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MBA SEMESTER II MB0048 –Operation Research- 4 Credits (Book ID: B1137) Assignment Set- 1 (60 Marks

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Note: Each question carries 10 Marks. Answer all the questions Q1. a. Explain how and why Operation Research methods have been valuable in aiding executive decisions. [5 Marks] b. Discuss the usefulness of Operation Research in decision making process and the role of computers in this field. [5 Marks] Answer: a. Churchman, Ackoff and Aruoff have defined “Operations research as the application of scientific methods, techniques and tools to operation of a system with optimum solutions to the problems”. Here Optimum implies the one, which is best of all possible alternatives. Another definition is that, “Operations research is the use of scientific methods to provide criteria for decisions regarding man, machine, systems involving repetitive operations”. Optimization is the act of obtaining the best result under any given circumstance. In various practical problems we may have to take many technical or managerial decisions at several stages. The ultimate goal of all such decisions is to either maximize the desired benefit or minimize the effort required. We make decisions in our every day life without even noticing them. Decision making is one of the main activities of a manager or executive. In simple situations decisions are taken simply by common sense, sound judgment and expertise without using any mathematics. But here the decisions we are concerned with are rather complex and heavily loaded with responsibility. Examples of such decision are finding the appropriate product mix when there are large numbers of products with different profit contributions and production requirement or planning public transportation network in a town having its own layout of factories, apartments, blocks etc. Certainly in such situations also decision may be arrived at intuitively from experience and common sense, yet they are more judicious if backed up by mathematical reasoning. The search of a decision may also be done by trial and error but such a search may be cumbersome and costly. Preparative calculations may avoid long and costly research. Doing preparative calculations is the purpose of Operations research. Operations research does mathematical scoring of consequences of a decision with the aim of optimizing the use of time, efforts and resources and avoiding blunders. The application of Operations research methods helps in making decisions in such complicated situations. Evidently the main objective of Operations research is to

provide a scientific basis to the decision makers for solving the problems involving the interaction of various components of organization, by employing a team of scientists from different disciplines, all working together for finding a solution which is the best in the interest of the organization as a whole. The solution thus obtained is known as optimal decision. b. OR increases the effectiveness of a management Decision making ability. It makes use of computer to solve large and complex problems. The Operation Research problems are time consuming and involve tedious computations. Even a simple problem with few variables take a long time to solve manually and even by a hand calculator. The advent of computers accelerated the wide use of Operation Research techniques for solving complex business problems faced by managers and administrators in business and government. The automation of computational algorithm allows decision-makers to concentrate on problem‟s formulation and the interpretation of the solutions. Major computer manufacturers and vendor have developed software packages for the various computer systems providing computational support for problems to be solved by the application of Operation Research techniques. Some academic departments in different universities have also produced software packages for solving various Operation Research problems. Computer manufacturers like IBM, CDC, Honeywell, UNIVAC, ICL, etc. have invested substantial amount in developing software programs for solving the optimizing, scheduling, inventory, simulation and other Operation Research problems. Also large scale simulations are possible only through computers by using GPSS software packages. Q2. Explain how the linear programming technique can be helpful in decisionmaking in the areas of Marketing and Finance. [10 Marks] Answer: Linear Programming is used to find a solution for optimizing a given objective. Objectives may be to maximize profit or minimize cost. Both objective function and constraints must be capable of being expressed as linear expression of decision variables. For example: Production department minimize cost of production but maximizes output. Marketing department maximizes output but minimizes cost of unit sales. Finance department tries to optimize capital investment and personnel department appoints good people at minimum cost. Thus each department plan their own objectives and all these objectives of various department or components come to conflict with each other and may not conform to the overall objectives of the organization. The application of OR techniques helps in overcoming this difficulty by integrating the diversified activities of various components so as to serve the interest of the organization as a whole efficiently. OR methods in industry can be applied in the fields of production, inventory controls and marketing, purchasing, transportation and competitive strategies etc.

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 output may be measured in the form of profits, costs, social welfare, effectiveness, etc. In many situations the output (or the set of outputs) can be expressed as a linear relationship among a number of variables. The amount of available resources can also be expressed as a linear relationship among some system variables. 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. The marketing department of the company forecasts a demand by calculating using linear programming technique. For example: take a situation of a company making cold drinks has 2 bottling plants located at towns T1 and T2. Each plant produces three drinks A, B and C and their production capacity per day is shown below:

The marketing department of the company forecasts a demand of 80,000 bottles of A, 22,000 botles of B and 40,000 bottles of C during the month of June. The operating costs per day of plants at T1 and T2 are Rs. 6,000 and Rs. 4,000 respectively. Find the number of days for which each plant must be run in June so as to minimize the operating costs while meeting the market demand. Solution: Let the plants at T1 and T2 be run for x1 and x2 days. Then the objective is to minimize the operation costs. Minimum of Z = 6000 x1 + 4000 x2. Constraints on the demand for the 3 cold drinks are 6000 x1 + 2000 x2 ≥ 80,000 – (i) 1000 x1 + 2500 x2 ≥ 22000 – (ii) 3000 x1 + 3000 x2 ≥ 40000 – (iii) also x1, x2 ≥ 0

Thus the LPP is to minimize the objective function subject to the constraints (i), (ii) and (iii). The solution space is unbounded. The constraint (iii) is dominated by the constraints (i) and (ii) and hence does not affect the solution space. Such a constraint 3000 x1 + 3000 x2 ³ 40000 is called the redundant constraint. The values of the convex region A, B, C are A (22, 0), B (12, 4) and C (0, 40). The values of the objective function Z at the vertices are Zat A = 132000 Zat B = 88,000 Zat C = 1,60,000 Thus the minimum value of Z is Rs. 80,000 and it occurs at B. Hence the optimal solution to the problem is x1 = 12 days, x2 = 4 days.

Q3. a. How do you recognise optimality in the simplex method? [5 Marks] b. Write the role of pivot element in simplex table? [5 Marks] Answer: a. To test for optimality of the current basic feasible solution of the LPP, we use the following algorithm called simplex algorithm. Let us also assume that there are no artificial variable existing in the program. Steps 1) Locate the most negative number in the last (bottom) row of the simplex table, excluding that of last column and call the column in which this number appears as the work column. 2) Form ratios by dividing each positive number in the work column, excluding that of the last row into the element in the same row and last column. Designate that element in the work column that yields the smallest ratio as the pivot element. If more than one element yields the same smallest ratio choose arbitrarily one of them. If no element in the

work column is non negative the program has no solution. 3) Use elementary row operations to convert the pivot element to unity (1) and then reduce all other elements in the work column to zero. 4) Replace the x -variable in the pivot row and first column by x-variable in the first row pivot column. The variable which is to be replaced is called the outgoing variable and the variable that replaces is called the incoming variable. This new first column is the current set of basic variables. 5) Repeat steps 1 through 4 until there are no negative numbers in the last row excluding the last column. 6) The optimal solution is obtained by assigning to each variable in the first column that value in the corresponding row and last column. All other variables are considered as non-basic and have assigned value zero. The associated optimal value of the objective function is the number in the last row and last column for a maximization program but the negative of this number for a minimization problem. b. Designate that element in the work column that yields the smallest ratio as the pivot element. If more than one element yields the same smallest ratio choose arbitrarily one of them. If no element in the work column is non negative the program has no solution. The pivot or pivot element is the element of a simplex table, an array, or some other kind of finite set, which is selected first by an algorithm (e.g. Gaussian elimination, Quicksort, Simplex algorithm, etc.), to do certain calculations. In the case of simplex table algorithms, a pivot entry is usually required to be at least distinct from zero, and often distant from it; in this case finding this element is called pivoting. Pivoting may be followed by an interchange of rows or columns to bring the pivot to a fixed position and allow the algorithm to proceed successfully, and possibly to reduce round-off error. Pivoting might be thought of as swapping or sorting rows or columns in a simplex table, and thus it can be represented as multiplication by permutation matrices. However, algorithms rarely move the simplex table elements because this would cost too much time; instead, they just keep track of the permutations. The pivot element in quicksort is the element that is selected as the boundary for partitioning. Quicksort sorts all elements "left" and "right" of the pivot element recursively. Overall, pivoting adds more operations to the computational cost of an algorithm. These additional operations are sometimes necessary for the algorithm to work at all. Other times these additional operations are worthwhile because they add numerical stability to the final result.

Q4. What is the significance of duality theory of linear programming? Describe the general rules for writing the dual of a linear programming problem. [10 Marks]

Answer: Every linear programming problem has associated with it, another linear programming problem involving the same data and closely related optimal solutions. Such two problems are said to be duals of each other. While one of these is called the primal, the other the dual. The significance 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. General rules for writing the dual of a linear programming problem: Consider the following L.P.P Maximize Z = c1x1 +c2x2 + . . .+ cnxn Subject to the constraints a11 x1 + a12 x2 + . . . + a1n xn ≤ b1 a21 x1 + a22 x2 + . . . + a2n xn ≤ b2 am1 x1 + am2 x2 + . . . + amn xn ≤ bm x1, x2, . . ., xn ≥ 0. i. The maximization problem in the primal becomes a minimization problem in the dual and vice versa ii. (≤) type of constraints in the primal becomes (≥) type of constraints in the dual and vice versa. iii. The coefficients c1, c2, . . .,cn in the objective function of the primal become b1, b2, …,bm in the objective function of the dual. iv. The constants b1, b2,…,bm in the constraints of the primal becomes c1,c2, . . .,cn in the constraints of the dual v. If the primal has n variables and m constraints the dual will have m variables and n constraints vi. The variables in both the primal and dual are non-negative Then the dual problem will be Minimize W = b1 y1 + b2 y2 + . . . +bm ym subject to the constraints a11 y1 + a21 y2 + . . . + am1 ym ≥ c1 a12 y1 + a22 y2 + . . . + am2 ym ≥ c2 a1n y1 + a2n y2 + . . . + amn ym ≥ cn y1, y2, . . ., ym ≥ 0. The standard form of L.P.P for maximization must contain “≤” type of constraints and for minimization problem it must contain “≥” type of constraints. Then it is easy to form dual L.P.P

Q5. Use Two-Phase simplex method to solve: [10 Marks] Minimize z= x1+x2 +x3 Subject to constraints: x1- 3x2 + 4x3=5 x1- 2x2 ≤ 3 2x2+ x3 ≥ 4 x1≥ 0, x2≥ 0 and x3is unrestricted. Answer: Rewriting in the standard form, Manimize Subject to X1 – 3X2 +4X3 +MA1 = 5 X1 -2X2 + S1 = 3 2X2 + X3 - S2 = 4, X1, X2, X3, S1, S2, A1 > 0. Phase 1: Consider the new objective, Maximize Subject to Cj A1 - 1 S1 0 S2 0 Zj Zj-Cj X1 0 1 1 0 1 1 Z* = A1 2 × 1 + x2 – S1 + A1 = 2 X2 0 -3* -2 2 -3 -3 ↑ most –ve Work Column X3 0 4 0 1 4 4 S1 0 0 1 0 0 0 S2 0 0 0 -1 0 0 A1 1 1 0 0 1 0 Ratio -5/3 -1 -4/3 Z = X1 + X2 + X3 + MA1 + 0S1 + 0S2

5 3 4

*Pivot element X1 enters the basic set replacing A1. The first iteration gives the following table: Cj X1 0 X1 0 -1/3 X2 0 1 X3 0 -4/3 S1 0 0 S2 0 0 A1 1 -1/3

-5/3

S2 0 S3 0 Zj Zj-Cj

-1/2 0 0 0

-7/2 2 0 0

-2 1 0 0

1 0 0 0

0 -1 0 0

-1/2 0 0 -1

½ 4 0

Phase I is complete, since there are one negative elements in the last row. Phase II: Consider the original objective function, Maximize z = x1 + x2+x3 + 0S1 + 0S2 Subject to -3x1/3 + x2 – 4x3/3 =-5/3 -x1/2 – 7x2/2 – 2x3 + S1 =1/2 2x2 + x3 –S2 = 4 x1, x2, S1, S2 = 0

The maximum value of the objective function Z = 6 which is attained for x1 = 2, x2 = 0.

Q6. Use Branch and Bound method to solve the following L.P.P: [10 Marks] Maximize z= 7 x1 + 9 x2 Subject to constraints: - x1 + 3 x2 ≤6 7 x1 + x2 ≤ 35 x 2≤ 7 x1, x2≥ 0 and are integers. Answer: We solve the LP-relaxation of the above example by the simplex method, and the final simplex tableau is given as follows.

Where s1 and s2 are the slack variables of the first and the second constraints, respectively. Generally, any of the constraint equations corresponding to a noninteger solution can be selected to generate the cut.

MBA SEMESTER II MB0048 –Operation Research- 4 Credits (Book ID: B1137) Assignment Set- 2 (60 Marks)
Note: Each question carries 10 Marks. Answer all the questions Q1. What are the essential characteristics of Operation Research? Mention different phases in an Operation Research study. Point out some limitations of O.R? [10 Marks] Answer: The essential characteristics of Operation Research: 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. 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 pre established 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. limitations of O.R: To account for the physical limitations of the system, the model must include constraints, which limit the decision variables to their feasible range or permissible values. These are expressed in the form of constraining mathematical functions. For example, in chemical industries, restrictions come from the government about throwing gases in the environment. Restrictions from sales department about the marketability of some products are also treated as constraints. A linear programming problem then has a set of constraints in practice. The mathematical models in OR may be viewed generally as determining the values of the decision variables x J, J = 1, 2, 3, n, which will optimize Z = f (x 1, x 2, xn). Subject to the constraints: g i (x 1, x 2 xn) ~ b i, i = 1, 2, m and xJ ³ 0 j = 1, 2, 3 n where ~ is £, ³ or =. The function f is called the objective function, where X j ~ b i, represent the i th constraint for i = 1, 2, 3 m where b i is a known constant. The constraints x j ³ 0 are called the non negativity condition, which restrict the variables to zero or positive values only.

Q2. What are the common methods to obtain an initial basic feasible solution for a transportation problem whose cost and requirement table is given? Give a stepwise procedure for one of them? [10 marks] Answer: the common methods to obtain an initial basic feasible solution for a transportation problem whose cost and requirement table is given are: North West Corner Rule

Step1: 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 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. 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. Vogel’s Approximation Method The Vogels Approximation Method takes into account not only the least cost cij but also the cost that just exceeds cij .The steps of the method are given below. Step 1: For each row of the transportation table identify the smallest and the nest to smallest costs. Determine the difference between them for each row. Display them alongside the transportation table by enclosing them in parenthesis against the respective rows. Similarity compute the differences for each column.

Step 2: for complete Answer visit www.studenthelp.tk

Q3. a. What are the properties of a game? Explain the “best strategy” on the basis of minmax criterion of optimality. [5 Marks] b. State the assumptions underlying game theory. Discuss its importance to business decisions. [5 Marks] Answer: a. the properties of a game : Competitive Situations Competitive situations occur when two or more parties with conflicting interests operate. The situations may occur as follows. 1 Marketing different brands of a commodity. Two (or more) brands of detergents (soaps) try to capture the market by adopting various methods (courses) such as ‘advertising through electronic media’, ‘providing cash discounts to consumers’ or ‘offering larger sales commission to dealers’. 2 Campaigning for elections. Two (or more) candidates who contest an elections try to capture more votes by adopting various methods (courses) such as ‘campaigning through T.V.’, ‘ door to door campaigning’ or ‘campaigning through public meetings’. 3 Fighting military battles. Two forces fighting a war try to gain supremacy over one another by adopting various courses of action such as ‘direct ground attack on enemy camp’, ‘ground attack supported by aerial attack’ or ‘playing defensive by not attacking’. We consider each of the above situations to be a competitive game where the parties (players) adopt a course of action (play the game). The “best strategy” is mixed strategy While playing a game, mixed strategy of a player is his predecision to choose his course of action according to certain preassigned probabilities. Thus, if player A decides to adopt courses of action 1 2 A and A with perspective probabilities 0.4 and 0.6, it is mixed strategy. b. the assumptions underlying game theory: A competitive game has the following assumptions. 1. The number of players (competitors) is finite. 2. Each player has finite number of courses of action (moves).

3. The game is said to be played when each player adopts one of his course of action. 4. Every time the game is played, the corresponding combination of courses of action leads to a transaction (payment) to each player. The payment is called pay-off (gain). The pay-off may be monetary (money) or some such benefit as increased sales, etc. 5. The players do not communicate to each other. 6. The players know the rules of the game before starting. 1 n-Person Game A game in which n players participates is called n-person game. A game in which two players participate is called 2-person game (two person game). 2 Zero-Sum Game If a game is such that whenever it is played the sum of the gains (pay-off) of the players is zero, it is called zero-sum game. A zero-sum game which has two players is called two-person zero-sum game. It is called rectangular game. In a two-person zero-sum game, the gain of the one player is equal to the loss of the other. 3 Two-Person Zero-Sum Game (Rectangular Game). for complete Answer visit www.studenthelp.tk

Q4. a. Compare CPM and PERT explaining similarities and mentioning where they mainly differ. [5 Marks] b. What is meant by graphing in Network Analysis? [5 Marks] Answer: a. Though there are no essential differences between PERT and CPM as both of them share in common the determination of a critical path and are based on the network representation of activities and their scheduling that determines the most critical activities to be controlled so as to meet the completion date of the project. 1 PERT 1. Since PERT was developed in connection with an R and D work, therefore it had to cope with the uncertainties which are associated with R and D activities. In PERT, total project duration is regarded as a random variable and therefore associated probabilities are calculated so as to characterise it. 2. It is an eventoriented network because in the analysis of network emphasis is given an important stages of completion of task rather than the activities required to be performed to reach to a particular event or task.

3. PERT is normally used for projects involving activities of nonrepetitive nature in which time estimates are uncertain. 4. It helps in pinpointing critical areas in a project so that necessary adjustment can be made to meet the scheduled completion date of the project. 2 CPM 1. Since CPM was developed in connection with a construction project which consisted of routine tasks whose resources requirement and duration was known with certainty, therefore it is basically deterministic. 2. CPM is suitable for establishing a tradeoff for optimum balancing between schedule time and cost of the project. 3. CPM is used for projects involving activities of repetitive nature.

Q5. Consider the following transportation problem: Factory A B C D Demand Godowns 1 2 7 9 11 9 60 5 11 10 10 20 3 7 6 6 9 40 4 7 11 2 6 20 5 5 2 9 40 6 3 5 8 12 40 Stock availabl e 60 20 90 50

It is not possible to transport any quantity from factory B to Godown 5. Determine: (a) Initial solution by Vogel’s approximation method. (b) Optimum basic feasible solution. Answer:

Initial solution by Vogel’s approximation method.

Eventually, the basic feasible solution is obtained as shown in table below:

The transportation cost according to the above route is given by: Z = 20 * 5 + 40 * 3 + for complete Answer visit www.studenthelp.tk

Q6. A machine operator processes five types of items on his machine each week, and must choose a sequence for them. The set-up cost per change depends on the item presently on the machine and the set-up to be made according to the following table: From To item Item A B C D E A ∞ 4 7 3 4 B 4 ∞ 6 3 4 C 7 6 ∞ 7 5 D 3 3 7 ∞ 7 E 4 4 5 7 ∞ If he processes each type of item once and only once each week, how should he sequence the items on his machine in order to minimize the total set-up cost? (Hint: A-> E -> C-> B-> D-> A Cost: 20)

So, Optimum Assignment is: A-> E -> C-> B-> D-> A A-> E E -> C C-> B B-> D D-> A Total cost = 4 =5 =6 =3 =3 = 21