PROGRAM – MASTERS OF BUSINESS ADMINISTRATION (MBA)

SEMESTER – 2

COURSE CODE and NAME: DMBA205 Operations Research

NAME : ROHIT RANJAN

ROLL NO. 2314512674
 Operations Research

History of Operations Research

The term Operation Research has its origin during the Second World War. The military
management of England called a team of scientists to study the strategicand tactical problems
which could raise in air and land defence of the country. Asthe resources were limited and those
need to be fully but properly utilized. The team did not involve actually in military operations
like fight or attending war butthe team kept off the war but studying and suggesting various
operations relatedto war.

What is Operations Research?

Several definitions have been given

 Operations research (abbreviated as OR hereafter) is a scientific method ofproviding

executive departments with a quantitative basis for decisions regarding the operations
under their control: Morse and Kimbal (1944)
 OR is an analytical method of problem-solving and decision-making that isuseful in
the management of organizations. In operations research, problems are broken down
into basic components and then solved in defined steps by mathematical analysis.
 Operational Research (OR) is the use of advanced analytical techniques to improve
decision making. It is sometimes known as Operations Research, Management Science or
Industrial Engineering. People with skills in OR holdjobs in decision support, business
analytics, marketing analysis and logistics planning – as well as jobs with OR in the title.
 As such a number of definitions can be found in literature, you can expressthe term OR
with the spirit mentioned in the literature.

1.1 Introduction to Operations Research (OR)

The term Operations Research (to be termed OR hereafter) describes the discipline that is
focused on the application of information technology for informed decision-making. In other
words, OR represents the study of optimal resource allocation. The goal of OR is to provide
rational bases for decision making by seeking to understand and structure complex situations,
and to utilise this understanding to predict system behaviour and improve system performance.
Much of the actual work is conducted by using analytical and numerical techniques to develop
and manipulate mathematical models of organisational systems that are composed of people,
machines, and procedures.
1.1.1 Brief History of Operations Research

The term operations research (O.R.) was coined during World War II, when the British military
management called upon a group of scientists together to apply a scientific approach in the study
of military operations to win the battle. The main Objectives was to allocate scarce resources in
an effective manner to various military operations and to the activities within each operation.
The effectiveness of operations research in military, inspired other government departments and
industries.

1.1.2 Indian Context of Operations Research

India used the techniques of operations research in the year of 1949 at Hyderabad. In Hyderabad,
a unit for operations research was set up names Regional Research Institute. Later on, in 1953,
another operations research unit was established at Calcutta for national planning and survey
names Indian Statistical Institute. Various other Indian companies are using operations research
techniques for solving their problems of advertising, quality control, transportations, planning
and sales promotions.

1.1.3 Definitions of Operations Research

OR has been defined in various ways, however given below are a few opinions about the
definition of OR which have been changed along-with the development of the subject.
In 1946 Morse & Kimbel has defined O. R. as:

OR is a scientific method of providing executive departments with a quantitative

basis for decision regarding the operations under their control.”
In 1957, Churchmen Ackoff and Arnoff defined:

“OR is the application of scientific methods, techniques and tools to problems involving the
operations of systems so as to provide those in control of the operations with optimum solutions
to the problem.”

The operational research society of U.K. defines OR as:

“Operational Research is the application of the methods of science to complex problems arising
in the direction and management of large systems of men, machines, materials and money in
industry, business, government and defence. The distinctive approach is to develop a scientific
model of the system, incorporating measurements of factors, such as chance and risk, with which
to compare the outcome of alternative decisions, strategies and controls. The purpose is to help
management determine its policies and actions scientifically.
1.2 Phases of Operations Research

Formulate the problem: This is the most important process; it is generally lengthy and time
consuming. The activities that constitute this step are visits, observations, research, etc. With the
help of such activities, the O.R. scientist getssufficient information and support to proceed and is
better prepared to formulatethe problem. This process starts with understanding of the
organisational climate,its Objectivess and expectations. Further, the alternative courses of action
are discovered in this step.

Models of Operations Research

A model is a representation of the reality. It is an idealised representation or abstraction of a real

life system. A model is helpful in decision making as it

provides a simplified description of complexities and uncertainties of a problem in logical

structure.
Physical model:• It includes all forms of diagrams, graphs and charts. They are designed to deal
with specific problems. They bring out significant factors and inter-relationship in pictorial
firm so as to facilitate analysis.
Mathematical model:• It is known as symbolic models also. It employs a set of mathematical
symbols to represent the decision variable of the system.
By nature of environment:• Deterministic model in which every thing is defined and the results
are certain, for instance: EOQ model; and probabilistic models in which the input and output
variables follow a probability distribution, for instance: Games Theory.
By the extent of generality: • The two models belonging to this class are: generalmodels can
be applied in general and does not pertain to one problem only, for instance: Linear
programming; and specific model is applicable under specific condition only, for instance: Sales
response curve or equation as a function of advertising is applicable in the marketing function
alone.
Steps of Operations Research

Following are the steps which are involved in solving any operations research model:

Fig. 1.1 Steps involved in operations research

Management Applications of Operations Research?

 Finance budgeting and investment

 Purchase, procure and exploration
 Production management
 Marketing
 Personal management
 Research and development

Scopes of OR

Agriculture: optimum allocation of land, crops, irrigation etc.

Finance: maximize income, profit, minimize cost etc.

In industries: Allocation of resources, assignment of problems to worthyemployees

etc.

Personal management: To appoint best candidate, decide minimum employeesto complete

job etc.

Production management: Determine number of units to produceto

maximize profit, etc.
 Linear Programming

Introduction to Linear programming (LP)

Linear programming is designed by George B. Dantzig in 1947 to solve optimisation problem
where all the constraints and Objectives functions are in the form of linear function. Linear
programming is a technique of making decisions under the conditions of certainty that is all
Objectivess and constraints are quantified.
Linear programming is the analysis of problems in which a linear function of a number of
variables is to be optimised (maximise or minimised) when those variables are subject to a
number of constraints in the mathematical linear inequalities.

Requirements of linear programming problems (LPP)

The common requirements of a LPP are as follows:
 Decision Variables And Their Relationship
 Well-Defined Objectives Function
 Existence Of Alternative Courses Of Action
 Non-Negative Conditions On Decision Variables
Basic assumptions of LPP
 Linearity: You need to express both the Objectives function and constraintsas linear
inequalities.
 Deterministic: All co-efficient of decision variables in the Objectives andconstraints
expressions are known and finite.
 Additive: The value of the Objectives function and the total sum of resources used must
be equal to the sum of the contributions earned fromeach decision variable and the sum
of resources used by decision variablesrespectively.
 Divisibility: The solution of decision variables and resources can be non-negative
values including fractions.

General Form of Linear Programming

The LPP is a class of mathematical programming where the functions representing the
Objectivess and the constraints are linear. Optimisationrefers to the maximisation or
minimisation of the Objectives functions.

The general form of linear programming

Maximise or Minimise: Z = c1 x1 + c2 x2 + + cn xnSubject
to the constraints,
a11 x1 + a12 x2 +----- + a1n xn ~ b1a21 x1 +
a22 x2 +-----+ a2n xn ~ b2

am1 x1 + am2 x2 + -----------+ amn xn ~ bm

and x1 ≥ 0, x2 ≥ 0,---------------------------- n ≥ 0
Where cj, bi and aij (i = 1, 2, 3, ….. m, j = 1, 2, 3 --- n) are constants determinedfrom the
technology of the
problem and xj (j = 1, 2, 3 n) are the decision variables. Here ~ is either ≤(less
than), ≥ (greater than) or =
aij are interpreted physically as follows. If bi is the available amount of resources i,
where aij is the amount of resource i that must be allocated to each unit of activity j,
the “worth” per unit of activity is equal to cj.

For instance: A milk distributor supplies milk in bottles to houses in three areas A, B, C in a
city. His delivery charge per bottle is 30 paisa in area A; 40 paisa in area B and 50 paisa in area
C. He has to spend on an average, 1 minute to supply one bottle in area A; 2 minutes per bottle
in area B and 3 minutes per bottle in area
C. He can spare only 2 hours 30 minutes for this milk distribution but not morethan one
hour 30 minutes for area A and B together. The maximum number of bottles he can deliver
is 120.

Find the number of bottles that he has to supply in each area so as to earn themaximum.
Construct a mathematical model.

Solution: The decision variables of the model can be defined as follows:

x1 : Number of bottles of milk which the distributor supplies in Area A. x2 : Number of bottles
of milk which the distributor supplies in Area B. x3 : Number ofbottles of milk which the
distributor supplies in Area C.

The Objectives:

Constraints:

Maximum number of milk bottles is 120 that is x1+x2+x3 ≤120.

Since he requires one minute per bottle in area A, 2 minutes per bottle in area Band 3 minutes
per bottle in area C

and he cannot spend more than 150 minutes for the work, 1.x1 + 2.x2 + 3.x3 ≤150Further, since

he cannot spend more than 90 minutes for areas A and B. 1.x1+2.x2

≤ 90.
Non-negativity x1 ≥ 0, x2 ≥ 0.

The problem can now be stated in the standard L.P. form asMaximise Z =

0.3x1 + 0.4x2 + 0.5x3 Subject to

x1 + x2 + x3 ≤ 120 , x1 + 2x2 + 3x3 ≤ 150 , x1 + 2x2 ≤ 90 , and x1 ≥0, x2 ≥ 0

Graphical method

If we have clear Objectives function as well as associated constraints by formulating the linear
programming model, our next step is to solve the problem and achieve the best possible optimal
solution. Graphical method is one of the methods for solving linear programming problems. It
includes the following steps:

aij are interpreted physically as follows. If bi is the available amount of resources i,

where aij is the amount of resource i that must be allocated to each unit of activity j,
the “worth” per unit of activity is equal to cj.

For instance: A milk distributor supplies milk in bottles to houses in three areas A, B, C in a
city. His delivery charge per bottle is 30 paisa in area A; 40 paisa in area B and 50 paisa in area
C. He has to spend on an average, 1 minute to supply one bottle in area A; 2 minutes per bottle
in area B and 3 minutes per bottle in area
C. He can spare only 2 hours 30 minutes for this milk distribution but not morethan one
hour 30 minutes for area A and B together. The maximum number of bottles he can deliver
is 120.

Find the number of bottles that he has to supply in each area so as to earn themaximum.
Construct a mathematical model.

Solution: The decision variables of the model can be defined as follows:

x1 : Number of bottles of milk which the distributor supplies in Area A. x2 : Number of bottles
of milk which the distributor supplies in Area B. x3 : Number ofbottles of milk which the
distributor supplies in Area C.

The Objectives:
Constraints:

Maximum number of milk bottles is 120 that is x1+x2+x3 ≤120.

Since he requires one minute per bottle in area A, 2 minutes per bottle in area Band 3 minutes
per bottle in area C

and he cannot spend more than 150 minutes for the work, 1.x1 + 2.x2 + 3.x3 ≤150Further, since

he cannot spend more than 90 minutes for areas A and B. 1.x1+2.x2

≤ 90.

Non-negativity x1 ≥ 0, x2 ≥ 0.

The problem can now be stated in the standard L.P. form asMaximise Z =

0.3x1 + 0.4x2 + 0.5x3 Subject to

x1 + x2 + x3 ≤ 120 , x1 + 2x2 + 3x3 ≤ 150 , x1 + 2x2 ≤ 90 , and x1 ≥0, x2 ≥ 0

Graphical method

If we have clear Objectives function as well as associated constraints by formulating the linear
programming model, our next step is to solve the problem and achieve the best possible optimal
solution. Graphical method is one of the methods for solving linear programming problems. It
includes the following steps:
Important Terms

• Solution: Value of decision variable of linear programming model are calledsolutions

• Basic solution: A basic solution of a system of m equations and n

variables (m < n) is a solution where at least n-m variables are zero

• Feasible region: Any non-negative value of (x1, x2) (i.e.: x1 ≥ 0, x2 ≥ 0) is a
feasible solution of the LPP if it satisfies all the constraints. The collection of all
feasible solutions is known as the feasible region.
• Feasible solution: The solution which satisfies all the constraints of linear
programming problems is called a
feasible solution.
• Basic feasible solution: A basic feasible solution of a system of m equations and n variables (m
< n) is a solution
where m variables are non-negative (≥0) and n-m variables are zero.
• Optimal feasible solution: Any feasible solution that optimises theObjectives
function is called an optimal feasible solution.
• Degenerate solution: Abasic solution is said to be degenerate if one or morebasic
variables become zero.
• Infeasible solution: The solution which do not satisfy all the
constraints of linear programming problem.
• Convex: A set X is convex if for any points x1, x2 in X, theline
segment joining these points is also in X. That is, x1, x2
X, 0 ≤ ≤ 1 x2 + (1- )x1 X
By convention, a set containing only a single point is also a convexset.
x2 + (1- )x1 (where 0 ≤ ≤ 1) is called a convex combination of x1and x2.
A point x of a convex set X is said to be an extreme point if there
does not exist x1, x2 X (x1 ≠ x2) such that x = x2 + (1- )x1 for
some with 0 < < 1
• Half plane: A linear inequality in two variables is known as a half plane. The
corresponding equality or the line is known as the boundaryof the half- plane.
• Convex polygon: A convex polygon is a convex set formed by the inter-section of
finite number of closed
half-planes.
• Redundant constraint: A redundant constraint is a constraint which does notaffect the
feasible region.
For instance: Solve the given LPP using the graphical method. Maximise Z = 50x 1 +80x2
Subject to the constraints

1.0x1 + 1.5x2 ≤ 600

0.2 x1 + 0.2x2 ≤ 100

0.0x1 + 0.1x2 ≤ 30

and x1 ≥ 0, x2 ≥ 0

Solution: The horizontal axis represents x1 and the vertical axis x2. Plot the constraintlines and
mark the feasibility

region as shown in the figure below:

Fig. 2.1 Feasible region of two dimensional LPP

Any point on the thick line or inside the shaded portion will satisfy all the restrictions of the
problem. The ABCDE is the feasibility region carried out by theconstraints operating on the
Objectives function. This depicts the limits within which the values of the decision variables are
permissible.

The inter-section points C and D can be solved by the linear equations x2 = 30; x1 + 1.5 x2 =
600, and 0.2x1 + 0.2x2 = 100 and x1 + 1.5x2 = 600 That is C (150, 300) and D (300, 180).

The next step is to maximise revenues subject to the above shaded area.

Table 2.1 Revenue at different corner points

Mixed Constraint LP Problem

For instance: By using graphical method, find the maximum and minimum valuesof the function
Z = x – 3y where x and y are non-negative and subject to the following conditions:
3x + 4y ≥19,
2x – y ≤ 9
2x + y ≤15
x–y≥–3
Solution: You can start by writing the constraints (conditions) to be satisfied by x,y in the
following standard (less
than or equal) form:
– 3x – 4y ≤ – 19 2x – y ≤ 92x
+ y ≤ 15
–x+y≤ 3
Consider the equations:
– 3x – 4y = – 19, 2x – y = 9, 2x + y = 15, – x + y = 3,

Both the above equations represent straight lines in the xy – plane. Denote thestraight lines
by L1, L2, L3 and L4 respectively.

You can see the lines L1, L2, L3 and L4 form a quadrilateral ABCD lying in the firstquadrant
of the xy – plane. You can see that the region bounded by this quadrilateral is convex.
Fig. 2.2 Feasible region of two dimensional LPP