Shalabh Singh

Room No: 231

shalabhsingh@iim
raipur.ac.in

Operations Research
 Quantitative Analysis for Management - II
• Operations Research
– Introduction
– Linear Programming – Formulation and Graphical Method
– Linear Programming – Simplex Method
– Linear Programming – Duality
– Application of simplex method: Case study/exercise
– Transportation Problems
– Assignment Problems
– Introduction to Integer Programming (IP)
– Games and Strategies
– Queuing Theory
– Case presentation

• Evaluation Scheme
Class Participation: 10%
Quiz: 20%
Assignment: 10%
Project: 10%
Mid-Term Exam: 20%
End-Term Exam: 30%
 History of Operations Research
• During World War II, the
military managements in the
U.K and the USA engaged a
team of scientists to study
strategic and tactical
problems related to air and
land defense of the country.

➔ They wanted to allocate the limited military resources and

form a plan of action to utilize them in the most effective
manner. This was done under the name 'Operation Research'
(OR) because the team was dealing with research on military
operation.
 The Origins of Operations Research
• Operations research (OR)
– Seeks solutions to problems that arise in complex
organizations
• First used in the military during WW II
– Managing allocation of scarce resources
• Early 1950s: OR introduced into business, industry,
and government

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 Introduction
• Research designed to determine most efficient way
to do something
• Science of decision making: Mathematical or
scientific analysis of a process or operation, used in
making decisions.
• Scientific base for management to take effective and
timely decisions to their problems.
• Avoids danger from taking decisions by guess or
using thumb rules.
 Operations Research: Summary

• Research into operations

• Allocating limited resources (funds, manpower,
time, raw material) among competing activities in
the best possible manner.
• Search of optimal solution strategy in a given
situation.
• Applicable to business operations
 The Origins of Operations Research
• Factors influencing growth of OR
– Improved techniques
• Simplex method
– Computer revolution
• Fast solution of complex computational
problems
• Microsoft Excel
– Includes a Solver that can be used with various OR
problems

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 The Nature of Operations Research
• Process
– Carefully observe and formulate the problem
– Gather data
– Construct a mathematical model
– Test whether the model represents the actual
situation
– Modify the model as appropriate and validate
again

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Application

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Application

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 Optimization Problem

 What is an Optimization Problem all about??

☺ Minimizing or Maximizing some Objective subject to
certain restrictions.

 Why is an Optimization Problem required??

☺ All problems seek to maximize or minimize some
quantity (the objective function).
☺ The presence of restrictions or constraints, limits the
degree to which we can pursue our objective.
☺ There must be alternative courses of action to choose
from.
 Linear Programming Problem
• Optimization Problem: (Mathematically)
– Return Function (Objective Function)
– Constraint Functions
• Linear Program
– All functions are linear = linear relationship
 What do we mean by linear?
➔ Linear:
– Things are proportional
– Double the production:
Profit gets doubled
Raw material consumption is doubled
 An Example

• Two Products (Bulbs and Batteries)

• Each requires two raw materials (P and Q)
• One batch of bulbs needs
– 2 units of P, 4 units of Q
• One batch of batteries needs
– 3 units of P, 2 units of Q
 An Example
• Raw material availability is limited
– 6 units of P, 9 units of Q
• Each product yields different profit/unit
– bulb: $4 per unit
– battery: $5 per unit

 Problem:
How much of each
product should be
produced so that total
Profit is maximized
 Elements of a Linear Programming Model
• Decision Variables
– Quantities whose values the management wants to
decide
– x1: batches of bulbs to produce
– x2: batches of batteries to produce

• Parameters (Problem Data)

– Quantities that cannot be changed by management
• Profit per unit
• Raw material availability
• Qty. of raw material needed per unit of product
• Objective Function
– A mathematical function of decision variables, whose value
the management wishes to minimize or maximize by
controlling the values of decision variables
– Maximize 4x1 + 5x2
• Constraints
– Restrictions under which the decision must be
taken
– a) Requirement  Availability (for each raw material)
• 2x1 + 3x2  6 (availability of P)
• 4x1 + 2x2  9 (availability of Q)
– b) Production Quantities cannot be negative
• x1  0, x2  0
 Complete Model
Maximize 4x1 + 5x2
Subject to: 2x1 + 3x2  6
4x1 + 2x2  9
x1 , x2  0

The above is an LP Formulation of the problem.

Study and Explore the mathematical structure.
Learn techniques for solving it.
Learn how to formulate real life problems as LPs
 Linear Programming Assumptions

• Problem data is known exactly (deterministic)

• All variables can assume any real value
(continuous variables)
• All variables are non-negative
• All relationship between variables are linear
 Formulation of a Linear Program

Formulation:
To translate a given real world situation into a mathematical
statement.

• Identify Decision variables

• Identify objective function
• Identify constraints

More of an Art than a Science

Takes practice and experience to formulate correctly and

efficiently