By: Rijalu Negash ( Ph.

D)
Email- rijalunegash@yahoo.com
Mob. 0917820457
1
 WELCOME TO:
Quantitative Analysis for
Management Decisions Making
Credit hours: 3
 CHAPTER ONE
Introduction to Quantitative
Analysis and Management Science
 1.1. Overview of Management Science
 The scientific management revolution of the early 1900s,
initiated by Frederic W. Taylor.
o Taylor provided the foundation for the use of quantitative
methods in management.
 Modern management science research is generally considered to
have originated during the World War II.
o At this period, teams were formed to deal with strategic and tactical
problems faced by the military.
o Teams, which often consisted of people with diverse specialties (e.g.,
mathematicians, engineers, and behavioral scientists), were joined
together to solve a common problem by utilizing the scientific method.
The objective of Operations Research is to provide a scientific basis to
the decision maker for solving the problems involving the interaction of
various components of an organization by employing a team of
scientists from various disciplines, all working together for finding a
solution which is in the best interest of the organization as a whole. The
best solution thus obtained is known as optimal decision”.

We can define an operations research model as some sort of mathematical or

theoretical description of various variables of a system representing some
aspects of a problem on some subject of interest or inquiry. The model enables
to conduct a number of experiment involving theoretical subjective
manipulations to find some optimum solution to the problem on hand.
• Developments that occurred during the post–World War II period
led to the growth and use of management science in non-military
applications.

• During the post World War II, researches conducted using

numerous methodological developments.

• The most significant development was the discovery by George

Dantzig, in 1947 of the simplex method for solving linear
programming problems.
1.2. Problem Solving and Decision Making
Problem solving: can be defined as the process of identifying a
difference between the actual and the desired state of affairs
and then taking action to resolve the difference.
 For justification and careful analysis of problem, the problem
solving process involves the following seven steps:
1. Identify and define the problem
2. Determine the set of alternative solutions;
3. Determine the criterion or criteria that will be used to evaluate the
alternatives;
4. Evaluate the alternatives;
5. Choose an alternative;
6. Implement the selected alternative, and
7. Evaluate the results to determine whether a satisfactory solution has
been obtained
 Decision making: is the process of identifying, analyzing and
choosing the best alternative from many analyzed alternatives to
implement it.

 If there is no alternative, then there is no need to worry about

decision-making.

 It is the term generally associated with the first five steps of the
problem solving process.

 Thus, the first step of decision making is to identify and define

the problem.
 Decision making ends with the choosing of an alternative, which
is the act of making the decision.
 Quantitative management approach is a scientific method to
solve management problems in order to help managers to make
better decision.

 It encompasses a number of mathematically oriented

techniques that have either been developed within the field of
management science.

 Quantitative management approach can be applied to some

problems in a variety of different types of organizations
including government, military, business and health care
institutions, etc.
1.2. Quantitative Approach to Problem Solving
 The management science approach follows a generally
recognized ordered set of steps of the following:

Observation

Problem
definition

Model
Construction
Feedback
Solution

Information

Implementation
1. Observation
 The first step in the application of quantitative management
approach is the identification of problem that exists in the
system of the organization.

 Thus, the system must be continuously and closely observed

so that problems can be identified as soon as they occur or are
anticipated.

 The problems are most of the time identified by a management

scientist, a person skilled in the techniques of management
approach and trained to identify problems.
2. Definition of the Problem
 Once the problem has been identified, it must be clearly and
concisely defined.
 Since the existence of a problem implies that the objectives of the
firm are not being met in some way, the goals or objectives of the
organization must be also clearly defined.
 The problem is an observed gap between what happened and
what ought to happen.
3. Model Construction 
 A management model is an abstract representation of an existing
problem situation.
 It can be in the form of a graph or a chart, but most frequently it
consists of a set of mathematical relationships that are made up
of numbers and symbols.
 Mathematical Models Cont’d

 Relate decision variables (controllable inputs) with

fixed or variable parameters (uncontrollable inputs).

 Frequently seek to maximize or minimize some

objective function subject to constraints.

 The values of the decision variables that provide the

mathematically-best output are referred to as the
optimal solution for the model.
 Mathematical Model Cont’d
 Models generally contain variables (controllable) and
parameters. Controllable variables are generally the
decision variables and are generally unknown.

 Parameters are known quantities that are a part of the

problem

02/09/2023 TADESSE TIKO(PhD) 14

 The problem definition phase leads to a specific
objective, such as maximization of profit or
minimization of cost, and possibly a set of restrictions
or constraints, such as production capacities.
 The success of the mathematical model and quantitative
approach will depend heavily on how accurately the
objective and constraints can be expressed in terms of
mathematical equations or relationships.
 A mathematical expression that describes the problem’s
objective is referred to as the objective function.

02/09/2023 TADESSE TIKO(PhD) 15

 For example:
 A business firm that sells product costs of $5 to produce and
sells for $20. A model that computes the total profit that will
accrue from the item sold is:
Z = $20x - $5x
 ‘x’ represents the number of units of the products that are produced and
sold.
 ‘z’ represents the total profit that results from the sale of the
product.
 The symbols ‘z’ and ‘x’ are variables.
 In addition, ‘z’ is a dependent variable because its value is
dependent on the number of units sold.
 ‘x’ is an independent variable since the number of units sold is
not dependent on anything else ( in this equation).
 The numbers $20 and $5 are called parameters.
 Parameters are constant values that are generally coefficients of
variables (symbols) in the equation.
 Parameters usually remain constant during the process of solving
a specific problem.
 The parameter values are derived from data (piece of
information) from the problem environment.

 For example: The selling price of $20 and product cost of $5 could
be obtained from the firm’s accounting department and would be
very accurate.
 The equation as whole is known as a functional relationship.
 Profit, ‘z’ is a function of the number of units sold, ‘x’ and the
equation relates profit to units sold.
 In this case, the relationship is a model of the determination of profit
for the firm.

 The model construction also indicates the objective function

constraints.
 To understand the objective function constraints, let’s see the
following example:
 The product is made from steel and that the business firm has 100
pounds of steel available. If it takes 4 pounds of steel to make each
unit of the product, we can develop the following mathematical
relationship.

4x= 100b of steel

 This equation indicates that for every unit produced, 4 of the
available 100 pounds of steel will be used. Now our model consists
of two relationships.
 
Z= $20x-$5x
4x=100
 We can say that the profit equation in this new model is called
an objective function, and the resource equation is a
constraint.
 In other words, the objective of the firm is to achieve as much
profit, z, as possible, but the firm is constrained from
achieving an infinite profit by the limited amount of steel
available.
 To signify this distinction between the two relationships in the
model, we will add the following notations:

Maximize Z = $20x-$5x
Subject to 4x=100
 
 This model now represents the manager’s problem of
determining the number of units to be produced as ‘x’.

 Thus, when we determine the value of ‘x’, it represents a

potential or recommended decision for the manager. Therefore,
‘x’ is also known as a decision variable.
4. Model solution
 Once models have been constructed in management science,
they are solved using the management science techniques.
 When we refer to model solution, we also mean problem
solution.
 For the model developed above and presented as below;
Z= $20x-$5x
Subjected to 4x=100
 
 The solution technique is a simple algebra. Solving the
constraint equation for ‘x’, we have:

4x=100
x = 100/4
x = 25 units
 Substituting the value of 25 for x in to the profit function results
in the total profit as follows:

Z =$20x-$5x
Z= $ 20(25) - $5 (25)
Z= $375
 Thus, if the manager decides to produce 25 units of the product,
the business firm will receive $375 as profit.
 5. Implementation of the Decision 
The quantitative approach provides information that can aid the
management in decision making.

 In making the ultimate decision, the manager must combine the

information obtained with his/ her own expertise and experiences.

If the manager does not use the information derived from the
management technique, the result are not implemented.

If the results are not implemented, the effort and resources that
went in to problem definition, model construction and solution
are unnecessarily wasted.
1.4. Quantitative Analysis Techniques  
 The management science deals with many techniques that can
help managers to make decision under certainty and uncertainty
conditions.
 The decisions that can be made on certainty conditions depend
on experience and past data of the organization.
 Under certainty conditions, different types of mathematical
programming techniques can be used for making decision when
the existing data become difficult to manually compute.
 The programming used to identify this technique does not refer
to computer programming, but rather to a predetermined set of
mathematical steps used to solve a problem.
 The mathematical programming techniques assume that all parameters
in the model are known with certainty.

 Therefore, the solution results are assumed to be known with the

certainty, with no probability
 A technique that assumes certainty in its solution is referred to
as deterministic.
 The decisions under uncertainty conditions are made with the
different degree of decision maker´s optimism.
 Decisions under risk conditions are made with the use of
probabilistic techniques with some possibility that alternative
solutions might exist.
1.5. Classification of Quantitative Analysis
Techniques
 1.6. Decision Making Under Condition of Certainty

In this type of decision making environment, there is only one type

of event that can take place.
 The decision maker has full and needed information to make
decision.

 The manager knows exactly what the outcome will be as he/she

has enough clarity about the situation, knows the resources, time
available for decision making.

 The nature of the problem itself, possible alternatives to solve the

problem, and undoubtedly clarity of certain with the result of
alternatives.
 In most situations, the solutions are already available from the
past experience or incidents and appropriate for the problem at
hand.
 For example: The decision to restock food supply, when the stock falls
below a determined level.

 In decision making under certainty, the situation can be mapped as

a table with one payoff column (One state of nature).

 Therefore, in making a decision, all one has to do is to compare all

the entries in the payoff column and select the alternative with the
highest profit or lowest cost.
 In executing such a comparison, one distinguishes between two
cases:

 When the number of alternatives is small, an approach known as complete

enumeration is used.

 When the number of alternatives is large, or even infinite, it is important to

search for the best solutions with the aid of mathematical models.
 I. Complete Enumeration:
Complete enumeration means examining every payoff,
one at a time, comparing the payoffs to each other and
discarding inferior solutions.
The process continues until all payoffs are examined.
Decision making under certainty involves the following
steps:
i. Determine the alternative courses of action;
ii. Calculate (assess) the payoffs, one for each course of action;
iii. Select the one with the best payoff (largest profit or smallest
cost) either by complete enumeration or by the use of
mathematical model.
 Example: Assignment of employees to machines: A maintenance crew of three
mechanists is to be assigned to the repair of three machines on one- to- one basis
in a manner that minimizes repair time. Based on historical data, the supervisor
knows the exact time, which varies with each person-machine match as shown
below in the table.

Machine
A B C
Machinist

4
Jack 3 7 Repair
Time
Gelu 4 6 6

Melat 3 8 5
 By comparing the total repair time for all possibilities, it is found
that alternative a6 is the best since the total repair time is the
smallest as shown below.

Alternatives Total payoff

(Total repair time)
a1: Jack-A, Gelu-B, Melat- C 3+6+5= 14
a2: Jack A, Gelu-C, Melat- B 3+6+8 = 17
a3: Jack-B, Gelu-A Melat-C 7 +4+5 =16
a3: Jack-B, Gelu-C, Melat-A 7+6+3 = 16
a5: Jack-C, Gelu-A, Melat-B 4+4+8 = 16
a6: Jack-C, Gelu-B, Melat-A 4+6+3 = 13
 II. Computation with Mathematical Model
While complete enumeration is an effective approach in many
situations, there are two cases in which it does not work at all
or works very poorly due to the following reasons:
i. When there is infinite number of alternatives for solving managerial
problems such as allocation of resources, or blending liquid
materials.
 To cope with these problems, models such as linear programming are to be
used.
ii. Problems with finite but large number of alternatives.
 In these cases, it is possible to enumerate all the alternatives, but it
may take years to do so even with the aid of high speed computers.
Therefore, special mathematical models need to be used.  
Questions?
 CHAPTER TWO

LINEAR PROGRAMMING MODELS

 LEARNING OBJECTIVES
 Understand basic assumptions and properties of linear
programming (LP).
 Formulate linear programming models
 Use graphical solution procedures for LP problems
 Understand special situations such as optimal solutions
in LP problems.
 Apply the steps of simplex methods for solving linear
problems.
 2.1. INTRODUCTION TO LINEAR
PROGRAMMING/LP
 Management decisions in many organizations involve trying
to make most effective use of resources (machinery, labor,
money, time, warehouse space, and raw materials) in order
to:
Produce products - such as computers, automobiles, or
clothing or
Provide services - such as package delivery, health
services, or investment decisions.
 To solve problems of resource allocation one may use
mathematical programming.
 Introduction
• Mathematical programming is used to find the best or
optimal solution to a problem that requires a decision
or set of decisions about how best to use a set of
limited resources to achieve a state goal of objectives.
Steps involved in mathematical programming
– Conversion of stated problem into a mathematical
model that abstracts all the essential elements of the
problem.
– Exploration of different solutions of the problem.
– Finding out the most suitable or optimum solution.
• LP-requires that all the mathematical functions in the
model be linear functions.
• LP- A model consisting of linear
relationships representing a firm’s
objective and resource constraints

• LP is a mathematical modeling technique

used to determine a level of operational
activity in order to achieve an objective,
subject to restrictions called constraints
 Why Talk About Linear Programming?

• LP is simpler than NLP, hence, good for a foundation

• Linearity has some unique features for optimization
• A lot of problems are or can be converted to a LP
formulation
• Some NLP algorithms are based upon LP simplex method

 Moreover, LP applied extensively to management

problems areas like:-
 Material, transportation, operations,
 financial, marketing, accounting,
 human resources, and warehousing
40
 LP Model Formulation

Max/min z = c1x1 + c2x2 + ... + cnxn

subject to:
a11x1 + a12x2 + ... + a1nxn (≤, =, ≥) b1
a21x1 + a22x2 + ... + a2nxn (≤, =, ≥) b2
am1x1 + am2x2 + ... + amnxn (≤, =, ≥) bm

xj = decision variables
bi = constraint levels
cj = objective function coefficients
aij = constraint coefficients

Copyright 2006 John Wiley &

Supplement 13-41
Sons, Inc.
LP MODEL COMPONENTS AND ASSUMPTIONS
COMPONENTS
The components are the building blocks of an LP model
I. The Objective Function - is the mathematical or
quantitative expression of the objective of the
company/model, in terms of decision variables. The
objective in problem solving is the criterion by which all
decisions are evaluated.
In LPMs a single quantifiable objective must be specified
by the decision maker. For example, the objective might
relate to profits, or costs, or market share, but to only
one of these. Moreover, because we are dealing with
optimization, the objective will be either maximization or
minimization, but not both at a time.
II. The Decision Variables - represent unknown
quantities to be resolved for. These decision variables
may represent such things as the number of units of
different products to be sold, the amount of Birr to
be invested in various projects, the number of ads to
be placed with different media.
-Since the decision maker has freedom of choice
among actions, these decision variables are
controllable variables.
III. The constraints - are restrictions which define or limit
the feasibility of a proposed course of action. They limit the
degree to which the objective can be pursued.
Atypical restriction embodies scarce resources (such as
labor supply, raw materials, production capacity, machine
time, storage space), legal or contractual requirements (e.g.
Product standards, work standards), or they may reflect
other limits based on forecasts, customer orders, company
policies etc

IV. Parameters - are numerical coefficients or constants

values that specify the impact that one unit of each
decision variable will have on objective function and
constraint equations
 Assumption of LP Models
i. Linearity. The linearity requirement is that each decision variable
has a linear impact on the objective function and in each
constraint in which it appears. It is required that the same
coefficient apply over the entire range of possible value so the
decision variable.
ii. Divisibility. The divisibility requirement pertains to potential
values of decision variables. It is assumed that non-integer values
are acceptable. For example: 3.5 TV sets/hr
iii. Certainty. The parameters values are known and constant.
Moreover, all the relevant constraints identified and represented in
the model are as they are.
iv. Non-negativity. The non-negativity constraint is that negative
values of variables are unrealistic and, therefore, will not be
considered in any potential solution; only positive values and zero
will be allowed.
Types of LP
 Examples of LP Problems (1)
1. A Product Mix Problem-The decision maker wishes to
produce the combination of products that will maximize
total income.
2. A Blending Problem-The problem is to determine how much
of each commodity should be purchased and blended
3. A Production Scheduling Problem-The problem is to
determine the production schedule that minimizes the sum
of production and storage costs.
4. A Transportation Problem-The problem is to determine the
amount to be shipped from each origin to each destination
such that the total cost of transportation is a minimum.
5. A Flow Capacity Problem-The problem is to determine the
maximum flow, or capacity of the network.
 BASIC STEPS OF DEVELOPING A LP MODEL

1. Identification of the problem as solvable by LP: At

this step, the problem that needs solution to be
identified and checked whether to be solved by LP.
2. Formulation of the Model
 One of the most important phases in the solution of LP
problem, which translates words in to an objective function
together with the set of constraints.
 It refers to the transformation of word problems in to a
mathematical model that needs solutions.
 BASIC STEPS OF DEVELOPING A LP MODEL
 The main steps in model formulation:
i. Determine what the specific objective is. That is maximize profit
or minimize cost, keeping in mind the limited resources available
through appropriate combination.
ii. Assign variables to each of the unknown quantities to be solved
such as profit, cost, number of products to be produced, etc.
iii. Find a mathematical expression that represents the objective in
terms of the unknowns.
iv. Find mathematical expressions that represent any limited resources
(constraints) in terms of unknowns.
v. Include any additional constraints that are not explicitly stated in
the problem ( Example: the decision variables must be non-
negative).
 BASIC STEPS OF DEVELOPING A LP MODEL

3. Solution
 Mathematical relationships resulting from formulation process
are solved to identify optimal solution.
4. Interpretation and What-if Analysis
 Problem solver or analyst works with the manager to:
o Interpret results and implications of problem solution.
o Investigate changes in input parameters and model
variables and impact on problem solution results.
 FORMULATION OF A LP MODEL

• A common LP application is product mix problem.

o Two or more products are usually produced using
limited resources - such as personnel, machines, raw
materials, and so on.
• Profit firm seeks to maximize is based on profit
contribution per unit of each product.
• Firm would like to determine -
o How many units of each product it should produce in
order to maximize overall profit given its limited
resources.
2.2. Maximization & Minimization
Model Example:
 PROBLEM DEFINITION:
MAXIMIZATION PROBLEM

• Product mix problem of Pottery Company

• How many product A and Product B should be
produced to maximize profits given labor and materials
constraints?
• Product resource requirements and unit profit:
Resource Requirements
Labor Row mater Profit
Product
(hr/unit) (lb/unit) ($/unit)
Product A 1 4 40
Product B 2 3 50
Resource 40 120
PROBLEM DEFINITION EXAMPLE CONT’D

Resource 40 hrs of labor per day

Availability: 120 lbs of Row Material
Decision Variables x1 = number of product A to produce per day
x2 = number of product B to produce per day
Objective Maximize Z = $40x1 + $50x2
Function: Where Z = profit per day
Resource 1x1 + 2x2  40 hours of labor
Constraints: 4x1 + 3x2  120 pounds of clay
Non-Negativity x1  0; x2  0
Constraints:
MODEL FORMULATION EXAMPLE

Complete Linear Programming Model:

Maximize Z = $40x1 + $50x2

subject to: 1x1 + 2x2  40
4x1 + 3x2  120
x1, x2  0
 2.2.1. Graphical Solution Method

1. Plot model constraint on a set of coordinates

in a plane
2. Identify the feasible solution space on the
graph where all constraints are satisfied
simultaneously
3. Plot objective function to find the point on
boundary of this space that maximizes (or
minimizes) value of objective function

Copyright 2006 John Wiley &

Supplement 13-57
Sons, Inc.
Graphical Solution: Example Maximization
Maximize Z = $40x1 + $50x2
subject to: 1x1 + 2x2  40
4x1 + 3x2  120
x1, x2  0
x2
50 –

40 – 4 x1 + 3 x2 120 lb

30 – Area common to
both constraints
20 –
x1 + 2 x2 40 hr

10 – | | | | | |
10 20 30 40 50 60 x1
Copyright 2006 John Wiley &
Supplement 13-58
Sons, Inc.
0–
MAXIMUM SOLUTION COORDINATES:

Maximize Z = $40x1 + $50x2

subject to: 1x1 + 2x2  40
4x1 + 3x2  120
x1, x2  0

The set of all points that

satisfy all the constraints of
the model is called a feasible
region
Optimal Solution Coordinates
 Extreme Corner Points

x1 = 0 bowls
x2 x2 =20 mugs
x1 = 24 bowls
Z = $1,000
x2 =8 mugs
40 –
Z = $1,360 x1 = 30 bowls
30 – x2 =0 mugs
Z = $1,200
20 – A

10 – B
| | | C|
0–
10 20 30 40 x1

Copyright 2006 John Wiley &

Supplement 13-60
Sons, Inc.
Locating the Solution Corners
 Evaluate the objective function, that is the
maximum profit
Corners ZMax= $40x1 + $50x2
O (0,0) 0
A (0,20) $1000
C (30,0) $1200
B (24,8) $1360

Slack (unused) = Requirement – Production

1x1 + 2x2  40……..24 +2(8)=40 …….(40-40=0)
---Slack = Zero hours of labor
 4x1 + 3x2  120…….4(24) +3(8)=120…..(120-120=0)
---Slack = Zero pounds of Row Material
 Minimization Problem

CHEMICAL CONTRIBUTION
Brand Nitrogen (lb/bag) Phosphate (lb/bag)
Gro-plus 2 4
Crop-fast 4 3

Minimize Z = $6x1 + $3x2

subject to
2x1 + 4x2  16 lb of nitrogen
4x1 + 3x2  24 lb of phosphate
x1, x2  0
Copyright 2006 John Wiley &
Supplement 13-62
Sons, Inc.
 Graphical Solution
x2

14 – x1 = 0 bags of Gro-plus
x2 = 8 bags of Crop-fast
12 –
Z = $24
10 –
A
8– Z = 6x1 + 3x2

6–

4–
B
2–
C
| | | | | | |
0–
2 4 6 8 10 12 14 x1
Copyright 2006 John Wiley &
Supplement 13-63
Sons, Inc.
Evaluate the objective function, that minimize
cost
Corners ZMin= $40x1 + $50x2

A (0,8) $24
C (8,0) $48
B (4.8,1.6) $33.6

 Surplus
2x1+4x2 = 16...... 2 (0) +4 (8) =32.... ...(32-16=16 lb of nitrogen as surplus)
4x1+3x2=24...... 4(0)+3 (8)=24........... (24-24=0 lb of phosphate)

NB-The procedure for a minimization consists of the same steps as

maximization except considering with all  constraints…….Surplus
“” sign
 2.2.2. The simplex method for solving LP models
 Simplex method is a linear-programming algorithm that can solve
problems having more than two decision variables.
 The simplex method is an iterative technique that begins with a feasible
solution that is not optimal, but serves as a starting point
 The simplex technique involves generating a series of solutions in
tabular form, called tableaus.
 By inspecting the bottom row of each tableau, one can immediately tell
if it represents the optimal solution.
 Each tableau corresponds to a corner point of the feasible solution
space.
 The first tableau corresponds to the origin.
 Subsequent tableaus are developed by shifting to an adjacent corner
point in the direction that yields the highest (smallest) rate of profit
(cost).
 This process continues as long as a optimal level of profit (cost)
Step 2- Develop the initial tableau: the initial tableau always represents the “Do
Nothing” strategy, so that the decision variables are initially non-basic.
A. List the variables across the top of the table and write the objective
function coefficient of each variable jut above it.
B. There should be one row in the body of the table for each constraint.
List the slack variables in the basis column, one per raw.
C. In the Cj column, enter the objective function coefficient of zero for
each slack variable. (Cj - coefficient of variable j in the objective
function)
D. Compute values for row Zj
E. Computer values for Cj – Zj.
Step-3. Develop subsequent tableaus
3.1. Identify the entering variable - a variable that has a largest
positive value is the Cj – Zj raw.
3.2. Identify the leaving variable - Using the constraint coefficients
or substitution rates in the entering variable column divide each
one into the corresponding quantity value. However do not divide
by a zero or negative value. The smallest non-negative ratio that
results indicate which variable will leave the solution.
 The Simplex Method for Solving LP Models
Initialization: setup to start iterations, including
finding an initial CPF solution

Optimality test: is the CPF solution

optimal?

if no if yes stop

Iteration: Perform an iteration to find a

better CPF solution
• NB-The simplex procedure for a
minimization consists of the same steps
as maximization except considering with
all  constraints…….Surplus “” sign
 Simplex Algorithm-
Minimization problem

71
 B. Simplex Algorithm- Minimization problem
 Some of the important aspects of minimization problem
1. Artificial variables have no economic significance
• Introduced only to bring in the standard form of simplex
method.
• Need be removed from the solution as soon as they become non-
basic. 
2. Since these variables are added for computation purpose only,
• ensure their zero value in the optional solution.
• This can be done by assigning very large penalty (+M) for a
72
minimisation problem, so that these do not enter the solution.
 Cont’d…
3. If artificial variables cannot be removed from the solution,
then the solution so obtained is said to be Non-Feasible. This
would indicate that the resources of the system are not
sufficient to meet the expected demand.
4. Equality Constraints also can be handled by using artificial
variables to obtain initial solution.

73
 Cont’d…
 Big M-Method
 In this method, we assign the coefficients of the artificial
variables, as a very large positive penalty i.e., +M
therefore called Big M-method.

74
 Cont’d…
 The Big M-method for solving LP problem can be adopted
as follows:

Step 1 : The standard simplex table can be obtained by

subtracting a surplus variable and adding an artificial
variables.
 Slack variables are assigned zero coefficients and artificial
variables assigned +M coefficients in the objective
function.
Step 2: We obtain initial basic feasible solution by assigning
zero value to the decision and slack variables. 75
 Cont’d…
Step 3: Initial basic feasible solution is obtained in the form
of the simplex table as above and then values of ∆j = Cj - Zj
are calculated.
If ∆j ≥0, then the optimal solution has been obtained.
If ∆j< 0, then we select the largest negative value of ∆j and
this column becomes the key column indicating the entering
variable.

76
 Cont’d…
Step 4: Determine the key row as in case of maximisation
problem i.e., selecting the lowest positive value of the ratio Q
or bi/aij, obtained by dividing the value of quantity bi by
corresponding element of the key column.

77
 Cont’d…
 Step 5: Repeat steps 3 and 4 to ensure optimal solution
with no artificial variable in the solution. If at least one
artificial variable is present in the basis with zero value
and coefficient of M in each Cj - Zj values is negative, the
LP problem has no solution. This basic solution will be
treated as degenerate.
 A tie for the pivot row is broken arbitrarily and can lead to
degeneracy.

78
 Cont’d…
 If at least one artificial variable is present in the basis
with positive value, and coefficient of M in each Cj - Zj
values is non-negative, then LP problem has no optimal
basic feasible solution. It is called pseudo-optimum
solution.

79
 Example
 Food A contains 20 units of vitamin X and 40 units of
vitamin Y per gram. Food B contains 30 units each of
vitamin X and Y. The daily minimum human requirements
of vitamin X and Y are 900 and 1200units respectively.
How many grams of each type of food should be
consumed so as to minimise the cost, if food A costs 60
cents per gram and food B costs 80 cents per gram.

80
 Solution:

 LPP formulation is as follows

Min. Z = 60x1+ 80x2 (Total Cost)

Subject to, 20x1 + 30x2 > 900 (Vitamin X Constraint)

40x1 + 30x2 > 1,200 (Vitamin Y Constraint)

andx1, x2 > 0

81
 Cont’d…
 Adding slack and artificial variables, we get
 

Min. Z = 60x1 + 80x2 + 0S1 + 0S2 + MA1 + MA2

Subject to, 20x1 + 30x2 – S1 + A1 = 900

40x1 + 30x2 - S2 + A2 = 1,200

andx1, x2, S1, S2, A1, A2 > 0

82
 Initial non-optimal solution is written as follows:

simplex table I
Zj Cj 60 80 0 0 M M Ratio
  BV  Q x1 x2 s1 s2 A1 A2
M A1 900 20 30 -1 0 1 0 45
M A2 1200 40 30 0 -1 0 1 30

  Zj 2100M 60M 60M -M -M M M

  Cj-Zj   60-60M 80-60M M M 0 0

Since ∆j = 60 – 60M is the lowest, x1 becomes the

entering variable, similarly Ratio bi/aij = 30 is
83
lowest positive value, hence it goes out.
 Simplex table II
Zj Cj 60 80 0 0 M Ratio
  BV  Q x1 x2 s1 s2 A1 Q/aij
M A1 300 0 15 -1 1/2 1 20
60 X1 30 1 3/4 0 -1/40 0 40

  Zj 1800+300M 60 45+15M -M -3/2+1/2M M

  Cj-   0 35-15M M (3-M)/2 0
Zj

Since ∆j = 35 – 15M is the lowest, x1 becomes the

entering variable, similarly Ratio bi/aij = 20 is
84
lowest positive value, hence it goes out.
Initial non-optimal solution is written as follows:
Simplex table III

Zj Cj 60 80 0 0
  BV  Q x1 x2 s1 s2
80 X2 20 0 1 -1/15 1/30
60 X1 15 1 0 1/20 -1/20

  Zj 2500 60 80 -7/3 -1/3

  Cj-   0 0 7/3 1/3
Zj

Since ∆j = zero and positive value, hence this the

solution.
85
Class Work
Solution

87
 Initial Tableau

 X1 – entering variable and A2 – the leaving variable and the Pivot element is 8
 Row operation:
 New R2 = 1/8 *Old R2 to make the pivot element ONE
 New R1 = -3 * New R2 + Old R1 to make the pivot column elements
ZERO except the key element
 Second Tableau

 X2 – entering variable and A1 – exiting variable and key element is 9/2

 Row operation:
 New R1 = 2/9 * Old R1 to make the pivot element ONE
 New R2 = -1/2 * New R1 + Old R2 to make the pivot column elements ZERO
except the key element
 Third Tableau

 Do we reach at optimal? Yes, b/c in case of minimization, if all the C-Z row
are zero and positive, it indicates optimality is attained
 Therefore, X1 = 20/3 X2 = 8/3 S1 = 0 S2 = 0
 and Min Z = 212/3
 Irregular types of LPP
 The basic simplex solution of typical maximization and
minimization problems has been shown in this chapter. However,
there are several special types of atypical linear programming
problems.
 For irregular problems the general simplex procedure does not
always apply.

These special types include problems with more than one optimal
solution, infeasible problems, problems with unbounded
solutions, problems with ties for the pivot column or ties for the
pivot row, and problems with constraints with negative quantity
91
 Multiple optimal solution

40

Profit @ corner B
30

A and C is equal
20

(1200)
B
10

FR
C
10 20 30 40 50 92
An infeasible solution

93
 Cont’d…
The three constraints do not overlap to form a feasible solution area.
Because no point satisfies all three constraints simultaneously, there is no
solution to the problem.

X1= 4
8

X2=6 C
6

B
4

4X1+2X2=8
2

A
C
2 4 6 8 10 94
 An unbounded problem

 In some problems the feasible solution area formed by the

model constraints is not closed. In these cases it is possible
for the objective function to increase indefinitely without ever
reaching a maximum value because it never reaches the
boundary of the feasible solution area.
 In an unbounded problem the objective function can increase
indefinitely because the solution space is not closed.

95
 An unbounded solution
But unlimited profits are
not possible in the real
world; unbounded
solution, like an infeasible
solution, atypically reflects
an error in defining the
problem or in formulating
10

the model
Z=
8

4X1

The objective function is

6

+2
X2
2 4

shown to increase without

FR bound; thus, the solution is
2 4 6 8 10
never reached 96
The END!

97
CHAPTER THREE

Duality theory
 3.1 Dual in LP Model
 For every linear programming problem, there is a corresponding
linear programming problem called the dual.

 If the original problem is a maximization problem then the

dual problem is minimization problem and if the original
problem is a minimization problem then the dual problem is
maximization problem.

 In either case, the final table of the dual problem will contain both
the solution to the dual problem and the solution to the original
problem.
 Dual in LP Model
 The solution of the dual problem is readily obtained from the
original problem solution if the simplex method is used.
 The formulation of the dual problem also sometimes referred
as the concept of duality - helpful for the understanding of the
linear programming.
 The variable of the dual problem is known as the dual
variables or shadow price of the various resources.
 The dual problem is easier to solve than the original problem.
 The dual problem solution leads to the solution of the original
problem and thus efficient computational techniques can be
developed through the concept of duality.
 Dual in LP Model

 If the original problem is in the standard form, then the dual problem can be
formulated using the following rules:
 The number of constraints in the original problem is equal to the number of
dual variables.
 The number of constraints in the dual problem is equal to the number of
variables in the original problem.
 The original problem profit coefficients appear on the right hand side of the
dual problem constraints.
 If the original problem is a maximization problem then the dual problem is a
minimization problem.
 Similarly, if the original problem is a minimization problem then the dual
problem is a maximization problem.
 The original problem has less than or equal to (≤) type of constraints while
the dual problem has greater than or equal to (≥) type constraints.
 The coefficients of the constraints of the original problem which appear
from left to right are placed from top to bottom in the constraints of the dual
problem and vice versa.
 Dual in LP Model

 If the Primal problem has an optimal solution, then also

the dual problem has an optimal solution and the
objective values of these solutions are the same.
 Dual in LP Model

 To solve a minimization problem with > constraints, we must change in to a

maximization problem with < constraints.

1.The original greater than or equal to min” will be called the primal problem.
2. The less than or equal to max” to which we change will be called the dual
problem.
3. Convert the primal in to the dual and solve using the method developed ,
then read the solution of the primal from the solution of the dual.

 If the original problem is a maximization problem, then the dual problem is

a minimization problem.
Example:
ZMin = 2x1 + 3x2
subject to: 3x1 + 2x2 > 12
7x1 + 2x2 > 20
 Dual in LP Model

 Convert the inequalities in to equalities, positive variables

would be subtracted , and these are called surplus variables
rather than slack variables .

 The surplus variables may be denoted by P1 and P2 and

indicate them next to their respective constraints. Thus, the
primal may be written as follows:

P1: 3x1+2x2 > 12

P2: 7x1+2x2 > 20
Minimize: 2x1 + 3x2 = 
 Dual in LP Model

 Form the dual problem;

 For this purpose, make the coefficients of X1 and x2
columns the coefficient of the new variables P1 and P2 and
obtain.

3P1+ 7P2
2P1+2P2
 Next change > to <, use the coefficients of X1 and X2 in  -
row as the right- hand constant and write:
3P1+7P2 < 2
2P1+ 2P2 < 3
 Dual in LP Model

 Therefore, the dual problem can be constructed as follows:

Maximize  = 12P1+20P2
Subject to:
3P1+7P2 < 2
2P1+ 2P2 < 3
P1,P2 > 0
Note:
1). The dual is a “less than or equal to max” problem
2). X1 and X2 are as slack variables
3). This method is known as minimization by
maximizing the dual.
 Dual in LP Model
 Thus, we will solve the LP dual problem of the following by
using simplex method.
Maximize  = 12P1+20P2
Subject to:
3P1+7P2 < 2
2P1+ 2P2 < 3
P1,P2 > 0
 Solve the model by forming equations with slack variables using simplex
method.
 The equation with slack variables will be constructed as follows:

Maximize  -12P1 -20P2 = 0

subject to: 3P1+7P2 +X1 = 2
2P1 + 2P2 + X2 = 3
P1, P2, X1, X2 > 0
Questions?
 CHAPTER FOUR

TRANSPORTATION and ASSIGNMENT

PROBLEMS AND PROGRAMMING
 4.1. Transportation Problem (TP)

Distributing any commodity from any group

of supply centers, called sources, to any group
of receiving centers, called destinations, in such
a way as to minimize the total distribution cost
(shipping cost).
Transportation Problem (TP) Cont’d

 Total supply must equal total demand.

 If total supply exceeds total demand, a dummy
destination, whose demand equals the difference
between the total supply and total demand is created.
 Similarly if total supply is less than total demand, a
dummy source is created, whose supply equals the
difference.
All unit shipping costs into a dummy destination or out
of a dummy source are 0.
Example 1:
Example 2:

Destinatio Supply
n
D1 D2 D3 D4
S1 50 75 35 75 12
Source 65 80 60 65 17
S2
S3 40 70 45 55 11
(D) 0 0 0 0 10
Demand 15 10 15 10
Transportation Tableau:
 3.1.1. Initial Solution Procedure:
 In a transportation model an initial solution can be found by
several alternative methods such as:
i. Northwest corner method
ii. The Minimum cell-cost method,
iii. Vogel’s Approximation Method
1. Northwest Corner Starting Procedure:
 With the northwest corner method, an initial allocation is made to
the cell in the upper left-hand corner of the tableau(Northwest
corner).
 The amount allocated is the most possible, subject to the supply
and demand constraints for the cell.
 Initial Solution Procedure Cont’d:

 The steps of the northwest corner method are as

follows:
1. Allocate as much as possible to the cell in the upper
left-hand corner, subject to the supply and demand
constraints.
2. Allocate as much as possible to the next adjacent
feasible cell.
3. Repeat step 2 until all rim requirements have been
met.
Shipment:
From S1 to: D1= 10 units; D2 = 2units
From S2 to: D2 = 8 units; D3 = 9 units
From S3 to: D3 = 1 unit; D4 = 10 units
Total sipping cost = $2250
2. The Minimum Cell Cost Method
 With the minimum cell cost method, the initial
allocation is made to the cell with the lowest cost.
 The steps of the minimum cell cost method are as
follows:
1. Allocate as much as possible to the feasible cell
with the minimum transportation cost.
2. Repeat step 1 until all rim requirements have been
met.
Shipment:
From S1 to: D3= 10 units; D4 = 2 units
From S2 to: D2 = 10 units; D4= 7 units
From S3 to: D1 = 10 units; D4 = 1 unit
Total sipping cost = $2065
 3. Vogel’s Approximation Method
 Vogel’s Approximation method (VAM) is based on the
concept of penalty cost or regret.
 If a decision maker incorrectly chooses from several
alternative course of action, a penalty may be suffered
and the decision maker may regret the decision that
was made.
 In a transportation problem, the course of actions are
the alternative routes and a wrong decision is
allocating to a cell that does not contain the lowest
cost.
3. Vogel’s Approximation Method
 The steps of Vogel’s Approximation Method are as
follows:
1. Determine the penalty cost for each row and column by
subtracting the lowest cell cost in the row or column from the
next lowest cell cost in the same row or column.
2. Select the row or column with the highest penalty cost.
3. Allocate as much as possible to the feasible cell with the lowest
transportation cost in the row or column with the highest
penalty cost.
4. Repeat steps 2, and 3 until all rim requirements have been met.
Shipment:
From S1 to: D2 = 2 units; D4 = 10 units
From S2 to: D2 = 7 units; D3 = 10 units
From S3 to: D1 = 10 units; D2 = 1 unit
Total sipping cost = $2030
 3.1.2. Advance Transportation Problem
Solution Method

 Other two methods for solving a transportation

model are:
1. Stepping-stone method
2. Modified Distribution Method (MODI)
 1. Stepping-stone method

 Once the initial basic feasible solution has been

determined by any one of the previous three methods,
the next step is to solve the model for the optimal
(Minimum total cost) solution.
 One of the methods to solve this solution is the
Stepping-stone method.
Stepping-stone method cont’d

 The steps of stepping-stone method are as follows:

Step 1: Determine the stepping-stone path and cost changes
for each empty cell in the tableau.

Step 2: Allocate as much as possible to the empty cell with the

greatest net decrease in cost.

Step 3: Repeat step 1 and 2 until all empty cells have positive
cost changes that indicate an optimal solution.
Stepping-stone method example cont’d
1. Stepping stone path for cell 1A

To A B C Supply Before Stepping-

From stone method
1 +1 6 -1 8 10 Zmin=$8(25)+6(0)+
25 125 150 10(125)+7(0)+11(0)
+11(175)+4(200)
2 7 11 11 +5(75)+12(0) =
175 175 $4,550
3 -1 4 +1 5 12
200 75 275

Demand 200 100 300 600

1A 1B 3B 3A = $6-8+5-4= - $1
Or (+1A-1B+3B-3A = +6-8+5-4=-1) or +6-4+5-8=-1
( The stepping stone reduces total transportation cost )
Stepping-stone method cont’d
2. Stepping stone path for cell 2A
To A B C Supply
From
1 6 -1 8 +1 10
25 125 150

2 +1 7 11 -1 11
175 175
3 -1 4 +1 5 12
200 75 275

Demand 200 100 300 600

2A 2C 1C 1B 3B 3A
$+7 -11+10 - 8+5-4= - $1 or +7-4+5-8+10-11=-1
( The stepping stone reduces total transportation cost )
Stepping-stone method cont’d
3. Stepping stone path for cell 2B

To A B C Supply
From
1 6 -1 8 +1 10
25 125 150

2 7 +1 11 -1 11
175 175
3 4 5 12
200 75 275

2B Demand
2C 1C
200 1B100
= $11 -11+10
300 – 8 =600+ $2
or +11-8+10-11=2
( The stepping stone increases total transportation cost )
Stepping-stone method cont’d
4. Stepping stone path for cell 3C

To A B C Supply
From
1 6 +1 8 -1 10
25 125 150

2 7 11 11
175 175
3 4 -1 5 +1 12
200 75 275

3CDemand
1C 200 1B 3B100 300
= $12 -10+8 – 5 =600
+ $5 ( The stepping
stone increases total transportation cost )
The negative value for cell 1A and 2A indicates an improved
solution is possible.
For each unit we can shift into that cell, the total cost will
decrease by $1.
 The next question is how many units can be reallocated into
that cell while retaining the balance of supply and demand for
that table?
The Stepping- stone path for cell 1A is:
The + Signs in the path indicate units to be added, the - signs
indicate units to be subtracted. The limit on subtraction is the
smallest quantity in a negative position along the cell path.
There are two quantities in negative positions, 25 and 200.
-Because 25 is the smaller quantity, that amount will be shifted
in the following manner
 Stepping-stone method cont’d
Stepping stone path for cell 1A and 2A were found to decreases the unit
transportation cost by $1. Therefore, Stepping-stone path for cell 1A is;

1B=+8-6+4-5=1
2A=+ 7 -11+10 – 6 =0
2B=+11-11+10-6+4-5=3
3C=+12-10+6-4=4
None of these no is negative, this is an optimal solution. Therefore, the total
transportation cost is: Zmin=$6(25)+8(0)+10(125)+7(0)+11(0)+11(175)+4(175)
+5(100)+12(0) = $4,525
Stepping-stone method cont’d
 Our evaluation for four paths indicates no cost reductions.
Therefore, the solution shown in stepping path for cell 1A is
optimal .
 The stepping path for cell 2A resulted in a cost change of $0. In
other words, allocating to this cell would neither increase nor
decrease total cost.
 This situation indicates that the problem has multiple optimal
solution.
 Thus, x2A could be entered in to the solution and there would not
be a change in the total minimum cost of $4,525.
 To identify the alternative solution, we would allocate as much as
possible to cell 2A, which in this case is 25 tons of wheat. The
alternative solution is shown in the following slide.
 Stepping-stone method cont’d
The optimal solution: the stepping stone path in cell 2A.
To A B C Supply
From
1 6 8 10
150 150

2 7 11 11
25 150 175
3 4 5 12
175 100 275

2A=Demand 200
+7-4+5-8+10-11=-1 100 300 600
 Then, how many units can be reallocated from (There are three
quantities in negative positions, 200,25 and 175). 25 is the smaller
quantity, that amount will be shifted in the above manner
 1A, 1B,2B,and 3C-These is no negative, this is an optimal solution
 Therefore, Zmin=$7(25)+4(175)+5(100)+8(0)+10(150)+11(150)+12(0)
+11(0)+6(0) = $4,525 ( This is equal to the total minimum cost of
transportation with allocation at cell 1A)
Modified Distribution Method(MODI)

 The Modified distribution method is basically a

modified version of the stepping-stone method.

 In the MODI method, the individual cell cost

changes are determined mathematically, without
identifying all of the stepping- stone paths for the
empty cells.

 In order to apply MODI method, we will again use

the initial solution obtained by the minimum cell
cost method or other initial solution procedures.
Modified Distribution Method(MODI)
 Steps of the modified distribution method:
Step 1: Develop an initial solution using one of the three
methods available (Northwest corner method, Minimum
cell-cost method, and Vogel’s Approximation Method).
Step 2: Compute ui and vi values for each row and column by
applying the formula ui+vj=cij to each cell that has an
allocation ( ui- for row & vi for column cells computation).
Step 3: Compute the cost change for each empty cell using the
formula cij-ui- vj.
Step 4:Allocate as much as possible to the empty cell that will
result in the greatest net decrease in unit cost. Allocate
according to the stepping-stone path for the selected cell.
Step 5: Repeat step 2through step 4 until all calculated empty
cell cost values become positive or zero.
Modified Distribution Method(MODI)
Example: BBC
 Building Brick Company (BBC) has orders for 80 tons of
bricks at three sub-urban locations as follows: Northwood =
25 tons, Westwood = 45 tons, and Eastwood = 10 tons. BBC
has two plants, each of which can produce and supply 50
tons per week.
How should end of week shipments be made to fill the above
orders given the following delivery cost per ton:
Northwood Westwood
Eastwood
Plant 1 24 30 40
Plant 2 30 40 42
Modified Distribution Method(MODI)
Example: BBC
Initial Transportation Tableau
 Since total supply = 100 and total demand = 80, a dummy
destination is created with demand of 20 and 0 unit costs.

Northwood Westwood Eastwood Dummy Supply

24 30 40 0 50
Plant 1

30 40 42 0 50
Plant 2

Demand 25 45 10 20
2. Modified Distribution Method(MODI)

 The Minimum Cell Cost Method

Iteration 1: Tie for least cost (0), arbitrarily select x14.
 Allocate 20. Reduce s1 by 20 to 30 and delete the
Dummy column.
Iteration 2: Of the remaining cells the least cost is 24 for x11.
 Allocate 25. Reduce s1 by 25 to 5 and eliminate the
Northwood column.
Iteration 3: Of the remaining cells the least cost is 30 for x12.
 Allocate 5. Reduce the Westwood column to 40 and
eliminate the Plant 1 row.
Iteration 4: Since there is only one row with two cells left,
make the final allocations of 40 and 10 to x22 and x23,
respectively.
Modified Distribution Method(MODI)

 The Minimum Cell Cost Method: Initial tableau

Northwood Westwood Eastwood Dummy Supply

24 30 40 0
Plant 1 25 5 30 20 50

30 40 42 0
Plant 2 40 10 50

Demand 25 45 10 20

Total transportation cost = $2770

Modified Distribution Method(MODI)

 MODI Method (for obtaining reduced costs):

 Associate a number, ui, with each row and vj with
each column.
Step 1: Set u1 = 0.
Step 2: Calculate the remaining ui's and vj's by
solving the relationship cij = ui + vj for occupied
cells.
Step 3: For unoccupied cells (i,j), the reduced cost
= cij - ui - vj.
 MODI Method Cont’d
Iteration 1:
MODI Method
1. Set u1 = 0
2. Since u1 + vj = c1j for occupied cells in row 1, then
v1 = 24, v2 = 30, v4 = 0.
3. Since ui + v2 = ci2 for occupied cells in column 2,
then u2 + 30 = 40, hence u2 = 10.
4. Since u2 + vj = c2j for occupied cells in row 2, then
10 + v3 = 42, hence v3 = 32.
 MODI Method Cont’d
Iteration 1:

MODI Method Cont (continued)

Calculate the reduced costs (circled numbers on the next
slide) by cij - ui - vj.

Unoccupied Cell Reduced Cost

(1,3) 40 - 0 - 32 = 8
(2,1) 30 - 10 -24 = -4
(2,4) 0 - 10 - 0 = -10
 Since some of the reduced costs are negative, the current solution is
not optimal.
 Cell (2,4) has the most negative; therefore, it will be the basic variable
that must be occupied in the next iteration.
 MODI Method Cont’d
 Iteration 1 Tableau

Northwood Westwood Eastwood Dummy ui

24 30 40 0
Plant 1 25 5 +8 20 0

30 40 42 0
Plant 2 -4 40 10 -10 10

vj 24 30 32 0
 MODI Method Cont’d
Iteration 1:

 Stepping Stone Method:

 The stepping stone path for cell (2,4) is (2,4), (1,4), (1,2), (2,2).

 The allocations in the subtraction cells are 20 and 40, respectively.

The minimum is 20, and hence reallocate 20 along this path. Thus
for the next tableau:
x24 = 0 + 20 = 20 (0 is its current allocation)
x14 = 20 - 20 = 0 (blank for the next tableau)
x12 = 5 + 20 = 25
x22 = 40 - 20 = 20
The other occupied cells remain the same.
 MODI Method Cont’d
Iteration 1 Tableau:

Northwood Westwood Eastwood Dummy Supply

24 30 40 0
Plant 1 25 25 50

30 40 42 0
Plant 2 20 10 20 50

Demand 25 45 10 20 New
quantity
Total transportation cost is $2570 = 2770 – 10 (20)

Reduced cost of cell (2,4)

 MODI Method Cont’d
 Iteration 2:

 The reduced costs are found by calculating the ui's and vj's for
this tableau.
1. Set u1 = 0.
2. Since u1 + vj = cij for occupied cells in row 1, then
v1 = 24, v2 = 30.
3. Since ui + v2 = ci2 for occupied cells in column 2,
then u2 + 30 = 40, or u2 = 10.
4. Since u2 + v3 = c2j for occupied cells in row 2, then
10 + v3 = 42 or v3 = 32; and, 10 + v4 = 0 or v4 = -10.
 MODI Method Cont’d
 Iteration 2:

 Calculate the reduced costs (circled numbers on the

next slide) by cij - ui - vj.

Unoccupied Cell Reduced Cost

(1,3) 40 - 0 - 32 = 8
(1,4) 0 - 0 - (-10) = 10
(2,1) 30 - 10 - 24 = -4
Since there is still negative, reduced cost for cell (2,1),
the solution is not optimal. Thus, cell (2,1) must be
occupied.
 MODI Method Cont’d
 Iteration 2 Tableau:

Northwood Westwood Eastwood Dummy ui

24 30 40 0
Plant 1 0
25 25 +8 +10

30 40 42 0
Plant 2 -4 20 10 20 10

vj 24 30 32 -10
 MODI Method Cont’d

Iteration 2
 Stepping Stone Method:
 The most negative reduced cost is = -4 determined by x21.
The stepping stone path for this cell is (2,1),(1,1),(1,2),(2,2).
The allocations in the subtraction cells are 25 and 20 respectively.
Thus the new solution is obtained by reallocating 20 on the
stepping stone path. Thus for the next tableau:
x21 = 0 + 20 = 20 (0 is its current allocation)
x11 = 25 - 20 = 5
x12 = 25 + 20 = 45
x22 = 20 - 20 = 0 (blank for the next tableau)
The other occupied cells remain the same.
 MODI Method Cont’d
 Iteration 3 Tableau:

Northwood Westwood Eastwood Dummy Supply

24 30 40 0
Plant 1 5 45 50

30 40 42 0
Plant 2 20 10 20 50

Demand 25 45 10 20

 Total cost is $2490 = 2570 - 4(20)

 MODI Method Cont’d
 Iteration 3:

 The reduced costs are found by calculating the ui's and vj's for this
tableau.
1. Set u1 = 0
2. Since u1 + vj = c1j for occupied cells in row 1, then
v1 = 24 and v2 = 30.
3. Since ui + v1 = ci1 for occupied cells in column 2,
then u2 + 24 = 30 or u2 = 6.
4. Since u2 + vj = c2j for occupied cells in row 2, then
6 + v3 = 42 or v3 = 36, and 6 + v4 = 0 or v4 = -6.
 MODI Method Cont’d
 Iteration 3:
 Calculate the reduced costs (circled numbers on the next
slide) by cij - ui - vj.

Unoccupied Cell Reduced Cost

(1,3) 40 - 0 - 36 = 4
(1,4) 0 - 0 - (-6) = 6
(2,2) 40 - 6 - 30 = 4

Since all the reduced cost are non-negative, the current

solution is optimal.
 MODI Method Cont’d
 Iteration 3 Tableau:
 Since all the reduced costs are non-negative, this is the
optimal tableau.

Northwood Westwood Eastwood Dummy ui

24 30 40 0
Plant 1 5 45 +4 +6 0

30 40 42 0
Plant 2 20 +4 10 20 6

vj 24 30 36 -6
 MODI Method Cont’d

Optimal Solution:

From To Amount Cost

Plant 1 Northwood 5 120
Plant 1 Westwood 45 1,350
Plant 2 Northwood 20 600
Plant 2 Eastwood 10 420
Total Cost = $2,490
Any Questions?
 3. 2. Assignment Problems

 An assignment problem seeks to minimize the total cost

assignment of m workers to n jobs, given that the cost of
worker i performing job j is cij.

It assumes all workers are assigned and each job is

performed.

An assignment problem is a special case of a

transportation problem in which all supplies and all
demands are equal to 1 unit; hence assignment problems
may be solved as linear programs.
 Assignment Problems Cont’d

Network Representation
c11
1 1
c12
c13

c21
2 c22 2

c32

3 3

WORKERS JOBS
 Assignment Problems Cont’d

The steps of the assignment solution method are as follows:

Step 1: For each row, subtract the minimum number in that row
from all numbers in that row.
Step 2: For each column, subtract the minimum number in that
column from all numbers in that column.
Step 3: Draw the minimum number of lines to cover all zeroes.
If this number = m, STOP -- an assignment can be made.
Step 4: Determine the minimum uncovered number (call it d).
Subtract d from uncovered numbers.
Add d to numbers covered by two lines.
Numbers covered by one line remain the same.
Then, GO TO STEP 3.
 Example 1: Assignment Model

 A contractor pays his subcontractors a fixed fee plus mileage for

work performed. On a given day the contractor is faced with
three electrical jobs associated with various projects. Given
below are the distances between the subcontractors and the
projects.
Projects
A B C
Westside 50 36 16
Subcontractors Federated 28 30 18
Goliath 35 32 20
Universal 25 25 14
 Example 1 Cont’d
 Initial Tableau Setup:
 Since the Hungarian algorithm requires that there be the same
number of rows as columns, add a Dummy column so that the
first tableau is:
A B C Dummy
Westside 50 36 16 0
Federated 28 30 18 0
Row
Goliath 35 32 20 0
subtraction
Universal 25 25 14 0
 Example 1 Cont’d
 Initial Tableau Setup:
Step 1: Subtract minimum number in each row from all numbers
in that row. Since each row has a zero, we would simply
generate the same matrix above.
Step 2: Subtract the minimum number in each column from all
numbers in the column. For A it is 25, for B it is 25, for C it is
14, for Dummy it is 0. This yields:
A B C Dummy
Westside 25 11 2 0
Federated 3 5 4 0
Column
Goliath 10 7 6 0 subtraction
Universal 0 0 0 0
 Example 1 Cont’d

Step 3: Draw the minimum number of lines to cover all zeroes.

Although one can "eyeball" this minimum, use the following
algorithm. If a "remaining" row has only one zero, draw a line
through the column. If a remaining column has only one zero
in it, draw a line through the row.
A B C Dummy
Westside 25 11 2 0
Federated 3 5 4 0
Goliath 10 7 6 0
Universal 0 0 0 0

Step 4: The minimum uncovered number is 2 (circled)

 Example 1 Cont’d

Step 3: Draw the minimum number of lines to cover all zeroes.

A B C Dummy
Westside 23 9 0 0
Federated 1 3 2 0
Goliath 8 5 4 0
Universal 0 0 0 2

Step 4: The minimum uncovered number is 1 (circled).

 Example 1 Cont’d

Step 5: Subtract 1 from uncovered numbers. Add 1 to numbers

covered by two lines. This gives:

A B C Dummy
Westside 23 9 0 1
Federated 0 2 1 0
Goliath 7 4 3 0
Universal 0 0 0 3
 Example 1 Cont’d

Step 4: The minimum number of lines to cover all 0's is four.

Thus, there is a minimum-cost assignment of 0's with this
tableau. The optimal assignment is:

Subcontractor Project Distance

Westside C 16
Federated A 28
Goliath (unassigned)
Universal B 25
Total Distance = 69 miles
Assign the programmers to the programs in Assignment model and compute the
minimum time.

Programs
(Estimated time in minute)
A B C
Programmers

1 120 100 80

2 80 90 110

110 140 120

3
 Chapter six:
Quantitatively Network
Analysis
 Network Concept

• Networks:
– Networks illustrate the way in which the parts of the project
are organized.
– They can be used to determine the time duration of the
projects.
– The network techniques that are used for project analysis are
PERT and CPM.
– PERT stands for Project Evaluation and Review Technique,
whereas CPM is an acronym for Critical Path Analysis.
 PERT and CPM and Diagram Construction

• Program Evaluation & Review Technique (PERT):

– Developed to manage the project duration
– Many tasks pushed the boundaries of science &
engineering (tasks’ duration = probabilistic)
• Critical Path Method (CPM):
– The longest path in which the minimum length of time is
required for the completion of the project.
– A complex undertaking, but individual tasks are routine
(tasks’ duration = deterministic)
 Similarities
Both PERT and CPM
• Graphically display the precedence relationships &
sequence of activities.
• Estimate the project’s duration.
• Identify critical activities that cannot be delayed
without delaying the project.
• Estimate the amount of slack associated with non-
critical activities.
 Network Diagrams
• Activity-on-Node (AON):
– Uses nodes to represent the activity (a rectangular box or a
circular)
– Uses arrows to represent precedence relationships
 PERT & CPM Cont’d
• The arrows represent the dependencies between
the different activities and the specific sequence
in which the estimated tasks must be
accomplished.

– The length and the slope of these arrows do not

provide any information about operational hours,
workload etc.
 Activity Identification

• Short description: example, Lay foundation,

erect frame, etc.
• Alphabetic or numeric code: example, A, B, C,
etc., or 100, 101, 108 etc.
• Using tail and head event numbers: example, 1-
2, 2-3, 3-4, 3-6, etc------this is for ‘Activity on
arrow’
 Activity On Node Network Technique
• Define the relationships of each activity in the project
context.
– Which activities must be finished before starting this
one?
– Which activities can directly start after finishing this
one?
– Which activities can be done in parallel to this one?

 Predecessor, successor and parallel relationships for

each task.
 Dummy Activity

• Dummy activity: is an activity that does not

consume time or resources.
• It shows merely the dependencies or proper
relationship between activities.
• A dotted arrow represents dummy.  
 Dummy Activity

3
Lay Dummy
foundation

2 0
Finish
work 7
Build
house 6
3 1 1
1 2 4
3
1
Order materials
Design house &
obtain financing 1
Select Select carpet
paint

5
 Importance of Network diagram
• To answer:
– What is the total time to complete the project?
– What are the scheduled start and finish dates for each
specific activity?
– Which activities are critical and must be completed
exactly as scheduled to keep the project on schedule?
– How long can noncritical activities be delayed before
they cause an increase in the project completion time?
 AON Diagrams

Order & relationships are shown as arrows

Any activity may either:
Succeed (follow) – task B succeeds task A
Precede (go before) – task A precedes task B

TASK A TASK B
 AON Diagrams
Any activity may:
Be performed concurrently – Task C can be performed at the
same time as Task D

TASK C

TASK D TASK E
 AON Diagrams –Rules

Direction
Arrows should always go forward
– The flow of work is from left to right

TASK C
 TASK C 
TASK D TASK E
TASK D TASK E
 AON Diagrams –Rules

• Arrows should only go from one node to another

node.

TASK C
TASK C 

TASK D TASK E
TASK D TASK E
 AON Diagrams –Rules

• Avoid overlapping arrows

TASK C
TASK C

TASK D TASK F
TASK D TASK E

TASK E
 AON Diagrams –Rules

• If overlapping can not be avoided, use bridges

TASK C

TASK D TASK E

TASK D
 AON Diagrams –Rules

• There should be one starting node (Start

Project) and one finishing node (Project
Complete) for each activity.
TASK C TASK D
TASK Start TASK Finish

TASK D TASK E
 AON Diagrams –Rules

• In a CPM network, two or more activities are

not allowed to share the same starting and
ending nodes at the same time.

Lay
foundation
4
2

Order
materials
 AON Diagrams –Rules

• When two or more tasks start from the same

starting point, dummy activity is inserted to give two
activities different nodes.
3
Lay foundation Dummy

0
2
1
4
2
Order
materials
 AON Diagrams –Rules

• An AON diagram should not contain more

than 50 nodes.

• For large projects, break the project into sub-

projects to make it easier to manage.
 Network Drawing
• Preparing AON:
– Identify the order that tasks must be done

– Prepare AON on scrap paper

– Check your diagram

– Revise your diagram to remove overlapping arrows

– Check your diagram

– Revise your diagram to reflect resource restrictions and preferable task order.
 Basic steps in Network diagram----CPM &PERT

Step 1: Define activities

– The project & all of its significant activities or tasks
– Efficient tool: WBS
• The WBS represents a logical decomposition of the work to be
performed.

(Example: What are the activities that are needed to

build a house? to conduct a research?)
– Finding these activities is a brainstorming activity
 Basic steps in Network diagram----CPM
&PERT Cont’d

Step 2: Define Activity interdependencies

– The relationship among activities
– Decide which activities must precede and follow
others.
– It demands the understanding of the whole project
and the knowledge of applied technologies.
Result: preceding or succeeding activity list
 Basic steps in Network diagram----CPM
&PERT Cont’d
• Step 3: Draw the Network
• Network connecting all of the activities
 Result: the network itself
Step 4: Assign time and /or resource
• Activity by activity
Time estimation methods:
 CPM: the use of normal duration: only one activity duration
 PERT estimation: three activity duration times
• For each task, estimate the lowest (optimistic), most likely, and
highest (pessimistic) durations, then use
• estimated Average time = (low + high + 4*most likely)/6
• steps 1 to 4 are also known as the planning phase
 Basic steps in Network diagram----CPM
&PERT Cont’d
• Step 5: compute the longest time path through the
network
• this is called the critical path
• Key questions:
 What is the expected duration of the project?
 What are the earliest start and finish dates for each activity?
 What are the latest start and finish dates for each activity that does
not interfere with the project completion time?
 Analyzing these times in order to find the critical activities &
the amount of float in the non-critical ones.

 This step is scheduling

 Basic steps in Network diagram----CPM
&PERT Cont’d

• Step 6: use the network to help plan, schedule,

monitor, and control the project.
 Critical Path Method (CPM)
Step 1-Define the Project and identify the activities: Cables manufacturing
company is bringing a new product on line to be manufactured in their current
facility in existing space. The owners have identified 11 activities and their
precedence relationships. Develop an AON for the project.
Immediate Duration
Activity Description
Predecessor (weeks)
A Develop product specifications None 4
B Design manufacturing process A 6
C Source & purchase materials A 3
D Source & purchase tooling & equipment B 6
E Receive & install tooling & equipment D 14
F Receive materials C 5
G Pilot production run E&F 2
H Evaluate product design G 2
I Evaluate process performance G 3
J Write documentation report H&I 4
K Transition to manufacturing J 2
Step 2- Diagram the Network for
Cables manufacturer
Step 3 (a)- Add Deterministic Time Estimates and
Connected Paths
 Step 3 (a) (Con’t): Calculate the
Project Completion Times
Paths Path duration
ABDEGHJK 40
ABDEGIJK 41
ACFGHJK 22
ACFGIJK 23
• The longest path (ABDEGIJK) limits the project’s
duration (project cannot finish in less time than its
longest path).
• ABDEGIJK is the project’s critical path.
 Some Network Definitions
• All activities on the critical path have zero slack.
• Slack defines how long non-critical activities can be
delayed without delaying the project.
• Slack = the activity’s late finish minus its early finish (or
its late start minus its early start)
• Earliest Start (ES) = the earliest finish of the immediately
preceding activity.
• Earliest Finish (EF) = is the ES plus the activity time
• Latest Start (LS) and Latest Finish (LF) = the latest an
activity can start (LS) or finish (LF) without delaying the
project completion.
 Critical path determination

• The path with the longest duration is the

critical path (and the project duration)
– If any tasks on the critical path are delayed, the
overall project completion will be delayed.
– Tasks not on the critical path may have a non-zero
amount of slack or float, which is the amount of
duration they can slip without affecting the project.
 Critical Path Determination Cont’d

• A manager might add resources to tasks on the

critical path, if that will actually help finish
them sooner.

– This technique can be called expediting or crashing

the project.
 Critical Path Determination Cont’d

 Critical Path: –
o The series of activities all of which must finish
on time for the whole project to finish on time.

o Sometimes described as the longest path

through a network, hence the shortest project
time.
 Earliest and latest start and finish time

 Earliest start and finish time:

 Calculate the Forward Pass by adding the durations
along each path in your network to:

 establish the earliest start (ES) and finish (EF) dates

for each activity on the network.
 Earliest and latest start and finish
time Cont’d
• A formula for computing Earliest start time:
o ESj = Maximum (EFi j)
Where i is the starting node number of all activities ending at Node j or for
activity i j.
 For example: If we compute the earliest start time at node 4
(j=4) and if its activities start from preceeding nodes, (i= 2 & 3),
the computation will be as follows:
 ES 4 = Maximum (EF2 , EF3 )
= Maximum (3, 5)
= 5 months ( which is the earliest start time at node 4).
 Earliest and latest start and
finish time Cont’d
• A formula for computing Earliest Finish time:
o EFj = Maximum (EFi + tij)
Where i is the starting node number of all activities ending at Node j and t ij
is the time for activity i j.
 For example: If we compute the earliest finish time (EF) at
node 6 (j=6) and if its activities start from preceeding nodes,
(i= 4 & 5), the computation will be as follows:
 EF 6 = Maximum (EF5 + t56, EF4 +t46)
= Maximum (6+1, 5+3)
= Maximum ( 7, 8)
= 8 months ( which is the earliest time at node 6)
ES, EF Network
 Earliest and latest start and finish time
Cont’d

Latest start and finish time:

– A backward pass is made through the network to
compute the latest start and latest finish times for
each activity in the network.
• Formula For computing Latest start time (LS):
o LSi = Minimum ( LS j – ti)
o Where i is the starting node number of all activities
ending at Node j or for activity i j.
 Earliest and latest start and finish time
Cont’d
• Formula for Computing the Latest finish time:
• The latest finish time (LF) at node i is computed as follows:
– LFi = Minimum (LFj - tij)
– Where j is the ending node number of all activities starting at
node i and tij is the time for activity i j.
– Example: We will compute the latest finish time at node 4 (i.e.,
i=4).
– LF 4 = Minimum ( LF6 – t46, LF5- t45)
= Minimum (8-3, 7-1)
= Minimum (5, 6)
= 5 months ( the latest finish time at node 4).
LS, LF Network
 Activity Slack/Float Time

Activity slack/Float time:

 Slack/float is the amount of time an activity can be delayed
without affecting the overall project duration.
 It is extra time available for completing an activity.
• For events on the critical path, the earliest finish (EF) time and
latest finish (LF) time are equal. This means that these events on
the critical path must start exactly on time and cannot be
delayed at all.
• In order to determine critical path, we can simply see at which nodes
the earliest finish and latest finish times are equal.
• Activities on the critical path have no slack.
 Activity Slack/Float Time Cont’d

• As a general rule, the critical path encompasses those activities in

the network that have no slack.
• In general, activity slack can be determined as follows:
– Slack/float time for activity i = Latest finish time (Activity i) - Earliest finish
time (activity i)
– Example: Slack for activity 5 = LF5 – EF5( Assume LF5=7 & EF5=6)
= 7-6
= 1 Month (This means activity 5 can be delayed 1
month without delaying the project.
 Calculating Slack
Late Early Slack
Activity
Finish Finish (weeks)
A 4 4 0
B 10 10 0
C 25 7 18
D 16 16 0
E 30 30 0
F 30 12 18
G 32 32 0
H 35 34 1
I 35 35 0
J 39 39 0
K 41 41 0
 Probabilistic Time Estimates
• As an alternative to CPM, PERT ( Project Evaluation and Review
Technique) uses probabilistic activity time.

• In probabilistic activity time we determine three time estimates for

each activity which enable us to estimate the mean and variance
for a beta distribution of the activity times.

• The three time estimates for each activity are the most likely time,
the optimistic time, and the pessimistic time.
 Probabilistic Time Estimates Cont’d
• The most likely time is the time that would most
frequently occur if the activities were repeated many
times.
• The optimistic time is the shortest possible time within
which the activity could be completed if everything went
right.
• The pessimistic time is the longest possible time the
activity would require to be completed assuming
everything went wrong.
 Probabilistic Time Estimates Cont’d
• The three time estimates can subsequently be used to estimate
the mean and variance of a beta distribution. If we let:
a= optimistic time estimate
m= most likely time estimate
b = pessimistic time estimate
Then mean is computed as follows:
Mean ( Expected time): t = a+4m+b
6
 Revisiting Cables Production company Using
Probabilistic Time Estimates
Optimistic Most likely Pessimistic
Activity Description
time time time
A Develop product specifications 2 4 6
B Design manufacturing process 3 7 10
C Source & purchase materials 2 3 5
D Source & purchase tooling & equipment 4 7 9
E Receive & install tooling & equipment 12 16 20
F Receive materials 2 5 8
G Pilot production run 2 2 2
H Evaluate product design 2 3 4
I Evaluate process performance 2 3 5
J Write documentation report 2 4 6
K Transition to manufacturing 2 2 2
 Calculating Expected Task Times
optimistic  4most likely   pessimistic
Expected time 
6
Optimistic Most likely Pessimistic Expected
Activity
time time time time
A 2 4 6 4
B 3 7 10 6.83
C 2 3 5 3.17
D 4 7 9 6.83
E 12 16 20 16
F 2 5 8 5
G 2 2 2 2
H 2 3 4 3
I 2 3 5 3.17
J 2 4 6 4
K 2 2 2 2
Network Diagram with Expected Activity
Times
 Estimated Path Durations through the
Network

Activities on paths Expected duration

ABDEGHJK 44.66
ABDEGIJK 44.83
ACFGHJK 23.17
ACFGIJK 23.34
• ABDEGIJK is the expected critical path & the
project has an expected duration of 44.83
weeks
 Calculation

• Based on the previous Network Diagram,

Find the Earliest start time, Earliest Finish
time, Latest start time, Latest finish time,
and Activity Slack/Float Time
Questions