MBA@IICMR – Pune 44

MBA SEM II

Paper No. 204

Subject: Decision Science

Subject Teacher: Prof. Vidhya Hittalmani

Notes Unit 2

Linear Programming

• Linear programming has nothing to do with computer programming.

• The use of the word “programming” here means “choosing a course of action.”

• Linear programming involves choosing a course of action when the mathematical

model of the problem contains only linear functions.

Components of a LP Formulation
1) Decision Variables: represent unknown quantities. The solution for these terms are what we
would like to optimize.
2) Objective Function: states the goal of the decision-maker. There are two types of objectives:
 Maximization, or
 Minimization
3) Constraints: put limitations on the possible solutions of the problem. The availability of
scarce resources may be expressed as equations or inequalities which rule out certain
combinations of variable values as feasible solutions.
4) Non-negativity Conditions: are special constraints which require all variables to be either zero
or positive.
Concepts in LPP
 The maximization or minimization of some quantity is the objective in all linear
programming problems.
  All LP problems have constraints that limit the degree to which the objective can be
pursued.
 A feasible solution satisfies all the problem's constraints.
 An optimal solution is a feasible solution that results in the largest possible objective
function value when maximizing (or smallest when minimizing).
 A graphical solution method can be used to solve a linear program with two variables.
 If both the objective function and the constraints are linear, the problem is referred to as a
linear programming problem.
 Linear functions are functions in which each variable appears in a separate term raised to
the first power and is multiplied by a constant (which could be 0).
 Linear constraints are linear functions that are restricted to be "less than or equal to",
"equal to", or "greater than or equal to" a constant.

Guidelines for LPP Formulation

 Understand the problem thoroughly.
 Define the decision variables.
 Describe the objective.
 Describe each constraint.
 Write the objective in terms of the decision variables.
 Write the constraints in terms of the decision variables.
 Formulate the LPP with objective function and the constraints

Slack and Surplus Variables

 A linear program in which all the variables are non-negative and all the constraints are
equalities is said to be in standard form.
 Standard form is attained by adding slack variables to "less than or equal to" constraints,
and by subtracting surplus variables from "greater than or equal to" constraints.
 Slack and surplus variables represent the difference between the left and right sides of the
constraints.
 Slack and surplus variables have objective function coefficients equal to 0.
 Special Cases in LPP

1) Infeasibility in LPP
• No solution to the LP problem satisfies all the constraints, including the non-
negativity conditions.
• Graphically, this means a feasible region does not exist.
• Causes include:
• A formulation error has been made.
• Management’s expectations are too high.
• Too many restrictions have been placed on the problem (i.e. the problem is
over-constrained).

2) Unbounded in LPP
• The solution to a maximization LP problem is unbounded if the value of the
solution may be made indefinitely large without violating any of the constraints.
• For real problems, this is the result of improper formulation. (Quite likely, a
constraint has been inadvertently omitted.)

Simulation
“Simulation is a technique of solving decision making problem by designing constructing and
manipulating a model of real system”
“A Simulation model is the one which depicts working of a large scale system of men, machines,
material and information operating over a period of time in a simulated environment of the actual
real world conditions”
- D. G. Malcolm
Advantages
•Useful for analysing problems where conventional quantitative analytical models fail or cannot
be used easily
•Easier to use, flexible and less expensive.
•Risk of interference with real world systems gets avoided, as this model is used for analysis
•Can be used to study the interactive effect of individual co

Disadvantages
•It is just descriptive in nature
•Does not give optimal solutions like other quantitative techniques
•Time consuming process
•Developing a model is complicated
•Not precise
•Only uncertain situations can be evaluated

Simulation Process
•Define the problem or system to be simulated
•Formulate the model
•Test the model, compare its behavior with the behavior of actual problem
•Identify and collect the data needed to test the model
•Run the simulation
•Analyze the results of the simulation and if required change the solution to be evaluated
• Return the simulation for new solution
•Validate the simulation

Monte-Carlo simulation: Following are the steps

1. Define th problem or system to be simulated
2. Formulate the model
3. Test the model , compare its behaviour with the behaviour of actual problem.
4. Identify and collect the data needed to test the model
5. Run the simulation.
6. Analyze the results of the simulation and if required change the solution to be
evaluated.
7. Rerun the simulation for new solution
8. Validate the simulation.