TRANSPORTATION PROBLEM

INVESTMENT STRATEGY

Submitted by
Jatin Arora (191089)
Nitish Goel (191100)
Hemant kumar (191101)
CASE BACKGROUND
 Company wants to determine investment strategy for next four
years.

 Five investment plans have been selected

 Investment capital has been allocated for each of the four years

 Maximum Investment level has been established for each

investment type

 Assumption --Amount invested in any year will remain invested

until the end of four years
Investment Rupee available
made at the Investment type (in "ooo)
beginning of
year
A B C D E

NET RETURN DATA

1 0.80 0.90 0.60 0.75 1.00 500

2 0.55 0.65 0.40 0.60 0.50 600

3 0.30 0.25 0.30 0.50 0.20 750

4 0.15 0.12 0.25 0.35 0.10 800

Maximum rupee 750 600 500 800 1000

investment in
“000
CONVERTING MAXIMISATION PROBLEM INTO MINMISATION PROBLEM

Investment made Rupee available

at the beginning Investment type (in "ooo)
of year

A B C D E

NET RETURN DATA

1 0.2 0.10 0.40 0.25 0.00 500

2 0.45 0.35 0.60 0.40 0.50 600

3 0.70 0.75 0.70 0.50 0.80 750

4 0.85 0.88 0.75 0.65 0.90 800

Maximum rupee 750 600 500 800 1000 2650

investment in
“000 3650
 INTRODUCING DUMMY ROW TO MAKE PROBLEM A BALANCED ONE

Investment made Rupee available

at the beginning Investment type (in "ooo)
of year

A B C D E
NET RETURN DATA
1 0.2 0.10 0.40 0.25 0.00 500
2 0.45 0.35 0.60 0.40 0.50 600
3 0.70 0.75 0.70 0.50 0.80 750
4 0.85 0.88 0.75 0.65 0.90 800
5 0 0 0 0 0 1000

Maximum rupee 750 600 500 800 1000 3650

investment in “000
3650
 APPLYING VAM TO FIND THE INITIAL BASIC FEASIBLE SOLUTION

A B C D E

NET RETURN DATA SUPPLY P

1 0.2 0.10 0.40 0.25 0 500 0.1 0.1
2 0.45 0.35 0.60 0.40 0.50 600 .05 .05
3 0.7 0.75 0.70 0.5 0.80 750 0.2 .2

4 .85 0.88 0.75 0.65 .90 800 0.1 .2

5 0 0 0 500 0 500 0 1000
500
0 0

DEMAND 750 600 500 800 1000

300

P .2 0.1 0.4 0.25 0

 APPLYING VAM TO FIND THE INITIAL BASIC FEASIBLE SOLUTION

A B C D E

NET RETURN DATA SUPPLY P

500
1 0.2 0.10 0.40 0.25 0 500 0.1 0.1
2 0.45 0.35 600 0.60 0.40 0.50 600 .05 .05 .
3 0.7 450 0.75 0.70 0.5 300 0.80 750 0.2 .2 .2

4 .85 300 0.88 0.75 0.65 .90 500 800 0.1 .2 .2

5 0 0 0 500 0 500 0 1000
500
0 0

DEMAND 750 600 500 800 1000

300 500

P .2 0.1 0.4 0.25 0

0.25 0.25 0.15 0.5

0.25 0.4 0.1 0.3

0.15 0.15 0.1

INITIAL BASIC FEASIBLE SOLUTION

A B C D E

-- -- -- -- 500
1
2 -- 600 -- -- --

3 450 -- -- 300 --
4 300 -- -- -- 500
5 -- -- 500 500 --
TEST FOR OPTIMALITY
 Total no of allocations should be m+n-1 =9
But there are only 8 allocations in the above solution.
Hence the initial solution is degenerate
 Now we introduce epsilon (Є) to the non basic cell in the
IBFS such that basic cell does not form a loop
INITIAL BASIC FEASIBLE SOLUTION
CONT.

A B C D E

-- -- -- -- 500
1
2 Є 600 -- -- --

3 450 -- -- 300 --
4 300 -- -- -- 500
5 -- -- 500 500 --
COST OF OCCUPIED CELLS USING MODI
METHOD

A B C D E UI

1 -- -- -- -- 0 0

2 0.45 0.35 -- -- -- 0.5

3 0.7 -- -- 0.5 -- 0.75

4 0.85 -- -- -- 0.9 0.9

5 -- -- 0 0 -- 0.25

VI -0.05 -0.15 -0.25 -0.25 0

COST OF UNOCCUPIED CELLS USING
MODI METHOD

A B C D E UI

1 0.2 0.1 0.4 0.25 -- 0

2 -- -- 0.6 0.4 0.5 0.5

3 -- 0.75 0.7 -- 0.8 0.75

4 -- 0.88 0.75 0.65 -- 0.9

5 0 0 -- -- 0 0.25

VI -0.05 -0.15 -0.25 -0.25 0

NET EVALUATION

CIJ’ = CIJ – (UI +VI)

A B C D E

1 0.25 0.25 0.65 0.5 --

2 -- -- 0.35 0.15 0

3 -- 0.15 0.2 -- 0.5

4 -- 0.13 0.1 0 --

5 -0.2 -0.1 -- -- -0.25

c
Since all ij is not >=0 solution is not optimal so we introduce θ in the basic
feasible solution corresponding to most negative element of the net evaluation table
BASIC FEASIBLE SOLUTION

A B C D E

-- -- -- -- 500
1
2 Є 600 -- -- --

3 450 -- -- 300 --
4 300 -- -- -- 500
5 -- -- 500 500 θ
BASIC FEASIBLE SOLUTION CONT.

A B C D E

-- -- -- -- 500
1
2 Є 600 -- -- --

3 -- -- -- 750 --
4 750 -- -- -- 50
5 -- -- 500 50 450
COST OF OCCUPIED CELLS USING MODI
METHOD

A B C D E UI

1 -- -- -- -- 0 0

2 0.45 0.35 -- -- -- 0.5

3 -- -- -- 0.5 -- 0.5

4 0.85 -- -- -- 0.9 0.9

5 -- -- 0 0 0 0

VI -0.05 -0.15 0 0 0
COST OF UNOCCUPIED CELLS USING
MODI METHOD

A B C D E UI

1 0.2 0.1 0.4 0.25 -- 0

2 -- -- 0.6 0.4 0.5 0.5

3 0.7 0.75 0.7 -- 0.8 0.5

4 -- 0.88 0.75 0.65 -- 0.9

5 0 0 -- -- -- 0

VI -0.05 -0.15 0 0 0
NET EVALUATION

CIJ’ = CIJ – (UI +VI)

A B C D E

1 0.35 0.25 0.4 0.25 --

2 -- -- 0.1 -0.1 0

3 0.25 0.4 0.2 -- 0.3

4 -- 0.13 -0.15 -0.25 --

5 0.05 0.15 -- -- --

c
Since all ij is not >=0 solution is not optimal so we introduce θ in the basic
feasible solution corresponding to most negative element of the net evaluation table
BASIC FEASIBLE SOLUTION

A B C D E

-- -- -- -- 500
1
2 Є 600 -- -- --

3 -- -- -- 750 --
4 750 -- -- θ 50
5 -- -- 500 50 450
BASIC FEASIBLE SOLUTION CONT.

A B C D E

-- -- -- -- 500
1
2 Є 600 -- -- --

3 -- -- -- 750 --
4 750 -- -- 50 --
5 -- -- 500 -- 500
 Total no of allocations should be m+n-1 =9
But there are only 8 allocations in the above solution.
Hence the initial solution is degenerate
 Now we introduce epsilon (Є1) to the non basic cell in
the IBFS such that basic cell does not form a loop
BASIC FEASIBLE SOLUTION CONT.

A B C D E

-- -- -- -- 500
1
2 Є 600 -- -- --

3 -- -- -- 750 --
4 750 -- -- 50 --
5 Є1 -- 500 -- 500
COST OF OCCUPIED CELLS USING MODI
METHOD

A B C D E UI

1 -- -- -- -- 0 0

2 0.45 0.35 -- -- -- 0.45

3 -- -- -- 0.5 -- 0.7

4 0.85 -- -- 0.65 -- 0.85

5 0 -- 0 -- 0 0

VI 0 -0.1 0 -0.2 0
COST OF UNOCCUPIED CELLS USING
MODI METHOD

A B C D E UI

1 0.2 0.1 0.4 0.25 -- 0

2 -- -- 0.6 0.4 0.5 0.45

3 0.7 0.75 0.7 -- 0.8 0.7

4 -- 0.88 0.75 -- 0.9 0.85

5 -- 0 -- 0 -- 0

VI 0 -0.1 0 -0.2 0
NET EVALUATION

CIJ’ = CIJ – (UI +VI)

A B C D E

1 0.2 0.2 0.4 0.45 --

2 -- -- 0.15 0.15 0.95

3 0 0.15 0 -- 0.1

4 -- 0.13 -0.1 -- 0.05

5 -- 0.1 -- 0.2 --

c
Since all ij is not >=0 solution is not optimal so we introduce θ in the basic
feasible solution corresponding to most negative element of the net evaluation table
BASIC FEASIBLE SOLUTION

A B C D E

-- -- -- -- 500
1
2 Є 600 -- -- --

3 -- -- -- 750 --
4 750 -- θ 50 --
5 Є1 -- 500 -- 500
BASIC FEASIBLE SOLUTION CONT.

A B C D E

-- -- -- -- 500
1
2 Є 600 -- -- --

3 -- -- -- 750 --
4 250 -- 500 50 --
5 500 -- -- -- 500
COST OF OCCUPIED CELLS USING MODI
METHOD

A B C D E UI

1 -- -- -- -- 0 0

2 0.45 0.35 -- -- -- 0.45

3 -- -- -- 0.5 -- 0.7

4 0.85 -- 0.75 0.65 -- 0.85

5 0 -- -- -- 0 0

VI 0 -0.1 -0.1 -0.2 0

COST OF UNOCCUPIED CELLS USING
MODI METHOD
A B C D E UI

1 0.2 0.1 0.4 0.25 -- 0

2 -- -- 0.6 0.4 0.5 0.45

3 0.7 0.75 0.7 -- 0.8 0.7

4 -- 0.88 -- -- 0.9 0.85

5 -- 0 0 0 -- 0

VI 0 -0.1 -0.1 -0.2 0

NET EVALUATION

CIJ’ = CIJ – (UI +VI)

A B C D E

1 0.2 0.2 0.5 0.45 --

2 -- -- 0.25 0.15 0.05

3 0 0.15 0.1 -- 0.1

4 -- 0.13 -- -- 0.05

5 -- 0.1 0.1 0.2 --

Since all cij is >=0 solution is optimal

 FINAL SOLUTION
 The allocation will be as follows

In the year Investment type Amount in “ooo

1 E 500
2 B 600
3 D 750
4 A 250
4 C 500
4 D 50

THE NET RETURN ON INVESTMENT FOR PLANNING HORIZON

FOR FOUR YEARS PERIOD IS GIVEN BY
500*0.1+600*0.65+750*0.5+250*0.15+500*0.25+50*0.35 = 1445 THOUSANDS