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NAME

SUDHIR RAMANNA SHETTY

ROLL NUMBER SUBJECT SUBJECT CODE

520913885

OPERATIONS RESEARCH

MB 0032

Operations Research 2

MB0032 Operations Research - 4 Credits

Assignment Set- 1 (60 Marks)

Master of Business Administration-MBA Semester 2

**Q1. Describe in details the different scopes of application of Operations Research.
**

Ans- In general, whenever there is any problem simple or complicated, the OR techniques may be applied to find the best solution. i) In Defence Operations: In modern warfare the defence operations are carried out by a number of independent components namely Air Force, Army and Navy. The activities in each of these components can be further divided in four subcomponents viz.: administration, intelligence, operations and training, and supply. ii) In Industry: The system of modern industries are so complex that the optimum point of operation in its various components cannot be intuitively judged by an individual. The business environment is always changing and any decision useful at one time may not be so good some time later. There is always a need to check the validity of decisions continually, against the situations. The industrial revolution with increased division of labour and introduction of management responsibilities has made each component an independent unit having their own goals. iii) Planning: In modern times it has become necessary for every government to have careful planning, for economic development of the country. OR techniques can be fruitfully applied to maximize the per capita income, with minimum sacrifice and time. A government can thus use OR for framing future economic and social policies.

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iv) Agriculture: With increase in population there is a need to increase agriculture output. But this cannot be done arbitrarily. There are a number of restrictions under which agricultural production is to be studied. Therefore there is a need to determine a course of action, which serves the best under the given restrictions. The problem can be solved by the application of OR techniques. v) In Hospitals: The OR methods can be used to solve waiting problems in outpatient department of big hospitals. The administrative problems of hospital organization can also be solved by OR Techniques. vi) In Transport: Different OR methods can be applied to regulate the arrival of trains and processing times, minimize the passengers waiting time and reduce congestion, formulate suitable transportation policy, reducing the costs and time of transshipment. vii) Research and Development: Control of R and D projects, product introduction planning etc. and many more applications.

Q2. What do you understand by Linear Programming Problem? What are the requirements of L.P.P.? What are the basic assumptions of L.P.P.?

Ans- One of the most important problems in management decision is to allocate limited and scarce resource among competing agencies in the best possible manner. Resources may represent man, money, machine, time, technology on space. The task of the management is to derive the best possible output (or set of outputs) under given restraints on resources. The management problem may be to optimize (maximize or minimize) the output or the objective function subject to the set of constraints An optimization problem in which both the objective function and the constraints are represented by linear forms is a problem in linear programming.

Requirements of L.P.P

i. Decisions variables and their relationship ii. Well defined objective function iii. Existence of alternative courses of action iv. Nonnegative conditions on decision variables.

Basic assumptions of L.P.P

1. Linearity: Both objective function and constraints must be expressed as linear inequalities. 2. Deterministic: All coefficient of decision variables in the objective and constraints expressions should be known and finite. 3. Additivity: The value of objective function for the given values of decision variables and the total sum of resources used, must be equal to sum of the contributions earned from each decision variable and the sum of resources used by decision variables respectively. 4. Divisibility: The solution of decision variables and resources can be any nonnegative values including fractions.

**Q3. Describe the different steps needed to solve a problem by simplex method.
**

Ans- Following are the steps needed to solve the problem by simplex method-

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1. Introduce stack variables (Si’s) for “ less than or equal to” type of constraint. 2. Introduce surplus variables (Si’s) and Artificial Variables (Ai) for “ more than or equal to” type of constraint. 3. Introduce only Artificial variable for “=” type of constraint. 4. Cost (Cj) of slack and surplus variables will be zero and that of Artificial variable will be “M” 5. Find Zj - Cj for each variable. 6. Slack and Artificial variables will form Basic variable for the first simplex table. Surplus variable will never become Basic Variable for the first simplex table. 7. Zj = sum of [cost of variable x its coefficients in the constraints – Profit or cost coefficient of the variable]. 8. Select the most negative value of Zj - Cj. That column is called key column. The variable corresponding to the column will become Basic variable for the next table. 9. Divide the quantities by the corresponding values of the key column to get ratios select the minimum ratio. This becomes the key row. The Basic variable corresponding to this row will be replaced by the variable found in step 6. 10. The element that lies both on key column and key row is called Pivotal element. 11. Ratios with negative and “Q” value are not considered for determining key row. 12. Once an artificial variable is removed as basic variable, its column will be deleted from next iteration. 13. For maximisation problems decision variables coefficient will be same as in the objective function. For minimization problems decision variables coefficients will have opposite signs as compared to objective function. 14. Values of artificial variables will always is – M for both maximisation and minimization problems. 15. The process is continued till all Zj - Cj more than or equal to 0.

**Q4. Describe the economic importance of the Duality concept.
**

Ans- The Importance Of Duality Concept Is Due To Two Main Reasons i. If the primal contains a large number of constraints and a smaller number of variables, the labour of computation can be considerably reduced by converting it into the dual problem and then solving it ii. The interpretation of the dual variable from the loss or economic point of view proves extremely useful in making future decisions in the activities being programmed. Here the sense of optimization is very important. Hence clearly for any two primal and dual feasible solutions, the values of the objective functions, when finite, must satisfy the following inequality. The strict equality, z = w, holds when both the primal and dual solutions are optimal. Consider the optimal condition z = w first given that the primal problem represents a resource allocation model, we can think of z as representing profit in Rupees. Because bi represents the number of units available of resource i, the equation z = w can be expressed as profit (Rs) = summation of (units of resource i) x (profit per unit of resource i) This means that the dual variables yi, represent the worth per unit of resource i [variables yi are also called as dual prices, shadow prices and simplex multipliers]. With the

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same logic, the inequality z < w associated with any two feasible primal and dual solutions is interpreted as (profit) < (worth of resources) This relationship implies that as long as the total return from all the activities is less than the worth of the resources, the corresponding primal and dual solutions are not optimal. Optimality is reached only when the resources have been exploited completely, which can happen only when the input equals the output (profit). Economically the system is said to remain unstable (non optimal) when the input (worth of the resources) exceeds the output (return). Stability occurs only when the two quantities are equal.

Q5. How can you use the Matrix Minimum method to find the initial basic feasible solution in the transportation problem.

Ans- Matrix Minimum Method Step 1: Determine the smallest cost in the cost matrix of the transportation table. Let it be cij , Allocate xij = min ( ai, bj) in the cell ( i, j ) Step 2: If xij = ai cross off the ith row of the transportation table and decrease bj by ai go to step 3. if xij = bj cross off the ith column of the transportation table and decrease ai by bj go to step 3. if xij = ai= bj cross off either the ith row or the ith column but not both. Step 3: Repeat steps 1 and 2 for the resulting reduced transportation table until all the rim requirements are satisfied whenever the minimum cost is not unique make an arbitrary choice among the minima.

Q6. Describe the Integer Programming Problem. Describe the Gomory’s All-I.P.P. method for solving the I.P.P. problem.

Ans- The Integer Programming Problem I P P is a special case of L P P where all or some variables are constrained to assume nonnegative integer values. This type of problem has lot of applications in business and industry where quite often discrete nature of the variables is involved in many decision making situations. Eg. In manufacturing the production is frequently scheduled in terms of batches, lots or runs; In distribution, a shipment must involve a discrete number of trucks or aircrafts or freight cars

**Gomory’s All – IPP Method
**

An optimum solution to an I. P. P. is first obtained by using simplex method ignoring the restriction of integral values. In the optimum solution if all the variables have integer values, the current solution will be the desired optimum integer solution. Otherwise the given IPP is modified by inserting a new constraint called Gomory’s or secondary constraint which represents necessary condition for integrability and eliminates some non integer solution without losing any integral solution. After adding the secondary constraint, the problem is then solved by dual simplex method to get an optimum integral solution. If all the values of the variables in this solution are integers, an optimum intersolution is obtained, otherwise another new constrained is added to the modified L P P and the procedure is repeated. An optimum integer solution will be reached eventually after introducing enough new constraints to eliminate all the superior non integer solutions. The construction of additional constraints, called secondary or Gomory’s constraints, is so very important that it needs special attention.

Operations Research 6

MB0032

Operations Research - 4 Credits

**Assignment Set- 2 (60 Marks)
**

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Master of Business Administration-MBA Semester 2

Q1. What are the important features of Operations Research? Describe in details the different phases of Operations Research.

Ans- Important features of OR are: i. It is System oriented: OR studies the problem from over all point of view of organizations or situations since optimum result of one part of the system may not be optimum for some other part. ii. It imbibes Inter – disciplinary team approach. Since no single individual can have a thorough knowledge of all fast developing scientific knowhow, personalities from different scientific and managerial cadre form a team to solve the problem.

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iii. It makes use of Scientific methods to solve problems. iv. OR increases the effectiveness of a management Decision making ability. v. It makes use of computer to solve large and complex problems. vi. It gives Quantitative solution.

vii. It considers the human factors also.

**Phases of Operations Research
**

The scientific method in OR study generally involves the following three phases: i) Judgment Phase: This phase consists of a) Determination of the operation. b) Establishment of the objectives and values related to the operation. c) Determination of the suitable measures of effectiveness and d) Formulation of the problems relative to the objectives. ii) Research Phase: This phase utilizes a) Operations and data collection for a better understanding of the problems. b) Formulation of hypothesis and model. c) Observation and experimentation to test the hypothesis on the basis of additional data. d) Analysis of the available information and verification of the hypothesis using preestablished measure of effectiveness. e) Prediction of various results and consideration of alternative methods. iii) Action Phase: It consists of making recommendations for the decision process by those who first posed the problem for consideration or by anyone in a position to make a decision, influencing the operation in which the problem is occurred.

**Q2. Describe a Linear Programming Problem in details in canonical form.
**

Ans- The general Linear Programming Problem (LPP) defined above can always be put in the following form which is called as the canonical form: Maximise Z = c1 x1+c2 x2 + +cn xn Subject to a11 x1 + a12 x2 + + a1n xn £ b1 a21 x1 + a22 x2 + + a2n xn £ b2 am1 x1+am2 x2 + …… + amn xn £ bm x1, x2, x3, … xn ³ 0. The characteristics of this form are: 1) all decision variables are nonnegative. 2) all constraints are of £ type. 3) the objective function is of the maximization type.

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Any LPP can be put in the cannonical form by the use of five elementary transformations: 1. The minimization of a function is mathematically equivalent to the maximization of the negative expression of this function. That is, Minimize Z = c1 x1 + c2x2 + ……. + cn xn is equivalent to Maximize – Z = – c1x1 – c2x2 – … – cnxn. 2. Any inequality in one direction (£ or ³) may be changed to an inequality in the opposite direction (³ or £) by multiplying both sides of the inequality by –1. For example 2x1+3x2 ³ 5 is equivalent to –2x1–3x2 £ –5. 3. An equation can be replaced by two inequalities in opposite direction. For example, 2x1+3x2 = 5 can be written as 2x1+3x2 £ 5 and 2x1+3x2 ³ 5 or 2x1+3x2 £ 5 and – 2x1 – 3x2 £ – 5. 4. An inequality constraint with its left hand side in the absolute form can be changed into two regular inequalities. For example: | 2x1+3x2 | £ 5 is equivalent to 2x1+3x2 £ 5 and 2x1+3x2 ³ – 5 or – 2x1 – 3x2 £ 5. 5. The variable which is unconstrained in sign (i.e., ³ 0, £ 0 or zero) is equivalent to the difference between 2 nonnegative variables. For example, if x is unconstrained in sign then x = (x + – x – ) where x + ³ 0, x – £ 0.

**Q3. What are the different steps needed to solve a system of equations by the simplex method?
**

Ans- To solve system of equations, we first assign any of n – m variables with value zero. These variables which have assigned value zero initially are called the non-basic variables, the remaining variables are called basic variables. Then the system can be solved to obtain the values of the basic variables. If one or more values of the basic variables are also zero valued, then solution of the system is said to degenerate. If all basic variable, have non-zero values, then the solution is called a nondegenerate solution. A basic solution is said to be feasible, if it satisfies all constraints.

Consider the system of equations 2x1 + x2 – x3 = 2 3x1 + 2x2 + x3 = 3 where x1, x2, x3 (greater than or equal) 0. Since there are 3 variables and two equations, assign 3 – 2 = 1 variable, the value zero initially. Case (i): Let x3 = 0 i.e., x3 be a non-basic variable, then equation becomes 2x1 + x2 = 2 3x1 + 2x2 = 3 Solving, we get x1 = 1, x2 = 0. Therefore The solution degenerates, but is feasible. Case (ii) : Let x2 be a non-basic variable i.e., x2 = 0, then solution is x1 = 1 and x3 = 0 Here also the solution degenerates but feasible. Case (iii) : Let x1 be non-basic i.e., x1= 0 Solution is x2 =1/3 , x3 = –1/3 . The solution non-degenerates, but is not feasible. Consider a LPP given in the standard form Optimize Z = CTX Subject to AX = B, X greater than or equal to 0. The initial solution of such a problem denoted by X0, is obtained by treating all decision and surplus variables as non-basic variables i.e., they have assigned value zero, all slack and, artificial variables as basic variables and have assigned values which are on R.H.S. of the corresponding constraint equations.

Operations Research 9 Q4. What do you understand by the transportation problem? What is the basic assumption behind the transportation problem? Describe the MODI method of solving transportation problem.

Ans- Transportation problem studies the minimization of the cost of transporting a commodity from a number of sources to several destinations. The supply at each source and the demand at each destination are known. 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. It is assumed that the total supply and the total demand are equal. i.e. (1) 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 Transportation Algorithm (MODI Method) The first approximation to (2) is always integral and therefore always 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 table given below called the transportation table. The transportation algorithm is the simplex method specialized to the format of table it involves: 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. The solution to T.P is obtained in two stages. In the first stage we find Basic feasible solution by any one of the following methods a) North-west corner rale b) Matrix Minima Method or least cost method c) Vogel‟s approximation method. In the second stage we test the B.Fs for its optimality either by MODI method or by stepping stone method.

Q5. Describe the North-West Corner rule for finding the initial basic feasible solution in the transportation problem.

Ans- North West Corner Rule Step 1: The first assignment is made in the cell occupying the upper left hand (north west) corner of the transportation table. The maximum feasible amount is allocated there, that is x11 = min (a1,b1) So that either the capacity of origin O1 is used up or the requirement at destination D1 is satisfied or both. This value of x11 is entered in the upper left hand corner (small square) of cell (1, 1) in the transportation table. Step 2: If b1 > a1 the capacity of origin O, is exhausted but the requirement at destination D1 is still not satisfied , so that at least one more other variable in the first column will have to take on a positive value. Move down vertically to the second row and make the second allocation of magnitude x21 = min (a2, b1 – x21) in the cell (2,1). This either exhausts the capacity of origin O2 or satisfies the remaining demand at destination D1. If a1 > b1 the requirement at destination D1 is satisfied but the capacity of origin O1 is not completely exhausted. Move to the right horizontally to the second column and make the second

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allocation of magnitude x12 = min (a1 – x11, b2) in the cell (1, 2) . This either exhausts the remaining capacity of origin O1 or satisfies the demand at destination D2 . If b1 = a1, the origin capacity of O1 is completely exhausted as well as the requirement at destination is completely satisfied. There is a tie for second allocation, An arbitrary tie breaking choice is made. Make the second allocation of magnitude x12 = min (a1 – a1, b2) = 0 in the cell (1, 2) or x21 = min (a2, b1 – b2) = 0 in the cell (2, 1). Step 3: Start from the new north west corner of the transportation table satisfying destination requirements and exhausting the origin capacities one at a time, move down towards the lower right corner of the transportation table until all the rim requirements are satisfied.

**Q6. Describe the Branch and Bound Technique to solve an I.P.P. problem.
**

Ans- The Branch And Bound Technique Sometimes a few or all the variables of an IPP are constrained by their upper or lower bounds or by both. The most general technique for the solution of such constrained optimization problems is the branch and bound technique. The technique is applicable to both all IPP as well as mixed I.P.P. To explain how this partitioning helps, let us assume that there were no integer restrictions (3), and suppose that this then yields an optimal solution to L.P.P. – (1), (2), (4) and (5). Indicating x1 = 1.66 (for example). Then we formulate and solve two L.P.P’s each containing (1), (2) and (4). But (5) for j = 1 is modified to be 2 ≤ x1 ≤ U1 in one problem and L1 ≤ x1 ≤ 1 in the other. Further each of these problems process an optimal solution satisfying integer constraints (3) Then the solution having the larger value for z is clearly optimum for the given I.P.P. However, it usually happens that one (or both) of these problems has no optimal solution satisfying (3), and thus some more computations are necessary. We now discuss step wise the algorithm that specifies how to apply the partitioning (6) and (7) in a systematic manner to finally arrive at an optimum solution. We start with an initial lower bound for z, say z (0) at the first iteration which is less than or equal to the optimal value z*, this lower bound may be taken as the starting Lj for some xj. In addition to the lower bound z (0) , we also have a list of L.P.P’s (to be called master list) differing only in the bounds (5). To start with (the 0 th iteration) the master list contains a single L.P.P. consisting of (1), (2), (4) and (5). We now discuss below, the step by step procedure that specifies how the partitioning (6) and (7) can be applied systematically to eventually get an optimum integer valued solution. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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