MBA@IICMR – Pune 44

MBA SEM II

Paper No. 204

Subject: Decision Science

Subject Teacher: Prof. Vidhya Hittalmani

Notes Unit 1

Decision making is a process of selecting from a set of alternative courses of action, that course,
which best meets the objectives of the decision problem, as compared to the others as judged by
the decision maker

Main characteristics of decision-making

 Decision is the end product of deliberations and logical reasoning
 Decision is the selection of the best course of action among the available alternatives
 Decision involves evaluation of the alternatives
 Decision aims at achieving the objectives of the Organisation
 Decision making involves commitment of the decision of the decision maker
 Decision at times may be negative

Steps in the Decision making process

1. Diagnose/ Define the problem
2. Collection of the relevant data
3. Develop various alternatives for solving the problem
4. Evaluation of these alternatives in light of the solution objective using a suitable criterion
5. Select the best alternative
6. Implement the selected decision

Quantitative Techniques
 Are statist ical and OR techniques
Help in decis io n-making process
Concerning business and industry
Provide the decisio n maker
Wit h systemat ic and powerful means of analysis
Wit h quantitative data
In exploring policies
For achieving pre-determined goals

Role of QT in business and industry

Provide a tool for scient ific analysis

Provide so lut ion to various business problems
Enable proper deplo yment of resources
Help in minimizing wait ing and servicing costs
Enable the management to decide when to buy and how much to buy
Assist in choosing correct strategy
Facilitate the process of decisio n-making

Assignment Model

Hungarian Method of Solution

Step 1: In a given (n x n) assignment table or matrix, subtract the smallest element or number in
each row from every element in that row
Step 2: Then subtract the smallest element or number in each column from every element in that
column to get a reduced assignment matrix
Step 3: Draw minimum number of vertical and horizontal lines to cover all the zeroes in the
reduced matrix. Start with the row or column having maximum number of zeroes to draw the
lines.
Now,
 a) If the number of lines = number of rows / number of columns (n), it implies that the
solution is optimum. Then go to Step 4
b) If the number of lines < n, then the solution is not optimum. Then go to Step 5
Step 4: Make the assignments as follows:
i) Check the rows successively. Mark a square □ around a single unmarked zero in a row
and cancel all the other zeroes in its column
ii) Check the columns successively. Mark a square □ around a single unmarked zero in a
column and cancel all the other zeroes in its row
iii) Repeat steps a) and b) until all the zeroes in the matrix are either marked with square □ or
cancelled out
Step 5: if the solution is not optimum then,
i) Select the smallest element among all the uncovered elements of the reduced matrix
ii) Subtract it from all the uncovered elements and add it to the elements at the intersection
of the lines, keeping other elements unchanged. Then go to step 3 & repeat the procedure
until the optimum solution is obtained

Balanced assignment problem

Un-Balanced assignment problem
Assignment problem with Restrict ions
Assignment problem for Maximizat ion

Transportation Model
Characteristics
A product is transported from a number of sources to a number of destinations at the
minimum possible cost.
Each source is able to supply a fixed number of units of the product, and each destination
has a fixed demand for the product.
The linear programming model has constraints for supply at each source and demand at
each destination.
All constraints are equalities in a balanced transportation model where supply equals
demand.
 Constraints contain inequalities in unbalanced models where supply does not equal
demand.

To use the transportation model we need to know the following:

 The origin points and the capacity or supply per period at each
 The destination points and the demand per period at each
 The cost of shipping one unit from each origin to each destination
 The transportation problem can be regarded as a generalization of the assignment
problem. In an assignment problem we have a number of origins each processing one
item, and the same number of destinations each requiring one item and are asked to
empty the origins and fill the destinations in such a way the Total Effectiveness is
optimized. In a transportation problem we have “m” origins, with origin “i” processing
“ai” items and “n” destinations (possibly different number from “m”) with destination “j”
requiring “bj” items, and with ai = bj.
 We are given the m.n costs associated with shipping one item from any origin to any
destination, and are asked to empty the origins and fill the destinations in such a way that
the total cost is minimized.
 The assignment problem is seen to be a special case of transportation problem in which m
= n, all the ai and bj are unity.
 The iterative routine to be presented as the mode of the solution of the transportation
problem involves a succession of “feasible solutions” of gradually diminishing cost;
eventually the minimum achievable cost is reached, and the corresponding feasible
solution is optimal.

Methods to solve the TP problem:

1. Least Cost Method
2. North West Corner Method
3. Vogels Approximation Method