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QUANTITATIVE TECHNIQUES OF MANAGEMENT

LAKSHAY PAWAR BBS 2-C

50284

ACKNOWLEDGEMENT
Firstly, we would like to thank our supervisor of this project, Mr. Abhishek Tandon for his expert guidance and support. He continuously motivated us to work for this project and make it a success. His willingness to inspire us contributed tremendously in its completion. He had been very kind and patient while suggesting us the outlines of this project and correcting our doubts. Also, we would like to thank the Delhi University and Shaheed Sukhdev College of Business Studies for providing us with a platform and environment to work and nurture our talents. We would like to extend heartfelt thanks to our Principal, Ms. Poonam Verma for her invaluable support. We would also like to express our gratitude towards our parents for their kind co-operation and encouragement that helped us in completion of this project. Our thanks and appreciations also go to our batch mates in developing the project and people who have willingly helped us out with their abilities.

TABLE OF CONTENTS: S. NO PARTICULARS 1 2 3 4 5 6 7 8 TRANSPORTATION PROBLEM (INTRO) NORTH WEST CORNER METHOD APPLYING MODI METHOD VOGEL APPROXIMATION METHOD APPLYING MODI METHOD DEGENERACY MULTIPLE OPTIMAL SOLUTIONS SOME MORE SPECIAL CASES PAGE NO. 4 7 10 17 19 24 25 26 .

SPECIMEN OF A TRANSPORTATION TABLE: From To City 1 City 2 City 3 City 4 Supply (Million kwh) 35 50 40 Plant 1 Plant 2 Plant 3 Demand (Million kwh) $8 $9 $14 45 $6 $12 $9 20 $10 $13 $16 30 $9 $7 $5 30 . the purpose is to minimize the cost of shipping goods from one location to another so that the needs of each arrival area are met and every shipping location operates within its capacity.TRANSPORTATION PROBLEM One of the most important and successful applications of quantitative analysis to solving business problems has been in the physical distribution of products. Basically. commonly referred to as TRANSPORTATION PROBLEM.

FORMULATION OF A LPP: Min Z = 8X11+6X12+10X13+9X14+9X21+12X22+13X23+7X24+14X31+9X32+16X33+5X34 S. 3. 2. 3.: X11+X12+X13+X14 <= 35 X21+X22+X23+X24 <= 50 X31+X32+X33+X34 <= 40 (Supply Constraints) X11+X21+X31 >= 45 X12+X22+X32 >= 20 X13+X23+X33 >= 30 X14+X24+X34 >= 30 (Demand Constraints) Xij >= 0 (i= 1.T. j= 1. 2. 4) .

TRANSPORTATION PROBLEM is a special branch of LPP problem. Obtain the initial solution  North West Corner Method (NWC method)  Vogel Approximation Method (VAM method) 2. If solution is optimal we stop. Ascertain whether the solution is optimal or not  Modify Distribution Method (MODI method) 3. otherwise we revise the solution. . These problems are solved by transportation method. 1.

1. North West Corner Method (NWC method)Begin in the upper left (northwest) corner of the transportation table and set x11 as large as possible (here the limitations for setting x11 to a larger number. According to the explanation above we can set x11=3 (meaning demand of demand point 1 is satisfied by supply point 1). Your x11 value can not be greater than minimum of these 2 values). will be the demand of demand point 1 and the supply of supply point 1. 3 2 6 2 X 5 2 3 .

3 2 X 6 2 X 3 2 3 After applying the same procedure. 3 2 3 X 3 2 X X 2 3 . we saw that we can go east (meaning supply point 1 still has capacity to fulfill some demand).After we check the east and south cells. we saw that we can go south this time (meaning demand point 2 needs more supply by supply point 2).

x23=2. x24=1.Continuing the same procedure we will get:3 2 3 2 X 1 2 X X X 3 3 2 3 2 1 X X 2 X X X 2 3 2 3 2 1 2 X X X X X X X x11=3. x34=2 . x12=2. x22=3.

Applying MODI METHOD for optimal solution:- .

we assign the values as:- Cost comes out to be .By following the similar procedure.

we found out all the rest of the values:- .Similarly.

e. Following are the conditions for making a loop: Loop will start from the cell having maximum opportunity cost with a positive sign  Always in a clockwise direction  Cover even number of cells. of which only 1 cell will be uncovered cell  No single row or column will have similar signs . But here. making loops. since all the opportunity costs are positive we will go to the next stage i.Now we find out the opportunity cost of all uncovered cells as:- We get the optimal solution when opportunity cost of all the uncovered cells comes out to be negative.

.

Again we follow the same procedure: .

By following the same procedure again and again we will ultimately reach the optimal solution wherein all the opportunity costs become negative: The least cost comes out to be: $6.250 .

Vogel Approximation Method (VAM Method):Begin with computing each row and column a penalty. and crossout the row or column as in the previous methods.2. The penalty will be equal to the difference between the two smallest shipping costs in the row or column. Supply 6 7 8 10 15 80 78 15 Demand Column Penalty 15 15-6=9 5 80-7=73 5 78-8=70 78-15=63 7-6=1 Row Penalty Step 2: Identify the largest penalty and assign the highest possible value to the variable. Supply 6 5 15 80 78 15 Demand Column Penalty 15 15-6=9 X _ 5 78-8=70 78-15=63 7 8 5 8-6=2 Row Penalty . Identify the row or column with the largest penalty. Then assign the highest possible value to that variable. Step 1: Compute the penalties. Find the first basic variable which has the smallest shipping cost in that row or column. Compute new penalties and use the same procedure.

By following same procedure we get tables as: Supply 6 5 15 80 7 5 78 15 Demand Column Penalty 15 15-6=9 X _ X _ _ 8 0 _ Row Penalty Supply 6 0 15 5 80 7 5 78 15 Demand Column Penalty 15 _ X _ X _ 8 X Row Penalty _ _ Supply 6 0 15 15 Demand Column Penalty X _ X _ X _ 5 80 7 5 78 X 8 X Row Penalty _ _ .

Applying MODI METHOD for optimal solution:- Since SS>DD. the problem is an UNBALANCED PROBLEM. So we first balance the problem by introducing a dummy column as follows: .

with the first allocation. next assignment is due in this route: . Hence. which one must select. We exclude this column and work on the remaining matrix for calculating the penalty cost. the least cost route is S1D1. destination D5 is consumed. first allocation is as follows.Highest of all calculated penalty costs is for S3. Therefore. should be the lowest cost of this row. Now. source S1 has highest penalty cost. Now for this. We get the following matrix. allocation is to be made in row of source S3. The route (or cell). Hence. Route S3D5. For this row.

. we leave this column and proceed for calculation of next penalty cost.After second allocation. since destination D1 is consumed.

D2 and S1 is cancelled now. we move further: .

The initial cost for this allocation is (13 × 100 + 16 × 150 + 16 × 100 + 15 × 100 + 17 × 150 + 0 × 100) or equal to Rs. In the only left column D3. Thus.Column D4 is consumed. we get the following allocations in the Vogel’s approximation method. . 9350. the allocations of 100 units and 150 units are done in route S2D3 and S4D3 respectively.

1). . Hence.CHECK FOR DEGENERACY: (m + n – 1) = 7 Number of filled cell = 6. Thus. we get following matrix after removing degeneracy. go to step 4 for removing the degeneracy. Let us select route S1D5. which is one less than (m + n . We allocate in the least-cost un-filled cell. This cell is route S1D5 or S2D5.

We had 8 uncovered cells. This is a case of MULTIPLE OPTIMAL SOLUTIONS. We make next table. out of which 7 had a negative value and one with a zero. . the initial assignment of Vogel’s solution is optimal with total cost of Rs. 9350.OPPORTUNITY COST: Unassigned route S1D3 S1D4 S2D1 S2D2 S2D5 S3D1 S3D2 S3D4 Opportunity cost (ui + vj – Cij) 0 + 17 – 19 = –2 0 + 16 – 17 = –1 –1 + 13 – 17 = –5 –1 + 16 – 19 = –4 –1 + 0 – 0 = –1 0 + 13 – 15 = –2 0 + 16 – 17 = –1 0 + 16 – 16 = 0 Since all opportunity costs are negative or zero. start the loop making process from zero and get that other solution.

we subtract all the values of the table from the maximum value of the table. . then we first need to convert it in a minimization problem. MAXIMISATION PROBLEM:If we are given a maximization type of problem.SOME MORE SPECIAL CASES: 1. 2. In such a case a large cost of M is entered for the restriction. This discourages the solution from using such cells. Rest of the question is solved in the same manner as discussed above. PROHIBITED ROUTE:It is a special case of transportation problem wherein there is a restriction in the supply of a commodity from a given source to a destination. To convert it. Then solve the question accordingly and in the same manner as discussed earlier.