BAFPRES Final - Jul 102019 1

University of the Philippines
Open University
Fundamentals of
Prescriptive Analytics
A Business Analytics Course
Dr. Eugene Rex Jalao

Asst. Prof. Mar Cruz
Ms. Tricia Ascan
Mr. Edison Sevillo
Course Writers
OPEN UNIVERSITY
COMMISSION ON HIGHER EDUCATION

OPEN UNIVERSITY
Fundamentals of Prescriptive Analytics 1

UNIVERSITY OF THE PHILIPPINES OPEN UNIVERSITY
Fundamentals of Prescriptive Analytics

A Business Analytics Course
Welcome! There are three types of business analytics according to purpose, namely: 1)
descriptive, 2) predictive and 3) prescriptive. This course tackles prescriptive analytics
which is operationalized by the multidisciplinary field of Operations Research. Hence,
this course particularly introduces topics relating to optimization models and algorithms,
queueing and simulation. For the most part, the course emphasizes on modelling to
produce adequate and sound prescriptions to solve business or management problems.
COURSE OBJECTIVES
At the end of the course, you should be able to:
1. Identify opportunities for optimization;

2. Identify components of a model;
3. Utilize prescriptive analytics tools to build an optimization model;
4. Validate optimization model;
5. Discuss key concepts, theories, and algorithms in optimization; and
6. Develop an awareness of the ethical norms as required under policies and
applicable laws governing confidentiality and non-disclosure of
data/information/documents and proper conduct in the learning process and
application of business analytics.
COURSE OUTLINE
MODULE 1 – Introduction to Prescriptive Analytics and Operations Research
MODULE 2 – Modeling with Linear Programming
A. Definition of Linear Programming
B. Components of Linear Programming Model
C. Assumptions in Linear Programming
D. Formulation Techniques

MODULE 3 – Solving Linear Programming Models
A. Graphical Method
B. Simplex Algorithm
C. Sensitivity Analysis
D. Cases in Linear Programming
MODULE 4 – Special Problems in Linear Programming
A. Transportation Problems
B. Transshipment Problems
C. Assignment Problems
D. Network Problems
MODULE 5 – Queuing
A. Elements of Queueing Systems
B. Queueing Models and Solutions
MODULE 6 – Simulation
COURSE MATERIALS
Your learning package for this course consists of:

1. This course guide;
2. Study guides for each module, with lecture notes and learning activity guides;
3. Video lectures; and
4. Additional reading materials in digital form.
All learning resources will be made available for downloading so you can review them as
often as you wish without having to go online.
COURSE MATERIALS
Topics UPOU Videos* Other Online Resources**
Module 1 – • “Introduction Application of Business Analytics:
Introduction to to Big Data • http://technical.ly/baltimore/wp-
Prescriptive and content/uploads/sites/3/2012/10/ColdChainAn
Analytics and Business alyticsMagpieSensing-Whitepaper-Final.pdf
Operations Analytics” by
Research Prof. Erik
Paolo
Capistrano
• “Ethical
Implications
in Business
Analytics” by

Mr. Dominic
Ligot
• “Applications
of Business
Analytics” by
Mr. Dominic
Ligot
• “Prescriptive
Analytics” by
Mr. Dominic
Ligot
• “Introduction
to
Operations
Research” by
Prof. Ramon
Miguel
Panis, UPD
Module 2 –
Modeling with
Linear
Programming
A. Definitio • “LP Modeling Tutorial/Notes on Linear Programming Modeling:
n of Linear I” by Prof. • https://ocw.mit.edu/courses/sloan-school-of-
Programming Ramon management/15-053-optimization-methods-in-
B. Compon Miguel management-science-spring-
ents of Panis, UPD 2013/tutorials/MIT15_053S13_tut01.pdf
Linear • http://mat.gsia.cmu.edu/classes/QUANT/NOT
Program ES/chap5.pdf
ming
Model
Assumptions
in Linear
Programming
Model
Formulation • “LP
Techniques Modeling I”
by Prof.
Ramon
Miguel
Panis, UPD
• “Some LP
Tricks” by
Prof. Ramon

Miguel
Panis, UPD
Module 3 –
Solving Linear
Programming
Models
A. Graphic • “Solving Tutorial/Notes on Graphical Method:
al Method Linear • https://ir.library.oregonstate.edu/downloads/3j
Programmin 3332677
B. Simplex g Models” by Tutorial/Notes on Simplex Algorithm:
Algorith Prof. Simon • http://mat.gsia.cmu.edu/classes/QUANT/NOT
m Anthony ES/chap7.pdf (Section 7.1 and Section 7.2)
Lorenzo,
UPD For Big-M and Two-Phase Methods:
• “Solving LP • https://www.utdallas.edu/~scniu/OPRE-
Models 6201/documents/LP07-Big-M-Formulation.pdf
Using Excel
Solver Add- • http://faculty.smcm.edu/acjamieson/f12/480Bi
in” by Prof. gMExample.pdf
Simon • http://optlab.mcmaster.ca/feng/4O03/Two.Pha
Anthony se.Simplex.pdf
Lorenzo, • http://www.maths.qmul.ac.uk/~ffischer/teachin
UPD g/opt/notes/notes8.pdf
Software Illustrations:
• QM for Windows:
https://www.youtube.com/watch?v=Emm9hJc
nD6Y
https://www.youtube.com/watch?v=6mUONySygyU
• Excel QM:
https://www.youtube.com/watch?v=uSOZ8jbT
sUE
C. Sensitivi • “Sensitivity Interpreting Excel Solver Report:
ty Analysis” by • https://www.youtube.com/watch?v=mT9Hjylw_
Analysis Prof. Simon kQ.
Anthony • http://www.excel-
Lorenzo easy.com/examples/sensitivity-analysis.html
D. Cases in • “Special Tutorial/Notes on Cases in Linear Programming:
Linear Cases in • https://www.youtube.com/watch?v=_eMA0LW
Program Linear sRQQ
ming Programmin • http://mat.gsia.cmu.edu/classes/QUANT/NOT
g” by Prof. ES/chap7.pdf (Section 7.3)
Simon
Anthony
Lorenzo

Module 4 –
Special
Problems in
Linear
Programming
A. Transpo • “LP Software Illustrations:
rtation Modeling II” • QM for Windows:
Problems by Prof. https://www.youtube.com/watch?v=bqxSwz3D
Ramon MKg
Miguel • Excel QM:
Panis, UPD https://www.youtube.com/watch?v=pF0M1YA
• “Transportati oKYg
on Model” by
Prof. Angelo
Ani, UPLB
B. Transshi • “Transshipm Tutorial/Notes on Transshipment Problems:
pment ent Model” • https://www.utdallas.edu/~scniu/OPRE-
Problem by Prof. 6201/documents/TP6-Transshipment.pdf
s Angelo Ani, • https://www.youtube.com/watch?v=A57v1EnU
UPLB upk
C. Assignm • “LP Software Illustrations:
ent Modeling II” • Excel QM:
Problem by Prof. documents.saintleo.edu/docs/GBA334/GBA33
s Ramon 4_Assignment_Problem_Using_QM.pdf
Miguel
Panis, UPD
• “Assignment
Model” by
Prof. Angelo
Ani, UPLB
D. Network • “Network Tutorial/Notes on:
Problem Theory 1” by • Minimum Spanning Tree:
s Prof. Ramon https://www.youtube.com/watch?v=Pn874kEc
Miguel 3IA
Panis,
https://www.youtube.com/watch?v=5XkK88VEILk
UPD
• “Network • Maximum Flow:
Theory 2” by https://www.youtube.com/watch?v=Tl90tNtKvx
Prof. Ramon s
Miguel
https://www.youtube.com/watch?v=Gvx7oG2pFCA
Panis, UPD • Shortest Route:
• “LP https://www.youtube.com/watch?v=X6n30V6qCWU
Modeling II”
by Prof. • PERT-CPM:
https://www.youtube.com/watch?v=gEBMPP0SOnU
Ramon
Miguel https://www.youtube.com/watch?v=xa2SFdbS1Oc

Panis,
http://tozalp.home.uludag.edu.tr/PERT.pdf
UPD
• QM for Windows:
https://www.youtube.com/watch?v=ZODPznjz
sgw
Module 5 –
Queuing
A. Element • “Queuing Tutorial/Notes on Queueing:
s of Queuing Theory” by • http://people.brunel.ac.uk/~mastjjb/jeb/or/queu
System Prof. Angelo e.html
B. Queuing Ani, UPLB
Models
• Excel QM:
and
http://documents.saintleo.edu/docs/GBA334/G
Solution
BA334_Queuing_Theory_Using_QM.pdf
s
Module 6 – • “Simulation” Tutorial/Notes on Monte Carlo Simulation:
Simulation by Prof. • https://www.youtube.com/watch?v=Xr4a6Dw6
Christian qcc
John
Immanuel S.
Boydon,
UPD
*with accompanying PPT presentations
** Note that there may be differences in notations or symbols with respect to the UPOU videos or
among other suggested online references. Yet, the concepts or procedures remain the same.
These resources were suggested to increase the familiarity of the students with the topics under
each module.
For further reading, the following textbooks are suggested:
Module
Textbook
1 2 3 4 5 6
1. Essentials of Business Analytics by J.D. Ch. Ch. 8 Ch.
Camm, J.J. Cochran, M.J. Fry, J.W. 1 11
Ohlmann, D.R. Anderson, D.J. Sweeney
& T.A. Williams
2. An Introduction to Management Ch. 2, 4, Ch. Ch. Ch. Ch.

Science: Quantitative Approaches to 17; Ap. 3 6, 11 12
Decision Making (13th ed.) by D.R. A 19,
Anderson, D.J. Sweeney, T.A. Williams, J.D. 20

Camm & K. Martin
3. Introduction to Management Science Ch. 2, 4 Ch. Ch. Ch. Ch.

th
(11 ed.) by B.W. Taylor 3 6, 7 13 14
4. Introduction to Operations Research Ch. Ch. 3 Ch. Ch. Ch. Ch.

th
(10 ed.) by F.S. Hillier & G.J. Lieberman 1 4 9, 17 20
10
5. Optimization Modeling with Ch. 2 Ch. Ch.
Spreadsheets (2nd ed.) by K.R. Baker 4; 3
Ap.
2, 3
6. Quantitative Analysis for Ch. 8 Ch. Ch. Ch. Ch.
Management (11th ed.) by B. Render, R.M. 7 9, 13 14
Stair, Jr. & M.E. Hanna 11
7. Operations Research: An Ch. Ch. 2 Ch. Ch. Ch.

Introduction (8th ed.) by H.A. Taha 1 3 5, 6 15
As suggested in the preceding items, the following are the software programs to be
used:
Software
Refer to:
Programs
Microsoft https://support.office.com/en-us/article/Load-the-Solver-Add-in-in-Excel-
Excel Solver 612926fc-d53b-46b4-872c-e24772f078ca?ui=en-US&rs=en-
Add-in (Free) US&ad=US
Excel QM http://wps.prenhall.com/bp_taylor_introms_11/220/56508/14466195.cw/
(Free) content/
QM for http://wps.prenhall.com/bp_taylor_introms_11/220/56508/14466195.cw/
Windows content/
(Free)
STUDY SCHEDULE
Inclusive
Week Module/Activity Requirement
Dates
1 (to be Orientation, Module 1
specified)
2 Module 2 (Part 1) Exercise 1

16 Integration/Reflection Project
COURSE REQUIREMENTS
To pass the course, you must accomplish/perform the following:
1. Exercises (70% of final grade). Exercises are set of problems given to the
students. These are problems that are more straightforward than cases and
require one to build models and solved such models by employing the algorithms
taught in class either manually (partially or completely) or through software
programs. In an exercise, around three to four questions are provided, totaling to
30 points.
2. Project (20% of final grade). At the end of the semester, a project in the form of
term paper is submitted. The student identifies a subject company or
organization and is required to solve a problem or issue using the tools and
techniques learned in class. The problem to work on should be approved first by
the faculty-in-charge. Further, the student is required to submit a certification
from the project’s stakeholder (e.g. business owner, manager, supervisor)
expressing that you have provided a copy and discussed the results of the
project with the stakeholder. This requirement is worth 100 points.
3. Participation (10%). Your participation and activity log in the online classroom will
be monitored and graded.
Grades are reported according to the following conversions:
96%-100% 1.00 71%-75% 2.25

91%-95% 1.25 66%-70% 2.50
86%-90% 1.50 61%-65% 2.75
81%-85% 1.75 60% 3.00

76%-80% 2.00 <60% 5.00
GENERAL GUIDELINES
1. Exercises and project should be submitted only through MyPortal. Submissions
made through my email are not accepted. The deadline of submission for
exercises is usually one week after these were given. For late submissions, there
will be a corresponding deduction for each day the requirement is late. No make-
up exercises will be given.
2. Always observe academic integrity. Students caught cheating in any form will
automatically get a grade of 5.00.
3. Students are expected to read ahead on the lecture topics before these are
discussed in the virtual classroom to ensure lively interactions. Learn from
everyone. Feel free to share your experiences that you think are related to the
topics.
ABOUT THE FACULTY-IN-CHARGE

I am Assistant Professor Mar B. Cruz. I am a regular faculty member at the Department
of Agribusiness Management and Entrepreneurship, College of Economics and
Management, University of the Philippines Los Baños (UPLB). I am a graduate of BS
Agribusiness Management and MS Industrial Engineering from UPLB and UP Diliman,
respectively. I teach Operations Research and Operations Management to
undergraduate and graduate business/management students. You may reach me
through the following information:
Primary email: mbcruz4@up.edu.ph
Alternative email: marcruz@hotmail.ph
Office tel.: +63 49 536-2846

MODULE 1: INTRODUCTION TO PRESCRIPTIVE ANALYTICS
AND OPERATIONS RESEARCH
Introduction
Business analytics involves the use and processing of big data to make sound business
decisions. There are three types of business analytics according to purpose, namely: 1)
descriptive, 2) predictive and 3) prescriptive. This module tackles prescriptive analytics
which is operationalized by the multidisciplinary field of Operations Research.
Learning Objectives
After working on this module, you should be able to define and determine the
relationships of Business Analytics, Prescriptive Analytics and Operations Research.
1.1. Business Analytics
Business Analytics refer to timely, accurate, high-value and actionable insights or

information through the utilization of organizational and sometimes external data. It helps
transform data to information and knowledge and decisions and finally to action. By
“data”, it means “big data”. To provide us with an initial understanding about business
analytics and big data, the student is referred to “Big Data and Business Analytics” by
Prof. Erik Paolo Capistrano.
Study Question
Is business analytics relevant or applicable only to “big” businesses?
The use of data and the results from processing thereof in Business Analytics do not
come without any ethical implications. Mr. Dominic Ligot discussed these implications in
his video entitled, “Ethical Implications of Business Analytics.” He cited four ethical
implications, namely: 1) awareness, disclosure and privacy issues [2:03], 2) data

ownership and control [3:38], 3) discrimination and self-determination and finally [4:34],
4) liabilities on using algorithms and automated decision making [5:42].
1.2. Prescriptive Analytics
There are three types of Business Analytics according to purpose, namely: 1)

descriptive, 2) predictive and 3) prescriptive analytics. An overview and illustration of
these three aspects of business analytics is provided by “Applications of Business
Analytics” by Mr. Dominic Ligot. In this video, the application Waze was used to illustrate
these three [2:55]. It also provided examples on finance [4:19], human resources [5:47]
and marketing [7:20] among others.
While descriptive and predictive analytics are concerned with describing situations and
predicting results and patterns, respectively, prescriptive analytics is primarily concerned
with providing solutions or recommendations; hence, the term “prescriptive.” For an
overview of prescriptive analytics, one is referred to “Prescriptive Analytics” by Mr.
Dominic Ligot. In the video, it introduces the concept of optimization and simulation.
Activity 1-1
Open the link:
http://technical.ly/baltimore/wp-
content/uploads/sites/3/2012/10/ColdChainAnalyticsMagpieSensing-Whitepaper-
Final.pdf
Reflect on the application of prescriptive analytics illustrated in the article contained in
the link. Write down as many as you can other possible opportunities or problems that
prescriptive analytics can be applied.
1.3. Operations Research
As mentioned, prescriptive analytics involves optimization and simulation models. These

two are under the realms of the Operations Research field. Operations Research can be
defined in various ways. Primarily, it is a scientific, multi-disciplinary approach that seeks
to provide best or optimal solutions to business or organizational problems. Operations
Research is sometimes known as Management Science or Quantitative Business
Analysis.
Prof. Ramon Miguel Panis in his video, “Introduction to Operations Research” introduced
Operations Research [3:31] and brought the student back to its historical development

[1:04]. He also illustrated the Operations Research Methodology from defining and
observing a system to formulating, solving and validating the appropriate model [14:25]
Study Question
Is there a difference between “optimal” and “best” solution?
References
UPOU Videos:
• “Introduction to Big Data and Business Analytics” by Prof. Erik Paolo Capistrano
• “Ethical Implications of Business Analytics by Mr. Dominic Ligot
• “Prescriptive Analytics” by Mr. Dominic Ligot
• “Introduction to Operations Research” by Prof. Ramon Miguel Panis, UPD
Other Online Resources:
• http://technical.ly/baltimore/wp-
content/uploads/sites/3/2012/10/ColdChainAnalyticsMagpieSensing-Whitepaper-
Final.pdf
Suggested Textbooks for Further Reading:
• Essentials of Business Analytics by J.D. Camm, J.J. Cochran, M.J. Fry, J.W.
Ohlmann, D.R. Anderson, D.J. Sweeney & T.A. Williams (Chapter 1)
• Introduction to Operations Research (10th ed.) by F.S. Hillier & G.J. Lieberman
(Chapter 1)
• Operations Research: An Introduction (8th ed.) by H.A. Taha (Chapter 1)

MODULE 2: MODELING WITH LINEAR PROGRAMMING
Introduction
One of the most important skills in Prescriptive Analytics or Operations Research is
modeling. There are many software resources that can solve linear programming models
at an instant. However, none so far are programs that can instantly provide the
appropriate model/s. Also, programs like the simple Excel Solver Add-in to more
complicated Matlab report solutions to practically any model inputted without regard to
the model’s adequacy and relevance. Hence, it is imperative for a business analyst to
develop his/her skills on modeling over time. This module provides basic knowledge and
techniques in formulating linear programming models.
Learning Objectives
After working on this module, you should be able to;
1. Define linear programming model;

2. Discuss the components of a linear programming model;
3. Explain the assumptions in linear programming; and
4. Illustrate some techniques in linear programming modeling.
2.1. Definition of Linear Programming Model
Prof. Ramon Miguel Panis in his video [1:12], “LP Modeling I,” simply defined linear
programming model as a mathematical too/model used to solve optimization model. An
example of a linear programming model followed [1:26]. It can be seen from the example
that such model is a mathematical illustration of a scenario that maximizes or minimizes
something given or subject to some constraints; where all variables are expressed in
linear terms. Linearity in this case is described as the absence of absolute terms and
variables are neither exponents nor multiplied with other variables. It must be noted that
there are problems that can be formulated in a non-linear fashion. These models are
known as non-linear programing models and are, however, discussed elsewhere. Linear
and non-linear programming models are collectively known as mathematical models.
2.2. Components of a Linear Programming Model
As discussed by Prof. Panis in the same video, there are three components of a linear
programming model: 1) decision variables [2:05], 2) objective/goal [3:00] and 3)

constraints [3:48]. Decision variables, as the term implies, these are the items that you
want to know or determine like the number of units of tables and desks to manufacture
or number of liters of Chemical A and Chemical B to mix. Values to these variables are
referred prescriptions. It is important to caution the student that without properly defining
these decision variables, the model will be rendered senseless and invalid.
Meanwhile, the objective or goal is expressed as maximization or minimization of a

function. A function can be a benefit (e.g. profit) or cost (e.g. losses) in nature that needs
to be maximized or minimized, respectively. Finally, constraints are limitations in the
pursuit of the objective. This can be in the form of capacity of resources, demand for
product, policies among others that are mathematically expressed.
2.3. Assumptions in Linear Programming
Prof. Panis also explained that a basic linear programming model follows four
assumptions, namely: 1) proportionality [5:23], 2) additivity [6:52], 3) certainty [7:47] and
4) divisibility [9:24]. Proportionality states that the contribution of the decision variables to
the objective function and constraints are directly proportional. Meanwhile, additivity
states that the total contribution of each variable in objective function and constraints is
the direct sum of the individual contribution of each variable. The coefficients of the
objective function and constraints are expressed with absolute certainty. This is the
assumption on certainty. Finally, divisibility means that the decision variables can have
fractional values.
The student should understand that in some instances, a strict integer value for a
decision variable is desired. In fact, in the assignment, shortest route and project
evaluation (CPM) models, the decision variables are expressed as binary (values can
only be zero or one). The assumption of divisibility these cases is dropped but still
maintaining the linearity nature of the model. Hence, the first instance refers to integer
LP (or integer programming) while the second set of models refers to binary
programming which is a type of integer programming. These are further explained by
Prof. Ramon Miguel Panis in his video, “LP Modeling II.” In this video, Prof. Panis
introduced the transportation, assignment and shortest route problems which will be
further tackled later in special problems in linear programming.
2.4. Formulating Linear Programming Models
After knowing the components and assumptions of linear programming models, it is time
to be acquainted with problems requiring linear programming approach. To teach one
with some techniques in formulating linear programming models, two videos are
followed. In the same video of Prof Panis, the modeling exercise started at [10:30]. The

problems worked through were either product-mix, blending or covering problems
requiring linear programming.
Activity 2-1
In the video “LP Modeling I” by Prof. Ramon Miguel Panis, starting from the second
problem [19:70], take time to read each of the remaining problems at [10:30], [19:17],
[26:28] and [36:30] by pausing it. Try to formulate the corresponding model for each
problem. Define the decision variables properly, state the objective function and express
the necessary constraints. Verify answers by playing back the video.
Second, the student is referred to the video “Some LP Tricks” by Prof. Ramon Miguel
Panis. There are problems that require non-linear programming models instead that
need to be converted to linear one to have a “better” optimal solution. This is the concept
of global optimal solution, a topic discussed elsewhere. Prof. Panis shared few
techniques to express a non-linear program to a linear one. He specifically covered three
types of problems, the fractional [01:13], absolute [09:39] and minimax-maximax [18:05].
A sample problem [24:23] is used to illustrate two of the three types simultaneously.
For more resources about the modeling, the student can visit the following links:
• https://ocw.mit.edu/courses/sloan-school-of-management/15-053-optimization-
methods-in-management-science-spring-2013/tutorials/MIT15_053S13_tut01.pdf
• http://mat.gsia.cmu.edu/classes/QUANT/NOTES/chap5.pdf
Note that for the second link, the material showcases not only modeling but also solving
linear programming models. At this point, you are advised to focus on the linear
programming part. The solving part will be tackled in the next module.
References
Data Warehousing (Video) by Mari Anjeli Crisanto

Introduction to Data Warehousing and Enterprise Data Management (Slides) by Eugine
Rex Jalao
https://www.youtube.com/watch?v=zTs5zjSXnvs&t=293s&list=WL&index=20
https://www.youtube.com/watch?v=l74BAViTVns&t=194s&list=WL&index=21
Case Study: Dimensional Modeling - Northwind Business (Document) by Eugene Rex
Jalao

MODULE 3: SOLVING LINEAR PROGRAMMING MODELS
Introduction
After careful formulation of the linear programming model, it is now time to solve it.
Depending on the number of variables and convenience, a model can be solved through
the graphical method or the Simplex Algorithm. In this module, the student will be taught
how to perform these two methods manually and software-aided. Also, an overview of
sensitivity analysis and special cases in linear programming are presented in this
module.
Learning Objectives

1. Solve linear programming models through graphical method;
2. Solve linear programming models through Simplex Algorithm;
3. Perform sensitivity analysis in linear programming; and
4. Discuss the special cases in linear programming,
3.1. Graphical Method
A linear programming model with two variables can be conveniently solved through the
graphical method. It must be noted though that the graphical method uses the same
concept with Simplex Algorithm. A discussion on this can be found elsewhere. Prof.
Simon Anthony Lorenzo explained how to solve linear programming models using the
graphical method [0:45] through his video, “Solving Linear Programming Models.” The
video started with a problem requiring formulation.
One of the challenges in the graphical method is solving for the extreme points, as
introduced in the preceding video. In the following link,
https://ir.library.oregonstate.edu/downloads/3j3332677, the student is taught how to
compute for the extreme points through algebraic operations.
3.2. Simplex Algorithm
When there are three variables, it may be difficult to accurately graph and compute for
the extreme points; more so with linear programs that have more than three variables.
This is where Simplex Algorithm comes in. In the same video [7:40] of Prof. Lorenzo,
pay attention to his step-by-step illustration of the simplex algorithm. He started with a

two-variable problem to demonstrate the simplex algorithm. In general, after the model is
prepared for the Simplex process through some transformation processes [08:09], the
algorithm starts with finding the entering and leaving variables then performing some
mathematical (Gauss-Jordan) operations. When there is no longer an entering variable,
then an optimal solution is found.
For a more thorough discussion about the algorithm, the student may consult Section
7.1 and Section 7.2 of the material in the following link:
http://mat.gsia.cmu.edu/classes/QUANT/NOTES/chap7.pdf. Note that the material
reminds one to convert a Min problem to Max problem as part of the standardization
process. However, as explained by Prof. Lorenzo, if the problem is Min, then one should
select the variable associated to the most positive coefficient in the Z-row instead of the
one with the most negative coefficient. In fact, when using software, one has the liberty
to settle with a Min or Max objective function. It is also worthwhile to note in Section 7.2
that the iterations are represented graphically.
It must be noted that so far, what has been illustrated is the simplest form of Simplex
Algorithm. This means that only constraints of ≤-type were involved. When there are
constraints of ≥- and =-types, the standardization process calls for surplus and artificial
variables. Such types are mostly observable in Min problems. The way to deal with
these scenarios is through a more complicated execution of the Simplex Algorithm in the
form of either Big-M Method or Two-Phase Method. These methods are discussed
elsewhere. Problems requiring these methods are solved with the aid of software
solvers, instead, in this module. The student may refer to the following links:
Big-M • https://www.utdallas.edu/~scniu/OPRE-6201/documents/LP07-Big-M-
Method: Formulation.pdf
• http://faculty.smcm.edu/acjamieson/f12/480BigMExample.pdf
Two- • http://optlab.mcmaster.ca/feng/4O03/Two.Phase.Simplex.pdf
Phase • http://www.maths.qmul.ac.uk/~ffischer/teaching/opt/notes/notes8.pdf
Method:
Activity 3-1
In this activity, the student is taught how to solve linear programming models using
applicable software or programs. For this course, three readily available programs (Excel
Solver Add-in, QM for Windows and Excel QM) are used. To download or install, refer to
the following:

• Excel Solver Add-in:
https://support.office.com/en-us/article/Load-the-Solver-Add-in-in-Excel-612926fc-d53b-
46b4-872c-e24772f078ca?ui=en-US&rs=en-US&ad=US
• Excel QM and QM for Windows
https://support.office.com/en-us/article/Load-the-Solver-Add-in-in-Excel-612926fc-d53b-
46b4-872c-e24772f078ca?ui=en-US&rs=en-US&ad=US
After installing these programs, the student is encouraged to watch the following tutorial
videos:
• Excel Solver Add-in: “Solving LP Models Using Excel Solver Add-in” by Prof.
Simon Anthony Lorenzo
• QM for Windows:
https://www.youtube.com/watch?v=Emm9hJcnD6Y
https://www.youtube.com/watch?v=6mUONySygyU
• Excel QM: https://www.youtube.com/watch?v=uSOZ8jbTsUE
Now, try to solve the following problems using the software programs:
• Problem at [0:45] in “Solving Linear Programming Models” by Prof. Simon
Anthony Lorenzo
• Problems at [19:70], [10:30], [19:17], [26:28] and [36:30] in “LP Modeling I” by
Prof. Ramon Miguel Panis
• Example 7.2.1 page 88
http://mat.gsia.cmu.edu/classes/QUANT/NOTES/chap7.pdf
• Exercise 62 page 92 http://mat.gsia.cmu.edu/classes/QUANT/NOTES/chap7.pdf
3.3. Sensitivity Analysis
Sensitivity analysis is done to answer what-if questions relating to changes in linear

programming models. It aims to answer what will happen to the solution if the following
instances either happen: 1) changes in the right-hand side constraints, 2) changes in the
objective function coefficients, 3) changes in the constraint coefficients, 4) addition of a
new variable, or 5) addition of new constraints. In Prof. Simon Anthony Lorenzo’s video,
“Sensitivity Analysis,” these changes are illustrated one by one by working the same
Company X problem and using the Excel Solver Add-in. At this point, it is hoped that the
student is already familiar with the said add-in.

Rather than commanding the Simplex Algorithm every time there are changes in the
coefficients in the objective function or right-hand side values of the constraints, we can
capitalize the sensitivity report feature of Excel Solver Add-in. The report provides
possible range of values for the coefficients of the objective function and the values of
right-hand side of the constraints to remain optimal. This report can be generated
alongside the optimal solution, as shown in the video provided by the following link:
https://www.youtube.com/watch?v=mT9Hjylw_kQ. The video in general teaches one
how to interpret the reports generated by the solver including the sensitivity report. You
may refer also to the following link: http://www.excel-easy.com/examples/sensitivity-
analysis.html for guidance.
Activity 3-2
Using the same problem set in Activity 3-1, generate the corresponding sensitivity
reports. Verify the range of values given by trying to change the linear programming
models accordingly and executing again the Simplex Algorithm (similar with what Prof.
Lorenzo did). Did the solution remain optimal?
3.4. Special Cases in Linear Programming
There are four special cases in linear programming: 1) alternative optima, 2)

degeneracy, 3) infeasibility and 4) unboundedness. These cases where clearly
discussed by Prof. Lorenzo in his video titled, “Special Cases in Linear Programming.”
When there is more than one optimal solution, then the case of alternative optima [0:51]
is exhibited by the linear programming model. Degeneracy [4:36] is brought about by
redundant constraints. Infeasibility [6:27], as the term suggests, happens when there is
no feasible region formed by the constraints. Finally, unboundedness [7:47] happens
when the objective function can be indefinitely increased or decreased.
In Prof. Lorenzo’s video, these cases were illustrated graphically. Note that these cases
can also be detected in simplex tableaus. In the following link,
http://mat.gsia.cmu.edu/classes/QUANT/NOTES/chap7.pdf, its Section 7.3 illustrates
these cases with simplex tableaus. It is emphasized at this point that one must be
familiar already with the simplex algorithm/simplex tableaus.

References
UPOU Videos:
• “Solving Linear Programming Models” by Prof. Simon Anthony Lorenzo

• “Solving LP Models Using Excel Solver Add-in” by Prof. Simon Anthony Lorenzo
• “Sensitivity Analysis” by Prof. Simon Anthony Lorenzo
• “Special Cases in Linear Programming” by Prof. Simon Anthony Lorenzo
• https://ir.library.oregonstate.edu/downloads/3j3332677
• http://mat.gsia.cmu.edu/classes/QUANT/NOTES/chap7.pdf
• https://www.youtube.com/watch?v=Emm9hJcnD6Y
• https://www.youtube.com/watch?v=6mUONySygyU
• https://www.youtube.com/watch?v=uSOZ8jbTsUE
• https://www.youtube.com/watch?v=mT9Hjylw_kQ.
• http://www.excel-easy.com/examples/sensitivity-analysis.html
• https://www.youtube.com/watch?v=_eMA0LWsRQQ
• https://www.utdallas.edu/~scniu/OPRE-6201/documents/LP07-Big-M-
Formulation.pdf
• http://faculty.smcm.edu/acjamieson/f12/480BigMExample.pdf
• http://optlab.mcmaster.ca/feng/4O03/Two.Phase.Simplex.pdf
• http://www.maths.qmul.ac.uk/~ffischer/teaching/opt/notes/notes8.pdf
• An Introduction to Management Science: Quantitative Approaches to Decision

Making (13th ed.) by D.R. Anderson, D.J. Sweeney, T.A. Williams, J.D. Camm &
K. Martin (Chapter 3)
• Introduction to Management Science (11th ed.) by B.W. Taylor (Chapter 3)
(Chapter 4)
• Optimization Modeling with Spreadsheets (2nd ed.) by K.R. Baker (Chapter 4,
Appendices 2 & 3)
• Quantitative Analysis for Management (11th ed.) by B. Render, R.M. Stair, Jr. &
M.E. Hanna (Chapter 7)

MODULE 4: SPECIAL PROBLEMS IN LINEAR PROGRAMMING
Introduction
So far, the student has learned the general way of formulating and solving linear
programming models. There are linear programming problems that have unique or
special features/structures on their models which paved way to the development of
algorithms that particularly solve such problems. In this module, there are four special
LP problems covered: transportation, transshipment assignment and network models.
Network problems are further categorized as minimum spanning tree, maximum flow,
shortest route and project duration. The students are reminded that though these models
are special, these can be dealt or solved with the general Simplex Algorithm.
Learning Objectives
After working on this module, you should be able to:
1. Model appropriate situations as transportation, transshipment, assignment and

network problems;
2. Solve the given model using the appropriate manual solution algorithm; and
3. Solve the given model using at least one software.
4.1. Transportation Problems

The first special problem is the transportation problem. In this problem, the objective is to
minimize the total transportation costs by identifying the optimal number of goods or
units in general to be shipped from a source directly to a destination. Prof. Angelo Ani, in
his video titled, “Transportation Model,” introduced the problem with Example 1 [1:18].
After providing the network representation of the problem, Prof. Ani constructed the
corresponding transportation model and solved it first with Excel Solver.
Note that the problem in Example 1 showcased an unbalanced problem where the total
supply exceeds total demand. In this case, the appropriate general model is shown in
the left box at [12:13]. In fact, the model can also be used for balanced problems. When
total supply and total demand are equal (balanced problem), then one should expect that
all supply points are exhausted, and all requirements are met. Thus, it is safe to settle
with equal signs instead, as exhibited in the right box at [12:13]. Finally, when the total
demand exceeds the total supply, then the problem is deemed infeasible because the

premise is to satisfy the demand. However, if such shipments are allowed despite lack of
supply, an optimal solution is obtained by reversing the inequality signs in the general
model shown in the said left box. This signifies that supply points are exhausted while
only some requirements are met.
There are also problems that though do not literally involved shipping physical goods,
they can be modelled as transportation problems as illustrated in Example 2 [15:21]. In
this example, the departments and the product types are in essence the source and
destination points, respectively. Prof. Ani also demonstrated how to go about a situation
when there is an infeasible shipment (production in the case of Example 2) between a
source and a destination. Example 3 [22:05] and Example 4 [28:27] are similar to
Example 2 but are slightly more challenging. Meanwhile, the transportation problem is
also tackled by Prof. Ramon Miguel Panis in his video [1:56], “LP Modeling II,” in light of
his discussion on integer programming and binary integer programming. As a remark in
relation to the video of Prof. Panis, a transportation may not necessarily be an integer
programming problem. It depends on the nature of items or units being shipped.
To solve the problem manually, the transportation simplex algorithm is performed. The
algorithm requires three basic steps: 1) preparing the transportation tableau, 2) finding
an initial solution and 3) iterating the tableau until optimal solution is obtained. For the
first step, Prof. Ani introduced the transportation tableau in the early part of the video
[12:30] and demonstrated how to balance a transportation tableau using Example 1 (S1)
in the latter part [48:20] as required by the transportation simplex algorithm. Prof. Ani
proceeded then to finding an initial solution [49:58] for the problem using either the
Northwest Corner Method [51:00], Least Cost Method [57:31] or Vogel’s Approximation
Method (VAM) [1:02:22].
Study Question
Among these three, it is usually VAM that provides the best starting point since it
provides usually the lowest total transportation cost. What does this imply with respect to
the optimal solution and number of iterations required to find the optimal solution?
After obtaining an initial solution through any of the three, the balanced transportation
tableau was iterated using either the Stepping Stone Method [1:14:08] or Method of
Multipliers [1:24:26]. These methods basically follow the Simplex Algorithm learned in
Module 3 in terms of needing to find the leaving and entering variables. The stepping
Stone Method is more intuitive and easier to understand than the Method of Multipliers.

The latter method requires a more technical knowledge in Operations Research to
appreciate its mechanism.
Activity 4-2
Provide the corresponding LP model of Example 2 [15:21], Example 3 [22:05] and
Example 4 [28:27] using the general models as seen in the video [12:13],
“Transportation Model.” Afterwards, solve each problem or model using the programs
installed from Activity 3-1.
For software illustrations under transportation problems, the student is referred to the
following links:
• QM for Windows: https://www.youtube.com/watch?v=bqxSwz3DMKg
• Excel QM: https://www.youtube.com/watch?v=pF0M1YAoKYg
4.2. Transshipment Problems
The transshipment problem is a generalization of the transportation problem (hence, the

objective is to minimize total transportation or shipping costs) where there exist
intermediate nodes between the (original) supply and (final) destination points. These
intermediate nodes are termed “transshipment nodes.” Since intermediate, the node can
both supply and demand for units being shipped. In the video, “Transshipment Model,”
Prof. Angelo Ani introduced the transshipment problem by arguing that it may be
impossible or sometimes not economical to have direct shipments. Afterwards, Prof. Ani
walked the student through with the illustration of the problem and formulation of
transshipment models.
Optimal solution of the transshipment problem can be identified by solving the equivalent
transportation model. In other words, one needs to construct the equivalent
transportation tableau of the model and proceed as if solving a transportation model.
Prof. Ani worked with Example 1 [1:27] and Example 2 [7:56] to illustrate such. The
student is encouraged to visit the following link: https://www.utdallas.edu/~scniu/OPRE-
6201/documents/TP6-Transshipment.pdf, for further tutorial about constructing the
equivalent transportation tableau.
In the video of Prof. Ani, he did not show anymore how to iterate the equivalent
transportation tableaus using the Transportation Simplex Algorithm. Instead, he used
Excel Solver to obtain the optimal solution for each example following the same
procedures in transportation problem. Hence, it is emphasized herein that before
proceeding to transshipment problem, the student should already have a good
understanding of the transportation problem.
For the formulation of the transshipment model, the student is referred to the following
link (specifically at [38:56]): https://www.youtube.com/watch?v=A57v1EnUupk. The

constraints of the model follow the basic principle that inflow is equal to outflow, which
means that shipments from a node should total to shipments made into the node. This
principle should be understood by the student since it is also the basis of modelling the
constraints in the succeeding problems (shortest route, maximum flow and project
duration (CPM)).
Activity 4-2
In the “Transshipment Model” video, formulate the corresponding model of Example 1

[1:27] and Example 2 [7:56]. Also, solve the problems or models using applicable
programs (aside from Excel Solver Add-in) installed from Activity 3-1. Further, with
Example 1, perform the Transportation Simplex Algorithm.
4.3. Assignment Problems
Assignment problem is a special case of your transportation problem where each

“source” is assigned or matched to one “destination.” In essence, only one “unit” is
shipped between a “source” and a “destination” as the “source” can supply only one
“unit” and the destination can require only one “unit” as well. In the context of
assignment problem, sources can be workers which are assigned to destinations in the
form of tasks or jobs. It can also be possible that persons are paired.
The objective in assignment problem is to minimize the total assigning costs. In terms of
the model, it is noteworthy that the decision variables are binary in nature, they can take
only a value of one or zero. A value of one means that an assignment can be made
between a “source” and a “destination.” Otherwise, no assignment is observed. Prof. Ani
explained these well in his video, “Assignment Model.” Prof. Ramon Miguel Panis,
meanwhile, provided a supplementary video, “LP Modelling II,” on modelling assignment
problems found at [15:19] and [25:27].
The video of Prof Ani started with Example 1 [2:05] to illustrate the assignment problem.
The model is solved using Excel Solver. The example also illustrated that the same
technique in avoiding shipment or production (as that in transportation and
transshipment problems) can be applied to avoid undesirable assignments.
An algorithm designed to solve assignment models is the Hungarian Method. This

method is easy to execute but may take a while to reach the optimal solution depending
on the complexity of the assignment problem. Prof. Ani demonstrated this algorithm with
Example 2 [5:02] and Example 3 [11:36]. Note that the algorithm also requires a
balanced tableau and the same technique with that of transportation problem is
employed to balance a tableau.

The ease of performing the Hungarian Method does not reduce its mathematical
significance. The method was developed by capitalizing the structure of the assignment
model. Although, the method requires a more technical knowledge in Operations
Research to appreciate its mechanism.
Activity 4-2
Example 1 [2:05] in the video, “Assignment Model,” was solved through Excel Solver
Add-in. Construct the corresponding assignment model of Example 1 by following the
general model presented in the video [1:58]. Further, solve the model using the
Hungarian Method. Verify optimal solution obtained using the applicable programs
(aside from Excel Solver Add-in) installed from Activity 3-1.
For a tutorial on how to use the Excel QM to solve assignment models, the student is
referred to the following link:
documents.saintleo.edu/docs/GBA334/GBA334_Assignment_Problem_Using_QM.pdf.
4.4. Network Problems
To better appreciate the network problems and their respective network representations,
an introductory discussion on network theory is provided by Prof. Panis in his video
titled, “Network Theory 1.” Here, he discusses the basic elements of a network or graph
such as nodes, arcs, weights, cycle, directed and undirected arcs or paths, tree, branch,
etc. The student is reminded to keep these terms in mind to facilitate discussions in the
succeeding problems.
Minimum Spanning Tree Problems
From the video [7:07], “Network Theory 1,” one learned that a spanning tree is a tree
that connects all nodes in a graph. However, what we would like to have is spanning tree
that provides the least total distances between nodes. This describes the minimum
spanning tree problem, as introduced by Prof. Panis in [8:32]. Designing network wirings
and pipeline connections are just few of the many problems that can be modelled as
minimum spanning tree problem where the number or distances of connections are
minimized. This problem can be represented by a linear program which has a constraint
that guarantees the absence of cycles (recall that a tree has no cycles). We leave the
discussion on this elsewhere and focus on how to use solve a minimum spanning tree
problem without the model.
In the video [8:48], Prof. Panis discussed only one algorithm (Prim’s). The algorithm
starts with one node and then growing it into a minimum spanning tree is formed. This
algorithm is also demonstrated in the following link,

https://www.youtube.com/watch?v=Pn874kEc3IA. Another algorithm is the Kruska’ls
algorithm. This algorithm starts with a pair of nodes, instead, as shown in the video
contained in the following link: https://www.youtube.com/watch?v=5XkK88VEILk. This
method is easier because at each iteration, one does not locate each unconnected node
but instead locates only the least weight thereby connecting the associated nodes.
Activity 4-5
Using the example [8:48] used to demonstrate Prim’s Algorithm in the “Network Theory
1” video, use to solve the problem with Kruskal’s Algorithm. Further, solve the problem
using the applicable programs installed from Activity 3-1.
Shortest Route Problems
The shortest route problem involves determining the shortest route between two nodes.
A node may represent a coordinate or an intersection while an arc may represent
distance or time to travel between two nodes. The corresponding model aims to
minimize the total distance between two nodes. Prof. Panis, in his video [33:41], “LP
Modeling II,” presented how shortest route problems are modelled especially the
constraints. Such model is the same as the assignment problem where decision
variables can only take a value of 0 or 1. When the value is equal to one, it means that
one should pass through that arc being represented by that decision variable. This is to
ensure that that passing through multiple arcs simultaneously is prohibited. As for the
constraints, the principle is the same with that of transshipment problem.
There are two algorithms to solve a shortest route problem covered in the video,
“Network Theory 1” by Prof. Panis. These algorithms output the shortest route between
a desired start node and any other nodes in the network. Start and destination nodes are
also referred as source and sink nodes, respectively. Prof. Panis started with Dijkstra’s
(pronounced as “Days-tra’s”) Algorithm with the first example [13:17] and then presented
the second technique, commonly referred as the Dual LP technique, by working through
sample problems at [22:35] and [34:35]. The latter is based on the dual linear program
formulation of the shortest route problem. One obvious difference between the two is
that one (Dijkstra’s) starts with the start node while the other (Dual LP) starts with the
destination node.

Study Question
The examples at [13:17], [22:35] and [34:35] in the “Network Theory 2” video depict
directed graphs or network. If, however, there are undirected arcs in the network, how
would this then affect the modelling and solving process using the relevant algorithms?
A more general algorithm is the Floyd’s Algorithm. While the two algorithms earlier
provide the shortest route between a particular start node to any other nodes, the
Floyd’s Algorithm provides the shortest route between any two nodes. This means that it
can provide the shortest route for any combination of a desired start node and any other
node. An illustration of this algorithm is provided by the video contained in the following
link: https://www.youtube.com/watch?v=X6n30V6qCWU. The basic idea of this algorithm
is to check whether there is an incentive of passing through an intermediate node in
going from one node to another node. This means that if passing through an
intermediate node in going from one node to another would have shorter distance than
directly going from one node to another, then one must pass through that node.
Activity 4-6
In the “Network Theory 1” video, there were three examples at [12:17], [22:35] and
[34:35] presented that related to shortest route problem. For this activity, the student is
requested to do the following:
1. Formulate the corresponding models for each of the examples. Solve these
problems or models using the applicable programs installed from Activity 3-1.
2. Perform a manual execution of Dijkstra’s Algorithm to determine the shortest
route from Node A to Node G in Example [22:35] and from Node 10 to Node 1 in
Example [34:35].
3. Perform a manual execution of the Dual LP to determine the shortest route from
Node A to F in Example [12:17].
4. Perform a manual execution of Floyd’s Algorithm to determine the shortest route
from Node A to Node G in Example [22:35].
Maximum Flow Problems

This network problems involves determining the capacity of the network or the maximum
rate a which the material (e.g. fluid, data, cars) coming from the source node to sink
node. This problem for example involves maximizing the flow of oil through a pipeline
system, water through an aqueduct system and vehicles through a transportation

networks. The problem was illustrated and explained by Prof. Panis in his video,
“Network Theory 2.” To solve such problems, Prof. Panis illustrated the Ford-Fulkerson
Algorithm with two examples at [1:14] and [11:20]. Afterwards, he also explained the
concept of cut in relation to the solution. As a supplement, the student may also refer to
the video contained in the following link: https://www.youtube.com/watch?v=Tl90tNtKvxs.
Notice that this algorithm involves enumerating all possible paths from the source node
to the sink node which make the process cumbersome and trial-and-error by nature.
With this, it is usually rewarding to formulate the corresponding linear program of the
maximum flow problem and solve it using any software of choice. This video,
https://www.youtube.com/watch?v=Gvx7oG2pFCA, will teach one how to formulate the
model for a maximum flow problem. It is interesting to note that the way the flow
constraints are formulated follows the same process that of the transshipment and
shortest route problems.
Activity 4-7
In the video, “Network Theory 2,” construct the corresponding linear program for each of
the two examples at [1:14] and [11:20]. Further, solve the problems or models using the
applicable programs installed from Activity 3-1.
Project Duration Problems
A network model can be used also in project planning. The activities and their
relationships in a project can be illustrated as network either the activity-or-arc/arrow
(AOA) manner or activity-on-node (AON) manner. For AOA, an activity is represented by
two connected nodes. These nodes signify the start and end of the activity with the arc
representing the duration of the activity. On the other hand, as the term implies, AON
represents an activity through a single node and the duration of the activity is also
written in the node.
Meanwhile, the durations can be expressed either in deterministic or probabilistic terms.

With deterministic durations, these are known with certainty such that if an activity takes
10 days to complete, the duration is indeed 10 days. Meanwhile, with probabilistic
durations, these are expressed with uncertainty such that the same activity may most
likely be completed in 10 days but there are chances it can be finished as early as eight
days and as long as 12 days.
In project duration problem, the aim is to determine the duration of the project as
determined by the critical path. Prof. Panis, in “Network Theory 2” video [4:39], tackled
the Critical Path Method (CPM) following the AOA manner with deterministic durations.
Prof. Panis started with the description of critical and non-critical activities and the
concept of earliest start and latest completion/finish times and how these relate to
activities in the critical path. He then proceeded to the first example [16:55]. This was
followed by another example at [29:06]. The student is encouraged to visit the following

links before working through the said examples:
https://www.youtube.com/watch?v=gEBMPP0SOnU and
https://www.youtube.com/watch?v=xa2SFdbS1Oc. These two videos teach the student
more about AOA.
A CPM problem involves a model that can be constructed following the approach in
shortest route modelling except that the objective in CPM is to maximize the total flow
entering the network. The nature of the decision variables and the techniques in
expressing the constraints remain the same with that of the shortest route modelling.
Activities associated to decision variables with zero values are members of the critical
path and hence, determine the duration of the project which is the optimal z-value.
Meanwhile, the AOA representation is said to be more intuitive than AON because the
first clearly depicts the start and end points of an activity. However, the major drawback
of AOA is that the network representation gets complicated with the presence of dummy
activities especially when the number of activities increases, and the precedence
relationships become more complicated. It is for this reason the AON is thought to be
more straightforward in illustrating the network problem. The Project Evaluation and
Review Technique (PERT) basically uses the AOA representation.
PERT differs also from CPM because it considers probabilistic durations as described
earlier. It uses three time-estimates (optimistic, most likely and pessimistic estimates of
the duration) to determine the critical path and ultimately the duration of the project. For
a more comprehensive discussion and illustration about PERT, the student is referred to
the following link: http://tozalp.home.uludag.edu.tr/PERT.pdf
Activity 4-8
In the video “Network Theory 2,” formulate the corresponding linear program for the two
examples of CPM problems at [16:55] and [29:06]. Further, solve the problems or
models using the programs installed from Activity 3-1.
For a tutorial on how to use the QM for Windows to solve project duration problems, the
student is referred to the following link:
https://www.youtube.com/watch?v=ZODPznjzsgw

References
UPOU Videos:
• “LP Modeling II” by Prof. Ramon Miguel Panis, UPD
• “Transportation Model” by Prof. Angelo Ani, UPLB
• “Transshipment Model” by Prof. Angelo Ani, UPLB
• “Assignment Model” by Prof. Angelo Ani, UPLB
• “Network Theory 1” by Prof. Ramon Miguel Panis, UPD
• “Network Theory 2” by Prof. Ramon Miguel Panis, UPD

• https://www.youtube.com/watch?v=bqxSwz3DMKg
• https://www.youtube.com/watch?v=pF0M1YAoKYg
• https://www.utdallas.edu/~scniu/OPRE-6201/documents/TP6-Transshipment.pdf
• https://www.youtube.com/watch?v=A57v1EnUupk
• documents.saintleo.edu/docs/GBA334/GBA334_Assignment_Problem_Using_Q
M.pdf
• https://www.youtube.com/watch?v=Pn874kEc3IA
• https://www.youtube.com/watch?v=5XkK88VEILk
• https://www.youtube.com/watch?v=X6n30V6qCWU
• https://www.youtube.com/watch?v=Tl90tNtKvxs.
• https://www.youtube.com/watch?v=Gvx7oG2pFCA
• https://www.youtube.com/watch?v=gEBMPP0SOnU
• https://www.youtube.com/watch?v=xa2SFdbS1Oc.
• http://tozalp.home.uludag.edu.tr/PERT.pdf
• https://www.youtube.com/watch?v=ZODPznjzsgw

K. Martin (Chapter 6, 19, 20)
• Introduction to Management Science (11th ed.) by B.W. Taylor (Chapter 6, 7)
(Chapter 9, 10)
• Optimization Modeling with Spreadsheets (2nd ed.) by K.R. Baker (Chapter 3)
M.E. Hanna (Chapter 9, 11)
• Operations Research: An Introduction (8th ed.) by H.A. Taha (Chapter 5, 6)

MODULE 5: QUEUING
Introduction
The preceding modules presented or discussed models that are deterministic in nature.
This means that the values of the problem parameters are exact and do not deviate from
these values. This module on queuing, together with the succeeding module on
simulation, tackle probabilistic or stochastic models. Some parameters of the situations
being analyzed in these models are not constant. Instead, they follow certain probability
distributions, implying the presence of variability.
Queuing Theory, as a discipline, is the science of waiting lines. This module introduces
queuing and covers some of the basic queuing models. The material focuses on the
recognition of the corresponding models appropriate to common queuing situations.
Many examples dealing with different situations are provided so students can effectively
differentiate these models. Performance measures are then evaluated using available
queuing formulas and spreadsheet templates. The derivation of the formulas, however,
is beyond the scope of the material. If interested, one may refer to any standard
operations research book for sample derivations.
Learning Objectives
1. Describe a queuing system;

2. Evaluate the performance of a queuing system using different metrics of the
appropriate model; and
3. Use at least one software to compute queuing-related performance measures.
5.1. Queuing Systems
In his video “Queuing Theory,” Prof. Angelo Ani defined queuing theory as the
mathematical analysis of waiting lines in different forms and cases. A simple queuing
system has a queue where customers stay while they wait for service and a service
facility that contains at least one server which performs the service. It is also
emphasized that customers and servers are not necessarily humans as they may also
be inanimate objects such as machines, calls, and equipment. Waiting lines occur when
there is a temporary imbalance between supply (capacity) and demand.

A conventional way to describe a queuing system is through the Kendall-Lee notation.
This notation summarizes information about the distribution of the arrival and service
rates, number of servers, prioritization rule and maximum number of customers allowed
to enter and to stay in the system. Since the probability distributions of the inter-arrival
time and service time are of great importance in the analysis, one is expected to have a
considerable knowledge on the different statistical distributions. Prof. Ani included a brief
review of the useful distributions in the lecture [4:48].
Prof. Ani, in the same video, explained the set of performance metrics that characterize
queuing systems [13:50], and how Little’s Law provides the relationships among some of
these metrics [17:15]. In particular, most queuing systems are assessed in terms of the
average number of customers in queue (Lq) and in the whole system (L) and the
average waiting time of customers in queue (Wq) and in the whole system (W). Other
metrics include server utilization and probability of balking customers or those customers
who cannot enter the queuing system.
Before dwelling with the different queuing models covered in this module, the birth-and-
death model of Markovian queues is also presented. Markovian models assume that
interarrival times and service times are exponentially distributed. Since exponential
distribution exhibits the memoryless property, Markovian models are relatively more
mathematically tractable than non-Markovian counterparts while at the same time
capturing the variability displayed by realistic queuing systems. These computations
provided will be helpful when one wishes to derive queuing formulas, or when one
analyzes a Markovian queue that doesn’t follow all the assumptions of available simple
models. This introduction also presents common terms used in modelling queues such
as birth and death rates.
Activity 5-1
Objective: To identify instances where ETL would be necessary in an organization.
Task: From Activity 3-1, identify what data would need to undergo ETL. What would their
final forms be?
Tools & Resources (Video): Activity 3-1 and “Extraction, Transformation, and Loading”
by Raymond Lagria

5.2. Queuing Models
Examples of the different queuing models are discussed in the lecture material. The
analysis of the example usually follows this outline. First, a situation is provided with a
list of questions to be answered. Second, a Kendall-Lee notation appropriate for the
situation is established with a brief justification why such model is chosen. The rate
diagram corresponding to the model is likewise presented. Third, questions are
interpreted by translating them into mathematical expressions of the desired variables of
interest, usually performance measures. Lastly, questions are answered by substituting
problem parameters in appropriate queuing formulas. In most examples, too, a
spreadsheet template is shown illustrating how the values are automatically computed
after keying in the required inputs.
The following models are covered by the lecture material.
• M/M/1. This is one of the most basic queuing models. This is a Markovian queuing
model with a single server. In the runway example, the runway represents the server
while the planes are the customers. The second example deals with the queue in the
cashier of a grocery store. This example illustrates that even modest improvement in
the service time can lead to significant improvement in system performance.
• M/M/s. This is similar to the M/M/1 model except that the system has two or more
servers. The contact center example presents a common application of the model. It
also highlights how the number of servers affects the metrics. In the second example
concerning patients queuing for dentists, it is emphasized how an M/M/s model
differs from multiple M/M/1 models. One must focus attention to the performance
measures of the two alternatives presented so one can choose the better one.
• G/G/∞. The presence of infinite servers is a reality when the customers serve
themselves. Hence, this model is aptly called as the self-service model. It is
emphasized that the G/G/∞ model does not require the inter-arrival time or the
service time to be strictly exponential. Formula for the four major metrics (L, Lq, W,
and Wq) are available, while the additional formula for the steady-state probabilities
(Pn) is provided when inter-arrival time is Markovian (i.e., M/G/∞). The presence of
customers in a gym modelled as an M/G/∞ is used as an example.
• M/M/s/GD/K/∞. These are queues with limited system capacity. Examples provided
include a drive-thru queue where vehicle spaces are limited and a queuing system
for videoke booths in an amusement arcade. In this model, not all customers can
enter the system either because of a physical limitation such as unavailable queuing
spaces or because of customer behavior that prefers not to wait. Unlike in the
previous models where all customers are assumed to enter the system, some
customers in the M/M/s/GD/K/∞ left without even joining the queuing system.

Probability of balking is therefore nonzero. The example also shows how cost –
particularly cost of losing customers due to balking – is incorporated in the model.
The second example also provides two alternative manual ways of solving for the
performances measures. The first approach employs available formulas for the
model, while the second one uses concepts related to the birth-and-death model of
Markovian queues.
• M/M/s/GD/N/N. This queuing system assumes that the input population is finite. This
means that the number of customers that can enter the system is limited. In the first
example, the five machines that require setup act as the customers in the queuing
system with the employee as the server. Since there are only 5 machines, input
population is set at N = 5. The example also highlights how the model got its
alternative name – Machine-repair model – noting that the example can be modified
such that repair is performed on the machine instead of setup. Another example
discussing the queuing system in Supply Station of a hospital is also presented.
• M/G/1. In some situations with single server, the service time is not necessarily
exponential but the inter-arrival time is. These are modelled as M/G/1. The
Pollaczek-Khinchin equation may be tapped to evaluate the performance of the
system. Two examples are provided. In these examples, the effects of different
levels of variability in service times are explored and compared. It is concluded that
lower variability in service times leads to better system performance.
• Other Models. Two situations that do not perfectly fit the models above are
presented. The first one involves cooperating servers. This evaluates the
performance of a system where servers can are help one another when only few
customers are available to be served. The second one considers balking wherein the
arrival rate of customers that enter the system depends on the number of customers
already inside the system. These two models are considered as advanced and may
be skipped if desired. These two examples though illustrate how birth-and-death
analysis of Markovian queues can be employed to evaluate the systems.
Activity 5-2
• In the “Queuing Theory” video, solve the examples using the applicable
programs installed from Activity 3-1. Further, for familiarity with the formulas of
the different models, replicate the spreadsheet solutions presented in the video.
•
• For a tutorial on how to use the Excel QM to solve queuing problems, the student
is referred to the following link:
http://documents.saintleo.edu/docs/GBA334/GBA334_Queuing_Theory_Using_
QM.pdf.

•
• Supplementary materials can be accessed also in
http://people.brunel.ac.uk/~mastjjb/jeb/or/queue.html.
Study Question
Which of the following models result in zero waiting time in queue (i.e., Wq = 0): (a)
M/G/∞, (b) M/M/3/FCFS/6/6, (c) M/M/5/FCFS/5/∞?
While the major differences among the models are captured by the Kendall-Lee notation,
some subtle assumptions and characteristics of the models should be emphasized as
well.
• The models above assume that the arrival and service rates are stationary. This
means that rates do not exhibit fluctuations over time. There are no peak and lean
periods. This somehow limits the applications of the models as some real-life
queuing scenarios display observable patterns such as arrival of customers in fast
food outlets or arrival of vehicles in toll booths.
• Customers who are able to enter the system will patiently wait until the completion of
service. If some customers join the queue for some time but eventually become
impatient and leave, more complex models involving reneging must be employed.
Reneging is a customer behavior illustrated by a customer that already joins the
queue leaves prior to receiving service. Reneging is observed when a caller decides
to cancel a call to a contact center when he is put on hold for quite some time without
even connecting to an agent. Reneging is likewise experienced when a customer,
after spending time in queue, leaves the queue for a hair salon service when she
feels she cannot be serviced immediately. Reneging is different from balking as it
suggests that the customer already joins and spends some time in the queue, while
balking denotes that the customer does not enter or refuse to enter the queuing
system.
• As mentioned in the video [15:30], computed performance measures pertain to

steady-state performance. Thus, the values correspond to the part where the system
is already stable and disregards the portion when the system is just initializing or
transitioning to steady state. Transient analysis, which is relatively more complex, is
beyond the scope of the material.

Since results of queuing theory formulas are valid only when the assumptions of the
models are met, one must take caution not to haphazardly use a model without checking
the validity of necessary assumptions. Indeed, the rigorous requirements of these
models somehow limit their applications in real life. If situations do not perfectly follow
the conditions of model, one may opt to use simulation to evaluate the system
performance. Simulation will be introduced in the next module.
Knowledge in queuing theory helps in estimating effects of operational decisions such as

increasing number of servers, improving service times, provision of additional queueing
spaces, and reducing variability of service time perhaps y automating the service. It is
emphasized that the values of the performance metrics serve as basis or guidelines in
making decisions towards the improvement of the associated operation or process.
These values can be used also to compare the performance of two different queuing
systems.
Study Question
Increasing the number of servers in a queuing system basically improves the average
length of queue and the average waiting time of customers. However, there are several
considerations in doing so. Cite and explain at least three considerations.
Study Question
Consider a parking lot where vehicles enter the lot when a parking space is available.
Otherwise, an arriving vehicle immediately leaves. Identify if the statements below are
correct or not. Assume exponential inter-arrival time of vehicles and exponential stay
time of vehicles in the parking lot. The capacity of the parking lot is 40 vehicles.
a. The system has a finite system capacity.
b. Average waiting time in queue (Wq) can be improved by adding additional
parking spaces.
c. If average stay time of vehicle in the system is reduced, this will result in lower
probability of balking.

References
UPOU Videos:
• “Queuing Theory” by Prof. Angelo Ani, UPLB

• http://people.brunel.ac.uk/~mastjjb/jeb/or/queue.html
• http://documents.saintleo.edu/docs/GBA334/GBA334_Queuing_Theory_Using_
QM.pdf

(Chapter 17)
M.E. Hanna (Chapter 9, 13)

MODULE 6: SIMULATION
Introduction
From the basic linear programming problems to the special ones (transportation,
transshipment, assignment and network problems), we have so far worked with
optimization problems or techniques. Sometimes, a process or system may be difficult to
model as linear program due to its complexity. In this module, the concept of simulation,
a non-optimization technique, is introduced, and the Monte Carlo process of simulation
is discussed further.
Learning Objectives
1. Define simulation;
2. Discuss the simulation methodology; and
3. Illustrate Monte Carlo Simulation using at least one software.
6.1. Simulation
Simulation is the process of mathematically imitating the operation of a real-world

process or system to make inference about the performance of such process or system.
It is also performed when evaluating a performance of a proposed process improvement.
Hence, simulation is one of the techniques in prescriptive analytics. It is useful in
operations, scheduling and plant design problems in manufacturing, and queueing,
manpower assignment and process flow problems in services among other applications.
Prof. Christian John Immanuel S. Boydon explained the merits and reasons for using
simulation in his video, “Simulation.”
Study Question
Simulation does not provide optimal solutions unlike linear programming. Results in
simulation vary due to the probabilistic nature of the technique. Does this mean

simulation provide a less superior solution than any optimization technique?
6.2. Simulation Methodology
In the same video of Prof. Boydon, the simulation methodology was clearly discussed.
The methodology starts with the “capture” step where historical data are gathered, and
the parameters needed are identified. Afterwards, test data based on the parameters set
are generated together with the simulation model in the “imitate” step. The next step is
the “run and replicate” step where the verified and validated model is executed, and
proposed changes or alternatives are tried. Finally, the resulting data is evaluated using
analytical tools and implemented when necessary in the “test and evaluate” step.
6.3. Monte Carlo Simulation
One specific type of simulation is the Monte Carlo Simulation. This type utilizes statistical
sampling to produce probability distributions of possible outcome values based on the
probability distributions of input variables. The name “Monte Carlo” was selected as the
code for the classified technique during the WWII. The name was based on the famous
Monte Carlo casino in Monaco.
Prof. Boydon illustrated Monte Carlo Simulation using three spreadsheet examples, dice
simulation [6:18], simple queueing simulation [11:04] and simple inventory simulation
[26:51]. To appreciate the second example, the student should have sufficient familiarity
with the basic models of queueing at this point.
Study Question
Monte Carlo Simulation, as illustrated in the second example, can be applied to
queueing problems. Meanwhile, the basic queueing models and the corresponding
formulas to describe a queueing system were learned from the previous module. What
are the instances that favor the use of Monte Carlo Simulation to describe a queueing
system?

The student may refer to the supplementary video on Monte Carlo Simulation through
the following link: https://www.youtube.com/watch?v=Xr4a6Dw6qcc.
Activity 6-1
Think of a situation or process, preferably business in nature, and design a Monte Carlo
Simulation Plan. Identify the data needed and the parameters and variables of interest.
Afterwards, create the necessary spreadsheet and run the simulation at least 500 times.
An alternative to spreadsheet is the simulation module of QM for Windows software.

This software was Installed from Activity 3-1.
References
UPOU Videos:
• “Simulation” by Prof. Christian John Immanuel S. Boydon, UPD

• https://www.youtube.com/watch?v=Xr4a6Dw6qcc

• Essentials of Business Analytics by J.D. Camm, J.J. Cochran, M.J. Fry, J.W.
Ohlmann, D.R. Anderson, D.J. Sweeney & T.A. Williams (Chapter 11)
(Chapter 20)
M.E. Hanna (Chapter 14)

Exercise 1
Modeling with Linear Programming (Part 1)
Introduction
This exercise assesses the familiarity of the student with the components and assumptions of linear
programming. Further, this exercise develops the modeling skills of the student starting with basic linear
programming problems.
Problems
PART 1. Identification. Provide the required information.
For items 1-4, refer to the following problem:
The MMC company makes a dog food from several ingredients. Two of the ingredients, cereal and meat,
provide nutrient A and nutrient B. The company wants to know how many ounces of cereal and meat it
should include in each package of dog food to meet the minimum requirements of 48 milligrams of nutrient A
and 12 milligrams of nutrient B while minimizing cost. These requirements were based on the
recommendations of veterinarians. An ounce of cereal contributes 8 milligrams of nutrient A and 1 milligram
of nutrient B, whereas an ounce of meat contributes 6 milligrams of A and 2 milligrams of B. An ounce of
cereal costs $5.00, and an ounce of meat costs $3.00. Let x and x be the amount of cereal and meat (in
1 2
ounce) to be used, respectively.
(Most of the time, tabulating the information gathered makes modeling easier.)
Nutrient A Nutrient Cost
Ingredient
(milligrams per ounce) (milligram per ounce) ($ per ounce)
Cereal
Meat
Required (milligrams)
Provide what is required. Each item is worth 2 pts. For a total of 8 pts.
1. Objective function: ____________________________

2. Constraint related to Nutrient A: ____________________________
3. Constraint related to Nutrient B: ____________________________
4. Constraint to avoid negative amounts of cereal and meat to be used:
____________________________
For problems 5-8, refer to the following model claimed to be a linear program:
Max Z = 3x x + x + x
1 2 3 4

=0
Cite four instances in the model that will invalidate the claim. Each item is worth 1 pt. for a total of 4 points.
5. ____________________________
6. ____________________________
7. ____________________________
8. ____________________________
PART 2. Multiple Choice. Write the letter corresponding to your answer. Each item is worth 2 pts. for a total
of 8 pts.
ABC company produces two types of feeds, Mighties and Growies. Sorghum and corn are the two
ingredients of these feeds. Mighties requires one pound of sorghum while Growies requires two pounds of it.
Also, Mighties require two pounds of corn while Growies require one pound of it. There are 300,000 pounds
of sorghum and 200,000 pounds of corn available per month. Due to some limitations, the company can only
manufacture at most 80,000 packages per month. One package of Mighties is sold at Php 280.00 while for
Growies, Php 200.00. Note that the cost for blending and packing is Php 2.50 per package for Mighties and
Php 2.00 per package for Growies. Further, one pound of sorghum costs Php 2.00 while one pound of corn
is more expensive by Php 3.00. The company holds that it can sell packages as much as it can produce. Let
x and x be the number of packages of Mighties and Growies to be produced, respectively.
1 2
9. The statement “Let x and x be the number of packages of Mighties and Growies to be produced,
1 2
respectively” relates most to what component of linear programming models?

A. Constraints
B. Decision variables
C. Objective function
D. None of the above
10. Which of the following best illustrates the objective of the problem?
A. Max Z = 280x + 200x 1 2
B. Min Z = 2(x + 2x ) + 5(2x + x ) + 2.5x + 2x

1 2 1 2 1 2
C. Max Z = 280x + 200x – [2(x + 2x ) + 5(2x + x ) + 2.5x + 2x ]

1 2 1 2 1 2 1 2
D. Min Z = 280x + 200x – [2(x + 2x ) + 5(2x + x ) + 2.5x + 2x ]

1 2 1 2 1 2 1 2
11. Which of the following is not an appropriate constraint in the model?

A. x ≥ 0, x ≥ 0
1 2
B. x + 2x ≤ 300,000
1 2
C. x ≥ 80,000
1
D. 2x + x ≤ 200,000
1 2
12. Supposed that a fractional value of 4.2 packages for x is allowed, what assumption in linear 1
programming is observed?

A. Additivity
B. Certainty
C. Divisibility
D. Proportionality

Exercise 2
Modeling with Linear Programming (Part 2)
Introduction
This exercise is slightly more challenging the Exercise 1. The aim of this exercise is to encourage the
student to “think outside the box” and used the linear programming tricks learned previously in formulating
the required models.
Problems
Write the letter corresponding to your answer. Each item is worth 2 pts. for a total of 10 points.
1. Supposed that the objective function is Max Z=2x1+3x2+5x1+x2+1 given that 2x + 7x ≤ 23, which 1 2
among the following is not part of the equivalent LP model if we let y = tx ? i i
A. Max Z = 2y + 3y + 5t 1 2
B. y +y +t≥0
1 2
C. y +y +t=0
1 2
D. 2y + 7y ≤ 23t
1 2
2. Supposed that the objective function is Max Z = 3|x | + x considering that x + x = 5, which among
1 2 1 2
the following is not part of the equivalent LP model if we denote x = x -x ? i i

+
i
-
A. Max Z = 3(x + – x ) + x 1 1
-
2
B. x ,x,x≥0
1
+
1
-
2
C. x –x +x=5
1
+
1
-
2
3. Supposed that the objective function is Max Min {3x + x , x + 4x , x – x }, which among the following
1 2 1 2 1 2
is not part of the equivalent LP model considering that t = Min {3x + x , x + 4x , x – x }? 1 2 1 2 1 2
A. 3x + x ≥ t
1 2
B. x + 4x ≥ t
1 2
C. Max Z=t
D. All of the above
For item 4, refer to the following problem:
Consider MMC restaurant that is open seven days a week. Based on experience, the number of workers
needed on a particular day is given as follows:
Mon Tue Wed Thu Fri Sat Sun

Number 14 13 15 16 19 18 11
Every worker works five consecutive days, and then takes two days off, repeating this pattern indefinitely.
The aim is to minimize the number of workers that staff the restaurant given the workforce requirement for
each day? Let x be the number of workers who will start working on day i, i = Mon, Tue, Wed, Thu, Fri, Sat
i
and Sun.

4. Which among the following constraint is appropriate for the problem?
A. x + x + x + x + x ≥ 14
1 4 5 6 7
B. x + x + x + x + x ≥ 11
7 3 4 5 6
C. x + x + x + x + x ≥ 18
7 2 3 4 5
D. x + x + x + x + x ≥ 16
4 7 1 2 3
The products – model 1, 2, and 3 – are manufactured in the company’s departments. Model 1, 2, and 3 take
8 mins, 6 mins, and 10 minutes of labor time per unit, respectively, in the assembly department. A total of
100 man-hours is available in the said department. Meanwhile, if the finishing department produces only
model 1 in a day, it can produce a total of 800 units. If it produces only model 2, it can finish 900 units; and
only model 3, 600 units in a day. Let x , x , and x be the number of units of model 1, 2, and 3 to be produced
1 2 3
daily, respectively. Assume a linear model.
5. Setup the constraint(s) required to model the capacity of the assembly department.
A. 8x + 6x + 10x ≤ 100(60)
1 2 3
B. x /8 + x /6 + x /10 ≤ 100(60)
1 2 3
C. 8x ≤ 100(60), 6x ≤ 100(60), 10x ≤ 100(60)

1 2 3
D. x /8 ≤ 100(60), x /6 ≤ 100(60), x /10 ≤ 100(60)

1 2 3
6. Setup the constraint(s) required to model the capacity of the finishing department.
A. 8x + 9x + 6x ≤ 8(9)(6)
1 2 3
B. x /800 + x /900 + x /600 ≤ 1

1 2 3
C. x ≤ 800, x ≤ 900, x ≤ 600

1 2 3
D. 8x ≤ 8(9)(6), 9x ≤ 8(9)(6), 6x ≤ 8(9)(6)

1 2 3
For problems 7-9, refer to the following problem:
Products A and B are manufactured in a company. Both require the inputs X, Y, and Z according to 1:1:3
and 2:1:3 ratios, respectively. The costs per lb of the inputs are: X, $0.5; Y, $1.0, and; Z, $0.5. Inputs X and
Z have unlimited market supply but only 5,000 lbs of Y is available. The company can sell the products at $4
and $5 per lb of A, and B, respectively. Let x be the amount of input i (i=1 for X, 2 for Y, and 3 for Z) used to
ij
produce product j (j=1 for A, 2 for B). Let y be the total amount of product j produced. A linear program that
j
models the situation is formulated.
7. Which constraint is used to model the ratio of inputs of product A?

A. x + x + 3x = y
11 21 31 1
B. x + x + 0.33x = y
11 21 31 1
C. 0.2x = y 11 1
D. x = 0.2y
11 1
8. Which constraint is used to model the availability of resource Y?

A. x + x + x ≤ 5,000
12 22 32
B. x + x + x ≤ 5,000
21 22 23
C. x + x ≤ 5,000
21 22

D. x + x ≤ 5,000
12 22
9. Which of the following expressions models the total cost of resource X?

A. 0.5(x + x + x )
11 21 31
B. 0.5(x + x + x )
11 12 13
C. 0.5(x + x )
11 12
D. 0.5(x + x )
11 21
For problems 10, please refer to the following problem:
There are four investment opportunities that an individual can undertake. Marie wishes to invest in these
plans a total combined amount of Php 500,000. Let xi be the amount invested in plan i, i = 1, 2, 3, and 4.
She hopes to withdraw the money after one year, providing annual interest as shown. At most Php 100,000
can be allocated to Plan 3.
Plan 1 2 3 4
Return 12% 14% 16% 9%
10. Which of the following is not part of the appropriate LP?

A. Max Z = 1.12x + 1.14x + 1.16x + 1.09x
1 2 3 4
B. 1.12x + 1.14x + 1.16x + 1.09x = 500,000

1 2 3 4
C. x ≤ 100,000
3
D. x, x, x, x ≥ 0
1 2 3 4

Exercise 3
Solving Linear Programming Models: Graphical and Simplex Algorithm
Introduction
This exercise assesses the students understanding about the concepts and foundations related to the
graphical method and simplex algorithm as means of solving linear programming. Further, this exercise
serves as the stepping stone towards familiarity with several programs such as Excel Solver Add-in, QM for
Windows and Excel QM among others.
Problems
of 12 pts.
For items 1-3, refer to the graph of the feasible region of an LP below with objective function of Max Z
= 2x + 3x :
1 2
1. Which among the following points do not belong in the feasible region?
A. Origin
B. C
C. B
D. E
2. Which among the following points represents the optimal solution to the LP?
A. A
B. B
C. C
D. D

3. Which among the following objective function will make B as the optimal point?
A. Min Z = x 1
B. Max Z = x 2
C. Max Z = -2x + 3x 1 2
D. Min Z = 2x + 3x 1 2
For items, refer to the following iteration of an LP Problem with maximization objective:
BV Z x 1 x
2 s 1 s 2 s
3 Sol’n
Z 1 0 -30 60 0 0 360
x1 0 1 0 1 0 0 6
s2 0 0 1 0 1 0 4
s3 0 0 8 -6 0 1 12
4. What is the value of x ? 1
A. 1
B. 0
C. 6
D. Cannot be determined
5. Which among the following is the entering variable?

A. x1
B. x2
C. s3
D. s1
6. Which among the following is the leaving variable?

A. x1
B. s2
C. s3
D. x2
7. Which among the following is not a row in the simplex tableau after iterating the current tableau?
A. Z 1 0 0 75/2 0 15/4 405
B. S1 0 0 0 3/4 1 -1/8 5/2
C. X1 0 1 0 1 0 0 6
D. X2 0 0 1 -3/4 0 1/8 3/2

PART 2. Software Exercise. Using any software of choice, find the values of x , x , and Z for each LP
1 2
model. Print the generated results. Each problem is worth 2 pts. for a total of 6 pts.
Problem 7 Problem 8
Let Let
x – number of units of Product 1 to be soldx – number of units of Product 1 to be bought
1 1
x – number of units of Product 2 to be soldx – number of units of Product 2 to be bought

2 2
Max Z (Profit) = 4x + 4x 1 2 Min Z (Cost) = 8x + 12x

1 2
Subject to: Subject to:

3x + 5x ≤ 150
1 2 3x + 5x ≥ 9
1 2
x – 2x ≤ 10
1 2 2x + 2x ≥ 10
1 2
5x + 3x ≤ 150
1 2 6x + 2x ≥ 18
1 2
x, x ≥ 0
1 2 x, x ≥ 0
1 2
Answers: Answers:
x = ____________
1 x = ____________
1
x = ____________
2 x = ____________
2
Z = ____________ Z = ____________
Problem 9
Let
x – number of units of Product 1 to be produced
1

2

3

4
Max Z (Profit) = 90x + 84x + 70x + 60x

1 2 3 4
Subject to:
10x + 8x + 9x3 + 15x4 ≤ 5,000
1 2
2x + 3x + 3x ≤ 1,800
1 2 3
x + x + x + x = 600
1 2 3 4
x ≥ 150
3
x, x x, x ≥ 0
1 2, 3 4
Answers:
x = ____________
1
x = ____________
2
Z = ____________

Exercise 4
Sensitivity Analysis in Linear Programming
Introduction
This exercise assesses the student’s ability to perform and interpret sensitivity analysis results with the aid
of software tools such as Excel Solver Add-in.
Problems
A nutritionist-dietician wants to develop a meal at lowest cost that is rich is calories, calcium, fiber and
protein while low in fat and cholesterol. The nutritionist-dietician would like to consider the following food
items (with corresponding nutrient contribution and cost per unit) in making such meal.
Fat Cholesterol Iron Calcium Protein Fiber

Item Calories Cost
(g) (mg) (mg) (mg) (g) (g)
1. Bran cereal (cup) 90 0 0 6 20 3 5 $0.18
2. Dry cereal 110 2 0 4 48 4 2 0.22

(cup)
3. Oatmeal (cup) 100 2 0 2 12 5 3 0.10
4. Oat bran (cup) 90 2 0 3 8 6 4 0.12
5. Egg 75 5 270 1 30 7 0 0.10
6. Bacon (slice) 35 3 8 0 0 2 0 0.09
7. Orange 65 0 0 1 52 1 1 0.40
8. Milk – 2% (cup) 100 4 12 0 250 9 0 0.16
9. Orange juice 120 0 0 0 3 1 0 0.50

(cup)
10. Wheat toast 65 1 0 1 26 3 3 0.07

(slice)
Based on literature, the meal should observe at least 410 calories, 5 milligrams of iron, 350 milligrams of
calcium, 30 grams of protein, and 10 grams of fiber. Furthermore, fat content and cholesterol should not
exceed 20 grams and 30 milligrams, respectively.
If x to x represents the items in order, formulate the linear programming model and using Solver Excel
1 10
Add-in, generate the corresponding solution and sensitivity analysis report. Each question is worth 1 pt. for a
total of 20 pts.
Find the values of the following variables:

1. x = ______________
1

2. x = ______________
3
3. x = ______________
10
4. Z = ______________
Complete the following table by executing the specified changes:
Changes New Z value New x 2 New x

5
value value
1 unit increase in the fiber requirement 5. ___ ___ ___
$0.03 increase in oatmeal cost per cup increase 8. ___ ___ ___
2g increase in protein contribution of egg per unit 11. ___ ___ ___
When additional food item X is added (x ) with contributions twice

11 14. ___ ___ ___
higher than that of dry cereal per cup in all aspects.
17. To remain optimal, to what extent the calorie requirement can be increased?
18. To remain optimal, what should be the possible values for the fiber requirement?
19. To remain optimal, the allowable decrease in the costs of bacon per slice should be
______________.
20. To remain optimal, the allowable increase in the costs of dry cereal per cup should be
______________.

Exercise 5
Special Cases in Linear Programming
Introduction
This exercise familiarizes the students with the special cases in linear programming. The student is
expected at this point have a good grasp with the graphical illustrations/concepts of linear programming.
Problems
Each item is worth 2 pts. for a total of 20 pts.
For items 1-4, refer to the following set of models:
Formulatio Formulatio Formulatio

Formulation 3
n1 n2 n4
Max Z = 3x Max Z = 3x Max Z = 10x + 10x

1 1 1 2 Max Z = x 1
+ 2x 2 + 3x Subject to:
2 + 2x 2
Subject to: Subject to:2x ≤ 10 1 Subject to:

x +x ≥5
1 2 4x + 6x ≤ 48 2x + 4x ≤ 16
1 2 1 2 x ≤1
1
x ≥2
1 4x + 2x ≤ 12 4x ≤ 8
1 2 2 2x ≤ 2
2
2x ≥ 8
2 3x ≥ 3 2 x =6 1 x + 2x ≤ 2
1 2
x, x ≥ 0
1 2 2x ≥ 2 1 x, x ≥ 0 1 2 x, x ≥ 0
1 2
x, x ≥ 0
1 2
Using the graphical approach, determine which formulation is/has:
1. as correct as is: ___________________

2. more than one optimal solution: ___________________
3. unbounded: ___________________
4. infeasible: ___________________

For items 5-10, refer to Figure 1 and Figure 2 below:
Figure 2
Figure 1
5. Which between the two figures (1 or 2) illustrate unboundedness? ___________________

6. In Figure 2, which between the two objective functions (Objective fxn 1 or Objective fxn 2) will
illustrate the case of only optimal solution? ___________________
7. In Figure 2, which between the two objective functions (Objective fxn 1 or Objective fxn 2) will most
likely illustrate the case of multiple optimal solution? ___________________
8. Is there a redundant constraint (do not treat non-negativity constraint as redundant) in Figure 2?
___________________
9. Does the LP model represented in Figure 1 generate a degenerate solution?
___________________
10. Does the LP model represented in Figure 2 generate a degenerate solution?
___________________

Exercise 6
Transportation Problems
Introduction
This is the first exercise on special LP problems. This exercise tests the ability of the students to formulate
transportation models and solve it manually or through software.
Problems
of 14 pts.
A sand processing company transports sand bags from three plants to three construction sites. The supply
capacities of the three plants, the demand requirements at the three sites, and the transportation costs per
ton are as follows:
Construction Site
Plant Supply
1 2 3
1 $8 5 6 120 tons
2 15 10 12 80
3 3 9 10 80
Demand 110 tons 50 90
1. When the Northwest Corner Method is used, how many tons of sand bags should be transported
from Plant 2 to Construction Site 2 in the initial solution?
A. 10
B. 50
C. 20
D. 40
2. Which among the following constraints is not appropriate for the corresponding LP model of the
problem?
A. x + x + x ≤ $19.00
11 12 13
B. x ,x ,x ≥0
13 23 33
C. x + x + x ≥ 90
13 23 33
3. Which among the following

A. $2,310.00
B. $1,780.00
C. $1,570.00

Table 1. Initial solution with Northwest Corner Rule. Table 2. Initial solution with Least Cost Method.
Destination Destination Destination Destination Destination Destination
1 (1) 2 (2) 3 (3) 1 (1) 2 (2) 3 (3)
Source $8 5 6 Source $8 5 6
1 (1) x =120
11 1 (1) x =70
12 50
Source 15 10 12 Source 15 10 12
2 (2) 30 50 2 (2) 30 50
Source 3 9 10 Source 3 9 10
3 (3) 20 60 3 (3) 80
Dummy 0 0 0 Dummy 0 0 0
(4) 40 (4) 40
Table 3. Solution for a particular transportation problem. Table 4. Solution for a particular transportation problem.
Destination Destination Destination Destination Destination Destination
1 (1) 2 (2) 3 (3) 1 (1) 2 (2) 3 (3)
Source $8 5 6 Source $8 5 6
1 (1) x =120
11 (-8) (-9) 1 (1) x =30
11 (1) 90
Source 15 10 12 Source 15 10 12
2 (2) (10) 70 10 2 (2) (1) 70 10
Source 3 9 10 Source 3 9 10
3 (3) 30 (1) 50 3 (3) 80 (10) (9)
Dummy 0 0 0 Dummy 0 0 0
(4) (7) (2) 40 (4) 40 (4) (2)
Note: (Rate of improvement) Note: (Rate of improvement)
4. Which between Table 1 and Table 2 is better in terms of finding the optimal solution?
A. Table 1
B. Table 2
C. Both are equally advantageous
5. What is the rate of improvement associated to Dummy-Destination 1 cell in Table 1?

A. -5
B. -4
C. +6
D. 0
6. What is the leaving variable with reference to Table 3?

A. x 13
B. x 23
C. x 21
D. x 11
7. When Table 4 is iterated, what is now the total transportation cost?

A. $1,780.00
B. $1,570.00
C. $1,840.00
D. $2,310.00

Part 2. Software Exercise. Using any software of choice, find the optimal values of x ’s and Z for the
ij
transportation problem below. Print the generated results. Each item is worth 1 pt. for a total of 6 pts.
Mighty Utilities, Inc., supplies natural gas to customers in a three-county area. The company purchases
natural gas from two companies: Southern Tagalog Gas and Northwest Corner Gas. Demand forecasts for
the coming winter season are Hamilton John County, 450 units; Butler John County, 250 units; and
Clermont Voyance County, 350 units. Contracts to provide the following quantities have been written:
Southern Gas, 500 units; and Northwest Gas, 850 units. Distribution costs for the counties vary, depending
upon the location of the suppliers. The distribution costs per unit (in thousands of dollars) are as follows:
To
From
H.J. County (1) B.J. County (2) C.V. County (3)
S.T. Gas (1) 10 20 15
N.C. Gas (2) 12 15 18
Answers:
8. x11 = _______________
9. x12 = _______________
10. x13 = _______________
11. x21 =_______________
12. x22 =_______________
13. x23 = _______________

Exercise 7
Transshipment Problems
Introduction
This exercise tests the ability of the students to formulate transshipment models and solve it manually or
through software.
Problems
PART 1. Identification. Complete the following LP Model corresponding to the transshipment problem
depicted by the following figure. Each item is worth 1 pt. for a total of 9 pts.
Decision Variables:
Let x be the number of units to be shipped from
ij
node i to node j where i,j = 1, 2, 3, …, 8 such

that route i-j is feasible.
Objective Function:
1.______
Constraints:
Node 1: 300 = x + x + x 13 14 15
2.______: x + x + x = 100
37 47 57
Node 3: x + x = 3.______
13 23
Node 6: 4.______ = 200

5.______: x + x = x + x + x
14 24 46 47 48
Node 2: 6.______ = x + x + x 23 24 25
Node 8: x + x + 7.______ = 300

38 58
8.______ and to avoid negative values, 9.______
PART 2. Software Exercise. Solve the transshipment problem in Part 1 using any software of choice. This
problem is worth 11 pts.
Answers:
10. x = ___________________
13
11. x = ___________________
14
12. x = ___________________
23
13. x = ___________________
24
14. x = ___________________
25
15. x = ___________________
36
16. x = ___________________
37
17. x = ___________________
38
18. x = ___________________
46
19. x = ___________________
47
20. Z = ___________________

Exercise 8
Assignment Problems
Introduction
This exercise tests the ability of the students to formulate assignment models and solve it manually or
through software.
Problems
of 8 pts.
Below are the costs of assigning persons A, B and C to various tasks.
Task 1 Task 2 Task 3

Person A 800 1,100 1,200
Person B 500 1,600 1,300
Person C 500 1,000 2,300
1. Which among the following is not part of the corresponding assignment model if x denotes such
ij
assignment where i the person (A, B, C) while j is the task (1, 2, 3)?
A. x +x +x =1
A1 A2 A3
B. Min 800 + 500 + 500 + 1,100 + 1,600 + 1000 + 1,200 + 1,300 + 2,300
C. X +x +X =1
A1 B1 C1
2. If Person C should not be assigned to Task 2, what is the best way to avoid such assignment?
A. Assign lower costs to other assignments
B. Assign way higher cost for Person C – Task 2 assignment
C. Remove Person C and Task 2 in the assignment problem
D. There is nothing that we can do
PART 2. Identification. Provide the required information. Each item is worth 2 pts. for a total of 6 points.
Below is the final (optimal) assignment tableau following the Hungarian Method.
Dishwashing Ironing Cooking

Anna 3 4 0
Kate 0 0 5
Joyce 0 1 0
3. Anna should be assigned to what task? _______________

4. Ironing should be done by _______________.
5. Joyce should be assigned to what task? _______________
6. What is the minimum total assignment cost? _______________

PART 3. Software Exercise. Using any software of choice, find the optimal assignment schedule of the
assignment problem presented in Part 1. This problem is worth 10 points.
7. Person A should be assigned to ______________.

8. Person B should be assigned to ______________.
9. Person C should be assigned to ______________.
10. The minimum total assignment cost is ______________.

Exercise 9
Network Problems (Part 1)
Introduction
This is the first exercise on network problems. It covers minimum spanning tree and shortest route
problems. This exercise tests the ability of the students to solve the preceding problems manually or
software-aided.
Problems
of 12 pts.
The director of security wants to connect security video

cameras to the main control site from five potential trouble
locations. Ordinarily, cable would simply be run from each
location to the main control site. However, because the
environment is potentially explosive, the cable must be run in
a special conduit that is continually air purged. This conduit
is very expensive but large enough to handle five cables (the
maximum that might be needed).
1. If it makes no difference which one is the main control site, which among the following arcs is not
part of the minimum spanning tree?
A. 3-5
B. 1-5
C. 1-2
D. 2-3
2. What is the minimum distance route for the conduit between the locations?
A. 217
B. 177
C. 154
D. 202
CARD, Calamba Area Rapid Delivery, operates a delivery

service in the Calamba metropolitan area. Most of
CARD’s business involves rapid delivery of documents
and parcels between offices during the business day.
CARD promotes its ability to make fast and on-time

deliveries anywhere in the metropolitan area. When a
customer calls with a delivery request, CARD quotes a
guaranteed delivery time. The adjacent network shows
the street routes available. The numbers above each arc
indicate the travel time in minutes between the two
locations.
3. Which among the following paths is part of the optimal route going from node 1 to node 6?
A. 2→4
B. 4→5
C. 1→3
D. 5→6
4. How many minutes would be saved if the shortest route is taken instead of the route 1→3→5→6?
A. 5
B. 6
C. 1
Consider the distance and sequence tables of the optimal iteration in Floyd’s Algorithm:
Distance Table Sequence Table
1 2 3 4 5 1 2 3 4 5
1 - 6 3 5 8 1 - 4 1 3 2
2 4 - 7 1 2 2 2 - 1 2 2
3 3 3 - 2 5 3 3 4 - 3 2
4 5 1 8 - 3 4 2 4 1 - 2
5 5 1 6 2 - 5 2 5 5 2 -
5. Which among the following paths is not part of the shortest route from 1 to 6 conveyed by the
provided tables?
A. 3→4
B. 4→2
C. 2→5
D. 1→4
6. Which among the following paths is not part of the shortest route from 4 to 6 conveyed by the
provided tables?
A. 4→1
B. 4→2
C. 2→1
D. 1→3

PART 2. Software Exercise. Using any software of choice, provide the required information. This problem
is worth 8 pts.
Branch Start Node End Node Distance

1 1 3 10
2 3 7 11
3 6 7 8
4 3 4 2
5 4 7 4
6 1 5 6
7 4 6 3
8 1 2 5
9 2 5 10
10 5 6 7
If the information provided in the table is for a minimum spanning tree problem, identify 4 arcs included in
the minimum spanning tree.
7. _____________________
8. _____________________
9. _____________________
10. _____________________
If the information provided in the table is for a shortest route problem requiring route from node 1 to node 7,
identify 3 optimal paths and the minimum total distance.
Paths:
11. _____________________
12. _____________________
13. _____________________
Minimum Total Distance:
14. _____________________

Exercise 10
Network Problems (Part 2)
Introduction
This exercise covers maximum flow and project duration problems. This exercise tests the ability of the
students to solve the preceding problems manually or software-aided.
Problems
Software Exercise. Using any software of choice, provide the required information. This problem is worth
20 pts.
1. The adjacent figure illustrates a highway network system. Figures on arcs are expressed in
thousand vehicles per hour. Node 1 and Node 6 are the source and sink (destination) nodes,
respectively.
Answers:
What is the maximum number of cars that can pass through the highway network? _________________
In the optimal solution, how many cars can pass through arc 1-5? _________________
In the optimal solution, how many cars can pass through arc 4-6? _________________
2. Doug Casey oversees planning and coordinating next spring’s sales management training program
for his company. Doug listed the following activity information for this project:
Activity Description Immediate Predecessor Duration (Wks.)

A Plan topic - 2.5
B Obtain speakers A 6.0
C List meeting locations - 3.0
D Select location C 2.5
E Finalize speaker travel plans B, D 1.5
F Make final check with speakers E 3.0
G Prepare and mail brochure B, D 7.0
H Take reservations G 5.0
I Handle last-minute details F, H 2.5

Answers:
What is the critical path? __________________________________

How long (in wks.) will it take for the entire project to be completed? _________________

Exercise 11
Queuing (Part 1)
Introduction
This is the first exercise on queueing. It covers three models, namely: M/M/1, M/M/s and self-service
models. This exercise tests the ability of the students to solve the preceding models software-aided.
Problems
Software Exercise. Using any software of choice, provide the required information. Each item is worth 2
pts. for a total of 20 pts.
MBC Wholesale Fruit Distributors employ one worker whose job is to load fruit on outgoing company trucks.
Trucks arrive at the loading gate at an average of 24 per day, or 3 per hour, according to a Poisson
distribution. The worker loads them at a rate of 4 per hour, following approximately the exponential
distribution in service times.
1. Describe the problem in terms of the Kendall-Lee Notation. ___/___/___/___/___/___/

2. Find Wq. _________________
3. Find L. _________________
Relating to the second problem, the company believes that adding a second fruit loader will substantially
improve the firm’s efficiency. He estimates that the loading gate will double the loading rate from 4 trucks per
hour to 8 trucks per hour.

5. Find W. _________________
6. Find Lq. _________________
It is common in malls that children are left in playground areas alongside their respective guardian. In a
particular playground, a child plays on the average 15 minutes with 5 minutes deviation. Children come to
the playground at an arrival rate of 20 per hour following the Poisson distribution. Assume infinite capacity
for the 24/7 playground service.

8. How many children are expected to be found in the playground at any given point in time?
___________
9. What is the probability that there are at most 10 members in the playground? _________________
10. What is Wq? ________________

Exercise 12
Queuing (Part 2)
Introduction
This is the second exercise on queueing. It covers some of the remaining models in Module 5. This exercise
tests the ability of the students to solve the preceding models software-aided.
Problems
Software Exercise. Using any software of choice, provide the required information. Each item is worth 2
pts. for a total of 20 pts.
MBC Wholesale Fruit Distributors employ one worker whose job is to load fruit on outgoing company trucks.
Trucks arrive at the loading gate at an average of 24 per day, or 3 per hour, according to a Poisson
distribution. The worker loads them at a rate of 4 per hour, following approximately the exponential
distribution in service times. This time, the single-server or worker can handle only 30 trucks. If the truck can
no longer be accommodated, then it will go somewhere else.

2. Find the probability that there are 26 trucks in the system at any point in time. _________________
3. Find Lq. _________________
Relating to the second problem, the company believes that adding a second fruit loader will substantially
improve the firm’s efficiency. He estimates that the loading gate will double the loading rate from 4 trucks per
hour to 8 trucks per hour. Further, the 30-truck rule policy in the system is held.

5. Find Po. _________________
6. Find λave. _________________
A photocopying business has 6 photocopier machines. These machines are running except when they are
recalibrated by attendants. These machines may wait for an attendant to be available since the attendants
may be recalibrating other machines. There are three attendants, and each can recalibrate a machine for 15
minutes following the exponential distribution. After each recalibration process, each machine can run 3
hours before it requires another calibration.

8. What is the proportion of time that the attendants are all idle as all machines do not need
recalibration?
9. What is the proportion of time that the attendants are all busy as all machines need recalibration?
10. On the average, how long does a machine wait before serviced by an attendant?

Exercise 13
Simulation (Part 1)
Introduction
This is the first exercise on Monte Carlo Simulation. It requires the student to properly depict the problem,
identify the variables relevant to the simulation problem and execute simulation using a software.
Problem
Software Exercise. Using any software of choice, perform Monte Carlo Simulation 50 times to answer the
questions at the end of the problem. This problem is worth 20 points.
Dr. Phil Pines, a dentist, tries hard to schedule appointments so that patients do not have to wait beyond
their appointment time. His May 20 schedule is shown in the following table:
Patient Schedule Expected time needed

Art 9:30 am 15
Bryan 9:45 am 15
Chris 10: 00 am 30
Darren 10:30 am 10
Edna 10:40 am 20
Fe 11:00 am 15
Gina 11:15 am 20
Hunter 11:35 am 20
Not every patient arrives exactly on schedule, and expected times to examine patients are just that
expected. Some examinations take longer than expected, and some take less time.
Greenberg’s experience dictates the following:

a. 20% the patient will be 20 minutes early
b. 10% the patient will be 10 minutes early
c. 40% the patient will be on time
d. 25% the patient will be 10 minutes late
e. 5% the patient will be 20 minutes late
He further estimates that:

a. 15% of the time he will finish in 20% less time than expected
b. 50% of the time he will finish in the expected time
c. 25% of the time he will finish in 20% more time than expected
d. 10% of the time he will finish in 40% more time than expected

Dr. Pines has to leave at 12:05 pm on May 20 to catch his scheduled flight for vacation. Assuming that by
9:30 am, he is ready to work at 9:30 am. Further, the patients are treated in order of their scheduled exam
(even if one late patient arrives after an early one).
1. Will he be able to make the flight? In your simulation, how many times Dr. Pines will not be able to
catch his flight out of the 50 instances?
2. On the average, how many minutes does a patient wait for his turn?
3. On the average, how many minutes does the doctor need to wait for his scheduled patient?
4. Cite three other possible assumptions that will support your simulation.

Exercise 14
Simulation (Part 2)
Introduction
This is the second exercise on Monte Carlo Simulation. It requires the student to properly depict the
problem, identify the variables relevant to the simulation problem and execute simulation using a software.
Problem
Software Exercise. Using any software of choice, perform Monte Carlo Simulation 50 times to answer the
questions at the end of the problem. This problem is worth 20 points.
A car rental agency wants to determine how many rental cars it should maintain. By looking at previous
records, the agency determined probability distributions for the number of car rentals per day and the
duration (in days), as provided below:
Number of customers per day Probability Rental duration (days) Probability

0 0.20 1 0.10
1 0.30 2 0.20
2 0.40 3 0.50
3 0.10 4 0.15
5 0.05
1. Using a fleet of four rental cars for 20 days, compute the probability that the agency will not have a
car available upon demand. Should the agency expand its fleet?
2. Cite three assumptions held.

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University of the Philippines

Dr. Eugene Rex Jalao

COMMISSION ON HIGHER EDUCATION

University of the Philippines

Fundamentals of Prescriptive Analytics 1

Fundamentals of Prescriptive Analytics

At the end of the course, you should be able to:

1. Identify opportunities for optimization;

Fundamentals of Prescriptive Analytics 2

Your learning package for this course consists of:

Fundamentals of Prescriptive Analytics 3

Fundamentals of Prescriptive Analytics 4

Fundamentals of Prescriptive Analytics 5

Fundamentals of Prescriptive Analytics 6

For further reading, the following textbooks are suggested:

2. An Introduction to Management Ch. 2, 4, Ch. Ch. Ch. Ch.

Fundamentals of Prescriptive Analytics 7

3. Introduction to Management Science Ch. 2, 4 Ch. Ch. Ch. Ch.

4. Introduction to Operations Research Ch. Ch. 3 Ch. Ch. Ch. Ch.

7. Operations Research: An Ch. Ch. 2 Ch. Ch. Ch.

Fundamentals of Prescriptive Analytics 8

To pass the course, you must accomplish/perform the following:

Grades are reported according to the following conversions:

96%-100% 1.00 71%-75% 2.25

Fundamentals of Prescriptive Analytics 9

ABOUT THE FACULTY-IN-CHARGE

Fundamentals of Prescriptive Analytics 10

1.1. Business Analytics

Business Analytics refer to timely, accurate, high-value and actionable insights or

Fundamentals of Prescriptive Analytics 11

1.2. Prescriptive Analytics

There are three types of Business Analytics according to purpose, namely: 1)

1.3. Operations Research

As mentioned, prescriptive analytics involves optimization and simulation models. These

Fundamentals of Prescriptive Analytics 12

Is there a difference between “optimal” and “best” solution?

Other Online Resources:

Suggested Textbooks for Further Reading:

Fundamentals of Prescriptive Analytics 13

After working on this module, you should be able to;

1. Define linear programming model;

2.1. Definition of Linear Programming Model

2.2. Components of a Linear Programming Model

Fundamentals of Prescriptive Analytics 14

Meanwhile, the objective or goal is expressed as maximization or minimization of a

2.3. Assumptions in Linear Programming

2.4. Formulating Linear Programming Models

Fundamentals of Prescriptive Analytics 15

Data Warehousing (Video) by Mari Anjeli Crisanto

Fundamentals of Prescriptive Analytics 16

After working on this module, you should be able to;

3.1. Graphical Method

3.2. Simplex Algorithm

Fundamentals of Prescriptive Analytics 17

Fundamentals of Prescriptive Analytics 18

3.3. Sensitivity Analysis

Sensitivity analysis is done to answer what-if questions relating to changes in linear

Fundamentals of Prescriptive Analytics 19

3.4. Special Cases in Linear Programming

There are four special cases in linear programming: 1) alternative optima, 2)

Fundamentals of Prescriptive Analytics 20

• “Solving Linear Programming Models” by Prof. Simon Anthony Lorenzo