1.

1. Introduction

OPTIMISATION OF RESOURCES

In business situations, we often face problems of allocating a fixed set of

resources among a set of competing demands. Examples of such situations are deciding a product mix within the manufacturing and marketing constraints, preparation of a schedule for transporting goods from the place of transportation to the points of demand, etc. A common feature of these problems is the limitations imposed on the decision maker by the availability of resources such as production capacity, availability of raw materials, working capital, warehouse capacities, existence of demand and so many other hard facts of life which prevents management from doing exactly what it pleases. If after working within all constraints the decision maker has but one single alternative way of resolving his problem, then of course there is no need for further analysis. However, very often given the fixed set of resources there are innumerable ways of allocating them over a set of activities. Depending on the overall objectives of the firm, criterion of evaluating these alternatives will have to be specified. The criteria for selecting among alternatives could be profit, loss, total cost, total contribution earned, total labour utilized etc. As a class, these problems may be referred to as programming problems. They are of so much interest because their applicability to practical problems in government, military and industrial operations. But we find that the methods are of little assistance in solving such problem. Therefore, new methods had to be developed. Here we shall take only a special but very import class of programming problems.

Three Major Categories of Allocation Problem The first type of Problem: arises when there are more jobs to be done than available resources permit. Hence a selection of jobs must be made as well as a determination of how they are to be done. The familiar Products mix problem, cutting stock problems and blending problems are of this type. Given the demands for each of a wide range of products, and the profit contributions of each what combination of products should be made in what quantities so as to maximize the expected profit? Most budgeting problems are also of this type. For example, there are usually many more research and development projects available to a company then it has funds or personnel to carry out. In the second type of Problem : we have a certain number of jobs to be done and some of the jobs require more than one resource and resources can be used for more than one job. The problem then involves dividing the resources and job appropriately. This type of problem is known as the Transportation Problem. For example, there may be number o empty freight available at certain yards, and a number are required at various locations. How should each point demand be supplied. Of again if there are a number of plants each producing the same products, from which plant should the requirements of various customers be filled? In short, most distribution problems are of this sort. Another type of problem that arises is when each job requires one and only one resource, and there are the same number of jobs and resources. Here the objective is to allocate the resources to the jobs in such a way that the overall efficiency is maximized. This problem is called the assignment problem because it involves assigning one resource to each job.
2

The

resource may very well be a person. For example, the resources may be trucks of different sizes and the jobs may be deliver routes of differing characteristics. Drivers must be assigned to trucks, operators to machines, clerks to particular clerical tasks, classes to room etc. The third type of allocation problem: arises when one has control over the amount of resource and hence can determine what resources should be added, where or what resources should be disposed off. For example, the need to determine where to build a new plant or warehouse creates a problem of this type. Or the decision as to which of several plants to shut down during slack period is of the same type. Within a plant the same type of problem may arise with respect to determining what types of problem may arise with respect to determining what types of machine to add or remove from the production line. How many salesman should a company have and how should their territories be selected is a question of the same type. Broadly speaking, programming problems deal with determining optimal allocations of limited resources to meet given objectives when there are alternatives uses for resources. In mathematical programming we build up a function and we are essentially interested in finding out for what value of the variables the function takes maximum or minimum value when a fixed set of restrictions are imposed on the variables. We consider Linear Programming Technique for this purpose.

Date (approx.)
1776 1799 1832 1900 1901 1915 1927 1931 1935 1940 1946 1947 1950 1951 1960 1970 1970 1980

Historical Summary of Operations Management Contribution Contributor

Specialization of labor in manufacturing Interchangeable parts, cost accounting Division of labor by skill; assignment of jobs by skill; basics of time study Scientific management; time study and work study developed; dividing planning and doing of work Scheduling techniques for employees, machines, jobs in manufacturing Economic lot sizes for inventory control Human relations; the Hawthorne studies Statistical inference applied to product quality; quality control charts Statistical Sampling applied to quality control: inspection sampling plans Operations research applications in World War II Digital computer Linear programming Mathematical programming, nonlinear and stochastic processes Commercial digital computer; large-scale computations available Organizational behavior; continued study of people at work Integrating operations into overall strategy and policy Computer applications to manufacturing, scheduling, and control, material requirements planning (MRP) Quality and productivity applications from Japan; robotics, computer-aided design and manufacturing (CAD/CAM) Adam Smith Eli Whitney and others Charles Babbage Frederick W. Taylor Henry L. Gantt F.W. Harris Elton Mayo Walter A. Shewhart H.F. Dodge and H.G. Romig P.M.S. Blacket and others John Mauchly and J.P. Eckert George B. Dantzig, William Orchard Hays, and others A. Charnes, W.W. Cooper, H. Raiffa, and others Sperry Univac L. Cummings, L. Porter, and others W. Skinner J. Orlicky and O. Wright W.E. Deming and J. Juran

Areas of Operation Management

Linear programming (LP) Non linear programming (NLP) Integer programming (IP) Zero one programming Inventory control models Waiting line or Queuing theory Simulation Dynamic programming Sequencing Network scheduling PERT and CPM Goal Programming Operations Management Can be considered as being the application of scientific methods by interdisciplinary team to problem involving the design and control of organized mainmachine system to provide solutions which best serve the purpose of organization as a whole.

2.

Decision Making Process

Formulating the Problem

Constructing a Model

Deriving a Solution

Testing the Model and

Solution

Establishing Control over the solution Formulating the Problem The first phase of the operations research approach consists of the determination of the problem as viewed by the decision maker. In this phase we attempt to determine the characteristics of the problem such as: What is the problem? Where does it exist? Why does it exist? What is its impact on the total system? What factors about or within the problem environment are controllable and which are not? What are the alternatives? What is the measure of system effectiveness?

At the same time we must determine the objectives and aspirations of our decision maker and determine their measure of effectiveness (i.e., is the improvement of the system to be measured in increased profit, dollars of reduced cost, units of products produced, and so on?). Next we must determine the problem constraints, such as the legal or practical limitations on the use of resources, contractual obligations, time limitations, and the like. Constructing a Model of the System A model is used to represent the system under study. One may play with this model whereas experiments and observations of the actual system may not be economically or practically feasible. A model can take on many forms including a scale-model, a network schematic, or a set of descriptive mathematical relationships. The most general model is
Z = f (X, Y )

where : Z = a measure of effectiveness of a system program

X = variables within the system which are subject to control (decision variables) Y = f( )= variables within the system that are not subject to control a function relating the combined effect of the X and Y variables.

For example, we might wish to lower the temperature in a room having a window mounted air conditioner. The controllable in this system is the temperature control knob. However, this air conditioning system is limited by such uncontrollable variables as its size and the outside temperature. Consequently, the final temperature achieved is some function of both the controlled and the uncontrolled aspects. Deriving a Solution from the Model Given the model, we may derive the solution in a number of ways depending on the situation at hand. For example, in a computerized simulation model

we may try a number of alternate approaches by feeding them into the model in the form of input data. If the model is in the form of mathematical expressions, we may try to find a solution analytically, say by calculus. In any case, the solution should be derived by the most appropriate method. Testing the Model and Solution Since the model is only a representation of a system, it may not actually respond, as would the real system, to a solution. Consequently, we would like to implement and evaluate our proposed solution in the real system and/or we might wish to determine the sensitivity of the solution to variations in the model. During such implementation and analysis, we almost discover some shortcomings or errors in our original model. If necessary, we may have to refine our model and go back to the previous steps. Establishing Controls over the Solution Once we are satisfied with our model and its solution, we must also take care to establish controls over this solution before final implementation. The system modeled originally cannot be expected to remain the same forever. Changes in it which would affect our solution must be measured and modifications to the solution made so as to follow these changes. Implementing the Solution Our final step is to implement the solution. It is important that the operations research analysts participate in this step. The changes in procedure will often take time and meet with some resistance. To illustrate these steps let us consider the following simple example. A company produces various types of containers (barrels, boxes, and so on). They have received an order for a large quantity of open-top, rectangular storage tanks. The tank must have a square base and provide a storage capacity of 10 cubic feet. Proceeding through the phases cited earlier, we first attempt to formulate the problem. The first obvious question is: What is the problem? In the example under consideration, the problem most likely is to completely define the structure (i.e., find the dimensions) of the storage tank. A likely

measure of effectiveness is the cost of the finished product. That is, the lower the cost, the more satisfactory is the design. Our next consideration should be to determine what variables exist within the problem that we may control so as to (1) satisfy the basic design requirement and (2) minimize the storage tanks cost. First, we note that the volume is not within our control; it must be 10 cubic feet. Also, the base of the box must be square. This leaves us with only two controllable variables the base dimension and the height of the tank. Letting the first variable be x and the second be y , we may establish a model of the problem. In the most general sense, the cost of the storage tank (Z) is :
Z = f ( x, y )

However, since the cost of the tank is most probably proportional to the material used, this can be stated more specifically as
Z = c1 x 2 + 4c 2 xy

where :
c1 c2

xy

x2

c1 x 2
c 2 xy 4c 2 xy

= cost of material per square foot, used to construct the base = cost of material per square foot, used to construct the sides = the area of the base = the area of each side = cost of base = cost of one side = cost of all four sides.

Our model is not yet complete. We have formulated the objective of the problem : find x and y so as to minimize Z , but we must also consider the constraints. The only implied constraint or restriction comes from the requirement that the volume be 10 cubic feet. Mathematically, this constraint is
x 2 y =10

where the left hand side of the above equation is simply the equation for the volume of any box with a square base.

It now becomes clearer as to the character of the problem model. Specifically we must find volumes of x and y to minimize
Z = c1 x 2 + 4c 2 xy

subject to the requirement that

x 2 y =1 0

or
y =1 / x 2 0

Next, substitute the value of y into our objective to obtain

Z = c1 x 2 + 4c 2 x 10 / x 2

To find the minimum value of Z we take the derivative of Z with respect to x, set it to zero, and solve for x

3.

Linear Programming
10

Some Application of Linear Programming

Aggregate Planning : Production Find the minimum cost production schedule, taking into account hiring and layoff, inventory carrying, overtime, and subcontracting costs, subject to various capacity and policy constraints. Distribution : Shipping Find the optimal shipping assignments from factories to distribution centers or from warehouses to retailers. Inventory : Stock Control Determine the optimal mix of products to hold in inventory in a warehouse. Supplier Selection Find the optimal combination of suppliers to minimize the amount of unwanted inventory. Location : Plants or Warehouses Determine the optimal location of a plant or warehouse with respect to total transportation costs between various alternative locations and existing supply and demand sources. Process Management : Stock Cutting Given the dimensions of a roll or sheet of raw material, find the cutting pattern that minimizes the amount of scrap material Scheduling : Shifts Determine the minimum-cost assignment of workers to shifts, subject to varying demand. Vehicles Assign vehicles to products or customers and determine the number of trips to make, subject to vehicle size, vehicle availability, and demand constraints. Routing Find the optimal routing of a product or service through several sequential processes, each having its own capacity and other characteristics.

11

Characteristics and mathematical assumptions of Linear Programming model : 1. Objective Function 2. Decision Variables 3. Constraints 4. Feasible Region 5. Parameter 6. Linearity
1. Objective Function: States mathematically what is being maximized

(e.g. profit, present value) or minimized (e.g., cost, scrap, loss). The objective function provides the score board on which alternatives of different solution is judged.
2. Decision Variables: What must be decided? Represents choice that

the decision maker can control solving the problem yield their optimum value. For example, a decision control variable could be the number of units of a product to make next month.
3. Constraints: Are limitation that restrict the permissible choice of

decision variables. Each limitation can be expressed mathematically in one of the three ways:
i.

Less than or equal to ( ) . Constraint of this type put an upper limit on some function of decision variables. Equal to (=) Often used for certain mandatory relationship.
12

ii.

iii.

Greater than or equal to ( ) . Put a lower limit on some function of decision variables.

4. Feasible Region: Every linear programming problem must have one

or more constraints. Taken together the constraints define a feasible region, which represents all permissible combination of the decision variables. The goal of decision maker is to find the best possible solution.
5. Parameter : Also known as coefficient or given constant is a value

that the decision maker cannot control and that does not change when the solution is implemented. Each parameter is assumed to be known with certainty.
6. Linearity: The objective function constraint are assumed to be linear.

It implies proportionality and additively. Product Mix Problem: A company manufacturers two products P1 and P2. The company has two types of machines, three machines of type A and two of type B. Any one of the products has to undergo some operation each of the two types of machines. It will be assumed that : (a) the production is continuous (b) each product must first go on machine type A and then type B (c) the time required for adjusting the set of each machine to a different operation, when production shifts from one product to another, is negligible (d) the profit is directly proportional to the number of units sold. The company operates eight hours a day five days in a week. Table 1 shows that (1) the hours required on each machine type per unit of each

13

product, (2) the total available machine hours per week, (3) the profit realized on the sale of one unit of any one of the products. Table : 1 Machine Type Product P1 Product P2 Total (hrs) 120 080 time available per week A B Unit (Rs.) The problem is to determine the weekly output for each product in order to maximize the profit. Suppose X1, X2 are the number of units of product P1 and P2 respectively, produced per week. We want to find the values of X1 and X2 which maximize the total profit. Since the available machine time is limited we cannot arbitrarily increase the output of any one product. Let us first consider the restrictions imposed by the availability of machine time. Machine of type A are in use of total of 2X1 +5X2 hours per week. The total time used is the sum of the times required to produce product P1 i.e. 2X1 and P2 i.e. 5X2. The total amount of time used cannot be greater than 120 hours. Mathematically, this means that
2X 1 + 5X 2 120 (0.1)

2 Profit 4 3

5 2 4

would not be correct to set the total hour used equal to 120 for type A machines, since there may not be any combination of production rates that would use each of the two groups of machine to full capacity. We do not wish to predict which machines will be used to full capacity. Instead we
14

introduce a less than or equal to sign, the solution of the problem will indicate which machine will be used at full capacity. For machine B we can write:
4X 1 + 2X 2 80 ( 0 .2 )

Since no more than the available machine time can be used. The variables X1 and X2 must satisfy the above two equalities. Furthermore, we cannot produce negative quantities. Thus the additional restriction are :
X 1 0, X 2 0 (0.3)

and the weekly profit

Z = 3X1 + 4X 2

The problem is as follows : Maximum Z = 3X1 + 4X 2 Subject to :

2X 1 + 5X 2 120 4X 1 + 2X 2 80 X 1 0, X 2 0

The above example is a linear programming problem because the restriction and the function to be maximized involve only liner relation among the variables. We can solve the Linear Programming by using : 1. Graphical Method if we have only 2 variables. 2. General method for solving Linear Programming problem is Simplex Method.
15

We use packages for this purpose. Computer solution for this problem is X1 = 10 X2 = 20 Portfolio Selection Problem: Amount available for investment = Rs. 10,00,000 S.No. 1. 2. 3. 4. 5. Diversification Goals: 1. Investment in common and preferred stock should not be more than 30% of the total investment. 2. Investment in government bond should not be less than the investment in saving certificates. 3. The investment in corporate and government bonds should not be more than 50% of the total investment. Formulation: Define decision variables Objective Function: Return at the end of one year
Z =0.1 X 1 +0.1 X 2 +0.15 X 3 +0.1 X 4 +0.1 X 5 2 3 1 X1 , X 2 , X 3 , X 4 , X 5

Category of Investment Common Stocks Preferred Stock Corporate Bonds Government Bonds Saving Certificates

Expected Annual yield 5 7 12 9 8

the amount invested in the

five categories respectively.

Constraints:
16

1. Investment in common and preferred stock should not be more than

30% of the total investment. That means investment in saving certificates. That is

X 1 +X 2 0.3 x 100000

2. Investment in government bonds should not be less than the

X 4 X 5

3. The investment in corporate and government bonds should not be

more than 50% of total investment. That means

X 3 +X 4 0.3 x 100000

4. Total amount invested is :

X 1 +X 2 +X 3 +X 4 +X 5 = 1000000

The LP Problem is as follows

Z =0.1 X 1 +0.12 X 2 +0.1 X 3 +0.1 X 4 +0.1 X 5 5 3 1

Subject to :
X 1 +X 2 0.3 x 100000
X 4 X 5 0 X 3 +X 4 0.5 x 100000 X 1 +X 2 +X 3 +X 4 +X 5 = 1000000 X 1 , X 2 , X 3 , X 4 , X 5 0

Computer Package solution is given by

X 1 =0 , X 2 =300000 , X 3 =300000 , X 4 =20000 , X 5 =20000

Sensitivity Analysis : Post Optimality Analysis: Optimum solution to LP problem depends on : Coefficients of objective function and constraints Level of resources considered
17

In actual practice, the input data values are seldom known with absolute certainty. We often use estimates based on past data, we need to known the impact of the possible error of estimation. During planning process, mangers often ask what if questions. Change resource availability Add new product Add extra constraints Any change in the input data results in new LP problem. We carry out sensitivity analysis to investigate the relationship between optimal solution and possible changes in various components and parameters of the problem considered. Avoid the need of reworking the entire problem from the beginning each time a change is investigated. We use the optimal solution to study the affect of changes. The result of sensitivity analysis establish range for different parameters within the current optimal solution remains optimal.
1.M in Z =3x 1 +2 x 2 subject to 5x 1 +x 2 10 2 x 1 +2 x 2 12 x 1 +4 x 2 12 x1 0 x 2 0

18

2. M ax Z =2 x 1 + 3x 2 subject to x 1 +x 2 8 3x 1 +x 2 12 x1 0 x2 2

3. M ax subject

Z =4 x 1 +3x 2 to

x 1 +x 2 10 4 x 1 +3x 2 12 x1 0 x 2 0

The plant manager of a plastic-pipe manufacturer has the opportunity to use two different routings for a particular type of plastic pipe. Routing 1 uses extruder process A and routing 2 uses extruder process B. No matter which routing is used, the raw material for the pipe must pass through a melting process. The table below gives the hours per 100 feet of pipe required in each process.

Process Melting Extruder A Extruder B

Hours Per 100 Feet Routing 1 Routing 2 2 10 2 8

Maximum Hours Available 100 400 360

19

In addition, 100 feet of pipe produced on routing 1 require 30 pounds of plastic, whereas 100 feet of pipe only require 25 pounds on routing 2 because of the higher production quality. There is a total of only 1350 pounds of raw plastic material available. Also, the minimum production quantity is 3000 feet of pipe of ensure that existing production orders are fulfilled. Finally, it costs more to use routing 1; thus the profit per hundred feet is $ 50 for routing 1 and $ 80 for routing 2. (a) Specify the linear programming model for this problem. (b) Determine with graphical methods the solution that maximizes profits. (c) How much would the profit per 100 feet of pipe produced on routing 1 have to increase before it would pay to increase production on that routing ? (d) With reference to the solution in part b, management can buy an addition to the melting process that costs $500 but increases the capacity by 50 hours. It is worth it? Why ? The Blending Problem One of the major uses of LP has been to help solve the so called blending problem, where a final product is obtained by blending several constituents. This problem will be illustrated in simple form by the Greaseless Oil Company problem. The company produces regular, premium, and low-lead gasoline by blending three constituents: type A, B, and C. The three constituents are available in limited quantities and at costs as follows: Maximum Available / Day (Barrels) 2,000 3,000 1,000

Constituent Type A Type B Type C

Cost / Barrel $10.00 $ 7.50 $ 5.00

The selling prices are $ 0.20 per gallon for regular, $0.30 for premium, and $ 0.15 for low lead gasoline. The low-lead market is limited to 5,000 gallons per day. The gasolines must be produced according to the following specifications :
20

Regular :

1. Not less than 20% of constituent A 2. Not more than 30% of constituent C

Premium : 1. Not less than 40% of constituent A 2. Not less than 10% nor more than 20% of constituent B 3. Not more than 10% of constituent C Low lead : 1. Not less than 30% of constituent B The problem is to determine the volume of each gasoline to sell that will maximize profits. As usual, the first problem is to define the decision variables. Lets try the following :
x1 = x2
x3

amount of regular = amount of premium = amount of low lead

In order to derive the p j values, we need to know the variable cost of producing each gasoline. We know the respective selling prices, but obviously we dont want to maximize sales that will not guarantee maximization of profits. However, the costs are impossible to compute because we do not know the exact formula for producing each gasoline. Thus, it is impossible to formulate the problem using the above definitions. In this problem, then, there are really two decisions to be made : how much of each gasoline to produce and how to produce each. We therefore define: = barrels of constituent i to put into the total of gasoline j to be produced, where I = A, B, or C and j = R, P, or L (R = regular, P = premium, and L = low lead)
xi ,
j

With this definition we can determine, when desired, the total amount of gasoline j produced (T j ):
T j = X i , j
i =A c

j = R, P , L

21

For regular gasoline we have :

TR = X A , R + X B , R + X C , R

If we need the total amount of constituent i (Ci) used in the production schedule we can use :
C i = X i , j i = A, B, C
j =R L

For example :
C A = X A, R + X A, P + X A, L

An objective equation can now be formed. If we assumed that there are 50 gallons in a barrel, then we have: Maximize : Maximize :
1 TR +1 T p + 7.5TL 0 C A 7.5 C B + 5C c 0 5 1

+7.5 ( X A, L + X B , L + X C , L ) 10 ( X A, R + X A, P + X A, L ) 7.5 ( X B , R + X B , P + X B , L ) 5 ( X C , R + X C , P + X C , L )

10 ( X A, R + X B , R + X C , R ) + 15 ( X A, P + X B , P + X C , P )

can be simplified to : Maximize :

0X
A, R

+ 2.5 X B , R + X C , R + X A, P + 7.5 X B , P + 0 X C , P 5 5 1 2.5 X

A, L

+ X B , L +2.5 X C , L 0

The first set of constraints consists of the constituent availability constraints:

CA =
X
A, R

J =R

A, J

2,000
A, L

or

+X

A, P

+X

2,000

X B , R + X B , P + X B , L 3,000 X C , R + X C , P + X C , L 1,000

A constraint is required on the market potential for low-lead gasoline:

X A, L + X B , L + X C , L 100

22

Next we need to consider the specifications for each of the gasolines. Take specification (1) for regular gasoline as an example. Translating that specification we obtain :
Am ount of constituen t A in regular Am ount of regular X 0.20

The numerator of above is given by TR , so that:

X A, R X A, R + X B , R + X C , R X A, R 0.20 0.20 or

A, R

and the denominator is given by

(X

A, R

+ X B , R + X C , R ) or

0.8 X A, R 0.2 X B , R 0.2 X C , R 0 or 0.8 X A, R + 0.2 X B , R + 0.2 X C , R 0

The other specifications can be developed in a similar manner. They are : Regular, specification 2:
0.3 X A, R 0.3 X B , R + 0.7 X C , R 0

Premium, specification 1: Premium specification 2:

0.6 X A, P + 0.4 X B , P +0.4 X C , P 0

0.1 X A, P 0.9 X B , P + 0.1 X C , P 0 0.2 X A, P + 0.8 X B , P 0.2 X C , P 0

Premium, specification 3:
0.1 X A, P 0.1 X B , P + 0.9 X C , P 0

Low-lead, specification 1 :
0.3 X A, L 0.7 X B , L +0.3 X C , L 0

23

4.

ASSIGNMENT PROBLEM

A special type of Linear Programming problem where resource are being allocated to activities on one-one basis. Resources: In the form of employees, machines. Activities : In the form of jobs, tasks, events, sites Cost Matrix : There is a cost associated with assigning a given resource to any activity.

24

Objective: To find out an assignment on one-one basis which will minimize the total assignment cost. Assignment Problem Material Handling Cost Location 01 1 Machine 2 3 4 13 15 15 06 02 10 200 07 05 03 12 13 10 15 04 11 20 06 25

Hungarian Algorithm For Solving The Assignment Problem Step 1 : Select the smallest element in each row and subtract it from each element in that row Step 2 column. Step 3: Draw/choose smallest number of horizontal or vertical lines to cover all the zeroes. If the number of lines equals the number of activities or resources, stop. We have got the best assignment. Otherwise go to Step 4 Step 4: Choose the smallest element not covered by lines and subtract this element from each element not covered by lines. Add this smallest element to elements at the intersection of lines and go to Step 3.
25

: Consider the reduced cost matrix, select the smallest

element in each column and subtract it from each element in that

Problem Formulation: Suppose there are n jobs to be assigned to n persons on one-one basis. Let Cij be the cost of assigning ith job to jth person for
i = , 2, , n a d 1 n j = , 2, , n 1

Decision Variables: We define n x n decision variables as follows:

x ij = if i th jo is assig ed 1 b n =0 o erw th ise to j th p n erso

For

i = , 2, , n a d 1 n
n

j = , 2, , n 1
n

Min Total cost = C ij X ij

i = j= 1 1

Constraints:
j =1 n

x ij X ij

=1 for i =1, 2, , n =1 for j = 1, 2, , n , x ij =0 or 1

j =1

M Z =18 x 11 +26 x 12 +17 x 13 +11 x 14 +13 x 21 +28 x 22 +17 x 33 +26 x 27 in 38 x 31 +19 x 32 +19 x 33 +18 x 37 +19 x 41 +26 x 42 +21 x 43 +10 x 44

Subject to:
x 11 +x 12 +x 13 +x 14 =1 x 21 +x 22 +x 23 +x 24 =1 x 31 +x 32 +x 33 +x 34 =1 x 41 +x 42 +x 43 +x 44 =1 x 11 +x 21 +x 31 +x 41 =1 x 12 +x 22 +x 32 +x 42 =1 x 13 +x 23 +x 33 +x 43 =1

26

x 14 +x 24 +x 34 +x 44 =1
x ij = o 1, i = , 2, 3, 4 j = , 2, 3, 4 0 r 1 1

Total number of possible solutions 4!=4 x 3 x 2 x 1=24 5!= 5 x 4 x 3 x 2 x 1 = 120 10! = 36 millions, 20! = 2.43 x 18 Estimated time for Competition of Job Person A 1 Job 2 3 4 18 13 38 19 B 26 28 19 26 C 17 14 18 24 D 11 26 15 10

Transportation Problem:
We have m warehouses, supply depots (origins) numbered from 1 to m. Each origin Contains a certain amount of commodity available. Destination: We have n demand centers or cities numbered from 1 to n. Demand at each destination is known. Cost Matrix: Cost of transporting one unit of commodity from any given origin to any given destination is known

27

Problem: To find out amount of commodity that should be transported from each origin to different destinations such that total transportation cost is minimum and demand met Transportation Problem:
1 14 16 15 40

Destination/Sink
2 11 14 12 50 3 12 13 16 70 4 26 15 14 90 5 19 17 18 90 Availability 100 120 120

Origin or Source

1 2 3 Demand

Total Demand= Total Availability xij = Amount of commodity to be transported from source i to destination j i = 1,2,3 and j = 1,2,3,4,5

Algorithm for Solving

Step 1: Initial Feasible Solution: North West Corner Rule:

Start by allocating

commodity to northwest cell of the array or upper left

most cell and repeat thisprocedure. Finally end up with lower right cell. Step 2: Assign Variables Assign variables
u 1 , u 2 , , u m to

the m rows of the array.

v1 , v 2 , , v n

to the columns of the array.

Step 3: Set one of the ui or vj arbitrarily equal to zero and solve for remaining variables such that cost = ui +vj for those cells which have positive allocation

28

Step 4: Stop, if

C ij u i v j 0

for all cells. In this case we have got the

(C ij u i v j ) .

best solution Otherwise go to Step 5 Step 5: Find the cell having most negative value of Assign commodity to this cell and subtract or add from the assignment made to maintain row and column balance from the cells in which is subtracted find the maximum value of sch that is positive. Put the value in the corresponding cells. This gives us another feasible solution which is better than the previous feasible solution. Go to Step 2.

Transportation Problem: Plant 1 2 3 4 Demand 1 12 8 15 20 50 Ware House 2 20 7 10 2 30 Available 3 15 25 8 12 30 30 30 40 10

29

5.

PROBLEMS ON LINEAR PROGRAMMING ( LP )

1. The quack products company is equipped to produce three different products A, B and C. There are four resources that are available in a limited amount department 1 time, department 2 time, material, and in process storage in department 2. Each product requires processing in both departments 1 and 2. There are 320 hours of time per week available in department1. Department 2 employs 5 workers (all of whom perform the same job), and they work an 8-hour day, 5 days a week. The maximum material that can be made available per week is 300 gallons. The in-process storage is such that 400units of A could be handed per week if no other products were produced. Product A sells to yield a contribution toward fixed costs and profits of $ 12.00/ dozen bottles. In department1, 1 hour of processing time is required to produce 1 bottle. Department 2 can process 2 bottles per hour. One gallon of material is required per bottle. Product B sells to yield $ 2.00 pre unit. Two hours per unit of processing time is required in department 1, and 3 units per hour can be processed in department 2. Product

30

B requires 1 quart of material, and it consumes twice as much in-process storage as product A. Product Cs contribution is $1.50 per unit. In department 1, hour of processing time is required; department 2 can process 4 units per hour. Product C requires 1 point of material and 1/3 of the floor space required by product A. C requires 1 pint of material and 1/3 of the floor space required by product A. The company wants to know the product mix that will maximize profits. The company wants to know the product mix that will maximize profits.

Required 1. Define the decision variables. 2. Set up the linear-programming model. 2 The Uncola Company in advertising its soft drink, wishes to plan its program to each certain minimum percentages of the adult male group, the adult female group, and the teenage group. These percentages are 60%, 50% and 40% respectively. Three media are being considered. Television advertising costs $5,000 per spot. On the average, 3% of the adult male population, 5% of the adult female population, and 6 % of the teenage group will be exposed per spot. Radio advertising costs $1,000 per spot; the exposure per spot averages 4%, 3% and 4% respectively. Magazine advertising costs $3,000 per page and will reach an average of 3%, 4% and % of the groups per page. The company is interested in meeting the minimum percentages at a minimum cost. If a person views a spot, hears a spot, or reads an advertisement more than once, or is exposed to some combination. You are asked to ignore the lack of reality here, because the realistic model requires tools that have not yet been discussed. Required:

31

1. Define the decision variables. 2. Set up the linear-programming model. 3 The Illini Metal Company produces a certain casting which must contain minimum amounts of various metals. They have four types of ore to choose from, and they want to select from these ores in such a way as to minimize the cost of producing the product. Once the ores are selected, the metal must be refined. The cost of refining a pound of ore is the same regardless of the type. The casting requires a minimum of 20 ounces of led, 24 ounces of copper, and 30 ounces of cast iron. Type 1 ore has been analyzed and found to contain 2 ounces of lead, 1 ounce of copper, and 1 ounce of cast iron per pound. One pound of type 2 ore contains 1 ounce of lead, 3 ounces of copper, and 3 ounces of cast iron. A pound of type 3 ore contains ounce, 2 ounces, and 2 ounces, respectively, and a pound of type 4 ore contains , and 4 ounces, respectively. Type 1 ore costs $ 10 per pound; type 2 cost $ 15 per pound; type 3 costs $30 per pound; and type 4 costs $ 25 per pound. Required: 1 Define the decision variables 2 Set up the liner programming model. 4 The Fanny farmer company produces a particular kind of cow feed that must contain at least 3 units of vitamin A, 5 units of protein, and 8 units of carbohydrates per 100 pounds. In mixing this feed there are three basic ingredients corn, oats, and soybeans, which cost $ 1.25, S0.75, and $3.45 per bushel respectively. A bushel of corn weighs 70 pounds and contains 2 units of vitamin A, 1 unit of protein, and 4 units of carbohydrates. A bushel of oats weighs 30 pounds and contains 1 unit of vitamin A, 2 units of protein, and 3 units of carbohydrates. A bushel of soybeans weighs 60 pounds and contains 6, 6, and 4 units of vitamin A, protein and carbohydrates.

32

The problem is to find the input mix that will minimize total costs. Required 1. Define the decision variables. 2. Set up the linear programming model. 5 The wholesome wholesale company operates three warehouses. During a particular time period there are four customers that have ordered a certain item that is carried in stock at each of the warehouses. The amounts available, the amounts demanded, and the cost of transporting from each of the warehouses to each of the customers are given below: Customer Ware House 1 Ware House 2 Ware House 3 Customer Demand 1 2 4 3 3 0 2 1 3 2 40 3 3 5 4 30 4 2 4 3 50 Warehouse Availability 50 50 50

Required: Set up a linear programming model to find the shipping schedule that minimizes transportation costs. 6 The XYZ company is faced with the problem of scheduling production and subcontracting for three products. The products are sold at fixed prices. The company is anxious to supply the products in quantities that will be most profitable. Each of the products requires casting, machining, and assembling and packaging. Casting operations for products A and B can be subcontracted, but the castings for product C requires special equipment that precludes the use of subcontractors. Relevant data are given below. XYZ has capacities of 8,000 minutes of casting time, 12,000 minutes of machining time, and 10,000 minutes of assembly and packaging time per week.

33

Casting time (minutes/unit) Machining time (minutes/unit) Assembling and packaging time (minutes/unit) Variable Costs: Cost of Castings: Produced at XYZ Subcontracted Cost of Machining Cost of Assembly and Packaging Plant fixed cost/unit (allocation based on last years actual production): Produced at XYZ Subcontracted Selling Price Required: 1. Define the decision variables 2. Set up the linear-programming model.

A 6 6 3

B 10 3 2

C 8 8 2

$0.3 0 0.50 0.20 0.30

$0.5 0 0.60 0.10 0.20

$0.40 0.27 0.20

0.20 0.15 1.50

0.30 0.15 1.80

0.40 1.97

7: The Bomeli Company needs, during the coming week, 2,000 units of part # 1A, 4,000 units of # 2B, and 3,000 units of # 3C. Each part can either be produced or be purchased. If produced, the parts requires processing in each of three departments. The processing time and production costs are shown below.

34

Part # 1A Part # 2A Part # 3A

Production Time (Minutes) Dep 1 Dep 2 Dep 3 2 3 4 5 4 3 6 2 3

Production costs $2.00 3.00 4.00

There are 500 hours available in each department during the week. If purchased, the parts would cost $2.50, $3.25 and $ 4.20, respectively. The problem is to determine how many units of each part to purchase and how many to produce in order to minimize costs. Required: 1. Define the decision variables. 2. Set up the linear-programming model. 8 The Tonka-Trucking Company has $ 500,000 capital available to expand its fleet. There are four kinds of units that can be added. The purchase costs and the present net values of the cash flows (based on past experience) are shown below: Unit Truck Four Wheel covered trailer Tandem trailer (truck pulls two) Four wheel flat-bed trailer Cost/Unit $9,000 8,000 6,000/trailer 5,000 Cash Flow/Unit -$12,000 ( no receipts Just operating expenses) 29,500 16,000/trailer 12,000

There are enough drivers available to support up to 30 additional trucks. If trucks were the only units purchased, the available maintenance time would be adequate for 50 additional trucks. The time required for the maintenance of a truck is 3 times that for either a four-wheel covered trailer or a tandem trailer and 4 times that for a flat bed trailer. Because the trucks are in for repairs more frequently than the trailer units, it is necessary to buy trick and trailer units in a ratio greater than one to one. (Note: for tandems, a unit in this case consists of two trailers). A ratio of 4 trucks to 3 trailer units has proven to be 35

sufficient. The problem is to determine how to use the available capital to maximize the total net present value of the investment. Required: 1. Define the decision variables., 2. Set up the linear-programming model. 9 A commercial finance company has the following capital components available at the indicated costs. Type Stock equity Capital notes Subordinated debentures Long-term debentures Back loans Commercial paper Cost 10.0% 3.0 2.5 2.4 2.8 2.2

The company wants to minimize its overall capital cost, subject to the following conditions regarding the percentage of total capital to invest: 1. Stock equity must be at least twice the capital notes. 2. The sum of the stock equity an capital notes must be at least twice the subordinated debentures. 10. The Candy-Man Company makes three types of candy mixes for sale; economy, regular, and deluxe. They sell for $1.00, $1.20 and $12.50 per pound respectively. Each mix makes use of three ingredients: chocolate covered peanuts, chocolate-covered raisins, and chocolate-covered caramels, The cost of these ingredients are : Peanuts : $ 0.80/lb $ 0.60/lb $ 0.50/lb

36

The mixing requirements are as follows: Economy: none Regular : at least 10% of each ingredient Deluxe : at least 20% peanuts and no more than 20% raisins.

The production facilities are such that a maximum of 1,000 pounds of peanuts can be made available per week. For various reasons the production for the economy mix is to be limited to 20% of total production. Required: Assuming the company wants to maximize profits, develop the necessary LP model. 11. The Taxaco Company blends two different gasolines (regular and premium) from three refining streams (1,2 and 3). The streams operates at fix capacities of 9000, 7000 and 5000 barrels per week. The gasolines are sold at prices of p1 and p2 per barrel respectively, and any output of the three streams not used in the production of gasoline is sold at prices of s1, s2, s3 respectively. At least 4000 barrels of regular gasoline must be produced per week to satisfy a contract. The minimum octane numbers are 90 on regular and 100 on premium. Assume that each stream contributes to the octane number an amount equal to the product of its octane numbers and its fraction of the total volume of the mixture. The octane ratings of the three streams are 85, 95, and 110. Required: Assuming the company wants to maximize profits, develop the LP model that will indicate the optimum weekly volumes of regular and premium gasoline to produce

37

12 The Brindley Company operates from a warehouse that has a capacity of 600units of a particular product. Each month any quantity can be sold so long as it does not exceed the amount on hand at the beginning of the month. Each month, as much stock as is desired can be purchased (stock to be received at the end of the month) as long as the warehouse capacity is not exceeded. The company is fortunate to have the following error-free forecast of costs and sales prices for the next 4 months. Month 2 3 $38 $40 $42 $39

Cost Sales Price

1 $40 $45

4 $42 $44

Assuming there are 2000 units on hand at the beginning of the first month, what should be the companys purchases and sales policy for the next 4 months in order to maximize the 4-month profit figure? Required: Set up this problem as an LP problem. Remember that a months beginning inventory is equal to the previous months beginning inventory plus the previous months purchases, minus the previous months sales. 13. We have three reservoirs with daily supplies of 15, 20 and 25 million liters of fresh water, respectively. On each day we must supply four cities A, B, C, & D whose demands are 8, 10, 12 and 15 respectively. The cost of pumping per million liters is given below : A 2 3 4 Cities B C 3 4 2 5 1 2 D 5 2 3

Rservoirs

1 2 3

Use the transportation algorithm to determine the cheapest pumping schedule if excess water can be disposed of at no cost. 14. A group of four boys and four girls are planning on a one day picnic. The extent of mutual happiness between boy i and girl j when they are together is given by the following matrix (data obtained from their previous dating experiences): 38

Girl 1 2 3 4 1 11 9 10 1 2 1 9 3 13 3 5 8 5 12 4 8 1 10 11

Boy

The problem is to decide the proper matching between the boys and the girls during the picnic which will maximize the sum of all the mutual happiness of the couples. Formulate this as an assignment problem and solve. 15. A petroleum company has three refineries A, B, and C which produce 150 units, 220 units, and 130 units of petrol, respectively. The company owns four warehouses (1), (2), (3) and (4) each of which must receive 110 units, 120 units, 150 units and 120 units of petrol, respectively. The transportation costs (per unit) are as given in Table below : From refinery A B C (i) Transportation costs To warehouse (2) (3) 45 35 55 20 50 30

(1) 65 60 60

(4) 75 80 85

(ii)

Find an initial basic feasible solution by (a) the north-west corner rule, and (b) the least cost rule. [Ans. (a) x11 = 110, x12 = 40, x22 = 80, x23 = 140, x33 = 10, x34 = 120, and all other xij are nonbasic; (b) x12 = 120, x14 = 30, x23 = 150, x24 = 70, x31 = 110, x34 = 20, and all other xij are nonbasic. Find an optimal solution by starting with each of the initial basic feasible solutions obtained in Exercise (i). [Ans. Minimum transportation cost = 24450. Starting from (i) (b), an optimal solution is x12 = 100, x14 = 50, x23 = 150, x24 = 70, x31 = 110, x32 = 20, and the remaining xij = 0.]

16. A store wishes to purchase the following quantities of childrens dresses : Dress type A B C D Quantity 120 100 200 250

39

Quotations have been submitted by three different manufacturers who undertake to supply not more than the following quantities (all types of dresses combines): Manufacturer Total Quantity (1) 240 (2) 300 (3) 130

The store estimates that its profit per dress will vary with the manufacturer (see Table) Calculate the quantity of each type of dress it should order with each manufacturer. How should the orders be placed ? Table : Profit estimate per dress (Rs.) A 2 3 2.5 Dress B C 3 2.5 3.5 2 4 2.5 D 4 5 4.5

Manufacturer

(1) (2) (3)

17. There are five pumps available for developing five wells. The efficiency of each pump in producing the maximum yield at each well is shown . In what way should the pumps be assigned so as to maximize the overall efficiency ?

Efficiency of Pumps Pump 1 2 3 4 5 1 45 50 25 35 80 2 40 30 20 25 60 Well 3 65 25 15 30 60 4 30 60 20 25 70 5 55 30 40 20 50

[Ans. Assign pumps 1,2,3,4 and 5, respectively, to wells 3.4.5.2 and 1.]

18. A private company manufactures three products, each of which utilizes some capacity in the three manufacturing department namely assembly, inspection and packing (See Table 1). Assuming all that is produced can be

40

sold, find the production rate per week for each product so as to maximize the total profit.

Profit Max Product Profit/Unit Production Time in hour per unit Assembly Inspection Packing 0.4 0.12 0.05 9.6 0.10 0.03 0.2 0.16 0.04 1200 850 700

A 10 B 07 C 06 Available hours per week

19. A non ferrous metal corporation manufactures four different alloys from two basic metals. The requirements are given below. Determine the optimal product mix to maximize gross revenue. Metal Proportion of the Metal in Alloy 2 0.6 0.4 15 3 0.3 0.7 18 4 0.1 0.9 40 Supply of metal per day 6 tons 4 tons

1 1. 0.5 2. 0.5 Price/Ton 10

20. A machine produces paper in reels of width 180. A customer orders a number of reels each of fixed length but of varying widths (demand pattern given below). How should the reel be cut to the required width, keeping the length of each reel as be, so that the trimming loss is minimized. Formulate the problems. Width Demand Pattern Number of reels

41

80 40 25

ordered 150 125 175

42