STATISTICAL & QUANTITATIVE METHODS

Unit I Statistical and Quantitative Techniques: Meaning and

Classification of Statistical and Quantitative Techniques, Fundamentals of
statistics and descriptive statistics, Programming Techniques, Role of
Quantitative Techniques in Management Decision - making.

Unit II Transportation Problems Introduction, Terminology in

Transportation Problems, General Procedure for Solving a Transportation
Problem, Methods for Finding the Initial Feasible Solution: North – West
Corner Method (NWCM), Least Cost Method(LCM) or Matrix Minima
Method , Column Minima Method, Row Minima Method, Vogel’s
Approximation Method (VAM), Methods for Finding the OptimumSolution:
Modified Distribution (MODI) Method or UV method

Unit III Assignment Problems Introduction, Hungarian Assignment

Method (HAM), Special Cases in Assignment Problems: Unbalanced
Problem, Multiple Optimum Solution, Maximization Problems

Unit IV Game Theory Introduction, Terminology, Game Theory – Two

Person – Zero Sum – Game. Saddle Point, Value of Game, Dominance
Strategy, Mixed Strategy, Limitations of Game Theory.

Unit V Replacement Models and Sequencing Models Introduction to

Replacement, Terminologies, Replacement Models, Replacement Problems,
Introduction to Sequencing Models, Terminologies, Sequencing Models,
Sequencing Problems Johnson’s Algorithm for no jobs & Two machines n
jobs & three machines, Two jobs and m machines problems
 1. QUANTITATIVE TECHNIQUES

Meaning and Definition:

Quantitative techniques may be defined as those techniques which provide
the decision makes a systematic and powerful means of analysis, based on
quantitative data. It is a scientific method employed for problem solving
and decision making by the management. With the help of quantitative
techniques, the decision maker is able to explore policies for attaining the
predetermined objectives. In short, quantitative techniques are inevitable in
decision-making process.

Classification of Quantitative Techniques:

There are different types of quantitative techniques. We can classify them
into three categories. They are:
Mathematical Quantitative Techniques
Statistical Quantitative Techniques
Programming Quantitative Techniques

A} Mathematical Quantitative Techniques:

A technique in which quantitative data are used along with the principles of
mathematics is known as mathematical quantitative techniques.
Mathematical quantitative techniques involve:

1. Permutations and Combinations:

Permutation means arrangement of objects in a definite order. The number of
arrangements depends upon the total number of objects and the number of
objectstaken at a time for arrangement.

2. Matrix Algebra:
Matrix is an orderly arrangement of certain given numbers or symbols in rows
and columns. It is a mathematical device of finding out the results of different
types of algebraic operations on the basis of the relevant matrices.
3. Determinants:
It is a powerful device developed over the matrix algebra. This device is used
for finding out values of different variables connected with a number of
simultaneous equations.

4. Differentiation:
It is a mathematical process of finding out changes in the dependent
variable with reference to a small change in the independent variable.

5. Integration:
Integration is the reverse process of differentiation.

6. Differential Equation:
It is a mathematical equation which involves the differential coefficients of
the dependent variables.

B} Statistical Quantitative Techniques:

Statistical techniques are those techniques which are used in conducting the
statistical enquiry concerning to certain Phenomenon. They include all the
statistical methods beginning from the collection of data till interpretation of
those collected data.

Statistical techniques involve:

1. Collection of data:

One of the important statistical methods is collection of data. There are

different methods for collecting primary and secondary data.

2. Measures of Central tendency, dispersion, skewness and Kurtosis

Measures of Central tendency is a method used for finding he average of a
series while measures of dispersion used for finding out the variability in a
series. Measures of Skewness measures asymmetry of a distribution
while
measures of Kurtosis measures the flatness of peakedness in a distribution.

3. Correlation and Regression Analysis:

Correlation is used to study the degree of relationship among two or more
variables. On the other hand, regression technique is used to estimate the
value of one variable for a given value of another.

4. Index Numbers:
Index numbers measure the fluctuations in various Phenomena like price,
production etc over a period of time, They are described as economic
barometres.

5. Time series Analysis:

Analysis of time series helps us to know the effect of factors which are
responsible for changes:

6. Interpolation and Extrapolation:

Interpolation is the statistical technique of estimating under certain
assumptions, the missing figures which may fall within the range of given
figures. Extrapolation provides estimated figures outside the range of given
data.

7. Statistical Quality Control

Statistical quality control is used for ensuring the quality of items
manufactured. The variations in quality because of assignable causes and
chance causes can be known with the help of this tool. Different control charts
are used in controlling the quality of products.

8. Ratio Analysis:
Ratio analysis is used for analyzing financial statements of any business or
industrial concerns which help to take appropriate decisions.

9. Probability Theory:
Theory of probability provides numerical values of the likely hood of the
occurrence of
events.
C}Programming techniques involve:

1. Linear Programming:

Linear programming technique is used in finding a solution foroptimizing a

given objective under certain constraints.

2. Queuing Theory:

Queuing theory deals with mathematical study of queues. It aims at

minimizing cost of both servicing and waiting.

3. Game Theory:
Game theory is used to determine the optimum strategy in a competitive
situation.

4. Decision Theory:
This is concerned with making sound decisions under conditions of
certainty, risk and uncertainty.

5. Inventory Theory:

Inventory theory helps for optimizing the inventory levels. It focuses on

minimizing cost associated with holding of inventories.

6. Net work programming:

It is a technique of planning, scheduling, controlling, monitoring and co-

ordinating large and complex projects comprising of a number of activities
andevents. It serves as an instrument in resource allocation and adjustment of
time
Functions of Quantitative Techniques:
The following are the important functions of quantitative techniques

To facilitate the decision-making process

To provide tools for scientific research
To help in choosing an optimal strategy
To enable in proper deployment of resources
To help in minimizing costs
To help in minimizing the total processing time required for performing aset
of jobs

USES OF QUANTITATE TECHNIQUES

Business and Industry

Quantitative techniques render valuable services in the field of businessand

industry.
Today, all decisions in business and industry are made with the help of
quantitative techniques.

Some important uses of quantitative techniques in the field of business and

industry are given below:

Quantitative techniques of linear programming is used for optimalallocation

of scarce resources in the problem of determining product mix

Inventory control techniques are useful in dividing when and how much items
are to be purchase so as to maintain a balance between the cost of holding
and cost of ordering the inventory

Quantitative techniques of CPM, and PERT helps in determining the earliest

and the latest times for the events and activities of a project. This helps the
management in proper deployment of resources.

Decision tree analysis and simulation technique help the management in

taking the best possible course of action under the conditions of risks and
uncertainty.
Queuing theory is used to minimize the cost of waiting and servicing of the
customers in queues.

Replacement theory helps the management in determining the most

economic replacement policy regarding replacement of an equipment.

Limitations of Quantitative Techniques:

Even though the quantitative techniques are inevitable in decision- making

process, they are not free from short comings. The following are the
important limitations of quantitative techniques: Quantitative techniques
involves mathematical models, equations and other mathematical
expressions
Quantitative techniques are based on number of assumptions. Therefore,due
care must be ensured while using quantitative techniques, otherwise it willlead
to wrong conclusions.
Quantitative techniques are very expensive.
Quantitative techniques do not take into consideration intangible facts like
skill, attitude etc.
Quantitative techniques are only tools for analysis and decision-making.
They are not decisions itself.

Role of Quantitative Techniques in Management Decision – making:-

Solution for various business problems

With increasing competition and scare resources, how manager can increase
the profits of the organization are some examples of problems faced in
today’s business. Quantitative Techniques help in the field of production,
marketing, finance and other activities of business. It is answer to such type
of problems:
How to employ man and machine?
How much time customers wait for a service?
Can business deliver goods on time?
How effectively businesses use its resources?
Selection of an appropriate strategy
Every business is having a motive to increase its market share from its
competitors by observing the strategies of the others. So game theory comes
handy in this situation where businessman can minimize cost or maximize
profit.

Base for scientific analysis

Quantitative techniques enforce disciplined thinking about organizational
problems
.They provide precise description of the cause and effect relationship and risk
elimination. Quantitative techniques replace subjective and intuitive
approach withanalytical and objective approach.

Reduction in cost and minimizing waiting time

Time is essence in service industry. It is rightly said that a good decision if
taken at right time then outcome of that decision will automatically good. There
is gap between service time and capacity so serve. So queuing theory helps
in minimizing waiting time and wastage of resources. It provides a base for
businessman to take acorrect and profitable decision.

Proper allocation of resources

Quantitative techniques help in the proper allocation of resources which
save time and cost of the businessman. PERT and CPM is first tool for proper
allocation of resources to each and every activity in a proper manner. These
techniques ensure completion of task with in time and with limited resources.
These help managers to plan, schedule and control large and complex projects
so resources wastage can e minimized.

Helpful in inventory management

The inventory management is deal with planning and control of inventory in
the organization. If inventory holds for large time and in large quantity then
this idle resource and create losses for the organization. On the other hand,
if there is shortage of inventory then it also negative impacts on profitability
of the organization. So quantitative techniques maintain balance between
holding the inventory or not. These enables management to decide when to
buy and how much to buy.
Facilities in decision making
Decision making is an essential part of management process. Thus, the
decision maker in the present business must understand the scientific
methodology of making decisions. In real life, some decision making
situations are simple while other are not. The decision is multidimensional
response which includes production, cost quality, price of the product etc.
The quantitative techniques help in decision making process in the way that
identify the factors which influence the decisions and quantify them.
 Unit II Transportation Problems:

Step 1: Formulate the problem.

Formulate the given problem and set up in a matrix form. Check whether the
problem is a balanced or unbalanced transportation problem. If unbalanced,
add dummy source (row) or dummy destination (column) as required.

Step 2: Obtain the initial feasible solution.

The initial feasible solution can be obtained by any of the following three
methods:

Northwest Corner Method (NWC) :

Definition: The North-West Corner Rule is a method adopted to compute
the initial feasible solution of the transportation problem. The name North-
west corner is given to this method because the basic variables are selected
from the extreme left corner.
The concept of North-West Corner can be well understood through a
transportation problem given below:
In the table, three sources A, B and C with the production capacity of 50 units,
40 units, 60 units of product respectively is given. Every day the demand of
three retailers D, E, F is to be furnished with at least 20 units, 95 units and 35
units of product respectively. The transportation costs are also given in the
matrix.

The prerequisite condition for solving the transportation problem is that

demand should be equal to the supply. In case the demand is more than
supply, then dummy origin is added to the table. The supply of dummy origin
will be equal to the difference between the total supply and total demand. The
cost associated with the dummy origin will be zero.

Similarly, in case the supply is more than the demand, then dummy source
is created whose demand will be equivalent to the difference between supply
and demand. Again the cost associated with the dummy source will be zero.

Once the demand and supply are equal, the following procedure is followed:

Select the north-west or extreme left corner of the matrix, assign as many
units as possible to cell AD, within the supply and demand constraints. Such
as 20 units are assigned to the first cell, that satisfies the demand of destination
D while the supplyis in surplus.
Now move horizontally and assign 30 units to the cell AE. Since 30 units are
available with the source A, the supply gets fully saturated.

Now move vertically in the matrix and assign 40 units to Cell BE. The supply
of source B also gets fully saturated.
Again move vertically, and assign 25 units to cell CE, the demand of
destination E is fulfilled.
Move horizontally in the matrix and assign 35 units to cell CF, both the
demand and supply of origin and destination gets saturated. Now the total
cost can be computed.

The Total cost can be computed by multiplying the units assigned to each cell
with the concerned transportation cost. Therefore,

Total Cost = 20*5+ 30*8+ 40*6+ 25*9+ 35*6 = Rs 1015

Least Cost Method (LCM)

Definition: The Least Cost Method is another method used to obtain the
initial feasible solution for the transportation problem. Here, the allocation begins
with the cell which has the minimum cost. The lower cost cells are chosen over
the higher-cost cell with the objective to have the least cost of transportation.
The Least Cost Method is considered to produce more optimal results than
the North-west Corner because it considers the shipping cost while making
the allocation, whereas the North-West corner method only considers the
availability and supply requirement and allocation begin with the extreme left
corner, irrespective of the shipping cost.

Let’s understand the concept of Least Cost method through a problem

givenbelow:
In the given matrix, the supply of each source A, B, C is given Viz. 50units,
40 units, and 60 units respectively. The weekly demand for three retailers D,
E, F i.e. 20 units, 95 units and 35 units is given respectively. Theshipping
cost is given for all the routes.

The minimum transportation cost can be obtained by following the steps

given below:

The minimum cost in the matrix is Rs 3, but there is a tie in the cell BF, and
CD, now the question arises in which cell we shall allocate. Generally, the
cost where maximum quantity can be assigned should be chosen to obtain the
better initial solution. Therefore, 35 units shall be assigned to the cell BF.
With this, the demand for retailer F gets fulfilled, and only 5 units are left with
the source B.
Again the minimum cost in the matrix is Rs 3. Therefore, 20 units shall be
assigned to the cell CD. With this, the demand of retailer D gets fulfilled. Only
40 units are left with the source C.
The next minimum cost is Rs 4, but however, the demand for F is completed,
we will move to the next minimum cost which is 5. Again, the demand of D
is completed. The next minimum cost is 6, and there is a tie between three
cells. But however, no units can be assigned to the cells BD and CF as the
demand for both the retailers D and F are saturated. So, we shall assign 5
units to Cell BE. With this, the supply of source B gets saturated.
The next minimum cost is 8, assign 50 units to the cell AE. The supply of
source Agets saturated.
The next minimum cost is Rs 9; we shall assign 40 units to the cell CE. With
his both the demand and supply of all the sources and origins gets saturated.

The total cost can be calculated by multiplying the assigned quantity with
theconcerned cost of the cell. Therefore,

Total Cost = 50*8 + 5*6 + 35*3 +20*3 +40*9 = Rs 955.

Vogel’s Approximation Method (VAM)

Definition: The Vogel’s Approximation Method or VAM is an iterative

procedure calculated to find out the initial feasible solution of the
transportation problem. Like Least cost Method, here also the shipping cost
istaken into consideration, but in a relative sense.
The following is the flow chart showing the steps involved in solving the
transportation problem using the Vogel’s Approximation Method:
Vogel’s Approximation Method Steps
Below are the steps involved in Voge’s approximation method of finding the
feasible solution to a transportation problem.
Step 1: Identify the two lowest costs in each row and column of the given cost
matrix and then write the absolute row and column difference. These
differences are called penalties.
Step 2: Identify the row or column with the maximum penalty and assign the
corresponding cell’s min(supply, demand). If two or more columns or rows
have the same maximum penalty, then we can choose one among them as per
our convenience.
Step 3: If the assignment in the previous satisfies the supply at the origin, delete
the corresponding row. If it satisfies the demand at that destination, delete the
corresponding column.
Step 4: Stop the procedure if supply at each origin is 0, i.e., every supply is
exhausted, and demand at each destination is 0, i.e., every demand is satisfying.
If not, repeat the above steps, i.e., from step 1.

Solution:
For the given cost matrix,
Total supply = 50 + 60 + 25 = 135
Total demand = 60 + 40 + 20 + 25 = 135
Thus, the given problem is balanced transportation problem.
Now, we can apply the Vogel’s approximation method to minimize the total
cost of transportation.
Step 1: Identify the least and second least cost in each row and column and then
write the corresponding absolute differences of these values. For example, in
the first row, 2 and 3 are the least and second least values, their absolute
difference is 1.

These row and column differences are called penalties.

Step 2: Now, identify the maximum penalty and choose the least value in that
corresponding row or column. Then, assign the min(supply, demand).
Here, the maximum penalty is 3 and the least value in the corresponding
column is 2. For this cell, min(supply, demand) = min(50, 40) = 40
Allocate 40 in that cell and strike the corresponding column since in this case
demand will be satisfied, i.e., 40 – 40 = 0.
Step 3: Now, find the absolute row and column differences for the remaining
rows and columns. Then repeat step 2.
Here, the maximum penalty is 3 and the least cost in that corresponding row is
3. Also, the min(supply, demand) = min(10, 60) = 10
Thus, allocate 10 for that cell and write down the new supply and demand for
the corresponding row and column.
Supply = 10 – 10 = 0
Demand = 60 – 10 = 50
As supply is 0, strike the corresponding row.
Step 4: Repeat the above step, i.e., step 3. This will give the below result.
In this step, the second column vanishes and the min(supply, demand) =
min(25, 50) = 25 is assigned for the cell with value 2.
Step 5: Again repeat step 3, as we did for the previous step.

In this case, we got 7 as the maximum penalty and 7 as the least cost of the
corresponding column.
Step 6: Now, again repeat step 3 by calculating the absolute differences for
the remaining rows and columns.

Step 7: In the previous step, except for one cell, every row and column
vanishes. Now, allocate the remaining supply or demand value for that
corresponding cell.

Total cost = (10 × 3) + (25 × 7) + (25 × 2) + (40 × 2) + (20 × 2) + (15 × 3)

= 30 + 175 + 50 + 80 + 40 + 45
 = 420

2. Find Solution using Voggel's Approximation method

D1 D2 D3 D4 Supply
S1 19 30 50 10 7
S2 70 30 40 60 9
S3 40 8 70 20 18
Demand 5 8 7 14

Solution:
TOTAL number of supply constraints : 3
TOTAL number of demand constraints : 4
Problem Table is
D1 D2 D3 D4 Supply
S1 19 30 50 10 7
S2 70 30 40 60 9
S3 40 8 70 20 18
Demand 5 8 7 14

D1 D2 D3 D4 Supply Row Penalty

S1 19 30 50 10 7 9=19-10
S2 70 30 40 60 9 10=40-30
S3 40 8 70 20 18 12=20-8
Demand 5 8 7 14
Column
21=40-19 22=30-8 10=50-40 10=20-10
Penalty
Table-1

The maximum penalty, 22, occurs in column D2.

The minimum cij in this column is c32 = 8.

The maximum allocation in this cell is min(18,8) = 8.
It satisfy demand of D2 and adjust the supply of S3 from 18 to 10 (18 - 8 =
10).

Table-2
D1 D2 D3 D4 Supply Row Penalty
S1 19 30 50 10 7 9=19-10
S2 70 30 40 60 9 20=60-40
S3 40 8(8) 70 20 10 20=40-20
Demand 5 0 7 14
Column
21=40-19 -- 10=50-40 10=20-10
Penalty

The maximum penalty, 21, occurs in column D1.

The minimum cij in this column is c11 = 19.
The maximum allocation in this cell is min(7,5) = 5.
It satisfy demand of D1 and adjust the supply of S1 from 7 to 2 (7 - 5 = 2).

Table-3
D1 D2 D3 D4 Supply Row Penalty
S1 19(5) 30 50 10 2 40=50-10
S2 70 30 40 60 9 20=60-40
S3 40 8(8) 70 20 10 50=70-20
Demand 0 0 7 14
Column
-- -- 10=50-40 10=20-10
Penalty

The maximum penalty, 50, occurs in row S3.

The minimum cij in this row is c34 = 20.
The maximum allocation in this cell is min(10,14) = 10.
It satisfy supply of S3 and adjust the demand of D4 from 14 to 4 (14 - 10 = 4).

Table-4
D1 D2 D3 D4 Supply Row Penalty
S1 19(5) 30 50 10 2 40=50-10
S2 70 30 40 60 9 20=60-40
S3 40 8(8) 70 20(10) 0 --
Demand 0 0 7 4
Column
-- -- 10=50-40 50=60-10
Penalty

The maximum penalty, 50, occurs in column D4.

The minimum cij in this column is c14 = 10.
The maximum allocation in this cell is min(2,4) = 2.
It satisfy supply of S1 and adjust the demand of D4 from 4 to 2 (4 - 2 = 2).

Table-5
D1 D2 D3 D4 Supply Row Penalty
S1 19(5) 30 50 10(2) 0 --
S2 70 30 40 60 9 20=60-40
S3 40 8(8) 70 20(10) 0 --
Demand 0 0 7 2
Column
-- -- 40 60
Penalty

The maximum penalty, 60, occurs in column D4.

The minimum cij in this column is c24 = 60.
The maximum allocation in this cell is min(9,2) = 2.
It satisfy demand of D4 and adjust the supply of S2 from 9 to 7 (9 - 2 = 7)
Table-6
D1 D2 D3 D4 Supply Row Penalty
S1 19(5) 30 50 10(2) 0 --
S2 70 30 40 60(2) 7 40
S3 40 8(8) 70 20(10) 0 --
Demand 0 0 7 0
Column
-- -- 40 --
Penalty

The maximum penalty, 40, occurs in row S2.

The minimum cij in this row is c23 = 40.
The maximum allocation in this cell is min(7,7) = 7.
It satisfy supply of S2 and demand of D3.
Initial feasible solution is
D1 D2 D3 D4 Supply Row Penalty
S1 19(5) 30 50 10(2) 7 9 | 9 | 40 | 40 | -- | -- |
S2 70 30 40(7) 60(2) 9 10 | 20 | 20 | 20 | 20 | 40 |
S3 40 8(8) 70 20(10) 18 12 | 20 | 50 | -- | -- | -- |
Demand 5 8 7 14
 21 22 10 10
21 -- 10 10
Column -- -- 10 10
Penalty -- -- 10 50
-- -- 40 60
-- -- 40 --

The minimum total transportation

cost =19×5+10×2+40×7+60×2+8×8+20×10=779

4. Row minima method Steps (Rule)

Example-1
Find Solution using Row minima method
D1 D2 D3 D4 Supply
S1 19 30 50 10 7
S2 70 30 40 60 9
S3 40 8 70 20 18
Demand 5 8 7 14

Solution:
TOTAL number of supply constraints : 3
TOTAL number of demand constraints : 4
Problem Table is
D1 D2 D3 D4 Supply
S1 19 30 50 10 7
S2 70 30 40 60 9
S3 40 8 70 20 18
Demand 5 8 7 14
In 1st row, The smallest transportation cost is 10 in cell S1D4.
The allocation to this cell is min(7,14) = 7.
This exhausts the capacity of S1 and leaves 14 - 7 = 7 units with D4

Table-1
D1 D2 D3 D4 Supply
S1 19 30 50 10(7) 0
S2 70 30 40 60 9
S3 40 8 70 20 18
Demand 5 8 7 7

In 2nd row, The smallest transportation cost is 30 in cell S2D2.

The allocation to this cell is min(9,8) = 8.
This satisfies the entire demand of D2 and leaves 9 - 8 = 1 units with S2

Table-2
D1 D2 D3 D4 Supply
S1 19 30 50 10(7) 0
S2 70 30(8) 40 60 1
S3 40 8 70 20 18
Demand 5 0 7 7

In 2nd row, The smallest transportation cost is 40 in cell S2D3.

The allocation to this cell is min(1,7) = 1.
This exhausts the capacity of S2 and leaves 7 - 1 = 6 units with D3

Table-3
D1 D2 D3 D4 Supply
S1 19 30 50 10(7) 0
S2 70 30(8) 40(1) 60 0
S3 40 8 70 20 18
Demand 5 0 6 7

In 3rd row, The smallest transportation cost is 20 in cell S3D4.

The allocation to this cell is min(18,7) = 7.
This satisfies the entire demand of D4 and leaves 18 - 7 = 11 units with S3

Table-4
D1 D2 D3 D4 Supply
S1 19 30 50 10(7) 0
S2 70 30(8) 40(1) 60 0
S3 40 8 70 20(7) 11
Demand 5 0 6 0

In 3rd row, The smallest transportation cost is 40 in cell S3D1.

The allocation to this cell is min(11,5) = 5.
This satisfies the entire demand of D1 and leaves 11 - 5 = 6 units with S3

Table-5
D1 D2 D3 D4 Supply
S1 19 30 50 10(7) 0
S2 70 30(8) 40(1) 60 0
S3 40(5) 8 70 20(7) 6
Demand 0 0 6 0

In 3rd row, The smallest transportation cost is 70 in cell S3D3.

The allocation to this cell is min(6,6) = 6.
Table-6
D1 D2 D3 D4 Supply
S1 19 30 50 10(7) 0
S2 70 30(8) 40(1) 60 0
S3 40(5) 8 70(6) 20(7) 0
Demand 0 0 0 0

Initial feasible solution is

D1 D2 D3 D4 Supply
S1 19 30 50 10 (7) 7
S2 70 30 (8) 40 (1) 60 9
S3 40 (5) 8 70 (6) 20 (7) 18
Demand 5 8 7 14

The minimum total transportation

cost =10×7+30×8+40×1+40×5+70×6+20×7=1110

5. Column minima method

Example-1
Find Solution using Column minima method

D1 D2 D3 D4 Supply

S1 19 30 50 10 7

S2 70 30 40 60 9

S3 40 8 70 20 18

Demand 5 8 7 14

Solution:
TOTAL number of supply constraints : 3
TOTAL number of demand constraints : 4
Problem Table is

D1 D2 D3 D4 Supply
S1 19 30 50 10 7
S2 70 30 40 60 9
S3 40 8 70 20 18
Demand 5 8 7 14

In 1st column, The smallest transportation cost is 19 in cell S1D1

The allocation to this cell is min(7,5) = 5.
This satisfies the entire demand of D1 and leaves 7 - 5 = 2 units with S1

Table-1
D1 D2 D3 D4 Supply
S1 19(5) 30 50 10 2
S2 70 30 40 60 9
S3 40 8 70 20 18
Demand 0 8 7 14

In 2nd column, The smallest transportation cost is 8 in cell S3D2

The allocation to this cell is min(18,8) = 8.
This satisfies the entire demand of D2 and leaves 18 - 8 = 10 units with S3

Table-2
D1 D2 D3 D4 Supply
S1 19(5) 30 50 10 2
S2 70 30 40 60 9
S3 40 8(8) 70 20 10
Demand 0 0 7 14

In 3rd column, The smallest transportation cost is 40 in cell S2D3

The allocation to this cell is min(9,7) = 7.
This satisfies the entire demand of D3 and leaves 9 - 7 = 2 units with S2

Table-3
D1 D2 D3 D4 Supply
S1 19(5) 30 50 10 2
S2 70 30 40(7) 60 2
S3 40 8(8) 70 20 10
Demand 0 0 0 14
In 4th column, The smallest transportation cost is 10 in cell S1D4
The allocation to this cell is min(2,14) = 2.
This exhausts the capacity of S1 and leaves 14 - 2 = 12 units with D4

Table-4
D1 D2 D3 D4 Supply
S1 19(5) 30 50 10(2) 0
S2 70 30 40(7) 60 2
S3 40 8(8) 70 20 10
Demand 0 0 0 12

In 4th column, The smallest transportation cost is 20 in cell S3D4

The allocation to this cell is min(10,12) = 10.
This exhausts the capacity of S3 and leaves 12 - 10 = 2 units with D4

Table-5
D1 D2 D3 D4 Supply
S1 19(5) 30 50 10(2) 0
S2 70 30 40(7) 60 2
S3 40 8(8) 70 20(10) 0
Demand 0 0 0 2

In 4th column, The smallest transportation cost is 60 in cell S2D4

The allocation to this cell is min(2,2) = 2.
Table-6
D1 D2 D3 D4 Supply
S1 19(5) 30 50 10(2) 0
S2 70 30 40(7) 60(2) 0
S3 40 8(8) 70 20(10) 0
Demand 0 0 0 0

Initial feasible solution is

D1 D2 D3 D4 Supply
S1 19 (5) 30 50 10 (2) 7
S2 70 30 40 (7) 60 (2) 9
S3 40 8 (8) 70 20 (10) 18
Demand 5 8 7 14

The minimum total transportation

cost =19×5+10×2+40×7+60×2+8×8+20×10=779
Modified Distribution Method:

Definition: The Modified Distribution Method or MODI is an efficient

methodof checking the optimality of the initial feasible solution.

The concept of MODI can be further comprehended through an illustration

givenbelow:

There are two phases to solve the transportation problem. In the first phase,
the initial basic feasible solution has to be found and the second phase involves
optimization of the initial basic feasible solution that was obtained in the first
phase. There are three methods for finding an initial basic feasible solution,
1. NorthWest Corner Method
2. Least Cost Cell Method
3. Vogel’s Approximation Method
This article will discuss how to optimize the initial basic feasible solution
through an explained example. Consider the below transportation problem.
Solution:
Step 1: Check whether the problem is balanced or not.If
the total sum of all the supply from sources O1, O2, and O3 is equal to the total
sum of all the demands for destinations D1, D2, D3 and D4 then the
transportation problem is a balanced transportation problem.

Note: If the problem is not unbalanced then the concept of a dummy row or a
dummy column to transform the unbalanced problem to balanced can be
followed as discussed in this article.

Step 2: Finding the initial basic feasible solution. Any

of the three aforementioned methods can be used to find the initial basic feasible
solution. Here, NorthWest Corner Method will be used. And according to the
NorthWest Corner Method this is the final initial basicfeasible solution:
Now, the total cost of transportation will be (200 * 3) + (50 * 1) + (250 * 6)
+ (100 * 5) + (250 * 3) + (150 * 2) = 3700.
Step 3: U-V method to optimize the initial basic feasible solution.
The following is the initial basic feasible solution:
– For U-V method the values ui and vj have to be found for the rows and the
columns respectively. As there are three rows so three ui values have to be
found i.e. u1 for the first row, u2 for the second row and u3 for the third row.
Similarly, for four columns four vj values have to be found
i.e. v1, v2, v3 and v4. Check the image below:

There is a separate formula to find ui and vj,

ui + vj = Cij where Cij is the cost value only for the allocated cell. Read more
about it here.
Before applying the above formula we need to check whether m + n – 1 is equal
to the total number of allocated cells or not where m is the total number of
rows and n is the total number of columns.In this case m =
3, n = 4 and total number of allocated cells is 6 so m + n – 1
= 6. The case when m + n – 1 is not equal to the total number of allocated cells
will be discussed in the later posts.
Now to find the value for u and v we assign any of the three u or any of the four
v as 0. Let we assign u1 = 0 in this case. Then using the above formulawe
will get v1 = 3 as u1 + v1 = 3 (i.e. C11) and v2 = 1 as u1 + v2 = 1 (i.e. C12).
Similarly, we have got the value for v2 = 1 so we get the value for u2 =5
which implies v3 = 0. From the value of v3 = 0 we get u3 = 3 which implies
v4 = -1. See the image below:
Now, compute penalties using the formula Pij = ui + vj – Cij only for unallocated
cells. We have two unallocated cells in the first row, two in the second row and
two in the third row. Lets compute this one by one.
1. For C13, P13 = 0 + 0 – 7 = -7 (here C13 = 7, u1 = 0 and v3 = 0)
2. For C14, P14 = 0 + (-1) -4 = -5
3. For C21, P21 = 5 + 3 – 2 = 6
4. For C24, P24 = 5 + (-1) – 9 = -5
5. For C31, P31 = 3 + 3 – 8 = -2
6. For C32, P32 = 3 + 1 – 3 = 1
The Rule: If we get all the penalties value as zero or negative values that mean
the optimality is reached and this answer is the final answer. But if we get any
positive value means we need to proceed with the sum in the next step.
Now find the maximum positive penalty. Here the maximum value is 6which
corresponds to C21 cell. Now this cell is new basic cell. This cell will also be
included in the solution.
The rule for drawing closed-path or loop. Starting from the new basic cell
draw a closed-path in such a way that the right angle turn is done only at the
allocated cell or at the new basic cell. See the below images:
Assign alternate plus-minus sign to all the cells with right angle turn (or the
corner) in the loop with plus sign assigned at the new basic cell.
Consider the cells with a negative sign. Compare the allocated value (i.e. 200
and 250 in this case) and select the minimum (i.e. select 200 in this case).
Now subtract 200 from the cells with a minus sign and add 200 to the cells with
a plus sign. And draw a new iteration. The work of the loop is over and the new
solution looks as shown below.

Check the total number of allocated cells is equal to (m + n – 1). Again find
u values and v values using the formula ui + vj = Cij where Cij is the cost
value only for allocated cell. Assign u1 = 0 then we get v2 = 1. Similarly, we
will get following values for ui and vj.
Find the penalties for all the unallocated cells using the formula Pij = ui +
vj – Cij.
1. For C11, P11 = 0 + (-3) – 3 = -6
2. For C13, P13 = 0 + 0 – 7 = -7
3. For C14, P14 = 0 + (-1) – 4 = -5
4. For C24, P24 = 5 + (-1) – 9 = -5
5. For C31, P31 = 0 + (-3) – 8 = -11
6. For C32, P32 = 3 + 1 – 3 = 1
There is one positive value i.e. 1 for C32. Now this cell becomes new basic
cell.

Now draw a loop starting from the new basic cell. Assign alternate plus and
minus sign with new basic cell assigned as a plus sign.
Select the minimum value from allocated values to the cell with a minus sign.
Subtract this value from the cell with a minus sign and add to the cell with a
plus sign. Now the solution looks as shown in the image below:

Check if the total number of allocated cells is equal to (m + n – 1). Find u

and v values as above.
Now again find the penalties for the unallocated cells as above.
1. For P11 = 0 + (-2) – 3 = -5
2. For P13 = 0 + 1 – 7 = -6
3. For P14= 0 + 0 – 4 = -4
4. For P22= 4 + 1 – 6 = -1
5. For P24= 4 + 0 – 9 = -5
6. For P31= 2 + (-2) – 8 = -8
All the penalty values are negative values. So the optimality is reached.
Now, find the total cost i.e. (250 * 1) + (200 * 2) + (150 * 5) + (50 * 3) +
(200 * 3) + (150 * 2) = 2450
 Unit III Assignment Problems

Meaning of Assignment Problem:

An assignment problem is a particular case of transportation problem where the

objective is to assign a number of resources to an equal number of activities so
as to minimise total cost or maximize total profit of allocation.

The problem of assignment arises because available resources such as men,

machines etc. have varying degrees of efficiency for performing different
activities, therefore, cost, profit or loss of performing the different activities is
different.

Thus, the problem is “How should the assignments be made so as to optimize

the given objective”. Some of the problem where the assignment technique may
be useful are assignment of workers to machines, salesman to different sales
areas.

Definition of Assignment Problem:

Suppose there are n jobs to be performed and n persons are available for doing
these jobs. Assume that each person can do each job at a term, though with
varying degree of efficiency, let cij be the cost if the i-th person is assigned to
the j-th job. The problem is to find an assignment (which job should be
assigned to which person one on-one basis) So that the total cost of performing
all jobs is minimum, problem of this kind are known as assignment problem.

Hungarian Method for Solving Assignment Problem:

The Hungarian method of assignment provides us with an efficient method of
finding the optimal solution without having to make a-direct comparison of
every solution. It works on the principle of reducing the given cost matrix to a
matrix of opportunity costs.

Opportunity cost show the relative penalties associated with assigning

resources to an activity as opposed to making the best or least cost assignment.
If we can reduce the cost matrix to the extent of having at least one zero in each
row and column, it will be possible to make optimal assignment.

The Hungarian method can be summarized in the following steps:

Step 1: Develop the Cost Table from the given Problem:
If the no of rows are not equal to the no of columns and vice versa, a dummy
row or dummy column must be added. The assignment cost for dummy cells
are always zero.

Step 2: Find the Opportunity Cost Table:

(a) Locate the smallest element in each row of the given cost table and then
subtract that from each element of that row, and

(b) In the reduced matrix obtained from 2 (a) locate the smallest element in
each column and then subtract that from each element. Each row and column
now have at least one zero value.

Step 3: Make Assignment in the Opportunity Cost Matrix:

The procedure of making assignment is as follows:
(a) Examine rows successively until a row with exactly one unmarked zero is
obtained. Make an assignment single zero by making a square around it.

(b) For each zero value that becomes assigned, eliminate (Strike off) all other
zeros in the same row and/ or column
(c) Repeat step 3 (a) and 3 (b) for each column also with exactly single zero
value all that has not been assigned.

(d) If a row and/or column has two or more unmarked zeros and one cannot be
chosen by inspection, then choose the assigned zero cell arbitrarily.

(e) Continue this process until all zeros in row column are either enclosed
(Assigned) or struck off (x)

Step 4: Optimality Criterion:

If the member of assigned cells is equal to the numbers of rows column then it
is optimal solution. The total cost associated with this solution is obtained by
adding original cost figures in the occupied cells.

If a zero cell was chosen arbitrarily in step (3), there exists an alternative
optimal solution. But if no optimal solution is found, then go to step (5).

Step 5: Revise the Opportunity Cost Table:

Draw a set of horizontal and vertical lines to cover all the zeros in the
revised cost table obtained from step (3), by using the following procedure:
(a) For each row in which no assignment was made, mark a tick (√)

(b) Examine the marked rows. If any zero occurs in those columns, tick the
respective rows that contain those assigned zeros.

(c) Repeat this process until no more rows or columns can be marked.

(d) Draw a straight line through each marked column and each unmarked row.
If a no of lines drawn is equal to the no of (or columns) the current solution is
the optimal solution, otherwise go to step 6.

Step 6: Develop the New Revised Opportunity Cost Table:

(a) From among the cells not covered by any line, choose the smallest element,
call this value K

(b) Subtract K from every element in the cell not covered by line.
 (c) Add K to very element in the cell covered by the two lines, i.e.,
intersection of two lines.

(d) Elements in cells covered by one line remain unchanged.

Step 7: Repeat Step 3 to 6 Unlit an Optimal Solution is Obtained:

The flow chart of steps in the Hungarian method for solving an

Example:
1. In a computer centre after studying carefully the three expert
programmes, the head of computer centre, estimates the computer time
in minutes required by the experts for the application programmes as
follows:

Assign the programmers to the programmes in such a way that the total
computer time is minimum.

assignment problem is shown in following figures

Solution:
The Hungarian method is used to obtain an optimal solution.

Step (1) & (2):

The minimum time element in row 1, 2 and 3 is 80, 80 and 110. resp. Subtract
these elements from all elements in this respective row.

The reduced time matrix is shown in following table (1) Table 1:

In reduced Table (1) the minimum time element in columns A, B, and C is

0,10 and 0 resp, subtract these elements from all elements in this resp. column
to get the reduced time matrix as shown in Table 2.

Step 3 (a):
Examine all the rows starting from first one- until a row containing only single
zero element is located, Here, rows 1 and 3 have only one zero in the cells (1,
C) and (3,A) resp, we assigned these zeros. All zeros in the assigned column
are crossed off as shown in table 3.
(b) We now examine each column starting from A in table 3, There is one
zero in column B in the cell (2, B). Assign this cell as shown in table 4.

(c) Since the no of Assignments (= 3) equal the no of rows (= 3), the optimal
solution is obtained.

The pattern of assignment among programmers and programmes with their

respective line (in minutes) is given below.
Example 2:
A department has five employees with five jobs to be performed. The time in
hours) each men will take to perform each job is given in the effectiveness
matrix.

How should the jobs be allocated one per employee so as to minimize the total
man- hours?

Solution:
Step (1) & (2) Applying step (2) of the algorithm, we get the reduced
opportunity time matrix as shown in Table (1).

In reduced table (1) the minimum time element in column I,II,III, IV, and V is
0,0,0,0,0 resp, subtracting these from the elements of the resp. column we get
same reduced matrix.

Step 3 (a):
We examine all the row starting from A one-by-one until a row containing only
single zero element is located. Here rows A, B and E have only one zero element
in the cells (A, II), (B, I) and (E, IV), Assignment is made in these
cells. All zeros in the assigned columns are now crossed off as shown in table
2.

(b) We now examine each column starting from column. 1. There is one zero
in column III, cell (C, III) Assignment is made in this cell. Thus cell (C, V) is
Crossed off. All zeros in the table now are either assigned or crossed off as
shown in Table 2.

The solution is not optimal because only four assignments are made.

Step 4:
Cover the zeros with minimum numbers of lines (= 4) as explained below.

(a) Mark (√) row D since it has no assignment then.

(b) Mark (√) columns I and IV since row D has zero element in these columns.

(c) Mark (√) rows B & E since column 1 and (IV) have an assignment in rows
B and E resp.

(d) Since no other rows or columns can be marked draw straight lines through
the unmarked rows A & C and the marked columns I and IV as shown in Table
3.
Step 5:
Develop the new revised table by selecting the smallest element among all
uncovered elements by the lines in table 3 viz., 2. subtract K = 2 fromuncovered
elements including itself and add it to elements 5,10,8 and 0 incells (A, 1),
(A,IV), (C, 1)< and (E,IV) resp. which lie at the intersection of two lines.
Another’s revised table so obtained is shown in table 4.

Step 7:
Repeat step (3) to (5) to find a new solution. The new assignment is shown in
Table 5.
Since the no. of assignment (= 5) equals the no of rows (or columns), the
solution is optimal.

The pattern of assignments among jobs and employees with their

respective time (in hour) is given below:

Unbalanced Maximization Assignment problem example

Example : A company has five machines that are used for four jobs. Each
job can be assigned to one and only one machine. The cost of each job on
each machine is given in the following Table.
Assignment Problem

Solution: Convert the 4 × 5 matrix into a square matrix by adding a dummy

row D5.
Dummy Row D5 Added
Row-wise Reduction of the Matrix

Column-wise reduction is not necessary since all columns contain a single

zero. Now, draw minimum number of lines to cover all the zeros, as shown in
Table.

All Zeros in the Matrix Covered

Number of lines drawn ≠ Order of matrix. Hence not optimal.

Select the least uncovered element, i.e., 1, subtract it from other uncovered
elements, add to the elements at intersection of lines and leave the elements
that are covered with single line unchanged as shown in Table.

Subtracted or Added to Elements

Number of lines drawn ≠ Order of matrix. Hence not optimal.

Again Added or Subtracted 1 from Elements

Number of lines drawn = Order of matrix. Hence optimality is reached.
Nowassign the jobs to machines, as shown in Table.

Assigning Jobs to Machines

Example : In a plant layout, four different machines M1, M2, M3 and M4 are
to beerected in a machine shop. There are five vacant areas A, B, C, D and E.
Because of limited space, Machine M2 cannot be erected at area C and
Machine M4 cannot be erected at area A. The cost of erection of machines is
given in the Table.

Assignment Problem

Find the optimal assignment plan.

Solution: As the given matrix is not balanced, add a dummy row D5 with
zero cost values. Assign a high cost H for (M2, C) and (M4, A). While
selecting the lowest cost element neglect the high cost assigned H, as shown
in Table below.
Dummy Row D5 Added
- Row-wise reduction of the matrix is shown in Table.
Matrix Reduced Row-wise

Note: Column-wise reduction is not necessary, as each column has at least

onesingle zero. Now, draw minimum number of lines to cover all the

zeros, see Table. Lines Drawn to Cover all Zeros

Number of lines drawn ≠ Order of matrix. Hence not Optimal. Select the
smallest uncovered element, in this case 1. Subtract 1 from all other
uncovered element and add 1 with the elements at the intersection. The
element covered by single line
remains unchanged. These changes are shown in Table. Now try to draw
minimumnumber of lines to cover all the zeros.

Added or Subtracted 1 from Elements

Now number of lines drawn = Order of matrix, hence optimality is reached.

Optimal assignment of machines to areas are shown in Table.

Optimal Assignment
Hence, the optimal solution is:
 Unit IV Game Theory

Introduction:
Game theory was introduced by a mathematician, John Von Neumann andan
economist, Oskar Morgenstern, in 1950s. This theory aims at providing a
systematic approach to business decision making of organizations. It is
applied to evaluate the situations where individuals and organizations have
contradictory objectives.

In such a case, game theory helps in solving the problem and arriving at a
common consensus. Apart from this, the theory can be applied to analyze
activities, such as legal and political strategies and economic behavior. Over
a passage of time, the game theory has emerged as a vast and complex subject.
The games in the game theory are simple as well as complex. The main aim
of applying the game theory is to find out the best strategy to resolve a
particular problem. Moreover, the game theory helps organization by
increasing the probability of earning maximum profit and reducing the
probability of losses. The game theory has applications in sociology,
psychology, and mathematics.

Assumptions of Game Theory:

The game theory provides an appropriate solution of a problem if its
conditions are properly satisfied. These conditions are often termed as the
assumptions of the game theory.

Some of these assumptions are as follows:

1. Assumes that a player can adopt multiple strategies for solving a problem.
2.Assumes that there is an availability of pre-defined outcomes.
3. Assumes that the overall outcome for all players would be zero at the
end of thegame.
4. Assumes that all players in the game are aware of the game rules as
well asoutcomes of other players.
5. Assumes that players take a rational decision to increase their profit.
Terminology:
Strategy - A strategy for a player has been defined as a set of rules or
alternative courses of action available to him in advance, by which player
decides the courses of action that he should adopt. There are two types:

Pure Strategy- If the player selects the same strategy each time, then it is a
pure strategy. In this case each player knows exactly what the other is going
to do, i.e. there is a deterministic situation and the objective of the players is
to maximize gains or to minimize losses.

Mixed Strategy - When the players use a combination of strategies and each
player is always kept guessing as to which course of action is to be selected
by the other, then it is known as a mixed strategy. Thus, there is a probabilistic
situation and the objective of the player is to maximize expected gains or to
minimize losses. Thus, mixed strategy is a selection among pure strategies
with fixed possibilities.

Optimal Strategy - A course of action which puts the player in the most
preferred position irrespective of the strategy of his competitors. Any
deviation from this strategy results in a decreased pay-off for the player.

Value of the Game - The expected pay-off of the game when all the players
of the game follow their optimum strategies. The game is called fair if the
value of the game is zero and unfair if it is non-zero.

Two-person zero-sum game - There are two types of Two-person zero-sum

games. In one, the most preferred position is achieved by adopting a single
strategy and therefore the game is known as the pure strategy game. The
second type requires the adoption by both players of a combination of
different strategies in order to achieve the most preferred position and is,
therefore, referred to as the mixed strategy game.

Pay-off matrix
A two-person zero-sum game is conveniently represented by a matrix. The
matrix which shows the outcome of the game as the players select their
particular strategies, is known as the pay-off matrix. It is important to assume
that each player knows not only his own list of possible courses of action but
also that of his opponent.

Saddle point
In a zero-sum game, the pure strategies of two players constitute a saddle
point if the corresponding entry of the payoff matrixis simultaneously a
maximum of row minima and a minimum of column maxima. This decision-
making is referred to as the minimax-maximin principle to obtainthe best
possible selection of a strategy for the players.

In a pay-off matrix, the minimum value in each row represents the minimum
gain for player A. Player A will select the strategy that gives him the
maximum gain among the row minimum values. The selection of strategy by
player A is based on maximin principle. Similarly, the same pay-off is a loss
for player B. The maximum value in each column represents the maximum
loss for Player B. Player B will select the strategy that gives him the minimum
loss among the column maximum values.

The selection of strategy by player B is based on minimax principle. If the

maximin value is equal to minimax value, the game has a saddle point (i.e.,
equilibrium point). Thus the strategy selected by player A and player B are
optim
Game Theory – Two Person – Zero Sum – Game.

Two-Person Zero-Sum Games: Basic Concepts:

Game theory provides a mathematical framework for analyzing the decision-

making processes and strategies of adversaries (or players) in different types
of competitive situations. The simplest type of competitive situations are two-
person, zero-sum games. These games involve only two players; they are
called zero- sum games because one player wins whatever the other player
loses.

Example: Odds and Evens

Consider the simple game called odds and evens. Suppose that player 1 takes
evens and player 2 takes odds. Then, each player simultaneouslyshows either
one finger or two fingers. If the number of fingers matches, then the result is
even, and player 1 wins the bet ($2). If the number of fingers does not match,
then the result is odd, and player 2 wins the bet ($2). Each player has two
possible strategies:show one finger or show two fingers. The payoff matrix
shown below represents the payoff to player 1.

Basic Concepts of Two-Person Zero-Sum Games

This game of odds and evens illustrates important concepts of simple games
A two-person game is characterized by the strategies of each player and
thepayoff matrix.
The payoff matrix shows the gain (positive or negative) for player 1 that
would result from each combination of strategies for the two players. Note
that the matrix for player 2 is the negative of the matrix for player 1 in a zero-
sum game.

The entries in the payoff matrix can be in any units as long as they represent
the utility (or value) to the player.

There are two key assumptions about the behavior of the players. The first
isthat both players are rational. The second is that both players are
greedy meaning that they choose their strategies in their own interest (to
promote their own wealth).

Game Theory Saddle Point Problem :

The game theory for saddle point problem is shown below

Example : Consider the example to solve the game whose pay-off matrix
is givenin the following table as follows:
Game Problem

The game is worked out using minimax procedure. Find the smallest value in
each row and select the largest value of these values. Next, find the largest
value in each column and select the smallest of these numbers. The procedure is
shown in the following table.
Minimax Procedure

If Maximum value in row is equal to the minimum value in column, then

saddlepoint exists.
Max Min = Min Max1 = 1
Therefore, there is a saddle point.The strategies are,
Player A plays Strategy A1, (A A1). Player B plays Strategy B1, (B B1).
Value of game = 1.

Example : Solve the game with the pay-off matrix for player A as given in
table.
Game Problem

Solution: Find the smallest element in rows and largest elements in

columns asshown in table.
Minimax Procedure

Select the largest element in row and smallest element in column. Check for
theminimax criterion,
Max Min = Min Max1 = 1
Therefore, there is a saddle point and it is a pure strategy.Optimum Strategy:
Player A A2 StrategyPlayer B B1 Strategy
The value of the game is 1.

Example : Check whether the following game is given in Table,

determinable andfair.
Game Problem

Solution: The game is solved using maximin criteria as shown in Table.

Maximin Procedure

The game is strictly neither determinable nor fair.

Example : Check whether the following game is given in Table,

determinable andfair.
Game Problem

Solution: The game is solved using maximin criteria as shown in Table.

Maximin Procedure

The game is strictly neither determinable nor fair.

Example : Identify the optimal strategies for player A and player B for the
game, given below in Table. Also find if the game is strictly determinable and
fair.

The game is strictly determinable and fair. The saddle point exists and the
gamehas a pure strategy. The optimal strategies are given in the following
table.

Optimal Strategies

Example : Solve the game with the pay off matrix given in table and
determine thebest strategies for the companies A and B and find the value

of the game for them. Game Problem

Solution: The matrix is solved using maximin criteria, as shown in table
below.
Maximin Procedure

Therefore, there is a saddle point. Optimum strategy for company A is A1

and
Optimum strategy for company B is B1 or B3.

Dominance property in Operation Research

The principle of dominance states that if one strategy of a player dominates

overthe other strategy in all conditions then the later strategy can be ignored.
A strategydominates over the other only if it is preferable over other in all
conditions. The concept of dominance is especially useful for the evaluation
of two-person zero- sum games where a saddle point doesnot exist.

In case of pay-off matrices larger than 2 × 2 size, the dominance property can
be used to reduce the size of the pay-off matrix by eliminating the strategies
that would never be selected.

Dominance Principle in Game Theory problems

The dominance principle in game theory problems are explained below

Example : Solve the game given below in Table after reducing it to 2 × 2

game:
Game Problem

Solution: Reduce the matrix by using the dominance property. In the given
matrix for player A, all the elements in Row 3 are less than the adjacent
elements of Row
Strategy 3 will not be selected by player A, because it gives less profit for
player
A. Row 3 is dominated by Row 2. Hence delete Row 3, as shown in table.
Reduced the Matrix by Using Dominance Property

For Player B, Column 3 is dominated by column 1 (Here the dominance is

oppositebecause Player B selects the minimum loss). Hence delete Column
3. We get the reduced 2 × 2 matrix as shown below in table.

Reduced 2 × 2 Matrix
Now, solve the 2 × 2 matrix, using the maximin criteria as shown below in
table.

Maximin Procedure

Therefore, there is no saddle point and the game has a mixed strategy.
Applyingthe probability formula,

p1 =2-6(1+2)-(7+6)
=-43-13
=410=25
q1 =2-7(1+2)-(7+6)
=-53-13
=510=12
q2 =1- q1 =1-
12=12

Value of the game,

v =(1*2)-(7*6)(1+2)-(7+6)
=2-423-13
 =4010= 4
The optimum strategies are shown in table
Optimum Strategies
Limitations of game theory:
1. As the number of players increases in the actual business the game theory
becomes more difficult.

2. It simply provides a general rule of logic not the winning strategy.

3. There is much uncertainty in actual field of business which cannot be

considered in game theory.

4. Businessmen do not have adequate knowledge for the game theory.

 Unit V Replacement Models and Sequencing Models

Introduction :
In any establishment, sooner or later equipment needs to be replaced,
particularly when new equipment gives more efficient or economical service
than the old one. In some cases, the old equipment might fail and work no more
or is worn out. In such situations it needs more expenditure on its maintenance
than before. The problem in such situation is to determine the best policy to be
adopted with respect to replacement of the equipment. The replacement theory
provides answer to this question in terms of optimal replacement period.
Replacement theory deals with the analysis of materials and machines which
deteriorate with time and fix the optimal time of their replacement so that total
cost is the minimum.

Example 1 A milk plant is considering replacement of a machine whose cost

price is Rs. 12,200 and the scrap value Rs. 200. The running (maintenance
and operating) costs in Rs. are found from experience to be as follows:
Year: 1 2 3 4 5 6 7 8
Running 200 50 80 120 180 250 320 400
Cost: 0 0 0 0 0 0 0
When should the machine be replaced?
 Solution The computations can be summarized in the following tabular form:
Calculations for average cost of machine

(In Rupees)

Year Running Cumulative Depreciation Total Average

Cost Running Cost Cost TC Cost
(1) Cost (5) = (3) +
(2) (3) (4) (4) (6)
(5)/(1)

1 200 200 12000 12200 12200

2 500 700 12000 12700 6350
3 800 1500 12000 13500 4500
4 1200 2700 12000 14700 3675
5 1800 4500 12000 16500 3300
6 2500 7000 12000 19000 3167
7 3200 10200 12000 22200 3171
8 4000 14200 12000 26200 3275

From the table it is noted that the average total cost per year, A(n) is minimum
in the 6th year (Rs. 3167). Also the average cost in 7th year(Rs.3171) is more
than the cost in 6th year. Hence the machine should be replaced after every 6
years.
Example 2
A Machine owner finds from his past records that the maintenance costs per
year of a machine whose purchase price is Rs. 8000 are as given below:
Year: 1 2 3 4 5 6 7 8
Maintenance 1000 130 170 220 290 380 480 6000
Cost: 0 0 0 0 0 0
Resale Price: 4000 200 120 600 500 400 400 400
0 0
Determine at which time it is profitable to replace the machine.
Solution C = Rs. 8000. Table 13.2 shows the average cost per year during
the life of machine. Here, The computations can be summarized in the
following tabular form:
Calculations for average cost of machine

Year f(t) Cumulati Scrap Total cost

ve value
maintena
nce
cost
1 1000 1000 4000 5000 5000
2 1300 2300 2000 8300 4150
3 1700 4000 1200 10800 3600
4 2200 6200 600 13600 3400
5 2900 9100 500 16600

6 3800 12900 400 20500 3417

7 4800 17700 400 25300 3614
8 6000 23700 400 31300 3913

The above table shows that the value of TA during fifth year is minimum.
Hence the machine should be replaced after every fifth year.
Introduction to Sequencing Models:
Sequence models are a very common sequence modeling technique in
machine learning that is used for analyzing sequence data. This blog post will
discuss types of sequence models, their examples, and how they can be used to
help with the understanding and analysis of sequences.

Sequence data are the data points which are ordered in the meaningful manner
such that earlier data points or observations provide the information about
later data points or observations. The time series data is an example of
sequence data which can be defined as a sequence of observations where each
observation is dependent on the previous one. Sequence data can be represented
as observations of one or more characteristics of events over time.

Lets take a look at some of the example of sequence data points.

 Is the output of flipping a coin a sequence data? Well, if the coin is fair,
the output of coin flips is not a sequence data. However, if the coin is
defective, the output can become sequence data.
 Is the text appearing in a sentence, a sequence data? Yes, the text which
appears in a sentence is sequence data.
 Is the movie a sequence data? Yes, the sequence of frames in a movie is
an example of sequence data. The CNN can be used to extract the features
from each frame (image) and passed to the sequence models for modeling
purpose.

Terminologies:
 Number of Machines: The number of machines refer to the number of service
facilities through which a job must pass before it is assumed to be completed.
 Processing Time: It is the time required by a job on each machine.
 Processing Order: It refers to the order (sequence) in which machines are
required for completing the job.
 Idle Time on a Machine: It is the time for which a machine does not have a
job to process, i.e idle time from the end of job (i-1) to the start of job i.
 Total Elapsed Time: It is the time interval between starting the first job and
completing the last job including the idle time (if any) in a particular order by
the given set of machines.
 No Passing Rule: It refers to the rule of maintaining the order in which jobs
are to be processed on given machines. For example, if n jobs are to be
processed on two machines M1 and M2 in the order M1 M2, then each job
should go to machine M1 first and then to M2.

Types of Sequencing Models:

There are three different types of sequence models based on whether the input
and output to the model is sequence data or non-sequence data. They are as
following:
 One-to-sequence: In one-to-sequence model, the input data is non sequence
and the output data is sequence data. Here is how one-sequence
 model looks like:

 Sequence-to-one: In sequence-to-one sequence model, the input data is

sequence and output data is non sequence.

What are Sequence Models: Types & Examples

December 6, 2021 by Ajitesh Kumar · 1 Comment

Sequence models are a very common sequence modeling technique

in machine learning that is used for analyzing sequence data. This blog post will
discuss types of sequence models, their examples, and how they can be used to
help with the understanding and analysis of sequences.
Table of Contents

What is sequence data?

Types of sequence models
Examples of sequence models
What is sequence data?
Sequence data are the data points which are ordered in the meaningful manner
such that earlier data points or observations provide the information about
later data points or observations. The time series data is an example of
sequence data which can be defined as a sequence of observations where each
observation is dependent on the previous one. Sequence data can be represented
as observations of one or more characteristics of events over time.Here is the
example of how sequence daata looks like:

Lets take a look at some of the example of sequence data points.

 Is the output of flipping a coin a sequence data? Well, if the coin is fair,
the output of coin flips is not a sequence data. However, if the coin is
defective, the output can become sequence data.
 Is the text appearing in a sentence, a sequence data? Yes, the text which
appears in a sentence is sequence data.
 Is the movie a sequence data? Yes, the sequence of frames in a movie is
an example of sequence data. The CNN can be used to extract the features
from each frame (image) and passed to the sequence models for modeling
purpose.
Types of sequence models
There are three different types of sequence models based on whether the input
and output to the model is sequence data or non-sequence data. They are as
following:

One-to-sequence: In one-to-sequence model, the input data is non

sequence and the output data is sequence data. Here is how one-sequence
model looks like:

Sequence-to-one: In sequence-to-one sequence model, the input data is

sequence and output data is non sequence.
 Sequence-to-sequence: In sequence-to-sequence sequence model, the
input data is sequence and output data is sequence.

Processing of n jobs through two machines

The simplest possible sequencing problem is that of n job two machine
sequencing problem in which we want to determine the sequence in which n-
job should be processed through two machines so as to minimize the total
elapsed time T. The problem can be described as:
a) Only two machines A and B are involved;
b) Each job is processed in the order AB.
c) The exact or expected processing times A1,A2,A3, --- , An ; B1,B2,B3, ---
, Bn are known and are provided in the following table

Machine Job(s)
1 2 3 -- - i -- - n
A A1 A2 A3 -- - Ai -- - An
B B1 B2 B3 -- - Bi -- - Bn

The problem is to find the sequence (or order) of jobs so as to minimize the
total elapsed time T. The solution of the above problem is also known as
Johnson s procedure which involves the following steps:
Step 1. Select the smallest processing time occurring in the list A1,A2,A3,
--- , An ; B1,B2,B3, --- , Bn if there is a tie, either of the smallest
processing times can be selected.
Step 2. If the least processing time is Ar , select the rth job first. If it isBs,
do the sth job last as the given order is AB
 Step 3. There are now (n-1) jobs left to be ordered. Repeat steps I and II for
the remaining set of processing times obtained by deleting the
processing time for both the machines corresponding to the job
already assigned.
Step 4. Continue in the same manner till the entire jobs have beenordered.
The resulting ordering will minimize the total elapsed time T and is
called the optimal sequence.
Step 5. After finding the optimal sequence as stated above find the total
elapsed time and idle times on machines A and B as under:
Total The time between starting the first job in the optimal
elapse sequence on machine A and completing the last job in the
d time optimal machine B.
=
Idle (Time when the last job in the optimal sequence on
time sequences is completed on machine B)- (Time when the
on last job in the optimal sequences is completed on machine
machi A)
ne A =
Idle (Time when the first job in the optimal sequences is
time completed on machine A)+
on
machi
ne B =

The Johnson s procedure can be illustrated by following examples:

Example 1
There are nine jobs, each of which must go through two machines P and Q in
the order PQ, the processing times (in hours) are given below:

Machine Job(s)
A B C D E F G H I
P 2 5 4 9 6 8 7 5 4
Q 6 8 7 4 3 9 3 8 11
Find the sequence that minimizes the total elapsed time T. Also calculate the
total idle time for the machines in this period.
Solution
The minimum processing time on two machines is 2 which correspond to task
A on machine P. This shows that task A will be preceding first. After assigning
task A, we are left with 8 tasks on two machines
Machine B C D E F G H I
P 5 4 9 6 8 7 5 4
Q 8 7 4 3 9 3 8 11

Minimum processing time in this reduced problem is 3 which correspond to

jobs E and G (both on machine Q). Now since the corresponding processing
time of task E on machine P is less than the corresponding processing time of
task G on machine Q therefore task E will be processed in the last and task G
next to last. The situation will be dealt as

A G E

The problem now reduces to following 6 tasks on two machines with processing
time as follows:
Machine B C D F H I
P 5 4 9 8 5 4
Q 8 7 4 9 8 11

Here since the minimum processing time is 4 which occurs for tasks C and I
on machine P and task D on machine Q. Therefore, the task C which has less
processing time on P will be processed first and then task I and task D will be
placed at the last i.e., 7th sequence cell.
The sequence will appear as follows:
A C I D E G

The problem now reduces to the following 3 tasks on two machines

 Machine B F H
P 5 8 5
Q 8 9 8

In this reduced table the minimum processing time is 5 which occurs for tasks
B and H both on machine P. Now since the corresponding time of tasks B and
H on machine Q are same i.e. 8. Tasks B or H may be placed arbitrarily in the
4th and 5th sequence cells. The remaining task F can then be placed in the 6th
sequence cell. Thus the optimal sequences are represented as

A I C B H F D E G
or
A 1 C H B F D E G
Further, it is also possible to calculate the minimum elapsed time corresponding
to the optimal sequencing A → I → C → B → H → F → D → E → G.
Job Machine A Machine B
Sequence Time In Time Out Time In Time Out
A 0 2 2 8
I 2 6 8 19
C 6 10 19 26
B 10 15 26 34
H 15 20 34 42
F 20 28 42 51
D 28 37 51 55
E 37 43 55 58
G 43 50 58 61

Hence the total elapsed time for this proposed sequence staring from job A to
completion of job G is 61 hours .During this time machine P remains idle for
11 hours (from 50 hours to 61 hours)and the machine Q remains idle for 2 hours
only (from 0 hour to 2 hour ).
15.2 Processing of n Jobs through Three Machines
The type of sequencing problem can be described as follows:
a) Only three machines A, B and C are involved;
b) Each job is processed in the prescribed order ABC
c) No passing of jobs is permitted i.e. the same order over each
machine is maintained.
d) The exact or expected processing times A1,A2,A3, --- , An ; B1,B2,B3, -
-- , Bn and C1,C2,C3, --- , Cn are known and are denoted by the
following table

Job(s)
Machine 1 2 3 -- - i - - n
-
A A1 A2 A3 -- - Ai -- - An
B B1 B2 B3 -- - Bi -- - Bn
C C1 C2 C3 Ci Cn

Our objective will be to find the optimal sequence of jobs which minimizes the
total elapsed time. No general procedure is available so far for obtainingan
optimal sequence in such case. However, the Johnson s procedure can be
extended to cover the special cases where either one or both of the following
conditions hold:
a) The minimum processing time on machine A ≥ the maximum
processing time on machine B.
b) The minimum processing time on machine C ≥ the maximum
processing time on machine B.
The method is to replace the problem by an equivalent problem involving n jobs
and two machines. These two fictitious machines are denoted by G and H and
the corresponding time Gi and Hi are defined by
Gi = Ai + Bi and Bi + Ci
Now this problem with prescribed ordering GH is solved by the method with
n jobs through two machines, the resulting sequence will also be optimal for
the original problem. The above methodology is illustrated by following
example:
Example 2
There are five jobs (namely 1,2,3,4 and 5), each of which must go through
machines A, B and C in the order ABC. Processing Time (in hours) are given
below:
Jobs 1 2 3 4 5
Machine A 5 7 6 9 5

Machine B 2 1 4 5 3

Machine C 3 7 5 6 7

Find the sequence that minimum the total elapsed time required to complete
the jobs.
Solution
Here Min Ai = 5; Bi = 5 and Ci =3 since the condition of Min. Ai ≥ Max. Bi is
satisfied the given problem can be converted into five jobs and two machines
problem.

Jobs
1 7 5
2 8 8
3 10 9
4 14 11
5 8 10
The Optimal Sequence will be
2 5 4 3 1
Total elapsed Time will be
Machine A Machine B Machine C
Jobs
In Out In Out In Out
2 0 7 7 8 8 15
5 7 12 12 15 15 22
4 12 21 21 26 26 32
3 21 27 27 31 32 37
1 27 32 32 34 37 40
Min. total elapsed time is 40 hours.
Idle time for Machine A is 8 hrs. (32-40)
Idle time for Machine B is 25 hours (0-7, 8-12, 15-21, 26-27, 31-32 and
34-40)
Idle time for Machine C is 12 hours (0-8, 22-26.)
15.3 Problems with n Jobs and m Machines
Let there be n jobs, each of which is to be processed through m machines, say
M1,M2, --- , Mm in the order M1,M2,M3, --- , Mm. Let T ij be the time taken by
the ith machine to complete the jth job.
The iterative procedure of obtaining an optimal sequence is as follows:
Step I: Find (i) minj (T1j) ii) minj (Tmj) iii) maxj (T2j,T3j,T4j, --- , T(m-1)j) for
j=1,2,---, n
Step II: Check whether
a. minj(T1j) ≥ maxj (Tij) for i=2,3, ,m-1
Or
b. minj(Tmj) ≥ maxj (Tij) for i=2,3,---,m-1
Step III: If the inequalities in Step II are not satisfied, method fails,
otherwise, go to next step.
Step IV: Convert the m machine problem into two machine problem by
introducing two fictitious machines G and H, such that
����������������� TGj = T1j + T2j + --- +T(m-1)j
and THj = T2j + T3j + --- +Tmj
Determine the optimal sequence of n jobs through 2 machines by usingoptimal
sequence algorithm.
Step V: In addition to condition given in Step IV, if Tij = T2j + T3j + ---
+Tmj = C is a fixed positive constant for all i = 1, 2, 3, , n then
determine the optimal sequence of n jobs and two machines M 1 and
Mm in the order M1Mm by using the optimal sequence algorithm.
Example 3
Find an optimal sequence for the following sequencing problem of four jobs
and five machines when passing is not allowed, of which processing time (in
hours) is given below:
Job Machine

A B C D E

1 7 5 2 3 9

2 6 6 4 5 10

3 5 4 5 6 8

4 8 3 3 2 6

Also find the total elapsed time.

Solution
Here Min. Ai = 5, Min. Ei = 6
Max. (Bi, Ci, Di) = 6, 5, 6 respectively
Since Min. Ei = Max. (Bi, Di) and Min. Ai = Max. Ci satisfied therefore the
problem can be converted into 4 jobs and 2 fictitious machines G and H as
follows:
 Fictitious Machine
Job
1 17 19
2 21 25
3 20 23
4 16 14

The above sequence will be:

1 3 2 4
Total Elapsed Time Corresponding to Optimal Sequence can be obtained as
follows:
Machine Machine Machine Machine Machine
A B C D E
Job In Out In Out In Out In Out In Out
1 0 7 7 12 12 14 14 17 17 26
3 7 12 12 16 16 21 21 27 27 35
2 12 18 18 24 24 28 28 33 35 45
4 18 26 26 29 29 32 33 35 45 51

Thus the minimum elapsed time is 51 hours.

Idle time for machine A = 25 hours(26-51)
Idle time for machine B = 33 hours(0-7,16-18,24-26,29-51)
Idle time for machine C = 37 hours(0-12,14-16,21-24,28-29,32-51)
Idle time for machine D = 35 hours (0-14,17-21,27-28,35-51)
Idle time for machine E = 18 hours (0-17,26-27)