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Operations Research

Course Outline
Operations Research is the science of decision making and the art
of decision modelling. It is a set of quantitative tools used by the
managers to take decisions and formulate their business
strategies.
The basic objective of this course is to provide an understanding of
the important techniques used in decision making. A certain level
of mathematical hands-on expertise will be required to ensure
understanding of the tools in operations research. While
quantitative tools will be used to develop the understanding of the
complex business situations, the course will aim to develop the
management decision-making ability. The implementation of these
tools has been facilitated considerably by the development of
spreadsheet-based software package; we will make liberal use of
spreadsheet models.

Course Schedule
Session Topic
1. Linear Optimization - Introduction
2. Geometry and visualization of linear
programming
3. Linear Programming – Solver
4. Linear Programming – Sensitivity Analysis
5. Transportation problem – Formulation and
Solutions
6. Transportation problem – Formulation and
Solutions Quiz
7-10 Linear Programming – Case Study

Course Evaluation • Quiz 30% • Project 30% • End Term 40% Missed exams. unless excused in advance by permission. will result in a zero for that activity. . No make-ups are given. This policy is absolute and no exceptions will be made. unless documented extreme extenuating circumstances exist. Tests may cover any of the material discussed to date in the class.

68. 76. 30. 52. 60. 37. 44. 85-100 of 30 36 43 51 59 67 75 84 Marks Grade F D D+ C C+ B B+ A A+ s . Grading Pattern Range 0.

. cheating) will be dealt very seriously.Academic Integrity. Any kind of academic dishonesty (e. and to take responsibility for his/her actions. A student is expected to know what constitutes academic integrity (please go through student’s manual) to avoid committing an academic offence..g. plagiarism. .

The result was called Operations Research. The objective was to find the most effective utilization of limited military resources by the use of quantitative techniques. Operations Research Operations Research (OR) started just before World War II in Britain with the establishment of teams of scientists to study the strategic and tactical problems involved in military operations. .

• Integer programming: studies linear programs in which some or all variables are constrained to take on integer values. while the constraints must be specified with linear equalities and inequalities • Nonlinear programming: studies the general case in which the objective function or the constraints or both contain nonlinear parts. . • Quadratic programming: allows the objective function to have quadratic terms.Numerical Methods of Optimization • Linear programming: studies the case in which the objective function is linear and the constraints are specified using only linear equalities and inequalities.

.  Combinatorial optimization: is concerned with problems where the set of feasible solutions is discrete or can be reduced to a discrete one.Numerical Methods of Optimization (contd.  Dynamic programming: studies the case in which the optimization strategy is based on splitting the problem into smaller sub-problems.)  Stochastic programming: studies the case in which some of the constraints depend on random variables.

Goal of Optimization The goal is to find values for n decision variables X = (x 1. x2. The decision maker must choose values for the variables so that he is in a position to optimize his objective which may include • Maximize profit • Maximize utilization of equipment • Minimize cost • Minimize raw materials or resources • Minimize traveling time etc. The term operations research quite often is associated almost exclusively with the use of mathematical techniques to model and analyze decision problems. . etc. …. OR seeks the determination of the best (optimum) course of action of a decision problem under the restriction of limited resources. xn)..

Dantzig (1947) published “Programming in Linear Structure” • Kontorovich (1939) was published in 1959. .Linear programming • George B. • Koopmans coined the term “Linear Programming” (1948).

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Step 3. Express any hidden conditions. and express them mathematically.Problem Formulation Step 1. Step 2. Formulate the Objective Function: Determine the quantity to be optimized and express it as a mathematical function. Formulate the Constraints: Identify all stipulated requirements. Integer requirements. . Examples: non- negativity. Doing so serves to define the input variables. Such conditions are not stipulated explicitly in the problem but are apparent from the physical situation being modeled. restrictions and limitations.

Food Y contains 8 and 12 units of vitamin A and B respectively and costs 20p. Formulate the above as a L. .P.P. The daily requirements of vitamin A and B are 100 units and 120 units respectively. to minimize the cost. Example .1 Food X contains 6 units of vitamin A and 7 units of vitamin B per gram and costs 12p./gm./gm.

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7x + 12y  120. y 0. Let x and y represent the units of food X and Y respectively. So the objective function is min z = 12x + 20y subject to 6x + 8y  100. x. .

If the manufacturer makes a profit of Rs. Problem An automobile manufacturer makes automobiles and trucks in a factory that is divided into two shops. Shop A which perform the basic assembly operation must work 5 man days on each truck but only 2 man days on each automobile.man days per week. how many of each should be produced to maximize his profit? . 250 on each automobile. Shop B which perform finishing operations must work 3 man days for each automobile or truck that it produces. 300 on each truck and Rs. Because of men and machine limitations shop A has 180 man days per week available while shop B has 135.

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5 and Rs. . Blending. Formulate the problem to maximize profit. 7 respectively. Example 2. Market demand shows at least 150 units of gasoline X and 130 units of gasoline Y must be produced. The manager of an oil refinery must decide on the optimum mix of two possible blending processes of which the input and output production runs as follows: Input Output Crude A Crude B Gasoline Gasoline Y X 1 8 4 7 9 2 5 6 6 5 The maximum amount available of crudes A and B are 250 units and 200 units respectively.. The profit per production run from process 1 and process 2 are Rs.

000 units per quarter. Because the company’s production capacity is 125. 25 per unit and company policy is to charge an inventory holding cost of Rs. third and fourth quarters. Next year. particularly during the fourth quarter because Christmas sales makes the highest sales quarter of the year. 1 per hard drive per quarter for each unit in inventory at the beginning of a quarter.000 units in the first quarter followed by 100. . management estimates that the demand for a 10-GB hard drive will be 50. 50. Because demand has seasonal variations it is difficult to schedule production to keep costs to a minimum.000 units in inventory and wishes to end the last quarter with 20.000 in the second. during the slow seasons the company must produce extra hard drives and store them in inventory to help meet demand during the high seasons.000 units in inventory. Formulate a linear programming to determine how many hard drives should be produced in each quarter in order to minimize total cost.Hard Drivers Inc.000. Assume the company starts off the first quarter with 10.000 and 200. manufactures computer hard drives. The production cost of a hard drive is Rs.

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and construction loans. corporate bonds. (ii) at least 30% of the funds invested must be in precious mode.. International City Trust (ICT) invests in large cap stocks. To encourage a diversified portfolio. and (iv) the average risk score of the total investment must be 2 or less. precious metal stocks. . 5 million available for immediate investment and wishes to maximize the interest earned on the investments over the next year. the board of directors has placed several limits on the amount that can be committed to any one type of investment: (i) no more than 25% of the total amount invested may be in any single type investments.Portfolio Selection Problem. mortgage-backed securities. ICT has Rs. (iii) at least 45% invested in large cap stocks and corporate bonds.

9 . earned Risk Score Large Cap Stocks 19% 1.7 Corporate Bonds 10% 1. the following table shows the expected return over the next year as well as a score that indicates the risk associated with the investment Investment Int.For each type of investment.2 Gold Stocks 18% 3.7 Platinum Stocks 12% 2.4 Mortgage Securities 8% 2 Construction Loans 15% 2.

of operators required 0200 – 0600 2 0600 – 1000 8 1000-1400 10 1400-1800 5 1800-2200 4 2200-0200 1 An operator is on duty continuously for eight hours from the time of the duty commences. Example 5. (HR) The MTNL wants to know the minimum number of operators required to meet the daily requirement of the Jamshedpur telephone exchange: Time of day Minimum no. Formulate the LP model of the problem. .

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Each table sold with a profit of Rs. . Flair Furniture’s problem is to determine the best possible combination of tables and chairs to manufacture in order to reach the maximum profit. Each chair requires 3 hours of carpentry and 1 hour of painting and varnishing. The firm would like this production mix situation formulated as an LP problem. each chair produced is sold for a Rs. 7. 5 profit. The production process for each is similar in that both require a certain number of hours of carpentry work and a certain number of labor hours in the painting and varnishing department. During the current production period. 240 hours of carpentry time available and 100 hours of painting and varnishing time available. Each table takes 4 hours of carpentry and 2 hours of painting and varnishing shop. Flair Furniture Company The flair furniture company produces inexpensive tables and chairs.