Algorithms and the Economist

The Economist, in its September 13th issue, has a nice article on how businesses use algorithms to work better. From the introduction:

ALGORITHMS sound scary, of interest only to dome-headed mathematicians. In fact they have become the instruction manuals for a host of routine consumer transactions. Browse for a book on Amazon.com and algorithms generate recommendations for other titles to buy. Buy a copy and they help a logistics firm to decide on the best delivery route. Ring to check your order’s progress and more algorithms spring into action to determine the quickest connection to and through a call-centre. From analysing credit-card transactions to deciding how to stack supermarket shelves, algorithms now underpin a large amount of everyday life.

They have a number of very nice examples, including UPS:

For its fleet of aircraft in America, the company uses an algorithm called VOLCANO (which stands for Volume, Location and Aircraft Network Optimiser). Developed jointly with the Massachusetts Institute of Technology (MIT), it is used by three different planning groups within UPS—one to plan schedules for the following four to six months, one to work out what kind of facilities and aircraft might be needed over the next two to ten years, and one to plan for the peak season between Thanksgiving and Christmas. Getting the scheduling wrong imposes a heavy cost: flying half-empty planes or leasing extra aircraft is an expensive business. UPSVOLCANO has saved the company tens of millions of dollars since its introduction in 2000.

This UPS example is one of my favorite classroom examples of how algorithmic advances can be a key driver in success for a firm.

Of course, the phrase “operations research” never appears. I guess if people find algorithms scary, operations research will drive them away screaming. The magazine unwittingly shows why operations research never seems to get its due. In a sidebar, “ant algorithms” are given as an example of a powerful algorithm “with great potential”. The great strength of “ant algorithms” is a great name and a wonderful analogy. As for potential, perhaps… I would love to see an ant algorithm that can come close to the integer programming techniques that underly VOLCANO and other UPS systems.

Thanks to the four or five people who wrote me about this article. Even without mentioning operations research, articles like this are good for our field: they teach people the importance of our sorts of approaches to problem solving.