Behavioral operations research

Behavioral operations research (BOR) examine and takes into consideration of human behavior and emotions when facing complex decision problems. BOR is the operations management analog of experimental economics and behavioral finance, and it is also often known as a part of management science. BOR relates to the behavioural aspects of the use of operations research in problem solving and decision support. The general purpose is to make better use and improve the use of operations research theories, so that the benefits received form the use of operations research are effectively realized in practice.^[1]

Overview

Operations research, or in other words operational research, involves a wide range of problem solving skills aiming to help individuals or organizations to make more rational decisions as well as improving their efficiency.^[2] However, operations research often assume that agents involved in the process or operating system, such as employees, consumers and suppliers, makes fully rational decisions. Their decisions are not affected by their emotions as well as their surroundings and that they are able to react and distinguish between different types of information.^[3] In reality, this is not always true, human behavior has an important role in decision making and worker motivation, therefore should be considered in the study of operations. This has led to the rise of Behavioral operations research, it is defined as the study of impacts that human behavior has on operations, design and business interactions in different organizations.^[4] Behavioral operations research aims to understand the decision making of managers and try to make improvements to the supply chain using the understanding given. Behavioral operations research includes knowledge from a number of fields, this includes economics, behavioral science, psychology and other social sciences. Traditional operations research and behavioral operations research has a common intellectual goal, aiming to make differences in operations outcome, such as flexibility, efficiency and productivity.^[5]

Theoretical influence

It has been known for a long time that humans have some limitations in their ability to collect and react to relevant information. When a decision or conclusion has to be made through complex information, human decision-makers often fail to comply with normative decision theories. Moreover, a person's lifestyle, social interaction and collective behaviors has clear influence on people's decision.^[5]

The breakdown of Cognitive Psychology Study which refers to the study of human mental processes and their role in thinking,feeling and behaving.

Cognitive psychology

This is a relatively new branch of psychology which focuses on the human's ability to make decisions, solve problems, learning, attention, memory and forgetting, these are only a few of the practical applications of this science, to some extent it is also related to motivation and emotion.^[6] Cognitive psychology is interested in what is happening within our minds when new informations is received and how do people response to these information, how are these reaction linked to our behavior and emotions.^[7] Cognitive psychology is considered as one of the dominant theoretical force in behavioral science nowadays, investigations have been taken place in different scientific ways trying to explain people's complex mental behaviors.^[8]

Social psychology

The Asch experiment shows that participants tend to adhere to the group norms.

People often have different reaction and behavior when they are put into different social situation, the aim of social psychology is to understand the nature and causes of individual behaviors.^[9] It questions or provides an insight of how our behavior relies on the physical environment.^[10] Social psychology theories help us understand why there are competition between individuals, it is often the case that individuals or organisations seek to protect and maintain their status, it has been observed that individuals and organisations are willing to sacrifice efficiency to achieve their goal of staying at a higher hierarchical position.In addition to status, social psychology also include people's behavior towards goal setting, feedback and controls, interdependence, and reciprocity.^[5]

Organizational Behavior

The use psychology in behavioral operations research all links to the idea of judging the relationship people's mental health and wellbeing and their behavior at work. Psychology experts often set up indicators to evaluate how the surroundings, such as working environment and noise can affect an employee in terms of their productivity at work.^[11] Organizational behavior is the study of ways people react or behave when they are organized in groups. The purpose of this study is to improve business productivity, trying to create a more efficient business organization. Organizational behavior theories are applied towards human resource trying to maximize the output from individual group members.The study of organization behavior can be broken down into different section, this includes Personality, Job Satisfaction and Reward Management, Leadership, Authority, Power and Politics.^[12]

Main streams of research

There are four main streams of research that can be consider as a part of behavior operations research, these research gives us an idea of the weakness of the current operations research model and the effectiveness of behavioral operations research in predicting human decisions and reactions when facing different situations.^[4]

Socio-technical view of technology management

Physical technologies can be defined as socio technology system which consist of humans, human activity, spaces, artifacts, tools, and communications media. This theory suggest that the social interaction at workplace is determined by the technology and techniques used at work. Therefore, a change in technology used at work can lead to unexpected consequences, this may include differences in motivation.^[4]

Human factor engineering

Human factor engineering can be applied to improve workplace, working systems and products aiming to reduce human errors during operations as well as improving human efficiency, productivity and operational performance. It often involves improvements of large machineries to reduce accidents during work, it is believed that behavior operations research can be related to human factor engineering as systematic errors, which happens very often technology and different machineries, can affect people's decision making and their interaction with the operating system.^[13]

Visualisation of Bullwhip effect

The bullwhip effect

The bullwhip effect happens along the supply chain of an organisation, this is when agents along the supply chain fail to pass on relevant and accurate information to their superior leading to a large variation in the demand of goods and services from the customers and the supply from the organisation.^[14] Human behavior is a very important aspect to be considered, as decision making and emotions in market is a very important fact to be considered and it will make a big difference to the final result of the bullwhip effect. This is because, managers who can calmly make decisions while others competitors panic and deliver inaccurate messages often perform better within the industry. When the market is in poor conditions, 'fear' can be an important factor affecting managers decisions, therefore human behavior is closely related to people's decision.^[15]

System dynamics models in operations contexts

System dynamics models in operations contexts focuses on the importance of how components in a system interact with each other as well as providing an overview of the processes that takes place within the system. Behavioral operations research often benefit from the development of comprehensive systems models as they are able to analyse and provide an insight of the operational system, this allows the study of behavioral operations to understand how people in these settings or work conditions think about the context in which they operate. In an operations system it often involves lever for managers to manipulate the components involved in the system, the uses of these levers are determined by human behaviors and these behaviors include feelings of stress and fear.^[16]

Problems related to BOR

Newsvendor problem

The newsvendor model (or newsboy or single-period or perishable) is a mathematical model used in operations management and applied economics to determine optimal level products or services to keep in stock when the demand is unknown. This model is also known as the Newsvendor Problem by analogy with the situation faced by a newspaper vendor who must make on time stocking decision of how many copies of newspaper to keep in stock when facing uncertain demand. If the newspaper vendor stocks too much, these newspaper may end up worthless by the end of the day as they are no longer up-to-date. However, if the newspaper vendor stocks too little, he misses the opportunity too make more profit and suffer loss of goodwill.^[17]

Heuristic performance regarding the secretary problem - Expected success probabilities for three heuristics

Assignment problem

The assignment problem is one of the complex optimization problems, the problem consist with a number of agents and a number of tasks. The purpose is to assign each agent with a task, these can be any tasks. All agents are expected or aimed to be allocated in a way that will maximize productivity and efficiency but minimize the total cost of the assignment.

Secretary problem

The secretary problem can also be called the optimal stopping theory, it focuses heavily in applied probability, statistics and decision theory. The idea behind the secretary problem is that to make the best decisions when there is a pool of different options, other options are unknown, details of other options will only be given if the currently existing option is given up. The problem comes down to the idea of optimal strategy, maximizing the probability of selecting the best option.

References