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MBA SEMESTER 2 MB0048 Operations Research- 4 Credits (Book ID: B1137) Assignment Set- 1 (60 Marks)

Note: Each question carries 10 Marks. Answer all the questions 1. a. Operation Techniques is a bunch of mathematical techniques.Comment. b. Operation Research is an aid for the executive in making his decisions based on scientific methods analysis. Discuss the above statement in brief. 2. Comment on the following statements: a. Operation Research advocates a system approach and is concerned with optimization. b. Operation Research replaces management by personality. 3. Explain how the profit maximization transportation problem can be converted to an equivalent cost minimization transportation problem. 4. Write the difference in the simplex solution procedure for a maximization problem and a minimization problem of linear programming. 5. What do you mean by the two-phase method for solving a given LPP? Why is it used? 6. Indicate any four shortcomings of taking a simulation approach to solve an O.R. problem.

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Q.1.A. Operation Techniques is a bunch of mathematical techniques.Comment.


Ans:The Structure of the Mathematical Model Many industrial and business situations are concerned with planning activities. In each case of planning, there are limited sources, such as men, machines, material and capital at the disposal of the planner. One has to take decision regarding these resources to either maximise production, or minimise the cost of production or maximise the profit. These problems are referred as the problems of constrained optimisation. Linear programming is a technique for determining an optimal schedule of interdependent activities, for the given resources. Therefore, you can say that programming refers to planning and the process of decision-making about a particular plan of action from a given set of alternatives. Any business activity or production activity to be formulated as a mathematical model can best be discussed through its parts which are as follows: 1. Decision variables 2. Objective function 3. Constraints 4. Diet problem Decision variables Decision variables are the unknowns, which you need to determine from the solution of the model. The parameters represent the controlled variables of the system. Objective function The objective function defines the measure of effectiveness of the system as a mathematical function of its decision variables. The optimal solution to the model is obtained when the corresponding values of the decision variable yield the best value of the objective function whilst satisfying all constraints. Therefore, you can say that the objective function acts as an indicator for the achievement of the optimal solution.

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While formulating a problem, the desire of the decision-maker is expressed as a function of n decision variables. This function is a linear programming problem that is each of its items will have only one variable raised to the power one). Some of the objective functions in practice are: Maximisation of contribution or profit Minimisation of cost Maximisation of production rate or minimisation of production time Minimisation of labour turnover Minimisation of overtime Maximisation of resource utilisation Minimisation of risk to environment or factory

Constraints To account for the physical limitations of the system, you need to ensure that the model includes constraints, which limit the decision variables to their feasible range or permissible values. These are expressed as constraining mathematical functions. For example, in chemical industries, restrictions come from the government about throwing gases in the environment. Restrictions from sales department about the marketability of some products are also treated as constraints. A linear programming problem then has a set of constraints in practice. The mathematical models in OR may be viewed generally as determining the values of the decision variables x J, J = 1, 2, 3, ------ n, which will optimize Z = f (x 1, x 2, ---- x n). Subject to the constraints: g i (x 1, x 2 -------The function f is called the o constraint for i = 1, 2, 3 ---are called the non-negativity condition, which restrict the variables to zero or positive values only. ---- m

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Diet problem Formulate the mathematical model for the following: Vitamin A and Vitamin B are found in food 1 and food 2. One unit of food 1 contains 5 units of vitamin A and 2 units of vitaminB. One unit of food 2 contains 6 units of vitamin A and 3 units of vitaminB. The minimum daily requirement of a person is 60 units of vitamin A and 80 units of Vitamin B. The cost per one unit of food 1 is Rs. 5/- and one unit of food2 is Rs. 6/-. Assume that any excess units of vitamins are not harmful. Find the minimum cost of the mixture (of food1 and food2) which meets the daily minimum requirements of vitamins. Mathematical Model of the Diet Problem: Suppose x1 = the number of units of food1 in the mixture and x2 = the number of units of food2 in the mixture. Lets formulate the constraint related to vitamin-A. Since each unit of food1 contains 5 units of vitamin A, we have that x1 units of food1 contains 5x1 units of vitamin A. Since each unit of food 2 contains 6 units of vitaminA, we have that x2 units of food 2 contains 6x2 units of vitaminA. Therefore, the mixture contains 5x1 + 6x2 units of vitamin-A. Since the minimum requirement of vitamin A is 60 units, you can say that 5x1 + 6x2 = 60. Now lets formulate the constraint related to vitaminB. Since each unit of food1 contains 2 units of vitaminB we have that x1 units of food1 contains 2x1 units of vitamin-B. Since each unit of food2 contains 3 units of vitaminB, we have that x2 units of food2 contains 3x2 units of vitaminB. Therefore the mixture contains 2x1 + 3x2 units of vitaminB. Since the minimum requirement of vitaminB is 80 units, you can say that 2x2 + 3x2 = 80 Next lets formulate the cost function. Given that the cost of one unit of food1 is Rs. 5/- and one unit of food 2 is Rs. 6/-. Therefore, x1 units of food1 costs Rs. 5x1, and x2 units of food 2 costs Rs. 6x2. Therefore, the cost of the mixture is given by Cost = 5x1 + 6x2. If we write z for the cost function, then you can write z = 5x1 + 6x2. Since cost is to be minimised, you can write min z = 5x1 + 6x2.

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Since the number of units (x1 or x2) are always non-negative, therefore, you have x 0, x Therefore, the mathematical model is: 5x1 + 6x2 = 60 2x1 + 3x2 = 80 x1 = 0, x2 = 0, min z = 5x1 + 6x2. The OR approach needs to be equally developed in various agricultural problems on a regional or international basis. With the explosion of population and consequent shortage of food, every country faces the problem of optimum allocation of land in various crops in accordance with climate conditions and available facilities. The problem of optimal distribution of water from a resource like a reservoir for irrigation purposes is faced by each developing country, and a good amount of scientific work can be done in this direction.

Q.1.B. Operation Research is an aid for the executive in making his decisions based on scientific methods analysis. Discuss the above statement in brief
Ans:Churchman, Aackoff and Aruoff defined Operations Research as: the application of scientific methods, techniques and tools to operation of a system with optimum solutions to the problems, where 'optimum' refers to the best possible alternative. The objective of Operations Research is to provide a scientific basis to the decisionmakers for solving problems involving interaction of various components of the organisation. You can achieve this by employing a team of scientists from different disciplines, to work together for finding the best possible solution in the interest of

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the organisation as a whole. The solution thus obtained is known as an optimal decision. You can also define Operations Research as The use of scientific methods to provide criteria for decisions regarding man, machine, and systems involving repetitive operations. Some key features of OR are as follows: 1. OR is system oriented. OR scrutinises the problem from an organisations perspective. The results can be optimal for one part of the system, while the same can be unfavourable for another part of the system. 2. OR imbibes an interdisciplinary team approach. Since no single individual can have a thorough knowledge of all fast developing scientific know-how, personalities from different scientific and managerial cadre form a team to solve the problem. 3. OR makes use of scientific methods to solve problems. 4. OR increases effectiveness of the managements decision-making ability. 5. OR makes use of computers to solve large and complex problems. 6. OR offers a quantitative solution. 7. OR also takes into account the human factors.

The scientific method in OR study generally involves the following three phases.

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Judgment Phase: This phase includes the following activities: Determination of the operations Establishment of the objectives and values related to the operations Determination of the suitable measures of effectiveness Formulation of the problems relative to the objectives

Research Phase: This phase utilises the following methodologies: Operations and data collection for a better understanding of the problems Formulation of hypothesis and model Observation and experimentation to test the hypothesis on the basis of additional data Analysis of the available information and verification of the hypothesis using pre-established measure of effectiveness Prediction of various results and consideration of alternative methods

Action Phase: The action phase involves making recommendations for the decision process. The recommendations can be made by those who identified and presented the problem or anyone who influences the operation in which the problem has occurred.

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Q.2.A. Operation Research advocates a system approach and is concerned with optimization.
Ans:Minimal time and effort and maximum benefit coupled with the best possible output or a set of outputs is the mantra of any decision-maker. Today, decision-makers or managements have to tackle the issue of allocating limited and scarce resources at various levels in an organisation in the best possible manner. Man, money, machine, time and technology are some of these common resources. The managements task is to obtain the best possible output (or a set of outputs) from these given resources. You can measure the output from factors, such as the profits, the costs, the social welfare, and the overall effectiveness. In several situations, you can express the output (or a set of outputs) as a linear relationship among several variables. You can also express the amount of available resources as a linear relationship among various system variables. The managements dilemma is to optimise (maximise or minimise) the output or the objective function subject to the set of constraints. Optimisation of resources in which both the objective function and the constraints are represented by a linear form is known as a linear programming problem (LPP). The simplex algorithm is an iterative procedure for finding the optimal solution to a linear programming problem. The objective function controls the development and evaluation of each feasible solution to the problem. If a feasible solution exists, it is located at a corner point of the feasible region determined by the constraints of the systemTo test for optimality of the current basic feasible solution of the LPP, use the following algorithm called simplex algorithm. Lets also assume that there are no artificial variables existing in the program. Steps Perform the following steps to solve the simplex algorithm. Locate the negative number in the last row of the simplex table. Do not include the last column. The column that has negative number is called the work column. Next, form ratios by dividing each positive number in the work column, excluding the last row into the element in the same row and last column. Assign that element to the work column to yield the smallest ratio as the pivot

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element. If more than one element yields the same smallest ratio, choose the elements randomly. The program has no solution, if none of the element in the work column is non-negative. To convert the pivot element to unity (1) and then reduce all other elements in the work column to zero, use elementary row operations. Replace the x -variable in the pivot row and first column by x-variable in the first row pivot column. The variable to be replaced is called the outgoing variable and the variable that replaces it is called the incoming variable. This new first column is the current set of basic variables. Repeat steps 1 through 4 until all the negative numbers in the last row excluding the last column are exhausted. You can obtain the optimal solution by assigning the value to each variable in the first column corresponding to the row and last column. All other variables are considered as non-basic and have assigned value zero. The associated optimal value of the objective function is the number in the last row and last column for a maximisation program, but the negative of this number for a minimisation problem.

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Q.2.B. Operation Research replaces management by personality.


Ans:1.OR is system oriented. OR scrutinises the problem from an organisations perspective. The results can be optimal for one part of the system, while the same can be unfavourable for another part of the system. 2. OR imbibes an interdisciplinary team approach. Since no single individual can have a thorough knowledge of all fast developing scientific know-how, personalities from different scientific and managerial cadre form a team to solve the problem. 3. OR makes use of scientific methods to solve problems. 4. OR increases effectiveness of the managements decision-making ability. 5. OR makes use of computers to solve large and complex problems. 6. OR offers a quantitative solution. 7. OR also takes into account the human factors. The limitations are more related to the problems of model building, time and money factors. Magnitude of computation: Modern problems involve a large number of variables. The magnitude of computation makes it difficult to find the interrelationship. Intangible factors: Non quantitative factors and human emotional factor cannot be taken into account. Communication gap: There is a wide gap between the expectations of managers and the aim of research professionals. Time and Money factors: When you subject the basic data to frequent changes then incorporation of them into OR models becomes a costly affair. Human Factor: Implementation of decisions involves human relations and behaviour The OR approach needs to be equally developed in various agricultural problems on a regional or international basis. With the explosion of population and consequent shortage of food, every country faces the problem of optimum allocation of land in various crops in accordance with climate conditions and available facilities.

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Q.3. Explain how the profit maximization transportation problem can be converted to an equivalent cost minimization transportation problem
Ans:Transportation model is an important class of linear programs. For a given supply at each source and a given demand at each destination, the model studies the minimisation of the cost of transporting a commodity from a number of sources to several destinations. The transportation problem involves m sources, each of which has available ai (i = 1, 2 m) units of homogeneous product and n destinations, each of which requires bj (j = 1, 2., n) units of products. Here ai and bj are positive integers. The cost cij of transporting one unit of the product from the ith source to the jth destination is given for each i and j. The objective is to develop an integral transportation schedule that meets all demands from the inventory at a minimum total transportation cost. The condition (1) is guaranteed by creating either a fictitious destination with a demand equal to the surplus if total demand is less than the total supply or a (dummy) source with a supply equal to the shortage if total demand exceeds total supply. The cost of transportation from the fictitious destination to all sources and from all destinations to the fictitious sources are assumed to be zero so that total cost of transportation will remain the same. The first approximation to (2) is integral. Therefore, you always need to find a feasible solution. Rather than determining a first approximation by a direct application of the simplex method, it is more efficient to work with the transportation table given below. The transportation algorithm is the simplex method specialised to the format of table involving the following steps:

i) Finding an integral basic feasible solution ii) Testing the solution for optimality iii) Improving the solution, when it is not optimal iv) Repeating steps (ii) and (iii) until the optimal solution is obtained

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The solution to TP is obtained in two stages. In the first stage, you find the basic feasible solution using any of the following methods a) North-west corner rule b) Matrix Minima Method or least cost method c) Vogels approximation method. In the second stage, you test the basic feasible solution for its optimality either by MODI method or by stepping stone method. After evaluating an initial basic feasible solution to a transportation problem, the next question is how to get the optimum solution. The basic techniques are illustrated below. 1. Determine the net evaluations for the nonbasic variables (empty cells) 2. Determine the entering variable 3. Determine the leaving variable 4. Compute a better basic feasible solution 5. Repeat steps (1) to (4) until an optimum solution has been obtained Improving the solution Definition: A loop is the sequence of cells in the transportation table such that: i) Each pair of consecutive cells lie either in the same row or same column ii) No three consecutive cells lies in the same row or same column iii) The first and the last cells of the sequence lies in the same row or column iv) No cell appears more than once in the sequence Consider the non-basic variable corresponding to the most negative of the quantities cij ui vj, calculated in the test for optimality; it is made the incoming variable. Construct a loop consisting exclusively of this incoming variable (cell) and current basic variables (cells). Then allocate the incoming cell to as many units as possible after appropriate adjustments have been made to the other cells in the loop. Avoid violating the supply and demand constraints, allow all allocations to remain nonnegative and reduce one of the old basic variables to zero (where upon it ceases to be basic). The transportation problem is a special type of linear programming problem in which the objective is to transport a homogeneous product manufactured at several plants (origins) to a number of different destinations at a minimum total cost.

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Q.4. Write the difference in the simplex solution procedure for a maximization problem and a minimization problem of linear programming.
Ans:Minimal time and effort and maximum benefit coupled with the best possible output or a set of outputs is the mantra of any decision-maker. Today, decision-makers or managements have to tackle the issue of allocating limited and scarce resources at various levels in an organisation in the best possible manner. Man, money, machine, time and technology are some of these common resources. The managements task is to obtain the best possible output (or a set of outputs) from these given resources. You can measure the output from factors, such as the profits, the costs, the social welfare, and the overall effectiveness. In several situations, you can express the output (or a set of outputs) as a linear relationship among several variables. You can also express the amount of available resources as a linear relationship among various system variables. The managements dilemma is to optimise (maximise or minimise) the output or the objective function subject to the set of constraints. Optimisation of resources in which both the objective function and the constraints are represented by a linear form is known as a linear programming problem (LPP). The common requirements of a LPP are as follows. i. Decision variables and their relationship ii. Well-defined objective function iii. Existence of alternative courses of action iv. Non-negative conditions on decision variables Basic Assumptions of LPP 1. Linearity: You need to express both the objective function and constraints as linear inequalities. 2. Deterministic: All co-efficient of decision variables in the objective and constraints expressions are known and finite. 3. Additivity: The value of the objective function and the total sum of resources used must be equal to the sum of the contributions earned from each decision variable and the sum of resources used by decision variables respectively.

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4. Divisibility: The solution of decision variables and resources can be non-negative values including fractions. The LPP is a class of mathematical programming where the functions representing the objectives and the constraints are linear. Optimisation refers to the maximisation or minimisation of the objective functions. Canonical forms You can represent the general Linear Programming Problem (LPP) mentioned above in the canonical form as follows: Maximise Z = c1 x1+c2 x2 + ------ + cn Subject to, a11 x1 + a12 x2 + ------ + a1n xn a21 x1 + a22 x2 + ------ + a2n xn am1 x1+am2 x2 + + amn xn x1, x2, x3, xn 0. b1 b2 bm

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The following are the characteristics of this form. 1. All decision variables are non-negative. 2. All constraints are of type. 3. The objective function is of the maximisation type. You can represent any LPP in the canonical form by using five elementary transformations, which are as follows: 1. The minimisation of a function is mathematically equivalent to the maximisation of the negative expression of this function. 2. Any inequality in one direction ( or ) may be changed to an inequality in the opposite direction ( or ) by multiplying both sides of the inequality by 1. 3. An equation can be replaced by two inequalities in opposite direction. 4. An inequality constraint with its left hand side in the absolute form can be changed into two regular inequalities. 5. The variable which is unconstrained in sign ( 0, 0 or zero) is equivalent to the difference between 2 non-negative variables.

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In linear programming problems, you may have: i) a unique optimal solution or ii) many number of optimal solutions or iii) an unbounded solution or iv) no solutions. Suppose a linear programming problem has an unbounded feasible solution space. If the set of all values of the objective function at different feasible solutions is not bounded above (respectively, bounded below), and if the problem is a maximisation (respectively, minimisation) problem, then we say that the given problem has an unbounded solution In a LPP, you first identify the decision variables with economic or physical quantities whose values are of interest to the management. The problems must have a welldefined objective function expressed in terms of the decision variable. The objective function is to maximise the resources when it expresses profit or contribution. Here, the objective function indicates that cost has to be minimised. The decision variables interact with each other through some constraints. These constraints arise due to limited resources, stipulation on quality, technical, legal or variety of other reasons. The objective function and the constraints are linear functions of the decision variables. A LPP with two decision variables can be solved graphically. Any nonnegative solution satisfying all the constraints is known as a feasible solution of the problem. The collection of all feasible solutions is known as a feasible region. The feasible region of a LPP is a convex set. The value of the decision variables, which maximise or minimise the objectives function is located on the extreme point of the convex set formed by the feasible solutions. Sometimes the problem may be unfeasible indicating that no solution exists for the problem

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Q.5. What do you mean by the two-phase method for solving a given LPP? Why is it used?
Ans:Two Phase Method The drawback of the penalty cost method is the possible computational error resulting from assigning a very large value to the constant M. To overcome this difficulty, a new method is considered, where the use of M is eliminated by solving the problem in two phases. Phase I: Formulate the new problem. Start by eliminating the original objective function by the sum of the artificial variables for a minimisation problem and the negative of the sum of the artificial variables for a maximisation problem. The Simplex method optimises the ensuing objective with the constraints of the original problem. If a feasible solution is arrived, the optimal value of the new objective function is zero (suggestive of all artificial variables being zero). Subsequently proceed to phase II. If the optimal value of the new objective function is non-zero, it means there is no solution to the problem and the method terminates. Phase II: Start phase II using the optimum solution of phase I as the base. Then take the objective function without the artificial variables and solve the problem using the Simplex method. The optimal solution of the new objective is Z* = 0. The characteristics of the standard form of LPP are: 1. All constraints are equations except for the non-negativity condition, which remain

2. The right-hand side element of each constraint equation is non-negative. 3. All the variables are non-negative. 4. The objective function is of maximisation or minimisation type. You can change the inequality constraints of equations by adding or subtracting the left hand side of each such constraint by a non-negative variable. The non-negative

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an equation is called a slack variable. The non-negative variable subtracted from a surplus variable To solve this system of equations, you must first assign any of n m variables with value zero. The variables assigned the value zero are called non-basic variables, while the remaining variables are called basic variables. Then, solve the equation to obtain the values of the basic variables. If one or more values of the basic variables are valued at zero, then solution is said to degenerate, whereas if all basic variable have non-zero values, then the solution is called a non-degenerate solution. A basic solution satisfying all constraints is said to be feasible.

Q.6. Indicate any four shortcomings of taking a simulation approach to solve an O.R. problem.
Ans:The simulation approach is recognised as a powerful tool for management decisionmaking. One should not ignore the cost associated with a simulation study for data collection, formation of the model and the computer time as it is fairly significant. A simulation application is based on the premise that the behaviour pattern of relevant variables is known, and this very premise sometimes becomes questionable. Not always can the probabilities be estimated with ease or desired reliability. The results of simulation should always be compared with solutions obtained by other methods wherever possible, and tempered with managerial judgment. Simulation is also called experimentation in the management laboratory. While dealing with business problems, simulation is often referred to as Monte Carlo Analysis. Two

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American mathematicians, Von Neumann and Ulan, in the late 1940s found a problem in the field of nuclear physics too complex for analytical solution and too dangerous for actual experimentation. They arrived at an approximate solution by sampling. The method they used had resemblance to the gamblers betting systems on the roulette table, hence the name Monte Carlo has stuck. Imagine a betting game where the stakes are based on correct prediction of the number of heads, which occur when five coins are tossed. If it were only a question of one coin; most people know that there is an equal likelihood of a head or a tail occurring, that is the probability of a head is . However, without the application of probability theory, it would be difficult to predict the chances of getting various numbers of heads, when five coins are tossed. Why dont you take five coins and toss them repeatedly. Note down the outcomes of each toss after every ten tosses, approximate the probabilities of various outcomes. As you know, the values of these probabilities will initially fluctuate, but they would tend to stabilise as the number of tosses are increased. This approach in effect is a method of sampling, but is not very convenient. Instead of actually tossing the coins, you can conduct the experiment using random numbers. Random numbers have the property that any number is equally likely to occur, irrespective of the digit that has already occurred. The approach to solve a gambling problem can be extended to decision-making in business where risk is a common feature. The probabilities associated with the variables can be estimated on the basis of availability of previous data or by inputting subjective values. In any simulation problem, the variables to be studied will be given with associated probabilities. The initial conditions will also be specified. You can choose random numbers from table. However, to get uniform results, the random numbers will be specified. The first step involves coding the data that is, you assign random numbers to the variable. Then you identify the relationship between the variables and run the simulation to get the results

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Use of random number tables The random numbers can be selected by any random process, similar to drawing numbered chips from a hat. However, it is convenient to use a table of random numbers prepared on the basis of some physical phenomenon. The grouping of random numbers in the tables has no significance and one should be concerned with individual digits only. The first random number could be picked at random from any point in the tables and the subsequent ones are to be selected proceeding sequentially either in a vertical or horizontal direction. Depending upon the number of digits required, the random numbers will be chosen in sets of single digit or twodigit numbers, that is pseudorandom numbers Sample Size As you have seen with the coin-tossing experiment, the larger the number of trials, the more confident you can be in your estimates. The question that arises is how many trials for simulation? If the experiment is as simple as tossing a coin involving only one variable, you can work out the sample size required for a given confidence level Application of Simulation The range of application of simulation in business is extremely wide. Unlike other mathematical models, simulation can be easily understood by the users and thereby facilitates their active involvement. This makes the results more reliable and also ensures easy acceptance for implementation. The degree to which a simulation model can be made close to reality is dependent upon the ingenuity of the OR team who identifies the relevant variables as well as their behaviour. You have already seen by means of an example how simulation could be used in a queuing system. It can also be employed for a wide variety of problems encountered in production systems the policy for optimal maintenance in terms of frequency of replacement of spares or preventive maintenance, number of maintenance crews, number of equipment for handling materials, job shop scheduling, routing problems, stock control and so forth. The other areas of application include dock facilities, facilities at airports to minimise congestion, hospital appointment systems and even management games. In case of other OR models, simulation helps the manager to strike a balance between opposing costs of providing facilities (usually meaning long term commitment of funds) and the opportunity and costs of not providing them.

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