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Q1. a. Explain how and why Operation Research methods have been valuable in aiding executive decisions. b. Discuss the usefulness of Operation Research in decision making process and the role of computers in this field. Answer. Churchman, Aackoff and Aruoff defined Operations Research as: ³the application of scientific methods, techniques and tools to operation of a system with optimum solutions to the problems´, where µoptimum¶ refers to the best possible alternative. The objective of Operations Research is to provide a scientific basis to the decisionmakers for solving problems involving interaction of various components of the organization. You can achieve this by employing a team of scientists from different disciplines, to work together for finding the best possible solution in the interest of the organization as a whole. The solution thus obtained is known as an optimal decision. You can also define Operations Research as ³ The use of scientific methods to provide criteria for decisions regarding man, machine, and systems involving repetitive operations´. OR ³Operation Techniques is a bunch of mathematical techniques.´ b. ³Operation Research is an aid for the executive in making his decisions based on scientific methods analysis´. Discuss the above statement in brief. Ans. ³Operation Research is an aid for the executive in making his decisions based on scientific methods analysis´. Discussion:-Any problem, simple or complicated, can use OR techniques to find the best possible solution. This section will explain the scope of OR by seeing its application in various fields of everyday life. i) In Defense Operations: In modern warfare, the defense operations are carried out by three major independent components namely Air Force, Army and Navy. The activities in each of these components can be further divided in four sub-components namely: administration, intelligence, operations and training and supply. The applications of modern warfare techniques in each of the components of military organizations require expertise knowledge in respective fields. Furthermore, each component works to drive maximum gains from its operations and there is always a possibility that the strategy beneficial to one component may be unfeasible for another component. Thus in defense operations,
known as the µoptimum strategy¶. there is a need to increase agriculture output. . inventory controls and marketing. iv) Agriculture: With increase in population. Thus each department plans its own objectives and all these objectives of various department or components come to conflict with one another and may not agree to the overall objectives of the organization. transportation and competitive strategies. vii) Research and Development: You can apply OR methodologies in the field of R&D for several purposes. but minimizes cost of unit sales. A team of scientists from various disciplines come together to study the strategies of different components. with minimum sacrifice and time. purchasing. The business environment is always changing and any decision useful at one time may not be so good sometime later. After appropriate analysis of the various courses of actions. vi) In Transport: You can apply different OR methods to regulate the arrival of trains and processing times minimize the passengers waiting time and reduce congestion. such as to control and plan product introductions. Explain how the linear programming technique can be helpful in decisionmaking inthe areas of Marketing and Finance. having maximum use of the individual components. Finance department tries to optimize the capital investment and personnel department appoints good people at minimum cost. thereby reducing the costs and time of trans-shipment. ii) In Industry: The system of modern industries is so complex that the optimum point of operation in its various components cannot be intuitively judged by an individual. The industrial revolution with increased division of labor and introduction of management responsibilities has made each component an independent unit having their own goals. OR techniques can be fruitfully applied to maximise the per capita income.there is a requirement to co-ordinate the activities of various components. formulate suitable transportation policy. There are several restrictions. You can solve this problem by applying OR techniques v) In Hospitals: OR methods can solve waiting problems in out-patient department of big hospitals and administrative problems of the hospital organizations. the team selects the best course of action. A government can thus use OR for framing future economic and social policies. Q2. it has become necessary for every government to have careful planning. For example: production department minimizes the cost of production but maximise output. for economic development of the country. The application of OR techniques helps in overcoming this difficulty by integrating the diversified activities of various components to serve the interest of the organization as a whole efficiently. which gives maximum benefit to the organization as a whole. iii)Planning: In modern times. But this cannot be done arbitrarily. There is always a need to check the validity of decisions continuously against the situations. Marketing department maximizes the output. OR methods in industry can be applied in the fields of production. Hence the need to determine a course of action serving the best under the given restrictions.
´. such as marketing mix determination. production scheduling. In this problem. Convert the inequalities into equations. Such problems are generally solved using the ³simplex method. The smallest quotient identifies a row. 3. Maximize Z = 40×1 + 30×2 Subject to: x1 + x2 122×1 + x2 16x1 0. This is done by adding one slack variable for each inequality. Linear programming problems are a special class of mathematical programming problems for which the objective functions and all constraints are linear. how many commercial messages should be run on each medium to maximize total audience contact? Linear programming can find the answer. and newspaper. a. Q3.If the promotional budget is limited to $18. Calculate the quotients. and it represents the amount by which x1 + x2 fallsshort of 12. The most negative entry in the bottom row identifies a column. The local Chamber of Commerce periodically sponsors public service seminars and programs. workforce assignment. Convert the inequalities into equations.For example to convert the inequality x1 + x2 12 into an equation. we add a non-negativevariable y1. and maximum media usage limitations are shown in Exhibit 1.After adding the slack variables. write the objective function and the constraints. radio. Later whenwe read off the final solution from the simplex table. financial decision making. Promotional plans are under way for this year¶s program. Linear programming can be applied to a variety of business problems. and resource blending. if Niki works fewer that 12 hours. Construct the initial simplex tableau. our problem reads .200. say 10. This is done by adding one slack variable for eachi n equality. 4. The element in the intersection of the column identified in step 4 and the row identified in this step is identified as the pivot element.5. Advertising alternatives include television. 2. and we getx1 + x2 + y1 = 12Here the variable y1 picks up the slack. costs. Audience estimates. the values of the slack variables willidentify the unused amounts. That is.Ans. x2 0 2. then y1 is 2. How do you recognise optimality in the simplex method? b. Write the role of pivot element in simplex table? Ans. Write the objective function as the bottom row. Set up the problem. Simplex method is used for solving Linear programming problem especially when more than two variables are involved SIMPLEX METHOD 1. A classic example of the application of linear programming is the maximization of profits given various production or cost constraints.We can even rewrite the objective function Z = 40×1 + 30×2 as 40×1 30×2 + Z = 0.
The horizontal line separates the constraints from the objective function. subject to linear equality and linear inequality constraints. we can represent the problem into an augmented matrix called the initial simplex tableau as follows Here the vertical line separates the left hand side of the equations from the right side. therefore the column 1 is identified Q. linear programming is a technique for the optimization of a linear objective function. Ans. Now that the inequalities are converted into equations.4 What is the significance of duality theory of linear programming? Describe the general rules for writing the dual of a linear programming problem. Write the objective function as the bottom row. we get Which reads y1 = 12 y2 = 16 Z = 0 The solution obtained by arbitrarily assigning values to some variables and then solving for the remaining variables is called the basic solution associated with the tableau. The right side of the equation is represented by the column C The reader needs to observe that the last four columns of this matrix look like the final matrix for the solution of a system of equations. If we arbitrarily choose x1 = 0 and x2 = 0. Given a polytope and a real. by searching through the polytope vertices Linear programs are problems that can be expressed in canonical form : where x . The most negative entry in the bottom row identifies a column.Objective function: 40×1 30×2 + Z = 0Subject to constraints: x1 + x2 + y1 = 122×1 + x2 + y2 = 16x1 0. More formally. So the above solution is the basic solution associated with the initial simplex tableau. x2 0 3.value daffine function defined on this polytope. The most negative entry in the bottom row is 40. Construct the initial simplex tableau. a linear programming method will find a point on the polytope where this function has the smallest (or largest) value if such point exists. Linear programming is a specific case of mathematical programming. We can label the basic solution variable in the right of the last column as shown in the table below. Linear programming (LP) is a mathematical method for determining a way to achieve the best outcome (such as maximum profit or lowest cost) in a given mathematical model for some list of requirements represented as linear relationships.
(In this context.)Linear programming can be applied to various fields of study. y 0. x 0.represents the vector of variables (to be determined).with the corresponding asymmetric dual problem. which provides an upper bound to the optimal value of the primal problem. Industries that use linear programming models include transportation. The expression to be maximized or minimized is called the objective function (c Tx in this case). . telecommunications. Duality: Every linear programming problem. and manufacturing. and design. but can also be utilized for some engineering problems. y 0. Minimize b T y subject to A T y = c. energy. two vectors are comparable when every entry in one is lessthan or equal-to the corresponding entry in the other. Otherwise. every feasible solution for a linear program gives a bound on the optimal value of the objective function of its dual. One is the fact that (for the symmetric dual) the dual of a dual linear program is the original primal linear program. assignment. The equations A x b are the constraints which specify a convex polytope over which the objective function is to be optimized. c and b are vectors of (known) coefficients and A is a (known)matrix of coefficients. It is used most extensively in business and economics. There are two ideas fundamental to duality theory. It has proved useful in modeling diverse types of problems in planning.In matrix form. they are incomparable.Minimize b T y subject to A T y c . Additionally. can be convertedinto adual problem.with the corresponding symmetric dual problem. we can express the primal problem as:Maximize c T x subject to A x b . routing. scheduling. referred to as a primal problem.An alternative primal formulation is: Maximize c T x subject to A x b .
The strong duality theorem states that if the primal has an optimal solution. y*. it is possible for both the dual and the primal to be infeasible Q5 Q6 MBA SEMESTER II MB0048 ±Operation Research. then the dual also has an optimal solution. Duality theory tells us that if the primal isunbounded then the dual is infeasible by the weak duality theorem. if the dual isunbounded.2 (60 Marks) . A linear program can also be unbounded or infeasible. Likewise. then the primal must be infeasible. such that cTx*=bTy* .The weak duality theorem states that the objective function value of the dual at any feasible solution is always greater than or equal to the objective function value of the primal at any feasible solution. x*.4 Credits (Book ID: B1137) Assignment Set. However.
using interdisciplinary groups. Operations research is also known as OR. No single part of the system can have a bearing effect on the whole.1. performance and yield. What are the essential characteristics of Operation Research? Mention different phases in an Operation Research study. The knowledge of all the people involved aids the research and preparation of the scientific model. scientific and mathematical models are used for studies. Systems Orientation o This approach recognizes the fact that the behavior of any part of the system has an effect on the system as a whole. physics. applying scientific methodology. OR attempts appraise the effect the changes of any single part would have on the performance of the system as a whole. and the findings are then studied with . revelation of newer problems and the consideration of human factors in relation to the state under which research is being conducted. The disciplines could include mathematics. This science is basically concerned with optimizing maxima and minima of the objective functions involved. Point out some limitations of O. Interdisciplinary groups o The team performing the operational research is drawn from different disciplines. economics and engineering. and the findings cannot be applied to natural environments. Simulation of these models is carried out. uses statistics. Therefore. psychology. This stresses the idea that the interaction between parts of the system is what determines the functioning of the system. Characteristics of Operations Research Operations research. Examples of maxima could be profit. The management of various companies has benefited immensely from operations research.R? [10 Marks] Ans. It then searches for the causes of the problem that has arisen either in one part of the system or in the interrelation parts. algorithms and mathematical modeling techniques to solve complex problems for the best possible solutions. providing quantitative answers. Application of Scientific Methodology o OR extensively uses scientific means and methods to solve problems. Minima could be loss and risk. It has basic characteristics such as systems orientation. statistics. Most OR studies cannot be conducted in laboratories. an interdisciplinary division of mathematics and science.
New Problems Revealed o Finding a solution to a problem in OR uncovers additional problems. To obtain maximum benefits from the study. human factors are not considered. processes or environment in the form of equations. Ensuring flexibility for such contingencies is a key characteristic of OR. PHASES OPERATIONS RESEARCH Formulate the problem: This is the most important process. The proposed model may be field tested and modified in order to work under stated environmental constraints. Develop a model: Once a problem is formulated. human factors are a prime consideration. the O. Such a scenario would result in unexpected costs and budget overruns. scientist gets sufficient information and support to proceed and is better prepared to formulate the problem. A model may also be modified if the management is not satisfied with the answer that it gives. the alternative courses of action are discovered in this step. No model will work . Human Factors o In other forms of quantitative research. We have to identify both the static and dynamic structural elements. A company looking to reduce costs in manufacturing might discover in the process that it needs to buy one more component to manufacture the end product. ongoing and continuous research is necessary. the next step is to express the problem into a mathematical model that represents systems. Further. New problems must be pursued immediately to be resolved. The activities that constitute this step are visits. etc. which would affect the company s output. Provides Quantitative Answers o The solutions found by using operations research are always quantitative. People involved in the process may become sick.R. Select appropriate data input: Garbage in and garbage out is a famous saying. The company must decide which option is the best alternative for it. observations. and device mathematical formulas to represent the interrelationships among elements. it is generally lengthy and time consuming. relationships or formulas. OR considers two or more options and emphasizes the best one. but in OR. its objectives and expectations. This process starts with understanding of the organizational climate. With the help of such activities.respect to the real environment. research.
R. Factors that cannot be quantified find no place in O. there is a gap between the two. the next step is to find a solution.R.R. If the model is not behaving properly. To achieve this. models. Validation of the model: A model is said to be valid if it can provide a reliable prediction of the system s performance. techniques provide a solution only when all the elements related to a problem can be quantified.R.R. Thus. who might not be aware of the business problems. All relevant variables do not lend themselves to quantification. The gap between one who provides a solution and one who wishes to use it should be eliminated. techniques results in improved working and wins the management support.R. models is a costly affair. The purpose of this step is to have sufficient input to operate and test the model.R. a manager fails to understand the complex working of O. these factors are enormous and expressing them in quantity and establishing relationships among these require voluminous calculations that can only be handled by computers. being specialist s job requires a mathematician or a statistician.R. In the modern society. Money and Time Costs: When the basic data are subjected to frequent changes. O. A properly implemented solution obtained through O. Solution of the model: After selecting the appropriate data input. Implement the solution: The implementation of the solution involves so many behavioural issues and the implementing authority is responsible for resolving these issues. incorporating them into the O. Distance between Manager and Operations Researcher: O. Implementation: . present and future aspects of the problem.appropriately if data input is not appropriate. techniques try to find out an optimal solution taking into account all the factors. Non-Quantifiable Factors: O. a fairly good solution at present may be more desirable than a perfect O. Moreover. solution available after sometime.R. Limitations Dependence on an Electronic Computer: O. scientist as well as management should play a positive role. A model must be applicable for a longer time and can be updated from time to time taking into consideration the past. Similarly. then updating and modification is considered at this stage.
Q2. It is assumed that the total supply and the total demand are equal.m) units of homogeneous product and n destinations. each of which has available. The transportation problem involves m sources. n) units of products. It must take into account the complexities of human relations and behaviour. Discuss its importance to business decisions. Alternatively. statistics and philosophy for minimizing the possible loss while maximizing the potential gain.. Here a i and bj are positive integers. i (i = 1.. Transportation Problem & its basic assumption This model studies the minimization of the cost of transporting a commodity from a number of sources to several destinations.Condition (1)The condition (1) is guaranteed by creating either a fictitious destination with ademand equal to the surplus if total demand is less than the total supply or a (dummy)source with a supply equal to the shortage if total demand exceeds total supply. 2. What are the properties of a game? Explain the ³best strategy´ on the basis of minmax criterion of optimality. a) Minimax (sometimes minmax) is a decision rule used indecision theory. The cost of transportation from the fictitious destination to all sources and from all destinations to the fictitious sources are assumed to be zero so that total cost of transportation will remain the same. Ans. a. 2 . b. Formulation of Transportation Problem The standard mathematical model for the transportation problem is as follows. . The objective is to develop an integral transportation schedule that meets all demands from the inventory at a minimum total transportation cost. 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? Ans. each of which requires bj (j = 1.. game theory.Implementation of decisions is a delicate task.e. Let xij be number of units of the homogenous product to be transported from source i to the destination j Then objective is to Theorem: A necessary and sufficient condition for the existence of a feasible solution to the transportation problem (2) is that Q3. The cost cij of transporting one unit of the product from the ith source to the jth destination is given for each i and j. it can be thought of as maximizing the minimum gain . The supply at each source and the demand at each destination are known.i. State the assumptions underlying game theory.
no matter whatBchooses. In zero-sum games.Equivalently. See Scion s minimax theorem and Parthasarathy s theorem for generalizations. this solution is not stable. Player 1 s strategy guarantees him a payoff of V regardless of Player 2 s strategy. then if AbelievesBwill choose B1 then will choose A1 to gain 3. Then. However. while the simpleminimax choice for Bis B2 since the worst possible result is then no payment. since if BbelievesAwill choose A2 then will choose B1 to gain 1. no matter . and eventually both players will realize the difficulty of making a choice.Bwill not choose B3 since some mixtures of B1 and B2 will produce a better result. and similarly Player 2 can guarantee himself a payoff of V. the best payoff possible for player 1 is V. a minima strategy is a mixed strategy which is part of the solution to a zero-sum game. he also maximizes his own minimum payoff. who is quoted as saying As far as I can see. whereAand Bmake simultaneous moves. the minima solution is the same as the Nashequilibrium. Game theory In the theory of simultaneous games.illustratesminimaxsolutions. it has also been extended to more complex games and to general decision making in the presence of uncertainty. Suppose each player has three choices and consider the payoff matrixfor Adisplayed at right. if the choices are A1 and B1 thenBpays 3 toA). there exists a value V and a mixed strategy for each player. So a more stable strategy isneeded.Assume the payoff matrix for Bis thesame matrix with the signs reversed(i.Minimax theorem The minimax theorem states: For every two-person.(maxim in). the minimaxchoice for Ais A2 since the worst possible result is then having to pay 1. the best payoff possible for player 2 is V. and then will choose B2. such that (a) Given player 2 s strategy. and (b) Given player 1 s strategy. Originally formulated for two-player zero-sum game theory. see also example of a game without a value. This theorem was established by John von Neumann. Example The following example of a zero-sum game. zero-sum game with finitely many strategies.Some choices are dominated by others and can be eliminated: will not choose A3 since either A1 or A2 will produce a better result. The name minimax arises because each player minimizes the maximum payoff possible for the other since the game is zero-sum. covering both the cases where players take alternate moves and those where they make simultaneous moves.e. there could be no theory of games without that theorem I thought there was nothing worth publishing until the Minimax Theorem was proved .
Changing the rules is another way in which companies can benefit.Brandenburger and Nalebuff have illustrated how companies that recognize they can change the rules of competition can vastly improve their odds of success. and sometimes respond in a way that benefits both themselves and the competition. Kiwi International Air Lines introduced services on its carriers that were of lower prices to get market share.Acan avoid having to make an expected payment of more than 1/3 by choosing A1 with probability 1/6 and A2 with probability 5/6. Finally. This can be accomplished either by making things clearer or more uncertain. and both papers were able to raise their prices and not lose revenue. the New York Post attempted to make radical price changes in order to get the Daily News to raise its price to regain subscribers. The authors introduce the idea of judo economics. However.Bcan ensure an expectedB chooses B1B chooses B2B chooses B3A chooses A1+3 2 +2A chooses A2 1 0 +4A chooses A3 4 3 +1 wouldn t have to pay as much to license these characters. the Daily News misunderstood and both newspapers were headed for a price war. The authors also show an example of how investment banks can maintain ambiguity to benefit themselves. it changed the game by introducing a new 16-bit system. This example shows how companies can think outside the box to change the way competition takes place in their industry. where a large company may be willing to allow a smaller company to capture a small market share rather than compete by lowering its prices. For example. It took Nintendo 2 years to respond with its own 16-bit system. The New York Post had to make its intentions clear. which gave Sega the opportunity to capture market share and build a strong brand image. As long as it does not become too powerful or greedy. no matter whatBchooses. then they do not have to worry so much about their . Companies can also change perceptions to make themselves better off. a small company can often participate in the same market without having to compete with larger companies on unfavorable terms.whatAchooses. when Sega was unable to gain market share from Nintendo s 8-bit systems. If the client is more optimistic than the investment bank. If companies are able to develop a system where they can make both themselves and their competitors better off. companies can change the boundaries within which they compete. but made sure that the competitors understood that they had no intention of capturing more than 10% of any market. In 1994. the bank can try to charge a higher commission as long as the client does not develop a more realistic appraisal of the company s value.
the authors say that it is important to be familiar with this information so that managers can change the way they compete to improve their chances of success.competitors trying to counter their moves. The biggest factor that both of these articles have in common is how crucial it is for managers to understand everything they can about their business and the environment in which they work. which is not usually possible under the traditional win-losestructure. However. The Right Game . The Major Differences and Similarities between CPM and PERTCPM (Critical Path Method) & PERT(Program Evaluation and Review Technique) 1PERT is a probabilistic tool used with three CPM is a deterministic tool. he or she must first have all available information and use that information to understand how to make the company better off. Also.This article has some parallels with the article Competing on Analytics by (). the work shown in Competing on Analytics tends to place an emphasis almost exclusively on the use of quantitative data to improve efficiency or market share of the company. Whether a manager intends to use analytics or game theory to be successful. a. the authors discuss how in order for companies to be able to change the environment or rules under which they compete they need to understand everything they can about the constructs under which they are competing. PERT is more suitable for R&D related CPM is best suited for routine and those projects where the project is performed for projects where time and cost estimates can the first time and the estimate of duration be accurately calculated are . Q4. In Competing on Analytics . What is meant by graphing in Network Analysis? [5 Marks] Ans. Compare CPM and PERT explaining similarities and mentioning where they mainly differ. This tool is basically a tool for planning CPM also allows and explicit estimate of and control of time. with only single Estimating the duration for completion of estimate of duration. costs in addition to time. however focuses more on using information to find creative ways of changing the constructs or rules applied between companies. often yielding a much broader impact. because companies can easily copy each other s ideas. therefore CPM can control both time and cost. At the end of The Right Game: Use Game Theory to Shape Strategy . b. it is to a firm s advantage if they can benefit when their competitors copy their idea.
E) 2V = set of vertices E = set of edges Each edge is now an 1 3arrow.uncertain. y y y y y y y y y y y y Modern extensible platform for graph computation and network analysis. Graphs _ In mathematics. » Selection of graph elements and subgraphs using Mathematica pattern language. to trade off resources. and navigation functions. including components. The probability factor I major in PERT The deterministic factor is more so values or so outcomes may not be exact. Hundreds of built-in Mathematica functions and standard graph algorithms. to analyze different types of schedules. outcomes are generally accurate and realistic.Mathematica 8 brings numerous high-level functions for computing with graphs. Extensions of both PERT and CPM allow the user to manage other resources in addition to time and money. covers. to analyze different types of schedules. » Extensive collection of graph operations and modifications. undirected. Tensions of both PERT and CPM allow the user to manage other resources in addition to time and money. Graph Theory _ Graph G=(V. and matchings. the entities are nodes. Direct support for random graph distributions. Comprehensive collection of predicates for testing graph properties. cycle. » . and the links are edges _ Graph theory starts in the 18th century. Building on Mathematica's powerful numerical and symbolic capabilities. to trade off resources. » Support for directed. b) Mathematica provides state-of-the-art functionality for analyzing and synthesizing graphs and networks. » Support for set-theoretic and Boolean-based operations on graphs. and weighted graphs. and to balance the use of resources. not just a line ->direction The in degree of a vertex is the number of 5incoming edges 4The out degree of a vertex is the number of outgoing edges. » Efficient shortest path. 15+ metrics and centrality measures to characterize graphs and networks. with Leonhard Euler _ The problem of Konigsberg bridges _ Since then graphs have been studied extensively. » Local and global structural properties. » Efficient graph isomorphism testing. and to balance the use of resources.E) _ V = set of vertices _ E = set of edges 2 _ An edge is defined by the two vertices which it connects _ optionally: 1 3A direction and/or a weight _ Two vertices are adjacent if they are connected by an edge 4 5 _ A vertex s degree is the number of its edges Graph G=(V. networks are called graphs.
Full integration of graphs and networks into Mathematica. Q5 Q6 . optimization. » Support of arbitrary properties for graph elements.y y y y Multi-paradigm approach to graph programming with matrix. » Generic BFS and DFS algorithms with a flexible programmatic interface. and Boolean-based frameworks.