"There has never been an era in which the business environment changed as rapidly as it does now. As uncertainty in management grows, accurate decision-making can determine whether a company survives."
Lee Joo-han, a specialist in optimization consulting at LG CNS, made the remarks in an interview with The Seoul Economic Daily on the 7th, saying, "The reason companies need mathematical optimization is to make decisions across all business activities quickly and accurately."
Mathematical optimization refers to a method of building mathematical models that account for real-world variables and constraints in order to find an optimal solution, or combination of variables. Companies combine a wide range of variables to achieve specific goals such as cutting costs or maximizing profit. As decision variables and external factors increase, the number of possible cases easily surpasses millions or tens of millions. Mathematical optimization is the engineering technique that dramatically shortens the time needed to select the best option without comparing each of an astronomical number of variable combinations one by one.
LG CNS launched its mathematical optimization business in 2017 and in 2019 became the first company in South Korea to establish a dedicated mathematical optimization organization. The company has continued the business of diagnosing current problems and proposing specific improvements based on client requirements. From 2017 through the first half of this year, LG CNS has won more than 200 mathematical optimization projects.
A flagship result is a project that cut warehouse inventory at a domestic air conditioner manufacturer by about half. The client had struggled because indoor and outdoor air conditioner units were produced at different rates. The two products must be shipped as matched pairs, but units left without a counterpart were moved to a separate logistics warehouse and piled up. Seventy percent of manufactured products were sitting in warehouses at any given time, and the inventory management costs fell entirely on the client.
"The first step in mathematical optimization consulting is to identify a company's problems in concrete terms," Lee said. "We understand the knowledge of the industry the client belongs to and pull together the client's business model and competitors' trends to derive problems and improvement measures." Lee added, "The process of commercializing mathematical optimization involves not only mathematical optimization experts but also industry experts, business process innovation experts and solution experts."
LG CNS is also pursuing the development of next-generation mathematical optimization techniques through industry-academia cooperation. The company is conducting research with the Seoul Metropolitan Government and Seoul National University on combining quantum computing technology with mathematical optimization. "The scale of data companies will use is going to grow even faster going forward, and the importance the industry places on mathematical optimization is growing accordingly," Lee said. "LG CNS is strengthening industry-academia ties to solve real-world problems based on academic and logical solutions."
