OPERATION RESEARCH

2/4/2025

Datche Dedan
#15 l.y
 1 INTRODUCTION TO OPERATIONS RESEARCH

1.1 Introduction

1.2 History of Operations Research

1.3 Stages of Development of Operations Research

1.4 Relationship Between Manager and OR Specialist

1.5 OR Tools and Techniques

1.6 Applications of Operations Research

1.7 Limitations of Operations Research

1.1 INTRODUCTION

 Terms that are used to refer OR: Industrial engineering (IE), management science (MS) or decision

science (DS).

 The OR starts when mathematical and quantitative techniques are used to substantiate the decision

being taken.

 Operations Research takes tools from different discipline such as mathematics, statistics,

economics, psychology, engineering etc. and combines these tools to make a new set of knowledge

for decision making.

 NOTE: The main purpose of O.R. is to provide a rational basis for decisions making in the absence

of complete information, because the systems composed of human, machine, and procedures may

do not have complete information.

 Operations Research can also be treated as science in the sense it describing, understanding and

predicting the systems behavior, especially man-machine system.

 Thus O.R. specialists are involved in three classical aspects of science; they are as follows: i)

Determining the systems behavior

ii) Analyzing the systems behavior by developing appropriate models

iii) Predict the future behavior using these models

 The business and industry befitted from O.R. in the areas of inventory, reorder policies, optimum

location and size of warehouses, advertising policies, etc.

 The business and industry befitted from O.R. in the areas of inventory, reorder policies, optimum

location and size of warehouses, advertising policies, etc.

DEFINATIONS OF OR

 According to the Operational Research Society of Great Britain : Operational Research is the attack

of modern science on complex problems arising in the direction and management of large systems

of men, machines, materials and money in industry, business, government and defense.

 Randy Robinson stresses that Operations Research: is the application of scientific methods to

improve the effectiveness of operations, decisions and management. By means such as analyzing

data, creating mathematical models and proposing innovative approaches.

 Pocock stresses that O.R. is an applied Science. He states “O.R. is scientific methodology

(analytical, mathematical, and quantitative) which by assessing the overall implication of various

alternative courses of action in a management system provides an improved basis for management

decisions”.

1.2 HISTORY OF OPERATION RESEARCH



1.3 STAGES of DEVELOPMENT of OPERTION RESEARCH

 Also known as phases and process of O.R: which has six important steps.

Step I: Observe the problem environment

Step II: Analyze and define the problem

Step III: Develop a model

Step IV: Select appropriate data input

Step V: Provide a solution and test its reasonableness

Step VI: Implement the solution

Step I: Observe the problem environment

 This step includes different activities; they are conferences, site visit, research, observations etc.

 These activities provide sufficient information to the O.R. specialists to formulate the problem.

Step II: Analyze and define the problem

 In this step in addition to the problem definition: the objectives, uses and limitations of O.R. study

of the problem also defined.

 The outputs of this step are clear grasp of need for a solution and its nature understanding.

Step III: Develop a model

 NOTE: A model is a representation of some abstract or real situation.

 The models are basically mathematical models, which describes systems, processes in the form of

equations, formula/relationships.

 The different activities in this step are variables definition, formulating equations etc.

 The model is tested in the field under different environmental constraints and modified in order to

work.
 Sometimes the model is modified to satisfy the management with the results.

Step IV: Select appropriate data input

 A model works appropriately when there is appropriate data input.

 The activities in this step include internal/external data analysis, fact analysis, and collection of

opinions and use of computer data banks.

 The objective of this step is to provide sufficient data input to operate and test the model developed

in Step III.

Step V: Provide a solution and test its reasonableness

 This step is to get a solution with the help of model and input data.

 This solution is not implemented immediately, instead the solution is used to test the model and to

find there is any limitations.

 Suppose if the solution is not reasonable or the behavior of the model is not proper, the model is

updated and modified at this stage.

 The output of this stage is the solution(s) that supports the current organizational objectives.

Step VI: Implement the solution

 At this step the solution obtained from the previous step is implemented. The implementation of the

solution involves many behavioral issues.

 Therefore, before implementation the implementation authority has to resolve the issues.

 A properly implemented solution results in quality of work and gains the support from the

management.
 1.4 RELATIONSHIP BETWEEN THE MANAGER AND O.R. SPECIALIST

 The key responsibility of manager is decision making.

 The role of the O.R. specialist is to help the manager make better decisions.
 1.5 O.R. TOOLS AND TECHNIQUES

 The common frequently used tools/techniques are mathematical procedures, cost analysis,

electronic computation.

 However, operations researchers given special importance to the development and the use of

techniques like linear programming, game theory, decision theory, queuing theory, inventory

models and simulation.

 some other common tools are non-linear programming, integer programming, dynamic

programming, sequencing theory, Markov process, network scheduling (PERT/CPM), symbolic

Model, information theory, and value theory.

Linear Programming:

 This is a constrained optimization technique, which optimize some criterion within some

constraints.

 In Linear programming the objective function (profit, loss or return on investment) and constraints

are linear.

Game Theory:

 This is used for making decisions under conflicting situations where there are one or more

players/opponents.

 In this the motive of the players are dichotomized.

 The success of one player tends to be at the cost of other players and hence they are in conflict.

Decision Theory:

 Concerned with making decisions under conditions of complete certainty about the future outcomes

and under conditions such that we can make some probability about what will happen in future.

Queuing Theory:
 This is used in situations where the queue is formed (for example customers waiting for service,

aircrafts waiting for landing, jobs waiting for processing in the computer system, etc.).

 The objective here is minimizing the cost of waiting without increasing the cost of servicing.

Inventory Models:

 Inventory model make a decision that minimize total inventory cost.

 This model successfully reduces the total cost of purchasing, carrying, and out of stock inventory.

Simulation:

 Simulation is a procedure that studies a problem by creating a model of the process involved in the

problem and then through a series of organized trials and error solutions attempt to determine the

best solution.

 Sometimes this is a difficult/time consuming procedure.

 Simulation is used when actual experimentation is not feasible or solution of model is not possible.

Non-linear Programming:

 This is used when the objective function and the constraints are not linear in nature.

 Thus, the non-linear programming is used to determine the approximation in which a solution lies

and then the solution is obtained using linear methods.

Dynamic Programming:

 Dynamic programming is a method of analyzing multistage decision processes.

 In this each elementary decision depends on those preceding decisions and as well as external

factors.

Integer Programming:

 If one or more variables of the problem take integral values only then dynamic programming

method is used. For example, number or motor in an organization,

 Markov Process:

 Markov process permits to predict changes over time information about the behavior of a system is

known.

 This is used in decision making in situations where the various states are defined.

 The probability from one state to another state is known and depends on the current state and is

independent of how we have arrived at that particular state.

Network Scheduling:

 This technique is used extensively to plan, schedule, and monitor large projects (for example

computer system installation, R & D design, construction, maintenance, etc.)

 The aim of this technique is minimizing trouble spots (such as delays, interruption, production

bottlenecks, etc.) by identifying the critical factors.

 The different activities and their relationships of the entire project are represented diagrammatically

with the help of networks and arrows, which is used for identifying critical activities and path.

 There are two main types of technique in network scheduling, they are:

Program Evaluation and Review Technique (PERT) – is used when activities time is not known

accurately/ only probabilistic estimate of time is available.

Critical Path Method (CPM) – is used when activities time is known accurately.

Information Theory:

 The objective of this theory is to evaluate the effectiveness of flow of information with a given

system.
 This is used mainly in communication networks but also has indirect influence in simulating the

examination of business organizational structure with a view of enhancing flow of information.

1.6 APPLICATIONS OF OPERATION RESEARCH

Accounting:

 Assigning audit teams effectively

 Credit policy analysis and Cash flow planning

 Developing standard costs

 Establishing costs for byproducts

 Planning of delinquent account strategy

Construction:

 Project scheduling,

 Monitoring and control Determination of proper work force

 Deployment of work force

 Allocation of resources to projects

Facilities Planning:

 Factory/warehouse, Hospital location, planning and size decision

 Estimation of number of facilities required

 International logistic system design

 Transportation loading and unloading

Finance:

 Building cash management models and Dividend policy making

 Allocating capital among various alternatives

 Building financial planning models

Manufacturing:

 Inventory control

 Marketing balance projection

 Production scheduling and smoothing

Marketing:

 Advertising budget allocation

 Product introduction timing

 Selection of Product mix

 Deciding most effective packaging alternative

Organizational Behavior / Human Resources:

 Personnel planning Recruitment of employees

 Skill balancing Training program scheduling

 Designing organizational structure more effectively

Purchasing:

 Optimal buying and Optimal reordering

 Materials transfer

Research and Development:

 R & D Projects control and R & D Budget allocation

 Planning of Product introduction

1.7 LIMITATIONS OF OPERATION RESEARCH

 Distance between O.R. specialist and Manager – Slow decision making due to complex nature.
 Magnitude of Calculations – Enormous and expressing them in quantitative model and establishing

relationships among these require voluminous calculations.

 Money and Time Costs - subject to frequent changes into the O.R. models are very expensive.

 Non-quantifiable Factors - models do not take into account emotional/ qualitative factors

 Implementation – Can be complex due to difficulty in decision making

1.9 Key Terms

 OR: Operations Research.

 MS: Management Science.

 Symbolic Model: An abstract model, generally using mathematical symbols.

 Criterion: is measurement, which is used to evaluation of the results.

 Integer Programming: is a technique, which ensures only integral values of variables in the

problem.

 Dynamic Programming: is a technique, which is used to analyze multistage decision process.

 Linear Programming: is a technique, which optimizes linear objective function under limited

constraints.

 Inventory Model: these are the models used to minimize total inventory costs.

 Optimization: Means maximization or minimization.

2 LINEAR PROGRAMMING – GRAPHICAL METHOD

2.1 Introduction to Linear Programming

2.2 Linear Programming Problem Formulation

2.3 Formulation with Different Types of Constraints

2.4 Graphical Analysis of Linear Programming

 2.5 Graphical Linear Programming Solution

2.6 Multiple Optimal Solutions

2.7 Unbounded Solution

2.8 Infeasible Solution

2.1 INTRODUCTION

 Linear Programming is a special and versatile technique which can be applied to a variety of

management problems. Ie, Advertising, Distribution, Investment, Production, Refinery Operations,

and Transportation analysis.

 The linear programming method is applicable in problems characterized by the presence of decision

variables.

 The objective function and the constraints can be expressed as linear functions of the decision

variables.

 The decision variables represent quantities that are, in some sense, controllable inputs to the system

being modeled.

 An objective function represents some principal objective criterion or goal that measures the

effectiveness of the system such as maximizing profits or productivity, or minimizing cost or

consumption.

 NOTE: Solving a linear programming problem means determining actual values of the decision

variables that optimize the objective function subject to the limitation imposed by the constraints.
 The main important feature of linear programming model is the presence of linearity in the

problem.

2.2 LINEAR PROGRAMMING PROBLEM FORMULATION

 The linear programming problem formulation is illustrated through a product mix problem.

 The product mix problem occurs in an industry where it is possible to manufacture a variety of

products.

 A product has a certain margin of profit per unit, and uses a common pool of limited resources.

 In this case the linear programming technique identifies the products combination which will

maximize the profit subject to the availability of limited resource constraints.

 Example 2.1: Suppose an industry is manufacturing two types of products P1 and P2. The profits

per Kg of the two products are Rs.30 and Rs.40 respectively. These two products require processing

in three types of machines. The following table shows the available machine hours per day and the

time required on each machine to produce one Kg of P1 and P2. Formulate the problem in the form

of linear programming model.

Solution:

 The procedure for linear programming problem formulation is as follows:

 Introduce the decision variable as follows:

Let x1 = amount of P1: x2 = amount of P2

 In order to maximize profits, we establish the objective function as 30x1 + 40x2, since one Kg of

P1 requires 3 hours of processing time in machine 1 while the corresponding requirement of P2 is 2

hours.

 So, the first constraint can be expressed as

3x1 + 2x2 ≤ 600

 Similarly, corresponding to machine 2 and 3 the constraints are

3x1 + 5x2 ≤ 800

5x1 + 6x2 ≤ 1100

 In addition to the above there is no negative production, which may be represented algebraically as

x1 ≥ 0; x2 ≥ 0:

 Thus, the product mix problem in the linear programming model is as follows:

 Maximize 30x1 + 40x2

 Subject to: 3x1 + 2x2 ≤ 600

3x1 + 5x2 ≤ 800

5x1 + 6x2 ≤ 1100

x1≥ 0, x2 ≥ 0

2.3 FORMULATION WITH DIFFERENT TYPES OF CONSTRAINTS

 The constraints in the previous example 2.1 are of “less than or equal to” type.

 Example 2.2: A company owns two flour mills viz. A and B, which have different production

capacities for high, medium and low-quality flour. The company has entered a contract to supply

flour to a firm every month with at least 8, 12 and 24 quintals of high, medium and low quality

respectively. It costs the company Rs.2000 and Rs.1500 per day to run mill A and B respectively.
 On a day, Mill A produces 6, 2 and 4 quintals of high, medium and low-quality flour, Mill B

produces 2, 4 and 12 quintals of high, medium and low-quality flour respectively. How many days

per month should each mill be operated in order to meet the contract order most economically.

 Solution: Let us define x1 and x2 are the mills A and B.

 Here the objective is to minimize the cost of the machine runs and to satisfy the contract order.

 The linear programming problem is given by Minimize 2000x1 + 1500x2

 Subject to: 6x1 + 2x2 ≥ 8

2x1 + 4x2 ≥ 12

4x1 + 12x2 ≥ 24

x1 ≥ 0, x2 ≥ 0

2.4 GRAPHICA ANALYSIS OF LINEAR PROGRAMMING

 This section shows how a two-variable linear programming problem is solved graphically, which is

illustrated as follows:

 Example 2.3: Consider the product mix problem discussed in section 2.2

 Maximize 30x1 + 40x2

 Subject to: 3x1 + 2x2 ≤ 600;

3x1 + 5x2 ≤ 800;

5x1 + 6x2 ≤ 1100;

x1≥ 0, x2 ≥ 0

 From the first constraints 3x1 + 2x2 ≤ 600, draw the line 3x1 + 2x2 = 600 which passes through the

point (200, 0) and (0, 300). This is shown in the following graph as line 1.

 In this case we must decide in which side of the line 3x1 + 2x2 = 600 the half plane is located.

 The easiest way to solve the inequality for x2 is 3x1 ≤ 600 – 2x2
 And for the fixed x1, the coordinates satisfy this inequality are smaller than the corresponding

ordinate on the line and thus the inequality is satisfied for all the points below the line 1.

Graph 1: Three closed half planes and Feasible Region

 Half Plane - A linear inequality in two variables is called as a half plane.

 Boundary - The corresponding equality (line) is called as the boundary of the half plane.

 Close Half Plane – Half plane with its boundary is called as a closed half plane.
 And for the fixed x1, the coordinates satisfy this inequality are smaller than the corresponding

ordinate on the line and thus the inequality is satisfied for all the points below the line 1.

 Similarly, we have to determine the closed half planes for the inequalities 3x1 + 5x2 ≤ 800 and 5x1

+ 6x2 ≤ 1100 (line 2 and line 3 in the graph).

 Since all the three constraints must be satisfied simultaneously, we have considered the intersection

of these three closed half planes.

 The complete intersection of these three closed half planes is shown in the above graph as ABCD.

The region ABCD is called the feasible region, which is shaded in the graph.

 Feasible Solution: Any non-negative value of x1, x2 that is x1 ≥ 0 and x2 ≥ 0 is known as feasible

solution of the linear programming problem if it satisfies all the existing constraints.

 Feasible Region: The collection of all the feasible solution is called as the feasible region.

2.5 GRAPHICAL LINEAR PROGRAMMING SOLUTION

 A two variable linear programming problem can be easily solved graphically.

 the method is simple but the principle of solution is depending on certain analytical concepts, they

are:

 Convex Region: A region R is convex if and only if for any two points on the region R the line

connecting those points lies entirely in the region R.

 Extreme Point: The extreme point E of a convex region R is a point such that it is not possible to

locate two distinct points in R, so that the line joining them will include E.

 The extreme points are also called as corner points or vertices. Thus, the following result provides

the solution to the linear programming model:

  “If the minimum or maximum value of a linear function defined over a convex region exists, then

it must be on one of the extreme points”.

Key Terms

 Objective Function: is a linear function of the decision variables representing the objective of the

manager/decision maker.

 Constraints: are the linear equations or inequalities arising out of practical limitations.

 Decision Variables: are some physical quantities whose values indicate the solution. Feasible

 Solution: is a solution which satisfies all the constraints (including the non-negative) presents in the

problem.

 Feasible Region: is the collection of feasible solutions.

 Multiple Solutions: are solutions each of which maximize or minimize the objective function.

 Unbounded Solution: is a solution whose objective function is infinite.

 Infeasible Solution: means no feasible solution.

UNIT II

1 TRANSPORTATION PROBLEM

1.5 Introduction

1.6 Transportation Algorithm

1.7 Basic Feasible Solution of a Transportation Problem

1.8 Modified Distribution Method

1.9 Unbalanced Transportation Problem

1.10 Degenerate Transportation Problem

1.11 Transshipment Problem

 1.12 Transportation Problem Maximization

1.1 INTRODUCTION

 A special class of linear programming problem is Transportation Problem, where the objective is to

minimize the cost of distributing a product from a number of sources (e.g. factories) to a number of

destinations (e.g. warehouses) while satisfying both the supply limits and the demand requirement.

 The model assumes that the distributing cost on a given rout is directly proportional to the number

of units distributed on that route.

Example 1.1:

 Suppose a manufacturing company owns three factories (sources) and distribute his products to five

different retail agencies (destinations).

 The following table shows the capacities of the three factories, the quantity of products required by

the various retail agencies and the cost of shipping one unit of the product from each of the three

factories to each of the five retail agencies.

 In this case, the transportation cost of one unit from factory 1 to retail agency 1 is 1, from factory 1

to retail agency 2 is 9, from factory 1 to retail agency 3 is 13, and so on.

 A transportation problem can be formulated as linear programming problem using variables with

two subscripts.
 Let: x11=Amount to be transported from factory 1 to retail agency 1

x12= Amount to be transported from factory 1 to retail agency 2

…….. …….. x35= Amount to be transported from factory 3 to retail agency 5.

 Let the transportation cost per unit be represented by C11, C12, ….C35 that is C11=1, C12=9, and

so on.

 Let the capacities of the three factories be represented by a1=50, a2=100, a3=150.

 Let the requirement of the retail agencies are b1=100, b2=60, b3=50, b4=50, and b5=40.

 Thus, the problem can be formulated as

Minimize C11x11+C12x12+……………+C35x35

 Subject to: x11 + x12 + x13 + x14 + x15 = a1

x21 + x22 + x23 + x24 + x25 = a2

x31 + x32 + x33 + x34 + x35 = a3

x11 + x21 + x31 = b1

x12 + x22 + x32 = b2

x13 + x23 + x33 = b3

x14 + x24 + x34 = b4

x15 + x25 + x35 = b5

x11, x12, ……, x35 ≥ 0.

 The problem has 8 constraints and 15 variables.

 So, it is not possible to solve such a problem using simplex method.

1.2 TRANSPORTATION ALGORITHM

 The steps of the transportation algorithm are exact parallels of the simplex algorithm, they are:

 Step 1: Determine a starting basic feasible solution, using any one of the following three methods
1. North West Corner Method

2. Least Cost Method

3. Vogel Approximation Method

 Step 2: Determine the optimal solution using the following method

1. MODI (Modified Distribution Method) or UV Method.

1.3 BASIC FEASIBLE SOLUTION OF A TRANSPORTATION PROBLEM

 Generally, the Vogel Approximation Method produces the best initial basic feasible solution, and

the North West Corner Method produces the worst, but the North West Corner Method involves

least computations.

North West Corner Method:

 The method starts at the North West (upper left) corner cell of the tableau (variable x11).

 Step -1: Allocate as much as possible to the selected cell, and adjust the associated amounts of

capacity (supply) and requirement (demand) by subtracting the allocated amount.

 Step -2: Cross out the row (column) with zero supply or demand to indicate that no further

assignments can be made in that row (column). If both the row and column become zero

simultaneously, cross out one of them only, and leave a zero supply or demand in the uncrossed-out

row (column).

 Step -3: If exactly one row (column) is left uncrossed out, then stop. Otherwise, move to the cell to

the right if a column has just been crossed or the one below if a row has been crossed out. Go to

step -1.

Example 1.2:

 Consider the problem discussed in Example 1.1 to illustrate the North West Corner Method of

determining basic feasible solution.

 Solution is given as x11 = 50; x21 = 50; x22 = 50; x32 = 10; x33 = 50; x34 = 50; x35 = 40

 The corresponding transportation cost is 50 * 1 + 50 * 24 + 50 * 12 + 10 * 33 + 50 * 1 + 50 * 23 +

40 * 26 = 4420

The allocation is shown in the following tableau:

Least Cost Method

 The least cost method is also known as matrix minimum method in the sense we look for the row

and the column corresponding to which (cost) Cij is minimum.

 This method finds a better initial basic feasible solution by concentrating on the cheapest routes.

 If there are two or more minimum costs then we should select the row and the column

corresponding to the lower numbered row.

 If they appear in the same row we should select the lower numbered column.

 If both a row and a column is satisfied simultaneously, only one is crossed out.

 Next, we look for the uncrossed-out cell with the smallest unit cost and repeat the process until we

are left at the end with exactly one uncrossed-out row or column.

Example 1.3:

 The least cost method of determining initial basic feasible solution is illustrated with the help of

problem presented in the section 1.1.

 The Least Cost method is applied in the following manner:

We observe that C11=1 is the minimum unit cost in the table.

 Hence X11=50 and the first row are crossed out since the row has no more capacity.

 Then the minimum unit cost in the uncrossed-out row and column is C25=1, hence X25=40 and the

fifth column are crossed out.

 Next C33=1is the minimum unit cost, hence X33=50 and the third column are crossed out.

 Next C22=12 is the minimum unit cost, hence X22=60 and the second column are crossed out.

 Next, we look for the uncrossed-out row and column now C31=14 is the minimum unit cost, hence

X31=50 and crossed out the first column since it was satisfied.

 Finally, C34=23 is the minimum unit cost, hence X34=50 and the fourth column are crossed out.

 So that the basic feasible solution developed by the Least Cost Method has transportation cost is

1 * 50 + 12 * 60 + 1 * 40 + 14 * 50 + 1 * 50 + 23 * 50 = 2710

 Note that the minimum transportation cost obtained by the least cost method is much lower than the

corresponding cost of the solution developed by using the north-west corner method.

Vogel Approximation Method (VAM):

 VAM is an improved version of the least cost method that generally produces better solutions. The

steps involved in this method are:

 Step 1: For each row (column) with strictly positive capacity (requirement), determine a penalty by

subtracting the smallest unit cost element in the row (column) from the next smallest unit cost

element in the same row (column).

 Step 2: Identify the row or column with the largest penalty among all the rows and columns. If the

penalties corresponding to two or more rows or columns are equal, we select the topmost row and

the extreme left column.

 Step 3: We select Xij as a basic variable if Cij is the minimum cost in the row or column with

largest penalty. We choose the numerical value of Xij as high as possible subject to the row and the

column constraints. Depending upon whether ai or bj is the smaller of the two ith row or jth column

is crossed out.

 Step 4: The Step 2 is now performed on the uncrossed-out rows and columns until all the basic

variables have been satisfied.

Example 1.4: