DISTRIBUTION MODEL
THIS METHOD RESULTS IS
- a special type of an Linear Programming Problem in the area
of physical distribution of goods and services coming from
several supply locations that are to be delivered to demand
centers.
TWO TYPES OF DISTRIBUTION MODELS
TRANSPORTATION MODEL - involves shipments from a
number of sources to a number of destinations
ASSIGNMENT PROBLEM- deals with situations wherein a
given number of candidates are assigned to a number of
positions.
FRANK LAUREN HITCHCOCK (1941) - an American
mathematician and physicist, presented the simplest form of
transportation model in his study “The distribution of a
product from several sources to numerous localities”
TJALLING CHARLES KOOPMANS (1947) - a Dutch-American
mathematician and economist. He wrote “Optimum
Utilization of the Transportation System”
ABRAHAM CHARNES & WILLIAM WAGER COOPER (1953)
- Two American Operation researchers, developed the
Stepping stone method; The modified distribution method
was developed in 1955.
Characteristics and Assumptions of the Transportation
problem
The main objective of the transportation model is to
determine the cheapest routes from the suppliers to the
destinations
* SUPPLY OR SOURCES – certain sources have limited
available quantity of one commodity.
* DEMAND – the demand comes from several destinations,
such as warehouses, distributions centers, shops, etc.
* QUANTITIES – the quantities available at each source and
the demands of each destinations are constant.
* SHIPPING COST – is based on per unit cost of the
commodity from the source to each destination. It is usually
based on the distance between the two points.
* It is assumed that there will be no shipments between
sources or between destinations as they will require special
adjustments to the transportation model
* Demand and supply quantities are presented in whole
numbers.
NORTHWEST CORNER METHOD
- IS THE MOST SIMPLE AND LOGICAL METHOD OF FINDING
THE INITIAL SOLUTION. THE PROCEDURE BEGINS BY
ALLOCATING UNITS TO THE UPPER LEFT HAND CORNER AND
ENDS IN THE LOWER RIGHT CORNER OF THE
TRANSPORTATION PROBLEM
MINIMUM COST METHOD
- IS SYSTEMATIZED PROCEDURE THAT IS EASY TO USE AND
YIELDS AN INITIAL SOLUTION THAT IS CLOSE TO THE OPTIMAL
SOLUTION IN SMALL PROBLEMS. IN THIS METHOD, THE
ALLOCATION IS MADE TO THE CELL WITH THE MOST
POSSIBLE LOWESR COST OR THE RIGHT HIGHEST PROFIT IN A
MAXIMIZATION CASE.
VOGEL'S APPROXIMATION METHOD
- IS AN ALGORITHM THAT OBTAINS THE INITIAL FEASIBLE
SOLUTION BY DETERMINING "PENALTY CAUSE" OF NOT
USING THE LOWEST COST ROUTE.
AN OPTIMAL OR NEAR OPTIMAL AS AN INITIAL SOLUTION
STEPPING STONE METHOD
- IS GENERALLY THE EASIEST TO VISUALIZE AND
UNDERSTAND. ITS PURPOSE IS TO DETERMINE THE EFFECR
ON THE TOTAL SHIPPING COST SHOULD ONE UNIT OF GOODS
ARE TO BE DELIVERED THROUGH THE UNUSED ROUTES.
MODIFIED DISTRIBUTION METHOD
- IS A MORE EFFICIENT PROCEDURE IN DETERMINING THE
NET CONTRIBUTION OF ROUTES THAT WERE NOT USED. IN
THIS METHOD, FOCUS IS ON THE EXTENSIVE USE OF THE
COST FACTORS ASSOCIATED WITH EACH CELL.
DISTRIBUTION MODEL (PART 2)
- The assignment model was developed and published in
1955 by Harold Kuhn, an American Mathematician.
- This model is another type of transportation problem.
- The objective is to assign a number of origins to the equal
number of destinations at either minimum cost or maximum
profit.
Business situations that can utilized the assignment model
are the following:
- assigning machines to produce the purchase orders;
- assigning manpower to sales territories;
- assigning contracts to bidders through a methodical bid
selection process;
- assigning teaching loads to teachers;
- assigning account executives to different clientele; and so
on
Methods for Solving the Assignment Problem
Complete Enumeration - The assignment problem is basically
presented as a balance problem with the number n of items
equal to the number n of entities. Thus there are n! (n
factorial) different solutions to a given assignment problem.
One way of solving assignment problem is by comparing all
possible solutions as presented in Table 1. However, this
method will not be practical when the number of possible
solutions is already unmanageable.
Simplex Method - The simplex method can be used but not
very efficient for solving assignment problem.
Transportation Method - Assignment problems can also be
solved using the transportation method. However, there are
more efficient methods.
Hungarian Method - The Hungarian method is the most
efficient way of solving largeor more complex assignment
problems.
Hungarian method or Flood's technique - is an algorithm that
provides an efficient solution procedure for solving large,
balanced assignment problems; was developed by Dénes
König, a Hungarian mathematician and is based on the
concept of opportunity loss.
* The procedure was based on the following theorem:
If one subtracts (or adds) a constant number from all entries
in any row or column of the assignment matrix, then the total
cost of each of the n! possible assignments is reduced (or
increased) by the constant number subtracted (or added).
NETWORK MODEL
- Describes configurations of flow in a connected system,
where the flow might involve material, people, funds and so
on.
- This configurations are conveniently described with flow
diagrams, which helped in the development of valid
spreadsheet models.
Network Management Tools:
* Program Evaluation and Review Technique(PERT)
- was developed in 1958 by US NAVY for Navi's Polaris
Project.
- was the tool used to plan and control the duration of this
project.
* Critical Path Method (CPM)
- In 1957, the CPM grew out of a research effort by Morgan
R. Walker of Du Pont and James E. Kelly of Remington Ran.
Characteristics of Project Management
1. The time of completion of the project can take weeks,
months, or even years. Due to the extended duration of such
projects.
2. The complexity of the nature of the project involves many
interrelated activities or events. It also involves participants
from the organization as well as those that are not directly
employed in the company, such as suppliers, contractors, etc.
3. Delays in the project may require the payment of penalty
fees.
4. The sequential nature of projects means that some
activities cannot begin until a certain condition or event had
taken place.
5. Projects are carefully planned activities that involve a
unique undertaking.
Terminologies in Program Evaluation and Review Technique
(PERT) and Critical Path Method (CPM)
Activity - refers to an effort that needs resources and time to
accomplish a goal or a project (training employees, buying
raw materials, meeting with suppliers, etc.)
Event - a goal that has been completed at a certain period is
considered an event; also be called as a milestone as it
happens after all activities that precede it must be
accomplished.
Project - involves a series of events and activities with a
definable beginning and a definable end, which is the goal
(patenting a new drug, building a school, fundraising for a
charity, etc)
Network - refers to activities and events that are arranged in
a logical and chronological order and presented graphically
that demonstrate the relationships among the different
activities and events that will lead to the completion of a
project.
Critical Activity - an activity that has a strong impact on
project completion; a slight delay of a critical activity will hold
up the target completion date of an entire project.
Path - represents a collection of activities that connects one
event to another.
Critical Path - a path that is comprised of a sequence of
critical activities that occur from the start of a project until
full completion; longest path throughout the project
network.
Immediate Predecessors - activities that must be
accomplished before the start of an activity in question.
Activity Slacks - also termed as FLOAT ACTIVITY; it is the
length of time that a task is allowed to be delayed as it will
not cause a delay for the entire project.
Differences between PERT and CPM
PERT - Usually requires three estimates to calculate the
weighted average of the expected completion date of the
project based on the probability distribution of the time of
completion.
PERT (probabilistic tools) while CPM (deterministic tool)
CPM - needed only one estimate of project duration;
includes an explicit estimate of the cost, whereas is a tool
mainly focused on planning and controlling time; it is event
oriented technique which means that network is on the basis
of event.
PURPOSE OF PERT/CPM
Most projects:
Complex = Delays = Additional Cost (penalties)
PROJECT REQUIRES:
- Careful planning
- Organizing
- Controlling
- Appropriate Management Systems (such systems may
increase the cost of doing the product)
EFFICIENT PROJECT MANAGEMENT:
PERT/CPM
- Determine critical activities
- Provides techniques that can inform project managers how
close the remaining activities are to becoming critical
1. Activities that are critical
2. Activities that are non critical
3. The slack time per noncritical activity
4. Other information as needed by management
Advantages of PERT/CPM
•Detailed planning
•Commitments and communication
• Efficient monitoring and control
•Identifying potential problem areas
• Proper use of resources
• Rescheduling
PERT/CPM Procedure
The PERT/CPM procedure is divided into three phases:
* FORMULATION phase is for the preparation of the basic
inputs to PERT/CPM. There are three steps in the formulation
phase:
1. Analyze the project by defining the activities and assigning
responsibilities to the participants.
2. After finalizing the content of each activity, the sequence
of executions is determined.
3. The third step is to estimate the length of time for each
activity. In the case of CPM, the activity duration estimate is
considered deterministic. This assumption is based on the
wealth of experience or expertise of participants. For PERT,
however, the duration is unknown; therefore, three
estimates are needed to predict the duration.
* SOLUTION phase involves the creation of the network,
event analysis, and activity analysis.
* ANALYSIS AND APPLICATION is focused on monitoring and CRASH DURATION - THE MINIMUM POSSIBLE DURATION FOR
control, as well as resource utilization. AN ACTIVITY
NORMAL POINT - THE TIME COST GRAPH SHOWS THE TIME
Solving CPM AND COST OF ACTIVITY IN A NORMAL WAY
Two main procedures: CRASH POINT - SHOWS THE TIME AND COST WHEN THE
1. FORWARD PASS -Aims to determine the earliest start and ACTIVITY IS FULLY CRASHED
earliest finish time of each activity by going forward on the
network.
EF = ES + t

2. BACKWARD PASS -On the other hand identifies the latest

finish time of each activity by moving backward through the
network.
LS = LF - t

Zero slack points

Slack = LS - ES = LF - EF

PROGRAM /PROJECT EVALUATION AND REVIEW (PERT)

- Is a network technique that is used for project planning and
scheduling that applies probabilistic activity times

2 PERT CATEGORIES
STOCHASTIC PERT - used for activity times that are of
probabilistic nature
DETERMINISTIC PERT - WHERE THE ACTIVITY TIME IS
ASSUMED TO BE KNOWN WITH CERTAINTY

3 ESTIMATES OF ACTIVITY TIME

OPTIMISTIC ESTIMATE - ESTIMATE OF THE SHORTEST
POSSIBLE DURATION OF AN ACTIVITY REACHING ITS
COMPLETION
MOST LIKELY ESTIMATE - ESTIMATE OF THE DURATION
WOULD OCCUR MOST OFTEN IF THE ACTIVITY IS REPEATED
UNDER EXACTLY THE SAME CONDITIONS SEVERAL TIMES
PESSIMISTIC ESTIMATE - LONGEST TIME THAT AN ACTIVITY
WILL BE COMPLETED "WHEN EVERYTHING WENT WRONG"

MEAN TIME (EXPECTED TIME)

- IT IS THE AVERAGE TIME THAT AN ACTIVITY NEED FOR ITS
COMPLETION AND WE USE TIME DATA FOR NETWORK
DIAGRAM ANALYSIS AND TO FIND CRITICAL PATH AND
EXPECTED PROJECT COMPETITION TIME .

VARIANCE - MEASURES VARIABILITY FROM THE AVERAGE OR

MEAN.

Another important aspect of management science is reducing

the overall project time at an acceptable cost.
CRASHING - THE PROCESS OF REDUCING THE TIME
NECESSARY TO COMPLETE A PROJECT BY ADDING
RESOURCES.
CRASHING AN ACTIVITY - REFERS TO TAKING SPECIAL COSTLY
MEASURE TO MINIMIZE THE ACTIVITY IN ITS NORMAL VALUE.
CRASHING THE PROJECT - REFERS TO CRASHING A NUMBER
OF ACTIVITY TO REDUCE THE TIME OF THE PROJECT BELOW
ITS NORMAL VALUE.