent of applications Research in managerial decisions by managers in manufacturing companies in Nigeria, using some selected manufacturing firms across South Eastern Zone of Nigeria as case study.  Other objectives include the following;

  1. To investigate the main reasons for high mortality rate of manufacturing firms in Nigeria, and specifically in South Eastern Zone of Nigeria.
  2. To find out how the application of Operations Research techniques can assist in reducing operating cost and expenses in manufacturing firms.
  3. To find out how and to what extent the application of Operations Research can help to improve capacity utilization in Nigeria manufacturing firms.
  4. To investigate the specific benefits the users of Operations Research techniques derive from doing so.
  5. To compare the operational activities of users and no-users of Operations Research among Nigerian manufacturing firms.
  6. To investigate the reasons for law awareness of the existence and the application of Operation Research in managerial decision in manufacturing firms in Nigeria.
  7. To make appropriate recommendations based on our findings.

1.4    RESEARCH HYPOTHESES

In line with the problems and objectives of this study, the following hypotheses were formulated and stated here in their null (HO:) form.

(1) Ho:     The growth and development of manufacturing firms cannot be accelerated through the application of Operations in managerial decision.

(2)  Ho:       Gains derived from applying Operations Research techniques in managerial decisions are not commensurate with the cost and efforts involved.

(3)   Ho:      The application of Operations Research techniques in managerial decision making process will not lead to any significant improvement in capacity utilization.

These hypotheses were tested in chapter four based on the data obtained from the field survey.

1.5    THE SIGNIFICANCE OF THE STUDY

Every research study undertaken is not done in isolation but for a purpose, as it will have a contribution to make both to the academic field and the society at large.  This study, therefore, is not an exception.  Firstly, it will improve the level of awareness of managers on the existence, relevance and the application of Operations Research techniques in managerial decisions.  Secondly, the study is significant in that business executives and mangers in public and private sector, and practitioners will find the result of the study useful and instructive.  The findings of the can equally be adopted by all manufacturing firms in Nigeria with appropriate adaptation to their peculiar needs.

1.6    THE ORGANIZATION OF THE STUDY

This research work is organized into five (5) chapters.  Chapter one I the introduction, under which the following were discussed, theoretical background of the study, the statement of the problem, objectives of the study, scope and limitations and the assumptions  of the study.

In chapter two, related literatures were reviewed to know the opinions and views of authorities and scholars on the subject of this research study.

Research methodology was discussed in chapter three.  The discussion covers such areas as research design, population, sample size, sources of data and the statistical instruments used for the analysis of data.  The data that were gathered were presented and analyzed in chapter four.  The summary of findings, conclusion and recommendations were presented in chapter five.

1.7    ASSUMPTIONS OF THE STUDY

          The following assumptions were made to guide the procedure used for carrying out this research study

  1. That the elements that make up our case will cooperate with the Research by filling and returning the questionnaire that were Administered correctly and promptly.
  2. That the management structures of our case study will enjoy relative stability throughout the survey period.
  3. That the right person shall give answers to the questions posed on the questionnaire when administered.

1.8         SCOPE AND LIMITATIONS OF THE STUDY

          This study was restricted to the application and relevance of Operations Research technique (as a branch of Quantitative Technique) in managerial decisions in manufacturing firms in South Eastern Zone of Nigeria.  The firms chosen were firms that produced standard products (Household, Food and Beverage, and Textiles).  Consequently, other firms not in this class were excluded.

          A major possible limitation of this study was the approach adopted in gathering our data.  This study adopted (and in fact, like most social science research) the variance – type investigation in which we employed highly structured data=gathering and quantitative analysis of cross-sectional data in out methodology.  Another vital constraint was the lukewarm attitude and the disappointment we got from some respondents who fixed appointments but do not meet up any.

          However, in-spite of these limitations we believe that our approach of blending structured and unstructured interviews with emphasis upon both quantitative and qualitative materials, complemented with several factory visits, shall provide some useful foundations for further empirical researches in this field, which inevitably will come to bear on the Nigerian manufacturing industry.

1.9    THE HISTORICAL BACKGROUND OF THE STUDY AREAS:

          JUHEL, HARDIS AND DROMEDAS.

          Juhel Nigeria Limited is located at Emene in Enugu, capital of Enugu State, Nigeria, it is a 100% indigenous company incorporated in 1987 with RC No 104 648 as a wholesale pharmaceutical company.

          In 1982, Dr. Ifeanyi Okoye, managing director and Chief Executive Officer of Juhel Nigeria Limited went into business, he did not go straight into pharmaceuticals where he specialized. Rather, he started in the petroleum industry by opening a gas plant.

          But with the passage of time, this pharmacist returned to this profession. And today, Judel Nigeria Limited has made an indelible market in the manufacturing sub-sector, particularly in the manufacture of drugs in Nigeria. Not rushing on his oars, this erudite pharmacist is pursing hard to begin the manufacture of injections ins the country, the first attempt in the sub-Saharan African except Egypt.

          Their brand and product range have since grown in strength and include virtually all therapeutic classes, such as, Antibiotics and Ant-infective, cardiovascular, Anti-diabetics. Anti-malarial, cough and cold, vitamins and minerals bottled mineral water Ivy table water etc.

          Hardis and Dromedas was incorporated in Nigeria, as a Limited Liability Company in the year 1993 and commenced business operations thereafter.

          Hardis and Dromedas Limited, has three manufacturing plants engaged in the manufacture of fine household and industrial hygiene, body care, beauty care products.

          Further more their Head office and major manufacturing plant is located at Emene Industrial Estate, Enugu, South-Eastern Nigeria. They have Branch Offices in Major Towns, including Lagos, port Harcourt, Aba, Onitsha, Uyo, Jos, Kano, Abuja, Makurdi Amongst others and a nationwide distribution network that ensures availability of our products at uniform and affordable prices.


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