The Relevance and Application of Operations Research in Managerial Decision-Making in Nigeria’s Manufacturing Organization
Chapter One
OBJECTIVES OF THE STUDY
The main objective of this study is to investigate the relevance and the extent of applications of Research in managerial decisions by managers in manufacturing companies in Nigeria, using some selected manufacturing firms across the South Eastern Zone of Nigeria as a case study. Other objectives include the following;
- To investigate the main reasons for the high mortality rate of manufacturing firms in Nigeria, specifically in the South Eastern Zone of Nigeria.
- To find out how the application of Operations Research techniques can assist in reducing operating costs and expenses in manufacturing
- To find out how and to what extent the application of Operations Research can help to improve capacity utilization in Nigeria manufacturing
- To investigate the specific benefits the users of Operations Research techniques derive from doing
- To compare the operational activities of users and no-users of Operations Research among Nigerian manufacturing
- To investigate the reasons for low awareness of the existence and the application of Operation Research in managerial decisions in manufacturing firms in
- To make appropriate recommendations based on our finding
CHAPTER TWO
REVIEW OF RELATED LITERATURE
INTRODUCTION
This study investigates the relevance and the extent of adoption of Operations Research (quantitative analysis) in managerial decisions.
The following review of related literature is divided into three parts. The first (conceptual framework) section discussed briefly, the concept and approaches to decision making in management. Second, the theory of operations research. The third and final section discussed some studies carried out on the relevance and application of operations research across the globe and their implications for sustainable development.
There are almost as many definitions and names of Operations research as there are authors on the subjects. Perhaps this is because operation research apparently means different things to different people. Lucey (1988:42), defines research as “the attack of modern science on complex problems, arising in the direction and management of large system of men, machines, materials and money in industry, business, government and defense”. Herman and Magee (1972:33) on their own say, Operations research is “the application of scientific attitude and the associated techniques to the study of operations whether in business, government or in military”.
Anserson, et al (1991:51) also define Operation research as “an approach to managerial decision making that is based on scientific method, makes extensive use of quantitative analysis”.
In a similar vein, the Encyclopedia of Professional management (1995) defines operations research as “the study of complex systems of people, equipment money and operations procedures for the purpose of understanding how they function, in order to improve their efficiency and effectiveness”. The authors went further to say that such studies are conducted through the use of the scientific method, utilizing and knowledge from the physical mathematical, and behavioral sciences.
Generally, the ultimate purpose of operations research is to provide the manager with a sound, scientific and quantitative basis for decision making.
HISTORICAL DEVELOPMENT OF OPERATIONS RESEARCH
During World War II, the various countries engaged in the war were confronted with enormous problems of planning and coordinating various military and economic activities (Wisniewski 1994). Teams of able minds from the government, the limitary, business and University Communities such as the Physicists, Chemistry, Mathematicians, Actuaries etc, were assembled in a number of these countries, for example, England and the United States, plan and coordinate the war effort. It then became apparent that new techniques must be developed to make sound analysis possible.
Many new analytical techniques (including Operations research) were indeed developed that period . One common characteristic used as a reference point was to establish, as the first step, quantitative relations among the activities to be taken in account. After the war most British industries maintained their own Operations research groups, examples are the United Steel Companies Group, the National Coal Board, and the British Iron and Steel Research Association (Harper, 1975).
Also, the United States military organizations followed Britain’s lead and installed Operations research in its own ranks. It has continued to use it since the end of the war, and an Operations research group is active in each of its branches for example, Operations Evaluation Group (Navy), the Operations Analysis Group and Rand Corporation (Air Force), and the Operations Research Office (Army)..However the accelerated growth of Operations research in recent years has followed the trend of applying the methods of physical Sciences and engineering to economic and political problems.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
This chapter presents the blueprints of how the research was conducted. It covers such areas as the data collection, the sampling techniques and sample size, questionnaire design, operational measures of the variables and the data analysis techniques.
THE RESEARCH DESIGN
Baridam (1995), citing Abdalah, et al (1979: 32) described research design succinctly thus: “Research design does not mean the specific method for collecting data through Questionnaire, interviews of direct observation but rather it is the more Fundamental questionnaire of how the study subject will be brought into the scope of the research and how they will be employed within the research setting to yield the required data;
From the above, the research design therefore, could be seen as a complete framework that guide a researcher in collecting and analyzing the data for a study. The Quasi-experimental design study was used for this study because the elements of the design like, research setting, the explanatory variables, the study subject were not under the control of the researcher. Also, this study employed the descriptive research approach known as the survey research. This technique allows the researcher to look for ideas and insight, which helps to explain what and how certain variables interrelate.
DATA COLLECTION
The main sources of data collected for this study comprised of a desk and a field survey.
Desk Survey: Secondary Sources
The secondary data used for this research study were gathered from several establishments and individuals within and outside Nigeria. These include the following;
- University of Nigeria, Nsukka and Enugu Campus Libraries
- University of Uyo and Abia State University, Utulu Libraries
- Nigeria Bottling Company Ltd, Owerri
- Rokanna Industries Plc, Nkede
- Dozie Plastic industries, Onitsha
- General Cotton Mill (GCM),Ogbaru
- Unilever Nigeria, Plc, Aba Factory
- Nigeria Breweries Plc, Aba Plant
- Internet (Websites)
- Manufacturers Association of Nigeria (MAN Aba State Branch)
- Federal Ministry of Trade and Commerce
Such documentary secondary data are, textbooks, journals, and magazines, special publications, annual report and accounts, encyclopedia, newspapers handbooks etc.
Field Survey
Primary data were collected from management staff in six (6) manufacturing firms firm three (3) Eastern States of Nigeria (Aba, Anambra and Imo) principally, questionnaire was used to collect primary data from these firms. In addition, interviews and observations were use to complement the information supplied through the filling of the questionnaire.
The questionnaire contained a list of some close-ended and open-ended questions in order to incorporate alternatives not foreseen. A structured questionnaire was used for the interviews conducted with the managers in the six (6) manufacturing firms. This was done to guarantee a standardized basis of data, which was compared across all firms. This procedure was completed by a formal discussion, which proved effective for uncovering the problematic processes of change. Observations of the activities of these firms were also made through several shop floor visits.
THE POPULATION OF THE STUDY
The population study was made up of the management staff of all registered manufacturing firms in South Eastern States of Nigeria (Aba, Anambra, Ebonyi, Enugu and Imo). A survey of these industries conducted in 1998 with an update in 2001, by the Abia State Chamber of Commerce, Aba, shows that there are 62 registered manufacturing firms in this zone. The publication was used as our sampling frame.
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
INTRODUCTION
We describe the methodology of our research in chapter three and this basis data were collected from one hundred and thirty three (133) managers participating in the study on the relevance and the extent of applicability of operations research in managerial decisions. THIS chapter hereby presents the data collected, their analysis and interpretation.
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATION
INTRODUCTION
It is very necessary to re-emphasize at this point that the main objective of this research study was to find out how relevant and applicable is Operation Reserch in managerial decisions focusing on some selected manufacturing firms in south eastern zone of Nigeria . The study was therefore, designed to answer questions on those identified problems of this research study some of which include:
- High mortality rate of manufacturingfirms
- Prevalent under-utilization of installedcapacity
- High operating costs andexpenses
- Low awareness rate of the existence and relevance of Operations Research.
- Dearth of indigenous reference materials and research studies on Operations Research.
However, for the objective of the study to be obtained, data were obtained from three (3) levels of management staff namely, Top level managers, middle Managers and the Operational managers in six (6) Manufacturing firms from three (3) states (Abia, Anambra and Imo). Also five (5) hypotheses were tested in the relevant sections of chapter four. Likewise, we explained the measurement techniques formulated in analyzing the data so collected and testing the formulated hypotheses as a matter of procedure.
The purpose of this chapter is therefore, to present and discuss results obtained from the collection and analysis of data. And also, to conclude the research work and make necessary recommendations.
SUMMARY OF FINDINGS
The following were our discoveries in the course of this research study:
- From the total number of one hundred Nineteen (119) Managers who participated in this research study (as respondents), seventy six (63.87%) of them have been applying Operations Research techniques in their decision. And in fact are very familiar with these techniques. Forty three (36.13%) have not used Operations Research techniques at
- It was also discovered that only 14 (11.76%) women are occupying managerial positions in these firms. From the interview conducted, the women said they are been discriminated against. While some male managers told us during our discussions that the small number of female occupying managerial positions is due to some cultural and environmental
- From the analysis of question 11 on the questionnaire, we discovered that most managers linked high rate of business failure to wrong decision-making. They claimed that Operations Research is capable of generating objective, reliable and accurate informationthat could serve as input to sound With a sound decision in place the likelihood of business failure will be removed.
- Also, wefound out that the most commonly used Operations Research techniques among managers in Nigerian
- Firms are, Basic Statistics (mean, Median, Mode, Bar-Chart, Pie- Chart, Histogram etc), Inventory control techniques, Break – Even Analysis, Forecasting techniques and decision analysis. Fifty two (68%) managers out of the seventy six (76) who claimed to be familiar with the applications of Operations Research techniques have used some of the above techniques successfully in solving some complex managerial problems. While a total of 24 (31%) managers have used and are familiar with the use if linear programming, Computer Simulation, Transportation Technique andPERT/CPM.
- The study also revealed that Operation Research has been applied by Nigerian Managers in decisions relating to thefollowing:
- Selection of building site ofplant
- Development of pricing, advertising and biddingprocedures
- Estimating credit and investmentrisks
- Locating points of distribution andwarehousing
- Capability analysis for new productdevelopment
- Determination of media-mix that minimizes the advertising effectiveness
- Development of production of schedule and inventory policy
- Selection of investment portfolio
- Though Operations Research is sometimes given an aura of mystery by their mathematically inclined proponents. Still some users said they have been having some difficulties in using the technique in their decisions. Some of the difficultiesare;
- Difficulty in interpreting and implementing the results of Operations Research. This they said is because most Operations Research techniques produce optimal solution via models and model does not manufacturing firms. The null hypothesis was rejected and the alternate hypothsis accepted because the calculated chi-square value of 37 was greater than the Chi-square theoretical value of 2.73. It was then concluded at 95% level of confidence that the application of Operation Research technique in managerial decisions will accelerate the growth and development of manufacturingfirms.
- Testing of hypothesis two revealed that gains derivable from the application of Operation Research techniques in managerial decisions often outweighs the costs and efforts The null (HO:) Hypothesis was also rejected because the Chi-square calculated value of 2.66 was greater than the chi-sqauare table value of0.71.
- The third hypothesis revealed that when Operation Research technique is properly applied there will be significant improvement in capacity utilization. The acceptance of the alternative hypothesis at 95% level of confidence states that operations research technique is a level catalyst for capacity utilization in manufacturing
- The testing of the fourth hypothesis revealed that the applications of Operations Research in managerial decisions will go a long wayto reducing the rate of business failure in Nigeria. THE NULL (HO:) hypothesis was rejected and the alternative accepted when the chi- square calculated value of 6.85 was found to be greater than the chi- square table value 1.15 at 95 level of confidence.
- Finally, discovered through the testing of hypothesis five that the application of Operation Research in managerial decisions will bring about a significant reduction in the operating costs and expenses of manufacturing firms. The null hypothesis (Ho🙂 was rejected while the
(Hi:) Hypothesis was accepted as 95% level of confidence.
COMPARING THE FINDINGS OF THIS STUDY WITH SIMILAR RESEARCH SURVEY IN AMERICA AND WESTERN EUROPE
The finding of this research study was compared with the outcome of similar studies in America and across Europe as reported by Shannon, et al (1994), Morgan (1998) and Wisniewsky (1994).
While we reported high frequency application and familiarity with the following Operation Research techniques by Nigerian managers. They are inventory control technique, Breakeven analysis and Basic statistics. Ledbetter and Cox (1997 ranked statistical analysis, Linear Programming , Simulation, Network models (PERT/CPM), Queuing, Dynamic Programming and game theory in order of usage and familiarity in American manufacturing industries, Gaither (1994), reported high frequency usage for Regression analysis, Simulation and Linear
Programing among American Managers. Likewise, as part of Shannon, et al (1990) asked practitioners to indicate whether or not they were familiar with and had used any of the Operations Research Programming, Computer Simulation, Network analysis and Queuing theory in that order are the most frequency utilized management science techniques.
All the above showed a major difference from the instruments/techniques that Nigerian managers are familiar with and have been applying in their decisions. Meanwhile, so much researchers have been undertaken in the United States into the use of Operations Research techniques by manufacturing firms. More limited research is available for Europe, but what is available, provides an interest insight into the use of operations research techniques. Wisniewski (1994) reported his experience as a member of the European – wide research team investigating the use of Operations Research techniques by manufacturing firms and their effectiveness in terms of organizational performance. His findings were very similar to what we discovered for Nigerian situation. About 90% (precisely 89%) of the firms responded that they use very regularly and are familiar with Basic statistics in their managerial decision. 77% are familiar with Decision analysis, 75% with inventory control techniques, 67 with Regression analysis, 40% with Linear Programming, 43% with project Management and 38% with PERT/CPM.
RECOMMENDATION
As a result of the issues that have surface from this study, the following recommendations were suggested:
- We strongly recommend that much more efforts should be put in place to encourage and assist Nigerian Managers in the use of such techniques as Linear Programming, Computer Simulation, CERT/CPM in their decision making process because of their usefulness in resolving complex
- Concerning the low level of awareness of the relevance and application of Operation Research among Nigerian managers, we recommendthat;
- Association of Operations Research practitioners be formed in Nigeria. There are seventy one (71) scholarly societies in Management Science and Operations Research in the world but none is existing in Nigeria. The only recognized scholarly society in Operations Research in Africa is the Operations Research Society in South Africa(ORSSA).
- When an association is put in place they should mount regular seminar, works and special training on Operations
- Operations Research journals should also be floated. Through this media the details of successful application of OR to specific business problems across the industries will be
- It is recommended that the outcome of the process of operations Research must be treated with caution and there must be due regard to the problems involved. This is because many of its techniques are applied via simplified versions of models, which do provide a solution to the actual real life problem. In this regard, the following factors must be considered;
- The appropriateness of the models to realproblem
- The accuracy of the data used and assumptions made where the objective of the ksub-optimizations is where the objective of the sub- system (e.g. a department) are pursued to the detriment of the overall organisation’s goals which is supposed to be
- We recommend a considerable expansion of the coverage of Operations research topics throughout business studies programmes in the higher Education sector. If possible it (Operations Research) should be taken as a degree course at the undergraduate level in Nigeria as it is in other parts of the world (e.g. UnitedKingdom).
- Just like it is required of every manager to be computer literate, every manager should also develop a general awareness and understanding of the more commonly used techniques of Operations
- Further studies on similar areas is highly
CONCLUION
The discussion of our empirical findings in manufacturing firms across South Eastern States of Nigeria has raised some concern as to the low level of awareness of the relevance and the application of Operations Research technique in managerial decisions. Operations Research do offer a method of analyzing a problems using proven techniques, of providing information about different decisions. It remains one of the vital tools for success in manufacturing industry. Lack of its application will spell doom for the industry. When industries get to appreciate this tool in decision making the industry will attain an efficient level never achieved before.
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