13.3.1 Mathematical Techniques
In principle, any mathematical technique can be used as a tool for operations analyst.
Mathematical techniques most commonly employed are: differential equations,
linear difference equations, integral equations, operator theory, vector and matrix
theory.
13.3.2 Statistical Techniques
Some of the most commonly applied techniques come from probability theory and
statistics. In everyday life, it is not easy to predict future events or the course of
present ones. Thus, such events become associated with probabilities to characterise
the uncertainties and provide data with realistic or plausible accuracy for decisionmaking. There are two types of probabilities:
(1) objective probability, where there is objective evidence (historical or common
experience) to justify the assignment of probabilities, e.g. die or coin.
(2) subjective probability, where no historical evidence exists and one has to rely on
one’s own estimation and the possible outcomes, to allocate probabilities.
Statistical techniques also include discrete and continuous probability, renewal
theory, Markov processes and stochastic processes. All these techniques are useful
when dealing with uncertainty, errors, sampling, estimation and prediction.
13.3.3 Inventory Models
Inventory models study resources which are idle such as materials, machines, labour
and money. Inventory models relate to two types of decisions:
(1) how much to produce (purchase or order) to replenish the inventory of an
item and
(2) when to produce (purchase or order) such that the total cost is a minimum.
Before deciding how much to produce or order, there are two basic inventory
costs to determine:
(a) the ordering costs, which are the costs of putting the item into the firm’s
inventory, comprising the cost of sending the purchase requisition, the cost of
issuing the purchase order, the follow-up cost, the cost of receiving the goods,
the cost of salaries and stationery, etc.
(b) the inventory carrying costs, also called the holding costs, include interest on
capital invested in inventory, obsolescence cost, storage space cost, stores
operation cost, taxes, insurance and pilferage cost and are expressed as a fraction
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13 Modelling in Infrastructure Planning
In principle, any mathematical technique can be used as a tool for operations analyst.
Mathematical techniques most commonly employed are: differential equations,
linear difference equations, integral equations, operator theory, vector and matrix
theory.
13.3.2 Statistical Techniques
Some of the most commonly applied techniques come from probability theory and
statistics. In everyday life, it is not easy to predict future events or the course of
present ones. Thus, such events become associated with probabilities to characterise
the uncertainties and provide data with realistic or plausible accuracy for decisionmaking. There are two types of probabilities:
(1) objective probability, where there is objective evidence (historical or common
experience) to justify the assignment of probabilities, e.g. die or coin.
(2) subjective probability, where no historical evidence exists and one has to rely on
one’s own estimation and the possible outcomes, to allocate probabilities.
Statistical techniques also include discrete and continuous probability, renewal
theory, Markov processes and stochastic processes. All these techniques are useful
when dealing with uncertainty, errors, sampling, estimation and prediction.
13.3.3 Inventory Models
Inventory models study resources which are idle such as materials, machines, labour
and money. Inventory models relate to two types of decisions:
(1) how much to produce (purchase or order) to replenish the inventory of an
item and
(2) when to produce (purchase or order) such that the total cost is a minimum.
Before deciding how much to produce or order, there are two basic inventory
costs to determine:
(a) the ordering costs, which are the costs of putting the item into the firm’s
inventory, comprising the cost of sending the purchase requisition, the cost of
issuing the purchase order, the follow-up cost, the cost of receiving the goods,
the cost of salaries and stationery, etc.
(b) the inventory carrying costs, also called the holding costs, include interest on
capital invested in inventory, obsolescence cost, storage space cost, stores
operation cost, taxes, insurance and pilferage cost and are expressed as a fraction
360
13 Modelling in Infrastructure Planning