OPERATIONS RESEARCH (O.

R)
CHAPTER ONE

1. OPERATIONS RESEARCH: AN OVER VIEW

CHAPTER OBJECTIVES
After completing this chapter, you should be able to:
 Explain the origin and historical development of Operations Research
 Define operations research
 Distinguish between the quantitative and qualitative decision making tools as well as their
merits
 Explain the meaning, rationales, and types of model and how models are used in
Operations Research
 Construct the management science/operations research approaches to problem solving.

INTRODUCTION
Operations Research is discipline devoted to solving certain managerial types of problems using
quantitative models. Being initiated mainly during the Second World War, these quantitative approaches
are widely employed in various organizations across the world.

It is assumed that you have studied various schools/views of management so far. Operations research
finds its roots from two of these schools:

(i) The Decision Theory/Decisional Management School and

(ii) The Mathematical or Quantitative Measurement School.

These schools of management strongly advocate the use of mathematical methods or quantitative tools
for making management decisions. Quantitative approach to management requires that decision
problems be defined, analyzed, and solved in a conscious, rational, logical and systematic and scientific
manner - based on data, facts, information and logic, and not on mere guess work or thumb rules.
Management is expected to associate alternatives courses of action to objectively measured decision
criteria before selection, hence, implementation. Operations Research is the body of knowledge, which
uses mathematical techniques to solve management problems and make timely optimal decisions.

Though common sense, experience, and commitment of the manager is essential in making decisions, we
cannot deny the role-played by scientific methods in making optimal decisions. Operations Research
uses logical analysis and analytical techniques to study the behaviors of a system in relation to its overall
working as resulting from its functionally interconnected constraints, whose parameters are recognized,

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quantified wherever possible relationships identified to the extent possible and alterative decisions are
derived.

Areas of application of Operations Research include forecasting, capital budgeting, capacity planning,
scheduling, inventory management, project management and production planning.

In this chapter, the basics of Operations Research are covered including the answers to such questions as:
what is Operations Research? Who, why, and where to use it? What are the common approaches to
address management problems? How did Operations Research emerge as an organized set of tools to
decision making? What is a model? What is the role of model in solving for management problems? Our
discussion in this chapter concludes with developing the process structure of management
science/Operations Research as a an approach to management decision making.

History of operations research

Operations Research is usually referred as a „war baby‟. It is because, the first problem attempted to solve
using this approach was concerned with how to set the time fuse bomb to be dropped from an aircraft onto
a submarine. In fact, the main origin of Operations Research was the Second World War. At the time of
outbreak of the Second World War, the military management in England invited a team of scientists to
study the strategic and tactical problems related to air and land defense of the country. At that time the
resources available with England were very limited and the objective was to win the war with the available
meager resources. The country had to find ways to allocate such resources as food, medicine, ammunition,
manpower etc., to manage the war without resulting in a supply crisis in the civil communities. It was
necessary to decide upon the most effective utilization of the available resources to achieve the objective.

It was also necessary to utilize the military resources cautiously. Hence, the generals of military invited a
team of experts in various walks of life such as scientists, doctors, mathematicians, business people, and
professors, engineers etc., to address the problem of resource utilization. These specialists handled
successive and intensive brain storming sessions and came out with a method of solving the problem.
They coined it with the name “Operations Research”.

As the name indicates, the word „Operations‟ was used to refer to the problems of military and the word
„Research‟ was used for inventing new method. After the World War, scarcity of industrial materials
emerged as the most serious economic problem and industrial productivity reached the lowest level
leading to Industrial recession. To solve the industrial problem, the method called linear programming
was used.

After seeing the success of British, the United States military started applying the OR techniques to solve
military, civil and industrial problems. The Americans have added various names to this discipline. Some
of which are Operational Analysis, Operations Evaluation, Operations Research, System Analysis,
System Evaluation, Systems Research, Quantitative methods, Optimizations Techniques and
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Management Science etc. ultimately, however, the name OPERATIONS RESEARCH prevailed and still
serves as most common reference of the discipline.

Before being introduced to the industry OR attracted little interest from the academic and research world.
But, the introduction of Linear Programming and Simplex method of solution by an American
Mathematician called George B. Dontzig in 1947 motivated others in the academic fields and various
industrial sectors. Their works resulted in many more techniques and models.

When initially introduced to the industrial world, the most critical problems addressed through these
techniques were related to how to optimize: profit maximization or minimization of costs. Today,
however, OR enjoys a considerable number of techniques applied across an extensive set of
organizational problems. In one word, we can say that Operations Research play a vital role in every
organization, especially in decision-making process.

The Nature and Meaning of Operations Research (OR)

Throughout its evolutionary development, OR has been offered with various definitions by different scholars.
This module emphasizes definitions that provide a useful basis for an initial understanding of the nature of
OR.

According to Mores and Kimball (1943) OR should viewed as scientific method of providing executive
management with a quantitative base for decisions regarding operations under their control. This view is
shared by Wagner (1969) who described OR as the scientific approach to problem solving for executive
management. The most extensive description, however, came from Hiller and Lieberman, where OR is
addressed as Optimal decision-making in, and modeling of, deterministic and probabilistic systems that
originate from real life. These applications, which occur in government, business, engineering, economics,
and the natural and social sciences, are largely characterized by the need to allocate limited resources. In
these situations, considerable insight can be obtained from scientific analysis, such as that provided by OR
(Hiller-Lieberman 1974). Others (Gross, 1979) tried to associate OR to its set of quantitative tools describing
it as a branch of applied mathematics where in the application is to the decision-making process. Those, who
studied OR at its contemporary development (Stevenson, 1989), tried to present it as a discipline devoted to
solving certain managerial type problems using quantitative models.

Working definition
For the purpose of this course; we can define Operations Research as a systematic analysis of a
problem through scientific methods, carried out by appropriate specialists, working together as
a team, constituted at the instance of management for the purpose of finding an optimum and
the most appropriate solution, to meet the given objective under a given set of constraints.

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Key points
From the back ground and definitions given above, Operations Research can be understood as:
1. The application of scientific methods, techniques and tools to a problem to find an optimal
solution.
2. A management tool in the hands of a manager to make a decision
3. A scientific approach to decision making process
4. An “applied research” aims at finding a solution for an immediate problem facing a society,
industry or a business enterprise .This is not “fundamental research”
5. A decision-oriented research, using scientific methods, for providing management a
quantitative basis for taking decision regarding operations under its control
6. Applied decision theory-It uses scientific, mathematical and logical means to take decisions.
Functions of Operations Research
A. objective: helps managers to make objective decision
B. scientific approach: helps decision makers to follow scientific approach to solve managerial
problems
C. inter disciplinary team work: it allows for and encourages team work
D. digital computers: over reliance on scientific calculators and other computing machines
E. decision making: helps decision makers to solve managerial problems

Decision Making
Decision making is the most vital aspect in management. Every one of us takes a number of decisions
every day. Some are important; some may not be necessarily so. Some decisions initiate a set of activities;
some put an end to them. In the business environment decisions made at the right time and place with
adequate analysis and deliberations ensure success. This shows the importance of decision making.
Though it is one of the most dynamic and situational management practices, decision making is most
commonly defined as:

Note
Decision making: The process of identifying, developing, and evaluating alternative courses of
action to select the most feasible and optimal one, in order to solve identified problems or achieve
predetermined objectives.

The following key issues can be generated from this definition.

Problem
 any variation between what was planned and what is actually achieved.

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 Problem solving
 the process of identifying a difference between some actual and some desired states of
affairs and then taking action to resolve the difference.
decision making
 rational and universal of analysis of and selection among alternatives.

The Decision-Making Process

As stated above, decision making is a rational process. It is composed of interdependent steps. Each step
presented below serves as an input to the next until the process is completed.
1. Identifying and defining the problem
 Problem is a necessary condition for a decision. i.e.: There would be no need for
decisions if problems did not exist.
2. Determining the set of alternative solutions
3. Determining the criteria to evaluate alternatives
 Involves identifying those characteristics that are important for making the decision
4. Analyzing the alternatives
 Focuses on the advantages and disadvantages or costs versus benefits of each alternative.
5. Selecting the best alternative
 Is responsible to select the most feasible alternative to solve our decision problem. In
selecting the best alternative, factors such as risk, timing and limiting factors should be
considered objectively.
6. Implementing the solution
 Guides the task of putting the decision into action.
7. Establishing a control and evaluation system
 Ongoing actions need to be monitored following the decision to evaluate the results and
determine if a satisfactory solution has been obtained.
The Decision-Making Environment
The environmental circumstances under which decisions are made dictate the degrees of certainty felt by
the decision maker. Relative to the quality and volume of information available, ability to determine the
possibility and nature of decision forces, and ability to determine the values and consequences of each
alternative, management decisions are assumed to be made under the following three basic conditions:
 certainty
 risk
 uncertainty

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These situations represent various the levels of certainty of a particular decision making environment and
are discussed with some details here under.
i. Decision making under conditions of certainty
In this situation, the decision maker has perfect knowledge about the outcome. We are
reasonably sure what will happen when we make a decision. Adequate and reliable information
is available. We know the cause & effect relationships.
Example
If you decide to invest your money in saving account in the commercial Bank of Ethiopia,
you are certain that you will earn five percent (5%) interest. If the bank changes the rate, you
will definitely know about it.
ii. Decision making under condition of risk
Usually, decision makers cannot have a precise knowledge about the outcome of a decision. In
such cases, decision makers may only be able to attach a probability to the expected outcomes of
each alternative. Under this situation, one may have factual information, but it may be
incomplete.
Example
If we gamble by tossing a fair coin, the probability that a tail will turn up is 50%.
iii. Decision making under conditions of uncertainty
It is a case where neither there is complete data nor probabilities can be assigned to the
surrounding condition. It is the most difficult condition for a manager. Some conditions that are
uncontrollable by management include competition, government regulations, technological advances, the
overall economy, as well as changes in the social and cultural tendencies of an environment.
Example
A corporation that decides to expand its operation, launching a new product, or
developing of a new technology in a foreign country may know little about its culture,
laws, economic environment, or politics. The political situation may be so volatile that
even experts cannot predict a possible change in government.

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Model and modeling in Operation research
Model is an abstraction of a reality. It is a simplified and often idealized representation of real
objects/situations. By its very nature a model is incomplete. Still, a good model will capture the important
details of reality without including innumerable minor details that would obscure rather than illuminate.
Given their level of abstraction, structure and allowance for analysis, models can be classified in the
following way:
A. Physical (iconic) Model
Iconic models are the least abstract. They are physical models that look like the reality. They are
also called Static Models.
They may be developed with two or three dimensions. They are supposed to be the closest
representation of the real object as it is.
Example
 Model of an airplane
 Photograph of a machine
 Layout drawing of a factory
 Globe
B. Analogue Models
They are also physical models but more abstract than iconic models. Instead of replicating
physical appearance as iconic models do, these models substitute some physical analogy for
important aspects of the reality. They are two dimensional.
These models mostly show inter and intra relationships between two or more parameters. They
may show the relationship between an independent variable (input) with that of a dependent
variable (output).
Example
 Histogram
 Frequency table
 Cause-effect diagram
 Flow charts
 Gantt charts
 price-demand graph
 world map with different colors
 Organizational chart

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C. Mathematical Models (Symbolic Models)
These are the most abstract reflections of the reality. They incorporate numbers and algebraic
symbols to represent important aspects of a problem often in equation form.
Here, a set of relations is represented in the form of mathematical equations, using symbols to
represent various parameters.

Example
Max Z=3000x 1 +2500x 2
Subject to:
2x 1 +x 2 < 40
x 1 +3x 2 < 45
x1 , x2 > 0
Where
 The first line represents the objective function - A mathematical statement of the goal of an
organization, stated as intent to maximize or to minimize some important quantity such as profits
or costs.
Max Z=3000x 1 +2500x 2 is the objective function
 Line three to five represent constraints - A restriction on the resources available to a firm (stated
in the form of an inequality or an equation.)
2x 1 +x 2 < 40
x 1 +3x 2 < 45 Are constraints
x1 < 12
x 1, x 2 > 0 x 1 , x 2 > 0 is non-negativity constraint
 x 1 and x 2 are decision variables-the unknown values that the problem is solved for.

The framework of operations research approach

At its current state of application, OR mobilizes a large number of tools and techniques to help
management address its decision-making commitments. Some of these tools are Probability theory,
Linear Programming, Transportation algorithm, Assignment problems, Queuing Theory,
PERT/CPM Method, etc. All OR techniques are ‟application specific‟. Maximum benefit can be
derived from selecting most appropriate techniques for each specific area or problem. Appropriate
selection of OR technique is an equally important task. Each technique has its own advantages and

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limitations. In all such cases, the ability of the manager is tested in the appropriate selection of OR
technique
However different the OR techniques could be, they adopt similar procedural structures. This procedural
approach in OR is quite similar to the scientific approach commonly used in the physical sciences. As
presented here under, the OR approach involves a logical sequence that includes careful definition of the
problem, use of models to formulate the problem, and adequate analysis leading to solution of the
problem.

Fig.1.1. the framework of OR approach

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 CHAPTER TWO

LINEAR PROGRAMMING PROBLEM AND MODELS (LPPM)

2.1. CHAPTER OBJECTIVES

After completing this chapter, you should be able to:

 Explain what Linear Programming is;

 Explain what is meant by the term constrained optimization;
 List and briefly explain the components and assumptions of Linear Programming models;
 Recognize problems that can be solved using Linear Programming Models and formulate
linear programming models;
 Explain the approaches to solving Linear Programming Models;
 Solve problems using Graphical Method for solving Linear Programming problems;
 Solve problems using Simplex Method for solving Linear Programming Problems;
 Use sensitivity analysis to evaluate a change in the RHS of a constraint and changes in the
value of an objective function coefficient.

2.2. Chapter introduction

Linear Programming is one of the most versatile, powerful and useful techniques for making managerial
decisions. Linear programming technique may be used for solving broad range of problems arising in
business, government, industry, hospitals, libraries, etc.

Linear programming (LP) model enables users to find optimal solutions to certain problems in which the
solution must satisfy a given set of requirements or constraints. It is a model used for optimum allocation
of scarce or limited resources to competing products or activities under such assumptions as certainty,
linearity, fixed technology, and constant profit per unit.
As a decision making tool, it has demonstrated its value in various fields such as production, finance,
marketing, research and development and personnel management.
Determination of optimal product mix (a combination of products, which gives maximum profit),
transportation schedules, Assignment problem and many more are the techniques managers use to make
optimal decisions.
In this chapter, you will learn about linear programming models where emphasis will be given to such
issues as familiarization of the model, problem recognition and formulation using the model, solving
linear programming problem for feasibility and optimality, and post optimality analysis.

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2.3. Linear programming problem and models
2.3.1. Meaning and Definition
Managers encounter decision making situations in which the set of acceptable solutions is some how
restricted. The restrictions may be imposed internally or externally. An internal restriction might be the
amount of raw materials, availability of labour time, machine time, technical requirements and budgets
that a department has to produce its products. An external restriction might be labour regulations (e.g.
safety equipment, training requirements overtime) that limit the options open to decision maker. The
restrictions are referred to as constraints.
The goal in linear programming is to find the best solution given the constraints imposed by the problem;
hence it is constrained optimization.
Linear Programming is one of the most versatile, powerful and useful techniques for making managerial
decisions. Linear programming technique may be used for solving broad range of problems arising in
business, government, industry, hospitals, libraries, etc whenever we want to allocate the available limited
resources for various competing activities for achieving our desired objective. As a decision making tool,
it has demonstrated its value in various fields such as production, finance, marketing, research and
development and personnel management.
A model, which is used for optimum allocation of scarce or limited resources to competing products or
activities under such assumptions as certainty, linearity, fixed technology, and constant profit per unit, is
linear programming. It is the mathematical representation of LP problems that has been developed to help
management in decision making, involving the efficient allocation of scarce resources to achieve an
optimization objective.

Figure 2.1. The linear programming problem/model

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2.3.2. Components of LP models
A. Objective Function
 is the goal or objective of a management, stated as intent to maximize or to minimize some
important quantity such as profits or costs.
B. De cision Variables

 represent the unknown values to be solved by the decision makers.

 are the variables whose values are unknown and are searched.
C. Parameters:
 are fixed values that specify the impact of one unit on the objective function and the constraint.
D. Constraints
 are limitations or restrictions imposed by the problems. It includes:
 Resource constraints: are restrictions that should be clearly identifiable and measurable in
quantitative terms, which arise from limitation of available resources.
Examples of limited resources are:
 Plant capacity
 Raw materials availability
 Labor power
 Market demand, etc
 Individual constraints: are constraints which are subject to individual decision variables.
 Non-negativity constraints: are constraints that require the decision variables not to take on
negative values.
Generally speaking, a constraint consists of four elements . These are:
I. A right hand side value (RHS): represents quantity that specifies the limit for that
constraint. It must be a constant, not a variable.
II. An algebraic sign: represents whether the limit is:
 An upper bound (< ) that cannot be exceeded
 A lower bound (> ) that is the lowest acceptable limit
 An equality (=) that must be met exactly.
III. The decision variable : to which the constraint applies.
IV. Parameters : The impact that one unit of each decision variable will have on the right hand
side quantity of the constraint.

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2.3.3. Assumptions of LPP models
The following are some important assumptions made in formulating a linear programming model:
A. Linearity
 The Objective Function and the constraints must be linear in nature in order to deal with a Linear
Programming Problems (LPP). Here the term linearity implies proportionality and additively.
B. Certainty
 It is assumed that the decision maker here is completely certain (i.e., deterministic conditions)
regarding all aspects of the situation, i.e., availability of resources, profit contribution of the
Products, technology, courses of action and their consequences etc.
C. Divisibility
 It is assumed that the decision variables are continuous. It means that companies manufacture
products in fractional units. For example, a company manufactures 2.5 vehicles, 3.2 barrels of oil
etc.
D. Non- Negativity
 indicate all variables are restricted to non-negative values (i.e., their numerical value will be ≥
0).i.e. negative values of variables are unrealistic or meaningless.
2.4. Formulation of LPP
Formulating linear programming problem models involves the following steps
1. Identify the objective function:
 First decide whether the problem is maximization or minimization problem.
 Second identify the coefficients of each decision variable.
 If the problem is a maximization problem, the profit per unit for each variable must be
determined.
 If the problem is a minimization problem the cost per unit must be determined.
 Make sure the units of measurements of all coefficients in the objective functions must be the
same.
2. Identify the constraints
 First, express each constraint in words.
 Second identify the coefficients of the decision variables in the constraints; and the RHS values
of the constraints.
 Determine the limits for the constraints i.e. see whether the constraint is of the form (<), (>) or
(=).
 Write the equation

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 3. Non- negativity assumption (Realistic assumption)
4. Using the above information (step 1 to 3), build the model.

Note
 The coefficients of the variables in the Objective Function are called the profit or
cost coefficients. They express the rate at which the value of the Objective Function
increases or decreases by including in the solution one unit of each of the decision
variables.
 The coefficients of the constraints’ variables are called the input- output coefficients
that indicate the rate at which the given resources are depleted or utilized.

Example 1

 A firm that assembles computers and computer equipment is about to start production two new
microcomputers. Each type of microcomputers will require assembly time, inspection time and
storage space. The amount of each of these resources that can be devoted to the production of
these microcomputers is limited. The manager of the firm would like to determine the quantity
of each microcomputer to produce in order to maximize the profit generated by sales of these
microcomputers.
Additional information

 In order to develop a suitable model of the problem, the manager has met with design and
manufacturing personnel. As a result of these meetings the manager has obtained the following
information.

TYPE ONE TYPE TWO

Profit per unit Birr 60 Birr 50

Assembly time per unit 4 hours 10 hours

Inspection time per unit 2 hours 1 hour

Storage space per unit 3 cubic feet 3 cubic feet

 The manager has also acquired information on the availability of company resources. These
weekly resources are:

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RESOURCE AMOUNTS AVAILABLE

Assembly time 100 hours

Inspection time 22 hours

Storage space 39 cubic feet

 The manager also met with the firm‟s marketing manager and learned that demand for the
microcomputers was such that whatever combination of these two types of microcomputers is
produced, all of the outputs can be sold.
Re quired:

 Formulate the LPPM of the problem.

Solution

Step 1: identify the decision variable

 the quantity/ amount/ units of each microcomputer (microcomputer type 1 and

microcomputer type 2) to be produced

Let x 1= represent quantity of microcomputer type 1 to be produced

x 2= represent quantity of microcomputer type 2 to be produced

Step 2: Identify the objective function

 The problem is maximization problem, as indicated in the problem (5th line of the problem)
 To write the equation both the objective function and the constraints summarize the given
information in tabular form accordingly

RESOURCE TYPE ONE TYPE TWO AVAILABILITY

Assembly time per unit 4 hours 10 hours 100 hours

Inspection time per unit 2 hours 1 hour 22 hour

Storage space per unit 3 cubic feet 3 cubic feet 39 cubic feet

Profit per unit Birr 60 Birr 50

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 Hence, the objective function is

 Max Z = 60x1 + 50 x2

Step 3: identify each constraints and write the equation

 Assembly time 4x1 + 10x2 < 100

 Inspection time 2x1 + x2 < 22

 Storage space 3x1 + 3x2 < 39

 Non negativity constraint x1 & x2 > 0

Step 4: write the summarized form of the model

In summary, the mathematical model of the microcomputer problem is:

Max Z= 60x1 + 50x2
Subject to
4x1 + 10x2 < 100
2x1 + x2 < 22
3x1 + 3x2 < 39
x1 & x2 > 0

Example 2

A firm is engaged in breeding pigs. The pigs are feed on various products grown on the farm. In
view of the need to ensure certain nutrient constituents (call them vitamins, minerals and
proteins) it is necessary to buy two additional products say A and B . One unit of product A
contains 36 units of vitamins, 3 units of minerals and 20 units of proteins. One units of product B
contains 6 units of vitamins, 12 units of minerals and 10 units of proteins. The minimum
requirement of vitamins, minerals and proteins is 108units, 36units and 100 units respectively.
Product A costs birr 20 per unit and product B costs birr 40 per unit

Required

Formulate the LPPM of the problem

Solution

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Step 1: identify the decision variables

 Product A and B to be purchased to prepare the food for pigs

Let x1 represent product A to be purchased

X2 represent products B to be purchased

Step 2: identify the objective function

 The problem is a minimization problem, so the equation;

Min Z = 20x1 + 40 x2

 we can put the information in a tabular form as follows

NUTRIENT
CONSTITUENTS
PRODUCT A PRODUCT B REQUIREMENT

Vitamins 36 units 6 units 108 units

Minerals 3 units 12 units 36 units

Proteins 20 units 10 units 100 units

Cost per unit Birr 20 Birr 40

Step 3: identify each constraints and write the equation

 Vitamins 36x1 + 6x2 > 108

 Minerals 3x1 +12 x2 > 36

 Proteins 20x1 + 10x2 >100

 Non negativity constraint x1 & x2 > 0

Step 4: write the summarized form of the model

In summary, the mathematical model of the problem is:

Min Z=20x1 + 40x2
Subject to
36x1 + 6x2 > 108
3x1 +12 x2 > 36
20x1 + 10x2 >100
x1 & x2 > 0

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2.5. Approaches to solve LPPM
There are two methods used to solve LP problems

1. Graphical methods

2. Simplex methods

2.5.1. Graphical methods

 Is used to find solutions for LPP when the decision variables of the problem are not greater
than two.

Note : Graphical LP is a two-dimensional model

Proce dure

To apply this method, we should follow the following steps.

1. Formulate LPP

2. Convert the inequalities of constraints into equality

3. Draw the constraint lines by considering mass equation

4. Locate the corner points of feasible region

5. Determine the values of the objective function at each corner points of feasible region

6. Select the point on the feasible region that optimizes the objective function-optimal
solution (The most favorable values)

7. Interpret the results

Example 1

Consider the microcomputer problem formulated above and solve it using the graphical
approach.

Step one: Graph each constraints:

 To draw the graph first change the inequality to equality i.e. replace the < and > sign into =
sign.

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Max Z=60x1 + 50x2

Subject to

36x1 + 6x2 > 100 36x1 + 6x2 = 100

3x1 +12 x2 > 22 3x1 +12 x2 = 22

20x1 + 10x2 >39 20x1 + 10x2 =39

x1 & x2 > 0 x1 & x2 = 0

 Then find the x and y intercepts (in our case x1 and x2 respectively) - points where each
constraint intersects the axis. To do so, set x1 = 0 to find values for x2 and set x2 = 0 to find
values for x1 .

For the first constraint:

4x1 + 10x2 = 100 4x1 + 10x2 = 100

4(0) + 10 x2 = 100 4x1 + 10(0) = 100

10x2 = 100 4x1 = 100

X2 = 10 x1 = 25

The x1 and x2 intercepts are (0, 10) (25, 0). Similarly calculate for the second and third constraints.

For the second constraint the intercepts are (0, 22) (11, 10)

For the third constraint the intercepts are (0, 13) (13, 0)

Graph the constraints using the intercepts calculated above.

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The graph is:

 As indicated in the graph, the corner points of the feasible region (the corner points of the
shaded region) are A, B, C, D and E. The next task is to find the coordinates of these corner
points, some are determined by observation and some are through simultaneous equation.
Then we test each corner points to find the points that results the optimal solution. These
activities are indicated in the following table.

Evaluating the corner points

Point Coordinates How determined Value of the objective function
X1 X2 M ax Z=60x1 + 50x2

A 0 0 Inspection 60(0) + 50(0) = 0

B 11 0 Inspection 60(11) + 50(0) =660
C 9 4 Simultaneous equation 60(9) + 50(4) =740
D 5 8 Simultaneous equation 60(5) + 50(8) =700
E 0 10 Inspection 60(0) + 50(10)=500

Since the maximum value (because the objective function of the problem is maximization) is 740, the
solution is:

X1 = 9, X2 = 4 and The Maximum Profit is Birr 740.

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When we interpret the result, we state the company should produce 9 units of microcomputer type one
and 4 units of microcomputer type two to get a maximum profit of Birr 740.

Example 2

Max.Z  50 X 180 X 2
St :
X 12 X 2 32
X 12 X 2 82
X1, X 2  0
Note: Try to solve the problem by yourself, in separate piece of paper before you
check the answer.

Example 3
Consider two models of color TV sets; Model A and B, are produced by a company to maximize
profit. The profit realized is $300 from a TV set of model A, and $250 from that of set B. The
limitations are:
A. availability of only 40hrs of labor each day in the production department
B. a daily availability of only 45 hrs on machine time
C. ability to sale 12 set of model A
Required
How many sets of each model will be produced each day so that the total profit will be as large as
possible?

Resources used per unit

Constraints Model A Model B Maximum Available hrs.

(X1 ) (X2 )

Labor hr. 2 1 40

Machine hr. 1 3 45

Marketing hr. 1 0 12

Profit $300 $250

Note: Try to solve the problem by yourself, in separate piece of paper before you
check the answer.

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Solution
1. Formulation of mathematical modeling of LPP
Max Z=300X1 +250X2
St:
2X1 +X2 < 40
X1 +3X2 < 45
LPP Model
X1 < 12
X1 , X2 >0
2. Convert constraints inequalities into equalities
2X1 +X2 = 40
X1 +3X2 = 45
X1 = 12
3. Draw the graph by intercepts
2X1 +X2 = 40 ==> (0, 40) and (20, 0)
X1 +3X2 = 45==> (0, 15) and (45, 0)
X1 = 12==> (12, 0)
X1 , X2 >0

4. Identify the feasible area of the solution which satisfies all constrains.
5. Identify the corner points in the feasible region
A (0, 0), B (0, 15), C (12, 11) and D (12, 0)

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 8. Identify the optimal solution point

Corners Coordinates Max Z=300 X1 +250X2

A (0, 0) $0
B (0, 15) $3750
C (12, 11) $6350
D (12, 0) $3600

Interpretation
12 units of product A and 11 units of product B should be produced so that the total profit
will be $6350
Example 4
A manufacturer of light weight mountain tents makes two types of tents, REGULAR tent and
SUPER tent. Each REGULAR tent requires 1 labor-hour from the cutting department and 3
labor-hours from the assembly department. Each SUPER tent requires 2 labor-hours from the
cutting department and 4 labor-hours from the assembly department .The maximum labor hours
available per week in the cutting department, and the assembly department are 32 and 84
respectively. Moreover, the distributor, because of demand, will not take more than 12 SUPER
tents per week. The manufacturer sales each REGULAR tents for $160 and costs$110 per tent to
make. Where as SUPER tent ales for $210 per tent and costs $130 per tent to make.

Required
A. Formulate the mathematical model of the problem
B. Using the graphic method, determine how many of each tent the company should manufacture
each tent the company should manufacture each week so as to maximize its profit?
C. What is this maximum profit assuming that all the tents manufactured in each week are sold in
that week?

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Solution
______________________________________________________________
Labor hours per tent
Department REGULAR (X 1 ) SUPER(X 2 ) Maximum labor-hours
available per week

___________________________________________________________________

Cutting department 1 2 32
Assembly department 3 4 84
Selling price per tent $160 $210
Cost per tent $110 $130
Profit per tent $50 $80

 The distributor will not take more than 12 SUPER tents per week. Thus, the manufacturer
should not produce more than 12 SUPER tents per week.
Decision variable : number of regular and super tent to be produced per week.
Let X1 =The No of REGULAR tents produced per week .
X2 =The No of SUPER tents produced per week .

X1 and X2 are called the decision variables

Max.Z  50 X 180 X 2 ……….Cutting department constraint
St : ……….Assembly department constraint
X 12 X 2 32 ……….Demand constraint
LPP Model
X 14 X 2 82 ……….Non-negativity constraints
X 2  12
X1, X 2  0

Corners Coordinates Max Z=50 X1 +800X2

A (0, 0) $0
B (0, 12) $960
C (8, 12) $1360
D (20, 6) $1480
E (28, 0) $1400

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Interpretation
The manufacturer should produce and sale 20 REGULAR tents and 6 SUPERS tents to get a
maximum weekly profit of $1480.
Example 5
Suppose that a machine shop has two different types of machines; machine 1 and machine 2,
which can be used to make a single product .These machine vary in the amount of product
produced per hr., in the amount of labor used and in the cost of operation. Assume that at least a
certain amount of product must be produced and that we would like to utilize at least the regular
labor force. How much should we utilize each machine in order to utilize total costs and still
meets the requirement?
Solution: The key information inputs in the problem are provided as follows
_______________________________________________________________

Resource used

Machine 1 (X1 ) Machine (X2 ) Minimum required hours

_________________________________________________________________________

Product produced/hr 20 15 100

Labor/hr 2 3 15______

Operation Cost $25 $30____________________________________

The problem is formulated in the next model

Min.Z  25 X 130 X 2
St :
20 X 115 X 2 100 LPP Model
2 X 13 X 2 15
X1, X 2  0

Constraint equation:

20X1 +15X2 =100 ==> (0, 20/3) and (5, 0)

2X1 +3X2 =15 ==> (0, 5) and (7.5, 0)

X1 X2 > 0

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the feasible solution space and the corner points are specified on the graph below

___________________________________________________________________________________________
Corners Coordinates MinZ=25 X1 + 30X2
A (0, 20/3) 200
B (2.5, 3.33) 162.5
C (7.5, 0) 187.5

_____________________________________________________________
The optimal solution mix is represented by X1 =2.5, X2 =3.33, and Min Z= 162.5
Example 6
A company owns two flour mills (A and B) which have different production capacities for
HIGH, MEDIUM and LOW grade flour. This company has entered contract supply flour to a
firm every week with 12, 8, and 24 quintals of HIGH, MEDIUM and LOW grade respectively. It
costs the Co. $1000 and $800 per day to run mill A and mill B respectively. On a day, mill A
produces 6, 2, and 4 quintals of HIGH, MEDIUM and LOW grade flour respectively. Mill B
produces 2, 2 and 12 quintals of HIGH, MEDIUM and LOW grade flour respectively.
Required
How many days per week should each mill be operated in order to meet the contract order most
economically standardize? Solve graphically.
Solution
No of days per week of Minimum flour in
Mil A (X1 ) Mill B(X2 ) quintals
HIGH Capacity (in quintal) 6 2 12
MEDIUM Capacity (in quintal) 2 2 8
LOW Capacity (in quintal) 4 12 24
Running cost/day $1000 $800

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Max.Z  100 X 1800 X 2
St :
6 X 12 X 2 12
2 X 12 X 2 8
4 X 1  12 X 2  24
X1, X 2  0
Optimal Solution values: X1 =1 X2 =3 and Min Z= $3400
Note
In maximization problems, our point of interest is looking the furthest point from the origin.
In minimization problems, our point of interest is looking the point nearest to the origin.

2.5.2. Solving for LPPs using the Simplex method

The graphical method to solving LPPs provides fundamental concepts for fully understanding the LP
process. However, the graphical method can handle problems involving only two decision variables (say
X1 and X2 ).
In the 1940s George B. Dantzig developed an algebraic approach called the Simplex Method, which is an
efficient approach to solve applied problems containing numerous constraints; and involving many
variables that cannot be solved by the graphical method.
The simplex method is an ITERATIVE or “step by step” method or repetitive algebraic approach that
moves automatically from one basic feasible solution to another basic feasible solution improving the
situation each time until the optimal solution is reached at.
Similar to the graphical solution approach, this method can be applied to solve for LPPs of different
objectives with various set of constraints.

Solving maximization problems

1. Maximization having all the constraints in “<” form
Example 1
Consider the microcomputer problem which is solved with graphical method so that you can
compare and contrast the two approaches.
Max Z= 60x1 + 50x2

Subject to

4x1 + 10x2 < 100

2x1 + x2 < 22
3x1 + 3x2 < 39
x1 & x2 > 0

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Solution procedure
To solve the problem using the simplex approach, follow the following steps.
Step 1: Formulate LPP Model:
In our example it is already done.
Step 2: Introduce slack variable convert the inequality of constraints into equality
(Standardize the problem)
Convert each constraint into a standard form by introducing a variable called Slack variable,
surplus variable and artificial variable
Slack Variables(S): is /are added to the left-hand side of a < constraint to convert the constraint
into its standard form. The value of the slack variable shows unused or underutilized resource .
Surplus variables(S): is/are added to the left-hand side of a > constraints to convert the constraint
into its standard form. The value of the surplus variable shows the excess resources used.
Artificial variables (A): somewhat analogous to slack variables in that they are added to equality
and a > constraints in the same way that slack variables are added to a < constraints. However
artificial variables have no physical interpretation; they merely serve as a device to enable us to
use the simplex process.
Since the above problem constraints have all a < algebraic sign, we use slack variables for standardizing
the problem.

Note
 A slack variable is always added for a < constraint to convert the constraint to a
standard form.

Slack variables represent unused resource or idle capacity. Thus, they don‟t produce any product and their
contribution to profit is zero.

Slack variables are added to the objective function with zero coefficients.
Max Z= 60x1 + 50x2+0s1+0s2+0s3

Subject to
4x1 + 10x2 +s1 =100
2x1 + x2 +s2 = 22
3x1 + 3x2 +s3 =39
x1 , x2 ,s1 ,s2 ,&s3 = 0

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 Note
 To standardize an LPP, start from the constraint and finally move to the objective function.
 When you add the slack variables, it should be according to the existence of the constraints
(how it is written in the model).
 Add S1 to the first constraint, s2 to the second constraints etc

Step 3: Develop the initial simplex tableau

To make the data ready for analysis, the simplex method uses a table called the simplex tableau or the
simplex matrix.
In constructing the initial simplex tableau, the search for the optimal solution begins at the origin.
Indicating that nothing can be produced;
Thus, based on this assumption, no microcomputer type one and microcomputer type two is
produced, which implies that x 1 =0 and x 2 =0
==>4x1 +10x2 + s1 +0 s2 + 0 s3 = 100 ==> 2x1 +x2 +0s1 + s2 + 0s3 = 22
4(0) +10(0) + s1 +0 s2 + 0 s3 = 100 2(0) +0 + 0s1 + s2 + 0 s3 = 22
s 1 = 100 – Unused assembly time. s 2 = 22 – Unused inspection time.

==> 3x1 + 3x2 +0s1 +0s2 + s3 = 39

3(0) +3(0) +0s1 +0 s2 + s3 = 39
s 3 = 39 – Unused storage space.
Therefore, Max Z=60x1 +50x2 + 0 s1 +0 s2 + 0 s3
=60(0) +50(0) + 0(100) +0(22) + 0(39)
=0
Note
 In general, whenever there are n variables and m constraints (excluding the non-
negativity), where m is less than n (m<n), n-m variables must be set equal to zero before
the solution can be solved algebraically.

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 a. Basic variables
 are variables with non-zero solution values
 are variables that are in the basic solution
 have 0 values in the C-Z row
b. Non-basic variables
 are variables with zero solution values
 are variables that are out of the solution

From the above example n=5 variables (x1, x 2 , s1 , s2 , and s3 ) and m=3 constraints (assembly, inspection
and storage space constraints), excluding non-negativity.

Therefore, n-m=5-3=2 variables (x 1 and x 2 ) are set equal to zero in the 1st simplex tableau. These are non-
basic variables. 3 Variables (s1 , s2 , and s3 ) are basic variables (in the 1st simplex tableau) because they
have non-zero solution values.

Step 3: Construct the initial simplex tableau(continued)

Initial simplex tableau
Slack variables
variables column
Real or decision

Solution quantity
Profit per unit

columns
Basic or DV
column

column

column

Profit per unit row

C 60 50 0 0 0
BV X1 X2 S1 S2 S3 Q
S1 0 4 10 1 0 0 100 R1
S2 0 2 1 0 1 0 22 Constraint
R2 equation rows
S3 0 3 3 0 0 1 39 R3
Z 0 0 0 0 0 0
Gross Profit row
C–Z 60 50 0 0 0
Net Profit row
/Indicator row/

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 Step 4: Determine the “incoming” or “entering” variables

Note:
 The entering variable is the variable that has the most (the largest) positive value in
the C - Z row (indicator row).
 It is the variable that has the highest contribution to profit per unit.
 X1 in our case is the entering variable. (Because the maximum number in the c-z row
is 60)
 The column associated with the entering variable is called key or pivot column X 1
column in our case.

Step 5: Determine the “leaving “or “outgoing” variable

In this step, we determine the variable that will leave the solution for X1 .
To identify the leaving variable, we should calculate the ratio first and then we should select the
minimum non-negative ratio. (Minimum ratio criteria)

Note
 The leaving variable is the variable that has the smallest replacement ratio(minimum ratio).
 S2 in our case is the leaving variable. (Because the smallest replacement ratio is 11
 The row associated with the entering variable is called key or pivot row S 2 row in our case.

The pivot element is the intersection point between the pivot row and pivot column; No 2 in the
above example
Replacement Ratio (RR) = Solution Quantity (Q)
Corresponding values in pivot column OR

Minimum Ratio (MR) = RHSV

Corresponding pivot column elements

In our case
100 =25
4
22 = 11 is the minimum
2
39 =13
3

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It is interesting to note that the three ratios (25, 11, 13) corresponding to the intersections of the
constraints with the x1(look the graphical solution). Note that the smallest of the ratios represents the
extreme point of the feasible solution space; the other points lie beyond the feasible solution space. Hence
by selecting the smallest ratio, the simplex procedure stays within the feasible solution space. It
sometimes happens that some of the substation rates for the variable we want to bring into solution are
zero or negative. We don‟t nee to divide the quantity values by a negative or a zero substitution rates.
Step 6: Calculate the values of pivot row (Row to be replaced) or Perform row operations . Perform
algebraic operations on the PIVOT COLUMN to convert the pivot element into 1 and the remaining pivot
column numbers into 0. Obtain the new row values through the following two operations:
Pivot row element = Old pivot row element OR 1/ Key element X corresponding
Key element elements of old pivot row

 Multiply (divide) all of the elements in a row by a constant

 Add or subtract the multiple of the row to or from another row
After identifying the entering, leaving and pivot element construct the second tableau by replacing the
S2 by X1 in the basic solution.

2nd tableau

C 60 50 0 0 0

SV X1 X2 S1 S2 S3 Q RR

S1 0 0 8 1 -2 0 56 56/8=7 R’1 =R1+ (-4R’2)

X1 60 1 1/2 0 1/2 0 11 11/1/2=22 R’2 =R2 /2
S3 0 0 3/2 0 -3/2 1 6 6/3/2=4 R’3 =R3 + (-3R’ 2)
Z 60 30 0 30 0 660
C–Z 0 20 0 -30 0

Note the following to see how it is calculated

Since the minimum replacement ratio (RR) is associated with the 2nd row we should start the operation
on the second row i.e. we should change the pivot element into 1. To do so we should divide the whole
elements of the 2nd row by the pivot element of the first tableau.

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 See the analysis below.
New R2 =2 1 0 1 0 22 when we divide it by 2 we get 1 ½ 0 ½ 0 11 so this
will be the new set row values of the second tableau.
Step 7: Calculate values for the remaining rows
Method:
New row element = (Old row element) + (No. above or below key element) X
corresponding elements of revised row
Then calculate the new values of the first row and the third row of the second tableau. You can begin in
ether row one or row three.
Let’s start with the first row
Bring the first row values of the initial tableau
4 10 1 0 0 100
Then take the second row values of the 2nd tableau
1 ½ 0 ½ 0 11
Then, in order to change 4 into 0, ask yourself what algebraic operation should be done. Very
simple, multiply the whole elements of the second tableau‟s value by -4.
You get
-4 -20 -2 0 -44, then add this value to the first row value of initial tableau.
Look at the summary below.
4 10 1 0 0 100 4 10 1 0 0 100 4 10 1 0 0 100
1 ½ 0 ½ 0 11 -4( 1 ½ 0 ½ 0 11) + -4 -2 0 -2 0 -44

0 8 1 -2 0 56 will be the new

values of the first row of the second tableau. To put it in a simple formula
NR1 =OldR1 + (-4NR2)
Similarly calculate for row three of the second tableau
3 3 0 0 1 39 3 3 0 0 1 39 3 3 0 0 1 39
1 ½ 0 ½ 0 11 -3 ( 1 ½ 0 ½ 0 11) + -3 -3/2 0 -3/2 0 -33
0 3/2 0 -3/2 1 6 will be the new
values of the 3rd row value of the second tableau. To put it in a simple formula again it will be:
NR3 =OldR3 + (-3NR2)

Note
 Divide each element of the pivot row by the pivot element to find new values in the key or pivot row.
 Perform row operations to make all other entries for the pivot column equal to zero.

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Then calculate the Z row values i.e. these are found by multiplying the values in each column by the
corresponding coefficients in the C column and adding them.

BV C X1 x2 s1 s2 s3 Q

S1 0 0(0 ) =0 0 (8 )=0 0 (1)=0 0(-2 ) =0 0(0)=0 0(56)=0

X1 60 60(1 )=60 60 (1/2) =30 60( 0 )=0 60(1/2)=30 60 (0)=0 60(11)=660

S3 0 0(0 )= 0 0(3/2) =0 0( 0 )=0 0(-3/2)=0 0( 1)=0 0(6)= 0

Z 60 30 0 30 0 660

Then finally calculate C – Z row. It is simply about following the formula.

Step 8 Test for optimum solution

If all Cj-Zj < 0 (Inclusive zeros and negative) it is optimum solution.
If not repeat step 4-8 till optimum basic feasible solution is obtained. i.e. repeat these steps till no
positive value occurs in the C – Z row. Or all Cj- Zj values are zeros and negative
Note
 A simplex solution in a maximization problem is optimal when the C-Z row consists entirely
zeros and negative No (when there are no positive values in the C-Z row.

3rd simplex tableau

BV C 60 50 0 0 0 Q

X1 X2 S1 S2 S3
S1 0 0 0 1 6 - 24
16/3
X1 60 1 0 0 1 - 9
1/3
X2 50 0 1 0 -1 2/3 4
Z 60 50 0 10 40/3 740
C-Z 0 0 0 -10 -
40/3

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  The entire C – Z < 0 indicating that no additional potential for improvement exists.
 Optimal solution is reached.
 the optimal solution is where X1 =9, X2 =4, S1 =24and Max Z=740

Interpretation of the Results

The last step is interpreting the result: in order to achieve the maximum weekly profit of birr 740,
the company should produce 9 units of microcomputer type one and 4 units of micro computer
type two. This will leave no slack in either inspection (s 2 =0) or storage space (s 3 =0). How ever,
there will be 24 hours of assembly time that is unused.

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