Written by Duke Peruzzi
Decision making is complex.
You make decisions every day. Some are big, some are small. However, even small decisions involve enormous complexity. Please tell me what I mean.
Think about something you probably do on a regular basis. It’s all about deciding what to wear to an important meeting. When you stand in front of your closet, three factors come into play.
1. you have a purpose. In this scenario, it’s probably to convey your professionalism.
2. There are variables. Choose from shirts, pants, shoes, jackets and accessories.
3. There are restrictions. You may only wear what is clean and available. And you need an item that matches that. Comfort can also be a constraint.
You must consider the constraints and identify which combinations of variables will help you achieve your goals. Even if you only have 10 shirts, 5 pairs of pants, 3 pairs of shoes, and 3 jackets, you have 450 combinations.
Thankfully, choosing clothes isn’t that difficult, so you can trust your instincts, get dressed and head to the meeting.
But what about big decisions that deeply impact your business? Well, it’s not that different from choosing an outfit.
Let’s take one real-life example. is to create efficient daily schedules for airlines around the world.
1. You have goals such as: Minimize fuel costs.
2. There are variables: Aircraft, gate, pilot, scheduled flight.
3. There are restrictions: Crew flight hours, gate availability, and aircraft capacity.
Identify which combination of available planes, gates, pilots, and scheduled flights can minimize fuel costs, considering crew flight hours, gate availability, and airline capacity constraints Must be.
This kind of decision is very complex. With just 50 aircraft, 30 gates, 200 pilots, and 500 scheduled flights, the possible combinations are astronomical.
You can also make decisions based on what has worked in the past, as many companies do. But what happens if past decisions were suboptimal? And what happens when disruption causes the present to no longer look like the past? If we made optimal decisions every day based on real-world conditions, we would have to pay less for fuel. How much can I save?
embrace complexity
This is where a proven and powerful decision-making approach comes in handy. It’s called “mathematical optimization.” Although this approach is not a buzzword like “machine learning” or “artificial intelligence,” mathematical optimization has been transforming business decision-making for more than 50 years.
The premise is simple. If you can describe a real-world problem in terms of measurable objectives, variables, and constraints, you can use mathematical optimization to find a solution.
Mathematical optimization is how the world’s largest companies solve highly complex business problems.
• national football league uses mathematical optimization to identify match schedules that maximize revenue while pleasing viewers.
• air france identifies new ways to optimize flight schedules, reducing annual fuel costs by 1%, amounting to millions of dollars each year.
• Mondelez International Schedule product shipments 92% faster than before using this method.
• blue yonder Real-time retail price adjustments increase product sales by 5% and reduce inventory by 20%.
• copenhagen airport Optimized allocation and saved $70 million.
Optimization opportunities are all around you
Mathematical optimization is already a hot topic in nearly every industry, including energy, transportation, manufacturing, supply chain, financial services, and healthcare. If you work for a Fortune 500 company, that strategy is almost certainly used somewhere within your organization.
Today, 80% of the world’s largest companies use Gurobi’s mathematical optimization technology. So there’s a good chance this strategy is already helping your organization solve its most complex challenges.
If you haven’t already, I encourage you to think about decisions in terms of goals, variables, and constraints. If a problem is measurable, it is solvable. Opportunities for mathematical optimization are all around you.
What’s especially powerful about this approach is that you can quickly pivot your business. Even when business interruptions occur, you can quickly calculate optimal decisions by simply adjusting variables and constraints. Imagine what that agility could do for your business.
We also encourage you to reach out to your operations research specialists who know how to apply the power of mathematical optimization to solve real-world problems. Find out how they use this approach and then start considering other problems you can solve using it.
Finally, join us at the Gurobi Decision Intelligence Summit in Amsterdam on November 5-6, 2024. There will be special presentations from Jumbo Supermarkten BV, KLM Royal Dutch Airlines and more. We look forward to meeting you!
Duke Perrucci is the CEO of Gurobi Optimization.
register here I will be attending the Gurobi Decision Intelligence Summit in Amsterdam this fall.