Quatech Projects

Westmead International School
School of Economics Business and Accountancy
CHAPTER 1
LINEAR PROGRAMMING
Linear programming is a powerful quantitative technique (or operational
research technique) designs to solve allocation problem. The term linear
programming consists of the two words Linear and Programming.
The word 'Linear' is used to describe the relationship between decision
variables which are directly proportional. For example, if doubling (or tripling) the
production of a product will exactly double (or triple) the profit and required
resources, then it is linear relationship.
The word 'programming' means planning of activities in a manner that
achieves some 'optimal' result with available resources. A program is 'optimal' if it
maximizes or minimizes some measure or criterion of effectiveness such as
profit, contribution (i.e. sales-variable cost), sales, and cost.
Thus, 'Linear Programming' indicates the planning of decision variables
which are directly proportional, to achieve the 'optimal' result considering the
limitations within which the problem is to be solved.
The minimization model starts with an objective function with the purpose
of minimizing a goal while maximization model starts with an objective function
with the purpose of maximizing a goal.
MAXIMIZATION
You make three kinds of computers: Sony, Dell, and Apple. These sell for
$1500, $2000, and $2400. The Sony model requires 3 hours for circuit board
installation and 1 hour to fit the peripheral equipment. The Dell model requires 1
1 Qualitative Technique

hour for circuit boards and 5 hours for peripherals. The Apple model requires 3
hours for circuit boards and 2 hours for peripherals. You have 120 hours
available for circuit board work and 60 hours for fitting peripherals. MAXIMIZE
PROFIT.
GRAPHICAL METHOD
TABLE 1.1
DATA TABLE
Kinds of Computers
Constraints
Maximize
Sony
Dell
Apple
x
120
3
1
3
Y
60
1
5
2
RHS
<=
<=
<=
1500
2000
2400
Equation form
Max 120x + 60y
3x + y <= 1500
x + 5y <= 2000
3x + 2y <= 2400

TABLE 1.2
GRAPHING RESULT
X
0
500
0
392.8571
Corner Points
Y
0
0
400
321.4286
Z
0.
60,000.
24,000.
66,428.57
INTERPRETATION: The Company should use 393 circuit boards, 321

peripherals to meet the minimum cost of Php66, 429. See graph result above.
SIMPLEX METHOD
TABLE 1.3
ITERATIONS
Kinds of Computer Solution

Cj
BasicVariables 120x 60 y 0slack1 0slack2 0slac3 Quantity
Iteration
cj-zj
120
60
0
0
0
1
0
slack 1
3
1
1
0
0
1,500
0
slack 2
1
5
0
1
0
2,000
0
slack 3
3
2
0
0
1
2,400
Iteration
cj-zj
0
20.0
-40
0
0
2
120
X
1
0.3333 0.3333
0
0
500
0
slack 2
0
4.6667
1
0
1,500
0.3333
0
slack 3
0
1
-1
0
1
900
Iteration
cj-zj
0
0
-38.57 -4.285
0
3
120
X
1
0
0.3571 -0.071
0
392.8571
60
Y
0
1
0.2143
0
321.4286
0.0714

slack 3
0.9286
-0.2143
578.5714
TABLE 1.4
DUALING

Maximize
Original Problem
x
y
Sony
<=
1500
Dell
<=
2000
Apple
<=
2400
Dual Problem
Sony
Dell
Apple
Minimize
1500
2000
2400
>=
120
>=
60
TABLE 1.5
RANGING
Variable
X
Y
Constraint
Sony
Dell
Apple

Value
Reduced
Original
Cost
Val
392.8571
0
120
321.4286
0
60
Dual
Slack/Surplus Original
Value
Val
38.5714
4.2857
0
0
0
578.5714
1500
2000
2400
Lower
Bound
12
40
Lower
Bound
Upper
Bound
180
600
Upper
Bound
400
500.0001
1821.429
2123.077
4700
Infinity

TABLE 1.6
SOLUTION LIST

Variable
Status
Value
X
Y
slack 1
slack 2
slack 3
Optimal Value (Z)
Basic
Basic
NONBasic
NONBasic
Basic
392.8571
321.4286
0
0
578.5714
66428.57
TABLE 1.7
OVERALL LINEAR PROGRAMMING RESULTS
Maximize
Sony
Dell
Apple
Solution->

X
Y
120
60
3
1
<=
1
5
<=
3
2
<=
392.8571 321.4286
RHS
Dual
1500
2000
2400
66428.57
38.5714
4.2857
0
INTERPRETATION: The Company should use 393 circuit boards, 321

peripherals to meet the maximum profit of Php66, 429. See graph result above.

MINIMIZATION
You make three kinds of computers: Sony, Dell, and Apple. The total
manufacturing cost for each computer is $1500, $2000, and $2400. The Cheap
model requires 3 hours for circuit board installation and 1 hour to fit the
peripheral equipment. The Good model requires 1 hour for circuit boards and 5
hours for peripherals. The deluxe model requires 3 hours for circuit boards and 2
hours for peripherals. You have 120 hours available for circuit board work and 60
hours for fitting peripherals Determine the best mix that will MINIMIZE your
COST.
TABLE 1.1
DATA TABLE
Kinds of Computer
x
Minimize
Sony
Dell
Apple
20
3
1
3
GRAPHICALMETHOD
Y
60
1
5
2
RHS
>=
>=
>=
1500
2000
2400
Equation form
Min 20x + 60y
3x + y >= 1500
x + 5y >= 2000
3x + 2y >= 2400

TABLE 1.2
GRAPHING RESULT
Corner Points
Y
1500
0
900
276.9231
X
0
2000
200
615.3846
Z
90,000.
40,000.
58,000.
28,923.08
INTERPRETATION: The Company should use 615 of circuit boards 277 of

peripherals to meet the minimum cost of Php29.
SIMPLEX METHOD
TABLE 1.3
ITERATIONS
Cj

0 artfcl
0
0 artfcl
0
1
surplus
2
surplus
1
2
Basic
Variables
20
x
60
y
cj-zj
artfcl 1
artfcl 2
artfcl 3
7
3
1
3
8
1
5
2
0
1
0
0
-1
-1
0
0
0
0
1
0
cj-zj
artfcl 1
Y
artfcl 3
5.4
2.8
0.2
2.6
0
0
1
0
0
1
0
0
-1
-1
0
0
-1.6
-0.2
0.2
-0.4
0 artfcl
3
0
surplus
3
Quantity
-1
0
-1
0
0
0
0
1
-1
0
0
-1
1,500
2,000
2,400
0.6
0.2
-0.2
0.4
0
0
0
1
-1
0
0
-1
1,100
400
1,600
Iteration
1
0
0
0
Iteration
2
0
60
0
Iteration

3
cj-zj
20
60
X
Y
1
0
0
1
artfcl 3
20
60
cj-zj
X
Y
0
1
0
0
0
1
surplus 1
cj-zj
20
60
0
1.9286
0.3571
0.0714
0.9286
0.9286
-1.2143
0.2143
-1
-0.3571
0.0714
-0.0714
0.2143
0.0714
-0.2143
0
0
0
0
392.8571
321.4286
0.9286
-0.2143
0.2143
-1
578.5715
-1
0
0
0
0
0
-1.0
-0.1538
0.2308
0
0.1538
-0.2308
0
-0.3846
0.0769
615.3846
276.9231
-1
-0.2308
0.2308
-1.0
0.3846
0.0769
1.0769
-1.0769
623.077
10.7692
3.0769
-3.0769
X
Y
1
0
0
1
0
0
0
0
-0.1538
0.2308
10.7692
0.1538
-0.2308
-0.3846
0.0769
615.3846
276.9231
surplus 1
-1
-0.2308
0.2308
0.3846
0.0769
1.0769
-1.0769
623.077
Iteration
4
Iteration
5
TABLE 1.4
DUALING
Minimize
Sony
Dell
Apple
Maximize
X
Y

Original Problem
X
Y
3
1
>=
1
5
>=
3
2
>=
Dual Problem
Cheap
Good
Deluxe
1500
2000
2400
3
1
3
1
5
2
1500
2000
2400
<=
<=
20
60
TABLE 1.5
RANGING
Variable
Value
615.3846

Reduced
Original
Lower
Cost
Val
Bound
0
20
12
Upper
Bound
90

Y
Constrain
t
Sony
Dell
Apple
276.9231
Dual
Value
0
-10.7692
-3.0769
0
Slack/Surplus
623.0769
0
0
60
Original
Val
1500
2000
2400
13.3333
Lower
Bound
-Infinity
800
1821.429
100
Upper
Bound
2123.077
4700
6000
TABLE 1.6
SOLUTION SET

Variable
Status
X
Basic
Y
Basic
surplus 1
Basic
surplus 2
NONBasic
surplus 3
NONBasic
Optimal Value (Z)
Value
615.3846
276.9231
623.077
0
0
28923.08
TABLE 1.7
OVERALL LINEAR PROGRAMMING RESULT
Minimize
Sony
Dell
Apple
Solution->

X
Y
RHS
20
60
3
1
>=
1500
1
5
>=
2000
3
2
>=
2400
615.3846
276.9231
28923.08
Dual
0
-10.7692
-3.0769
INTERPRETATION: The Company should use 615 of circuit boards 277 of

peripherals to meet the minimum cost of Php29.

CHAPTER 2
PROJECT EVALUATION REVIEW TECHNIQUE
CRITICAL PATH METHOD
PROJECT CRASHING
PERT and CPM techniques both involve dividing a large project into a
series of smaller tasks and activities. Although the two techniques differ in their
original forms, Render and Stair cite six steps common to both methods. These
steps are defining the project and its significant activities; developing a sequence
of these activities; drawing a network diagram that connects the activities;
assigning time or cost estimates; computing the longest time path through the
network, known as the critical path; and using the network to monitor and
manage the project. If project managers want to reduce total project time, they
must reduce the length of some activity on the critical path identified through
PERT or CPM, according to Render and Stair. Meanwhile, any delay of an
activity on that path will delay project completion. PERT is an excellent technique
for monitoring project completion time but does not consider costs. A modification
of this technique, PERT/Cost, allows project managers to control costs and
project time, according to Render and Stair. CPM approaches project costs
through two estimates: normal and crash. Normal time and cost are estimates of
project time and cost under normal conditions. Project crashing is the time and
cost required to complete a project on a deadline, sometimes through additional
expenditures to reduce completion time.

CRITICAL PATH METHOD (CPM)

Sam is the Event Manager of MTV Music Summit and she is tasked to
organize the event and finish the preparation at the earliest possible time. She
was able to determine the sequence of activities and the time in days needed to
finish each activity. The figures are summarized in Table1.1.
TABLE 1.1
DATA TABLE
CRITICAL PATH METHOD

Activity time
Prec 1
Prec 2
2
2
A
1
B
1
A
4
B
D
2
C
E
5
F
2
G
12
G
2
G
1
H
I
1
K
2
L
N
6
K
1
M
3
N
2
P
4
Q
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
Prec 3
TABLE 1.2
CPM RESULT
Project
A
B
C
CRITICAL PATH METHOD SOLUTION

Activity
Early
Early
Late
time
Start
Finish
Start
43
2
0
2
0
2
2
4
2
1
4
5
7
Late
Finish
Slack
2
4
8
0
0
3

D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
1
4
2
5
2
12
2
1
1
2
6
1
3
2
4
2
4
8
10
15
15
15
27
28
34
28
36
34
37
39
3
8
10
15
17
27
17
28
29
36
34
37
37
39
43
3
4
8
10
25
15
25
27
39
40
28
42
34
37
39
TABLE 1.3
CHARTS OF CRITICAL PATH METHOD
GANTT CHART-EARLY TIMES
GANTT CHART-LATE TIMES
4
8
10
15
27
27
27
28
40
42
34
43
37
39
43
1
0
0
0
10
0
10
0
11
6
0
6
0
0
0

GANTT CHART-EARLY AND LATE TIMES
PRECEDENCE GRAPH
INTERPRETATION: From above computations, the critical method is from

A-B-E-F-G-I-K-O-P-Q-R. See critical path method result and graphs above.
PROGRAM EVALUATION AND REVIEW TECHNIQUE (PERT)

Manny is the Project Manager of Barber Shop and he is tasked to open a

new branch in Batangas as part of the companys expansion program at the
earliest possible time. He was able to determine the sequence of activities and
the estimates (optimistic, probable, and pessimistic) in days needed to finish
each activity. The figures are summarized in Table2.1.
When he is going to finish the project? What is the critical path?
TABLE 2.1
DATA TABLE
PROGRAM EVALUATION AND REVIEW TECHNIQUE

Optimistic time
Most Likely time
Pessimistic time
Prec 1
34
35
42
23
30
31
19
20
27
37
40
43
47
55
57
43
50
51
38
45
46
22
25
48
12
15
18
Prec 2
TABLE 2.2
PERT RESULT
Project
A
B
C
D
E
F
Activity
time
248
36
29
21
40
54
49
Early
Start
0
36
65
36
86
140
PERT SOLUTION
Early
Late
Late
Finish
Start
Finish
36
65
86
76
140
189
0
36
65
149
86
140
36
65
86
189
140
189
Slack
0
0
0
113
0
0
Standard
Deviation
3.56
1.33
1.33
1.33
1
1.67
1.33

G
H
I
44
28.33
15
189
140
233
233
168.33
248
189
204.67
233
233
233
248
0
64.67
0
1.33
4.33
1
TABLE 2.3
TASK TIME COMPUTATION
Optimistic
time
A
B
C
D
E
F
G
H
I
34
23
19
37
47
43
38
22
12
PERT SOLUTION
Most
Pessimistic Activity
Likely
time
time
time
35
42
36
30
31
29
20
27
21
40
43
40
55
57
54
50
51
49
45
46
44
25
48
28.33
15
18
15
Project
Results
Total of
critical
Activities
Square
root of
total
Standard
Deviation
Variance
1.33
1.33
1.33
1
1.67
1.33
1.33
4.33
1
1.78
1.78
1.78
1
2.78
1.78
1.78
18.78
1
12.67
3.56
TABLE 2.4
CHARTS OF PROGRAM EVALUATION AND REVIEW TCHNIQUE

GANTT CHART-LATE TIMES
GANNT CHART-EARLY AND LATE TIMES
PRECEDENCE GRAPH

INTERPRETATION: Using Project evaluation and review technique critical path

method is A-B-C-E-F-G-I. See PERT result, task time computation and its graph
above.
PROJECT CRASHING
Vj, the Event Manager of MTV Music Summit was informed that the
project must be finished in 86 days. He was able to determine the normal and
minimum crashed time possible with their corresponding costs. The figures are
summarized in Table3.1.
What activities should be crashed while minimizing additional cost?
TABLE 3.1
DATA TABLE
CRASHING METHOD
A
B
C
D
E
F
G
H
Normal
time
5
4
10
5
7
5
4
6
Crash time
2
2
6
3
6
3
2
3
Normal
Cost
25000
30000
45000
30000
30000
20000
35000
35000
Crash Cost
Prec 1
34000
40000
81000
38000
37000
26000
44000
65000
A
B
C
D
E
F
G

TABLE 3.2
CRASHING RESULT
Project
A
B
C
D
E
F
G
H
TOTALS
Normal
time
46
5
4
10
5
7
5
4
6
CRASHING SOLUTION
Crash
Normal
Crash
Crash
time
Cost
Cost
cost/pd
27
2
25000
34000
3000
2
30000
40000
5000
6
45000
81000
9000
3
30000
38000
4000
6
30000
37000
7000
3
20000
26000
3000
2
35000
44000
4500
3
35000
65000
10000
250000
Crash
by
Crashing
cost
3
2
4
2
1
2
2
3
9000
10000
36000
8000
7000
6000
9000
30000
115000
TABLE 3.3
CRASH SCHEDULE
CRASHING SOLUTION
Project time
Period
cost
Cumulative cost
46
45
44
43
42
41
40
39
38
37
36
35
34
33
32
31
30
29
28
27
0
3000
3000
3000
3000
3000
4000
4000
4500
4500
5000
5000
7000
9000
9000
9000
9000
10000
10000
10000
0
3000
6000
9000
12000
15000
19000
23000
27500
32000
37000
42000
49000
58000
67000
76000
85000
95000
105000
115000
1
2
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
1
2
2
2
2
2
2
2
2
2
1
2
3
4
4
4
4
1
2
2
2
2
2
2
2
2
2
2
2
2
2
1
1
1
1
1
1
1
1
1
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
1
2
2
2
2
2
2
2
2
2
2
2
1
2
3

INTERPRETATION: From above computations the crash time would be 27 days.

See crashing result and crash schedule above.
CHAPTER 3
DECISION THEORY

Framework of logical and

helping managers in
mathematical concepts,
formulating rules that
may lead to
aimed
a
at
most
advantageous course of action under the given circumstances. Decision theory

divides decisions into three classes (1) Decisions under certainty: where a
manager has far too much information to choose the best alternative. (2)
Decisions under conflict: where a manager has to anticipate moves and countermoves of one or more competitors. (3) Decisions under uncertainty: where a
manager has to dig-up a lot of data to make sense of what is going on and what
it is leading to.
1.
2.
3.
4.
5.
Five criteria that may be used:

Maximax
Maximin
Hurwicz Criterion of Realism
La Place (Equally Likely)
Minimax Regret
Bors, the Market Analyst was able to determine further the probability of
occurrence of each type of market. The probability of occurrence is 40% that the
market is favourable, 50% that the market is average, and 10% that the market is
unfavourable. The figures are summarized in Table 1.1. (Figures below are in
thousands)
What will be Boots decision?
TABLE 1.1
DATA TABLE
PAYOFF SUMMARY
Expansion for plan payoff
Favorable
Average
Unfavorable

Probabilities
Construct a plant
Open Distribution Center
Do Nothing
Alpha = .25
.4
61
42
54
.5
54
65
43
.1
67
45
55
TABLE 1.2
DECISION TABLE RESUTS
Decision Theory Solution

Favorable Average Unfavorable EMV
Probabilities
Option 1
Option 2
Option 3
.4
61
42
54
.5
54
65
43
.1
67
45
55
Maximum
58.1
53.8
48.6
58.1
Best
EV
Row
Min
Row
Max
54
67
42
65
43
55
54
67
maximin Maximax
TABLE 1.3
EXPECTED VALUE MULTIPLICATIONS
Probabilities
Option 1
Option 2
Option 3

Favorable
Average
Unfavorable
.4
.5
.1
24.4
27
6.7
16.8
32.5
4.5
21.6
21.5
5.5
Row sum (Exp Val)

58.1
53.8
48.6
TABLE 1.4
PERFECT INFORMATION
Probabilities

Favorable Average Unfavorable
.4
.5
.1
Maximum

Option 1
Option 2
Option 3
Perfect Information
Perfect*probability
Best Expected Value
Exp Value of Perfect Info
61
42
54
61
24.4
54
65
43
65
32.5
67
45
55
67
6.7
63.6
58.1
5.5
TABLE 1.5
REGRET OR OPPORTUNITY LOSS

Average
Unfavorable
Favorable
Probabilities
Option 1
Option 2
Option 3
.4
0
19
7
.5
11
0
22
.1
0
22
12
Minimaxregret
Maximum
Regret
Expected
Regret
11
22
22
11
5.5
9.8
15
TABLE 1.6
HURWICS TABLE
Hurwicz Value
.00
.01
.02
.03
.04
.05
.06
.07
.08
.09
.10
.11
.12
.13
.14
.15
.16
.17

Option 1
Option 2
54
42
54.13
42.23
54.26
42.46
54.39
42.69
54.52
42.92
54.65
43.15
54.78
43.38
54.91
43.61
55.04
43.84
55.17
44.07
55.3
44.3
55.43
44.53
55.56
44.76
55.69
45
55.82
45.22
55.95
45.45
56.08
45.68
56.21
45.91
Option 3
43
43.12
43.24
43.36
43.48
43.6
43.72
43.84
43.96
44.08
44.2
44.32
44.44
44.56
44.68
44.8
44.92
45.04

.18
.19
.20
.21
.22
.23
.24
.25
.26
.27
.28
.29
.30
.31
.32
.33
.34
.35
.36
.37
.38
.39
.40
.41
.42
.43
.44
.45
.46
.47
.48
.49
.50
.51
.52
.53
.54
.55
.56
56.34
56.47
56.6
56.73
56.86
56.99
57.12
57.25
57.38
57.51
57.64
57.77
57.9
58.03
58.16
58.29
58.42
58.55
58.68
58.81
58.94
59.07
59.2
59.33
59.46
59.59
59.72
59.85
59.98
60.11
60.24
60.37
60.5
60.63
60.76
60.89
61.02
61.15
61.28
46.14
46.37
46.6
46.83
47.06
47.29
47.52
47.75
47.98
48.21
48.44
48.67
48.9
49.13
49.36
49.59
49.82
50.05
50.28
50.51
50.74
50.97
51.2
51.43
51.66
51.89
52.12
52.35
52.58
52.81
53.04
53.27
53.5
53.73
53.96
54.19
54.42
54.65
54.88
45.16
45.28
45.4
45.52
45.64
45.76
45.88
46
46.12
46.24
46.36
46.48
46.6
46.72
46.84
46.96
47.08
47.2
47.32
47.44
47.56
47.68
47.8
47.92
48.04
48.16
48.28
48.4
48.52
48.64
48.76
48.88
49
49.12
49.24
49.36
49.48
49.6
49.72

.57
.58
.59
.60
.61
.62
.63
.64
.65
.66
.67
.68
.69
.70
.71
.72
.73
.74
.75
.76
.77
.78
.79
.80
.81
.82
.83
.84
.85
.86
.87
.88
.89
.90
.91
.92
.93
.94
.95
61.41
61.54
61.67
61.8
61.93
62.06
62.19
62.32
62.45
62.58
62.71
62.84
62.97
63.1
63.23
63.36
63.49
63.62
63.75
63.88
64.01
64.14
64.27
64.4
64.53
64.66
64.79
64.92
65.05
65.18
65.31
65.44
65.57
65.7
65.83
65.96
66.09
66.22
66.35
55.11
55.34
55.57
55.8
56.03
56.26
56.49
56.72
56.95
57.18
57.41
57.64
57.87
58.1
58.33
58.56
58.79
59.02
59.25
59.48
59.71
59.94
60.17
60.4
60.63
60.86
61.09
61.32
61.55
61.78
62
62.24
62.47
62.7
62.93
63.16
63.39
63.62
63.85
49.84
49.96
50.08
50.2
50.32
50.44
50.56
50.68
50.8
50.92
51.04
51.16
51.28
51.4
51.52
51.64
51.76
51.88
52
52.12
52.24
52.36
52.48
52.6
52.72
52.84
52.96
53.08
53.2
53.32
53.44
53.56
53.68
53.8
53.92
54.04
54.16
54.28
54.4

.96
.97
.98
.99
1.00
66.48
66.61
66.74
66.87
67
64.08
64.31
64.54
64.77
65
54.52
54.64
54.76
54.88
55
INTERPRETATION: Base on the result, Boots best decision is to construct a

plant.
CHAPTER 4
INVENTORY MANAGEMENT
The word inventory in business means a detailed list of things in stock
for a period of time. A necessary function of all business operations. Skilful
inventory management could mean great savings for the company, and would
maximize the companys profit.
Proper inventory management should be maintained in order to bring
down the total annual cost of inventory. There are two costs involved in annul
inventory: the ordering cost and the carrying cost. Annual cost of inventory is
the sum of the annual ordering cost and the annual cost.

Carrying cost
Carrying cost or holding cost increases as the size of the inventory
increases. If the firm borrows money to finance inventory, the interest on the
money invested in the inventory is a major distribution to the carrying cost.
Storage cost is another source of carrying cost which includes rent of space,
heat, lights, refrigerator and wages of personnel needed to protect and keep
records of the inventory. Other sources include taxes and deterioration of goods.
Carrying cost is usually expressed on an annual basis as percentage of the
average annual inventory.
Ordering Cost
Ordering costs include costs associated with getting an item into the firms
inventory. Total ordering cost is composed of purchase order, shipping costs,
receiving and setting up of equipment. Ordering cost increase as the number of
order increases.
Economic Order Quantity (EOQ)
To minimize the um of ordering cost and carrying cost, we must determine the
proper quantity to order. The order size that minimizes the sum of ordering cost
and carrying cost is known as Economic Order Quantity (EOQ).
Two ways of finding EOQ:
a.
By the use of tables showing various lot sizes of quantity orders
b.
By the use of the formula : EOQ =
An auto parts supplier sells Hardy-brand batteries to car dealers and auto
mechanics. The annual demand is approximately 1,200 batteries. The supplier
pays $28 for each battery and estimates that the annual holding cost is 30

percent of the battery's value. It costs approximately $20 to place an order

(managerial and clerical costs). The supplier currently orders 100 batteries per
month.
TABLE 1.1
DATA TABLE
Hardy-Brand Batteries
Parameter
Demand rate(D)
Setup/Ordering cost(S)
Holding cost(H)
Unit cost
Value
1200
20
30%
28
TABLE 1.2
INVENTORY RESULTS
Parameter
Demand rate(D)
Setup/Ordering
cost(S)
Holding
cost(H)@30%
Unit cost
Hardy-Brand Batteries Solution

Value
Parameter
1200
Optimal order quantity (Q*)
20
Maximum Inventory Level (Imax)
8.4
28
Average inventory
37.8
Orders per period(year)

15.87
Annual Setup cost
317.49
Annual Holding cost
317.49
Unit costs (PD)
33600
Total Cost 34234.98
TABLE 1.3
COST CURVE
Value
75.59
75.59

IINTERPRETATION: Inventory results and cost curve answers are given

above.
CHAPTER 5
FORECASTING
A planning tool that helps management in its attempts to cope with
the uncertainty of the future, relying mainly on data from the past and present
and analysis of trends.
Forecasting starts with certain assumptions based on the managements
experience
and judgment.
These estimates are
projected
into
the
coming months or years using one or more techniques such as Box-Jenkins

models, Delphi method, exponential smoothing, moving averages, regression
analysis, and trend projection. Since any error in the assumptions will result in a

similar or magnified error in forecasting, the technique of sensitivity analysis is

used
which assigns a range of values to
the
uncertain factors (variables).
A forecast should not be confused with a budget.
NAIVE APPROACH
Given the following data below, prepare the forecast for the period 6 using
naive approach.
NAVE FORECASTING APPROACH
1
2
3
4
5
Demand(y)
80
85
75
78
84
TABLE 1.1
NAIVE FORECASTING RESULT

Measure
Error Measures
Bias (Mean Error)
MAD (Mean Absolute Deviation)
Value
1
6

MSE (Mean Squared Error)

Standard Error (denom=n-2=2)
MAPE (Mean Absolute Percent Error)
Forecast
next period
42.5
9.22
.08
84
TABLE 1.2
NAIVE DETAILS AND ERROR ANALYSIS

Forecast
Error
Demand(y
)
80
85
80
25
.06
75
85
-10
10
100
.13
78
75
.04
84
78
36
.07
TOTALS
402
24
170
.3
AVERAGE
80.4
42.5
.08
(MSE)
(MAPE)
Next period
forecast
84
|Error| Error^2
(Bias) (MAD)
Std
err
|Pct
Error|
9.22
TABLE 1.3
NAIVE CONTROL (TRACKING SIGNAL)
Demand(y Forecast Error RSFE |RSFE|

)
80
Cum
Abs
Cum
MAD
Track
Signal
85
80
75
85
-10
-5
10
15
7.5
-.67
78
75
-2
18
-.33
84
78
24
.67

TABLE 1.4
NAIVE GRAPH
INTERPRETATION: Using naive approach the interpretation for period six would
be 84. See naive details, error analysis, naive control (tracking signal) and naive
graph above.
MOVING AVERAGE APPROACH
Given the following data below, Prepare the forecast for the period 6 using
three period moving average approach.
1
2
3
4
5
TABLE 2.1
MOVING AVERAGE FORECASTING RESULT
Demand(y)
80
85
75
78
84


Measure
Error Measures
Bias (Mean Error)
Forecast
next period
Value
1.33
3.33
12.89
NA
.04
79
TABLE 2.2
DETAILS AND ERROR ANALYSIS
Demand(y
)
80
Forecast
Error
|Error|
Error^2
|Pct
Error|
85
3
4
75
78
80
-2
.03
84
79.33
4.67
4.67
21.78
.06
TOTALS
402
2.67
6.67
25.78
.08
AVERAGE
Next period
forecast
80.4
1.33
(Bias)
3.33
(MAD)
12.89
(MSE)
.04
(MAPE)
Std err
NA
79
TABLE 2.3
ERRORS AS FUNCTION OF N

N
Bias
MAD
MSE
Standard
error
MAPE
42.5
9.22
.08

-.67
5.67
38.83
10.79
.07
1.33
3.33
12.89
.04
4.5
4.5
20.25
.05
TABLE 2.4
CONTROL (TRACKING SIGNAL)
1
2
3
4
5
Moving Average approach Solution

Demand(y Forecast Error RSFE |RSFE| Cum
)
Abs
80
85
75
78
80
-2
-2
2
2
84
79.33
4.67 2.67
4.67
6.67
Cum
MAD
Track
Signal
2
3.33
-1
.8
TABLE 2.5
MOVING AVERAGE GRAPH
INTERPRETATION: Using moving average approach, the forecast for period six
would be 79. See moving average forecasting results, details and error analysis,
errors as function of n, control tracking signal and moving average graph above.
EXPONENTIAL SMOOTHING
Given the following data below, prepare the forecast for the period 6 using
exponential smoothing approach.

EXPONENTIAL SMOOTHING APPRACH

Demand(y)
213
312
258
152
239
1
2
3
4
5
Forecast
189
0
0
0
0
TABLE 3.1
FORECASTING RESULT
EXPONENTIAL SMOOTHING APPROACH

Measure
Error Measures
Bias (Mean Error)
Forecast
next period
Value
24.11
56.38
4523.19
86.83
.25
219.14
TABLE 3.2
DETAILS AND ERROR ANALYSIS
1
2
3
4
5
TOTALS
AVERAGE
Next period
forecast
EXPONENTIAL SOOTHING APPROACH

Demand(y Forecast Error |Error|
Error^2
)
213
189
24
24
576
312
195
117
117
13689
258
224.25
33.75 33.75
1139.06
152
232.69 -80.69 80.69 6510.47
239
212.52
26.48 26.48
701.42
1174
120.55 281.92 22615.96
234.8
24.11 56.38 4523.19
219.14
(Bias) (MAD)
(MSE)
Std err
86.83
|Pct
Error|
.11
.38
.13
.53
.11
1.26
.25
(MAPE)

TABLE 3.3
ERRORS AS FUNCTION OF ALPHA
Alpha
.00
.01
.02
.03
.04
.05
.06
.07
.08
.09
.10
.11
.12
.13
.14
.15
.16
.17
.18
.19
.20
.21
.22
.23
.24
.25
.26
.27
.28
.29
.30
.31
EXPONENTIAL SMOOTHING PPROACH

Bias
MAD
MSE
Standard
error
45.8
60.6
4867
90.06
44.68
60.34
4813.35
89.57
43.58
60.08
4764.62
89.11
42.51
59.84
4720.57
88.7
41.46
59.6
4680.92
88.33
40.43
59.38
4645.45
88
39.42
59.16
4613.91
87.69
38.43
58.95
4586.08
87.43
37.47
58.75
4561.76
87.19
36.52
58.55
4540.75
87
35.6
58.37
4522.84
86.82
34.7
58.19
4507.86
86.68
33.82
58.02
4495.64
86.56
32.96
57.85
4486.02
86.47
32.12
57.7
4478.82
86.4
31.29
57.55
4473.92
86.35
30.49
57.4
4471.16
86.32
29.71
57.27
4470.41
86.32
28.94
57.14
4471.55
86.33
28.2
57.01
4474.46
86.36
27.47
56.89
4479.03
86.4
26.76
56.78
4485.15
86.46
26.07
56.67
4492.71
86.53
25.4
56.57
4501.63
86.62
24.75
56.48
4511.82
86.72
24.11
56.38
4523.19
86.83
23.49
56.3
4535.67
86.95
22.88
56.22
4549.17
87.07
22.3
56.14
4563.64
87.21
21.73
56.06
4579
87.36
21.17
56
4595.21
87.51
20.63
55.93
4612.2
87.68
MAPE
.25
.25
.25
.25
.25
.25
.25
.25
.25
.25
.25
.25
.25
.25
.25
.25
.25
.25
.25
.25
.25
.25
.25
.25
.25
.25
.25
.25
.25
.25
.25
.25

.32
.33
.34
.35
.36
.37
.38
.39
.40
.41
.42
.43
.44
.45
.46
.47
.48
.49
.50
.51
.52
.53
.54
.55
.56
.57
.58
.59
.60
.61
.62
.63
.64
.65
.66
.67
.68
.69
.70
20.11
19.6
19.11
18.63
18.17
17.72
17.29
16.87
16.46
16.07
15.69
15.33
14.98
14.64
14.31
14
13.69
13.4
13.13
12.86
12.6
12.36
12.13
11.9
11.69
11.49
11.3
11.12
10.95
10.78
10.63
10.49
10.35
10.23
10.11
10
9.9
9.81
9.73
55.87
55.81
55.76
55.71
55.66
55.61
55.57
55.53
55.49
55.46
55.43
55.4
55.37
55.34
55.31
55.29
55.27
55.25
55.23
55.2
55.57
56.03
56.5
56.97
57.43
57.89
58.35
58.8
59.26
59.71
60.16
60.61
61.05
61.49
61.93
62.36
62.79
63.22
63.64
4629.92
4648.31
4667.34
4686.96
4707.14
4727.83
4749
4770.63
4792.68
4815.13
4837.96
4861.13
4884.64
4908.46
4932.57
4956.96
4981.63
5006.54
5031.69
5057.07
5082.68
5108.49
5134.5
5160.71
5187.11
5213.68
5240.43
5267.35
5294.42
5321.65
5349.03
5376.56
5404.22
5432.02
5459.94
5487.98
5516.14
5544.41
5572.77
87.84
88.02
88.2
88.38
88.57
88.77
88.97
89.17
89.37
89.58
89.8
90.01
90.23
90.45
90.67
90.89
91.12
91.35
91.58
91.81
92.04
92.27
92.51
92.74
92.98
93.22
93.46
93.7
93.94
94.18
94.42
94.66
94.91
95.15
95.39
95.64
95.88
96.13
96.37
.25
.26
.26
.26
.26
.26
.26
.26
.26
.26
.26
.26
.26
.26
.26
.26
.26
.26
.26
.26
.26
.27
.27
.27
.27
.28
.28
.28
.28
.28
.29
.29
.29
.29
.29
.3
.3
.3
.3

.71
.72
.73
.74
.75
.76
.77
.78
.79
.80
.81
.82
.83
.84
.85
.86
.87
.88
.89
.90
.91
.92
.93
.94
.95
.96
.97
.98
.99
1.00
9.65
9.58
9.52
9.46
9.42
9.37
9.34
9.31
9.29
9.28
9.27
9.26
9.27
9.27
9.29
9.3
9.33
9.35
9.39
9.42
9.46
9.51
9.56
9.61
9.67
9.73
9.79
9.86
9.93
10
64.06
64.47
64.88
65.29
65.69
66.09
66.48
66.87
67.25
67.63
68
68.37
68.74
69.09
69.45
69.79
70.13
70.47
70.8
71.12
71.44
71.75
72.05
72.35
72.64
72.93
73.21
73.48
73.74
74
5601.23
5629.78
5658.41
5687.11
5715.87
5744.68
5773.54
5802.43
5831.34
5860.27
5889.19
5918.11
5947
5975.85
6004.65
6033.39
6062.04
6090.6
6119.05
6147.37
6175.55
6203.56
6231.39
6259.03
6286.45
6313.63
6340.56
6367.21
6393.56
6419.6
96.62
96.87
97.11
97.36
97.6
97.85
98.09
98.34
98.58
98.83
99.07
99.32
99.56
99.8
100.04
100.28
100.52
100.75
100.99
101.22
101.45
101.68
101.91
102.14
102.36
102.58
102.8
103.01
103.23
103.44
.3
.3
.31
.31
.31
.31
.31
.31
.32
.32
.32
.32
.32
.32
.32
.33
.33
.33
.33
.33
.33
.33
.33
.33
.34
.34
.34
.34
.34
.34
TABLE 3.4
CONTROL (TRACKING SIGNAL)
1
2
Demand(y
)
213
312
Exponential Smoothing Solution

Forecast Error RSFE |RSFE| Cum
Abs
189
24
24
24
24
195
117
141
117
141
Cum
MAD
24
70.5
Track
Signal
1
2

3
4
258
152
224.25
232.69
239
212.52
33.75 174.75
94.06
80.69
26.48 120.55
33.75
80.69
174.75
255.44
58.25
63.86
3
1.47
26.48
281.92
56.38
2.14
TABLE 3.5
EXPONENTIAL SMOOTHING GRAPH
CHAPTER 6
QUEING / WAITING LINES
Queuing theory is the mathematical study of waiting lines. There are
several related processes, arriving at the back of the queue, waiting in the queue
(essentially a storage process), and being served by the server at the front of the
queue. It is applicable in transport and telecommunication and is occasionally
linked to ride theory. Incoming traffic to queuing theory systems is modelled via
Poisson distribution, with the assumptions of pure chance traffic. Call arrivals and
departures are random and independent events. Statistical equilibrium
probabilities within the system do not change. All incoming traffic can be routed
to any other customer within the network and congestion is cleared as soon as
servers are free.

Queuing theory is finding the best level of service by trade-off between the
cost of providing good service and the cost of customer waiting line. We will also
assume a first in first out (FIFO) disciple where customers are serviced according
to order of their arrival.
Four Models presented using Kendall notation:
1. M/M/1
2. M/M/m
3. M/D/1
4. M/M/1 with finite source
M/M/1
Bryan is the branch manager of East-West Bank and he wants to improve
the service of the bank by reducing the average waiting time of the banks client.
He was able to determine the average arrival and the average number of clients
serviced per hour. Bryan knows that there is also an opportunity cost for clients
who are idle while waiting in line. He was able to determine the tellers labour
cost as well as the average opportunity cost of clients who are waiting. The
figures are summarized in Table1.1.
How many clients are in the bank at any given time? How much time does
a client spent in the bank? How many clients are waiting to be served? How
much a time does a client spent in waiting? What is the probability that the teller
is busy? What is the probability that there are no clients? How much is the total
cost per shift?
TABLE 1.1
DATA TABLE
EAST-WEST BANK
Parameter
M/M/1 (exponential service times)
Arrival rate(lambda)
Service rate(mu)
Number of servers
Server cost $/time
Waiting cost $/time
Value
3
15
1
8
11

TABLE 1.2
WAITING LINES RESULTS
Parameter
M/M/1
(exponential
service times)
Arrival
rate(lambda)
Service rate(mu)
EAST-WEST BANK Solution

Value
Parameter
Value Minutes Seconds
Average server
.2
utilization
3
Average number in
the queue(Lq)
Average number in
the system(Ls)
Average time in the
queue(Wq)
Average time in the
system(Ws)
Cost (Labor + #
waiting*wait cost)
Cost (Labor + # in
system*wait cost)
15
Number of servers
Server cost $/time
Waiting cost
$/time
11
.05
.25
.02
60
.08
300
8.55
10.75
TABLE 1.3
TABLE OF PROBABILITIES

k
0
Prob (num in sys =

k)
.8
Prob (num in sys <=

k)
.8
Prob (num in sys

>k)
.2
.16
.96
.04
.03
3
4
5
6
0
0
0
0
1
1
1
1
0
0
0
0
TABLE 1.4
GRAPHS OF PROBABILITIES


INTERPRETATION: Waiting lines and table of probabilities results using MM1

method are above.
M/M/s; M/M/m
Clair, the Bank Manager of EAST-WEST Bank wants to improve the
service of the bank by hiring an additional teller. She observed that the average
arrival and the average number of clients serviced per teller per hour remains the
same. Clair knows that with the additional teller, the number of clients waiting in
line will decrease. She observed that the tellers labour costs as well as the
average opportunity cost of clients who are waiting remain the same. The figures
are summarized in Table2.1.
TABLE 2.1
DATA TABLE
EAST-WEST BANK
Parameter
Value

M/M/s
Service rate(mu)
Number of servers
Server cost $/time
Waiting cost $/time
3
15
2
8
11
TABLE 2.2
WAITING LINES RESULT
Parameter
M/M/s
Arrival
rate(lambda)
Service
rate(mu)
Number of
servers
Server cost
$/time
Waiting cost
$/time

Value
Parameter
Average server
.1
utilization
3
Average number in the
0
queue(Lq)
15
Average number in the
.2
system(Ls)
2
Average time in the
0
.04
2.42
queue(Wq)
8
Average time in the
.07
4.04
242.42
system(Ws)
11
Cost (Labor + #
16.02
waiting*wait cost)
Cost (Labor + # in
18.22
system*wait cost)
TABLE 2.3
TABLE OF PROBABILITIES
k
0
1
2
3
4
5

Prob (num in sys = Prob (num in sys <=
k)
k)
.82
.82
.16
.98
.02
1
0
1
0
1
0
1
Prob (num in sys

>k)
.18
.02
0
0
0
0

TABLE 2.4
COST VS. SERVERS

Number of servers
1
Total cost based on waiting

8.55
Total cost based on system

10.75
2
3
16.02
24
18.22
26.2
32
34.2
40
42.2
TABLE 2.5
GRAPHS OF PROBABILITIES

INTERPRETATION: Waiting lines, table of probabilities and cost vs.

server results using MMm/MMs method are above.
M/D/1
Grace, the Branch Manager of EAST-WEST Bank wants to improve the
service of the bank by replacing the teller with an ATM. She observed that the
average arrival and the average number of clients serviced per hour remain the
same. Because an ATM processes according to a fixed cycle, she presumed that
the service rate distribution is now constant. Lea knows that with the ATM as the
teller, the number of clients waiting in line will decrease. She observed that the
ATMs service cost is equal to the labour cost of a teller and the average
opportunity cost of clients who are waiting remain the same. The figures are
summarized in Table3.1.
How many clients are waiting to be served? How much time does a client
spend waiting? How many clients are at the ATM at any given time? How much
time does a client spend at the ATM? What is the probability that the ATM is
occupied? What is the probability that there are no clients? How much is the total
cost per shift?
TABLE 3.1
DATA TABLE
EAST WEST BANK

Parameter
M/D/1 (constant service times)
Value
Service rate(mu)
Number of servers
Server cost $/time
15
1
8
Waiting cost $/time
11

TABLE 3.2
WAITING LINES RESULTS
Parameter
M/D/1 (constant
service times)
Arrival
rate(lambda)
Service rate(mu)
Number of
servers
Server cost
$/time
Waiting cost
$/time
EAST WEST BANK Solution

Value
Parameter
Average server
.2
utilization
3
Average number in
.03
the queue(Lq)
15
Average number in
.23
the system(Ls)
1
Average time in the
0
.5
30
queue(Wq)
8
Average time in the
.08
4.5
270
system(Ws)
11
Cost (Labor + #
8.28
waiting*wait cost)
Cost (Labor + # in
10.48
system*wait cost)
INTERPRETATION: Waiting lines result using MM1 method is above.
CHAPTER 7

NETWORK
The term network flow program describes a type of model that is a special
case of the more general linear program. The class of network flow programs
includes such problems as the shortest path problem, the maximum flow
problem, the pure minimum cost flow problem, and the generalized minimum
cost flow problem. It is an important class because many aspects of actual
situations are readily recognized as networks and the representation of model is
much more compact than the general linear program. When the situation can be
entirely modelled as network, very efficient algorithm exists for the solution of the
optimization problem, many times more efficient than linear programming in the
utilization of computer time and space resources.
Network models use nodes and arcs to make decision.
Three techniques:
1. Minimal-Spanning Three Technique
2. Maximal-Flow Technique
3. Shortest-Route Technique
Minimal-Spanning Tree Technique
The objective of Minimal-Spanning Tree Technique is to connect each node to
at least one node while minimizing the total distance.
Maximal-Flow Technique
Maximal Flow Technique seeks to determine the maximum
quantity that can go from one node to another in a network at any given time.
Shortest-Route Technique
The shortest-route technique determines the minimum distance
from one point of the network to another.
MINIMAL SPANNING TREE
Blair is the Head Engineer of MY-DSL and he is tasked t provide a
telephone lines to 15 towns in the province of Nasugbu. Each town must be
connected from another town starting with Town A, using possible distance. He

was able to determine the distance in kilometres from one town to another. The
distance figures are summarized in Table 1.1.
How should the towns be cnnected?
MY-DSL
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
TABLE 1.1
DATA
TABLE
MINIMAL SPANNING TREE
Start node
End node
1
2
1
3
1
4
2
3
2
5
3
4
3
5
3
6
3
7
3
8
4
7
5
8
6
7
7
9
8
9
Cost
15
10
18
17
12
13
8
21
19
22
16
14
9
20
11
TABLE 1.2
NETWORK RESULT
MY-DSL
A
Start End node

node
1
2
Cost
Cost
10
15
10
18
17
Include

12
12
13
13
H
I
3
3
6
7
21
19
22
16
16
14
14
20
11
11
Total
93
TABLE 1.3
SOLUTION STEP
MINIMAL SPANNING TREE SOLUTION
MY-DSL
Ending
node
3
Cost
Starting
node
1
10
Cumulative
cost
10
18
12
30
13
43
14
57
11
68
16
84

93
INTERPRETATION: Using minimal spanning tree method 15 towns in Nasugbu

should be connected from B(1-3), G(3-5), E(2-5), F(3-4), L(5-8), O(8-9), K(4-7),
M(6-7) for a total of 93 kilometres. See minimal spanning tree network result and
solution step above.
MAXIMAL FLOW TECHNIQUE
Bagito is the Industrial Engineer of Sabang Water District and she is
tasked to ensure that maximum amount of water flows from Water Pump J. She
was able to determine the capacity of the outflow and inflow of water from one
pump to another in litres per second. The capacity figures are summarized in
Table 2.1.
What is the total capacity of the water flow?
TABLE 2.1
DATA TABLE

SABANG WATER
DISTRICT
A
Start
node
1
End node
Capacity
15
Reverse
capacity
9
11
13
10
16
12
16
14
12
14
11
15
13
10

TABLE 2.2
NETWORK RESULT
SABANG WATER
DISTRICT
Maximal Network
Flow
A
B
C
D
E
F
G
H
I
J

Start
End
Capacity
node
node
22
1
1
2
2
3
3
4
5
5
6
2
4
3
5
4
6
6
6
7
7
15
11
10
8
16
14
12
7
9
13
Reverse
capacity
Flow
9
13
16
12
7
8
14
11
15
10
11
11
9
2
0
9
11
-9
9
13
TABLE 2.3
ITERATIONS
Iteration
1
2
3
BATANGAS WATER DISTRICT Solution

Path
Flow
Cumulative Flow
1-> 4-> 6-> 7
11
11
1-> 2-> 3-> 6-> 5-> 7
9
20
1-> 2-> 5-> 6-> 7
2
22
INTERPRETATION: Using Maximal flow technique, the total capacity of the

water flow would be 22 liters per second. See maximal flow technique network
result and iterations above.
SHORTEST ROUTE TECHNIQUE
Boy is the Electrical Engineer of Batelect and he is tasked to provide
electricity to a new Electric post I from the generator located at Electric Post A at

the minimum possible distance. He was to determine the distance in kilometres

from on electric post to another. The distance figures are summarized in Table
1.1.
What is the shortest route from Post A to Post I?
TABLE 3.1
DATA TABLE
BATELECT
Start node
End node
Distance
12
13
13
14
16
15
TABLE 3.2
NETWORK RESULT
Total distance = 36
B
E
H
BATELECT Solution
Start node End node Distance
1
3
7
3
5
13
5
7
16
Cumulative Distance
7
20
36
TABLE 3.3
MINIMUM DISTANCE MATRIX
1
2
1
0
12
2
12
0
BATELECT Solution
3
4
7
13
19
8
5
20
17
6
21
33
7
36
33

3
4
5
6
7
7
13
20
21
36
19
8
17
33
33
0
20
13
14
29
20
0
9
34
25
13
9
0
27
16
14
34
27
0
15
29
25
16
15
0
INTERPRETATION: Using shortest route technique, the shortest route

from post A to Post I would be 36 kilometres. See shortest route network result
and minimum distance matrix above.
CHAPTER 8
TRANSPORTATION MODEL
The transportation model uses the principle of 'transplanting' something,
like taking a hole from one place and inserting it in another without change. First
it assumes that to disturb or change the idea being transported in any way will
damage and reduce it somehow. It also assumes that it is possible to take an
idea from one person's mind into another person's so that the two people will
then
understand
in
exactly
the
same
way.
The transportation model is a valuable tool in analyzing and modifying existing

transportation systems or the implementation of new ones. In addition, the model
is effective in determining resource allocation in existing business structures.

The model requires a few keys pieces of information, which include the following:
Origin of the supply
Destination of the supply
Unit cost to ship
The transportation model can also be used as a comparative tool providing

business decision makers with the information they need to properly balance cost
and supply. The use of this model for capacity planning is similar to the models
used
by
engineers
in
the
planning
of
waterways
and
highways.
This model will help decide what the optimal shipping plan is by determining a
minimum cost for shipping from numerous sources to numerous destinations.
This will help for comparison when identifying alternatives in terms of their impact
on the final cost for a system. The main applications of the transportation model
mention in the chapter are location decisions, production planning, capacity
planning and transhipment. Nonetheless, the major assumptions of the
transportation model are the following:
1.
Items
are
homogeneous.
2. Shipping cost per unit is the same no matter how many units are shipped.
3. Only one route is used from place of shipment to the destination.
The transportation problem involves determining a minimum-cost plan for
shipping from multiple sources to multiple destinations. A transportation model is
used to determine how to distribute supplies to various destinations while
minimizing total shipping cost. In this case, a shipping plan is produced and is not
changed unless factors such as supply, demand, or unit shipping costs change.

The variables in this model have a linear relationship and therefore, can be put
into a transportation table. The table will have a list of origins and each one's
capacity or supply quantity period. It will also show a list of destinations and their
respective demands per period. Also, it will show the unit cost of shipping goods
from each origin to each destination. Transportation costs play an important role
in location decision. The transportation problem involves finding the lowest-cost
plan for distributing stocks of goods or supplies from multiple origins to multiple
destinations that demand the goods. The transportation model can be used to
compare location alternatives in terms of their impact on the total distribution
costs for a system. It is subject to demand satisfaction at markets supply
constraints. It also determines how to allocate the supplies available from the
various factories to the warehouses that stock or demand those goods, in such a
way that total shipping cost is minimized.
Wheat is harvested in the Midwest and stored in grain elevators in three

different cities Kansas City, Omaha, and Des Moines. These grain elevators
supply three flour mills, located in Chicago, St. Louis, and Cincinnati. Grain is
shipped to the mills in railroad cars, each car capable of holding one ton of
wheat. Each grain elevator is able to supply the following number of tons of
wheat to the mills on a monthly basis.
Grain Elevator
Kansas
Omaha
Des Moines
Demand
Chicago
6
7
4
200
St. Louis
8
11
5
100
Cincinna
ti
10
11
12
300
Supply
150
175
275
MAXIMIZATION
NORTHWEST CORNER METHOD
Transportation Shipments
Optimal Profit A
B

5925
1
2
3
150
50
100
25
275
B
-2
C
0
-4
-7
Marginal Profit
1
2
3
Final Solution Table

A
B
150
(-2)
50
100
(-4)
(-7)
1
2
3
C
(0)
75
275
Iterations
A
150
50
(-4)
1
2
3
B
(-2)
100
(-7)
C
(0)
75
275
Shipment with Profit

A
B
150/900
50/350
100/1100
1
2
3
From
To
Shipping List
Shipment
1
2
2
2
3
A
A
B
B
C
150
50
100
25
275
C
25/275
275/3300
Profit per Unit

6
7
11
11
12
Shipment
Profit
900
350
1100
275
3300

MINIMUM COST METHOD

Optimal Profit A
B
5925
1
150
2
50
100
3
25
275
Marginal Profit
1
2
3
B
-2
-4
-7
C
0

A
B
150
(-2)
50
100
(-4)
(-7)
1
2
3
C
(0)
75
275
Iterations
A
150
50
(-4)
1
2
3
B
(-2)
100
(-7)
C
(0)
75
275

A
B
150/900
50/350
100/1100
1
2
3
From
To
Shipping List
Shipment
1
2
2
A
A
B
150
50
100
C
25/275
275/3300
Profit per Unit

6
7
11
Shipment
Profit
900
350
1100

2
3
B
C
25
275
11
12
VOGELS APPROXIMATION METHOD

Optimal Profit A
B
5925
1
125
2
75
100
3
275
3300
C
25
275
Marginal Profit
A
1
2
3
B
-2
C
0
-4
-7

A
B
125
(-2)
75
100
(-4)
(-7)
1
2
3
C
25
(0)
275
Iterations
A
125
75
(-4)
1
2
3

A
B
125/750
75/525
100/1100
1
2
3
From
B
(-2)
100
(-7)
C
25
(0)
275
C
25/250
275/3300
To
Shipping List
Shipment
Profit per Unit
Shipment
Profit

1
1
2
2
3
A
C
A
B
C
125
25
75
100
275
6
10
7
11
12
750
250
525
1100
3300
MINIMIZATION
NORTHWEST CORNER METHOD
Optimal Cost A
B
4525
1
25
2
3
175
100
C
125
175
Marginal Cost
A
1
2
3
1
2
3
B
1
3
4
A
B
25
(1)
(0)
(3)
175
100
C
125
175
(4)
Iterations
Iteration 1
1
2
3
Iteration 2
1
2
3
Iteration 3
1
A
150
50
(-4)
A
150
50
(-4)
A
150
B
(-2)
100
(-7)
B
(5)
(7)
100
B
(1)
C
(0)
25
275
C
(0)
125
175
C
(-4)

2
3
Iteration 4
1
2
3
(4)
50
A
25
(0)
175
(7)
100
B
(1)
(3)
100
175
125
C
125
175
(4)
Shipment with Cost

A
B
25/150
1
2
3
175/700
From
To
1
1
2
3
3
A
C
C
A
C
100/500
Shipping List
Shipment
Cost per Unit
25
125
175
175
100
MINIMUM COST METHOD

Optimal Cost A
B
4525
1
25
2
3
175
100
C
125/1250
175/1925
6
10
11
4
5
Shipment
Cost
150
1250
1925
700
500
C
125
175

Marginal Cost
A
1
2
3
1
2
3
B
1
3
4
A
B
25
(1)
(0)
(3)
175
100
C
125
175
(4)
Iterations
Iteration 1
1
2
3
Iteration 2
1
2
3
1
2
3
A
(-1)
(-1)
200
A
25
(0)
175
B
25
(2)
75
B
(1)
(3)
100
Shipment with Cost

A
B
25/150
175/700
100/500
Shipping List
C
125
175
(5)
C
125
175
(4)
C
125/1250
175/1925

From
To
Shipment
Cost per Unit
1
1
2
3
3
A
C
C
A
B
25
125
175
175
100
6
10
11
4
5
Shipment
Cost
150
1250
1925
700
500
VOGELS APPROXIMATION METHOD
Optimal Cost4525
1
2
3
A
B
25
175
C
150
150
100

Marginal Cost
A
0
1
2
3
B
1
3
4
A
B
(0)
(1)
25
(3)
175
100
1
2
3
C
150
150
(4)
Iterations
Iteration 1
1
2
3
Iteration 2
1
2
3
A
(4)
175
25
A
(0)
25
175
B
(5)
(3)
100
B
(1)
(3)
100
C
150
(-4)
150
C
150
150
(4)
Shipment with Cost

A
B
1
2
3
25/175
175/700
100/500
From
To
Shipping List
Shipment
1
2
2
3
3
C
A
C
A
B
150
25
150
175
100
C
150/1500
150/1650
Cost per Unit

10
7
11
4
5
Shipment
Cost
1500
175
1650
700
500

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Westmead International School

School of Economics Business and Accountancy

Westmead International School

Westmead International School

INTERPRETATION: The Company should use 393 circuit boards, 321

Kinds of Computer Solution

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Kinds of Computer Solution

Kinds of Computer Solution

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Kinds of Computer Solution

Kinds of Computer Solution

INTERPRETATION: The Company should use 393 circuit boards, 321

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Westmead International School

INTERPRETATION: The Company should use 615 of circuit boards 277 of

Kinds of Computer Solution

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Kinds of Computer Solution

Kinds of Computer Solution

Westmead International School

Kinds of Computer Solution

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INTERPRETATION: The Company should use 615 of circuit boards 277 of

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Westmead International School

CRITICAL PATH METHOD (CPM)

CRITICAL PATH METHOD

CRITICAL PATH METHOD SOLUTION

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GANTT CHART-EARLY TIMES

GANTT CHART-LATE TIMES

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GANTT CHART-EARLY AND LATE TIMES

INTERPRETATION: From above computations, the critical method is from

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Manny is the Project Manager of Barber Shop and he is tasked to open a

PROGRAM EVALUATION AND REVIEW TECHNIQUE

Most Likely time

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GANTT CHART-LATE TIMES

GANNT CHART-EARLY AND LATE TIMES

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INTERPRETATION: Using Project evaluation and review technique critical path

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INTERPRETATION: From above computations the crash time would be 27 days.

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Framework of logical and

formulating rules that

advantageous course of action under the given circumstances. Decision theory

Five criteria that may be used:

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Decision Theory Solution

Decision Theory Solution

Row sum (Exp Val)

Decision Theory Solution

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Decision Theory Solution

Decision Theory Solution

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Westmead International School