Course Standardization

Management Science
Course Code: MGT 691

Revised
September 2016
Management Science MGMT 691

Text Book: An Introduction to Management Science, 13th Edition by David

R. Anderson, Dennis J. Sweeney Thomas A Williams, Jeffrey
D Camm & Kipp Martin, South-Western Cengage Learning.
{Soft copy is available at elibrary\gabbas\MS

Software: - POM-QM Ver 4

- MS Excel

On Line Quizzes: - First quiz – after three sessions

- Second quiz – after five sessions
- Third quiz – after nine sessions
- Fourth quiz – after twelve sessions

Examinations: All examinations will be conducted in lab on software (POM-

QM and Excel).

Sept 2016 1
Management Science MGMT 691

Week – 1

01.1 Introduction

Give a brief introduction of the subject

01.2 Review of Basic Math

01.2.1 Graph of a linear equation – downward sloping and upward sloping

lines, horizontal and vertical lines and line passing through origin.

01.2.2 Concept of =,  and  region

01.2.3 Point of intersection

01.3 Linear Programming

01.3.1 Introduction (Chapter 2)

01.3.2 Discuss a maximization example (an example given at section 2.1 is

advised).

01.3.3 Discuss two basic assumptions of LP:

i. All relationships are linear

ii. Non-negativity constraint

01.3.4 Problem should be solved manually by Graphic Method.

01.3.5 For optimal solution use Corner Point Method. Isoprofit Line Solution
Method is not advisable. However, it is an option for the faculty.

01.4 Discuss the concept of utilization and un-utilization (slack) of a

resource.

01.5 Exercise: All the questions & case studies given at the end of chapter-2

======= End of the session =======

Sept 2016 2
Management Science MGMT 691

Week – 2

02.1. Discuss a minimization example. Following example is advised:

Contents per unit Minimum

Nutrients
Food – I Food – II Requirements
Calcium 10 4 20
Protein 5 5 20
Vitamin 2 6 12
Price Rs.6/= Rs.10/= -

02.2 It should be solved as per the method discussed in first week.

02.3 Discuss the concept of target, achievement, and the surplus.

02.4 Introduce software POM-QM for Windows.

02.5 Discuss few more examples. Following examples are advised:

02.5.1 An example with “=” constraint

A homeowner wants to paints her house. The paint must possess a
viscosity of at least 200 centipoises. For the desired level of brilliance
and durability, there must be at least 14 grams of a chemical-A and 30
grams of chemical-B in each gallon of paint.
There are two kinds of paint (I and II) available to her. Type I cost $6
and II cost $4 per gallon. Per gallon specifications of paints are as
follows:
Paint-I Paint-II
Viscosity 400 100
Chemical-A 20 10
Chemical-B 20 60
The homeowner decides to blend I and II in order to meet the three
requirements at a minimum cost. How much of I and II should be used
in each gallon of the blend in order to minimize cost.
{Solution: Paint I = 0.4 gallons, Paint II = 0.6 gallons and Cost =
$4.80}

Sept 2016 3
Management Science MGMT 691

02.5.2 An example with multiple feasible regions

A business firm is planning to advertise a special anniversary sale on
radio and TV during a particular week. For that, a maximum budget of
$16,000 is approved. It is found that radio commercial cost $800 per
spot with a minimum contract of five spots. TV commercial cost
$4,000 per spot. Because of heavy demand, only four TV spots are
available in the designated week. A study reveals that a TV spot is six
times effective as a radio spot in reaching potential customers. How
should the firm allocate its advertising to attract the largest possible
number of potential customers?
{Solution: On Radio zero spots and on TV four spots and PC = 24
units}

02.6. Resolve students’ quarries.

======= End of the session =======

Sept 2016 4
Management Science MGMT 691

Week – 3
03.1 Further example:

A company has two grades of inspectors I and II, who are to be

assigned for a quality control inspection. It is required that at least
1,800 pieces be inspected per day (8 hours). Grade-I inspector can
check 25 pieces per hour with an accuracy of 98%. Grade-II can check
15 pieces per hour with an accuracy of 95%.

The hourly wage rate of Grade-I and II is $4 and $3 respectively. Each

time an error is made, the cost to the company is $2. The company has
available for the inspection job eight grade-I and ten grade-II
inspectors. The company wants to determine optimal number of
inspectors to be appointed for the job with objective to minimize total
cost.
{Solution: Number of Grade I Inspectors = 8 and Grade II inspectors
= 1.67 and minimum cost = Rs.380}

03.2 Discuss third basic assumption of linear programming – all variables

are continuous.

03.3 Various Situations:

03.3.1 Infinite solution.

03.3.2 Feasible region is only a “Point”

03.3.3 Lines do not intersect.

03.3.4 No feasible region.

03.3.5 Discuss few situations for positive slope.

i. A furniture manufacturer is producing dining sets. A set consist of

five chairs and a table. Develop an LP constraint.
C > = 5T

ii. A furniture manufacturer is producing dining sets. A set consist of

five chairs and a table. Historical data reveals that demand for extra
chairs is six per cent of the total chairs. Develop an LP constraint.
Sept 2016 5
Management Science MGMT 691

C > = 5T + 0.06(5T)

iii. A button manufacturer has one machine which can produce 65

buttons of type A or 45 buttons of type B in one minutes. Company
has two hours. Develop a constraint.

X/65 + Y/45 <= 120

03.3.6 Few more examples.

A company produces two types of shirts, half sleeves and full sleeves.
If all resources are diverted to ward half sleeves shirt, company can
produce 1200 shirts. It is further given that time required to produce
full sleeves shirt is twice of time required for half sleeves shirts.
Develop a constraint.

Assumption: Time required for a half sleeves shirt is one hour.

Consequences: i. We have 1200 hours.
ii. Time required for a full sleeves shirt is two hours.

X + 2Y <= 1200

03.4 Resolve students’ quarries.

03.5. A quiz is advised.

======= End of the session =======

Sept 2016 6
Management Science MGMT 691

Week – 4

04.1. Sensitivity Post Optimal Analysis (Chapter – 3)

04.1.1 Discuss only maximization problem with resource constraints (≤ type

constraints).

04.1.2 Sensitivity should include following:

i. Right Hand Side Sensitivity Analysis.

ii. Development of Priority List (concept of unit worth).
iii. Changes in coefficients of objective function.

04.1.3 To develop the concepts, a small problem may be solved manually,

however, ultimately it should be solved through QM.

04.2 Give examples with more than two variables.

04.3. Resolve students’ quarries.

======= End of the session =======

Sept 2016 7
Management Science MGMT 691

Week – 5

05.1. Linear Programming Applications with more than two variables

(Chapter 4)

Discuss following examples:

i. Media Selection (4.1)

ii. Marketing Research (4.1)
iii. Portfolio Selection (4.2)
iv. Financial Planning (4.2)
v. Ch04.ppt
vi. Handout LP (elib.:gabbas\MS)

05.2 Resolve students’ quarries.

05.3. A quiz is advised.

05.4. This completes the course for the Mid-Term Examination.

======= End of the session =======

Sept 2016 8
Management Science MGMT 691

Week – 6

06.1. Transportation Models (Chapter – 6)

Discuss the concept of transportation problem

06.2. Discuss example given at section 6.1 and solve it through transportation
module of QM.

06.3. Problem Variation - Unbalanced Models

06.3.1 Discuss the concept of unbalanced model.

06.3.2 Following examples are advised:

i. Demand < Supply

Problem:
D-1 D-2 D-3 D-4 D-5 Supply
S-1 41 32 23 24 31 5,250
S-2 28 15 34 19 25 7,800
S-3 41 40 43 38 28 13,400
Demand 1,000 1,200 10,350 4,500 7,900 24,950\26,450
Solution:
Optimal cost =
D-1 D-2 D-3 D-4 D-5 Dummy
$682850
S-1 5,250
S-2 1,000 1,200 1,100 4,500
S-3 4,000 7,900 1,500
Discuss the concept of dummy destination
ii. Demand > Supply

Sept 2016 9
Management Science MGMT 691

Problem
D-1 D-2 D-3 D-4 D-5 Supply
S-1 61 47 16 61 23 65.988
S-2 44 24 34 61 37 119.325
S-3 28 18 65 11 44 14.365
Demand 29.666 22.987 105.465 60.332 17.365 235.815\199.678
Solution:
Optimal cost =
D-1 D-2 D-3 D-4 D-5
$5655.17
S-1 65.990
S-2 29.670 22.990 39.480 9.830 17.370
S-3 14.370
Dummy 36.140
Discuss the concept of dummy source.

06.4 Discuss the copy/paste operation from Excel to QM and vice versa.
======= End of the session =======

Sept 2016 10
Management Science MGMT 691

Week – 7

07.1. Problem Variation or Restrictions

07.1.1 Discuss the following situations:

i. Route capacities or route minimums.

ii. Unacceptable routes.
iii. Priority customers – A specific quantity must be sent.

07.1.2 Because of the restrictions, transportation module of QM will not work

and we need to transform a transportation problem to a linear
programming model.

07.2. Transformation of Transportation Model to Linear Model.

07.2.1 Discuss the transformation of the transportation models to a linear

model and solving it through linear programing module of QM.

07.2.2 Example given at section 6.1 is advised.

07.2.3 Solve it through linear programming module of QM.

07.2.4 Output of LP module should be presented as per the following format:

Route Units Cost per Total

From To Shipped Unit Cost
. . . . .
. . . . .
. . . . .
Sum -

07.3. Another example.

07.3.1 Problem:

Cus-1 Cus-2 Cus-3 Cus-4 Supply

Plant - 1 11 10 25 45 12,500
Plant - 2 32 23 15 38 18,180
Plant - 3 26 14 20 34 4,350
Demand 2,700 22,500 8,900 4,980 39,080\35,030

Sept 2016 11
Management Science MGMT 691

It is further given that;

- 100 per cent demand of Customer–4 should be met as he is a priority
customer.
- Plant–1 must send at least 50% of its production to Customer–3.

07.3.2 Solution

07.3.2.1 Introduce dummy plant

1 2 3 4
Cus-1 Cus-2 Cus-3 Cus-4 Supply
1 Plant - 1 11 10 25 45 12,500
2 Plant - 2 32 23 15 38 18,180
3 Plant - 3 26 14 20 34 4,350
4 Dummy 0 0 0 0 4,050
Demand 2,700 22,500 8,900 4,980

07.3.2.2 Model: Min.: C = 11X11 + 10X12 + 25X13 + 45X14 + 32X21 +

23X22 + 15X23 + 38X24 + 26X31 + 14X32 +
20X33 + 34X34

s.t. X11 + X12 + X13 + X14 <= 12,500 ---------- 1

X21 + X22 + X23 + X24 <= 18,180 ---------- 2
X31 + X32 + X33 + X34 <= 4,350 ---------- 3
X41 + X42 + X43 + X44 <= 4,050 ---------- 4
X11 + X21 + X31 + X41 >= 2,700 ---------- 5
X12 + X22 + X32 + X42 >= 22,500 ---------- 6
X13 + X23 + X33 + X43 >= 8,900 ---------- 7
X14 + X24 + X34 + X44 >= 4,980 ---------- 8
X44 = 0 ---------- 9
X13 >= 6,250 ---------- 10

Sept 2016 12
Management Science MGMT 691

07.3.2.3 Results

Route Units Cost per Total

From To Shipped unit Cost
Plant 1 Customer - 1 0 11 0
Plant 1 Customer - 2 6,250 10 62,500
Plant 1 Customer - 3 6,250 25 156,250
Plant 1 Customer - 4 0 45 0
Plant 2 Customer - 1 0 32 0
Plant 2 Customer - 2 10,550 23 242,650
Plant 2 Customer - 3 2,650 15 39,750
Plant 2 Customer - 4 4,980 38 189,240
Plant 3 Customer - 1 0 26 0
Plant 3 Customer - 2 4,350 14 60,900
Plant 3 Customer - 3 0 20 0
Plant 3 Customer - 4 0 34 0
35,030 751,290

07.4. Derive a general linear programming model as given on page 262.

Given:

CUSTOMERS
SUPPLY
I II III … N
C11 C12 C13 C1n
I X11 X12 X13 … X1n S1
C21 C22 C23 C2n
II X21 X22 X23 … X2n S2
FACTORIES

C31 C32 C33 C3n

III X31 X32 X33 … X3n S3
…

Cm1 Cm2 Cm3 Cmn

M Xm1 Xm2 Xm3 … Xmn Sm
DEMAND D1 D2 D3 … Dn

Sept 2016 13
 Management Science MGMT 691

Derivation
𝑛
Supply Constraints
Supply from Fac I: 𝑋11 + 𝑋12 + ⋯ + 𝑋1𝑛 ≤ 𝑆1 ∑ 𝑋1𝑗 ≤ 𝑆1
𝑛
𝑗=1
∑ 𝑋𝑖𝑗 ≤ 𝑆𝑖
𝑛
𝑗=1
Supply from Fac II: 𝑋21 + 𝑋22 + ⋯ + 𝑋2𝑛 ≤ 𝑆2 ∑ 𝑋2𝑗 ≤ 𝑆2
𝑗=1 Where i = 1,2,3,…,m
.
.
.
𝑛

Supply from Fac M: 𝑋𝑚1 + 𝑋𝑚2 + ⋯ + 𝑋𝑚𝑛 ≤ 𝑆𝑚 ∑ 𝑋𝑚𝑗 ≤ 𝑆𝑚

𝑗=1
𝑚
Demand Constraints
Received by Cus I: 𝑋11 + 𝑋21 + ⋯ + 𝑋𝑚1 ≥ 𝐷1 ∑ 𝑋𝑖1 ≥ 𝐷1
𝑚
𝐼=1
∑ 𝑋𝑖𝑗 ≥ 𝐷𝑗
𝑚
𝑖=1
Received by Cus II: 𝑋12 + 𝑋22 + ⋯ + 𝑋𝑚2 ≥ 𝐷2 ∑ 𝑋𝑖2 ≥ 𝐷2
𝑖=1 Where j = 1,2,3,…,n
.
.
.
𝑚

Received by Cus N: 𝑋1𝑛 + 𝑋2𝑛 + ⋯ + 𝑋𝑚𝑛 ≥ 𝐷𝑛 ∑ 𝑋𝑖𝑚 ≥ 𝐷𝑚

𝑖=1
Objective function: Min.: C = c11X11 + c12X12 + ⋯ + cmnXmn
𝑚 𝑛

𝑀𝑖𝑛. : 𝐶 = ∑ ∑ 𝑐𝑖𝑗𝑋𝑖𝑗
𝑖=1 𝑗=1

======= End of the session =======

Sept 2016 14
Management Science MGMT 691

Week – 8

08.1. Transshipment Models (section 6.3)

Discuss the concept of transshipment.

08.2 Transshipment module is not available in QM, therefore, transshipment

problem will be solved through linear programming model.

08.3 Discuss the example given at section 6.3

08.4 Problem variations as discussed in transportation problem may also be

discussed here.

08.5. Output of LP module should be presented as per the formats given

below:

Route
From To Units Cost per
Total Cost
(intermediate) Shipped Unit
. . . . .
. . . . .
. . . . .
Sub - Total

Route
Units
From To Cost per Unit Total Cost
Shipped
(intermediate) (Final)
. . . . .
. . . . .
. . . . .
Sub – Total
Total Cost of Transshipment
======= End of the session =======

Sept 2016 15
Management Science MGMT 691

Week – 9

09.1 Assignment Models (Section 6.2)

09.1.1 Discuss the concept of Assignment model.

09.1.1 Discuss few scenarios where we can apply assignment model.

09.2 Solve the example given at section 6.2 through assignment module of
QM.

09.3 Discuss balance as well as unbalance models.

09.4 A quiz is advised.

09.5 Resolve students’ quarries.

======= End of the session =======

Sept 2016 16
Management Science MGMT 691

Week – 10

10.1. Review of Matrix algebra

10.1.1 Discuss matrix multiplication

10.1.2 Discuss matrix multiplication on Excel.

10.1.3 Solve following example on Excel:

0.2 0.3 0.5

Given: 𝐴0 = [10 20 18] and 𝑇 = [0.9 0.1 0.0]
0.7 0.2 0.1

Find A1 Where A1 = A0T

A2 Where A2 = A1T
.
.
.
A50 Where A50 = A49T

10.1.4 Solution: 𝐴1 = [32.60 8.60 6.80]

𝐴2 = [19.02 12.00 16.98]
.
.
.
𝐴50 = [23.85 10.90 13.25]

10.2. Markov Analysis (Chapter 16)

10.2.1 Discuss basic concept of Markov analysis.

10.2.2 Discuss the basic assumptions of Markov analysis

10.3. Steady State Probabilities

10.3.1 Discuss the concept of stead state probabilities

10.3.2 Discuss the example given at section 16.1.

10.4. A quiz is advised.

======= End of the session =======

Sept 2016 17
Management Science MGMT 691

Week – 11

11.1. Solve Markov problems through Excel.

11.2. Solve Markov problem through QM.

11.3. Discuss the calculations of steady state probabilities manually (only

two states) – See page 768 and 769.

Example:

[𝑝1 𝑝2] [0.92 0.08

] = [𝑝1 𝑝2]
0.12 0.88

𝑤ℎ𝑒𝑟𝑒 𝑝1&𝑝2 𝑎𝑟𝑒 𝑠𝑡𝑒𝑎𝑑𝑦 𝑠𝑡𝑎𝑡𝑒 𝑝𝑟𝑜𝑏.

0.92p1 + 0.12p2 = p1 ------------------ 1

0.08p1 + 0.88p2 = p2 ------------------ 2
p1 + p2 = 1 ------------------ 3

Solve eq – 1 and eq – 3 simultaneously (or eq – 2 and eq – 3)

Result: p1 = 0.6 and p2 = 0.4
Verify the answer through QM

Note: eq – 1 and eq – 2 are the same equations, therefore, we need

eq – 3 to solve the system.

11.4. Steady state probabilities with more than two states should be solved
through QM.

11.5. An application - following example is advised:

11.5.1 Problem:
We have three super stores in a region; Popular Store, Mart n Mart and
Excellent Mart. A market research (sponsored by Excellent Mart) was
conducted to study the brand switching behavior of the consumers.
Consultant gave the distribution of customers and a transition matrix
which is as follows:

Sept 2016 18
Management Science MGMT 691

# of Popular Mart n
Excellent
Customers Store Mart
Popular Store 5,500 0.94 0.03 0.03
Mart n Mart 7,800 0.05 0.93 0.02
Excellent 21,200 0.11 0.08 0.81
The General Manger, marketing of Excellent Mart have realized the
issue and planned a new marketing strategy. He estimate a new
transition matrix which is as follows:
Popular Store Mart n Mart Excellent
Popular Store 0.91 0.03 0.06
Mart n Mart 0.05 0.90 0.05
Excellent 0.04 0.06 0.90
The cost of new strategy is Rs.63/= million per month and expected
revenue per month is Rs.8,000/=.
Should we employ new strategy? Support your answer.
11.5.2 Solution:
11.5.2.1 Results with the initial transition matrix:
Popular Mart n
Excellent
Store Mart
Ending number (given initial) 17,940 12,420 4,140
Steady State probability 0.52 0.36 0.12

11.5.2.2 Results with the new transition matrix:

Popular Mart n
Excellent
Store Mart
Ending number (given initial) 11,445 10,792 12,263
Steady State probability 0.33 0.31 0.36
Estimated increase in number of customers due to new strategy would
be 8,123 (12,263 – 4,140).
Additional Revenue = 8,123 x Rs.8,000 = Rs.64,984,000
Cost of New Strategy = Rs.63,000,000/=
Net Benefit = Rs.1,984,000/=
11.5.2.3 Conclusion: Yes, we should go for new strategy.

Sept 2016 19
Management Science MGMT 691

11.6. Exercise: Problem number 1 – 9 given at the end of chapter 16

======= End of the session =======

Sept 2016 20
Management Science MGMT 691

Week – 12

12.1 Resolve students’ quarries.

12.2 Discuss the concept of absorbing state probabilities.

12.3 Discuss the example 16.2; Account Receivable Analysis. This should
be solved on QM. Manual solution is an option for the faculty.

12.4 Discuss few more examples.

12.5 Exercise: Problem number 10 – 14 and case problem given at the end
of chapter 16.
======= End of the session =======

Sept 2016 21
Management Science MGMT 691

Week – 13

13.1. Project Scheduling (PERT/CPM) – Chapter 9

Discuss the basic concept of project scheduling.

13.2. Program Evaluation and Review Technique (PERT) Model

13.2.1 Discuss basic concept of PERT.

13.2.2 Discuss a, m & b and mean and standard deviation of activity.

13.2.3 Example 9.2 is advised.

13.2.4 It must be solved on QM

13.3. Resolve students’ quarries.

======= End of the session =======

Sept 2016 22
Management Science MGMT 691

Week – 14

14 Statistical inference on project scheduling through QM.

14.1 Discuss mean, variance standard deviation and probability.

14.2 Discuss following example:

An average completion time of a project, based on PERT model, is

estimated at 36.82 months with the standard deviation of 2.58 months.

i. Determine the probability of completing the project within 40

months.
{Solution: 89.12 %}

ii. Determine the time by which the management can be 95 per cent
confident of completing the project?
{Solution: 41.06 months}

iii. What is the chance that project will take at least 35 months?
{Solution: 75.96%}
======= End of the session =======

Sept 2016 23
Management Science MGMT 691

Week – 15

15.1 Critical Path Method (CPM) Model

Discuss project scheduling with time – the concept of crashing

activities and relationship (inverse) between time and cost.

15.2 Solve the following example on QM

15.3 An example

Time (week) Cost Immediate

Activities
Normal Crash Normal Crash Predecessor
A 10 5 6,950 9,450
B 14 10 13,800 15,200 A
C 14 8 8,500 10,600 A, B
D 25 14 18,250 21,000 C
E 30 25 29,350 30,725 D
F 20 13 16,800 20,300 E
G 80 40 15,600 21,200 A

15.3 Discuss the concept of determining least increase in cost over the
normal cost in order to complete the project in the crash time.

15.4 Discuss the concept of time and budget.

15.5 Resolve students’ quarries and overall review of the course.

15.6 Sectional marks must be finalized before the end of last session.
======= End of the session =======

Sept 2016 24