OPERATIONS RESEARCH ASSIGNMENTS (1-4)

Submitted in partial fulfilment of the requirement for

OPERATIONS RESEARCH COURSE, TERM II

MASTER OF BUSINESS ADMINISTRATION

Submitted to
PROF. RASHMI SINGH

Submitted by
GROUP-A

which includes
KUMAR GAURAV PGPJ03025R
AKSHAY SHARMA MBA19007
ATUL MBA19014
ETTAM ANVESH YADAV MBA19021
NISHANT PARMAR MBA19035
RAJASHEKAR VANAMALA MBA19042
TANISHQ VERMA MBA19049

INDIAN INSTITUTE OF MANAGEMENT JAMMU

2019-2021

1
 LETTER OF TRANSMITTAL

Prof. Rashmi Singh,

Faculty, Operations Research,
IIM Jammu, Jammu
Date: 10/11/2019

Dear Prof. Rashmi Singh,

We, Group A, have completed “Operations Research Assignments”. We have studied

about the Simplex linear programming, Transportation problem and Assignment problem.

We present you this report with utmost sincerity, we hope you will appreciate our
efforts.

Thanks and Regards,

Group-A

Kumar Gaurav
Akshay Sharma
Atul
Ettam Anvesh Yadav
Nishant Parmar
Rajashekar Vanamala
Tanishq Verma

2
 INDEX

S.no Page no
1 Assignment I 4-13
Analysis of Merton Production
2 Assignment II 14-20
Supply Chain of a Dairy Firm
3 Assignment III 21-23
Travelling salesman problem
4 Assignment IV 24
Newspaper vendor problem

3
 ASSIGNMENT I
Analysis of Merton Production

We do not consider fixed costs when calculating the contribution of each model since
these costs will be the same regardless the production mix and they are distributed to the two
truck models in proportion to degree of capacity utilization. Therefore, the contribution of
each model will be as follows:

Model 101 Model 102

Selling Price $ 39,000.00 $ 38,000.00
Direct Material $ (24,000.00) $ (20,000.00)
Direct labor $ (4,000.00) $ (4,500.00)
Variable Overheads $ (8,000.00) $ (8,500.00)
Contribution $ 3,000.00 $ 5,000.00

We formulate a Linear Programming model to get the perfect mix: Let Model 101 be X1 and
Model 102 be X2

Objective; (Maximize profit Z) = 3,000X1+ 5,000X2

Subject to Constraints:
X1+2X2 ≤ 4,000 (Engine Assembly)
2X1+2X2 ≤ 6,000 (Metal Stamping)
2X1 ≤ 5,000 (Model 101 Assembling)
3X2 ≤ 4,500 (Model 102 Assembling)
X1, X2 ≥0 (Non-negativity)

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Outputs

1-a)

The best production mix given the constraints would be

1) 2,000 units of model101 truck
2) 1,000 units of model 102 truck

Objective Function: $ 11,000,000

5
1-b)

A unit increase in engine assembly capacity is worth $ 2,000. Model 101 assembly and model
102 assembly have 1,000 and 2,000 unutilized resources respectively. Therefore, to get a
better mix, that adds this value to the contribution, given an increase in a unit of assembly
time, we forgo a unit of model 101 and produce an additional unit of model 102 and hence
the net contribution will be $ (-3,000 + 5,000) =$ 2,000. Hence the best mix would be 1,999
units of model 101 and 1,001 units of model 102 giving a contribution of $ 11,002,000.

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1-c)

If the engine assembly capacity is increased to 4,100 machine hours, the contribution would
increase by $ 2,000 * 100 to $ 11,200,000. This trend will continue until the increase in
machine engine capacity surpass the upper boundary of 4,500

Therefore the engine assembly can be increased by 500 before the value changes.

7
1-d)

The engine assembly capacity is fully exploited at 4,000 hours. However, it could be
expanded to 4,500 hours and therefore it is prudent for the company to purchase additional
(to a maximum of) 500 hours at a cost of $ 2,000 per hour. Therefore, the rent should not
exceed the $ 2,000 per engine assembly hour.

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3)

If model 103 is introduced we would have a different model.

The Engine assembly time for each would be (4000/5000) = 0.8, the metal stamping time would
be (6000/4000) = 1.5 and the model assembling time would be (0.5 * 2) = 1. The algebraic
expression would be as follows;(Let model 103 trucks be X3)

Objective; (Maximize profit Z) = 3,000X1 + 5,000X2 + 2,000X3

Subject to Constraints; X1+2X2+ 0.8 X3≤ 4,000 (Engine Assembly)

2X1+2X2+1.5X3 ≤ 6,000 (Metal Stamping)
2X1+ X3≤ 5,000 (Model 101& 103 Assembling)
3X2 ≤ 4,500 (Model 102 Assembling)
X1, X2, X3 ≥0 (Non negativity)
Output:

[Contd]

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From the model output, truck model 103 should not be produced.

10
4)
When we introduce the overtime, for the 2,000 hours engine assembly, the direct labor cost for
Model 101 and Model 102 will increase by $ 600 and $ 1,200 respectively. Therefore, the
contributions will decrease to $ 2,400 and $ 3,800 respectively. For the sake of algebraic
expression, we denote the units Model 101 produced during the overtime as X3 and X4. The
model will be as follows:

Objective; (Maximize profit Z) = 3,000X1 + 5,000X2 + 2,400X3+3,800X4

Subject to Constraints; X1+2X2≤ 4,000 (Engine Assembly)

X3+2X4≤ 2,000 (Engine Assembly Overtime)
2X1+2X2+2X3+2X4 ≤ 6,000 (Metal Stamping)
2X1 + 2X3≤ 5,000 (Model 101Assembling)
3X2+3X4 ≤ 4,500 (Model 102 Assembling)
X1, X2, X3,X4 ≥0 (Non negativity)
Output

[Contd]

11
 The optimal solution, given the constraints, gives a contribution of $ 11,700,000 with
1500 model 101 trucks and 1250 model 102 produced in regular time and 250 model 102s
produced in over time (No production of model 101 in overtime). This is an increase in
contribution by $ 700,000, which is relatively good. However, adoption of this would lead to
an increase in fixed overheads by $ 750,000 which is greater than the marginal increase in
contribution, and hence overtime operations in engine assembly should not be adopted.

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5)
Management proposal to produce 101 Models at least 3 times the number of Model 102.
Therefore we have a new constraint of X1 ≥ 3X2 which transforms to X1-3X2 ≤ 0. The model
will be;

Objective; (Maximize profit Z) = 3,000X1+ 5,000X2

Subject to Constraints; X1+2X2 ≤ 4,000 (Engine Assembly)

2X1+2X2 ≤ 6,000 (Metal Stamping)
2X1 ≤ 5,000 (Model 101 Assembling)
3X2 ≤ 4,500 (Model 102 Assembling)
X1-3X2 ≤ 0 (At least 3 times)
X1 X2 ≥0 (Non negativity)
Output

The output yields a contribution of $ 10,500,000 with 2,250 units of Model 101 and 750 units
of Model 102 which is lower than the initial contribution of $ 11,000,000 and therefore it is not
a worthy idea.

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 ASSIGNMENT II
Supply Chain in a Dairy Firm
a)

Distribution center
Howrah S24 N24 Haldia X Supply
Haringhata 19 15 17 19 0 8000
Bishnupur 18 13 16 29 0 8000
Madhyamgram 21 12 25 17 0 8000
Demand 3000 5000 4500 1000 10500 24000

Distribution centre
Howrah S24 N24 Haldia LHS Supply
Haringhata 0 0 0 0 0 8000
Bishnupur 3000 0 4500 0 7500 8000
Madhyamgram 0 5000 0 1000 6000 8000
LHS 3000 5000 4500 1000
Demand 3000 5000 4500 1000

Total Minimum Cost 203000

Total Demand 13500
Total Supply 24000

[Contd]

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 Processing Plant
Haringhata Bishnupur Madhyamgram Supply
Basirhat 22 24.5 23.5 3500
Barasat 25.5 27.5 24.5 4000
Kankinara 26 27 29 6000
Rishra 24.5 26.5 24 3000
Hoogly 25 27 24.5 2500
Demand 0 7500 6000

Processing Plant
Haringhata Bishnupur Madhyamgram LHS Supply
Basirhat 0 3500 0 3500 3500
Barasat 0 0 4000 4000 4000
Kankinara 0 1000 0 1000 6000
Rishra 0 3000 0 3000 3000
Hoogly 0 0 2000 2000 2500
LHS 0 7500 6000
Demand 0 7500 6000

Total Minimum
Cost 339250

We have calculated the flow of milk along with supply chain on weekly basis that will meet
the demand at the distribution centers. The minimum cost is Rs.339250.

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b)

Processing Plant
Haringhata Bishnupur Madhyamgram Supply
Basirhat 26 24.5 23.5 3500
Barasat 25.5 27.5 24.5 4000
Kankinara 26 27 29 6000
Rishra 24.5 26.5 24 3000
Hoogly 25 27 24.5 2500
Demand 0 7500 6000

Processing Plant
Haringhata Bishnupur Madhyamgram LHS Supply
Basirhat 0 3500 0 3500 3500
Barasat 0 0 4000 4000 4000
Kankinara 0 1000 0 1000 6000
Rishra 0 3000 0 3000 3000
Hoogly 0 0 2000 2000 2500
LHS 0 7500 6000
Demand 0 7500 6000

Total Minimum
Cost 339250

After increasing the cost from Bashirhat to Haringhata from Rs.10 to Rs.14 which leads to total
increase from Rs.22 to Rs.26, we get to know that there will no change in the total minimum
cost because we didn’t supply the milk from Bashirhat to Haringata.

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c)

Processing Plant

Haringhata Bishnupur Madhyamgram LHS Supply

Basirhat 0 3000 500 3500 3500

Barasat 0 0 0 0 4000

Kankinara 0 4500 0 4500 6000

Rishra 0 0 3000 3000 3000

Hoogly 0 0 2500 2500 2500

LHS 0 7500 6000

Demand 0 7500 6000

Total Minimum
Cost 340000

As the road from Barasat to Madhyamgram has been closed due to some reason there are manuy
changes in the supply to different regions from different vendors. Like previously we were
supplying 3500L from Barasat to Bishnupur which is now decreased Barasat to Bishnupur
which is now decreased b 500L and diverted to Madhyamgram. Similarly many changes has
occurred and now the current minimum cost has become Rs.340000

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d)

Processing Plant

Haringhata Bishnupur Madhyamgram LHS New Supply

Basirhat 0 2975 0 2975 2975

Barasat 0 0 3600 3600 3600

Kankinara 0 1525 0 1525 5400

Rishra 0 3000 0 3000 3000

Hoogly 0 0 2400 2400 2500

LHS 0 7500 6000

Demand 0 7500 6000

Total Minimum
Cost 340562.5

As we can see that the supply from Basirhat, Barasat and Kankinara has been decreased
which results in changes in the supply of quantity of milk from different regions. Also we
observed that our total minimum cost has been increased to Rs.340562.5

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e)

Distribution centre

Howrah S24 N24 Haldia LHS Supply

Haringhata 0 0 0 0 0 3000

Bishnupur 3000 0 4500 0 7500 8000

Madhyamgram 0 5000 0 1000 6000 8000

LHS 3000 5000 4500 1000

Demand 3000 5000 4500 1000

Total Minimum Cost 203000

[Contd]

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 Processing Plant

Haringhata Bishnupur Madhyamgram LHS Supply

Basirhat 0 3500 0 3500 3500

Barasat 0 0 4000 4000 4000

Kankinara 0 1000 0 1000 6000

Rishra 0 3000 0 3000 3000

Hoogly 0 0 2000 2000 2500

LHS 0 7500 6000

Demand 0 7500 6000

Total Minimum
Cost 339250

The processing plant at Haringhata was under maintenance due to which its supplying capacity
has decreased from 8000L to 3000L but as we know that we are not supplying any quantity
form this plant according to our supply chain because we are fulfilling the demand from other
plants so there is no change in the total minimum cost.

Conclusion:

In this Supply Chain of a Dairy Farm project we generate least cost model so that we can
increase our profit by decreasing our cost and wastage. This model includes processing plant
cost, Distribution cost and our cost of raw milk. From the result it is observed that we have
reached at minimum cost which is Rs.339250 and we have fulfilled the demand of all regions.
We have also observed the change in supplying chain by putting some conditions and how
these changes results in our cost. This model can extended too varying demand and costs. This
can also be applied to FMCGs.

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 ASSIGNMENT III
Travelling salesman problem

A travelling salesman, named Rolling Stone plans to visit five cities 1, 2, 3, 4 & 5. The travel
time (in hours) between these cities is shown below:

To

From 1 2 3 4 5

1 ∞ 5 8 4 5

2 5 ∞ 7 4 5

3 8 7 ∞ 8 6

4 4 4 8 ∞ 8

5 5 5 6 8 ∞

Solution

Table

To

From 1 2 3 4 5

1 ∞ 1 3 1

2 1 ∞ 2 1

3 2 1 ∞ 2

4 3 ∞ 4

5 3 ∞

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Draw the minimum number of vertical and horizontal lines necessary to cover all the zeros in
the reduced matrix.

Table

Select the smallest element from all the uncovered elements. Subtract this smallest element
from all the uncovered elements and add it to the elements, which lie at the intersection of two
lines. Thus, we obtain another reduced matrix for fresh assignment. Repeating step 3 on the
reduced matrix, we get the following assignments.

Table

To

From 1 2 3 4 5

1 ∞ 2 1

2 ∞ 1 1

3 1 ∞ 2

4 3 ∞ 5

5 4 ∞

The above solution suggests that the salesman should go from city 1 to city 4, city 4 to city 2,
and then city 2 to 1 (original starting point). The above solution is not a solution to the travelling
salesman problem as he visits city 1 twice.

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The next best solution can be obtained by bringing the minimum non-zero element, i.e., 1 into
the solution. Please note that the value 1 occurs at four places. We will consider all the cases
separately until the acceptable solution is obtained. To make the assignment in the cell (2, 3),
delete the row & the column containing this cell so that no other assignment can be made in
the second row and third column.

Now, make the assignments in the usual manner as shown in the following table.

Table

He starts from city 1 and goes to city 4; from city 4 to city 2; from city 2 to city 3; from city 3
to city 5; from city 5 to city 1.

Substituting values from original table:

4 + 7 + 6+ 4 + 5 = 26 hours.

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 ASSIGNMENT IV
Newspaper vendor problem

The coffee producer made an estimate with post data:

Demand Probability
20 .05
21 .15
22 .2
23 .4
24 .2

Marginal profit = p-c (16-10)

Underage cost = $6
Marginal loss = c-s (10-7)
Overage cost = $3
Expected demand = 20*.05 + 21*.15 + 22*.2 + 23*.4 +24*.2 = 23

So we can say he produces 23 cups of coffee every day.

Demand Benefit Loss Profit Probability Net profit

20 20(6)=120 (23-20)*3=9 111 .05 5.55
21 21(6)=126 (23-21)*6=6 120 .15 18
22 22(6)=132 (23-22)*3=3 129 .2 25.8
23 23(6)=138 0 138 .4 55.2
24 23(6)=138 0 138 .2 27.6

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