Assignment

Of

Operations Research

For

Name Abhimanyu Kumar

Roll No. 1802000207
Drive Fall 2018
Program Master of Business Administration- MBA
Semester Semester 2
Subject Code MBA 205
Subject Name Operations Research
BK ID B2068
 Assignment Set 1
1. Explain Various Assumptions of linear programming.
Ans.
In organisations, managers are required to make judicious use of scarce resources, such as man,
material, machines and capital, to minimise costs and maximise profits. A technique that is used to
select the best alternative from a set of feasible ones in situations where the objective function and
constraints are expressed in linier form of linear programming.
Assumptions in linear programming
Assumptions are the conditions that need to be present for conducting an experiment or
applying a formula. For using the linear programming tool to solve a problem, it is necessary for
the problem to fulfil all the conditions (or assumptions) of linear programming. Let us look at
these assumptions in detail:

 Linearity – It is assumed that there exist a linear relationship between the input and
output of production. It is not only an assumption but also a condition for linear
programming. According to assumption of linearity, the factor of production provides
equal returns in the short run. The linear relationship between input and output is
represented by a linear equation. For example, a manufacturing organisation requires 25
men (W), 10 machines (M) and 0.6 tons of raw materials (R) for the production of one unit
of output (O). In such a case, the relationship between input and output can be represented
as follows:
25W + 10M + 0.6R =10
However, this assumption has restricted the application of linear programming to only
linear input-output relationships.
 Continuity – As per this assumption, all variables are measurable only if they have a
numerical value. According to this assumption, only numerical values bring consistency in
the measurement of variables, which otherwise would be difficult if the variables are
measured in qualitative form.
 Independence and additivity – According to this assumption, variables and their
numerical values are not dependent on other variables. This implies that variables are
selected randomly within limits. For examples, in an industry, the production of steel
within two months contributes Rs. 40,000 to the total output regardless of the amount of
steel produced in one month. Another assumption related to the additive nature of
variables to be added together as that if the variables cannot be added together, they have
no meaning in linear programming. For example, two variables, namely 5 men and 2
machines, are used for producing one unit of product A. In this case, the production of one
unit of product is independent of the hours of work done by men or machines in one day.
 Proportionality – It is assumed that there is a proportional relationship among the
variables. The proportionality between the variables remains the same while finding out
the solution of a problem. This implies that the proportional relationship among the
variables is the same at every level of output. For example, if a product requires five units of
input to produce one unit of output, the production of 10 units of output will require 50
units of input.
2. Write short note on
a) Concept of Duality in Linear Programming problem.
b) North-West Corner Method in Transportation problem
c) Benefits of holding inventory
d) Economic Order Quantity (EOQ) model
Ans.
Concept of Duality in Linear Programming
The Duality in Linear Programming states that every linear programming problem has another
linear programming problem related to it and thus can be derived from it. The original linear
programming problem is called “Primal,” while the derived linear problem is called “Dual.”
By going through the following points, you can understand the relationship between the primal
and dual problems:

 If the primal problem is of a maximisation type, the dual problem would be of a

maximisation type and vice versa.
 The total number of variables in the primal problem would be equal to the total number of
constraints in the dual problem and vice versa.
 If the constraints in the primal are of the ≤ type (in case of maximisation) and of the ≥ type
(in case of minimisation), the variables in the dual would be non-negative.
 In case of constraints in the primal problem are of the = type, the variables in the dual
problem would be unrestricted in sign.
 If the variables in the primal are unrestricted in sign, the constraints in the dual would be
the = type.
North-West Corner method in Transportation Problem
NWCM is the simplest method that is used to find an initial feasible solution to a transportation
problem. In this method, minimum value ( ) is allocated to the north-west corner (upper-left
corner) of the transportation cost matrix. Here, represents the availability of goods at the supply
source i, and represents the requirement at demand point j. In the matrix, the row or column
that satisfies is not considered further. Now, minimum of ( ) is allocated again in the
remaining sub-matrix and the row or column is satisfied. This process continues till all tha rows
and columns in the matrix are satisfied.
Benefits of Holding Inventory
An adequate level of inventory helps in planning various organisational activities, such as
purchasing, production and selling. For example, if the organisation has a sufficient pool of raw
material, it can produce finished goods without any constraint. In such a case, the organisation
would not depend entirely on the sales of goods and services to buy raw material for further
production. This is a benefit of holding inventory in the long run. However, the benefit of holding
inventory in the short run is to meet an unexpected rise in the demand of customers. Other
benefits of maintaining inventory are as follows:

 Benefits in purchasing – These are the benefits obtained by purchasing goods in large
quantities. If an organisation purchases raw material or goods in a huge quantity. It may
avail discounts. This would lower ordering and carrying costs.
 Benefits in production – An adequate level of inventory facilitates a smooth flow of
production. If an organisation has a sufficient amount of inventory, it can increase or
decrease the level of production to match sales. This would be special advantage to
organisations with a seasonal sales pattern. Suppose the sales volume of a cooler
manufacturing organisation is higher in the summer season and lower in the winter season.
In such a situation, it would be better for the organisation to maintain a sufficient level of
inventory to avoid the situation of scarce or excess production of coolers.
 Benefits in sales – Effective management of inventory help an organisation to enhance its
sales efforts. If there is no inventory of finished goods, the level of sales would depend on
the level of current production. In such a situation, the organisation would not be able to
meet a higher demand instantly. There would be a time lag depending upon the production
 process. If the organisation maintains an adequate level of inventory, the actual sales would
not have to depend on lengthy manufacturing processes.
Economic Order Quantity (EOQ) Model
The EOQ model provides answers to the two basic questions related to inventory management.
These questions are as follows:

 What should be the size of the order?

 At what level should the order be placed?
When an organisation orders huge inventory in order to reduce the total ordering cost, the
carrying cost increases. Thus, if the organisation wishes to minimise the overall cost of the
inventory, it needs to consider both the ordering and carrying costs. After determining the desired
cost of inventory, the organisation compares the cost with the benefits of the inventory. The level
at which the cost of inventory is minimum and benefits are maximum is called the optimal level of
inventory. The optimal level of inventory is popularly referred to as EOQ. Therefore, EOQ may be
defined as the level of inventory order that reduces the total cost related to inventory management.
The EOQ model is based on the following assumptions:

 The forecasted consumption for inventory, usually for one year, is known.
 The consumption is even throughout the year.
 The orders placed to replenish inventory stocks are received at exactly that point of time
when the level of inventory becomes zero.
 The costs associated with inventory, such as ordering and carrying costs, can be
distinguished.
 The cost per order is constant regardless of the size of order.
 The carrying cost is a fixed percentage of the average value of inventory.
The total costs of ordering and carrying can be mathematically calculated by using the following
formula:
T = [{(B / Q) A} + {(Q / 2)C}]

Where,
B = Annual consumption

Q = Quantity ordered

A = Cost per Order

C = Percentage carrying cost x Price per unit

T = Total cost of ordering and carrying

The EOQ can be mathematically calculated by using the following formula:

EOQ =

3. a) What is degeneracy in transportation problem?

b) Solve the following transportation problem using Vogel’s approximation
method.
Factories Distribution centres Supply

3 2 7 6 50
7 5 2 3 60
2 5 4 5 25
Requirements 60 40 20 15
Ans.
Degeneracy
It implies that a solution is said to be Degenerate Basic Feasible Solution (DBFS) when the
number of allocations in a basic feasible solution is less than ‘m + n – 1’. The concept of degeneracy
is explained in detail later in the unit.
In case the basic feasible solution of a transportation problem with ‘m’ sources and ‘n’
destinations has fewer than ‘m + n – 1’ basic variables (occupied or allocated cells), the solution is
said to be a degenerate solution. Degeneracy can take place at two stages: at the initial solution or
during the testing of the optimal solution. To resolve degeneracy, an artificial quantity‘d’ is
assigned to an unoccupied cell that has the minimum transportation cost.
Vogel’s approximation method
VAM is an iterative process of determining a basic feasible solution for a transportation problem.
The IBFS obtained using this method is either optimum or close to the optimal solution. In this
method, each allocation is made on the basis of the opportunity (penalty or extra) cost. The
opportunity may be incurred if allocations in the cells with minimum unit transportation cost are
missed. Therefore, in this method, allocations are made so that the penalty cost is minimised.

 Calculate penalties for each row and column by taking the difference between the smallest
cost and next highest cost available in that row/column. If there are two smallest costs, then
the penalty is zero.
 Select the row/column, which has the largest penalty and make allocation in the cell having
the least cost in the selected row/column. If two or more equal penalties exist, select one
where a row/column contains minimum unit cost. If there is again a tie, select one where
maximum allocation can be made.
 Delete the row/column, which has satisfied the supply and demand.
 Repeat first and second steps until the entire supply and demands are satisfied.
 Obtain the initial basic feasible solution.
Factories Supply Penalties
3 2 7 6 50 1
7 5 2 3 60 1
2 5 4 5 25 2
Requirements 60 40 20 15
Penalties 1 3 2 2

Factories Supply Penalties

3 7 6 50-40=10 3
7 2 3 60 1
2 4 5 25 2
Requirements 60 20 15
Penalties 1 2 2

Factories Supply Penalties

7 2 3 60 1
2 4 5 25 2
Requirements 60-10=50 20 15
Penalties 5 2 2

Factories Supply
7 2 3 60
Requirements 50-25=25 20 15
 Factories Supply
7 3 60-20=40
Requirements 25 15

Factories Supply
7 40-15=25
Requirements 25
After completing Allocation Table it will be look like this:
Factories Supply
3(10) 2(40) 7 6 50
7(25) 5 2(20) 3(15) 60
2(25) 5 4 5 25
Requirements 60 40 20 15
Now Transportation cost can be calculated as given below:
(3×10)+(2×40)+(7×25)+(2×20)+(3×15)+ (2×25)
= 30+80+175+40+45+50
= 420
Thus the total cost of transportation will be Rs. 420.

Assignment Set 2
1. The processing time of four jobs and five machines (in hours, when passing is not
allowed) is given in following table
Job Machines
A B C D E
1 8 4 8 3 8
2 7 6 7 4 4
3 9 7 9 6 5
4 10 5 9 7 7
a) Find an optimal sequence for the above sequencing problem.
b) Calculate minimum elapsed time & idle time for machines A, B, C, D & E.
Ans.
Job Machines
A B C D E
1 8 4 8 3 8
2 7 6 7 4 4
3 9 7 9 6 5
4 10 5 9 7 7
The necessary condition to be satisfied is either or both of the following:

 Min ≥ max ( , , )
 Min ≥ max ( , , )

Here, Min = 7, Min = 4 and max ( , , )=9

In such sequencing problem both of the conditions are not satisfied, so this problem cannot be
solved.
That’s why we cannot find optimal sequence. And also we cannot calculate Minimum
Elapsed time and Idle time for the machine A, B, C, D, E.
2. a) Elaborate the meaning of Simulation, b) What are different Practical
applications of simulation.
Ans.
Simulation
Simulation is a representation of real-life situations. It is a method in which a replica of a real-
world process or system is developed over a period of time. The simulated model acts in the same
manner as the selected physical or abstract process or system behaves in reality. For example,
aircraft pilots are given training through simulation models as training with real aircrafts can incur
huge costs as well as involve various risks. Similarly, in education sector, teachers are trained on
the simulated models of students (a group of individuals who imitate as students). This avoids the
risk of spoiling the future of students if the teacher is not able to teach properly. Therefore,
simulation models have proved to be useful for training purposes. Simulation used for training
purposes are divided into three categories, which are as follows:

 Live simulation: Refers to a simulation in which equipment is used to imitate a real

system. For example, testing the battery of a car with the help of an electrical tester.
 Virtual simulation: Refers to a simulation in which real people operate on simulated
systems. For example, a pilot flying a simulated jet.
 Constructive simulation: Refers to a simulation in which simulated people operate on
simulated systems. For example, in war games, the players supervise soldiers and
equipment, which move around the board.
Types of simulation
Simulation models are used when a real system is not accessible, can be dangerous to engage or
has not been built. As discussed earlier, these models are used in various fields, such as safety
engineering, testing, training and education. Simulation models can be classified on the basis of
the changes produced in a system and uncertainty in the processes, events and controlling
parameters of the system. Let us discuss these two classifications of simulation models now:
On the basis of the changes produced in a system: Includes the following:

 Static simulation
 Dynamic simulation
On the basis of uncertainty in the processes, events and controlling parameters of a system:
Includes the following:

 Deterministic simulation
 Probabilistic simulation
Practical applications of simulation
As discussed earlier, simulation is a quantitative tool for business decision making. Moreover, it is
useful in situations when experimentation with a real system is risky and expensive. Simulation is
applicable for solving problems in various areas, such as police dispatching, selection of location
for emergency vehicles (ambulance and fire brigade), inventory control and financial planning.
Apart from this, simulation can also be used for portfolio selection, capital budgeting, and
production process scheduling. In military operations, it is used for designing weapon systems. Let
us discuss some important applications of simulation in the next sections.
Simulation in the education sector
Simulation is widely used for educational purposes. Simulation models are used to create a real-
world environment in a classroom that helps students to understand various key concepts. In
business schools, these models are used for management games and to perform experimentation
with different business strategies in a risk-free environment and conduct case study discussions.
Simulation in the medical sector
In the medical sector, simulation models are developed to teach therapeutic and diagnostic
procedures and various medical concepts. Moreover, these models are used to make decisions
related to the recruitment of healthcare personnel. Simulation models are also developed for
providing training on blood draw, laparoscopic surgery and trauma care.
Simulation in the entertainment sector
In the entertainment sector, simulation has been proved to be very effective in various fields,
which are as follows:

 Computer and video games: Refer to simulation games that represent a real
environment. These games represent interactions between playable characters and
environment realistically. Nowadays, simulation games are popular among people of all age
groups.
 Film: Refers to one of the most important applications of simulation, in the field of
entertainment. Simulation models are used to provide 3D computer graphics and special
visual effects in films. In this way, these models are used for producing high quality films
and controlling visual effects.
 Theme park rides: Refer to one of the most rapidly growing fields of entertainment.
Simulator models are used here to record the moves of rides. The first simulated ride was
Star Tours, which used a hydraulic motion-based cabin. Some of the popular simulated
rides are Soarin’ over California, The Amazing Adventures of Spiderman, Mission Space and
The Simpsons Ride.
Simulation in manufacturing
The field of manufacturing has a wide application of simulation models. These models are used for
evaluating the effect of capital investments in equipment, plants, warehouses and distribution
centres. Simulation models can also be used to determine the performance of the existing and
planned system.
3. a. Explain the importance and utility of the replacement model in business
organizations.
b. The maintenance cost and re-sale value per year of a machine whose purchase
price is Rs. 7000 is given below-
Year 1 2 3 4 5 6 7 8
Maintenance cost (Rs.) 900 1200 1600 2100 2800 3700 4700 5900
Re-sale Value (Rs.) 4000 2000 1200 600 500 400 400 400
When should the machine be replaced?
Ans.
Importance and Utility of the Replacement Model in Business Organizations
In an organisation, replacement problems arise when fixed assets, such as machines, equipment,
and other tools, need to be replaced due to reduced efficiency, failure or breakdown. Sometimes,
replacement takes place when more efficient equipment is available in the market or the
maintenance of the existing equipment is incurring a huge cost on an organisation. However, an
organisation needs to decide when the replacement of new equipment would be economical.
Replacement models help an organisation to determine when to replace equipment in a cost-
effective manner so that the overall productivity of the organisation is not affected. These models
help managers to answer the following questions:

 At what time should equipment be replaced?

 Should the existing equipment be replaced, if the new equipment with better efficiency is
available? If yes, then when?
 Should the time value of money be taken into account while replacing the equipment?
 What should be the replacement plan for equipment that is used in large quantities and may
fail randomly (for example, light bulbs)?
 What kind of replacement policy should be in place for the human resource of an
organisation?
Replacement models, in combination with various mathematical techniques, help managers in
developing successful replacement policies. An organisation uses different types of equipment.
Some equipment deteriorates with time; for example, the efficiency of a car reduces with time. On
the other hand, some equipment, such as electric bulbs, fails instantly and needs to be replaced
immediately. An organisation cannot use the same replacement policy for every kind of
equipment. Different equipment is replaced differently.
Replacement of Equipment

Year Maintenance cost (Rs.) Resale Value (Rs.)

1 900 4000
2 1200 2000
3 1600 1200
4 2100 600
5 2800 500
6 3700 400
7 4700 400
8 5900 400
The cost of the machine (C) = Rs. 7,000
The optimal replacement period of the machine is determined in Table:

Cumulative Resale Depreciation Total Cost Average Cost

Year Maintenance
Maintenance Value (5) (C-S) T(n) (6)= A(n)=(6)/(1)
(1) cost (Mt) (2)
Cost (∑Mt) (3) (S) (4) (3)+(5)
1 900 900 4000 3000 3900 3900.00
2 1200 2100 2000 5000 7100 3550.00
3 1600 3700 1200 5800 9500 3166.67
4 2100 5800 600 6400 12200 3050.00
5 2800 8600 500 6500 15100 3020.00
6 3700 12300 400 6600 18900 3150.00
7 4700 17000 400 6600 23600 3371.43
8 5900 22900 400 6600 29500 3687.50

From the given table, it can be seen that the lowest average cost is Rs. 3,020, which lies to the 5 th
year. Therefore, the best time to replace the machine is after the 5th year.

The End