Quantitative Analysis for Management – I

• Part I : Probability and Statistics
• Part II : Linear Programming and Extensions

Linear Programming
Graphical Method
LP formulation
Simplex Algorithm
Shadow Price and duality
Sensitivity analysis
Transportation Problem
Assignment Problem
Goal Programming

2, announced, (No make-up)
Assignment 1-2
Attendance and Time Keeping
Office hours : Wed/Th./Fr. 2:30-3:30 (Room 115)
E-mail : yka@iiml.ac.in

– Some unlearning may be required. Insight into its working. . – Learn LP from first principle.• Claroline Registration: – – – – – QAM-I (key: linprog) Ppts Assignment Quiz solutions Announcements and e-mails • Prior exposure to LP – Mechanics of algorithm vs.

W.I Linear Programming • Operations Research Research into operations Military Operations (W.Quantitative Analysis for Management .-II) Maximize effectiveness Mathematical modeling/analysis found useful Later applied to business operations H&L 1.1 The Origins of Operations Research .

Applications of LP • Linear Programming is the most widely used O.R. Model Production and Manpower planning Distribution/Logistics Planning Investment Planning Telecommunications Network Planning Airline Flight and Crew Scheduling Many others .


An Example • A Furniture Shop makes two Products (Table (T) and Chair (C) ) • Each requires two Resources (Carpentry/Woodwork (W) and Painting/Warnishing (P) ) • One Table needs 4 hours of Woodwork 2 hours of Painting • One Chair needs 3 hours of Woodwork 1 hour of Painting • Limited availability of resources 240 hours of W 100 hours of P .

• Each product yields different profit/unit T : $7 per unit C : $5 per unit • How much of each product should be produced so that Total Profit is maximized Resource requirement does not exceed availability • What is an Optimization Problem all about? Minimizing or Maximizing some Objective subject to certain restrictions. • Explore the structure of this problem • Study solution methods .Example Contd.

Exploring the Problem Product Resource Woodwork Table (T) Chair (C) Availability 4 3 240 Painting 2 1 100 Profit per unit $7 $5 Which is the more profitable product to produce? Chair or Table? If I produce only Tables. how many can I produce? How much profit do I make? Are the resources fully utilized? If I produce only Chairs. how many can I produce? How much profit do I make? Are the resources fully utilized? Can I get even higher profit by producing a mix? What is the right mix of Tables and Chairs that yields highest profit? .

67 420 3.75 1. Potential profit 1. Profit/hr.0 500 .5 5.Product Table (T) Resource Woodwork 4 Chair (C) Availability T 3 240 60 80 100 50 100 350 400 Painting 2 1 Profit $7 $5 Woodwrk Painting C Profit/hr.

20 .6 = 18 For each swapping of 4 chairs with 3 tables. and profit increases by $1. Difficult with many products and resources. 2 additional units of painting time get utilized.Resource Table (T) Chair (C) Woodwrk 4 Painting 2 Profit 66% 33% $7 3 Availability 75% 1 25% $5 240 100 70% 30% T 60 C Spare 80 0 50 100 350 400 Consider utilizing the spare painting time. But there is no woodwork time? How about sacrificing four chairs to make three tables? Change in profit? 73 – 54 = $1 How much Painting time is left now? 20 + 4 . How? Make some tables. What is the maximum number of times this swap can be made? 10 times! Rather complex trade-off analysis.

Operations Research Approach to Solving Decision Problems • Can the problem be described in mathematical terms? (Mathematical Modeling) Represent a decision making situtation using mathematical symbols and equations. • Form a mathematical model • Solve it using appropriate techniques • Interpret the results in terms of original problem .

of resource needed per unit of product .Elements of a Linear Programming Model • Decision Variables Quantities whose values the management wants to decide x1 : Number of Tables to produce x2 : Number of Chairs to produce • Parameters (Problem Data) Quantities that cannot be changed by management Profit per unit Resource availability Qty.

x2  240 Woodwork 2.x2  100 Painting b) Production Quantities x1 0.x1+3. x2  0 Functional Constraints cannot be negative Non-negativity Constraints . • Objective Function A mathematical function of decision variables.x1+1.x1 + 5.Elements of an LP .Contd. whose value the management wishes to minimize or maximize by controlling the values of decision variables Maximize Z = 7.x2 • Constraints Restrictions under which the decision must be taken a) Requirement  Availability for each resource 4.

x2 Subject to: 4. Learn how to formulate real life problems as LPs .x1 + 3.x1 + 1. x2  0 The above is an LP Formulation of the problem.Complete Model Maximize 7.x2  100 x1 . Study and Explore the mathematical structure. Learn techniques for solving it.x1 + 5.x2  240 2.

x2 = 6.x1 + 3.x1 + 3.Why call it Linear Programming • What do we mean by linear? Take the constraint 2.x2  6 Let x1 and x2 be coordinates on a graph paper Draw a graph of the equation 2. What does that graph look like? It is a straight line Linear: Things are proportional Double the production Profit gets doubled Raw material consumption is doubled .

Formulating a Linear Program • Before learning how to solve a linear program. • Formulate: To translate a given real world situation into a mathematical statement or model. . • Steps in Formulation: Fully comprehend the problem Identify Decision variables Identify objective function Identify constraints Must be linear Must not miss any constraints • More of an Art than a Science • Takes a good deal of practice and experience to formulate an LP correctly and efficiently. let us learn to Formulate one.

• Solve Formulation exercises at the end of Chapter 3 • Read Case Study 3. Personnel Scheduling. Controlling Air Pollution.4 Design of Radiation Therapy. Distributing Goods. Reclaiming Solid Wastes.1 Auto Assembly (page 92) (To be discusses in class next week) . Regional Planning.Self Study • Study the formulation examples in textbook H&L Section 3.