DMBA 205 – OPERATIONS RESEARCH

Set – 1

Q1. What is Operations Research? Explain the role of Operations Research in Decision
Making.

Ans: Churchman, Aackoff, and Aruoff defined operations research as “the application of
scientific methods, techniques and tools to the operation of a system with optimum solutions to
the problems” where 'optimum' refers to the best possible alternative.

The objective of OR is to provide a scientific basis to the decision-makers for solving problems
involving interaction with various components of the organization. This can be achieved by
employing a team of scientists from different disciplines to work together for finding the best
possible solution in the interest of the organization as a whole. The solution thus obtained is
known as an optimal decision.

However, in complex situations, although it is possible to take decisions based on one’s common
sense, a decision backed by mathematical calculations reduces the risk factor and increases the
probability of success. Some such situations, where decision-makers have to depend on
mathematical scoring and reasoning, are finding an appropriate product mix amidst competitor’s
products or planning a public transportation network in a city.

Role of Operations Research in Decision Making:-

 Operations research is important because it is a helpful tool used to solve complex

problems under uncertainty. In business, very few things are certain, and managers must
often make decisions based on their instincts instead of being able to use reliable data.
Operations research techniques fill this void with methods that quantify issues and give
business managers a better basis for making decisions.
 An operation research (OR) is an analytical method of problem-solving and decision-
making that is useful in the management of organizations. In operations research,
problems are broken down into basic components and then solved in defined steps by
mathematical analysis.

 Operations research, or OR, can be defined as the scientific, especially mathematical, and
analytical problem-solving method that helps the management of organizations to make
better decisions. Which in turn, helps in better, efficient, and effective working of the
organization, and improved productivity?
  The OR can be said as a problem-solving tool.
 It helps in providing a quantitative basis that is arrived at by applying the scientific
principles, for the complex decisions that the management takes.

Q2. a) Solve the following linear programming problem using Two Phase Simplex Method:

Minimize Z = x 1 - 2x 2 – 3x 3

Subject to: -2x 1 + x 2 + 3x 3 = 2

2x 1 + 3x 2 + 4x 3 = 1

Where x 1 , x 2 , x 3 ≥ 0

Ans:

Min z = x1 - 2 x2 - 3 x3
subject to
- 2 x1 + x2 + 3 x3 = 2
2 x1 + 3 x2 + 4 x3 = 1
and x1,x2,x3≥0;
-->Phase-1<--
The problem is converted to canonical form by adding slack, surplus and artificial variables as
appropriate
1. As the constraint-1 is of type '=' we should add artificial variable A1
2. As the constraint-2 is of type '=' we should add artificial variable A2
After introducing artificial variables
Min z = A1 + A2
subject to
- 2 x1 + x2 + 3 x3 + A1 =2
2 x1 + 3 x2 + 4 x3 + A2 = 1
and x1,x2,x3,A1,A2≥0
Iteration-1 Cj 0 0 0 1 1

Min Ratio
B CB XB x1 x2 x3 A1 A2
XB/x3

A1 1 2 -2 1 3 1 0 2/3=0.6667

A2 1 1 2 3 (4) 0 1 1/4=0.25→

z=3 Zj 0 4 7 1 1

Zj-Cj 0 4 7↑ 0 0

Positive maximum Zj-Cj is 7 and its column index is 3. So, the entering variable is x3.
Minimum ratio is 0.25 and its row index is 2. So, the leaving basis variable is A2.
∴ The pivot element is 4.
Entering =x3, Departing =A2, Key Element =4
R2(new)=R2(old) ÷4

R2(old) = 1 2 3 4 0

R2(new)=R2(old) ÷4 0.25 0.5 0.75 1 0

R1(new)=R1(old) - 3R2(new)

R1(old) = 2 -2 1 3 1

R2(new) = 0.25 0.5 0.75 1 0

3×R2(new) = 0.75 1.5 2.25 3 0

R1(new)=R1(old) - 3R2(new) 1.25 -3.5 -1.25 0 1

Iteration-2 Cj 0 0 0 1

B CB XB x1 x2 x3 A1 Min Ratio

A1 1 1.25 -3.5 -1.25 0 1

x3 0 0.25 0.5 0.75 1 0

Z =1.25 Zj -3.5 -1.25 0 1

Zj-Cj -3.5 -1.25 0 0

Since all Zj-Cj≤0
Hence, optimal solution is arrived with value of variables as :
x1=0,x2=0,x3=0.25 Min z=0
But this solution is not feasible because the final solution violates the 1st constraint -
2 x1 + x2 + 3 x3 = 2. and the artificial variable A1 appears in the basis with positive value 1.25
So phase-2 is not possible.

b) Solve the following transportation problem using Matrix Minima Method? Also find the
corresponding cost of transportation.

Warehouses

W1 W2 W3 W4 Supply
Factor y

F1 21 16 25 13 21
Factor y

F2 17 18 14 23 23
Factor y

F3 32 17 28 41 19
Factor y

Demand 11 15 17 20
Factor y

Ans: Let xij = no. of units of a product transported from ith factory (i = 1, 2, 3) to jth warehouse (j
= 1, 2, 3, 4). It should be noted that if in a particular solution the xij value is missing for a cell,
this means that nothing is shipped between factory and warehouse. The problem can be
formulated mathematically in the linear programming form as Minimize = 21x11 + 16x12 +
25x13 + 13x14 +17x21 + 18x22 + 14x23 + 23x24 + 32x31 + 17x32 + 28x33 + 41x34 subject to
Capacity constraints x11 + x12 + x13 + x14 = 21

x21 + x22 + x23 + x24 = 23

x31 + x32 + x33 + x34 = 19

Requirement constraints

x11 + x21 + x31 = 11

x12 + x22 + x32 = 15

x13 + x23 + x33 = 17

x14 + x24 + x34 = 20

xij ≥ 0

The above problem has 7 constraints and 12 variables. Since no. of variables is very high,
simplex method is not applicable. Therefore, more efficient methods have been developed to
solve transportation problems.

Q3. Five wagons are available at stations 1,2 3,4 and 5. These are required at five stations
A, B, C, D and E. The distances in km between various stations are given in the table
below. How should the wagons be transported to minimize the total distance travelled?

Stations (s) A B C D E

10 5 9 18 11
13 2 6 12 14
3 9 4 4 5
18 5 12 17 15
11 6 14 19 10

Ans: Find the matrix

Given:

Subtract the smallest element in each row from every element

Subtract smallest element in each column of assignment matrix

Draw horizontal and vertical lines for zeros, Cover all rows and columns which has maximum
number of zeros

Minimum number cover all zeros is 3, order of matrix is 5. From uncovered element smallest is
1, subtract it from all uncover elements except the intersection lines, that lines add the smallest
element.
Find the minimum mileage

Matrix is

Total minimum mileage = 10+6+4+9+10= 39

 Set – 2

Q4. a) Write any five differences between Critical Path Method [CPM] &amp; Program
Evaluation and Review Technique [PERT]

Ans:

PERT

 PERT – Project Evaluation and Review Technique

 PERT is a probabilistic model
 PERT was developed in connection with an Research and Development (R&D) work.
Therefore, it had to cope with the uncertainties that are associated with R&D activities. In
PERT, the total project duration is regarded as a random variable. Therefore, associated
probabilities are calculated in order to characterize it.
 It is an event-oriented network as in the analysis of a network, emphasis is given on the
important stages of completion of a task rather than the activities required to be
performed to reach a particular event or task.
 PERT is normally used for projects involving activities of non-repetitive nature in which
time estimates are uncertain.
 It helps in pinpointing critical areas in a project, so that necessary adjustment can be
made to meet the scheduled completion date of the project.

CPM

 CPM – Critical Path Method

 CPM is a deterministic model
 CPM was developed in connection with a construction project, which consisted of routine
tasks whose resource requirements and duration were known with certainty. Therefore, it
is basically deterministic.
 CPM is suitable for establishing a trade-off for optimum balancing between schedule
time and cost of the project.
 CPM is used for projects involving activities of repetitive nature.
b) Customers arrive at a sales counter managed by a single person according to a poisson
process with a mean rate of 20 per hour. The time required to serve a customer has an
exponential distribution with a mean of 100 seconds. Find the average waiting time of
customer in queue and in system.

Ans: The average waiting time of a customer is 225 seconds.

Step-by-step explanation:

Given: Arrival rate = = 20 per hour.

The Service rate can be calculated as = 3600/100 = 36 per hour

The average waiting time of a customer

Thus, The average waiting time of a customer in the system is 225 seconds.

We have made use of the formula here, to compute the average waiting time of a
customer when the service rate is 36 customers per hour.
Q6. What is Principle of Dominance in Game Theory? Reduce the following game by
dominance property and solve it:

Player B
1 2 3 4 5
I 1 3 2 7 4
Player A II 3 4 1 5 6
III 6 5 7 6 5
IV 2 0 6 3 1

Ans: The principle of dominance states that if one strategy of a player dominates over the other
strategy in all conditions then the later strategy can be ignored. A strategy dominates over the
other only if it is preferable over other in all conditions. The concept of dominance is especially
useful for the evaluation of two-person zero-sum games where a saddle point does not exist.

Rule:

1. If all the elements of a column (say ith column) are greater than or equal to the corresponding
elements of any other column (say jth column), then the ith column is dominated by the jth
column and can be deleted from the matrix.

2. If all the elements of a row (say ith row) are less than or equal to the corresponding elements
of any other row (say jth row), then the ith row is dominated by the jth row and can be deleted
from the matrix.

Advantages & Limitations of Game Theory

Advantages

1. Game theory gives insight into several less-known aspects, which arise in situations of
conflicting interests.

For example, it describes and explains the phenomena of bargaining and coalition-formation.

2. Game theory develops a framework for analyzing decision making in such situations where
interdependence of firms is considered.

3. At least in two-person zero-sum games, game theory outlines a scientific quantitative

technique that can be used by players to arrive at an optimal strategy.
Limitations

1. The assumption that players have the knowledge about their own pay-offs and payoffs of
others is not practical.

2. The techniques of solving games involving mixed strategies particularly in case of large pay-
off matrix are very complicated.

3. All the competitive problems cannot be analyzed with the help of game theory.

Game by dominance property: First consider the minimum of each row.

1 2 3 4 -3 -1 2 12 Maximum of {-3, -1, 2, 12} = 12. Column Maximum Value 1 2 3 4 5 15 14 18

12 20 Minimum of {15, 14, 18, 12, 20}= 12

Row Minimum Value

1 1
2 1
3 5
4 0

Maximum value of (1, 1, 5, 0) = 5

Next consider the maximum of each column

Column Maximum Value

1 6
2 5
3 7
4 7
5 6

Minimum of= (6, 5, 7, 7, 6) = 5

We see that the maximum of row minima = the minimum of the column maxima. So the game
has a saddle point. The common value is 5.

Therefore the value V of the game = 5