Summer

Exam Oct/Nov 2015

2015

Masters of Business Administration

MBA Semester 2
MB0048 OPERATIONS RESEARCH
Assignments
Q1. What are the features of operations research? What are the
limitations of operations research?
Answer:
List and explain any five features of operations research:

OR is system-oriented. OR scrutinizes the problem from an

organizations perspective. The results can be optimal for one part of
the system, while the same can be unfavorable for another part of the
system.

OR imbibes an interdisciplinary team approach. Since no single

individual can have a thorough knowledge of all the fast developing
scientific know-how, personalities from different scientific and
managerial cadre form a team to solve the problem.

OR uses scientific methods to solve problems.

OR increases effectiveness of the managements decision-making
ability.
OR uses computers to solve large and complex problems.

List and explain the five limitations of operations research:

The limitations are more related to the problems of model building, time, and
money factors. The limitations are:

Magnitude of computation Modern problems involve a large

number of variables. The magnitude of computation makes it difficult
to find the interrelationship.
Intangible factors Nonquantitative factors and human emotional\
factors cannot be taken into account.

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Communication gap There is a wide gap between the expectations

of managers and the aim of research professionals.
Time and money factors When you subject the basic data to
frequent changes then incorporating them into OR models becomes a
costly affair.
Human factor Implementation of decisions involves human relations
and behaviour.

Q2. a. Explain the graphical method of solving Linear Programming

Problem.
b. A furniture manufacturing company plans to make two products:
chairs and tables- from its available resources, which consists of
400 board feet of mahogany timber and 450 man-hours of labor. It
knows that to make a chair requires 5 board feet and 10 man-hours
and yields a profit of Rs.45 while each table uses 20 board feet and
15 man-hours and has a profit of Rs.80.
Formulate the LPP to maximize the profit.
Answer:

a)

Graphical Methods to Solve LPP

While obtaining the optimal solution to an LPP by the graphical method, the
statement of the following theorems of linear programming is used:
The collection of all feasible solutions to an LPP constitutes a convex
set whose extreme points correspond to the basic feasible solutions.
There are a finite number of basic feasible regions within the feasible
solution space.
If the convex set of the feasible solutions of the system of
simultaneous equation is a convex polyhedron, then at least one of the
extreme points gives an optimal solution.
If the optimal solution occurs at more than one extreme point, the
value of the objective function will be the same for all convex
combination of these extreme points.
Working rule
The method of solving an LPP on the basis of the above analysis is known as
the graphical method. The working rule for the method is as follows.
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Step 1: Formulate the problem in terms of a series of mathematical

equations representing objective function and constraints of LPP.
Step 2: Plot each of the constraints equation graphically. Replace the
inequality constraint equation to form a linear equation. Plot the equations
on the planar graph with each axis representing respective variables.
Step 3: Identify the convex polygon region relevant to the problem. The
area which satisfies all the constraints simultaneously will be the feasible
region. This is determined by the inequality constraints.
Step 4: Determine the vertices of the polygon and find the values of the
given objective function Z at each of these vertices. Identify the greatest and
the least of these values. These are respectively the maximum and minimum
value of Z.
Step 5: Identify the values of (x1, x2) which correspond to the desired
extreme value of Z. This is an optimal solution of the problem.
b)
Solution:
Mathematical Formulation:
The data of the problem is summarized below:
Products
Chair

Raw material
(per unit)
5

Labour
(per unit)
10

Profit
(per unit)
45

Total
Availability
400

Table

20

15

80

450

Step 1: The key decision to be made is to determine the number of units of

chairs and tables to be produced by the company.
Step 2: Let x l designate the number of chairs and x 2 designate the number
of tables, which the company decides to produce.
Step 3: Since it is not possible to produce negative quantities, feasible
alternatives are set of values of x x and x v such that Xj > and x 2 >
Step 4: The constraints are the limited availability of raw material and labour.
One unit of chair requires 5 board feet of timber and one unit of table
requires 20 board feet of timber. Since x 1 and x 2 are the quantities of
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chairs and tables, the total requirement of raw material will be 5xj + 20x 2 ,
which should not exceed the available raw material of 400 board feet
timber. So, the raw material constraint becomes,
5^j + 20; t 2 < 400
148 .Similarly, the labour constraint becomes,
10*!+ 1 5* 2 < 450

Step 5: The objective is to maximize the total profit that the company gets
out of selling their products, namely chairs, tables. This is given by the linear
function.
z= 45* t + 80* 2 .
The linear programming problem can thus be put in the following
mathematical form. Maximize z = 45* { + 80* 2 subject to 5*! + 20* 2 <
400
10*!+ 1 5* 2 < 450
*! > 0, * 2 >

Q3. a. List the steps of the Vogels Approximation Method (VAM) to

find the initial feasible solution.
b. The XYZ manufacturing company has a current transportation
schedule which is being questioned by the top management as to
whether or not it is optimal. The firm has 3 factories and 5
warehouses. The unit transportation costs (in Rs.), factory
capacities, and ware house requirements are given below. Find the
initial feasible solution using Vogels Approximation Method (VAM).
Answer:
a
Vogels approximation method

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The Vogels approximation method (VAM) takes into account not only the
least cost cij, but also the cost that just exceeds cij. The steps of the method
are given as follows:
Step 1 - For each row of the transportation table, identify the smallest and
the next to smallest costs. Determine the difference between them for each
row.
Step 2 - Identify the row or column with the largest difference among all the
rows and columns. If a tie occurs, use any arbitrary tie breaking choice. Let
the greatest difference correspond to the ith row and let Cij be the smallest
cost in the ith row. Allocate the maximum feasible amount xij = min (ai, bj) in
the (i, j)th cell and cross off the ith row or the jth column in the usual
manner.
Step 3 - Recomputed the column and row differences for the reduced
transportation table and go to step 2. Repeat the procedure until all the rim
requirements are satisfied.
b)

Solution:
The steps Involved in determining an initial solution are as follows:
(i) Calculate the difference between the two lowest transportation costs for
each row and column. These are written by the side of each row and column
and arc knowns row and column penalties.

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(ii) Select the row or column with the largest penalty and circle this value. In
case of a tie, select that row or column that allows the greatest movement of
units.
(iii) Assign the largest possible allocation within the restrictions of the row
and column requirements to the lowest cost cell for the row or column
selected in step (ii).
(iv) Cross out any column or row satisfied by the assignment made in the
prior step.
(v) Repeat the steps (r) to (iv) until all allocations have been made.
Using the above steps, the inital solution to the problem of Perfect
manufacturing Company is as follows:

Thus, the initial solution is

Transport from factory A to warehouse 5:800 units
Transport from factory B to warehouse 1:400 units
to warehouse 4:200 units
Transport from factory C to warehouse 2:400 units
to warehouse 3:500 units
to warehouse 4:200 units

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and the corresponding cost of transportation is 110000.

Q.4
a. What is Integer Programming Problem (IPP) ?
b. Explain Gomorys all integer algorithm of an IPP.
Answer:
Define Integer Programming Problem:
The IPP is a special case of Linear Programming Problem (LPP), where all or
some variables are constrained to assume non-negative integer values. In
LPP, the decision variables as well as slack or surplus variables were allowed
to take any real or fractional value. However, there are certain real life
problems in which the fractional value of the decision variables has no
significance. For example, it does not make sense saying 1.5 men working on
a project or 1.6 machines in a workshop. The integer solution to a problem
can, however, be obtained by rounding off the optimum value of the
variables to the nearest integer value. This approach can be easy in terms of
economy of effort, time and cost that might be required to derive an integer
solution but this solution may not satisfy all the given constraints. Secondly,
the value of the objective function so obtained may not be an optimal value.
Integer programming techniques come to our rescue during such scenarios.
Types of Integer Programming Problems:
Linear integer programming problems can be classified into three categories:
1. Pure (all integer programming problems) - Here, all decision
variables are restricted to integer values.
2. Mixed integer programming problems - Here some, but not all, of the
decision variables are restricted to integer values.
3. Zero one integer programming problems - Here, all decision
variables are restricted to integer values of 0 and 1.
All IPP Algorithm:
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The iterative procedure for the solution of integer programming problem is

as follows:
Figure depicts the iterative procedure of IPP.

Step 1: Convert the minimization IPP into maximization form. Ignore the
integrality condition.
Step 2: Introduce the slack or surplus variables, if needed to convert the in
equations into equations and obtain the optimum solution of the given LPP
by using simplex algorithm.
Step 3: Test the integrality of the optimum solution:
a) If the optimum solution contains all integer values, an optimum basic
feasible integer solution has been obtained.
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b) If the optimum solution does not include all integer values, then proceed
to the next step.
Step 4: Examine the constraint equations corresponding to the current
optimum solution.
Step 5: Express the negative fractions if any, in the kth row of the optimum
simplex table as the sum of a negative integer and a non-negative fraction.
Step 6: Find the Gomorian constraint
Step 7: Start with a new set of equation constraints. Find the new optimum
solution by dual simplex algorithm, that is, choose a variable to enter into
the new solution having the smallest ratio: {(Cj Zj)/ yij; yij<0} so that Gsla
(1) is the initial leaving basic variable.
Step 8: If the new optimum solution for the modified LPP is an integer
solution, it is also feasible and optimum for the given IPP. If it is not an
integer solution, then return to step 4 and repeat the process until an
optimum feasible integer solution is obtained.
Q5. A) Explain Monte Carlo Simulations.
Answer:

Monte Carlo simulations, a statistical technique used to model probabilistic

(or stochastic) systems and establish the odds for a variety of outcomes.
The concept was first popularized right after World War II, to study nuclear
fission; mathematician Stanislaw Ulam coined the term in reference to an
uncle who loved playing the odds at the Monte Carlo casino (then a world
symbol of gambling, like Las Vegas today). Today there are multiple types of
Monte Carlo simulations, used in fields from particle physics to engineering,
finance and more.
To get a handle on a Monte Carlo simulation, first consider a scenario where
we do not need one: to predict events in a simple, linear system. If you know
the precise direction and velocity at which a shot put leaves an Olympic
athletes hand, you can use a linear equation to accurately forecast how far
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it will fly. This case is a deterministic one, in which identical initial conditions
will
always
lead
to
the
same
outcome.

B) A Company produces 150 cars. But the production rate varies

with the distribution.
Product
ion rate
Probabi
lity

147

148

149

150

151

152

153

0.05

0.10

0.15

0.20

0.30

0.15

0.05

At present the track will hold 150 cars. Using the following random
numbers determine the average number of cars waiting for
shipment in the company and average number of empty space in
the truck. Random Numbers 82, 54, 50, 96, 85, 34, 30, 02, 64, 47.
Answer.
Production rate and probability
Production rate

Probability

Comulative
probability

Random
number
assigned

147
148
149
150
151
152
153

0.05
0.10
0.15
.20
.30
0.15
0.05

0.05
0.15
0.30
.50
.80
0.95
1.00

00-04
05-14
15-29
30-49
50-79
80-94
95-99

Tabe for simulation work sheet

Trial no.

Random no.

Simulated
production
rate

Car waiting Nomber

of
in
the example
factory
spaces
in
the truck

82

152

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2
3
4
5
6
7
8
9
10
Total

54
50
96
85
34
30
02
64
47

150
150
153
152
150
150
147
151
150

3
2
1
2
8

3
3

Therefore average number of car waiting = 8/10=0.8/ day

Average number of empty space = 3/10=0.3/day
Q6. a. Explain the dominance principle in game theory.
b. Describe the Constituents of a Queuing System.
c. Differentiate between PERT and CPM
Ans.
Dominance
In a rectangular game, the pay-off matrix of player A is pay-off in one specific
row ( r row ) th exceeding the corresponding pay-off in another specific row( s
row ) th . This means that whatever course of action is adopted by player B,
for A, the course of action Ar yields greater gains than the course of action
As . Therefore, Ar is a better strategy than As irrespective of Bs strategy.
Hence, you can say that Ar dominates As . Alternatively, if each pay-off in a
specific column ( p column ) th is less than the corresponding pay-off in
another specific column( q column ) th , it means strategy Bp offers minor
loss than strategy Bq irrespective of As strategy.
Hence, you can say that Bp dominates Bq . Therefore, you can say that:
a) In the pay-off matrix, if each pay-off in r row th is greater than (or equal to)
the corresponding pay-off in thes row th , Ar dominates As .
b) In the pay-off matrix, if each pay-off in p column th is less than (or equal
to) the corresponding pay-off in the q column th , Bp dominates Bq .
At times, a convex combination of two or more courses of action may
dominate another course of action. Whenever a course of action (say As or
Bq ) is dominated by others, then that course of action ( As or Bq ) can m be
deleted from the pay-off matrix. Such a deletion will not affect the choice of
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the solution, but it reduces the order of the pay-off matrix. Successive
reduction of the order using dominance property helps in solving games.
b.
Constituents of a Queuing System
In the previous section, you learnt the operating characteristics of a queuing
system. You will now learn the constituents of a queuing system. The
constituents of a queuing system include arrival pattern, service facility and
queue discipline.
Arrival pattern: It is the average rate at which the customers arrive.
Service facility: Examining the number of customers served at a time
and the statistical pattern of time taken for service at the service
facility.
Queue discipline: The common method of choosing a customer for
service amongst those waiting for service is First Come First Serve.
c.
PERT and CPM
Both are based on the network representation of activities and their
scheduling, which determines the most critical activities to be controlled in
order to meet the completion date of the project.
PERT

PERT was developed in connection with an Research and Development

(R&D) work. Therefore, it had to cope with the uncertainties that are
associated with R&D activities. In PERT, the total project duration is
regarded as a random variable. Therefore, associated probabilities are
calculated in order to characterize it.
It is an event-oriented network as in the analysis of a network,
emphasis is given on the important stages of completion of a task
rather than the activities required to be performed to reach a particular
event or task.

CPM

CPM was developed in connection with a construction project, which

consisted of routine tasks whose resource requirements and duration
were known with certainty. Therefore, it is basically deterministic.

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CPM is suitable for establishing a trade-off for optimum balancing

between schedule time and cost of the project.
CPM is used for projects involving activities of repetitive nature.

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