MBAFM/BI/BE-6212

Management Science
January-May: 2022

Dr. Shambhu Nath Singh

Department of Banking, Economics &
Finance, Bundelkhand University, Jhansi
 Syllabus: Management Science
• Unit I: Management Science - Basic Concepts and its
role in Decision Making; Linear Programming Problem:
Graphical and Simplex Method; Duality
• Unit II: Big M Method; Integer Programming Branch and
Bound algorithm; Sensitivity Analysis; Goal
Programming Problem
• Unit III: Transportation Problem and Assignment
Problem; Queuing Theory;
• Unit IV: Network Analysis Techniques; PERT/CPM;
Decision Theory and Decision Trees
• Unit V: Inventory Management; Game Theory;
Simulation.
 LPP- Big-M Method
The LPPs in which constraints are in the form of ≥
or = signs, we can not obtain the identity matrix in
the starting simplex table, therefore we introduce
a new type of variable called the Artificial Variable.
These variable are fictitious and cannot have any
physical meaning.
To solve this, we use The Charne’s Big-M Method
or Method of Penalties.
The artificial variable technique is a device to get
the starting basic feasible solution, so that the
Simplex procedure may be adopted as usual until
the optimal solution is obtained.
 The Charne’s Big-M Method (1)
1. Express the problem in the standard form.
2. Add non negative artificial variables to LHS of
the equations corresponding to constraints of
the type ≥ or = sign.
 However addition of these artificial variable
causes violation of the corresponding
constraints.
 Therefore, we would like to get rid of these
variables and would not allow them to appear
in the final solution.
 This is achieved by assigning a very large
penalty (-M for Maximization and M for
Minimization) in the objective function.
 The Charne’s Big-M Method (2)
 Solve the modified LPP by Simplex Method, until any
one of the three cases may arise.
 If no artificial variable appears in the basis and the
optimality conditions are satisfied, then the current
solution is an optimal basic feasible solution.
 If at least one artificial variable is there in the basis at
zero level and the optimality condition is satisfied, then
the current solution is an optimal basic feasible
solution (though degenerated).
 If at least one artificial variable appears in the basis at
positive level and the optimality condition is satisfied,
then the original problem has no feasible solution. The
solution satisfies the constraints but does not optimize
the objective function, since it contains a very large
penalty M and is called Pseudo Optimal Solution.
 Problems of Big-M Method
Question1: Solve the following LPP-

Question2: Solve the following LPP-

 Problems of Big-M Method
Question 3: Solve the following LPP-

Question 4: Solve the following LPP-

 Integer Programming Problem
A Linear Programming Problem in which all or some
of the decision variables are required to take non
negative integer values is called an Integer
Programming Problem.
There are two types of the problems-
1-Pure Integer Programming Problem
2-Mixed Integer Programming Problem
In a LPP if all the variables are required to take
integer values then it is called pure IPP.
If only some of the variables in the optimal of a LPP
are restricted to assume non negative integer values
while the remaining variables are free to take any
non integer values it is called a mixed IPP.
 Importance of IPP
In LPP all the decision variables are allowed to take
any non negative real values as it quite possible and
appropriate to have fractional values in many
situations. There are several frequently occurring
circumstances in business and industry that lead to
planning models involving integer values.
For example- In production, manufacturing is
frequently scheduled in terms of batches or lots. In
allocation of goods, a shipment must involve a
discrete number of trucks, aircrafts. In such cases
the fractional values of variables may be meaning
less in the context of the actual decision problem.
This is the main reason why IPP is so important for
managerial decisions.
 Integer Programming Problem
Branch and Bound algorithm
 This method is applicable to both, pure as well as mixed
IPP. Sometimes a few or all the variables of an IPP are
constrained by their upper or lower bounds.
 The most general method for the solution of such
constrained optimization problems is called ‘Branch and
Bound Method’.
 This method first divides the feasible region into smaller
subsets and then examines each of them successively,
until a feasible solution that gives an optimal value of
the objective function is obtained.
 Thus, we have branched the original problem into two
sub-problems. Each of these sub-problems is then solved
separately as LPP.
 Problems of Integer Programming
Question 1: Use Branch and Bound technique to solve the following IPP-
 Problems of Integer Programming
Question 2: Use Branch and Bound technique to solve the following
IPP-
 Sensitivity Analysis
Sensitivity analysis is concerned with the study
of sensitivity of the optimal solution with
discrete variations ( or changes) in parameters.

The process of studying the sensitivity of the

optimal solution of linear programming problem
is called Post-Optimality Analysis because it is
done after an optimal solution, assuming a given
set of parameters has been obtain for the
model.
 Sensitivity Analysis
 Seven types of discrete changes in the original linear
programming model may be investigated during the
sensitivity analysis.
1. Cj the profit (or cost) per unit associated with both basic
and non basic decision variables. (Coefficient of the
objective function).
2. Bi availability of resources (right hand side of
constraints).
3. Aij consumption of resources per unit of the product
(coefficient of decision variables in LHS of constraints).
4. The addition of a new variable to the problem.
5. The addition of a new constraint to the problem.
6. Deletion of a variable, and
7. Deletion of a constraint.
 Limitations of Sensitivity Analysis
 No doubt the uncertainty element is duly considered in
this concept, however it has certain limitations such as-
1. Only one variable is considered at a time for the
analysis. Thus the overall effect of the other variables
changing all together cannot be considered.
2. Only a linear relationship of changing variables is
considered so as it also suffers from all the limitations
of linearity.
3. The extent of uncertainty is not measured in this
analysis.
4. It depends on the skill and judgment of the analyst to
judge the likely changes. Thus results may vary from
person to person.
 Problems of Sensitivity Analysis
Question 1: Solve the following LPP-

(1)- Determine the optimal solution of LPP.

(2)- What shall be the effect on the
optimality of the solution if the objective
function is changed to-
 Problems of Sensitivity Analysis
Question 2: Solve the following LPP-

(1)- Find the optimal solution of LPP.

(2)- Discuss the effect of changing the availability from
(2, 3, and 4) to (4, 5, and 6).

(Increasing in
maximum Z)
 Goal Programming Problem
 Goal Programming was introduced by Charnes and Copper in
1961.
 Now-a-days, in dynamic business environment profit
maximization is not only the objective of the management but
organization objectives vary according to the characteristics,
types, philosophy of management and particularly the
environmental conditions of the organizations.
 Goal programming is a mathematical technique which is
applied to a variety of decision problems involving single or
multiple objectives.
 The fundamental difference between GP and LP is that it
provides the solution of problems involving multiple
objectives arranged according to the decision maker’s priority.
 Simply it is a multi-criteria mathematical programming
method.
 Applications of Goal Programming
 Goal programming is important for solving a wide range of
problems in diversified areas.
1. In the area of marketing, it has been applied to
advertising, media planning and product mix selection.
2. In finance, it has been applied to portfolio selection,
financial planning and capital budgeting.
3. In production, it has been applied to aggregate
production planning and transportation.
4. It has been applied in the area of man power planning
and accounting.
5. Goal programming has been used in assigning faculty
teaching schedules and for university admissions
planning.
 With the Best Compliments
Thanking to all…..
By

Dr. Shambhu Nath Singh

(Former District Economic & Statistical Officer)
M Sc (Physics), MBA (Finance), MA (Economics)
JRF in Management, NET in Economics
Coordinator Ph. D. Coursework
Bundelkhand University, JHANSI
Mobile-09450075770; 08299233527 (WhatsApp)
Email-drsnsinghbujhansi@gmail.com
 Unit 2 is over.
Thank You so much....

Dr. Shambhu Nath Singh