Module 1

Operations research
Operations Research is the systematic and method oriented study of the basic structure,
functions and relationships in an organization.
Operation research is the application of scientific methods, techniques and tools to
problems involving the operation of a system so as to provide those in control of the system
with optimum solution to the problem
Operations research is scientific methods of providing executive department with a
quantitative basis for decision regarding the operations under the control.
Operation Research is an applied decision theory which involves a team approach of
experts from various disciplines such as scientists, Engineers ,Business executives
,psychologistsetc
Features (characteristics) of OR
1. System Orientation – All possible interactions in activities of organization
2. Interdisciplinary approach – Team of scientific from different faculties
3. Scientific approach :Uses scientific methods to solve complex problem.
4. Decision making : Management to take better decision
5. Optimization of objective: OR attempts to fund the basis and optimal solution to
problem using OR techniques. It tries to optimize a well defined function subject to
given constraints.
6. Mathematical Models and quantitative solution
OR uses models built by quantitative measurements of variables concerning a given
problem and drives a quantitative solution from the model.
7. Use of computer : OR often require a computer to solve the complex mathematical
model
Functions of operational Research
1. OR provides a tool for scientific analysis
2. OR provides solution for business problem
3. OR provides proper development of resource
4. OR assists in choosing an optimum strategy
5. OR facilities the process of decision making
6. OR helps in minimizing waiting servicing cost
Phases of operation Research
1. Formulating the problem: identifying defining a specifying the components of model
2. Constructing the model : Objective function & constraints
3. Deriving the solution – Solution to the model
Analytical method, numerical method and simulation methods are used
4. Testing the validity : A model is said to be valid, if it can gave a reliable prediction of
system performance.
5. Controlling the solution : Control over solution of proper feedback of information
variables which deviated significantly
6. Implementing the results – Examination of solution to be adopted

Limitation of operation research

1. OR models do not consider qualitative factors or emotional factors

2. Mathematical models are applicable to only specific category of employees
3. It is a specialist job
4. Implementation of decisions is a delicate job
5. Incorporating the mode is a costly affair when basic data is subjected to frequent
changes

Role of operation research in decision making

Decision making is an important responsibility of today’s management and this can be
achieved through scientific approach to the problem. OR provides a quantitative basis for
decision making since it involves scientific method. By employing a systematic study of
the problem, building mathematical model representing with the model and predicting
future operation, OR helps business management in taking wise decision

OR techniques are useful in decision making in the following areas

1. Suggesting the best locations for factories &Warehouses

2. Suggesting most economic means of transportation
3. Identification of most profitable type or use of advertisement campaigns

OR techniques
1. Allocation model: Allocation of resources such that effectiveness is optimized.
Allocation problem can be solved by linear &non linearprogramming Technique
.Assignment models and Transportation models are special cases.
2. Sequencing : Placing items in a certain sequence
3. Waiting or queuing theory : Models involving waiting for services
4. Inventory models : These are models with regard to holding or storing resources aim
at optimum inventory level
 5. Competitive strategy models (Game theory) : When two or more people competing
for a certain resources,. Game model is used to determine optimum strategy in a
competitive situation
6. Decision Theory: Concern with making sound decisions under conditions of certainty,
risks &uncertainty.
7. Network analysis :Involve determination of an optimum sequence of performing
certain operations concerning some job in order to minimize overall time or cost. Eg.
PERT, CPM, Gantt Charts
8. Simulation : Technique of testing a model which represent real life situation
9. Search models : The models concern itself with search problem
10. Replacement theory : These are models concerned with the situation that arise when
some items need replacement because the same may deteoriatewith time or break down
completely.

Scope of operations (Applications of OR)

OR has a wide scope in every day lines

OR has a very great impact on Economics, management Engineering and other social and
behavioral service

1. In defenceoperation :Techniques of OR does much help to select the optimum

strategy. Many of the defense operation involves scientific decision making. The
methods via work techniques for shortest path problems scheduling, algorithm for
vehicle routing and allocation techniques for shipping food grain can be applied in
defence establishments
2. Industrial application

Industrial management includes managing force funded areas such as production,

marketing, personnel and finance and other support services

Techniques used in production function are as follows

- Linear programming for aggregate planning

- Shop floor production scheduling
- Network based techniques for line balancing project management
- Inventory control techniques for planning and procuring raw materials
- Replacement analysis for equipment replacement decision
- Queuing theory for designing in process buffer stock

Marketing function

1. Linear programming for product mix problem

2. Game theory for order bidding decision
3. Distance network related techniques for shipping finished goods
4. HR function
1. Manpower planning
 2. Queing theory for determining the size of maintenance crews
3. Scheduling techniques for man power scheduling
5. Finance function
1. Integra programming for capital for budgeting
2. Portfolio analysis
3. Investment analysis
6. Purchasing
1. Material transfer
2. Optimal buying
3. Optimal reordering
7. Research and development
1. Control of R&D projects
2. Product introduction planning

III Business Applications

1. Accounting : cash flow accounting, credit policy analysis ect

2. Construction : Allocation of resources to projects, determination of proper work force
Deployment of workforce
Project scheduling
3. Faculties planning : Factory size,ware, house location
4. Design a operate public system such as Govt. departments, postal system, bank,
highways, railways, airways, hospitals & educations, institutions

Models of OR

A model is an abstraction of reality. Models play a very important role in OR

Models in OR may be defined as an idealized representation of a real life situation
Eg. Road map a city to trace the shortest route from a given source to destination
Three dimensional view of a factory to plan the material movement in shop floor

Properties of a good model

1. It should be simple
2. It should be capable of adjustments with new formulation without having any
significant change in its frame
3. It should contain very few variables
4. A model should not take much time in its consultation

Advantages of a model

1. It describes problem more concisely

2. It provides some logical and systematic approach to the problem
3. It indicates limitation and scope of problem
4. It tends to make the overall structure of the problem more comprehensible
5. It enables the use of high powered mathematical techniques to analyse the problem
 6. It helps in finding avenues for new research and improvement in the system
Disadvantages of model

1. Models are only an attempt to understand an operation and should never be considered
as absolute in any sense.
2. The validity of any model can only be verified by carrying on experiment relevant data
characteristics

Types of models

Models are classified based on the following aspect

Model by function Models by Models by nature Models by extent

structure of environment of generality

Descriptive Normative or
models optimization
model

Iconic or Mathematical or Analogue

symbolic models models
Physical models

Deterministic Probabilistic or
model stochastic
models

Static models Heuristic model

Descriptive model: Describe and predict factsandrelationshipamong various activities of the

problem. These models do not have an objective function as a part of model to evaluate decision
alternatives. In this model, it is possible to get information as to how one or more factors change
as a result of changes in other factors.
Normative or optimization models
They are prescriptive in nature and develop objective decision rule for optimum solution

Models by structure

Iconic or physical models : They are pictorial representation of real system and have the
appearance of the real thing. Iconic models are obtained by enlarging or reducing the size of
the system. In other words they are images.
Eg .photographs, drawing model air planes, globes, map etc.
These models are easy to observe and difficult to manipulation
a. . Symbolic models
These model employ a set of mathematical symbol to represent the components of real
system. This symbolic models are some kind of mathematical equation or inequalities
reflecting the structure of system they represent.Eg : Inventory models, Queuing
models, allocation models ,sequencing models etc.
These models usually yield more accurate results under manipulation
b. Analogue models : In analogue models, one set of properties is used to represent
another set of properties. After the problem is solved, the solution is reinterpreted iin
terms of original system. Analogue models are easy to manipulate than iconic models
Eg.Control linear on a map are analogues of elevation as they represent the rise and fall
of heights
Deterministic models
In deterministic models, everything is defined and the results are certain
Eg. EOQ methods, economic lot size
Probabilistic model (Stochastic models)
In this model there is risk and uncertainty and thereforeinput and output variables
assume probability distribution. In this model at least one parameter or decision variable
is a random variable.
Eg. Game theory, if the strategy is not pure, we apply probability model
Static Model: In this model, time factor is not considered.
Eg. Inventory problem of determining EOQ
Heuristic Model : In this model, are used to explore alternative strategies which have
been over looked previously.

Linear programming (LPP)

Linear programming is one of the important operation research techniques used in business and
industry.
Linear programming is a mathematical technique which involves allocation of limited
resources in an optimal manner, on the basis of a given criterion of optimality
Linear programming deals with the optimization of a function of variables known as objective
function to a set of linear equalities/ inequalities. Optimization may be maximize or minimize.
Uses of linear programming
1. Linear programming technique is used to achieve the best allocation of available
resource which includes man hours, money, machine hours, raw materials etc.
2. Linear programming is the powerful quantitative technique which can be used to solve
problems concerning with maximizing profit and minimizing cost by allocating the
resource in such a way that it optimize the objective.
Advantages of Linear programming
1. It provides an insight and perspective into problem environment related with a multi
dimension phenomenon
2. It makes a scientific and mathematical analysis of the problem situation
3. It gives an opportunity to the design maker to formulate his strategies consistent with
constraints and objectives
4. By using LP, the decision makes make sure that he is considering best solution
Limitation of LPP

1. LPP treats all relationship as linear which is not hold good in many real life situations.
Fractional values appear in LPP which is not accepted
2. All the parameters in the linear programming model are assumed to be known constants,
where as in reality they are frequently neither known nor constants
3. Many problem are complex since the number of variables and constraints are quite a
large number and cannot be used in all business problem
Basic assumptions of LPP

1. Proportionality : There must be proportionally between objectives and constraints

2. Additivity: Sum of resources used by different activities must be equal to the total
quantity of resources used by eachactivity for all the resources individually or collectively

3. Divisibility : The solution need not be whole number

4. Certainity : Coefficients in the objective function and constraints are completely known
and do not change during the period under study.

5. Finiteness : Activity and constraints are of finite numbers

 6. Optimality : The solution to a problem is to be optimum (maximum or minimum)

Formulation of LPP

Steps involved in LPP are as follows

1.Identify the objective as maximization or minimization

2. Mention the objective quantitatively and express it as a linear function of variables known
as objective function
3 .Identify the constraints which are conditions stipulated in the problem. Constraints are
expressed in the form of linear inequalities or equation
Standard form of a mathematical model of linear programming problem
Optimise Z= C1x1+ C2x2+ ----------+Cnxn
Subject to a11x1+ a12x2+-----------+ a1nxn <-(>-)b1
a21x1+ a22x2+ ----------+a2nxn<-(>-) b2
am1x1+am2x2+-----------+amnxn<-(>-)bn
where x1,x2------xn>0
The above conditions are referred as structural constraints
Non Negative constraints where x1,x2,------xn>0
Applications of linear programming in management

1.Determining product mix

2.Product smoothening
3.Media selection
4.Travelling sales man Problem
5.Transportation problem
6.Assignment problem
7. Communication industry
8.Staffing problem

Method of solving LPP graphical method

A LPP can be solved by two methods

1. Graphical method – Geometrical method

2. Simplex method – Algebric function

A linear programming comprises of

1. A objective function
2. Set of constraints
3. Non negative restrictions
In a graphical method, the problem is solved by the method of graph drawn in a two
dimensional plane. Since only two variables can be represented in a two dimensional plane,
the graphical solution can be used only when the objective function has just two variables
x1 and x2

When the objective function has three or more variables, graphical method cannot be used
to solve the problem

Steps for solving LPP by graphical method

1. Formulate the problem into a LPP

2. Each inequality in the constraint may be written as equality
3. Draw straight lines corresponding to the equality to the equation as obtained in step 2.
So there will be as many straight line as there are equations.
4. Identify the feasible region. Feasible region is the area which satisfies all the constraints
simultaneously.
5. The vertices of the feasible region are to be located and these ordinates are to be
measured

Solution is the coordinate of vertex which optimizes the objective function and
corresponding values of the objective function

Simplex method
Simplex method is a linear programming technique in which we start with a certain solution
which is feasible. We improve the solution in a number of consecutive stages until we arrive
at an optimal solution.
For arriving at the solution LPP by this method, the constraints and objectives function are
presented in a table known as simplex table.
Main steps involved in simplex algorithm
1. Find an initial basic feasible solution of LPP
2. Test whether it is an optimal solution or not
3. If not optimal; improve the first trial basic feasible solution by a set of rules
4. Repeat steps 2 and 3 till an optimal solution is obtained

Feasible solution

A feasible solution to a LPP is the set of values of variables which satisfies all the
constraints and non negativerestrictions of the problem

Optimal solution

A feasible solution to a LPP is said to be optimum if it optimizes the objective function Z

Basic feasible solution

A feasible solution to a LPP in which the vector associated to non zero variables are linearly
dependent is known as basic feasible solution.
 Steps involved on simplex algorithm

1. Formulate the problem into a LPP

2. Convert the constraints into equation by introducing non negative slack variables
If the constraintshas a ≤ sign, variables added to LH side of the constraints to convert
them into inequalities are called slack variables. For ≥ sign, subtract to the LH side of
the constraints are called surplus variables
Coefficient of slack / surplus variables in the objective function is zero.
3. Construct a simplex table
4. Conduct the test of optimality
This is done by computing the net evaluation
 j = Zj – Cj
If all js are positive solution is optimal.If any of the j s are negative, continue from
steps 5 onwards.
5. Select the entering variables which has the highest negative value called key column
.A column which has highest negative value in a maximization problem and calculate
the key row which is the row correspond to minimum ratio column in the table. These
values are calculated by dividing the values in the Bj column by the corresponding
values in the key column
The values in the ratio column are known s exit ratios or limiting ratio. The variables
with the smallest non negative ratio is the exit variable
6. Calculate the new values for the new table value corresponds top values in the key rows
are obtained by dividing each value in the key row by the key number
7. New values can be calculated in remaining rows are calculated as follows.
New row = (old row values to be changed ) - (Corresponding new value for key row)
(value corresponding to values in row to be changed)

Repeat steps 4,5,6 till optimality is reached

Simplex problem (Minimization problem)

In the case of ≥ inequalities in maximization/ minimization problem, the inequalities may be

greater than RHS. There may be surplus on LHS. To equalize the LHSand RHS, we have to
introduce surplus variables to the LHS and the surplus variables to be deducted from the
inequalities.

A minimization problem can be converted to maximization problem by change the sign of the
coefficients in the objective function.

Artificial variables

Since the coefficient of the surplus variables are negative this will not provide an initial base
feasible solution. This difficulty can be overcome by introducing another set of variables as
artificial variables with positive coefficients. These artificial variables have no value. Hence
the artificial variables are assigned very large positive coefficients or cost represented by
Min the objective function.
This method of solving LP problems by introducing artificial variables and assigning to
them very large positive or negative coefficients represented by M is termed Big M
method.Big M method is applicable for both minimization as well as maximization problem.

Degeneracy in simplex problem.

Degeneracy is a condition that may occur during computational process of LPP

A basic feasible solution of LPP is said to be degenerate, if at least one of the basic variable is
zero. In an LPP, degeneracy occurs at the following stages.

1. Degeneracy may appear at the very firstiteration if one of the basic variable is zero.
2. Degeneracy if may occur at some subsequent iterations This happens when there is a
tie for selecting exit variable

When the simplest algorithm is applied to a degenerate feasible solution to get a new BFs,
the value of the objective function may remain unchanged.

In some cases, the problem of cycling may occurs, the same sequence of simplex table are
repeated for ever without reaching optimum solution. In this case ofcycling,variableswhich
have left the basic solution in the previous iteration reenters and no optimal solution will
be reached.

Duality in simplex algorithm

Every linear programming problem is associated with another linear programming problem
called Dual.Original problem is called Primal problem

Duality theorem sates that for every maximization (minimization) problem in linear
programming there is a unique similar problem of minimization (or maximization)
involving same data which describe the original problem

Procedure to find the dual of a given primal

1. If the primal is maximization, dual is minimization and vice versa

2. Constraints in the right hand side of the constraints of primal becomes the coefficients
in the objectives function of the dual and vice versa
3. Dual of the dual programme will be the original problem itself
4. In the constraints, first coefficients of different constraints in the primal becomes the
first constraints in the dual and son

Applications of dual

1. If the primal problem contains a large number of rows (constraints) and smaller number
of columns (variables) computational procedures can be considerably reduced by
converting it into dual
2. Calculation of dual checks the accuracy of the primal solution
3. Disability in linear programme has certain far reaching consequence of economic nature
4. It gives additional information as to how the optimal solution changes as a result of
changes in the coefficient and formulation of the problem. This is termed post
optimality or sensitivity analysis

Sensitivity analysis

After formulating mathematical model to a linear programming problem and then attaining
optimum solution of the problem, it may be required to study the effects of changes
(discrete or continuous) in the different parameter of problem on optimum solution

Analysis of such problems assessing due to the slight change made in the parameter or
structure of a given LPP after attaining its optimum solution known as

post optimality analysis or sensitivity analysis.

The sensitivity analysis is concerned with the extent of optimal solution of LPP for changes
in one or more

1. Coefficient in the objective function

2. Coefficient of variables in the constraints
3. RHS constraints in the constraints

The sensitivity analysis makes the LPP solution to a dynamic tool that evaluates change
conditions.

The following post optimally problems can be answered with the help of sensitivity
analysis

1. When the profit contribution increases or decreases

2. When the resources availability is curtailed or increased
3. If a new activity is added or existing and is deleted

Advantages of LPP

1. Optimum use of productive factors within the firm

2. Improved quality of decision
3. Use of sensitivity analysis helps the management to modify the solution and obtain
modified solution easily

Unit II

Assignment Problem

Assignment problem is a special case of transportation problem in which objective is to

assign a number of origins (or persons) to the equal number of destination (or tasks) at
minimum cost.
 Assignment problems deals with the allocation of jobs to person or allocation of tasks to
facilities, the assignment is to be done on the basics of one job to one person or one task to
one facility

Cost matrix

The assignment problem can be stated in the form of

n x nmatrix called cost matrix where Cij is the cost of assigning ith source to jth destination

Source 1 2 3 ….. n

1 C11 C12 C13 …. C1n

2 C21 C22……C2n

n Cn1 Cn2 … Cnn

Mathematically an assignment can be stated as follows

Minimise the total sost

Z = ∑𝒏𝒊=𝟏 ∑𝒏𝒋=𝟏 Cijxij

Subject to condition ∑𝑛𝑗=1 𝑥𝑖𝑗 = 1 for j = 1, 2 ….. n for which one job is to be done by
ith person where i=1 ….. n

∑𝑛𝑗=1 𝑥𝑖𝑗 = 1fori = 1,2 … .n which means one person to be assigned the jth job

MethodofsolvingAssignment problem
(Hungarian Alogarithm or Reduced Matrix Method)

1. Subtract the smallest element of each row in the cost matrix from every element of that
row
2. Subtract the smallest element of each column in the reduced matrix from every element
of that column
3. a.Starting with rows of the matrix obtained, examine all the rows having exactly one
zero element. Enclose this zero within  showing that assignment is made there. Cross
and all other zeros in the column to show that they cannot be sued to make other
assignments. Proceed in this way until last row is examined
b.Examine all the columns with one unmarked zero. Marked  at the zero and cross all
the zeros of the row in which  is marked. Proceed in this way till the last column is
examined
c.Continue these operations (a) and(b) successively until we reach any of the following
solution
d. If all the zeros are enclosed by  in this case we have maximal assignment and
assignment in every row or column or got solution.
 2. Remaining unmarked zeros lie at least two rows or column. It does not contain
assignment in all rows and all columns
In this case the following procedure is followed
4. Draw the minimum number of horizontal and vertical lines necessary to cover all zeros
at least once.
5. Select the smallest of the elements which is not covered by lines.subtract it from all the
elements that do not have a line through them, add it to the every element that lies at
the interaction of two lines and leave the remaining elements of the matrix unchanged.
6. Now reapply steps 3 to 5 to the modified matrix

Unbalanced Assignment Problem

An assignment problem is said to be unbalanced ,whenever the number of tasks (job)
is not equal to the number of facilities (person). Thus the cost matrix of an unbalanced
assignment problem is not a square matrix. For the solution of such problems we add
dummy rows or columns to the given matrix to make square. The cost on dummy rows
or columns are taken to zero. Now the problem reduces to balanced assignment problem
and can be solved by assignment algorithm
Maximization problem
If the objective of the allocation is to minimize some variable, such as cost, time etc it
is known as minimization problem. If on the contrary the objective is to maximize some
variable such as sales ,revenue and profit it is known as maximization problem.
In order to solve a maximization problem, it has to be converted into a minimization
problem. This can be done by multiplying each element of the related matrix by (-1) .
After converting a maximization problem into a minimization problem, it can be solved
by Hungarian problem or minimization problem can be converted to maximization by
subtracting highest element from all the elements. The problem now converted to
minimization problem.

Prohibited assignment (Restricted assignment)

In some assignment problems, it may not be possible to assign a particular task to a

particular facility due to space or size of the task or other restrictions. In such situations,
we can assign a very cost (sayα ) to the corresponding cells. So that it will be
automatically excluded in the minimizing process of assignment.

Travelling sales man problem (routing problem)

Travelling sales man problem is a special type of routing problem. The routing
problems are those where we have to select a route, from an origin to destination, which
yields minimum cost.

Suppose a salesman has to visit in cites .He wishes to start from a particular city visits
each city once and then return to his starting time. Objective is to select the sequence
in which cities are visited in such a way that his total travelling time is minimized. If
there are 4 cities A,B, C, D then once solution can to A to C, C to D, D to B, B to A
 Formulation of a travelling sales man problem as an assignment problem

Travelling sales man problem is very similar to assignment problem except that in the
former there is an additionalrestriction . The addition restriction is choosing a sequence
which can minimize cost. This is the route condition.

TRANSPORTATION PROBLEM

Transportation problem is a special kind of linear programming problems in which goods

are transported from a set of sources to a set of destinations subject to supply and demand of
the source or destination on respectively such that the total transportation cost is minimum.

The objective is to transport various amounts of s single homogenous

commodity that are stored at several origins is a number of destination.

Transportation problem is applicable to other problems also example allocation problem,

product mixetc

Transportation techniques can be applied not only to cost minimizing problem but also to time
minimizing problem, profit maximizing problem.

Uses of transportation problem

1. To minimize the transportation costs from factories to ware house or ware houses to
markets.
2. To determine the lowest cost allocation for a new factory
3. To determine minimum cost production schedule.

Transportation table

D1 D2 ………Dn Availability

O1 c11 cij cin a1

02 c21 c22 ….. c2n a2

0m cm1 cm2 cmn an

Requirement b1 b2 ……….. bn

The matrix is known as transportation table. Origin is denoted as 01, 02….. On and
destination is noted as D1, D2,….Dn and Cj for the cost associated with transportation
problem.

LPP for transportation problem

Minimise Z = ∑𝑛𝑖=1 ∑𝑛𝑗=1 , Cijxij

Subject to ∑𝑛𝑗=1 = ai for 1, 2…… n xij ≥ 0

 Basic assumptions in transportation techniques

1. ∑ 𝑎𝑖 = ∑ 𝑎𝑗 is total qty available for destination is equal to total requirement in different

destinations together.
2. Unit transportation cost from one origin to a destination is certain
3. Unit cost is independent of the quantity transported
4. Objective is to minimize the transportation cost

Definitions

Feasible solution :Feasible solution to a transportation problem is a set of non negative

individual allocation which satisfy the row and column restriction.

Therefore for feasibility the sum of allocation in the rows must be equal to availability in
that row.

Similarly sum of allocations in the column must be equal to demand in that column

Basic feasible solution : A feasible solution to a maximum transportation problem is said

to be basic feasible solution, if the total number of allocation is equal to (m+n-1) if m is the
no of rows and n is the no of coloumns

Optimal solution : A feasible solution (basic or not) is said to be optimal, if it minimizes

the total transportation cost.

Non degenerate basic feasible solution : A feasible solution of a maximum transportation

problem is said to be degenerate basic feasible solution if the

1. No of allocations must be equal to m+n -1

2. The allocations are in independent positionSteps for solving a transportation problem
1. Set up a transportation table with m rowsrepresenting the origin and n columns
representing destination
2. Develop an initial feasible solution to the problem
3. Test whether the solution is optimal or not
4. If the solution is not optimal, modify the allocation
5. . Repeat steps 4 and 5 until an optimal solution is obtained.

Initial basic feasible solution

Initial feasible solution are those which satisfy the rim requirement. That is the allocation made
in every row taken together is equal to availability shown in that row similarly for each column,
the total allocation should be equal to the requirement in that column

The initial basic solution is determined using

1. North west corner rule

2. Lowest cost entry method
3. Vogel approximation method is more preferred since the initial basic feasible solution
obtained either optimal or very close to the optimal solution.

North West corner rule

Alogarithm steps

Step 1 : Allocate to the cell(1,1) maximum possible amount which is the minimum of row
total and column total. So either arow or column total gets exhausted. So cross of total row
or column as the case may be

Step 2 : Consider the reduced matrix. In that matrix, allocate to the cell (1,1) maximum
possible amount (Which is the minimum of present row total or column total)

Step 3 : Repeat the above steps until all the available quantities are exhausted.

Lowest Costentry method

Choose the cell having lowest cost in the matrix allocate there, as much possible which is
the minimum of row total and column total. This either a row total or column total is
exhausted.

Cross off the corresponding row or column from the reduced matrix, locate the cell having
lowest cost. Allocate to that cell maximum possible thus leading to a feasible reduced
matrix.

Continue this process until all requirements are exhausted

VOGELS APPROXIMATION METHOD (VAM)

Step 1

Since this method, we write the difference between smallest and second smallest costs in
each column below the corresponding columns, within brackets.similarly write similar
difference in each row to the weight of corresponding row. These differences are known as
penalty

Step 2

Select the row or column having the largest penalty and allocate the maximum possible
amount to the cell with the lowest cost in that row or column as the case may be. This either
the row total is column total is completely exhausted (cross of that row or column).
Construct thereduced matrix with the remaining rows and column

Step 3 : For the reduced matrix obtained apply step 1 & 2 until all rows and column totals
are exhausted. The initial solution obtained by Vogelsmethod is more close to the optimal
solution than the solution obtained by other two method
By applying Vogelsmethod or lowest cost entry method or North west corner rule, an initial
basic feasible solution can be obtained. Next step is to examine whether the solution can be
improved. For the we have to conduct the test of optimality by modified distribution method
(MODI’s method)
MODIs Method

Step 1 : When the initial basic feasible solution obtained, some cells are occupied and other
unoccupied. No of occupied cells is (m+n-1) let cij be the cost of cell (i,j)
Then we determine (m+n) number called Ui&Vj values by framing (m+n) numbers called
Ui&Vj values by framing (m+n-1) equations of the form Ui+Vj = Cij correspond to each of
the occupied cell.
For solving the equations, we take one of Ui and Vj values as zero (since no of unknown is one
more than the number of equation)
Step 2 : Then we calculate cell evaluation known as dijvalues for unoccupied cells by the
formula dj = Cj –(Ui+Vj)
Step 3 : If all the dj values are positive, the solution is optimal and unique. If at least one of
them is zero, and other positive, the solution is optimal but alternative solution exists. If at least
dij is negative, the solution is not optimal.
Step 4 : If the solution is not optimal, make reallocation. Give maximum allocation to the cell
for which dij is negative, making one of the occupied cells empty
Then steps 1 to 4 will be repeated until solution becomes optimal.
Maximisation in transportation problem

A transportation problem in which objective is to maximize can be solved by converting the

given maximization problem to a minimization problem .For this, select the highest value and
subtract all other values from this highest values. Then the given problem becomes
minimization problem.

Unbalanced transportation problem

A transportation problem is said to be unbalanced transportation problem if the sum of all

available amounts is not equal to sum of all requirements in destination together ∑ 𝑎𝑖 ≠ ∑ 𝑏𝑗

Transportation problems are unbalanced when

1. Supply is less than demand : Lost sales &loosing customers. Introduce dummy origin
2. Supply is greater than demand
Profit is reduced by the loss caused by unsold quantity. Dummy destinations are
introduced to absorb the excess capacity of origin
An unbalanced transportation problem can be converted to a balanced transportation
problem by introducing a fictious source of destination which will provide the surplus
or demand. The cost of transporting unit from the fictiouss (source or destination) is
taken to be zero
 After converting the unbalanced transport problem into a balanced transportation
problem by a dummy source or destination, it can be solved by Northwest corner rule/
least cost method / VAM
Degeneracy in transportation problem
In a transportation problem, degeneracy occurs ,whenever the number of individual
allocation less than (m+n-1) where m & n are respectively number of rows and columns
of the transportationmatrix.
Degeneracy in the transportation problem are developed in 2 ways
1.The basic feasible solution may be degenerated from the initial stage onwards.
2. They may become degenerate at any immediate stage
In such cases, we allocate a small number  which is equal to zero to one or more empty
cells so that the total no of allocations is (m+n-1)

Difference between transportation problem and assignment problem

Transportation Problem Assignment Problem

1 Not of sources or number of Since assignment is done on one no

destination need not be equal Hence basis,the number of source and destination
the cost matrix is not necessary a a equal. Hence the cost matrix must be a
square matrix square matrix

2 The problem is balanced if the total The problem is unbalanced if the cost
supply and demand are nor equal matrix is not a square matrix

3 Capacity and requirement value is Capacity and requirement value is exactly

equal to a1 & b1 for pth source and jth one
destination
 Unit III

NETWORK MODELS

Project : A project consist of interrelated activities which are to be executed in a certain order
before the entire task is completed. The activities are inter related in a logical sequence known
as Precedence relationship

The work on a project cannot be started until all its immediate preceding activities that involve
planning, procuring processing the inputs etc are completed.

Eg. Excavation for foundation should be done only after the site preparation; white washing
should be done after plastering

Some of the typical project are as follows.

• Construction of a house
• Commissioning of factory
• Construction of ship
• New product launching
• Research to develop a new technology

Project management is generally applied for constructing items of public utilities, large
industrial projects, organizing mega events etc. Project management is considered to be an
important area in production scheduling mainly because many of the industrial activities
can be viewed as project management problem.

Eg. Fabrication of boilers , construction of railway coaches

Network : Network is a combination of activities and events of a project.

The problem of networks to find a certain course of action which minimize time, cost or
distance in performances of various activities.

Network problems may occur in many areas such as production, distribution,

transportation, communication and activities of commercial undertaking

Objectives of network analysis

1. Minimization of total cost of a project

2. Minimization of total time of a project
3. Minimization of cost of project for a given time
4. Minimization of idle resource
5. Planning scheduling and controlling projects

Network techniques
 Network techniques is a major advancement in management science. This technique is
based on the basic characteristic of all projects.

Different network techniques are PERT, CPM etc. The two network technique help
manages to plan, schedule, monitor and control large and complex projects.

Uses of network techniques

1. It helps the management in planning the completed projects controlling work & plan
and updation of plan
2. It helps the management in reaching the goal with minimum time and least cost and
also in forecasting probable project duration & associated cost
3. Network techniques have resulted in better management control, better utilization of
resource and better decision making .
4. Network techniques have resulted in saving of time or early completion of project.

Application of network techniques

1. Construction of buildings and factories

2. Administration
3. Manufacturing
4. R&D
5. Marketing

Networking diagram
The project can be broken into a number of distinct and well defined jobs called activities.
The beginning or end of each activities constitute an event of project
A graph drawn connecting various activities and events of a project is network diagram.
Each event is represented on it by a circle and each activity by arrow.
The arrow denotes the sequence of activities.

Two types of network diagram

1. Event oriented diagram : Emphasis given on the events of project also referred as
PERT. Events are first selected and events in such network falls in a logical sequence.

2. Activity oriented diagram : Emphasis is given an activities of the project. Activities

are arranged in logical order

Eg.CPM

Phases of project management

Project management has 3 phases planning, scheduling and controlling

The planning phase has following steps

1. Dividing the project into distinct activities
2. Estimating the time requirement for each activity
3. Establishing the precedence relationship among activities
4. Construction of arrow diagram (network)
Scheduling phase determined the start and end time of each and every activities which can

be summarized in the form of a time chart/ Gantt chart

The control phase uses the arrow diagram and time chart for continuous monitoring and

progress reporting.

Activity : An activity is a tasks associated with project

Eg. Lay pipe line

Here A is an activity A
Number 2 initial node
Number 3 is terminal node
2 3

Start and terminal actvities

Activities which have no predecessors are called start activities

Dummy activities : Certain activities which neither consumers time non resources but are
used simply to represent a connection or a link between the events are known as dummy
activities . It is shown in the network by a dotted line.

The purpose of introducing dummy activity is

1. To maintain the uniqueness in the numbering system as every activity may have distinct
set of events which activity can be identified.
2. To maintain proper logic in the network

B D
A Dummy

Rules for network construction

1. The Starting event and ending event of an activity are called tail event and head event
respectively
2. The network should have a unique starting mode (tail event)
3. The network should have a unique completion node (Head event)
4. No activity should be represented by more than one arc in the network
 5. No two activities should have the same starting node and same ending node
6. Dummy activity is an imaginary activity indicating precedence relation shop only.
Duration of dummy activity is zero.

Earliest event time T(E)

The earliest occurrence time or earliest event time (TE) is the earliest at which an event can
occur. Earliest occurrence of event 2 is denoted as E2.

Latest event time (TL) : The latest allowable occurrence time or latest time by which can event
must occur to keep the project on schedule. Latest occurrence of an event 2 is denoted by
L2.

1. Earliest start time (EST) : it is the earliest time which an activity can commence.
EST of activity 2-3 isE3
2. Earliest finish time (EFT) Earliest finish time of a activity is defined as the earliest
time by which an activity can be finished.
EFT = EST + Activity duration
3. Latest finish time (LFT)
Latest finish time for an activity is the latest time by which an activity can be finished
without delaying the completion of project.
LFT of an activity =Latest expected time of head event
For activity 2-3 , LFT = L2
4. Latest start time (LST)

Latest start time of an activity is the latest time by which an activity can be started without
delaying the completion of project

LST = LFT – Activity deduction

Slack and float

Slack is a term associated with events . It denotes is flexibility range within which an event
can occurs.

Slack of event 2 = L2 – E2 – LFT – EST

Float ; Float is associated with activity time Float denotes the range within which the
activity starts time or finish time may fluctuate without affecting the completion of the
project

Types of float

1. Total float
2. Free float
3. Independent float
4. Interferring float
Total float

1. Total float is the time spent by which starting or finishing an activity can be delayed
without delaying the completion of the project

Total float = LFT – EFT or LST – EST

2.Free float : Free float is that portion of positive total float that can be used by an activity
without delaying any succeeding activity . The concept of free float is based on the
probability that all activities start as early as possible.

Free float = EST of successor – EFT of present activity

3 Independent float

It is defined as the excess of minimum available time over the required activity duration

Independent float is the amount of an activity could be delayed if preceding activity finish
at their latest and the subsequent activity start at their earliest

Independent float = EST of an subsequent activity – LFT of preceeding activity –

Duration

4 Interfering float =Total float – Free of float

Uses of float

1. To solve resource leveling and resource allocation problem

2. Floats gives flexibility in representing some activity to smoothen the level of resources
or allocate the limited resources
3. Floats reduces the cost of project.

Critical path

Critical path is the path having longest duration . The activities on the critical path are
shown by dark of double line arrows.

Critical path in the network diagram is a path on which all the activities have zero float.

All activities on the critical path are zero float activities.

Critical activity : critical activity is the activity lying in the critical path.

Critical path method (CPM)

 CPM is a network technique consist of

1. Planning the sequence of activities to be performed in a network

2. Scheduling the time and resources to various operation
3. Controlling the performance so that they are not deviating from the plan

CPM is generally used for repetitive jobs

Features of CPM

1. CPM is a deterministic problem

2. It is used when duration of each activity or time is known exactly
3. It is used for repetitive projects
4. CPM can be effectively in production planning, road systems, traffic schedule and
communication network
5. CPM emphasis the relationship between applying more resources to shorten the
duration of given job in a project and increased cost of these addition resources.

Steps involved in CPM

1. List out the activities and draw a network

2. Find the earliest event time (Tg) and latest event time EL of each event shown in the
network diagram
3. Calculate EST, EFT, LST & LFT for each activity
4. Determine the float for each activity
5. Determine the critical activities having zero floats
6. Draw the double lines in network diagram passing through critical activities. The
double line shows the critical path
7. Calculate the total project duration which is the sum of duration of critical activities.

Project Evaluation and review technique(PERT)

PERT was developed in 1950s

PERT is a management technique proposed for those project or operations which are of non
repetitive nature for these projects in which precise time determination for various activities
cannot be made

Assumption in PERT

1. Activity duration are independent ie time required for one activity has no relation with
another activities
2. PERT is used in those places where a project cannot be easily defined in terms of time
and resources.
3. Time duration in each activity is not a constant and hence un certain

Time estimates in PERT

 1. Optimistic time estimate (to)

This is the shortest possible time in which an activity can be completed under ideal
conditions. This particular time estimate represents the time in which the activity or job
can be completed if everything goes well with no problem or adverse condition

2. Pessimistic time estimate (tp)

It is the maximum time that would be required to complete the activity. The particular time
represents the time it takes to complete a particular activity if everything went wrong
abnormal situation exists.

3. Most likely time estimate (tm) It is the time which the activity will take most
frequently performed a number of times. This time estimate a reflects a situation where
condition are normal expected time based on 3 estimates.
𝑻𝒐+𝟒𝒕𝒎+𝒕𝒑
Average time Te = 𝟔

Steps involved in PERT calculation

1. Identify the events and activities and prepare a suitable network for the given problem
2. Events are numbered in ascending order from left to right
3. Obtain the various time estimate for each activity . They are most likely tm, pessimistic
tp and optimistic to estimate

𝒕𝒐+𝟒𝒕𝒎+𝒕𝒑
Calculate expected time te = 𝟔

4. Compute the float associated with each activity

The activity with zero float are critical activities . Determine critical path through the
critical activities. Calculate the TE & TL for each event

5. Find the total expected duration time te by adding the time estimates for various
activities on critical path

Application / Uses of PERT

1. Research & development

2. Prototype production
3. Irrigation projects
4. Launching of space craft
5. Project planning & control

CPM & PERT are both network analysis techniques used in planning and control of
projects. Both the techniques make use of network diagram for management of projects.

Difference between PERT & CPM

 CPM PERT

1. CPM uses only single time estimate PERT uses multitime estimate for activity
for activity and does not consider duration (consider 3 time estimate
uncertainty. It is a determines to a uncertainity in time duration stochastic
model model)

2. CPM is used for repetitive jobs PERT is used for non repetitive jobs

3. CPM makes use of cost duration PERT analysis does not consider cost
relationship to arrive optimum
schedule
4. CPM is an activity oriented PERT is an event oriented

5. CPM is used for construction and PERT is used for planning scheduling
business problem research programme

Probability of completion of project by a specified date

(𝑡𝑝−𝑡𝑜)2
1. Find the variance of time estimate of all determines variance of each activity = 6
 = variance of project duration – sum of variances of time estimates of all critical
activities.
2. Find the probability of finishing the project on some fixed target by using the table of
normal distribution
Value of z = Due date- Expected date of completion /standard deviation of
critical path 
 = √𝒔𝒖𝒎 𝒐𝒇 𝒗𝒂𝒓𝒊𝒂𝒏𝒄𝒆𝒔 𝒐𝒇 𝒄𝒓𝒊𝒕𝒊𝒄𝒂𝒍 𝒂𝒄𝒕𝒊𝒗𝒊𝒕𝒊𝒆𝒔

Advantages of PERT & CPM

1. It helps the management to concentrate their attention on critical activities and

completion on time
2. It provides the best way of planning and scheduling of projects
3. Gives complete information about duration slackiness of activities
4. Suggests area for increasing efficiency and reduction of cost.

5. Helps to formulate new schedule when existing schedule cannot be met

6. Minimize the delay in competition of project

Crashing of projects
The normal time of a project duration is the to time duration of all critical activities together
(ie critical path duration). The reduction in the project duration can be achieved by reducing
the time required for selected activities, from their normal time
The maximum reduction in the time possible for any activities is limited to its crash time
(ie beyond this time, reduction is not possible)
The progress of reducing the total project duration by reducing activity timings is known
as crashing of project

Procedure of crashing

1. Find the critical path and identify the critical activities

2. Calculate the cost slope for different activities using the formula
𝐶𝑟𝑎𝑠ℎ 𝑐𝑜𝑠𝑡−𝑁𝑜𝑟𝑚𝑎𝑙 𝑐𝑜𝑠𝑡
cost slope = 𝑁𝑜𝑟𝑚𝑎𝑙 𝑡𝑖𝑚𝑒−𝐶𝑟𝑎𝑠ℎ 𝑡𝑖𝑚𝑒
3. Rank the activities in the critical path as per the ranking
4. Activity having lower cost slope should be crashed first to the maximum extent possible

Calculate the new direct cost by adding the cost of crashing to the normal cost

5. As the critical path duration is reduced by crashing as per step 3, other path become
critical as we get parallel critical paths

This means that project duration can be reduced by simultaneous crashing of activities in
the parallel critical paths

6. By crashing as per step 3 and 4, one reaches a point when further crashing is either not
possible or does not result in the reduction of crashing of project duration (This can
happen when activities which can be crashed lie in the non critical path)

For the different project duration total cost is found out

Total cost is got by adding corresponding over head cost to the direct cost and the duration
cost is got by adding the crashing cost cumulatively to the normal cost.

Resource allocation
A resource is a physical variable such as man, material , machine, space or money that is
required for completing various activities or jobs of a project.

The network analysis PERT/ CPM can be successfully carried out if the availability of
resources is liberal or unlimited. But usually all necessary resources will not be available
in unlimited quantities. Availability of the some if the resource such as manpower and
material may be restricted. Availability funds, capital investment and heavy equipment are
the most important resources that need be allocated carefully

For a given network, the requirements of various resources are determined using the early
start schedule of each activity. There may be activities which are to be performed
 simultaneously and may require common resources. The requirement of resources to
execute these simultaneous activities may exceed the available resources. Hence the
requirement of a particular type of resources may not be uniform all along the project
duration. The planning should be done on such a manner that resource are utilized in a
manner that resources are utilized in a more or less uniform manner. Large fluctuations in
these demand may cause problem in the project execution

The resource allocation procedure consists of two main activities

1. Resource smoothing
2. Resource leveling

Resource smoothing (Load smoothing)

If the constraint is the total project duration, then the resource allocation only smoothens
the demand on resources. Hence the period for maximum demand is located and the
activities according to their float are shifted so that there is balance between availability
and requirement of resources. Proper utilization of floats can smoothen the demand of
resources to the maximum allocation is called resources smoothening

Resource leveling (load levelling)

There are various activities in a project demanding varying levels of resources should not
go beyond the prescribed level. The operation of resource allocation is called resource
leveling.

Difference between resource smoothening and resource level

In resources smoothening methods, the total project duration is not changed. But some of the
activities stage times are shifted by these available floats so that a uniform demand for the
resources is generated. However the resources are considered to be unlimited.

In resource leveling, the activity start times are so rescheduled that the peak demand for a
particular resource are considered to be limited. In resheduling the activities, the floats are
used. But its does not give the desirable results , the total project duration may be changed.

Unit IV

Queuing Theory

A queue is formed when the demand for a service exceeds the capacity to provide that service.

Queing theory is a quantitative technique which consists in constructing mathematical models

of various types of queuing system. Queuing theory deals with the analysis of queries and
queuingbehaviors.

Objectives of Queing theory

1. To achieve the economic behavior between waiting time costs and service costs
2. Queuing theory can be used to estimate the different characteristics of the waiting line
such as average arrival rate, average service rate, average waiting time and average time
spent on the system
3. Queuing theory helps in taking decision about the optimum capacity so that the cost of
investment is minimum keeping the extent of queue within tolerancelimits.

Application of queuing theory

1. Scheduling of aircraft
2. Scheduling of works and jobs in Production control
3. Minimization of congestion due to traffic delay in Toll booths
4. Scheduling of components to assembling line
5. Scheduling and routing of salesman

Role of Queuing theory in management

Queuing theory plays a very important role in management ultimate good of queuing theory
is to achieve an economic balance between cost of service and cost associated with waiting,
based on probability theory it attempts to minimize the extent and duration of investment
costs.

Queuing theory is able to provide with the estimated average time and intervals under
sampling method and helps in taking decision about the optimum capacity. So that cost of
investment is minimum keeping the extent of queue within tolerance limits.

Queing system

Arrival – Queue – service – outlet

Types of queuing system

1. Single queue – single service point – There is only one queue and one service station.
This system is also known as single channel facility. In this system, the customer waits
in the only queue that is available till the service point is ready to take him for servicing
2. Single queue multiple service points

In this system, there is only one queue there are severalservice points. A customer waits in
single queue until one of the services station is ready take him for servicing.

3. Multiple queue single service point

In this system, there are several queues, the customer can join any one of these several
queuesbut there is only one service station.
4. Multiple queue multiple service points

In this system, there are several queues and also several service station also known as multi
channel facility
Terminologies

1. Customer – Customer are these who waiting in the queue or receiving service
customers may be people, machine, ships, letters etc.
2. Queue – A group of item such as people, machine etc waiting for service in a service
station
3. Server – A server is a person or machine by whose service is rendered
4. Service station – Point where service is provided
5. System – Queue + service
6. Queue length – No of customers waiting in the queue
7. Time spent by customer – Time spent for waiting in the queue plus service time
8. Queuing system – Compress of arrival of customers waiting in queue, picked up for
service being served and departure of customers.
9. Average length of queue – Number of customer in the queue per unit time
10. Waiting time : Time upto which customer has to wait in the queue before taken to
service
Customersbehavior in queue.
1. Jockeying – Moving from one queue to another queue, when there are several
queues in the hope of reducing waiting time
2. Reneging – Joining the queue and leaving it after ward.
3. Balking – Customer have priority over others. Customers are served before others
regarding of their order of arrival

Limitations of queuing theory

1. Most of the queuing models are complex cannot be easily understood. There is
always an element of uncertainty
2. Queue discipline also impose some limitation
3. In multiple channel queuing several times to practice from one queue forms arrival
for another make analysis more complex.

Characteristics of queing model

1. Arrival distribution

It is the input process. It represents the in which no of customer arrive at the system
called random arrival.

Arrival rate is defined as the rate at customers arrive to be service or the number of
customer arriving per unit of time

Arrival time is randomly distributed according to Poisson son distribution

Men value of arrival, rate is represented by 

2. Service (departure) distribution
It represents the pattern in which the no. of customers leave the system
No of customers served per unit of time is called Service rate
Service facilities can be fixed or distributed in accordance with some probability
distribution
Average no of customers being served in unit of time u
Average time taken to service a customer=1/u=Service time =

3. Service discipline or queue discipline

If the service facilities are free, the incoming customer is taken into service
immediately
If the service facilities are busy the customers in the queue may be handled in either
of the following ways services become free
1. FCFS (FIFO)
2. LIFO
3. Random service
4. Priorities

4.Queue output

In a single channel facilities the output of the queue does not possess any problem
for the customer who leaves after getting service. When the system is multi stage
channel facilities, because break down of a service station, can have repurcuison on
the queries.

Simple queue – single channel system characteristics

1. Single queue and single service point

2. Queue discipline is first come first served
3. Queue has infinite capacity
4. Arrivals are random and follow a poison distribution
5. No simultaneous arrivals
6. Service times are random and follow exponential distribution
7. No simultaneous arrivals
8. Traffic intensity is less than 1
Traffic Intensity 

Traffic intensity is defined as the rate of mean arrival  to mean service rate 

𝑀𝑒𝑎𝑛 𝑎𝑟𝑟𝑖𝑣𝑎𝑙 𝑟𝑎𝑡𝑒 

Traffic intensity = 𝑀𝑒𝑎𝑛 𝑠𝑒𝑟𝑣𝑖𝑐𝑒 𝑟𝑎𝑡𝑒 = 

Simple queue <1

>1, queue will grow without end

= 1, No change in queue system

Kendal’s notation for queuing system

Characteristics of queing system has been universally standardized in the format a/b/c

Where a = arrival distribution

b= service time distribution

c= no. of servers in the system

This is referred as kendels equation

Eg. Simple queue which has poisson arrival distribution, exponential service time
distribution and single server represented as M/M/1

Formulaes in queing system

1. Expected no. of customers or unit in the waiting line or serviced or


Expected numbers in the system E(n) = (−)
2. Expected number of units (or customers ) in the queue

2
Queue length = E(nq) = (−)


3. Average waiting time in the queue of an arrival E(w) = (−)
4. Average time an arrival spend in the time system
1
E(v) = −
5. Probability that the no an the queue and being served is greater than k is

P (n>k) =( )k+1
Model II : M/M/I : α/FCFS for long cheque
Model III : M/M/I : N/FCFS
Model I (M/M/I) : α/FCFS
This is the queue model with
1. Arrival and departure following poisson distribution service rate following
exponential distribution
2. Single channel with infinite capacity
3. Service discipline :First come first served. There are single channel problems. They
are simple queuing problem. This is also called Birth and death model
4. Problems in previous pages belonging to model 1
Model II (M/M/I) : α/FCFS
General singlestationqueing model or General Erlang model

This is same as Model I except that mean arrival rate and service rate are not constant.
Both are dependent on n in the number of units in the system
Arrival rate = n service rate = n

Consider the cases (1) n = 𝑛+1 and n = 
(2) n =  (α constant ) and n = n
In both cases, expected no of units in system

E(LS) = =
E(LS) – Average no. of units in the system
E(Lq) – Average queue length
E(ws) – Average waiting time in system
E(wqs) – Average waiting time in system


1. Average queue length E(lq) = ELs - 
1
2. Average waiting time in queue E9wq) =  (Elq)
n
3. Probability for n units in the system n = 𝑓𝑎𝑐𝑡𝑜𝑟𝑖𝑎𝑙 𝑛 e-
4. Probability that the unit is idling o = e-
When n =  and n =  the model coincides with model 1

Unit 4

Simulation
University previous Questions Part A& Part B)

1. Write a short note on Monte Carlo simulation June 2014 (5 Marks)

2. Explain simulation modeling – June 2014 (10 Marks )
3. What is simulation? Explain Monte carlo simulation(Nov 2013)-5 Marks
4. What are the uses of simulation –Nov 2012(5 Marks)
5. Define simulation. Give two application areas where the technique is suitable (Dec
2008)-10 Marks
Simulation
Simulation model is a simplified representation of real life situation which helps to
understand a problem and helps to find the solution by trial and error approach.
Simulation technique
Simulation technique is used in situations where it is not possible to construct
mathematical tools like linear programming
Simulation is the process of designing a model of real system and conducting
experiment withthis model for the purpose of understanding the behavior for the
operation of the system.
 Simulation is a problem solving technique which uses the computer aided experimental
approach to study problems that cannot be analyzed during formal analytical methods.
Slope involved in Simulation

1. Identify the problem

2. Identify decision variable associated with the problem
3. Construct a numerical model
4. Validate the model
5. Design the experiments
6. Run the simulation method
7. Examine the results and select the best course of action

Identify problem

Identify decision variable,

performance criteria and decision
rule
Construct simulation model

Validate model

Design experiments (specify value

of decision variable to be tested)

Run or conduct simulationNO

Modify the model by
Is simulation process completed changing input ie
YES values of decision
variables
Examine results & select best course
of action

Advantages of simulation
1.Simulation techniques can be used to solve the problem where the values of variables
are not known or partly known
2. Simulation methods are easier than analytical model
3. From the simulation model, data for further analysis can be generated
4. Effect of using the simulation model can be studied without using it in real situation
5. Simulation models are flexible
Disadvantages of simulation

1. Optimal results cannot be guaranteed by simulation

2. In many situation it is not possible to quantity the variables which affect the behavior
of system
3. In a number of situations, simulation is comparative costlier and time consuming
4. It is very difficult to construct simulation models if the number of variables are large
and their interaction ship is complex
5. Simulation technique provides only statistical estimates rather than exact results

Application of simulation techniques

1. Shop floor management

Analysing where to locate factors or plants inorder to be able to distribute goods and service
at lowest rate

Job scheduling problem

Implementation of new manufacturing technical such as just in time, flexible

manufacturing lean manufacturing, poke yoke, kanban system, kaizen etc

Level of machinery maintenance to minimize the service and break down cost

2. Design of queing system and Inventory system

Examining the ship arrivals and unloading in harbour point to avoid forming of queues

Testing a series of inventory order policies to find the least cost order point

3. Financial planning : Evaluation of investment opportunities

4. New product introduction in the market
5. Designing and planning of future production of automobile components
6. Demand forecasting
7. Capital budgeting problem
8. Replacement problem

Montecarlo simulation

Monte Carlo simulation is a simulation technique which is used to solve the problems by
the application of random number. They are selected in such a way that every number has
an equal chance of probabilityof selection.

Steps involved in Monte Simulation

Monte Carlo method is asubstitutionofmathematical evaluation of a model

The basics of Monte carlo techniques is the random sampling of variables possible value.
For this technique some random number are required which may be converted into random
variates whose behavior is known from past experience. Monte carlo technique is
concerned with experiments on random number and provide solution to complicated OR
problem

General procedure of Monte Carlo Methods

This method uses random number for originating some data by which a problem can be
solved. The random numbers are used in creating a new set of hypothetical data of a
problem from past experience. If no pattern can be assumed for the data, then randomness
can be assumed. When past information is not available, it can be obtained by conducting
a preliminary survey. The data collected are plotted on a graph from which a cumulative
probability function is obtained.

In Monte Carlo method, the sequence of s random number are selected from the random
number table. The random number obtained as taken a decimal numbers and also the
probability obtained at random from the parent population. These probabilities are plotted
on the cumulative frequency curve of the given data. The value of x correspond to each
probability given by the random number is the desired random sample values.

Steps involved in Monte carlo simulation

1. Construct the model which represents the relevant characteristics of the real world
system
2. Determine the probability distribution for the value of interest.
3. Determine the cumulative probability
4. Select the random numbers using random number table
5. From the sequence of random numbe,r determine the corresponding variables of
interest.

Advantages of Monte carlo method

1. Helpful in finding solution of complicated mathematical expression which is not

possible otherwise
2. By these methods, difficulties of trial and experimentation are provided.
3. Simulation techniques are easy to train staff and workers.

Disadvantages of Monte carlo method

1. These are costly way of getting a solution of any problem

2. These methods do not provide optimal answer to the problem. The answers are good
only when the size of sample is sufficiently large

Applications of Monte carlo simulation

1. Queing problem
2. Inventory problem
3. Risk analysis concerning major capital investment
4. Flexible budgeting

Unit V

Game theory

Game Theory is a theory of conflict and it is mathematical theory which deals with
competitive situations

It is a type of decision theory which is concerned with the decision making in situations
where two or more rational opponents are involved under conditions of competition and
conflicting interests

Definitions

1.Game

Game is an activity carried out by two or more persons having conflicting interest who
agreed to play abiding by certain predetermined rules and limitations

1. Competitive games

This involves two or more intelligent persons parties actively participate to dominate over
the components strategies and make attempts to win over.

Here each participant has a set of finite or infinite choice of actions available to him and
anyone of these choices can be used freely at a given time

3.Strategy :

Strategy of a player is determined rule by which a player decide his course of action
duringthe game. That is a strategy for a given player is a set of rules or programmes that
specify which of the available courses of section, he should select at each play

4 .Player : Each participant in the game is called player

5.Pure strategy : A pure strategy is a decision in advance of all plays to choose a

particularpre determined course of action.

6.Mixed strategy : A player is said to adopt mixed strategy when he does not adopt a single
strategy all the time but would play different strategies each a certain time. The player
would choose a particular course of action on the basis of probability.

7. Pay off matrix

The outcome of a game in the form of gains or losses to the completing player for choosing
different courses of action is known as pay off. In the game, the gain and losses resulting
from different moves and counter moves when represented in the form of a matrix is known
as pay off matrix

B1 B2

Pay off matrix A1

2 −3
𝐴2 [ ]
0 1

Here A is the maximizing player and B is the minimizing player. Each element in the matrix
is the gain for A when he chooses a course of action against which B chooses another course
of action

Here each rows of the pay offmatrixindicates gain to A for his particular strategy. A is
called maximizing player and B is minimizing player.

Value of game

Value of game is the maximum guaranteed gain to the maximizing player. (A) if both the
player use the best strategies. It is the expected pay off of a play when all the player of the
game follow there optimum strategies.

A game is said to be fair, if the value of game is zero.

Characteristics of competitive game (Scope of game theory)

1. There exists finite number of competitors called players

2. Each player has a list of finite number of possible courses of action
3. Each of the player chooses a single courses of action from the list of courses available
to him
4. Each play is associated with an outcome known as pay off. It determines a set of
payment
5. Possible gain or loss of each player depends not only on the choice made by him but
also choice made by his opponent

Different types of game

1. Two person and n person games

Game involving two players is called two persons game and n person is called n person
game

2.Zero Sum &Non Zero Sum Game

A zero sum game is one in which the sum of payments to all the competitors is zero fo
every possible outcome of the game. Here the sum of the points won equals the sum of
points lost.
A non zero sum game in which the sum of the pay offs from any play of the game may be
either positive or negative but not zero.

3.Finite and Infinite game

A game is said to be finite game, if it has a finite number of moves or plays.

A game without any limit on the number of moves or play is referred as infinite game.

Two persons zero sum game (Rectangular game)

A game with only two players in which the gain of one player is equal to the loss of other
player is called a two person sum games represented by pay off matrix in rectangular form

Assumption of two persons zero game

1. There are two players having opposite interest

2. No. of strategies available to each player is finite resulting in pay off
3. Amount won by one player is exactly equal to the amount lost by the other.

Limitations of game theory

1. A player may have infinite number of strategies. But we assume that there are
onlyfinitenumber of strategies.
2. Game theory ignores the presence of risk and uncertainly
3. The assumption that the gain of one person is the loss of opponent need not be true in
all situations
4. The assumption that the two persons involved in the game have equal intelligence may
not be true always.

Maximinprinciple

Here the maximizing player (A) lists worst possible pay off of all his potential strategies
and chooses the strategies which corresponds to the best. This is called maximum
principle .

Minimax principle

In this case, the minimizing player (B) lists his maximum losses from each strategy and
selects the strategy which corresponds to the least. This is called Minimaxprinciple.

Saddle point

A saddle point of a pay off matrix is the position in pay off matrix where the maximin
coincides with minimax. Pay off at the saddle point is the value of game

Example
 Player B

−3 2 4
Player A [−2 1 −3]
0 −2 3
Maximin = Max of row min = 2
Minimax – Minimum of column max = 2
Maximin = Minimax = 2 (A1, B2)
Saddle point is (A1, B2)
Value of game = 2

Solve the game whose pay off matrix is given as

Solution of mixed strategy problem
When there is no saddle point for a game problem, the minimax = maximin principle cannot
be applied to solve that problem. The strategies thus used to solve the problem is called
mixed strategy

Solution to mixed strategy problems can be solved by the following methods

1. Probability method
2. Linear programming method
3. Graphical method
Probability Method
This method is applied when there is no saddle and the pay off matrix has two rows and
two columns only. The player may adopt mixed strategies with certain probabilities.
Here the problem is to determine the problem of different strategies of both players
expected value of the game
Consider the following pay off matrix
𝑎 𝑏
[ ]
𝑐 𝑑
Let p be the probability of A using strategy A1, probability for A using strategy A2 is 1-p
Let q be the probability of B using the strategy .probability of B using strategy B2 is (1-q)
𝑎𝑑−𝑏𝑐 𝑑−𝑏 𝑑−𝑐
Value of game V = (𝑎+𝑑)−(𝑏−𝑐) q = (𝑎+𝑑)−(𝑏+𝑐) p= (𝑎+𝑑)−(𝑏+𝑐)