QUANTITATIVE TECHNIQUES

1. Sensitivity analysis

The linear programming approach to optimization problems includes the assumption

that input data is known and is not subject to changes. In real life this assumption may be
found inaccurate. For example, cost estimates are sometimes subject to errors, and to
changes over time due to dynamic behavior of the environment; Demand reflects market
behavior, which in itself is unpredictable to some degree; Resource availability may change
when management changes its preferences. So, a question about the sensitivity of the
optimal solution to changes in input parameters seems to be valid, and important for the
sake of making informed decisions.

Sensitivity analysis allows for only one parameter change at a time. The two types of
changes are considered within the framework of a linear programming model.

(i) Changes in one objective-function coefficient.

(ii) Changes in one constraint right-hand-side.

Generally speaking, the basic assumption that all the coefficients of a linear
programming model are known with certainty rarely holds in practice. Moreover, it may be
expedient to simplify causal relationships and to omit certain variables or constraints at the
beginning of the analysis to achieve tractability.

Once the optimum solution to a linear programming problem has been attained, it may
be desirable to study how the current solution changes when the parameters of the problem
are changed. In many practical problems this information is much more important than the
single result provided by the optimal solution. Such an analysis converts the static linear
programming solution into a dynamic tool to study the effect of changing conditions such
as in business and industry.

The change in parameters of the problem may be discrete or continuous. The study of
the effect of discrete changes in parameter on the optimal solution is called sensitivity
analysis or post optimality analysis, while that of continuous changes in parameters is
called parametric programming. One way of determining the effect of parameter changes is
to solve the problem anew, which may be computationally inefficient.

Alternatively, the current optimal solution may be investigated, making use of the
properties of the simplex criterion. The second method reduces additional computations
considerably and hence forms the subject of present discussion.

The changes in the parameter of linear programming problem include:

1. Change in the right hand side of the constraints bi.

2. Changes in the cost coefficients cj

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 3. Addition of new variables
4. Changes in the coefficient of constraints aij
5. Addition of new constraints
6. Deletion of variables
7. Deletion of constraints
Generally, these parameter change result in one of the following three cases:

1. The optimal solution remains unchanged i.e., the basic variables and their values
remain unchanged
2. The basic variables remain unchanged but their values change.
3. The basic variables as well as their values are changed
While dealing with these changes, one important objective is to find the maximum extent to
which a parameter or a set of parameters can be changed so that the current optimal
solution remains optimal. In other words, the objective is to determine how sensitive the
optimal solution is to the changes in those parameters. Such an analysis is called sensitivity
analysis

Sensitivity analysis for graphical solutions:

Sensitivity analysis is testing the optimal solution to see within what range of
changes in the environment it remains useful. The changes in the environment bring
pressure on the basis of the optimal solution and solution values to take up new values. If
the basis changes the optimal solution no longer is the same. If the basis remains the same
and only the solution values change, the optimal solution holds good. The sensitivity
analysis which is being discussed here considers following changes:

a. changes in the unit contributions(changes in coefficients of decision variables in the

objective function )

b. changes in limits on the resources

When the above changes take place in the market after the optimal solution is established,
sensitivity analysis (also known as post optimality analysis is done) is performed.
In many situations, the parameters and characteristics of linear programming model
may change over a period of time. Also the analyst may be interested to know the effect of
changing the parameters and characteristics of the model on the optimality. This kind of
sensitivity analysis can be carried out in the following ways:

1. Making changes in the right hand side constants of the constraints.

2. Making changes in the objective function coefficients
3. Adding a new constraint
4. Adding a new variable

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 1) Making changes in the right hand side constants of the constraints:

The right hand side constant (resource availability) of one or more constraints of a
linear programming model may change over a period of time. So the analyst may be
interested in knowing revised optimum solution based on the optimum table of the
original problem after incorporating the new changes in the right hand side constants.
The changes bring in the following results.

a) same set of basic variables with modified right hand side constants in the
optimal table.
b) Different set of basic variables in the optimal table.

2) Making changes in the objective function coefficients:

The profit coefficients or the cost coefficients of the objective function undergo
changes over a period of time. Under such a situation, one can obtain the revised
optimum solution from the optimal table of the original problem by following certain
steps. Also, one will be interested to know the range of the coefficient of variable in the
objective function over which the optimality is un affected.

3) Adding a new constraint:

Sometimes, a new constraint may be added to an existing linear programming

model as per changing realities. Under such a situation, each of the basic variables in
the new constraint is substituted with the corresponding expression based on the current
optimal table. This will yield a modified version of the new constraint in terms of only
the current non basic variables.

If the new constraint is satisfied by the values of the current basic variables, the
constraint is said to be a redundant one. So, the optimality of the original problem will
not be affected even after including the new constraint into the existing model.
If the new constraint is not satisfied by the values of the current basic variables, the
optimality of the original problem will be affected. So, the modified version of the new
constraint is to be augmented to the optimal table of the original problem and iterated
till the optimality is reached.

4) Adding a new variable:

In a problem like the product mix problem, over a period of time, a new product
may be added to the existing product mix. Under such a situation, one will be interested
in finding the revised optimal solution from the optimal table of the original problem.
2. Comparison between deterministic and probabilistic models in OR:

a) Deterministic model:

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 In Deterministic model, variables are completely defined and the outcomes are certain.
Certainty is the state of nature assumed in these models. They represent completely closed
systems and the parameters of the system have a single value that does not change with
time. For any given set of input variables, the same output variables always result. EOQ
model is deterministic; here the effect of changes in the batch sizes on the total cost is
known. Similarly, linear programming, transportation and assignment models are
deterministic modes.

b) Probabilistic models:

They are the products of an environment of risk and uncertainty. The input and the
output variables take the form of the probability distributions. They are semi closed models
and represent the likelihood of occurrence of an event. Thus they represent, to an extend
the complexity of the real world and the uncertainty prevailing in it. As an example, the
exponential smoothing model for forecasting demand is probabilistic model and game
theory is also probabilistic model.

3. Comparison between Static and dynamic models in OR:

a) Static model:

They are one time decision models. They represent a system at a specified time and
do not take into account the changes over time. In these models, cause and effect occur
almost simultaneously and time lag between the two is zero. They are easier to formulate,
manipulate and solve. EOQ is a static model.

b) Dynamic model:

They are the models for situations in which time often plays an important role. They
are used for optimization of multistage decision problems which require a series of
decisions with the outcome of each depending upon the results of the previous decisions in
the series. Dynamic programming is a dynamic model.

Write an essay on the scope of O.R. and methodology of O.R. explaining briefly the main
phases of an O.R. study and techniques used in solving OR Problems?
Operations Research (O.R.) is a science which deals with problem, formulation, solutions
and finally appropriate decision making. This subject is new and started after World War II,
when the failures of missions were very high. O.R. is the use of mathematical models,
statistics and algorithm to aid in decision-making. The tools of operations research are not
from any one discipline, rather Mathematics, Statistics, Economics, Engineering,

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Psychology, etc. have contributed to this newer discipline of knowledge. Today, it has
become a professional discipline that deals with the application of scientific methods for
decision-making, and especially to the allocation of scare resources. In India first unit of
OR started in the year 1957 with its base at RRL Hyderabad. The other group was set up in
Defence Science Laboratory which was followed by similar units at different parts of the
country.
According to H.A Taha O.R. is a scientific approach to problem solving for executive
management.

Features of Operation Research

The significant features of operations research include the followings:
(i) Decision-making. Every industrial organization faces multifaceted problems to identify
best possible solution to their problems. OR aims to help the executives to obtain optimal
solution with the use of OR techniques. It also helps the decision maker to improve his
creative and judicious capabilities, analyze and understand the problem situation leading to
better control, better co-ordination, better systems and finally better decisions.
(ii) Scientific Approach. OR applies scientific methods, techniques and tools for the
purpose of analysis and solution of complex problems. In this approach there is no place
for guess work and the person bias of the decision maker.
(iii) Inter-disciplinary Team Approach. Basically the industrial problems are of complex
nature and therefore require a team effort to handle it. This team comprises of
scientist/mathematician and technocrats who jointly use the OR tools to obtain an optimal
solution of the problem. The tries to analyze the cause and effect relationship between
various parameters of the problem and evaluates the outcome of various alternative
strategies.
(iv) System Approach. The main aim of the system approach is to trace for each proposal
all significant and indirect effects on all sub-system on a system and to evaluate each action
in terms of effects for the system as a whole. The interrelationship and interaction of each
sub-system can be handled with the help of mathematical/analytical models of OR to obtain
acceptable solution.
(v) Use of Computers. The models of OR need lot of computation and therefore, the use of

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computers become necessary. With the use of computers it is possible to handle complex
problems requiring large amount of calculations. The objective of the operations research
models is to attempt and to locate best or optimal solution under the specified conditions.
For the above purpose, it is necessary that a measure of effectiveness has to be defined
which must be based on the goals of the organization. These measures can be used to
compare the alternative courses of action taken during the analysis.

Scope of operations research

In its recent years of organized development, OR has entered successfully many different
areas of research for military, government and industry. The basic problem in most of the
developing countries in Asia and Africa is to remove poverty and hunger as quickly as
possible. So there is a great scope for economists, statisticians, administrators, politicians,
and the technicians working in a team to solve this problem by an OR approach. Besides
this, OR is useful in the following various important fields.

1. In Agriculture: With the explosion of population and consequent shortage of food, every
country is facing the problem of
a) Optimum allocation of land to various crops in accordance with the climatic conditions;
and
b) Optimum distribution of water from various resources like canal for irrigation purposes.

Thus there is a need of determining best policies under the prescribed restrictions. Hence a
good amount of work can be done in this direction.

2. In Finance: In these modern times of economic crisis it has become very necessary for every
government to have a careful planning for the economic development of their country. OR
techniques can be fruitfully applied:
a) To maximize the per capita income with minimum resources
b) To find out the profit plan for the company
c) To determine the best replacement policies etc.
3. In Industry: If the industry manager decides his policies(not necessarily optimum) only on the
basis of his past experience (without using OR techniques)and a day comes when he gets
retirement , then a heavy loss is encountered in the industry. This heavy loss can immediately
be compensated by newly appointing a young specialist of OR techniques in business

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 management. Thus OR is useful to the industry director in deciding optimum allocation of
various limited resources such as men, machines, material, money, time etc. to arrive at the
optimum decision.

4. In marketing: With the help of OR techniques a marketing administrator (manager) can

decide :
a) Where to distribute the products for sale so that the total cost of transportation etc. is
minimum ,
b) The minimum per unit scale price
c) The size of the stock to meet the future demand
d) How to select the best advertising media with respect to time, cost etc.
e) How, when, and what to purchase at the minimum possible cost

5. In personnel management: A personnel manager can use OR techniques:

a) To appoint the most suitable persons on minimum salary
b) To determine the best age of retirement for the employees
c) To find out the number of persons to be appointed on full time basis when the load is
seasonal

6. In Production management: A production manager can use OR techniques:

a) To find out the number and size of the items to be produced
b) In scheduling and sequencing the production run by proper allocation of machines
c) In calculating the optimum product mix and
d) To select, locate, and design the sites for the production plants

7. In L.I.C : OR approach is also applicable to enable the L.I.C officers to decide :

a) What should be the premium rates for various modes of policies
b) How best the profits could be distributed in the cases of profit policies?
Planning and Budgeting
OR is used for the preparation of Five Year Plans, annual budgets, forecasting of income
and expenditure, scheduling of major projects of national importance, estimation of GNP,
GDP, population, employment and generation of agriculture yields etc.
Defense Services
Basically formulation of OR started from USA army, so it has wide application in the areas
such as:
development of new technology, optimization of cost and time, tender evaluation, setting
and layouts of defense projects, assessment of Threat analysis, strategy of battle,

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effective maintenance and replacement of equipment, inventory control, transportation and
supply depots etc.
Industrial Establishment and Private Sector Units
OR can be effectively used in plant location and setting finance planning, product and
process planning, facility planning and construction, production planning and control,
purchasing, maintenance management and personnel management etc.
R & D and Engineering
Research and development being the heart of technological growth, OR has wide scope for
and can be applied in technology forecasting and evaluation, technology and project
management, preparation of tender and negotiation, value engineering, work/method study
and so on.

Methodology for Operation Research

The systematic methodology developed for an O.R. study deals with the problems
involving conflicting multiple objectives, policies and alternatives. O.R. in the final
analysis is a scientific methodology which is applied to the study of the operations of large
complex organizations or activities with a view to assessing the overall implications of
various alternative courses of action, thus providing an improved basis for managerial
decisions.
The approach to problem solving consists of the following six steps:
1. Formulation of the problem: It involves analysis of the physical system, setting up of
objectives, determination of restriction constraints against which decision should be
adopted, alternative courses of action and measurement of effectiveness.
2. Construction of a Mathematical model: After formulation of the problem , the next step is
to express all the relevant variables (activities) of the problem in to a mathematical model.
A generalized mathematical model might take the form:
E = f( xi, yi )
Where f represents a system of mathematical relationships between the measures of
effectiveness of the objective sought (E) and the variables, both controllable (x i ) and
uncontrollable (yi)
3. Deriving the solution from the model : Once the mathematical model is formulated ,the
next step is to determine the values of decision variables that optimize the given objective

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 function . This deals with the mathematical calculations for obtaining the solution to the
model.
In addition to the solution of the models, it is also sometimes essential to perform
sensitivity analysis, that is to determine the behavior of the system, changes in the systems
parameters and specifications. This is done because the input data (parameters) may not be
accurate or stable, and the structural assumptions of the model may not be valid.
4. Validity of the Model: The model should be validated to measure its accuracy. That is, in
order for a model to be useful, the degree to which it actually represents the system or
problem being modeled must be established. A model is valid or accurate if (a) it contains
all the objectives, constraints and decision variables relevant to the problem, (b) the
objectives, constraints, and decision variables included in the model are all relevant to, or
actually part of the problem, and (c) the functional relationships are valid.
5. Establishing control over the solution: After testing the model and its solution , the next
step of the study is to establish control over the solution, by proper feedback of the
information on variables which deviated significantly. As soon as one or more of the
controlled variables change significantly, the solution goes out of the control. In such a
situation the model may accordingly be modified.
6. Implementation of the final results: Finally, the tested results of the model are implemented
to work. This would basically involve a careful explanation of the solution to be adopted
and its relationship with the operating realities. This stage of O.R. investigation is executed
primarily through the co-operation of both the O.R. experts and those who are responsible
for managing and operating the system.

Phases and Processes of Operation Research Study

OR is a logical and systematic approach to provide a rational basis for decision-making.

There are six important steps in O.R. study, but it is not necessary that in all the studies
each and every step is invariably present. These steps are arranged in following logical
order.
Step I. Observe the Problem Environment
The first step of OR study is the observation of the environment in which the problem
exists. The activities that constitute this step are visits, conferences, observations, research

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etc. with the help of such activities, the OR scientist gets sufficient information and support
to proceed and is better prepared to formulate the problem.
Step II. Analyse and Define the Problem
In this step not only the problem is defined but also uses, objectives and limitations of the
study that are stressed in the light of the problem. The end results of this steps are clear
grasp of need for a solution and understanding of its nature.
Step III. Develop a Model
The next step is to construct a model, which is representation of same real or abstract
situation. O.R. models are basically mathematical models representing systems, process or
environment in form of equations, relationships or formulae. The activities in this steps is
to defining interrelationships among variables, formulating equations, using known OR
models or searching suitable alternate models. The proposed model may be field tested and
modified in order to work under stated environmental constraints. A model may also be
modified if the management is not satisfied with the answer that it gives.
Step IV. Select Appropriate Data input
Garbage in and garbage out is a famous saying. No model will work appropriately if data
input is not appropriate. Hence tapping right kind of data is a vital step in O.R. process.
Important activities in this step are analyzing internal-external data and facts, collecting,
opinions and using computer data banks. The purpose of this step is to have sufficient input
to operate and test the model.
Step V. Provide a solution and test Reasonableness
In this step the solution of the problems is obtained with the help of model and data input.
Such a solution is not implemented immediately. First this solution is used to test the model
and to find its limitations if any. If the solution is not reasonable or if the model is not
behaving properly, updating and modification of the model is considered at this stage. The
end result of this step is solution that is desirable and supports current organizational
objectives.
Step VI. Implement the Solution
This is the last phase of the O.R. study. In O.R. the decision-making is scientific but
implementation of decision involves many behavioural issues. Therefore, implementation
authority has to resolve the behavioral issues, involving the workers and supervisors to
avoid further conflicts. The gap between management and OR scientist may offer some

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resistance but must be eliminated before solution is accepted in totality. Both the parties
should play positive role, since the implementation will help the organization as a whole. A
properly implemented solution obtained through OR techniques results in improved
working conditions and wins management support.

Techniques uses in Operation Research

OR analysts have given special impetus to the development and use of techniques like,
linear programming, waiting line theory, game theory, inventory controls and simulation. In
addition, some other common tools are non-linear programming, integer programming,
dynamic programming, sequencing theory, Markov process, network schedulingPERT
and CPM, symbolic logic, information theory and utility/value theory.
(i) Linear Programming (L.P.)
Linear programming is basically a constrained optimization technique which tries to
optimize some criterion within some constraints. It consists of an objective function which
is some measure of effectiveness like profit, loss or return on investment and several
boundary conditions putting restriction on the use of resources. Objective function and
boundary conditions are linear in nature. There are methods available to solve a linear
programming problem.
(ii) Waiting Line or Queuing Theory
This deals with situations in which queues are formed or the customers have to wait for
service or machines wait for repairmen and therefore concept of a queue is involved. If we
assume that there are costs associated with waiting in line, and if there are costs of adding
more service facilities, we want to minimize the sum of costs of waiting and the costs of
providing service facilities. Waiting line theory helps to make calculations like number of
expected member of people in queue, expected waiting time in the queue, expected idle
time for the server, etc. These calculations then can be used to determine the desirable
number of service facilities or number of servers.
(iii) Game Theory
It is used for decision-making under conflicting situations where there are one or more
opponents. The opponents, in game theory, are called players. The motives of the players
are dictomized. The success of one player tends to be at the cost of others and hence they

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are in conflict. Game theory models, a conflict situation arises and helps to improve the
decision process by formulating appropriate strategy.
(iv) Inventory Control Models
These models deal with the quantities which are either to be purchased or stocked since
each factor involves cost. The purchase and material managers normally encounter such
situations. Therefore, inventory models provide rational answer to these questions in
different situations of supply and demand for different kind of materials. Inventory control
models help managers to decide ordering time, reordering level and optimal ordering
quantity. The approach is to prepare a mathematical model of the situation that expressed
total inventory costs in terms of demand, size of order, possible over or under stocking and
other relevant factors and then to determine optimal order size, optimum order level
etc. using calculus or some other technique.
(v) Simulation
It is basically data generating technique, where sometimes it is risky, cumbersome, or time
consuming to conduct real study or experiment to know more about situation or problem.
The available analytical methods cannot be used in all situations due to large number of
variables or large number of interrelationships among the variables and the complexity of
relationship; it is not possible to develop an analytical model representing the real situation.
Sometimes, even building of model is possible but its solution may not be possible. Under
such situations simulation is used. It should be noted that simulation does not solve the
problem by itself, but it only generates the required information or data needed for decision
problem or decision-making.
(vi) Non-Linear Programming
These models may be used when either the objective function or some of the constraints are
not linear in nature. Non-linearity may be introduced by such factors as discount on price
of purchase of large quantities and graduated income tax etc. Linear programming may be
employed to approximate the non-linear conditions, but the approximation becomes poorer
as the range is extended. Non-linear methods may be used to determine the approximate
area in which a solution lies and linear methods may be used to obtain a more exact
solution.
(vii) Integer Programming

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This method can be used when one or more of the variables can only take integer values.
Examples are the number of trucks in a fleet, the number of generators in a power house
and so on. Approximate solutions can be obtained without using integer programming
methods, but the approximation generally becomes poorer as the number becomes smaller.
There are techniques to obtain solution of integer programming problems.
(viii) Dynamic Programming
This is a method of analyzing multistage decision processes, in which each elementary
decision is dependent upon those preceding it as well as upon external factors. It drastically
reduces the computational efforts otherwise necessary to analyze results of all possible
combinations of elementary decisions.
(ix) Sequencing Theory
This is related to waiting line theory and is applicable when the facilities are fixed, but the
order of servicing may be controlled. The scheduling of service or the sequencing of jobs is
done to minimize the relevant costs and time.
(x) Markov Process
It is used for decision-making in situations where various states are defined. The
probability of going from one state to another is known and depends on the present state
and is independent of how we have arrived at that state. Theory of Markov process helps us
to calculate long run probability of being in a particular state (steady state probability),
which is used for decision-making.
(xi) Network SchedulingPERT and CPM
These techniques are used to plan, schedule and monitor large projects such as building
construction, maintenance of computer system installation, research and development
design etc. The technique aims at minimizing trouble spots, such as, delays, interruptions
and production bottlenecks, by identifying critical factors and coordinating various parts of
overall job/project. The project/job is diagrammatically represented with the help of
network made of arrows representing different activities and interrelationships among
them. Such a representation is used for identifying critical activities and critical path. Two
basic techniques in network scheduling are Program Evaluation and Review Technique
(PERT) and Critical Path Method (CPM). CPM is used when time taken by activities in a
project are known for sure and PERT is used when activities time is not known for sure
only probabilistic estimate of time is available to the users.

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(xii) Symbolic Logic
It deals with substituting symbols for words, classes of things or functional systems.
Symbolic logic involves rules, algebra of logic and propositions. There have been only
limited attempts to apply this technique to business problems.
(xiii) Information Theory
Information theory is an analytical process transferred from the electrical communications
field to operations research. It seeks to evaluate the effectiveness of information flow
within a given system. Despite its application mainly to communication networks, it had an
indirect influence in simulating the examination of business organizational structures with a
view to improving information or communication flow.

(xiv) Utility/Value Theory

It deals with assigning numerical significance to the worth of alternative choices. To date,
this has been only a concept and is in the stage of elementary model formulation and
experimentation and can be useful in decision-making process.

Limitations of operations research

OR has some limitations however, these are related to the problem of model building and
the time and money factors involved in application rather than its practical utility. Some of
them are as follows:
(i) Magnitude of Computation. Operations research models try to find out optimal
solution taking into account all the factors. These factors are enormous and expressing
them in quantity and establishing relationships among these require voluminous
calculations which can be handled by computers.
(ii) Non-Quantifiable Factors. OR provides solution only when all elements related to a
problem can be quantified. All relevant variables do not lend themselves to quantification.
Factors which cannot be quantified, find no place in OR study. Models in OR do not take
into account qualititative factors or emotional factors which may be quite important.
(iii) Distance between User and Analyst. OR being specialists job requires a
mathematician or statistician, who might not be aware of the business problems. Similarly,

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a manager fails to understand the complex working of OR. Thus there is a gap between the
two. Management itself may offer a lot of resistance due to conventional thinking.
(iv) Time and Money Costs. When basic data are subjected to frequent changes,
incorporating them into the OR models is a costly proposition. Moreover, a fairly good
solution at present may be more desirable than a perfect OR solution available after
sometime. The computational time increases depending upon the size of the problem and
accuracy of results desired.
(v) Implementation. Implementation of any decision is a delicate task. It must take into
account the complexities of human relations and behaviour. Sometimes, resistance is
offered due to psychological factors which may not have any bearing on the problem as
well as its solution.

Q. A furniture manufacturing company plans to make two products chairs and Tables from
its available resources which consist of 400 cubic feet of Mahogany timber and 450
man hours of labor. It is known that to make a chair requires 5 cubic feet and 10 man
hours and yields a profit of Rs. 45 while each table uses 20 cubic feet and 15 man hours
at a profit of Rs. 80. How many of each of the products should be made in order to
maximize profit. Use simplex method.

Ans :
Let number of chairs be X1 and number of tables be X2 ;
Chair needs 5 cubic feet of timber and 10 man hours while
Table needs 20 cubic feet of timber and 15 man hours.
Objective function : 45 X1 + 80 X2
Subject to constraints :
5 X1 + 20 X2 400 --------- (1)
10 X1 + 15 X2 450 --------- (2)
X1 0
X2 0

Solving by Simplex Method ;

So 5 X1 + 20 X2 +S1 = 400

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 10 X1 + 15 X2 + S2 = 450
Z = 45 X1 + 80 X2 + 0 S1 + 0 S2

Cost (C) Basic X1 X2 S1 S2 P0 =P0/Xi

0 S1 5 20 1 0 400 400/20=20
0 S2 10 15 0 1 450 450/15=30
Cj 45 80 0 0 0
Zj 0 0 0 0 0
j 45 80 0 0

We get 20 as the intersection element;

Now we need to make this 20 into 1 so we divide the whole row by 20.
Then we need to make all the numbers below this intersection element into zero.
So we subtract (the former intersection element of remaining row x new corresponding
element in replacing row) from the former element in remaining rows.
We then continue this process until we get all the values in j in negative or zeros.

Cost (C) Basic X1 X2 S1 S2 P0 =P0/Xi

80 X2 1 1/20 0 20 20/0.25=80
0 S2 25/4 0 -3/4 1 150 150/6.25=24
Cj 45 80 0 0 0
Zj 20 80 4 0 1600
j 25 0 -4 0

As we didnt get all the values in j as in terms of negative or zero so we again repeat
the above steps;

Cost (C) Basic X1 X2 S1 S2 P0 =P0/Xi

80 X2 0 1 1/12.5 -1/25 14
45 X1 1 0 -3/25 4/25 24
Cj 45 80 0 0 0
Zj 45 80 1 4 2200
j 0 0 -1 -4

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 We got the values of j in terms of negative and zero so we stop the process here and
the values of X1 = 24 and X2 = 14.

The maximum profit that can be earned is 45 x 24 + 80 x 14 = 2200

The furniture company should make 24 chairs and 14 tables in order to earn the
maximum profit.

1. What are the essential characteristics of OR?

The essential characteristics of operation research are

i) System(or executive) orientation
ii) The use of interdisciplinary teams
iii) Application of scientific methods
iv) Uncovering of New Problems
v) Improvement in the Quality of Decisions
vi) Use of Computer
vii) Quantitative Solutions
viii) Human Factor]

i) System (or executive) orientation:

Important characteristics of OR study is its concern with problem as a whole or its

system orientation. This means that an activity by any part of an organization has
some effect on the activity of every other part. The optimum operation of one part
of a system may not be the optimum operation for some other part. Therefore, to
evaluate any decision, one must identify all possible interactions and determine
their impact on the organization

ii) The use of interdisciplinary teams:

The second characteristics of OR study is that it is performed by a team of scientists

whose individual members have been drawn from different scientific and
engineering disciplines. For example, one may find a mathematician, statistician,
psychologist, economist and an engineer working together on an OR problem.

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 It has been recognized beyond doubt that people from different disciplines
can produce more unique solutions with greater probability of success, than could
be expected from the same number of persons from a single discipline. Another
reason for the existence of OR teams is that knowledge is increasing at a very fast
rate. No single person can collect all the useful scientific information from all
disciplines. Different members of the OR team bring the latest scientific know-how
to analyze the problem and help in providing better results.

iii) Application of scientific methods:

The third distinguishing features of OR is the use of scientific method to solve the
problem under study. Most scientific research, such as chemistry and physics can be
carried out well in the laboratories, under controlled conditions, without much
interference from the outside world. However, the same is not true in the systems
under study by OR teams. An operation research worker constructs representations
of the systems and its operations (models) on which he conducts his research.

iv) Uncovering of New Problems:

The fourth characteristic of operations research, is that solution of an OR problem

may uncover a number of new problems. Of course, all these uncovered problems
need not be solved at the same time. However, in order to derive maximum benefit,
each one of them must be solved. It must be remembered that OR is not effectively
used if it is restricted to one-shot problems only. In order to derive full benefits,
continuity of research must be maintained. Of course, the results of OR study
pertaining to a particular problem need not wait until all connected problems are
solved.

v) Improvement in the Quality of Decisions:

OR gives bad answers to problems, to which, otherwise, worse answers are given. It
implies that by applying its scientific approach, it can only improve the quality of
solution but it may not be able to give perfect solution.

vi) Use of Computer:

18
 Another characteristic of OR is that it often requires a computer to solve the
complex mathematical model or to manipulate a large amount of data or to perform
a large number of computations that are involved.

vii) Quantitative Solutions:

OR approach provides the management a quantitative basis for decision-making.

For example it will give answer like, "the cost to the company, if decision A is taken
is X; if decision B is taken is Y, etc."

viii) Human Factor:

In deriving quantitative solutions we do not consider human factors, which

doubtlessly play a great role in the problems posed. Definitely an OR study is
incomplete without a study of human factors.

2. Model building in is the essence of OR approach. Discuss

In OR approach, after formulating the problem, the next step is to construct a model for the
system under study. A model helps to analyze a system without the interruption of the latter.
It makes the problem more meaningful and clarifies important relationships among the
variables. It also tells as to which of the variables are more important than the others. Once
the model is formulated, it is possible to analyze the problem.
In OR study, it is usually a mathematical model. A mathematical model consists of a set of
equations which describe the system or problem. These equations represent

i) The effectiveness function and

ii) Constraints

The effectiveness function, usually called the objective function is a mathematical

expression of the objectives, i.e., mathematical expression of the cost or profit of the
operation. Constraints or restrictions are mathematical expressions of the limitations on the
fulfillment of the objectives.
The objective function and the constraints are functions of two types of variables,
controllable (also called decision) variables and uncontrollable variables. A variable that is
directly under the control of the operation analyst is called controllable variable. The value
of these variables is to be determined from the solution of the problem.
A variable that is a function of the external environment and over which the operations
analyst has no control, is called uncontrollable variable
The general form of mathematical model is
E = f(xi,yi)
Where, E = effective function,
xi = controllable variables
yi = uncontrollable variables
F = relationship between E and xi, yi

19
3. Quantitative methods compliment the experience and judgment of an executive in
decision making. They cannot replace it. Comment

Management is most of the time making decision. It is a decision science which helps
management to make better decisions. Decision is, in fact, a pivotal word in managing. It is
not only the headache of management rather all of us make decision. We daily decide about
minor to major issues. We choose to be engineers, doctors, lawyers, managers, etc., a vital
decision which is going to affect us throughout our lives.

Decision-making can be improved and, in fact, there is a scope of large scale improvement.
The essential characteristics of all decisions are

-objectives,

-alternatives,

-influencing factors (constraints).

Once these characteristics are known, one can think of improving the characteristics so as
to improve upon the decision itself. The Quantitative methods used in OR, which helps
management to make better decisions. Thus in OR, the essential features of decisions,
namely, objectives, alternatives and influencing factors are expressed in terms of
Quantitative or mathematical model. Thus the essence of OR is such mathematical models.
For different situations different models are used and this process is continuing since World
War II when the term OR was coined. However, with the advance of science and
technology, decision making in business and industry has become highly complex and
extremely difficult. The complexity of decision making made the executives look for
various aids in decision making. It is in these situations the quantitative methods in OR
comes to help. The experience and judgment alone has no place in decision making since
decision becomes highly questionable when it involves the choice among several
alternatives. OR provides the executives much needed tools for improving the various
decisions.

Despite many advantages of quantitative methods adopted in decision making the part of
human expertise (executives) cannot be completely avoided. Young enthusiasts, overtaken
by its advantages and exactness, forget that OR are meant for assisting Managers rather
than replacing them.

Thus at the implementation stage, the decisions cannot be governed by quantitative

considerations alone .It must take into account the delicacies of human relationships. That
is, in addition to being a pure scientist, one has to be tactful and learn the art of getting the
decisions implemented. This art can only be achieved by experience as well as getting

20
training. Thus, quantitative methods in OR compliment the experience and judgment of
managers in decision making but cannot replace it.

Characteristics of Transportation Problems

The Requirements Assumption
Each source has a fixed supply of units, where this entire supply must be distributed to
the destinations.
Each destination has a fixed demand for units, where this entire demand must be received
from the sources.
This assumptions means that the problem is balanced: Total Supply = Total Demand
The Feasible Solutions Property
A transportation problem will have feasible solutions if and only if the sum of its supplies
equals the sum of its demands.
The Cost Assumption
The cost of distributing units from any particular source to any particular destination is
directly proportional to the number of units distributed.
This cost is just the unit cost of distribution times the number of units distributed
Integer Solutions Property
As long as all its supplies and demands have integer values, any transportation problem
with feasible solutions is guaranteed to have an optimal solution with integer values for all
its decision variables. Therefore, it is not necessary to add constraints to the model that
restrict these variables to only have integer values
The Transportation Model
Any problem (whether involving transportation or not) fits the model for a transportation
problem if
1. It can be described completely in terms of a table (next slide) that identifies all the
sources, destinations, supplies, demands, and unit costs, and
2. satisfies both the requirements assumption and the cost assumption
The objective is to minimize the total cost of distributing the units

The model: Any problem (whether involving transportation or not) fits the model
for a transportation problem if it can be described completely in terms of a pa-

21
 rameter table like Table 8.5 and it satisfies both the requirements assumption and
the cost assumption.The objective is to minimize the total cost of distributing the
units. All the parameters of the model are included in this parameter table.
1. Illustrate graphically the following special cases of OR problem.
i Infeasible Solution
ii Unbounded Solution
iii Multiple Optima

(i) Infeasible Problem: Graphical Method In some cases, there is no feasible solution
area, i.e., there are no points that satisfy all constraints of the problem. An infeasible LP
problem with two decision variables can be identified through its graph. For example, let us
consider the following linear programming problem.

Minimize z = 200x1 + 300x2

subject to

2x1 + 3x2 1200

x1 + x2 400
2x1 + 1.5x2 900

x1, x2 0

22
The region located on the right of PQR includes all solutions, which satisfy the first and the
third constraints. The region located on the left of ST includes all solutions, which satisfy
the second constraint. Thus, the problem is infeasible because there is no set of points that
satisfy all the three constraints.

(ii) Unbounded Solutions

It is a solution whose objective function is infinite. If the feasible region is unbounded then
one or more decision variables will increase indefinitely without violating feasibility, and
the value of the objective function can be made arbitrarily large. Consider the following
model:

Minimize z = 40x1 + 60x2

subject to
2x1 + x2 70
x1 + x2 40
x1 + 3x2 90
x1, x2 0

23
The point (x1, x2) must be somewhere in the solution space as shown in the figure by
shaded portion.

The three extreme points (corner points) in the finite plane are:
P = (90, 0); Q = (24, 22) and R = (0, 70)
The values of the objective function at these extreme points are:
Z(P) = 3600, Z(Q) = 2280 and Z(R) = 4200

In this case, no maximum of the objective function exists because the region has no
boundary for increasing values of x1 and x2. Thus, it is not possible to maximize the
objective function in this case and the solution is unbounded.

(iii) Multiple Optimal Solutions: Graphical Method of Linear Programming

Situations may arise, when the optimal solution obtained is not unique. This case may arise
when the line representing the objective function is parallel to one of the lines bounding the
feasible region. The presence of multiple solutions is illustrated through the following
example.

Maximize z = x1 + 2x2

24
 subject to
x1 80
x2 60
5x1 + 6x2 600
x1 + 2x2 160
x1, x2 0.

In the above figure, there is no unique outer most corner cut by the objective function line.
All points from P to Q lying on line PQ represent optimal solutions and all these will give
the same optimal value (maximum profit) of Rs. 160. This is indicated by the fact that both
the points P with co-ordinates (40, 60) and Q with co-ordinates (60, 50) are on the line x 1 +
2x2 =160. Thus, every point on the line PQ maximizes the value of the objective function
and the problem has multiple solutions.

2.What are the limitations of Linear Programming?

1. Linearity of relations: A primary requirement of linear programming is that the
objective function and every constraint must be linear. However, in real life
situations, several business and industrial problems are nonlinear in nature.
2. Single objective: Linear programming takes into account a single objective only,
i.e., profit maximization or cost minimization. However, in today's dynamic
business environment, there is no single universal objective for all organizations.
3. Certainty: Linear Programming assumes that the values of co-efficient of decision
variables are known with certainty. Due to this restrictive assumption, linear

25
 programming cannot be applied to a wide variety of problems where values of the
coefficients are probabilistic.
4. Constant parameters: Parameters appearing in LP are assumed to be constant, but
in practical situations parameters are not constant.
5. Divisibility: In linear programming, the decision variables are allowed to take non-
negative integer as well as fractional values. However, we quite often face
situations where the planning models contain integer valued variables. For instance,
trucks in a fleet, generators in a powerhouse, pieces of equipment, investment
alternatives and there are a myriad of other examples. Rounding off the solution to
the nearest integer will not yield an optimal solution. In such cases, linear
programming techniques cannot be used.
6. Additivity: The decisions made are independent, except as noted in the constraints.
The additivity property prohibits cross-product terms, e.g. 5x1x2, which might
represent interaction effects between the variables.
Question 1
What do you mean by graphical method? Write down the various steps in solving an LPP
using graphical method.
Linear programming deals with optimization (maximization or minimization) of a function
of variables known as objective function, subject to a set of linear equalities and/ or
inequalities known as constraints. The objective function may be profit, cost, production
capacity or any other measure of effectiveness, which is to be obtained in the best possible
or optimal manner. The constraints may be imposed by different sources such as market
demand, production processes and equipment, storage capacity etc. By linearity means a
mathematical expression in which the variables do not have powers.
Simple linear programming problems of two decision variables can be easily solved by
graphical method. The graphic approach is restricted in application because it can be used
only when two variables are involved.
The steps involved are
Step 1
Identify the problem- the decision variables, the objective function, and constraint
restrictions.
Step 2
Consider each inequality- constraint as equation.
Step 3
Plot each equation of the graph, as each one will geometrically represent a straight line.
Step 4
Shade the feasible region. Every point on the line will satisfy the equation of the line. If the
inequality-constraint corresponding to that line is greater than or equal to, then the region
below the line lying in the first quadrant (due to non-negativity of variables) is shaded. For
the inequality-constraint with less than or equal to sign, the region above the line in the
first quadrant is shaded. The points lying in common region will satisfy all the constraints
simultaneously. The common region thus obtained is called the feasible region.

26
Step 5
Choose the convenient value of z (say = 0) and plot the objective function line.
Step 6
Pull the objective function line until the extreme points of the feasible region. In the
maximization case, this line will stop farthest from the origin and passing through at least
one corner of the feasible region. In the minimization case, this line will stop nearest to the
region and passing through at least one corner of the feasible region.

Step 7
Read the coordinates of the extreme point(s) selected in step 6, and find the maximum or
minimum (as the case may be) value of z.

Question 2
What is meant by optimality test in a transportation problem?
The optimality test is used to find whether the obtained basic feasible solution is optimal or
not. An optimality test can therefore be performed only on the feasible solution in which
1. Number of allocations is (m+n-1), where m is the number of rows and n is the
number of columns.
2. These (m+n-1) allocations should be in independent positions. That is, it is
impossible to increase or decrease any allocation without either changing the
position of allocations or violating the row column restrictions. A simple rule for
allocations to be in independent positions is that it is impossible to travel from any
allocation, back to itself by a series of horizontal and vertical jumps from one
occupied cell to another, without a direct reversal of route.

Now the test procedure for optimality involves examination of each vacant cell to find
whether or not making an allocation in it reduces the total transportation cost. The two
methods commonly used for this purpose are
1. Stepping stone method
2. Modified distribution method (MODI) method

Stepping stone method

In this method optimality test is applied by calculating the opportunity cost of each empty
cell. The occupied cells are analogous to the stepping stones, which are used in making
certain movements in this method.
The five steps of the Stepping-Stone Method are as follows:
1. Select an unused square to be evaluated.
2. Beginning at this square, trace a closed path back to the original square via squares
that are currently being used (only horizontal or vertical moves allowed). You can
only change directions at occupied cells.
3. Beginning with a plus (+) sign at the unused square, place alternative minus (-)
signs and plus signs on each corner square of the closed path just traced.
4. Calculate an improvement index, Iij by adding together the unit cost gures found
in each square containing a plus sign and then subtracting the unit costs in each
square containing a minus sign.

27
 5. Repeat steps 1 to 4 until an improvement index has been calculated for all unused
squares.
a. If all indices computed are greater than or equal to zero, an optimal solution
has been reached.
b. If not, it is possible to improve the current solution and decrease total
transportation costs.

Modified Distribution method (MODI method)

In the stepping stone method, a closed path is traced for each unoccupied cell. Cell
evaluations are found and the cell with the most negative evaluation becomes the basic cell.
In the modified distribution method, cell evaluations of all the unoccupied cells are
calculated simultaneously and only one closed path or the most negative cell is traced. Thus
it provides considerable time saving over stepping stone method. The steps involved are
1. Set up a cost matrix containing the costs associated with the cells for which
allocations have not been made.
2. Enter a set of numbers vj across the top of the matrix and a set of numbers u i across
the left side so that their sums equal the costs entered in step 1.
3. Fill the vacant cells with the sum of vj and ui.
4. Subtract the cell values of the matrix of step 3 from original cost matrix. The
resulting matrix is called cell evaluation matrix.
5. If all the cell evaluations are positive, the basic feasible solution is optimal. Else go
to step 6.
6. From the cell evaluation matrix identify cell with most negative entry.
7. Write down again the initial feasible solution. Tick mark the empty cell for which
the cell evaluation is most negative. This cell is called identified cell.
8. Trace a path in this matrix consisting of a series of alternately horizontal and
vertical lines. The path begins and terminates in the identified cell. All corners of
the path lies in the cells for which allocations have been made. The path may skip
over many occupied or vacant cells.
9. Mark the identified cell as positive and each occupied cell at corners of the path
alternately ve, +ve, -ve and so on.
10. Make a new allocation in the identified cell by entering the smallest allocation on
the path that has been assigned ve sign. Add and subtract this new allocation from
the cells at the corners of the path, maintaining the row and column requirements.
This is the next feasible solution.
11. Again check for optimality. (Repeat steps 1 to 5)

1. Explain Monte-Carlo simulation with an example?

Ans:- The Monte-Carlo simulation owes its development to the two mathematicians, John
Von Neumann and Stanislaw Ulam. Monte Carlo technique has been used to tackle a
variety of problems involving stochastic situations and mathematical problems, which
cannot be solved with mathematical techniques and where physical experimentation with
the actual system is impracticable. The system is first described by listing the various

28
events in the order of their occurrence. An event representing a point in time signifies the
end of one or more activities and the beginning of the next activity. As each event occurs,
certain actions are taken, resulting in the generation of new events which are further
considered in sequence.
For example, the arrival of a customer at service facility is the occurrence of an event and
action taken depends upon the availability of facility which may be free or occupied. If
free, service begins; if occupied, wait in line, which further generates new activities. If
service begins, computer service time; and if to wait in queue, computes waiting time and
length of queue etc. The process is repeated for the next arrival.
It is a sort of sampling technique in which instead of drawing samples from a real
population, the samples are drawn from a theoretical equivalent of the real population. By
making use of roulette wheel or random numbers, Monte Carlo approach determines the
probability distribution of the occurrence of the event under consideration and then samples
the data from this distribution.
Steps in the procedure of Monte-Carlo Simulation
1. Identify the problem.
2. Construct a model of the given problem.
3. Testing the model to ensure that its behavior conforms to the behavior of the actual
problem under real situation.
4. Identifying and collecting data ie, supplying values for input parameters and measuring
the output values, needed to test the values.
5. Running the simulation process (generate random numbers and associate these numbers
with the factors identified at step(4) and evaluate the result of the simulation).
6. Making changes if required in the model or parameters.
7. Rerunning the solution to test new solution.

Solved Example
1. Two persons X and Y work on a two station assembly line. The distributions of
activity time at their stations are

Time in seconds Time frequency for X Time frequency for Y

10 3 2

20 7 3

30 100 6

40 15 8

50 35 12

60 18 9

70 8 7

80 4 3

29
(a) Simulate operation of the line for eight items.
(b) Assuming Y must wait until X completes the first item before starting work,will he
have to wait to process any of the other eight items?

Solution

Table below shows the cumulative frequency distribution for X. Eight random
numbers picked up from table of random numbers are also plotted. The serial
numbers of random numbers are shown in the parentheses.

Time in Time Cumulative Range Random numbers

seconds frequency for frequency fitted
X

10 3 3 0-03 06(3),04(8)

20 7 10 04-10

30 10 20 11-20 12(4)

40 15 35 21-35

50 35 70 36-70 70(2),59(5),46(6),54(7
)

60 18 88 71-88 83(1)

70 8 96 89-96

80 4 100 97-100

Thus the eight times for X are 60,50,10,30,50,50,50 and 10 seconds respectively.

Likewise, the eight times for Y are derived from his cumulative distribution below.

Time in Time frequency Cumulative Range Random

seconds for y frequency numbers fitted

i ii

30
 10 2 2 4 0-04

20 3 5 10 05-10

30 6 11 22 11-22 15(5),12(7)

40 8 19 38 23-38 36(6)

50 12 31 62 39-62 51(1),54(8)

60 9 40 80 63-80

70 7 47 94 81-94 84(3),81(4)

80 3 50 100 95-100 99(2)

Thus the eight times for Y are 50,80,70,70,30,30,40,30 and 50 seconds respectively.
Cumulative frequency has been multiplied by 2 to make it 100

Person X Cumulative time Person Y Ys cumulative time

with initial 60 seconds
included

60 60 50 110

50 110 80 190

10 120 70 260

30 150 70 330

50 200 30 360

50 250 40 400

50 300 30 430

10 310 50 480

2. What are the advantages and limitations of simulation models?

Ans :- Advantages of the simulation technique

The simulation technique when compared with the mathematical programming and
standard probability analysis offers a numbers of advantages over these techniques;

31
(a) Simulation offers the solution by allowing experimentation with a model of the
system without interfering with the real system. Simulation is, thus, often a
bypass for complex mathematical analysis
(b) Through simulation, management can foresee the difficulties and bottlenecks
which may come up due to the introduction of new machines, equipment or
process. It, thus eliminates the need of costly trial and error methods of trying
out the new concept on real methods and equipment
(c) Simulation has the advantage of being relatively free from mathematics and thus
can be easily understood by the operating personnel and non-technical
managers. This helps in getting the proposed plans accepted and implemented.
(d) Simulation models are comparatively flexible and can be modified to
accommodate the changing environments of the real situation.
(e) Computer simulation can compress the performance of a system over several
years and involving large calculations into a few minutes of computer running
time.
(f) The simulation technique is easier to use than mathematical models and is
considered quite superior to the mathematical analysis.
(g) Simulation has advantageously been used for training the operating and
managerial staff in the operation of complex plans. It is always advantageous to
train people on simulated models before putting into their hands the real system.
Simulated exercises have been developed to impart the trainee sufficient
exercise and experience. A simulated exercise familiarizes the trainee with the
data required and helps in judging what information is really important. Due to
his personal involvement into the exercise, the trainee gains sufficient
confidence and moreover becomes familiar with the data processing on
electronic computer.

Limitations of simulation techniques

(a) Simulation does not produce optimum results. When the model deals with
uncertainties, the results of simulation are only reliable approximations
subject to statistical products.
(b) Quantification of the variables is another difficulty. In a number of situations
it is not possible to quantify all the variables that affect the behavior of the
system.
(c) In very large and complex problems, the large number of variables and the
interrelationships between them make the problem very unwieldy and hard
to program. The number of variables may be too large and may exceed the
capacity of the available computer.
(d) Simulation is, by no means a cheap method of analysis. In a number of
situations, simulation is comparatively costlier and time consuming.
(e) Application of the technique to some simple problems which can more
appropriately be handled by other techniques of mathematical programming.

32
 1. Discuss the significance and scope of OR in modern management

Operations research applies sophisticated statistical analysis and mathematical modeling to

solve an array of business and organizational problems, as well as improve decision-
making. As the business environment grows more complex, companies and government
agencies rely on analysis to inform decisions that were once based largely on management
intuition. Originally developed by the U.S. Department of Defense during World War II,
operations research has helped many large companies and government agencies make
better decisions, boost performance and reduce risk.

a) Simplifying Complexity

Modern challenges associated with global economy and growth of technology have
increased the complexity of the business environment. Modern corporations often strive to
serve a global, rather than a regional or national, customer base and face worldwide
competition. By relying on sophisticated mathematical models and advanced software
tools, operations research can assess all available options facing a firm, project possible
outcomes and analyze risks associated with particular decisions. The result is more
complete information on which management can make decisions and set policy, according
to the Institute for Operations Research and the Management Sciences, INFORMS for
short, a national organization of operations research professionals.

b) Maximizing Data
Companies collect large amounts of data but may feel overwhelmed by the volume and
lack the time or expertise to fully analyze these data, transforming them into useful
information on which to base decisions. Operations research uses advanced mathematical
and statistical techniques, such as linear programming and regression analysis, to help
organizations make the most of their data, according to INFORMS' Science of Better
website. Through detailed analysis of the data, operations research analysts can help
uncover options that lead to higher profits, more-efficient operations and less risk.

Operations research is a scientific discipline that managers use to

make informed decisions for their operations. It draws heavily from math, statistics and

33
 science. Operations managers use this extensively to schedule and assemble their
production functions. Operations research is primarily used in the manufacturing, oil,
energy and telecommunication industries.
History Significance
1. Operations research was first developed in the 1940s, during and after World War
II. Features
2. Companies use operations research to devise ways and means to maximize their
profits and restrict their losses and risks. The company is able to zero down on the most
optimum levels of production. Also, they devise means to produce at lower costs or
produce more quantities at the same costs. Benefits
3. The operations manager is able to evaluate the various available routes for
production and fix the most feasible and practical one. He tries to derive the maximum
output with the minimum possible input.
4. Operations research is very beneficial to the managers in deciding what to produce,
the quantities, the methods of production, which employees to engage in the production
processes and the marketing schemes of the produced goods.
5. The main limitation of operations research is that it often ignores the human
element in the production process. This science is technology driven and does not take
into account the emotional factors and absenteeism of the employees
Scope of Operations Research in modern management

Operation Research is today recognized as an Applied Science concerned with a

large number of diverse human activities. To be precise an operation uses some valuable
resources like men money machines time effort etc. the outcome of the operation has also
some value. An Operation Research worker is required: (i) to minimize the input value for
a specific output, or/and (ii) to maximize the output value for a specific input or/and (iii)
maximize some function of these values for example the profit function (difference
between output and input values) or return on investment function (ratio of output and
input values).

Operations Research & Management. Some of the areas of management where tools of
operations Research are applied are listed below:

1. Finance Budgeting and investments

(a) Cash flow analysis long range capital requirements investment portfolios dividend
policies, etc.

34
(b) Credit policies credit risks and delinquent account procedures-claim and complaint
procedures.

2. Purchasing Procurement and Exploration.

(a) Determining the quantity and timing of purchase of raw materials machinery etc.

(b) Rules for buying and supplies under varying prices

(c) Bidding policies

(d) Equipment replacement policies

(e) Determination of quantities and timings of purchases.

(f) Strategies for exploration and exploitation of new material sources.

3. Production Management

(i) Physical distribution.

(a) Location and size of warehouses distribution centers retail outets etc.

(b) Distribution policy.

(ii) Manufacturing and facility planning.

(a) Production scheduling and sequencing

(b) Project scheduling and allocation or resources.

(c) Number and location of factories, warehouses, hospitals and their sizes.

(d) Determining the optimum production mix.

(iii) Manufacturing

(a) Maintenance policies and preventive maintenance

(b) Maintenance crew sizes.

4. Marketing Management

(a) Product selection timing competitive actions.

(b) Advertising strategy and choice of different media of advertising

35
(c) Number of salesman frequency of calling of account etc

(d) Effectiveness of market research.

(e) Size of the stock to meet the future demand

5. Personal Management

(a) Recruitment policies and assignment.

(b) Selection of suitable personnel on minimum salary.

(c) Mixes of age and skills.

(d) Establishing equitable bonus systems.

6. Research and Development.

(a) Determination of areas of concentration of research and development

(b) Reliability and evaluation of alternative designs

(c) Control of developed projects

(d) Co-ordination of multiple research projects

(e) Determination of time cost requirements

2. What are the situations where OR techniques will be applicable?

a) Linear Programming
Linear programming is a technique for resolving problems of resource allocation. It is
designed to assist management in its optimization decisions involving the use of competing
resources. It offers a simplified technique for specifying how to use limited resources or
capacities of a business to obtain a particular objective such as least cost, least time or
highest margin when these resources have alternative uses. There are situations where a
business organization is faced with the problem of allocating its resources which include
money, materials, land, machine time and labour time. It helps in the process of selecting
the most desirable course of action from a number of available courses of action thereby
giving management information for making effective decisions about the resources under
its control. Its applicability is however restricted to problems that are entirely linear.

36
 c) Transportation Model
An important factor in logistics management is the determination of the lowest cost
transportation provider from among several alternatives. In many cases, it is possible to
transport items from a plant or warehouse to a retail outlet or distributor. Factors to
consider when making a decision include comparative cost of alternative modes, kind of
product and transportation time. A quantitative technique that is used for determining the
least cost means of transporting products is the transportation model. It helps to determine
the quantity of the item to be transported to each destination on a periodic basis in order to
minimize the total cost of transportation or to maximize revenue.
Assignment Model
The assignment model is a special form of a linear mathematical programming model that
is similar to the transportation model. However, in the assignment model, the supply at
each source and the demand at each destination are each limited to one unit. This technique
can be used to assign salespeople to different territories to maximize sales and profits.
c) Goal Programming

This is a type of linear mathematical programming that can be used to analyze decision
situations involving multiple goals, which sometimes are complementary or conflicting.
Linear programming model has only one objective function, as such, it is inappropriate for
many decision making situations in which a manager is concerned with several potentially
conflicting objectives. Goal programming provides a method for extending linear
programming to accommodate models in which there is more than one objective. For
example, there are times when management may want to maximize profits and increase
wages paid to employees or to upgrade product quality and reduce product cost. Goal
programming considers all the decision makers objectives in the function to be optimized.
The pervasiveness of multi-objective decisions make goal programming an important tool
for managers. It requires management to set some estimated targets for each goal and
assign priorities to them, that is, to rank them in order of importance. With this information,
goal programming tries to minimize the deviations from the targets that were set.
d) Decision Analysis

37
Decision analysis is a systematic approach to decision making in situations where there are
a number of alternative courses of action and some uncertainty as to the precise outcomes
of the various possible options. One of the features of problems which exist in the real-
world is the existence of uncertainty, this is, at the time the decision is made, the decision
maker is uncertain as to which state of nature will occur in the future and thus has no
control over them. In dealing with such problems, it is essential to obtain a measure of the
uncertainty. Most business decision situations can be categorized into two classes, decision-
making situations where probabilities cannot be assigned to future occurrences and
decision situations where probabilities can be assigned. Within this context, several
decision-making criteria are available. In the case where probabilities could be assigned to
the states of nature of a decision situation, the expected value criteria and decision trees are
used.
e) Markov Analysis
Markov analysis is a technique for analyzing the current behavior of some variables in an
effort to predict the future behavior of that same variable. According to Taylor and Bernard
(1996) a markov chain is a collection of random variables (xt) (where the index t runs
through 0, 1,) having the property that given the present, the future is conditionally
independent of the past. Markov chain is a sequence of events or experiments in which the
probability of occurrence for an event depends on the immediately preceding event. It is
also referred to as markov process. The controlling factor in a markov chain is the
transition probability. It is a conditional probability for the system to go to a particular new
state, given the current state of the system. Thus, markov analysis is specifically applicable
to systems that exhibit probabilistic movement from one state or condition of the system to
another overtime. It has been successfully applied to a wide variety of decision situations
such as examining and predicting the behavior of consumers in terms of their brand loyalty
and their switching from one brand to another, assessing the behavior of prices, manpower
planning, estimating bad debts or credit management and maintenance planning.
f) Queuing Model
Queuing models are techniques for analyzing problems concerned with providing service
to customers in a line. All queuing situations involve the arrival of customers at a service
facility where some time is spent waiting for and receiving the desired service. Given a

38
model of a queuing system, some of the descriptions of the system that can be obtained
from the model are as follows:
The relative frequency or probability that the system will be idle.
The probability that there will be n customers waiting in the queue.
The expected number of customers waiting in the queue.
The probability that it will take more than t units of time to service a customer.
The average time a customer spends in the queue waiting for service.
The average time required to get through the entire system.

The description above can be invaluable in business decision making. Queuing can be used
for solving problems such as the determination of the optimum number of servers, repairs
and maintenance of equipment subject to breakdown and outsourcing decisions. A cost is
usually associated with waiting because it involves consumption of time. Long queues may
cause customer annoyance and perhaps a switch to another firm. However, if there are too
many service points, they may often be idle and also involve high cost to the organization.
The objective of queuing models is to strike an optimal balance in minimizing waiting
costs to both the customer and the service facility.
g) Simulation

Simulation is a quantitative technique for evaluating alternative courses of action through

experimentation performed via a mathematical model in order to represent actual decision
making under conditions of uncertainty. It involves the operation of a model or simulator,
which is a representation of the system. The model is amenable to manipulation, which
would be impossible, too expensive or impractical to perform on the entity it portrays. The
operation of the model can be studied and the properties concerning the behavior of the
actual system or its sub-system can be inferred
. At times, there are problems which cannot be resolved analytically because the problem
involves a large number of interacting factors which will lead to considerable
complications when analytical techniques are applied. Also, in situations where certain
assumptions will make the suggested optimal solution not to be accurate, simulation would
be the appropriate method for tackling such problems. It can be applied to decisions
regarding manufacturing of alternative kinds of products, choosing location of a plant,

39
selecting suitable processes of production or arranging for the sales of the finished
product. .In all these situations, management must examine and weigh alternatives. When
alternatives are few in number and management has experience, decisions may be simple.
However, when he has little experience, lacks information or has a problem not amenable
to simple numerical analysis or trial and error methods, actual experimentation may be too
expensive and time consuming, simulation procedures may then be extremely helpful.
h) Forecasting
A forecast is a prediction of what will occur in the future. Managers are constantly trying
to predict the future regarding a number of factors in order to make decisions in the present
that will assure the continued success of their firms. Often, a manager will use judgement,
opinion or past experience to forecast what will occur in the future. However, a number of
mathematical methods are also available to aid the manager in making such decisions.
Forecasting is the process of developing assumptions or premises about the future that
managers can use in planning or decision-making. There are a variety of forecasting
methods, the applicability of which are dependent on the time frame of the forecast, the
existence of patterns in the forecast and the number of variables the forecast is related to.
i) Inventory Models
The term inventory is used to denote the quantity of goods or materials kept on hand for
future use in production or sales. By carrying large inventories, one can minimize the
chances of shortage or make more profit in case of a price rise or enjoy economics of scale
due to purchasing in bulk. However, large inventories require more carrying costs in terms
of insurance charges, taxes, storage, obsolescence and deterioration. Inventory models help
to strike a balance between having too many quantities of an item on hand and running out
of stock. It deals with the following decisions:
What is the best quantity of an item to order each time an order is placed?
When should order be placed?
What quantity of the item should be held as safety stock?
Should management take advantage of discount offer?

The basic inventory model is the Economic Order Quantity (EOQ) Model. It helps in
identifying the order quantity that can minimize the total cost of carrying inventory. In

40
many business situations, there are a number of different activities which must be
performed in a specific sequence in order to accomplish a project. Some of these activities
can be performed simultaneously while others are done one after the other. Network
models enable the manager to consider the nature of the activities that are required for the
completion of a project, to define the critical path and then to make decisions consistent
with his resources and requirements. It also enables management to plan ahead, to take
stock of the situation at every stage of planning and may even alert him in time to obviate
future sources of trouble. Thus management may be in a position to plan the best possible
use of resources in a way that the milestone is reached within the appointed time and given
costs
j) Dynamic Programming
Dynamic programming is a technique which is useful when a decision maker is faced with
a multistage decision. It is often concerned with the allocation of scarce resources. The
states at a stage are often the different resource levels available at that stage. Given each
state, a number of decisions are possible, each of which results in a return. For each state,
the best decision is determined as the one that results in the greatest return. These states and
decisions are then related to the next stage in the solution process with a transition function.
This means that the solution approach of dynamic programming is to breakdown a problem
into smaller sub problems called stages and then solves these stages sequentially. The
outcome of a decision at one stage will affect the decision made at the next stage in the
sequence. For example, when a manager specifies a production level for his assembly line
at the start of each month, the choice of a production level for the nth month can be
influenced by and in turn can influence production levels selected for prior and subsequent
months. The principle behind dynamic programming is known as the principle of
optimality. Dynamic programming is a unique approach to problem solving. It uses other
techniques within its overall solution approach. As such, it is applicable to a wide variety of
problems. It has been successfully applied to such areas as equipment replacement,
production scheduling, inventory management, and for planning advertising expenditures.
As a result of its wide application, there is no single algorithm that can be used to solve all
problems and so a separate algorithm is normally developed for each problem.
k) Non-linear Programming

41
Non-linear programming is a mathematical technique for analyzing problems in which the
objective function and constraints are not linear. The solution approach for problems with
non-linear relationships requires the application of substitution method which is used for
models that contain only equality constraints and calculus.
Q1.What is a queue? Give an example the basic elements of queues.
Delays and queuing problems are most common features not only in our daily-life
situations such as at a bank or postal office, at a ticketing office, in public transportation or
in a traffic jam but also in more technical environments, such as in manufacturing,
computer networking and telecommunications. They play an essential role for business
process re-engineering purposes in administrative tasks. Queuing models provide the
analyst with a powerful tool for designing and evaluating the performance of queuing
systems.
Whenever customers arrive at a service facility, some of them have to wait before
they receive the desired service. It means that the customer has to wait for his/her turn, may
be in a line. Customers arrive at a service facility with several queues, each with one server
(sales checkout counter). The customers choose a queue of a server according to some
mechanism (e.g., shortest queue or shortest workload).
Sometimes, insufficiencies in services also occur due to an undue wait in service
may be because of new employee. Delays in service jobs beyond their due time may result
in losing future business opportunities. Queuing theory is the study of waiting in all these
various situations. It uses queuing models to represent the various types of queuing systems
that arise in practice. The models enable finding an appropriate balance between the cost of
service and the amount of waiting.

= mean number of arrivals per time period

= mean number of people or items served per time period

Ls = average number of units (customers) in the system (waiting and being served)

Ws = average time a unit spends in the system (waiting time plus service time)

Lq = average number of units waiting in the queue

Wq = average time a unit spends waiting in the queue = utilization factor for the
system

42
Example:
Customers arrive at an ATM machine at an average rate of 20 per hour (assume the arrivals
rate is described by a Poisson distribution). The amount of time they spend at the machine
takes on average two minutes, but can vary from customer to customer (assume negative
exponential distribution). Calculate the average number of customers in the system, the
average time they spend in the system, the average number in the queue, the average time
spent in the queue and the percentage of the time the machine is idle.

= 20 / hour = 30 / hour

L = / (- ) =20/(30-20) = 2 customers

W =1/ (- ) = 1/(30-20) = 6 minutes

Lq = 2 / (- ) =202/30(30-20) = 1.33 customers

Wq = / (- ) = 20/30(30-20) = 4 minutes

Po =1- (/) = 0.333333

Q2.Explain the important characteristics of a queuing system.

Characteristics of a Queuing system
Distribution of time between arrivals
Distribution of service times
Number of parallel servers
Maximum number of customers a system can accommodate.

Based on the above characteristics, there can be different queuing models.

These characteristics can be represented with the help of Kendalls notation.
Kendalls notation is the most popular notation to represent characteristics of a
queuing model, which is presented below
A | B| C | N

Where,
A Inter-arrival distribution
B Service time distribution
C Number of parallel servers
N Number of customers allowed in the system.

Inter-arrival (A) and service time (B) distributions

A and B can take various distributions:

43
 M : Exponential inter-arrival time or service time distribution(Equivalent
Poisson distribution of arrival or service rate)
D: Deterministic or constant inter-arrival or service time
G:General distribution (Normal, Uniform or any Empirical distribution)
Number of parallel servers (C)
A service system can have a single server or more than one server also called
parallel servers. These servers in parallel helps in reducing the waiting time and the service
process become faster.
Number of customers (N) in the queuing system
A number of customers (N) in the system can be restricted to a number or can be
infinite. If the queuing system has infinite number of customers, the queue characteristics
are represented by A | B | C

Q3Give some applications of queuing theory

Validating complex simulation models;

Developing easy-to-implement models that
help narrow alternatives in the initial stages of
system design;
Providing insights into the importance and
impact of variability in manufacturing and
services;
Suggesting alternative ways of structuring a
system and allocating tasks to people and
machine

Applications in Manufacturing and Services:

Manufacturing
-Most tasks require specific jobs defined by
machinery
-Tasks to make a product defined when product design
known before order arrives
Services:
-Many possible task packages for each worker
-Dont know what tasks customers require until
they arrive

Q4.Explain single channel and multi-channel queuing models

There are two types of multi-channel problems. The first type occurs when the
system has more service centers, and the queues to every of them are isolated and an
element cannot pass from one queue to the other. The second type of waiting-queue
problem is said to be of multiple exponential channels or of several service channels in
parallel, when the element in queue can be served equally well by more than one station.

44
MULTIPLE-CHANNEL QUEUING PROBLEMS
The queuing problems in multi-channel problems should be considered rather as
several problems of the single-channel type. Fig. 1 illustrates a valid case; the formation of
each queue is independent from the others. When an element has selected the concrete
queue, it becomes part of the single-channel system.

The probability of the arrivals in queue A is independent from the probability of the arrivals
in queue B (and C) due to different characteristics of the routes. On the other hand, in
multiple exponential channels type each one of the stations can deliver the same type of
service and is equipped with the same type of facilities. The element which selects one
station makes this decision without any external pressure from anywhere. Due to this fact,
the queue is single. The single queue (line) usually breaks into smaller queues in front of
each station. Fig. 2 schematically shows the case of a single line (which has its mean rate
) that randomly scatters itself toward four stations (S = 4), each of which has an equal
mean service rate .

Model A (M/M/1): Single-Channel Queuing Model with Poisson

Arrivals and Exponential Service Times

The most common case of queuing problems involves the single-channel, or single-
server, waiting line. In this situation, arrivals form a single line to be serviced by a single
station. We assume that the following conditions exist in this type of system:
1. Arrivals are served on a first-in, first-out (FIFO) basis, and every arrival waits to be
served, regardless of the length of the line or queue.

45
 2.

Arrivals are independent of preceding arrivals, but the average number of arrivals (arrival
rate) does not change over time.
3. Arrivals are described by a Poisson probability distribution and come from an infinite (or
very, very large) population.
4. Service times vary from one customer to the next and are independent of one another,
but their average rate is known.
5. Service times occur according to the negative exponential probability distribution.
6. The service rate is faster than the arrival rate.
Model B (M/M/S): Multiple-Channel Queuing Model
Now lets turn to a multiple-channel queuing system in which two
or more servers or channels are available to handle arriving customers.
We still assume that customers awaiting service form one single line and
then proceed to the first available server. Multichannel, single-phase
waiting lines are found in many banks today: A common line is formed,
and the customer at the head of the line proceeds to the first free teller.
The multiple-channel system presented in Example D3 again assumes
that arrivals follow a Poisson probability distribution and that service
times are exponentially distributed. Service is first come, first-served,
and all servers are assumed to perform at the same rate earlier for the
single-channel model also applies.
The queuing equations for Model B (which also has the technical name
M/M/S) are shown in Table D.4. These equations are obviously more

46
complex than those used in the single-channel model; yet they are used
in exactly the same fashion and provide the same type of information as
the simpler model. (Note: The POM for Windows and Excel OM software
described later in this chapter can prove very useful in solving multiple-
channel, as well as other, queuing problems.)
Q1 Explain the assignment problems giving a suitable example?

The assignment problem is a particular case of transportation problem in which the

objective is to assign a number of resources to an equal number of activities at minimum
cost or maximum profit. The Assignment Problem is a special type of a linear programming
problem. This problem has extensive applications in allocation problems where different
entities are allocated or assigned to other entities. The Assignment problem is stated as
follows:
Given n tasks and n people the problem is to assign or allocate or match the tasks and
people such that each task is assigned to exactly one person and each person to only
one task. There is a cost of allocating task i to person j and the objective is to minimize
the total cost of allocation. The tasks and persons can be two sets of entities with the
same cardinality (same number of elements) Given n jobs and n people the problem is
to assign the jobs to people at minimum cost such that each person gets exactly one
job and one job goes to exactly one person. The cost of assigning job i to person j is
Cij.

Typical example where assignment problems can be used are :

Workers to machine
Sales personnel to different sales areas
Products to factories
Vehicles to routes
Jobs to machines
Classes to room
The formulation of the assignment problem

47
Let Xij = 1 if task i is assigned to person j (= 0 otherwise). Let Cij be the given cost of
assigning I to j. The objective is to minimize the total cost of allocation which is to
Minimize

Each task goes to exactly one person. This is given by

Each person gets only one task. This is given by

The assignment problem is therefore a binary Integer Programming (IP) problem where
there are an equal number of tasks and people.The formulation of the balanced assignment
problem has n2 binary decision variables and 2n linear constraints.
Example
Consider the 4 job 4 person assignment problem whose cost matrix is given in Table
Cost of 11 8 6
assignme
nt 7
5 4 8 7
10 11 9 12
16 14 15 18

Let Xij = 1 if job i is assigned to person j. The objective is to Minimize

Each person gets exactly one job

Each job goes to exactly one person. This is given by

Xij = 0,1

The above problem was formulated as a binary problem and solved using the excel
solver. The optimum solution is given in Table

48
Q2 Explain the difference between a transportation problem and an
assignment problem ?
Assignment problem v.s. transportation problem
The assignment problem is a specialtype of transportation problem
Sources are equivalent to assignees and destinations are tasks.
Number of sources m= number of destinations n
Every supply si= 1 and every demand dj= 1.

Assignment Problem Transportation Problem

1. It is a problem of finding optimal allocation 1. It is the problem of finding optimal

of two variables, such as workers & jobs. transportation schedule from Supply centers to
Demand centers.
2. Method of solution is Hungarian method. 2. To find Initial Feasible solution, we use VAM,
LCM or NWCR. To find optimal solution, we
use MODI (Modified Distribution method).
3. The problem is unbalanced when number of 3. The problem is unbalanced when total supply
rows is not equal to number of columns. is not equal to total demand.

49
(4) Assignment means allocating various jobs (4) A transportation problem is concerned
to various people in the organization. with transportation method or selecting routes in
Assignment should be done in such a way that a product distribution network among the
the overall processing time is less, overall manufacture plant and distribution warehouse
efficiency is high, overall productivity is high, situated in different regions or local outlets.
etc.
(5) We solve an assignment problem by using (5) We use three methods for solving a
two methods. transportation problem i.e., to find IBFS :

(a) Complete enumeration (a) VAM (b) NWCR (c) LCM

method.
Thereafter we find the optimum solution by
(b) Hungarian method using the MODI method.

(6) In an assignment problem only one (6) A transportation problem is not subject to
allocation can be made in particular row or aany such restrictions. Such restriction are
column. peculiar to assignment problems only. Many
allocations can be done in a particular row or
particular column.
(7) In assignment problem management aims (7) In transportation method, management is
at assignment jobs to various people. searching for a distribution route, which can
lead to minimization of cost and maximization
of profit.
(8) When no. of jobs no. of workers, it is a (8) When the total demand is not equal to
unbalanced problem. total supply it is unbalanced problem.
Q3 Show that assignment problem is a special case of transportation
problem?
The assignment problem is a special case of the transportation problem, which is a
special case of the minimum cost flow problem, which in turn is a special case of a linear
program. While it is possible to solve any of these problems using the simplex algorithm,
each specialization has more efficient algorithms designed to take advantage of its special
structure. If the cost function involves quadratic inequalities it is called the quadratic
assignment problem.
Sources are equivalent to assignees and destinations are tasks.
Number of sources m= number of destinations n
Every supply si= 1 and every demand dj= 1.

The assignment model is actually a special case of the transportation model in

which the workers represent the sources and the jobs represent the destinations.The supply
(demand) amount at each source (destination) equals to one. The cost of transporting
worker I to job j is Cij. In effect the assignment model can be solved directly as a regular
transportation model. Nevertheless, the fact that all the supply and demand amounts equal 1
has led to the development of a simple solution algorithm called Hungarian method.

50
Although the new solution method appears totally unrelated to the transportation model, the
algorithm is actually rooted in the simplex method, just as the transportation model is.
However, every basic feasible solution of a general assignment problem that has a
square payoff matrix of order n should have m+n -1=n+n-1=2n-1 assignments. But due to
the special structure of this problem, none of the solutions can have more than n
assignments, thus the assignment problem is inherently degenerate. In order to remove
degeneracy,(n-1) number of dummy allocations will be required in order to proceed with
the algorithm for solving a transportation problem. Thus the problem of degeneracy at each
solution makes the transportation method computationally inefficient to solve an
assignment problem, but considered as a special case of transportation problem. And the
new method called Hungarian method is more efficient than the simplex method.

Give a brief outline of the procedure for solving transportation problem.

Give some of the applications of queuing theory and explain the following terms.
(i) Queue length
(ii) Traffic Intensity
(iii) Service channels
(iv) Steady and transient state

Answer: The procedure for solving transportation problem

1. Define the objective function to be minimized.

2. Set up a transportation table with m rows representing the
origins & n columns representing the destinations.
3. Develop an initial feasible solution to the problem.( use north west
corner or least cost or Vogels approximation methods)
4. Test whether the solution is optimal or not.( check for allocations =
m+n-1)
5. If the solution isnt optimal modify the allocations.
6. Repeat steps 4 to 5 until an optimal solution is obtained

The study of queuing theory is mainly applied in the following fields;

1. Business: to analyze queues formed in front of banks,

supermarket, booking offices etc.

2. Industries: in servicing of machines, storages etc. queues are

quite common.

3. Engineering: telephone calls arrival and served, electronics,

computers etc.

4. Transportation: in postal services, airports, harbors, railways,

etc. queues are formed for transportation.

51
 5. Other fields: queues before cinema ticket window,
barbershop, restaurants etc.

Basic elements of a queuing model:

A queuing model may be described as follows: A customer arrives at a service facility and
joins a queue. The server chooses a customer from the queue to begin service. Upon the
completion of a service, the process of choosing a new customer from the queue is
repeated. It is assumed that no time is lost between the release of a serviced customer and
admission of a new one from the waiting line. Two principal components of a queuing
model, viz., the customer and the server interact only for the period of time the customer
needs to complete his service. The basic elements of a queuing model depend on the
following factors:
1. Input processes:
a. Arrival distribution (single or bulk arrivals).
b. Queue size (finite or infinite).
c. Calling source (finite or infinite).
d. Human behavior (jockeying, balking or reneging).

2. Service processes:
(i) Service-time distribution (single or bulk service).
(ii) Design of service facility (series, parallel or network
stations).
(iii) Service discipline (FCFS, LCFS, SIRO) and service
priority.

Some basic terms of queuing theory are;

Queue length

Its also called Expected number of customers in the queue. Denoted by

Lq, expected number of customers in the queue is the average number
of customers in the waiting or in the queue. In simple words, its the no:
of customers waiting in the queue.
Lq = Ls

Where = average no: of arrival per unit time

= average no: of customers served in unit time
= Traffic Intensity /
Ls = length of system = /

Traffic Intensity

52
Denoted by , the server utilization factor or Traffic Intensity is the proportion of time that
a server is actually busy in providing service to the customers. If is the steady-state
probability of n customers in the system, then we have the following relations:
= /
Where = average no: of arrival per unit time
= average no: of customers served in unit time

Service channels
Systems usually Consists of one or more service facilities, each of
which contains one or more parallel service channels, called
servers.
At a given facility, the customer enters one of the parallel service
channels and is served by that server.
Most elementary models assume one service facility with either
one or a finite number of servers.

Transient state

If the operating characteristics of the system are functions of time,

then the system is called a transient system

Steady state

If the operating characteristics of the system are independent of time, then the system is
called a steady-state system. Most of the queuing systems are designed to be steady-state
systems, i.e., the systems will attain stability after a sufficiently long period of time.

1 a) A small firm manufactures necklaces and bracelets. The combined number of two
items that it can handle is at most 24. Bracelet takes 1 Hr to make and necklace 0.5 Hrs.
Maximum number of hours available per day is 16. If the profit on bracelet is Rs.2 and
on necklace is Rs.1 how many of each products should be made to maximize profit?
X1 = No: of Bracelets
X2 = No: of Necklaces
Objective Function ,
Maximize Z = 2 X1 + X2
Constrain Function
X1 + X2 24
X1 + 0.5 X2 16
X1 0 , X2 0
X1+X2= 24(0,24),(24,0)
X1+0.5X2= 16 (0,32),(16,0)
32
28
24 B (0,24)
20
16 C (8,16)

53
 12
8
4
A(16,0)
4 8 12 16 20 24

At A , Z(16,0) = 32
At B, Z(0,24) = 24
At C , Z( 8,16) = 32
Maximum Profit Z =32
To maximize profit 8 bracelet and 16 necklace can be made otherwise 16 bracelet and
no necklace can be made
No: of bracelet and necklace can be made is (8, 16) otherwise (16,0)
b) What is degeneracy in transportation problem? How this problem arises and how can
this be overcome?
The solution procedure for non-degenerate basic feasible solution with exactly
m+n-1 strictly positive allocations at independent position. Thus degeneracy occur in
transportation problem whenever a number occupied cells is less than m+n-1.The basic
feasible solution to an m-origin and n-destination transportation problem can have at most
m+n-1 number of positive basic variables. Whenever the number of basic cells is less than
m+n-1 ,the transportation problem is degenerate one.
Degeneracy in transportation problem can occur in two ways:
a) Basic feasible solution may degenerate from the initial stage onwards
b) They may degenerate at any intermediate stage.

--Resolution of degeneracy during the initial stage

To resolve degeneracy allocate an extremely small amount of goods to one or more
of the empty cells so that a number occupied cells become m+n-1The cell containing the
extremely small allocation is of course considered to be an occupied cell.
Rule: The extremely small quantity usually denoted by Greek letter (delta) is introduced
to the least cost independent cell subject to the following assumptions.
< Xij for Xij > 0 ,
Xij += Xij- , Xij> 0
+ 0 =

If there are more than one s in the solution < ,whenever is above
--Resolution of degeneracy during the solution stages
The transportation problem may also become degenerate during the solution stages.
This happens when most favorable quantity is allocated to the empty cell having the largest
negative cell evaluation resulting in simultaneous vacation of two or more of currently
occupied cells. To resolve degeneracy allocate to one or more recently vacated cells so
that the number of occupied cells is m+n-1 in the new solution.

. Discuss various classification schemes of OR models

A model, as used in operations research, is defined as an idealized representation of
the real life situation. It represents one or a few aspects of reality. The objective of the

54
model is to provide a means for analyzing the behaviour of the system for the purpose of
improving its performance.
Classification schemes of models

The various schemes by which models can be classified are

1. By degree of abstraction
Mathematical models (viz. linear programming formulation of the blending
problem or transportation problem) are the most abstract type since it requires not
only mathematical knowledge but also great concentration to get the idea of the real
life situation they represent.
2. By function
Descriptive models explain the various operations in non-mathematical language
and try to define the functional relationships and interactions between various
operations.
Predictive models explain or predict the behaviour of the system. Exponential
smoothing model, for example, predicts the future demand.
Normative or prescriptive models develop decision rules or criteria for optimal
solutions. They are applicable to repetitive problems, the solution process of which
can be programmed without managerial involvement. Linear programming is a
prescriptive or normative model as it prescribes what the managers must follow.
3. By structure
(a) Iconic (physical) Model
Iconic model is a physical representation of some item either in an idealized
form or on a different scale i.e. a representation is an iconic model to the extent that
its properties are the same as possessed by what it represents. Commonly an iconic
model represents a static event. Models of automobiles used in the study of a
parking problem need is its dimensions i.e., two dimensions (photo blueprints
maps) or three dimensions (small airplane globe atom). When a model surpasses the
third dimension it is no longer possible to construct it physically.

(b) Analogue (schematic) Model

It represents a system or an object of the inquiry by utilizing a set of properties

different from what the original system possesses. After the model is solved the
solution is re-interpreted in terms of the original system. For example an analogue
computer is the physical representation of the variables in a problem. Also graphs
are very simple analogues. They represent properties like force, speed, age, time,
etc. in terms of distance. A graph is well suited for representing quantitative
relationship between any two properties and predicts how a change in one property
effects the other.

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 An organizational chart is a common analogue model. It represents the
relationships existing between the various members of the organization. A man
machine chart is also schematic model. It represents a time varying interaction of
men and machines over a complete work cycle. A flow process chart is another
schematic model which represents the order of occurrence of various events to
make a product. Similarly demand curves and frequency distribution curves used in
statistics are example of analogue models.

An analogue model represents one set of properties by another set of

properties. Analogue models can represent dynamic situation and they are
customarily used more than iconic models because of their vast capacity to depict
the characteristics of the event under consideration.

(c ) Symbolic Models

Symbolic models are those which employ a set of symbols (i.e. letters,
numbers etc.) and functions to represent the decision variables and their
relationships to describe the behaviour or the system the symbols used generally
mathematical or logical in character. They are by far the most widely employed in
an O.R. study because of the great deal of complexity associated with an
organization. A symbolic or mathematical model consists of a set of equations
which define and specify the relationship and interactions among various elements
of decision problem under study. The solution of the problem is then obtained by
applying well-developed mathematical techniques to the model.

4. Classification by Nature of the Environment.

(a) Deterministic Models: In deterministic models, parameters are completely

defined and the outcomes related to particular course of action are certain. Certainty
is the state of nature assumed in deterministic models. In other words, deterministic
models represent completely closed systems and the results of the models assume
single values only. For any given set of input variables the same output variables
always result. Linear programming and Break-even models are examples of
deterministic models.

(b) Probabilistic Models: These models handle those situations in which the
consequence or payoff of managerial actions cannot be predicted with certainty.
These models are the products of environment risk and uncertainty. The input
and/or the output variables take the form of probability distributions and assume
more than single values. The advantage of a probabilistic model is that it offers an
evaluation of the likelihood of any event or result. In other words probabilistic

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 models reflect to some extent the complexity of the real world and the uncertainty
surrounding it. They are probably semi closed models.

5. Classification according to behavior characteristics.

(a) Static Models: These models do not consider the impact of changes that takes
place during the planning horizon i.e. they are independent of time. Also in static
model only one decision is needed for the duration of a given time period. In a static
model, cause and effect are almost immediate and no time lag is allowed.
Alternatively the effects of time are considered linear and as such do not affect the
model output basically. Static models are easier to handle and understand.

(b) Dynamic models: These models consider time as one of the important variables
and admit the impact of change generated by time. Also in dynamic models, not
one, but a series of interdependent decision, is required during the planning horizon.
The time dimensions has a definite impact on the model so solution, and on the
interpretation of the results.

6. Classification according to procedure of solution.

(a) Analytical models: These models have specified mathematical structure and
they can be solved by known analytical or mathematical techniques. For example,
the general linear programming model as well as the special structured
transportation and assignments models is analytical models.

(b) Simulation and Heuristic Models: The development of the digital computer has
led to the introduction of two other of modeling in O.R. these are (i) Simulation and
(ii) Heuristic models. Simulation modeling has the advantage of being more flexible
than mathematical modeling and hence may be used to represent complex systems
which otherwise cannot be formulated mathematically. On the other hand
simulation has the disadvantage of not yielding general solutions like those obtained
from successful mathematical models.

Heuristic models are essentially models that employ some intuitive rules or
guidelines in the hope of generating new strategies which will yield improved
solutions. This is in contrast to mathematical and simulation models where the
strategies are generally well-defined. Heuristic models do not claim to find the
optimum solution to the problem and gives a solution to a problem depending on
the assumption based on past experience. The advantage of such models is that they
operate faster as compared to other models and are very useful for solving large size

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 problems. These models however require an ample amount of creativity and
experience on the part of decision maker.

2. Give three definitions of OR and explain.

Operations Research is defined as the application of mathematical (quantitative)

techniques to decision making. In OR, a problem is first clearly defined and represented
(modeled) as a set of mathematical equations. It is then subjected to rigorous computer
analysis to yield a solution (or a better solution) which is tested and re-tested against real-
life situations until an optimum solution is found. OR applies different approaches to
different types of problems: dynamic programming, linear programming, and critical path
method are used in handling complex information in allocation of resources, inventory
control, and in determining economic reorder quantity; forecasting and simulation
techniques such as Monte Carlo method are used in situations of high uncertainty such as
market trends, next period's sales revenue, and traffic patterns.
The term Operations Research (OR) describes the discipline that is focused on the
application of information technology for informed decision-making. In other words, OR
represents the study of optimal resource allocation. The goal of OR is to provide rational
bases for decision making by seeking to understand and structure complex situations, and
to utilize this understanding to predict system behaviour and improve system performance.
Much of the actual work is conducted by using analytical and numerical techniques to
develop and manipulate mathematical models of organizational systems that are composed
of people, machines, and procedures.
In simple terms, Operations Research is the research of operations. An operation
may be called a set of acts required for the achievement of a desired outcome. OR is the
application of modern methods of mathematical science to complex problems involving
management of large systems of men, machines, materials and money in industry, business,
government and defense. The distinctive approach is to develop a scientific model of the
system incorporating measurement of factors such as chance and risk to predict and
compare the outcomes of alternative decisions, strategies or controls.

3. Give mathematical formulation of assignment problem.

The Linear Assignment Problem also called Assignment Problem is a special type
of a Linear programming problem. This problem has extensive applications in allocation
problems where different entities are allocated or assigned to other entities. The
Assignment problem is stated as follows:
Given n tasks and n people. The problem is to assign or allocate or match the tasks
and people such that each task is assigned to exactly one person and each person to only
one task. There is a cost of allocating task i to person j and the objective is to minimize
the total cost of allocation. The tasks and persons can be two sets of entities with the same
cardinality (same number of elements)

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Given n jobs and n people the problem is to assign the jobs to people at minimum cost such
that each person gets exactly one job and one job goes to exactly one person. The cost of
assigning job i to person j is Cij.
Formulating the assignment problem
Let Xij = 1 if task i is assigned to person j (= 0 otherwise). Let C ij be the given cost of
assigning i to j. The objective is to minimize the total cost of allocation which is to

n n
Minimize Cij Xij
i=1 j=1

Each task goes to exactly one person. This is given by

n

Xij ==1 i
j=1

Each person gets only one task. This is given by

n

Xij=1 j
i=1

Xij = 0, 1.
The assignment problem is therefore a binary Integer Programming (IP) problem where
there are an equal number of tasks and people.

Explain the history of OR?

As a formal discipline, operational research originated in the efforts of military
planners during World War II. In the decades after the war, the techniques began to be
applied more widely to problems in business, industry and society. Since that time,
operational research has expanded into a field widely used in industries ranging from
petrochemicals to airlines, finance, logistics, and government, moving to a focus on the
development of mathematical models that can be used to analyse and optimize complex
systems, and has become an area of active academic and industrial research.
In the World War II era, operational research was defined as "a scientific method of
providing executive departments with a quantitative basis for decisions regarding the
operations under their control."Other names for it included operational analysis (UK
Ministry of Defence from 1962) and quantitative management. Prior to the formal start of
the field, early work in operational research was carried out by individuals such as Charles
Babbage. His research into the cost of transportation and sorting of mail led to
England's universal "Penny Post" in 1840, and studies into the dynamical behaviour of
railway vehicles in defence of the GWR's broad gauge. Percy Bridgman brought
operational research to bear on problems in physics in the 1920s and would later attempt to
extend these to the social sciences. The modern field of operational research arose during
World War II.Modern operational research originated at the Bawdsey Research Station in
the UK in 1937 and was the result of an initiative of the station's superintendent, A. P.
Rowe. Rowe conceived the idea as a means to analyse and improve the working of the
UK's early warning radar system, Chain Home (CH). Initially, he analysed the operating of
the radar equipment and its communication networks, expanding later to include the

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operating personnel's behaviour. This revealed unappreciated limitations of the CH network
and allowed remedial action to be taken.
Based on the history of Operations Research, it is believed that Charles Babbage
(1791-1871) is the father of Operational Research due to the fact that his research into the
cost of transportation and sorting of mail resulted in Englands universal Penny Post in
1840. The name operations research evolved in the year 1940. During World War 2, a team
of scientist (Blacketts Circus) in UK applied scientific techniques to research military
operations to win the war and the techniques thus developed was named as operation
research.
As a formal discipline, operations research originated from the efforts of army
advisors at the time of World War II. In the years following the war, the methods started to
be employed extensively to problems in business, industry and society. Ever since then, OR
has developed into a subject frequently employed in industries including petrochemicals,
logistics, airlines, finance, government, etc. Thus, the Operational Research began during
World War II in great Britain with the establishment of groups of scientists to analyze the
strategic and tactical problems associated with military operations. The aim was to discover
the most efficient usage of limited military resources by the application of quantitative
techniques. At the conclusion of war different things happened to O.R. in the Great Britain
and in the United States. In the UK expenses on defense research were lowered; this
resulted in the discharge of numerous Operational Research workers from the military at a
time when business managers were facing the need to restore much of Britains production
facilities which had been ruined in war. Professionals in the nationalized basic industries
specifically needed assistance from the OR men leaving the military organization. To the
contrary, defense research in US was increased and O.R. was expanded at the conclusion of
war. The majority of the experienced workers stayed in the service of the army. The
ultimate involvement of science in industrial problems of the executive type in the US is a
result of the advent of Second Industrial revolution. World War II had sparked scientific
advances in the study of communication, computation, & control which produced the
technological grounds for automation. In early 1950s industry started to take in a few of the
Operational Research workers who left the army. Thus O.R. started to spread and expand in
the United States.
India was among the few nations which began utilizing O.R. In 1949, the first
Operational Research unit was established at Hyderabad which was named Regional
Research Laboratory located. At the same time an additional unit was launched in Defense
Science Laboratory to fix the Stores, Purchase and Planning Problems. In 1953 at Calcutta,
an O.R. unit was established in Indian Statistical Institute. The objective was to use O.R.
techniques in National Planning and Survey. In 1955, Operations Research Society of India
was created, which is among the first members of International Federation of Operations
Research societies. Today, the utilization of O.R. techniques has spread out from army to a
wide range of departments at all levels.

What are the common methods to obtain the initial basic feasible solution for a
transportation problem? Give a step by step procedure for one of them?
The common methods to obtain basic feasible solution for a transportation problem are
(I) North west Corner Method
(II) Least Cost Method

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 (III) Vogels Approximation Method (VAM)

Vogels Approximation Method (VAM)

The Vogel approximation method is an iterative procedure for computing a basic

feasible solution of the transportation problem.
Steps

1. Identify the boxes having minimum and next to minimum transportation cost in each row
and write the difference (penalty) along the side of the table against the corresponding row.

2. Identify the boxes having minimum and next to minimum transportation cost in each
column and write the difference (penalty) against the corresponding column

3. Identify the maximum penalty. If it is along the side of the table, make maximum
allotment to the box having minimum cost of transportation in that row. If it is below the
table, make maximum allotment to the box having minimum cost of transportation in that
column.

4. If the penalties corresponding to two or more rows or columns are equal, select the top
most rows and the extreme left column.

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