Hepm3203 Operations Research

JOMO KENYATTA UNIVERSITY
OF
AGRICULTURE & TECHNOLOGY
SCHOOL OF OPEN, DISTANCE &

eLEARNING
IN COLLABORATION WITH
DEPARTMENT OF EPD
HEPM 3203 OPERATIONS RESEARCH
P.O. Box 62000, 00200

Nairobi, Kenya
HEPM 3203 OPERATIONS RESEARCH
Course Description
History and nature of operations research. Linear Programming; simplex method,solution
and its interpretation. application areas. Transportation model; using north-west
method, least cost method, Vogel approximation method (VAM). Assignment model;
formulation solution. Inventory models: periodic model, quantity models, basic
economic order quantity, discounts, stock-out, buffer stock, activity based costing
analysis, Pareto analysis, just in time (JIT) systems. Network model; deterministic,
critical path analysis/ critical path method, probabilistic model, programme evalu-
ation review technique, crashing, resource levelling. queuing model, single server
and multi-server systems, Simulation: Introduction and application in queuing and
inventory models. Game theory; pure and mixed strategies, SADDLE, dominance,
graphical solution, solution by algebraic and linear programming method.
Prerequisite:
Course Aims
This course is aimed at providing students with concepts of Operations Research
and their applications in business and other related areas.
Course Objectives
At the end of this course the student should be able to:
1. Understand operations research techniques.
2. Solve linear programming and optimization problems.
3. Use operations research techniques to solve practical problems in business

and management.
Instruction Methodology
Lectures, Case studies, Buzz (Group discussions) and Seminars.
ii
Course Text Books
1. Hamdy A. Taha, A.M. Natarajan, P. Balsubramanie and A. Tamilarasi (2008).
Operations Research (An Introduction)
2. Terry Lucey. Quantitative Techniques, 6th edition, (2002).
3. N.K Tiwari, Shishir K. Shandilya Operations Research.
Course Journals
Assessment Information
The module will be assessed as follows;
• 20% of marks from two (2) assignments
• 20% of marks from one written CAT to be administered at JKUAT main cam-
pus or one of the approved centres
• 60% of marks from written Examination to be administered at JKUAT main

campus or one of the approved centres
iii
Contents
1 Introduction 1
1.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 History of operations Research . . . . . . . . . . . . . . . . . . . . 2
1.3 The Nature of Operations Research . . . . . . . . . . . . . . . . . . 3
1.4 Operations Research Models . . . . . . . . . . . . . . . . . . . . . 5
1.5 Solving the OR Model . . . . . . . . . . . . . . . . . . . . . . . . 7
2 Linear Programming 10
2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.2 Basic Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.3 Mathematical Formulation of a LP model . . . . . . . . . . . . . . 11
2.4 Resource Allocation Models . . . . . . . . . . . . . . . . . . . . . 13
2.4.1 Maximization problems . . . . . . . . . . . . . . . . . . . . 13
3 Linear Programming (cont’d) 18

3.1 Minimization problems . . . . . . . . . . . . . . . . . . . . . . . . 18
3.2 Solution Methods for L.P. Problems . . . . . . . . . . . . . . . . . 20
3.2.1 Terminology for Solutions of the Model . . . . . . . . . . . 21
4 The Concepts of Inventory and Inventory Management 23

4.1 What is inventory? . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.1.1 Types of Inventory . . . . . . . . . . . . . . . . . . . . . . 23
4.1.2 What inventory management entails: . . . . . . . . . . . . . 24
4.2 Importance of Inventory Management . . . . . . . . . . . . . . . . 25
4.2.1 Internal customer expectations of inventory by functionality. 25
4.3 Need for Inventory Reasons/Need for inventory. . . . . . . . . . . . 26
4.4 Scope of Inventory Management . . . . . . . . . . . . . . . . . . . 27
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CONTENTS CONTENTS
4.5 Inventory Costs These can broadly be categorized into 4 groups. . . 29
5 Transportation Models 33
5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.2 Transportation Model . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.2.1 Transportation Problem as a Linear Programming Model . . 35
5.2.2 Formulation of a Transport Problem . . . . . . . . . . . . . 35
5.2.3 Finding an initial basic feasible solution . . . . . . . . . . . 36
6 Assignment Problem 45
6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.1.1 Mathematical Formulation of the Problem . . . . . . . . . . 46
6.1.2 Solution of an Assignment Problem . . . . . . . . . . . . . 47
7 Network Model 52
7.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.1.1 Concept of Network . . . . . . . . . . . . . . . . . . . . . 54
7.1.2 Rules for Construction of Network . . . . . . . . . . . . . . 56
7.2 Critical Path Method (CPM) . . . . . . . . . . . . . . . . . . . . . 56
7.3 Pert Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.4 Resource Scheduling in a Network . . . . . . . . . . . . . . . . . . 60
8 Network Optimization Models 63

8.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.2 Terminologies used in Networks . . . . . . . . . . . . . . . . . . . 64
8.3 The Shortest Path Problem . . . . . . . . . . . . . . . . . . . . . . 66
8.4 The Minimum Spanning Tree Problem . . . . . . . . . . . . . . . . 66
8.5 The Maximum Flow Problem . . . . . . . . . . . . . . . . . . . . . 67
8.6 The Minimum Cost Flow Problem . . . . . . . . . . . . . . . . . . 68
8.7 PERT/CPM Models for Project Management . . . . . . . . . . . . . 70
8.7.1 Basic difference between PERT and CPM . . . . . . . . . . 70
8.7.2 PERT/CPM Network Components And Precedence Rela-
tionship . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
8.7.3 Critical Path Calculations . . . . . . . . . . . . . . . . . . . 72
8.7.4 Determination of the Critical Path . . . . . . . . . . . . . . 73
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CONTENTS CONTENTS
8.7.5 Project Management PERT . . . . . . . . . . . . . . . . . . 75
9 Simulation 78
9.1 Game Theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
9.2 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
10 Waiting Line Theory or Queuing Model 81

10.1 Queuing system or process . . . . . . . . . . . . . . . . . . . . . . 82
10.1.1 Input Process . . . . . . . . . . . . . . . . . . . . . . . . . 82
10.1.2 Service Mechanism or Service Facility . . . . . . . . . . . . 84
10.2 Queuing problems . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
10.3 Symbols used in queuing models . . . . . . . . . . . . . . . . . . . 86
10.3.1 Notations . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Solutions to Exercises . . . . . . . . . . . . . . . . . . . . . . . . . 89
vi
HEPM3203 OPERATIONS RESEARCH
LESSON 1
Introduction
1.1. Introduction
Operational Research is an interdisciplinary branch of applied mathematics and
formal science that uses methods such as mathematical modelling, statistics, and
algorithms to arrive at optimal or near optimal solutions to complex problems. It
is typically concerned with optimizing the maxima (profit, assembly line perfor-
mance, crop yield, bandwidth, etc) or minima (loss, risk, etc.) of some objective
function. Operations research helps management achieve its goals using scientific
methods.
According to the Operations Society of Great Britain, Operations Research is the
application of the methods of science to complex problems arising in the direc-
tion and management of large systems of men, materials and money in industry,
business, Government and defense. The distinctive approach is to develop a sci-
entific model of the system, incorporating measurements of factors such as chance
and risk, with which to predict and compare the outcome of alternative decisions,
strategies or controls. The purpose is to help management to determine its policy
and actions scientifically.
It provides a facility to a decision maker to evaluate the given problems, identify
alternative solutions, recognize the constraints and then assist the decision maker to
have the best possible solution available, which is known as the optimal solution.
It tries to avoid the dangers from taking decisions merely by guessing or by us-
ing thumb rules. Management is a multidimensional and dynamic concept. It is
multidimensional in the sense that management problems and their solutions have
consequences in several dimensions, such as human, economic, social and political
fields. Also, the manager operates his system in an environment, which will never
remain static, hence the dynamic nature. Hence any manager, while making deci-
sions, must consider all aspects in addition to economic aspect, so that his solution
should be useful in all aspects.
The general approach is to analyse the problem in economic terms and then im-
plement the solution if it is not aggressive or does not impact negatively on other
aspects like humanity, social and political factors.
In summary we can say operations research has the following features:-
1
• Operations Research uses Scientific Methods for making decisions.
• It is interdisciplinary approach for solving problems and it uses the knowl-

edge and experience of experts in various fields.
• While analysing the problems all aspects are considered and examined and
analysed scientifically for finding the optimal solution for the problem on
hand.
• As operations research has scientific approach, it improves the quality of an-

swers to the problems.
• Operations research provides a scientific base for decision-making and pro-

vides scientific substitute for judgment and intuition.
In other words, operations research can be said to have the following characteristics
1. Operations Research is an interdisciplinary team approach.
2. Operations Research increases the creative ability of the decision maker.
3. Operations Research is a systems approach.
1.2. History of operations Research

Since the advent of the industrial revolution, the world has seen a remarkable
growth in the size and complexity of organizations. The artisans small shops of
an earlier era have evolved into the billion-dollar corporations of today. An integral
part of this revolutionary change has been a tremendous increase in the division of
labor and segmentation of management responsibilities in these organizations. The
results have been spectacular. However, along with its blessings, this increasing
specialization has created new problems, problems that are still occurring in many
organizations. One problem is a tendency for the many components of an organi-
zation to grow into relatively autonomous empires with their own goals and value
systems, thereby losing sight of how their activities and objectives mesh with those
of the overall organization. What is best for one component frequently is detrimen-
tal to another, so the components may end up working at cross purposes.
A related problem is that as the complexity and specialization in an organization
increase, it becomes more and more difficult to allocate the available resources to
2
the various activities in a way that is most effective for the organization as a whole.
These kinds of problems and the need to find a better way to solve them provided
the environment for the emergence of operations research (commonly referred to
as OR). The roots of OR can be traced back many decades, when early attempts
were made to use a scientific approach in the management of organizations. How-
ever, the beginning of the activity called operations research has generally been
attributed to the military services early in World War II. Because of the war effort,
there was an urgent need to allocate scarce resources to the various military opera-
tions and to the activities within each operation in an effective manner. Therefore,
the British and then the U.S. military management called upon a large number of
scientists to apply a scientific approach to dealing with this and other strategic and
tactical problems. In effect, they were asked to do research on (military) operations.
These teams of scientists were the first OR teams. By developing effective meth-
ods of using the new tool of radar, these teams were instrumental in winning the
Air Battle of Britain. Through their research on how to better manage convoy and
antisubmarine operations, they also played a major role in winning the Battle of the
North Atlantic. Similar efforts assisted the Island Campaign in the Pacific. When
the war ended, the success of OR in the war effort spurred interest in applying OR
outside the military as well. As the industrial boom following the war was running
its course, the problems caused by the increasing complexity and specialization in
organizations were again coming to the forefront. It was becoming apparent to a
growing number of people, including business consultants who had served on or
with the OR teams during the war, that these were basically the same problems that
had been faced by the military but in a different context. By the early 1950s, these
individuals had introduced the use of OR to a variety of organizations in business,
industry, and government. The rapid spread of OR soon followed.
1.3. The Nature of Operations Research

As its name implies, operations research involves research on operations. Thus,
operations research is applied to problems that concern how to conduct and coor-
dinate the operations (i.e., the activities) within an organization. The nature of the
organization is essentially immaterial, and, in fact, OR has been applied extensively
in such diverse areas as manufacturing, transportation, construction, telecommuni-
cations, financial planning, health care, the military, and public services, to name
3
just a few. Therefore, the breadth of application is unusually wide.

The research part of the name means that operations research uses an approach
that resembles the way research is conducted in established scientific fields. To
a considerable extent, the scientific method is used to investigate the problem of
concern. (In fact, the term management science sometimes is used as a synonym
for operations research.) In particular, the process begins by carefully observing
and formulating the problem, including gathering all relevant data.
The next step is to construct a scientific (typically mathematical) model that at-
tempts to abstract the essence of the real problem. It is then hypothesized that this
model is a sufficiently precise representation of the essential features of the situa-
tion that the conclusions (solutions) obtained from the model are also valid for the
real problem.
Next, suitable experiments are conducted to test this hypothesis, modify it as needed,
and eventually verify some form of the hypothesis. (This step is frequently referred
to as model validation.) Thus, in a certain sense, operations research involves cre-
ative scientific research into the fundamental properties of operations. However,
there is more to it than this. Specifically, OR is also concerned with the practical
management of the organization. Therefore, to be successful, OR must also pro-
vide positive, understandable conclusions to the decision maker(s) when they are
needed.
One way of summarizing the usual (overlapping) phases of an OR study is the
following:
1. Define the problem of interest and gather relevant data.
2. Formulate a mathematical model to represent the problem.
3. Develop a computer-based procedure for deriving solutions to the problem

from the model.
4. Test the model and refine it as needed.
5. Prepare for the ongoing application of the model as prescribed by manage-

ment.
6. Implement.
4
1.4. Operations Research Models

“The objective of Operations Research is to provide a scientific basis to the decision
maker for solving the problems involving the interaction of various components
of an organization by employing a team of scientists from various disciplines, all
working together towards finding a solution which is in the best interest of the orga-
nization as a whole. The best solution thus obtained is known as optimal decision".
Imagine that you have a 5-week business commitment between Nairobi (NBI) and
Kisumu (KSM). You y out of Nairobi on Mondays and return on Wednesdays. A
regular round-trip ticket costs shs.8,000, but a 20% discount is granted if the dates
on the ticket span a weekend. A one-way ticket in either direction costs 75% of the
regular price. How should you buy the tickets for the 5-week period?
Consider this situation as a decision-making problem. Solving this requires the
answer to the following three questions:
1. What are the decision alternatives?
2. Under what restrictions is the decision made?
3. What is the appropriate objective criterion for evaluating the alternatives?
These three alternatives can be considered:
1. Buy five regular NBI-KSM-NBI for departure on Monday and return on

Wednesday of the same week.
2. Buy one NBI-KSM, four KSM-NBI-KSM that span weekends and one KSM-
NBI.
3. Buy one NBI-KSM-NBI to cover Monday of the first week and Wednesday
of the last week and four KSM-NBI-KSM to cover the remaining legs. All
tickets in this alternative span at least one weekend.
The restriction on these options is that you should be able to leave NBI on Monday
and return on Wednesday of the same week.
An obvious objective criterion for evaluating the proposed alternative is the price of
the tickets. The alternative that yields the smallest cost would be the best. Specifi-
cally, we have
5
• Alternative 1 cost = 5 x 8,000 = kes 40,000
• Alternative 2 cost = (0:75 x 2 x 8,000) + (4 x 0.8 x 8,000) = kes 37,600
• Alternative 3 cost = 5 x 0.8 x 8,000 = kes 32,000
Option 3 looks like the best choice in this case.

Although this example illustrates the three main components of an OR model, situ-
ations differ in the details of how each component is developed and constructed.
Consider forming a maximum-area rectangle out of a piece of wire of length L
inches. Contrary to the example above, the number of alternatives are infinite (the
length and width of the rectangle can assume an infinite set of values). The alter-
natives of this problem can be expressed as continuous (algebraic) variables. Let l=
length and w= width of the rectangle in inches.
The restrictions in the situation can be expressed verbally as:
1. Length + width of rectangle= Half the length of the wire.
2. Length and width cannot be negative.
Algebraically, these restrictions can be translated as;
2(l + w) = L
l≥0 , w≥0
Finally, the objective of the problem is maximization of the area of the rectangle. If
we let z to be the area of the rectangle, then, the complete model becomes
maximize z = lw
subject to
2(l + w) = L
l, w ≥ 0
Based on these two examples, the general OR model can be given as
Maximize or minimize an Objective Function
subject to
Constraints
6
A solution of the model is feasible if it satisfies all the constraints, and optimal if,
in addition yo being feasible, it yields the best (maximum or minimum) value of the
objective function.
Problem: identify a fourth feasible alternative for the tickets problem.
1.5. Solving the OR Model

Generally, the type and complexity of the mathematical model dictates the nature
of the solution method. The following are some of the tools that can be used.
1. Linear Programming Model - This model is used for resource allocation

when the resources are limited and there are number of competing candidates
for the use of resources. The model may be used to maximize the returns or
minimize the costs. Consider the following situations:
• A manufacturing company wants to use their resources optimally and

produce different quantities of each type of product, which yield dif-
ferent returns, so as to maximize the returns. This is a maximization
problem.
• A company manufacturing different types of alloys requires to purchase
the three basic materials while at the same time maintaining the crucial
percentage of basic materials in each alloy. This is to be done at the
minimum cost. This is a minimization problem Both of these first two
are resource allocation models.
• Number of factories are manufacturing the same commodities in differ-
ent capacities and the commodity is sent to various markets to meet the
demands of the consumers. When the cost of transportation is known,
linear programming is used to formulate a program to distribute the
commodity from factories to markets at the least possible cost. The
model used is transportation model.
• When a company has number of orders on its schedule, which are to
be processed on the same machines and the processing time, is known,
then we have to allocate the jobs or orders to the machines, so as to
complete all the jobs in minimum time. This we can also solve using
the Assignment model.
7
All the above-discussed models are Linear Programming Models.
2. Sequencing Model-When a manufacturing rm has some job orders, which

can be processed on two or more machines and the processing times of each
job on each machine is known, then the problem of processing in a sequence
to minimize the cost or time is known as Sequencing model.
3. Waiting Line Model or Queuing Model-A model used for solving a prob-
lem where certain service facilities have to provide service to its customers,
so as to avoid lengthy waiting line or queue, so that customers will get satis-
faction from effective service and idle time of service facilities are minimized
is waiting line model or queuing model.
4. Replacement Model-Any capital item, which is continuously used for pro-

viding service or for producing the product is subjected to wear and tear due
to usage, and its efficiency goes on reducing. This reduction in efficiency can
be predicted by the increasing number of breakdowns or reduced productiv-
ity. The worn out parts or components are to be replaced to bring the machine
back to work through maintenance. A time is reached when even the main-
tenance cost becomes too high and the manager feels replacement of the old
machine by new one is the best thing to do. These type of problems and can
be solved using replacement models.
5. Inventory Models-Any manufacturing rm has to maintain stock of materials

for its use. This stock of materials, which are maintained in stores, is known
as inventory. Inventory is one form of capital or money. The company has
to maintain inventory at optimal cost. There are different types of inventory
problems, depending the availability and demand pattern of the materials.
These can be solved by the application of inventory models.
8
Revision Questions
Example . .......
Solution:
for revision
E XERCISE 1. Explain ...
9
LESSON 2
Linear Programming
2.1. Introduction
A model, which is used for optimum allocation of scarce or limited resources to
competing products or activities under such assumptions as certainty, linearity, fixed
technology, and constant profit per unit, is a linear programming model.
Linear Programming is one of the most versatile, powerful and useful techniques
for making managerial decisions
Linear programming (LP) is a technique for optimization of a linear objective func-
tion, subject to linear equality and linear inequality constraints. Informally, linear
programming determines the way to achieve the best outcome (such as maximum
profit or lowest cost) in a given mathematical model and given some list of require-
ments represented as linear equations.
It is a mathematical technique concerned with the allocation of scarce resources.
It is a procedure that optimizes the value of some objective function (maximizing
profits or minimizing costs) when the factors involved (e.g. labour or machine
hours) are subject to some constraints (e.g. only 1,000 labour hours available in a
week).
Problems to be solved must conform to the following:
1. The problem must be capable of being stated in numeric terms.
2. All factors involved in the problem must have a linear relationship.
3. The problem must permit a choice or choices between alternative courses of

action.
4. There must be one or more restrictions in the factors involved.
The programming part of a LP refers to the solution method.
2.2. Basic Assumptions

Below are some of the important assumptions made when formulating a linear pro-
gramming model:
10
1. The decision maker here is completely certain (i.e., deterministic conditions)

regarding all aspects of the situation, such as availability of resources, profit
contributions, technology, courses of action and their consequences etc.
2. The relationship between variables in the problem and the resources available
is linear. Here the term linearity implies proportionality and additivity. This
assumption is very useful as it simplifies modelling of the problem.
3. We assume here fixed technology i.e., production requirements are fixed dur-
ing the planning period and don’t change in the period.
4. The profit contribution of a product remains constant, irrespective of level of

production and sales.
5. The decision variables are continuous meaning companies can manufacture

products in fractional units e.g. 2.5 vehicles, 3.2 barrels of oil etc. This is
referred to as the assumption of perfect divisibility.
6. Only one decision is required for the planning period. This condition shows
that the linear programming model is a static model, implying that the linear
programming problem is a single stage decision problem. (Note: Dynamic
Programming problem is a multistage decision problem).
7. All variables are restricted to non-negative values (i.e., their numerical value
will be 0).
2.3. Mathematical Formulation of a LP model

The following steps are followed:
1. Study the given situation, find the key decision to be made. Hence, identify
the decision variables(issues or factors in the problem whose values are to be
determined) in the problem, specifying their units of measurement.
2. Formulate the objective function to be optimized and express it as a linear

function of the decision variables (z=decision variables multiplied by their
cost or profit contributions).
11
3. Formulate the constraints of the problem (these are imposed by resource

availability) and express them as linear equalities or inequalities in terms of
the decision variables. These are restrictions on the decision variables which
arise due to limited resources.
4. Add non-negativity restrictions.
The objective function, the set of constraints and the non-negativity restrictions
together form the LP model.
In particular, this model is seeks to select the values for x1 , x2 , . . . , xn so as to
Optimize z = c1 x1 + c2 x2 + · · · + cn xn
Subject to a11 x1 + a12 x2 + · · · + a1n xn (≤, =, ≥)b1
a21 x1 + a22 x2 + · · · + a2n xn (≤, =, ≥)b2
..
.
am x1 + am x2 + · · · + amn xn (≤, =, ≥)b2m (2.1)
and x1 , x2 , . . . , xn ≥ 0
This can then be summarized as
n
Optimize z = ∑ c jx j
j=1
Subject to ∑nj=1 ai j x j (≤, =, ≥)b1 , i = 1, 2, . . . , m
and xn ≥ 0, j = 1, 2, . . . , n
or as in the table below
12
Table 2.1:
where x j s are the decision variables and ai j s, bi s and c j s are constants.
2.4. Resource Allocation Models

2.4.1. Maximization problems
Here we mainly seek to maximize profits, revenue or output from a production
process.
Example . (Marangi Paint Problem). The Marangi Paint company produces
both interior and exterior paints from two raw materials, M1 and M2. The following
table provides the basic data for the problem:
Table 2.2:
A market survey indicates that, the daily demand for interior paint cannot exceed
that of exterior paint by more than 1 ton. Also the maximum daily demand for
interior paint is 2 tons. Marangi paint company wants to determine the optimum
(best) product mix for interior and exterior paints that maximizes the daily prots.
13
Solution:
Step 1. Identify the decision variables. These are the amounts of exterior and
interior paints that need to be produced. Let x1 and x2 represent the tons of exterior
and interior paints to be produced daily respectively.
Step 2. Formulate the objective function. The company wants to maximize prof-
its. Letting z represent the total daily profit (in thousands of dollars), the objective
function can be given as,
maximize z = 5x1 + 4x2
Step 3. Formulate the constraints that restrict raw material usage and express the
demand. For raw material usage we have:-
(usage of raw materials by both paints)≤(maximum raw material availability)
From the data we have,
6x1 + 4x2 ≤ 24 Raw material M1

x1 + 2x2 ≤ 6 Raw material M2
For the demand restrictions we have the first one saying that the difference between
the daily production of interior and exterior paints, x2 − x1 , does not exceed 1 tonne.
This translate to x2 − x1 ≤ 1. The second restriction stipulates that the maximum
daily demand for interior paint is limited to two tons, which translates to x2 ≤ 2.
Step 4. Add the non-negativity constraints.
Therefore the complete Marangi Model is:
subject to
14
6x1 + 4x2 ≤ 24
x1 + 2x2 ≤ 6x
−x1 + x2 ≤ 1
x2 ≤ 2
and
x1 , x2 ≥ 0
Example . (KICOMI Garment Problem). The KICOMI retail store stocks two
types of shirts A and B, These are packed in attractive cardboard boxes. In one
week the store can sell a maximum of 400 shirts of type A and a maximum of 300
shirts of type B. The storage capacity, however, is limited to a maximum of 600 of
both types combined.
Type A shirt fetches a profit of Kshs. 20/- per unit and type B a profit of Kshs. 50/-
per unit. The store wants to establish how many of each type of shirt they need to
stock per week in order to maximize their total profit. Formulate a mathematical
model for this problem.
Solution:
Step 1. We require the decision variables with regard to the quantities we need to
stock weekly. Let x1 and x2 represent the numbers of shirts A and B to be stocked
weekly respectively.
Step 2. The store is seeking to maximize weekly profits. The profit contributions
for types A and B are 20/- and 50/- per unit respectively, so if z represents the
weekly profits for KICOMI store, then the objective function becomes.
z = 20x1 + 50x2
Step 3. We are limited by the sales and storage capacities so we consider the max-
imum sales and the maximum storage. The sales and storage constraints are given
as
15
x1 ≤ 400
x2 ≤ 300
x1 + x2 ≤ 600
Step 4. Finally
x1 , x2 ≥ 0
The complete model is therefore given as

Subject to x1 ≤ 400
x2 ≤ 300
x1 + x2 ≤ 600
and x1 , x2 ≥ 0
16
Revision Questions
Example . Discuss discrete event simulation and its application

Solution:
for revision
E XERCISE 2. Explain the components in discrete-event simulation models
17
LESSON 3
Linear Programming (cont’d)
3.1. Minimization problems

For minimization we are interested in minimizing costs be they production, storage
etc as well as time spent on production or deliveries and so on.
Example . (Vitamin Deficiency Problem). A patient consults a doctor to check
on his ill health. The Doctor finds him to be having deficiency of two vitamins,
A and D. The patient is advised to consume vitamins A and D regularly for some
time so as to regain his health. The doctor prescribes tonics I and II, both of which
contain vitamins A, and D in certain proportions. He is also advised to consume at
least 40 units of vitamin A and 50 units of vitamin D Daily. The costs of tonics I
and II and the proportions of vitamins A and D that they contain are given in the
table below. Formulate the linear programming model that minimizes the cost of
tonics.
Table 3.1:
Solution:
Step 1. Let x1 and x2 represent the quantities of Tonic I and II that can be purchased
Step 2. Let the total cost of purchasing these tonics be z. The objective function
considering the costs becomes
We are limited by the proportion of each vitamin in the tonics and their minimum
daily requirements. The constraints will then be given by
18
2x1 + 4x2 40 Vitamin A constraint

3x1 + 2x2 50 Vitamin D constraint
Finally
x1 , x2 ≥ 0
In standard form, we have

Subject to 2x1 + 4x2 ≥ 40
3x1 + 2x2 ≥ 50
and x1 , x2 ≥ 0
Example . (Diet Problem). Polly wonders how much money she must spend on
food in order to get all the energy (2,000 kcal), protein (55 g), and calcium (800
mg) that she needs every day. She chooses six foods that seem to be cheap sources
of the nutrients and collects her data in the following table of nutritive value per
serving. She also decides to impose servings-per-day limits on all foods. Present
this problem in standard form.
Table 3.2:
Solution:
19
To design the most economical menu, she speculates about some as yet unspecified
menu, consisting of x1 servings of oatmeal, x2 servings of chicken, and so on. She
wants to find numbers x1 , x2 , . . . , x6 that satisfy her self-imposed servings-per-day
limits, meet the requirements for energy, protein, calcium, and yet minimize the
cost. This diet problem can be nicely formulated as follows.
minimize z = 3x1 + 24x2 + 13x3 + 9x4 + 20x5 + 19x6

Subject to 0 ≤ x1 ≤ 4
0 ≤ x2 ≤ 3
0 ≤ x3 ≤ 2
0 ≤ x4 ≤ 8
0 ≤ x5 ≤ 2
0 ≤ x6 ≤ 2
and110x1 + 205x2 + 160x3 + 160x4 + 420x5 + 260x6 ≥ 2000

4x1 + 32x2 + 13x3 + 8x4 + 4x5 + 14x6 ≥ 55
2x1 + 12x2 + 54x3 + 285x4 + 22x5 + 80x6 ≥ 800
and x1 , x2 , . . . , x6 ≥ 0
3.2. Solution Methods for L.P. Problems

Linear Programming, is a method of solving the types of problems in which two
or more candidates or activities compete to utilize the available limited resources,
with a view of optimizing the objective function of the problem. The objective may
be to maximize the returns or to minimize the costs. The various methods available
to solve the problem are:
1. The Graphical Method: This method limits us to problems that have two
decision variables in the problem. (To deal with more decision variables by
20
the graphical method will become complicated, because we would have to

deal with planes instead of straight lines).
2. The Systematic Trial and Error method, where we go on giving various

values to variables until we get optimal solution. This method takes too much
of time and laborious.
3. The Algebraic method. In this method each decision variable is considered

as a vector and principles of vector algebra are used to get the optimal solu-
tion. This method is also time consuming.
4. The Simplex method. When the problem is having more than two decision
variables, simplex method is the most powerful method to solve the problem.
It has a systematic algorithm used to solve the problem.
3.2.1. Terminology for Solutions of the Model

In linear programming (and its extensions) any specification of values for the deci-
sion variables (x1 , x2 , . . . , xn ) is called a solution, regardless of whether it is a desir-
able or even an allowable choice. Different types of solutions are then identified by
using an appropriate adjective.
• A feasible solution is a solution for which all the constraints are satisfied.
• An infeasible solution is a solution for which at least one constraint is vio-

lated.
• The feasible region is the collection of all feasible solutions. However we

can note that it is possible for a problem to have no feasible solutions.
• An optimal solution is a feasible solution that has the most favourable value
of the objective function. Most problems will have just one optimal solution.
However, it is possible to have more than one. Another possibility is that of
having no optimal solutions.
• A corner-point feasible (CPF) solution is a solution that lies at a corner of

the feasible region. Note that if a problem has exactly one optimal solution,
it must be a CPF solution. If the problem has multiple optimal solutions, at
least two must be CPF solutions.
21
Revision Questions
Example . ...
Solution: for revision
E XERCISE 3. ..
22
LESSON 4
The Concepts of Inventory and Inventory Management
4.1. What is inventory?

Inventory can be defined as below;
1. It is the stock of any items or resources held in an organization for sale or use.
2. It can also be defined as materials in a supply chain or in a segment of supply

chain; expressed in quantities, locations/sites and/or values.
There is a distinction between manufacturing firm inventory and service firm in-
ventory. Manufacturing firm inventory refers to all items held in inventory that
contributes to or become part of organizations products e.g. raw materials, finished
goods, supplies, work in progress and piece parts. Service firm’s inventory refers
to all tangible goods to be sold (stock in trade) and the supplies necessary to ad-
minister the service. e.g. a mobile phone company such as Safaricom keeps stock
of scratch cards, SIM cards, packaging material etc in order to offer competitive
services to its clients.
4.1.1. Types of Inventory

1. Stock in-trade/finished goods This is the stock carried by a merchandising
firm (wholesale, retail or other trading concern) to be sold at a profit.
2. Raw materials. These are basic materials or outputs from the primary sec-
tor which undergo production transformation processes to become finished
products e.g. steel, barley, cotton. Finished products of one firm may be raw
materials for another firm; e.g. Logs → paper → printing industry. Mining
→steel →steel products.
3. Work in progress. Comprises incomplete items e.g. wine-making industry.
4. Piece parts. They are all small components manufactured from raw materials
e.g bolts, nuts.
5. Bought parts These are finished parts or assemblies purchased from outside
suppliers to be used as raw materials or to be sold as spares or accessories.
23
The bought parts could be protected by patents or the outside supplier may be
producing in large quantities and thus enjoying economies of scale and hence
buying is preferred to making.
6. Tools Tools include hammers, nails, screwdrivers, milling cutters, forming

and shaping machines etc.
7. Gauges Refer to measuring instruments, for example vernier calipers, micro-

meter screw gauges, thermometers, etc.
8. Jigs and fixtures. Refers to pieces of equipment specifically designed to hold

materials/ parts while undergoing machining, fitting, assembly or other pro-
cesses particularly in manufacturing entities e.g. a vice, an anvil.
9. Packaging materials. Include wrapping materials e.g. wrapping papers, ropes,

bottles, protective coating such as Grease, wax or plastics.
10. Free issue materials. Materials or components provided by the customer

in connection with some equipment or commodity being manufactured for
him/her. e.g. leather for making seats.
11. Scrap and residues. They include the waste or surplus materials or parts aris-
ing from manufacturing processes/activities e.g. sawdust (+ve), pollutants
(-ve)
12. Equipment and spares.Includes machines, installations and vehicles as well

as the associated spare parts e.g. Production line, basic infrastructure.
13. General materials. Are all goods that do not fall within another category.
These are basically the maintenance, repair and operating supplies which are
consumed in the production process but do not become part of the final prod-
uct e.g. lubrication oil.
4.1.2. What inventory management entails:

Inventory management entails all the unified management of those internal activi-
ties associated with the acquisition, storage, issue, use and internal distribution of
inventory used in production and service.
24
It is the activity of determining the rate and quantities and the procedures of ma-
terials to be stocked in an organization and the regulation of receipts and issues of
those stocks.
4.2. Importance of Inventory Management

The potential benefits of the application of inventory management concepts are
many and include the following:
• Provides both internal and external customers the required service levels in
terms of quantities and the order rate fill (timing).
• Ascertains present and future requirements for all types of inventory to avoid
overstocking or under- stocking.
• Keeps costs at the minimum by variety reduction, economic lot sizes and
analysis of costs incurred in obtaining and keeping inventories.
• Provides upstream and downstream inventory visibility or service in the sup-

ply chain.
In order to reap these benefits, inventory management requires an effective organi-

zation and sound communication among supervisors and managers. This is because
various functions conflict making it difficult to have a harmonious way of enjoying
the above benefits e.g.
Purchasing, in an attempt to maintain low cost may choose vendors who have poor
delivery records (time, quality). This may have a potentially –ve effect on the pro-
duction.
Production on the other hand may require large adequate supply of materials.This
may lead to maintaining high inventory levels than necessary. Therefore, due to
these potential conflicts, it is necessary to deliberately set up rationalized inventory
management systems.
4.2.1. Internal customer expectations of inventory by functionality.

• Sales and marketing department. - Quick delivery - No shortage or stockouts.
- Many varieties. - Frequent deliveries.
25
• Finance department. - Lower inventory. - Low cost of operations. - High

inventory turnover (Max sale ÷ average stock) - Lower cost of delivery.
• Manufacturing Department. - Less varieties - Economic batch quantity mod-

els. - Quick setups - No rejections or cancellations
• Top management. - High inventory turnover. - Lower operation costs. -

Excellent customer services. - Maximum overall profits of the firm
• Operations - Low cost of operations - Right product in the right place at the
right time (excellent customer services)
4.3. Need for Inventory Reasons/Need for inventory.

Meeting production requirements. Raw materials, components and parts are re-
quired for producing finished goods. A manufacturing organization keeps stocks to
meet the continuous requirements of production. Work in progress (WIP) inventory
constitutes a major portion of production related inventory.
Support operational Requirements. To support production operations, inventory is
required for repairs, maintenance and operations support e.g. spare parts, consum-
ables such as lubrication oils, welding rods, chemicals etc.
Customer Service Consideration. Products like equipment, machinery and appli-
ances require replacement of spare parts and other consumables for trouble free
and smooth operation. Suppliers maintain an inventory of these parts to extend
after sales services to its customers. Availability of spare parts when required at
customer end is crucial for customer satisfaction and may be used as a tool for
competitive advantage.
Hedge against future expectations. Inventory takes care of shortages in material or
product availability or due to an unanticipated increase in the price of products.
Balancing supply and demand. The production and the consumption cycle never
match. The sudden requirement of products in large quantities may not be satisfied
since production cannot be taken so soon. In such a case, the products are manu-
factured in advance in anticipation of a sudden demand and kept in stock for supply
during the peak period.
Periodic variation. For seasonal products, the demand is at peak in certain periods
while it is lean/little for the rest of the year. Production runs in the factory are taken
26
based on the average demand for the year. Excess production in the lean periods is
kept in inventory to take care of high demand. In cases where raw material is avail-
able seasonally, the products are manufactured and stocked as inventory to meet the
demand of the finished product throughout the year. e.g agricultural produce.
Economies of scale. Products are manufactured at focused factories to achieve
economies of scale. This is done because of the availability of the latest technology,
raw materials and skilled labour. Hence the product is kept in store for distribution
to consumption centers as and when it is required.
Other reasons for keeping inventory include: - To take advantage of quantity dis-
counts. - As a necessary part of production process e.g. the maturing of whisky/
wine products. - Case of critical and strategic products such as petroleum or cere-
als (strategic food reserve). - As a contractual obligation e.g. the oil sector. Note:
Sometimes the firm finds itself with stocks for non-logical reasons such as:
1. Obsolete items are retained in stock.
2. Poor or non-existent inventory control policies resulting in larger than re-

quired orders, replenishment orders being out of phase with production etc.
3. Inadequate or non-existent stock records.
4. Poor liaison between production control, purchasing and marketing depart-

ments.
5. Sub-optimal decision-making e.g. production department might increase WIP

so as to ensure long production runs (conflict between the functional depart-
ments).
4.4. Scope of Inventory Management

The range or extent of matters dealt within inventory management is quite wide and
varies from organization to organization. The scope and complexity differs on the
basis of a number of factors which include the following:
• Single location or Multiple locations.
• Local operation (localized) or globalised operation.
• Type of item (durable or perishable)
27
• Manufacturing, merchandising or service firms.
• Single product or multi-product.
Inspite of the many factors to consider, some two authorities: - Lysons and Farring-
ton, noted that inventory management comprises such activities as:
• Demand management. This is ensuring that required operational supplies and

maintenance are available at the right quantities and at the right time.
• Forecasting future demand requirements.
• Managing items with difficulty in supply and demand patterns, related sea-
sonal demand, changes in end user applications or meeting demands for the
customization of products.
• Reviewing safety stocking cost and controlling minimum and maximum amounts
of inventory in terms of quality and value.
• Implementing lean inventory policies such as JIT contracts so as to minimize

investment in inventory.
• Liasing with purchasing to ensure that supplies are replenished in accordance

with corporate and procurement policies.
• Developing cost effective systems and procedures relating to ordering, procur-

ing and budgeting of supply.
• Controlling receipts, inspection, recording, location and issue of supplies.
• Ensuring the safety and security of supplies and the avoidance of loss as a
result of any factor such as deterioration, theft, waste, obsolescence etc.
• Coordination of inventory to ensure that supplies can be rapidly located.
• Variety reduction and standardization of inventory to ensure that supplies can

be rapidly located.
• Preparation and interpretation of reports on stock levels, stock usage and sur-
plus stock.
28
• Liaison with auditors regarding all aspects of inventory.
• Appropriate disposal of scrap, surplus, obsolete and related items.
4.5. Inventory Costs These can broadly be categorized into 4 groups.

Holding costs/carrying costs. These are costs incurred because a firm owns or main-
tains inventories e.g.:
• Opportunity cost of capital i.e. money tied up in stock is not available to be
used or invested elsewhere e.g. interest foregone.
• Storage/warehouse costs such as personnel, equipment, running the ware-

house. . . .etc.
• Insurance against fire, theft . . . etc iv) Security costs such as security person-
nel, alarm systems, electric fencing. . . etc
• Perishability costs. These are for perishable items such as edibles (bread,
milk, fruits, vegetables, newspapers and other periodicals; tax reports, fresh
flowers. . . etc)
• Obsolescence costs: These are usually due to being overtaken by technology.

This is quite prevalent in the electronics industry e.g. computers, mobile
phones.
• Pilferages.
• Spillages for liquids and gases etc.
• Damages e.g. breakages (fragile items like glass, tiles etc.)

Ordering / Procurement costs. These are the costs of getting the items into the
firm’s inventory. They are typically incurred each time an order is made. NB:
For merchandising firms they are called ordering costs while for manufacturing
firms they are called set-up costs (mobilizing factors of production). In order to
understand ordering costs let us look at the ordering cycle model below;
Requisitioning
Receipt & storage Purchase order
Transportation (freight)
Purchase made Fig: Ordering cycle model Examples:
29
• Purchasing dept costs: include personnel, equipments, communication costs

(phone, internet, fax), consumables (stationery, ribbons, ink, etc.)
• Transportation costs.
• Insurance on transit.
• Taxes e.g. customs duty for an imported item.
• Clearing and forwarding charges.
• Handling costs e.g. loading, pilferages, damages (breakages & spillages)
• Exchange rate differentials.
In the case of imported products, valuation is done on the basis of the current ex-
change rates in the market. Any fluctuations may increase or decrease the value of
the product. Due to this, there is the risk of selling stocks at prices lower than the
landed costs.
Shortage costs. These are incurred as a result of the item not being in stock. Exam-
ples:
• Loss of goodwill; could lead to loss of customers. ii) Contribution lost, due
to not making a sale.
• Back order costs - these are costs of dealing with disappointed customers.
• Costs of idle resources e.g.:- production personnel being paid when there’s a
raw material missing.
• Cost of having to speed up orders e.g. personnel working overtime, using a

faster transportation mode (and hence more costly)
Purchase Costs: This is what is paid to the supplier /seller by the buyer in exchange
of the product. Inventory is usually a large investment for many firms. It is normally
the second largest item in the balance sheet among the assets after fixed assets.
Thus, inventory should only be held if the benefits (service to customers) exceeds
the inventory costs. Also in inventory modeling, purchase costs is a relevant factor
to inventory policy due to availability of quantity discounts. Thus, for inventories,
(Total Cost) TC = Purchase + Holding + Ordering + Shortage costs costs costs costs
30
The objective of any inventory management systems or models is to minimize these

total costs. holding vs. shortage costs; ordering Vs holding costs. . . etc.
31
Revision Questions
Example . ...
Solution:
for revision
E XERCISE 4. ...
32
LESSON 5
Transportation Models
Learning Outcomes
A study of this lesson should enable students to:
• Use probabilistic techniques that covers problems in which all parameters are
not known with certainty
• Learn and understand;
– Transportation model
– North west corner rule
– Least cost method
– Vogels Approximation Method
5.1. Introduction
Many practical problems in operations research can be broadly formulated as linear
programming problems, for which the simplex this is a general method and cannot
be used for specific types of problems like,
i) Transportation models
ii) Transshipment models
iii) The assignment models
Remark.
The above models are also basically allocation models. We can adopt the simplex
technique to solve them, but easier algorithms have been developed for solution of
such problems. The following sections deal with the transportation problems and
their streamlined procedures for solution.
33
Table 5.1:
Origins Destinations(warehouse)Available
(factory) 1 2 ........... n
1 C11 C12 C1n a1
2 C21 C22 C2n a2
... ... ... ... ...
M Cm1 Cm2 Cmn am
Required b1 b2 bn
Table 5.2:
Origins Destinations(warehouse)Available
(factory) 1 2 ........... n
1 x11 x12 x1n a1
2 x21 x22 x2n a2
... ... ... ... ...
M xm1 xm2 xmn am
Required b1 b2 bn
5.2. Transportation Model

In a transportation problem, we have certain origins, which may represent factories
where we produce items and supply a required quantity of the products to a certain
number of destinations. This must be done in such a way as to maximize the profit
or minimize the cost. Thus we have the places of production as origins and the
places of supply as destinations. Sometimes the origins and destinations are also
termed as sources and sinks.
To illustrate a typical transportation model, suppose m factories supply certain items
to n warehouses.
Let factory i(i = 1, 2, ..., m) produce ai units and the warehouse j( j = 1, 2, ..., n)
requires b j units. Suppose the cost of transportation from factory i to warehouse j
is Ci j . Let us define the decision variables xi j being the amount transported from
the factory i to the warehouse j. Our objective is to find the transportation pattern
that will minimize the total transportation cost. The model of a transportation prob-
lem can be represented in a concise tabular form with all the relevant parameters
mentioned above. See table 5.1
The pattern of distribution of items in the form of transportation matrix is separately
given below in table 5.2.
34
Plant Location 1 2 3
Production (units) 40 70 90
5.2.1. Transportation Problem as a Linear Programming Model

The transportation problem can be represented mathematically as a linear program-
ming model. The objective function in this problem is to minimize the total trans-
portation cost given by
Z = C11 X11 +C12 X12 + ... +Cmn Xmn
Subject to the restrictions:
Row restrictions
X11 + X12 + . . . + X1n = a1
X21 + X22 + . . . + X2n = a2
X1n + X2n + . . . + Xmn = am
Column restriction
X11 + X21 + . . . + Xm1 = b1
X12 + X22 + . . . + Xm2 = b2
X1n + X2n + . . . + Xmn = bn
And
X11 , X12 , . . . , Xmn ≥ 0
It should be noted that the model has feasible solutions only if
m n
a1 + a2 + . . . + am = b1 + b2 + ... or ∑ ai = ∑ bj
i=1 j=1
The above is a mathematical formulation of a transportation problem and we can

adopt the linear programming technique with equality constraints. Here the alge-
braic procedure of the simplex method may not be the best method to solve the
problem and hence more efficient and simpler streamlined procedures have been
developed to solve transportation problems.
5.2.2. Formulation of a Transport Problem
Example . A company has plants located at three places where the production
pattern is described in the following table.
The potential demand at five places has been estimated by the marketing department
and is presented below.
35
Distribution centre 1 2 3 4 5
Potential demand (units) 30 40 60 40 60
Table 5.3: Distribution Centre

Plant 1 2 3 4 5
1 20 25 27 20 15
2 18 21 22 24 20
3 19 17 20 18 19
The cost of transportation from a plant to the distribution centre has been displayed
in the table 5.3
Represent the above data in a table to represent a transportation problem
Solution:
In this example the total supply and the total demand do not match as supply is less
than demand. Hence a dummy row (dummy plant) is introduced at a unit trans-
portation cost of 0. The following is the tabular representation of the transportation
problem.
Note: If the total demand (requirements) is less than the total supply (availability),
a dummy column (dummy destination) is introduced with a unit transportation cost
of 0.

5.2.3. Finding an initial basic feasible solution

An initial basic feasible solution to a transportation problem can be found by any
one of the three following methods:
i) North west corner rule (NWC)
ii) Least cost method (LCM)
Table 5.4: Distribution Centre

Plant 1 2 3 4 5 Supply
1 20 25 27 20 15 40
2 18 21 22 24 20 70
3 19 17 20 18 19 90
4 0 0 0 0 0 30
Demand 30 40 60 40 60 230
36
Table 5.5: Destinations

Origin P Q R Supply
A 5 7 8 70
B 4 4 6 30
C 6 7 6 50
Demand 65 42 43 150
iii) Vogel’s approximation method (VAM)
North West Corner Rule

• STEP 1- Start with the cell in the upper left hand corner (North West Corner).
• STEP 2 - Allocate the maximum feasible amount.
• STEP 3 - Move one cell to the right if there is any remaining supply. Other-
wise, move one cell down. If both are impossible, stop or go to step (2).
An example is considered at this juncture to illustrate the application of NWC

rule.
Example . In table 5.5, supply level, demands at various destinations, and the
unit cost of transportation are given. Use NWC rule to find the initial solution.
Solution:
The solution obtained by the North West Corner Rule is a basic feasible solution. In
this method we do not consider the unit cost of transportation. Hence the solution
obtained may not be an optimal solution. But this will serve as an initial solution,
which can be improved.
We give below the procedure for the solution of the above problem by NWC rule.
The North West Corner cell (AP) is chosen for allocation. The origin A has 70
items and the destination P requires only 65 items. Hence it is enough to allot 65
items from A to P. The origin A which is alive with 5 more items can supply to the
destination to the right is alive with 5 more items can supply to the destination to the
right of P namely Q whose requirement is 42. So, we supply 5 items to Q thereby
the origin A is exhausted. Q requires 37 items more. Now consider the origin B
that has 30 items to spare. We allot 30 items to the cell (BQ) so that the origin B
is exhausted. Then move to origin C and supply 7 more items to the destination Q.
Now the requirement of the destination Q is complete and C is left with 43 items
37
Table 5.6: Destination

Origin P Q R Supply
A 65 5 70 65 0
B 30 30 0
C 7 43 50 7 43 0
Demand 65 42 43
0 37 0
0
and the same can be allotted to the destination R. Now the origin C is emptied and
the requirement at the destination R is also complete. This completes the initial
solution to the problem.
The above calculations are performed conveniently in a table 5.6 as shown :
The total cost of transportation by this method will be;
65 × 5 + 5 × 7 + 30 × 4 + 7 × 7 + 43 × 7 = Kshs. 830
As the solution obtained by the North West Corner Rule may not be expected to
be particularly close to the optimal solution, we have to explore a promising initial
basic feasible solution, so that we can reach the optimal solution to the problem
with minimum number of iterations.

Least Cost Method

• STEP 1: Determine the least cost among all the rows of the transportation
table.
• STEP 2: Identify the row and allocate the maximum feasible quantity in the
cell corresponding to the least cost in the row. Then eliminate that row (col-
umn) when an allocation is made.
• STEP 3: Repeat steps 1 and 2 for the reduced transportation table until all
the available quantities are distributed to the required places. If the minimum
cost is not unique, the tie can be broken arbitrarily.
To illustrate, consider the example repeated in table 5.7

We examine the rows A, B and C, 4 is the least cost element in the cell (B, P) and
(B, Q) and the tie can be broken arbitrarily. Select (B, P). The origin B can supply
38

Origin P Q R Supply
A 5 7 8 70
B 4 4 6 30
C 6 7 7 50
Demand 65 42 43
55

Origin P Q R Supply
A 35 5 7 8 70 35
C 6 7 7 50
Demand 35 42 43
0
30 items to P and thus origin B is exhausted. P still requires 35 more units. Hence,
deleting the row B, we have the reduced matrix as in the table 5.8 below
In the reduced matrix (table 5.8) we observe that 5 is the least element in the cell
(A, P) and examine the supply at A and demand at P. The destination P requires 35
items and this requirement is satisfied from A so that the column P is deleted next.
So we have the reduced matrix as in table 5.9
In the reduced matrix (table 5.8) we choose 7 as least element corresponding to the
cell (A. Q). We supply 35 units from A to Q so have the reduced matrix in table
5.10.
We now have the allotment as per the least cost method as shown in the table 5.11
The cost of the allocation by the least cost method is
35 × 5 + 35 × 7 + 30 × 4 + 7 × 7 + 43 × 7 = Kshs. 890

Origin Q R Supply
A 35 7 8 35 0
C 7 7 50
Demand 42 43
7
39

Origin Q R Supply
A 7 7 43 8 35 0
Demand 7 43
0 0

Origin P Q R Supply
A 35 35 70
B 30 0 30
C 7 43 50
Demand 65 42 43
Vogel’s Approximation Method (VAM)

This method is based on the ’difference’ associated with each row and column in
the matrix giving unit cost of transportation ci j . This ‘difference’ is defined as the
arithmetic difference between the smallest and next to the smallest element in that
row or column. This difference in a row or column indicates the minimum unit
penalty incurred in failing to make an allocation to the smallest cost cell in that row
or column. This difference also provides a measure of proper priorities for making
allocations to the respective rows and column. In other words, if we take a row, we
have to allocate to the cell having the least cost and if we fail to do so, extra cost will
be incurred for a wrong choice, which is called penalty. The minimum penalty is
given by this difference. So, the procedure repeatedly makes the maximum feasible
allocation in the smallest cost cell of the remaining row or column, with the largest
penalty. Once an allocation is fully made in a row or column, the particular row or
column is eliminated. Hence and allocation already made cannot be changed. Then
we have a reduced matrix. Repeat the same procedure of finding penalty of all rows
and columns in the reduced matrix, choosing the highest penalty in a row or column
and allotting as much as possible in the least cost cell in that row or column. Thus
we eliminate another fully allocated row or column, resulting in further reducing
the size of the matrix. We repeat till all supply and demand are exhausted.
A summary of the steps involved in Vogel’s Approximation Method is given below:
• STEP 1: Represent the transportation problem in the standard tabular form.
• STEP 2: Select the smallest element in each row and the next to the smallest
40

Origin P Q R Supply Row
difference
A 5 7 8 70 (2)
B 4 30 4 6 300 (0)
C 6 7 7 50 (1)
Demand 65 42 43
12
Column (1) (3) (1)
difference Largest
penalty
element in that row. Find the difference. This is the penalty written on the
right hand side of each row. Repeat the same for each column. The penalty
is written below each column.
• STEP 3: Select the row or column with largest penalty. If there is a tie, the
same can be broken arbitrarily.
• STEP 4: Allocate the maximum feasible amount to the smallest cost cell in
that row or column.
• STEP 5: Allocate zero else where in the row or column where the supply or
demand is exhausted.
• STEP 6: Remove all fully allocated rows or columns from further considera-
tion. Then proceed with the remaining reduced matrix till no rows or columns
remain.
Let us apply Method to the above example as given below in table 5.12
The difference between the smallest and next to the smallest element in each row
and in each column is calculated. This is indicated in the parenthesis. We choose
the maximum from among the differences. The first individual allocation will be to
the smallest cost of a row or column with the largest difference. So we select the
column Q (penalty = 3) for the first individual allocation, and allocate to (B, Q) as
much as we can, since this cell has the least cost location. Thus 30 units from B are
allocated to Q. This exhausts the supply from B. However, there is still a demand
of 12 units from Q. The allocations to other cells in that column are 0, as indicated.
41

Origin P Q R Supply Row
difference
A 65 5 7 8 70 5 (2)
C 6 7 7 50 (1)
Demand 65 12 43
0
Column (1) (0) (1)
difference

Origin P R Supply Row
difference
A 5 7 8 50 (1)
C 7 7 50
Demand 12 43
7
Column (0) (1)
difference
The next step is to write down the reduced matrix (as in table 5.13) eliminating row
B (as it is exhausted).
From the table 5.13, (2) is the largest unit difference corresponding to the row A.
This leads to an allocation in the corresponding minimum cost location in row A,
namely cell (A, P). The maximum possible allocation is only 65 as required by P
from A and allocation of 0 to others in the row A. Column P is thus deleted and the
reduced matrix is given in table 5.14.
Maximum difference is 1 in row A and in column C. Select arbitrarily A and allot
the least cost cell (A, Q) 5 units. Delete row A.
Now, we have only one row C and two columns Q and R (Table 5.15) indicating
that all the available amount from C has to be moved to Q and R as per their re-
quirements. Hence we have the table 5.15
We obtain as our basic feasible solution by re-tracking various positive allocations
in successive stages. We have the solution by Vogel’s Approximation Method as
shown in the table 5.16
The cost of allocation by Vogel’s Approximation Method will be
65 × 5 + 5 × 7 + 30 × 4 + 7 × 7 + 43 × 7 = 325 + 35 + 120 + 49 + 301 = Kshs. 830
42

Origin Q R Supply
A 77 43 8 50
C 7 7
Demand 7 43
0 0

Origin P Q R Supply
A 65 5 70
B 30 30
C 7 43 50
Demand 65 42 43
NOTE
Cost of allocation for the same problem with three methods:
NWC method - Kshs. 830/-
Least cost method - Kshs.890/-
Vogel’s Approximation Method - Kshs. 830/-
Generally VAM gives a better initial solution
43
Revision Questions
E XERCISE 5. Explain what it means by transportation problem?

E XERCISE 6. Explain feasible solution and basic feasible solution of transporta-
tion problem?
E XERCISE 7. Explain in brief with examples:
(i) North West Corner rule.
(ii) Vogel’s Approximation Method.
44
LESSON 6
Assignment Problem
Learning Outcomes
• Discuss the assignment problem
• Formulate the assignment problem
• Use the assignment problem technique to solve linear programming problem
6.1. Introduction
A special type of problem called the assignment problem is also an allocation prob-
lem. Here we have n jobs to perform with n persons and the problem is how to
distribute the jobs to the different persons involved. Depending on the intrinsic
capacity or merit or potential of the individual, he will be able to accomplish the
task in different times. Then the objective function in assigning the different jobs
to different persons is to find the optimal assignment that will minimize the total
time taken to finish all the jobs by the individuals. For example, we have four
different building activities say, construction of a hotel, a theatre, a hospital and a
multistoried building and there are four contractors competing for these jobs. Each
contractor has to be assigned only one job. The allocation should aim to minimize
the total time taken to complete the construction of all four activities after assigning
only one job to one individual. In fact there are 4 permutations possible for allo-
cating 4 jobs to 4 contractors. We have 24 possible ways and it is tiresome to list
all the possible ways and find the best one. If we have more jobs to be allocated,
it is even difficult to list out the different permutations of allocations, then what to
speak of choosing the best combinations.
The problem may be stated formally as follows. Given an n × n array of real num-
bers representing the individual return associated with assigning one item to one
person. We have to find the best assignment so that the total return is optimal.
Consider the following example, given below in the table 6.1
In the above example, the elements of the matrix represent the times taken by A,
B, C and D in accomplishing the jobs 1, 2, 3 and we have to find which job is
45
Table 6.1:
Men
Jobs
A
D
B
C
1 5 6 8 7
2 4 7 6 6
3 5 4 6 5
4 6 7 4 6
to be assigned to whom so that the total time taken will be minimum. This is the
objective function. Thus, this is also an allocation problem. A solution can be found
to the above problem by the algorithm used to solve the transportation problem of
degenerate transportation problem. In this way only 4 cells will be allocated. This
leads to problem of degenerate transportation problem. There should be (4 + 4 + 1)
= 7 allocations in the initial basic feasible solution, but we have only 4 allocations.
Hence it is the degeneracy.
6.1.1. Mathematical Formulation of the Problem

Considering the above example, we have four jobs and four persons. We want to
allot one job to one person so that the total time taken will be minimum. We shall
formulate a mathematical model for the problem.
Let the decision variable Xi j be the assignment of ith job to jth person, and Ci j be
the time taken for ith job by the jth person.
The objective function is to minimize
n n
z= ∑ ∑ Ci j Xi j
i=1 j=1
Subject to restrictions,
Row restrictions
x11 + x12 + x13 + x14 = 1 for job 1
x21 + x22 + x23 + x24 = 1 for job 2
x31 + x32 + x33 + x34 = 1 for job 3
x41 + x42 + x43 + x44 = 1 for job 4
Column restrictions
x11 + x21 + x31 + x41 = 1 for person 1
46
Table 6.2:
Worker
Jobs
A
D
B
C
1 10 20 18 24
2 15 25 9 25
3 30 19 17 12
4 19 24 20 10
x12 + x22 + x32 + x4 2 = 1 for person 2

x13 + x23 + x33 + x43 = 1 for person 3
x14 + x24 + x34 + x44 = 1 for person 4
and Xi j = 0 or 1
In general,
xi1 + xi2 + ... + xin = 1, for i=1, 2, ..., n
and
x1 j + x2 j + ... + xn j = 1, for j=1, 2, ..., n
When compared with a transportation problem, we see that ai = 1 and b j = 1 for
all rows and columns, Xi j = 0 or 1.
6.1.2. Solution of an Assignment Problem

The solution to an assignment problem is based on the following theorem.
Theorem. If in an assignment problem we add a constant to every element of a row

or column in the effectiveness matrix then an assignment that minimizes the total
effectiveness in one matrix also minimizes the total effectiveness in the other matrix.
Example . A works manager has to allocate four different jobs to four workmen.
Depending on the efficiency and the capacity of the individual the times taken by
each differ as shown in the table 6.2. How should the tasks be assigned one job to a
worker so as to minimize the total man-hours?
The following steps are followed to find an optimal solution
STEP 1: Consider each row. Select the minimum element in each row. Subtract
this smallest element from all the elements in that row. This results in the table 6.3.
STEP 2: We subtract the minimum element in each column from all the elements
in its column. Thus we obtain table 6.4
47
Table 6.3:
Worker
Jobs
A
D
B
C
1 0 10 8 4
2 6 16 0 6
3 18 7 5 0
4 9 14 10 0
Table 6.4:
Worker
Jobs
A
D
B
C
1 0 3 8 4
2 6 9 0 16
3 18 0 5 0
4 9 7 10 0
STEP 3: In this way we make sure that in the matrix each row and each column has
at-least one zero element. Having obtained at-least one zero in each row and each
column, we assign starting from first row.
In the first row, we have a zero in (1, A). Hence we assign job 1 to the worker A.
This assignment is indicated by a shaded cell. All other zeros in the column are
crossed (X) to show that the other jobs cannot be assigned to worker A as he has
already been assigned. In the above problem we do not have other zeros in the first
column A.
Proceed to the second row. We have a zero in (2, C). Hence we assign the job 2 to
worker C, indicating by shading the cell. Any other zero in this column is crossed
(X).
Proceed to the third row. Here we have two zeros corresponding to (3, B) and (3,
D). Since there is a tie for the job 3, go to the next row deferring the decision for
the present. Proceeding to the fourth row, we have only one zero in (4, D). Hence
we assign job 4 to worker D. Now the column D has a zero in the third row. Hence
cross (3, D).
All the assignments made in this way are as shown in table 6.5.
48
Table 6.5:
Worker
Jobs
A
D
B
C
1 0 3 8 4
2 6 9 0 16
3 18 0 5 0
4 9 7 10 0
Table 6.6:
Jobs to
Worker
1 A
2 C
3 B
4 D
STEP 4: Now having assigned certain jobs to certain workers we proceed to the
column 1. Since there is an assignment in this column, we proceed to the second
column. There is only one zero in the cell (3, B); we assign the jobs 3 to worker
B. Thus all the four jobs have been assigned to four workers. Thus we obtain the
solution to the problem as shown in the table 6.6.
We summarise the above procedure as a set of following rules:
1. Subtract the minimum element in each row from all the elements in its row
to make sure that at least we get one zero in that row.
2. Subtract the minimum element in each column from all the elements in its
column in the above reduced matrix, to make sure that we get at least one
zero in each column.
3. Having obtained at least one zero in each row and atleast one zero in each
column, examine rows successively until a row with exactly one unmarked
zero is found and mark/highlight this zero, indicating that assignment in made
there. Mark (X) all other zeros in the same column, to show that they cannot
be used to make other assignments. Proceed in this way until all rows have
been examined. If there is a tie among zeros defer the decision.
49
4. Next consider columns, for single unmarked zero, highlight them and mark
(X) any other unmarked zero in their rows.
5. Repeat (c) and (d) successively until one of the two occurs.
There are no zeros left unmarked.

The remaining unmarked zeros lie at-least two in each row and column. i.e., they
occupy corners of a square.
If the outcome is (1), we have a maximal assignment. In the outcome (2) we use
arbitrary assignments. This process may yield multiple solutions.
50
B Machine
Jobs
A
C
X 19 28 31
Y 11 17 16
Z 12 15 13
III Jobs
Men IV V
II
I
A 3 10 3 8 2
B 7 9 8 7 2
C 5 7 6 4 2
D 5 3 8 4 2
E 6 4 10 6 2
Revision Questions
Example . Three jobs A, B, C are to be assigned to three machines X, Y, Z.

The processing costs (in Rs.) are as given in the matrix shown below. Find the
allocation, which will minimize the overall processing cost.
Solution: ....
E XERCISE 8. Five men are available to do five different jobs. From past records
the time in hours that each man takes for each job is known and is given below.
Find the assignment of men to jobs that will minimize the total time taken.
51
LESSON 7
Network Model
Learning Outcomes
• Construct a network which is useful for a programme evaluation or finding

an appropriate path which is more logical to business decisions
• Use the programme evaluation and review technique
• Use a critical path analysis method to find the viable cost of doing a project
52
7.1. Introduction
PERT is an acronym for “Programme Evaluation and Review Technique”. This
was created as a means to plan and accelerate the development of the Polaris Bal-
listic Missile. In USA the defense department developed a nuclear missile to be
launched from beneath the ocean’s surface by a mobile submarine, which would be
an effective deterrent against aggression by an enemy. This paved way to plan how
to design, develop and plan the different stages in the production of a missile and
how quickly this task could be completed. A planning and scheduling technique
named PERT gave the answer to these questions.
In any new venture, uncertainties are bound to creep in. PERT incorporated these
uncertainties into a model, which provides a reasonable answer to these uncertain-
ties. There are certain statistical aspects scheduling large projects consisting of
numerous activities whose completion times are uncertain and are independent of
one another. PERT is an event-oriented technique. By ‘event’ we mean reaching a
certain stage of completion of the project.
Another technique, Critical Path Method, abbreviated as CPM, has emerged simul-
taneously. It is also a network technique but it is concerned with obtaining the
trade-off, between cost and completion date for large projects. In any project con-
sisting of several activities each activity can be completed in a normal duration with
normal cost. If we employ more persons or skilled people or given overtime to the
workers, the activity could be completed in a reduced duration known as crash du-
ration. But this involves an increased cost in the form of additional resources. With
CPM the amount needed to complete the various activities is assumed to be known
with certainty. So, the direct costs for the activities increase and hence the cost of
the project also increases. By reducing the activity duration of some or all possi-
ble completed ahead of the schedule. This will naturally reduce the overhead cost
for the entire project. On one hand the direct expenses increase, if we shorten the
activity duration, but, the indirect expenses for the project are reduced. We have to
strike a balance or an optimum time schedule, or a least cost schedule is to be ob-
tained. This is the purpose of the Critical Path Method. Thus CPM is not concerned
with uncertain job times as in PERT. PERT is useful in research and developmen-
tal projects, whereas CPM is mostly used in construction projects, or in situations
already handled, so that the details like the normal completion time, crash duration
and cost of crashing are already known.
53
Table 7.1:
Physical Situation Nodes Branches Flow
Highway systems Intersections Roads vehicles
Communication systems Switching point Wires Messages
Fluid supply systems Pump stations Pipes fluid
Production system Work centers Handling routes Jobs
Project management Decision points Activities Time
Airway systems Airports Airlines Aircraft
The following are the suggested applications when PERT or CPM is found useful.
• The construction of a building or of a highway.
• Planning and launching a new product.
• Scheduling maintenance for a project.
• The manufacture and assembly of a large machine tool.
• To conduct a music or drama festival.
• Preparation of budget for a company.
7.1.1. Concept of Network

The first step in the application of CPM / PERT is to develop a network represen-
tation of the project plan. A ‘network’ is defined as a graphic representation with
a flow of some type in its branches. It represents nodes and branches. Below in
table 7.1, we represent different systems satisfying the definition of network in the
physical world.
A node is the intersection of the two branch lines. It is denoted by a circle. Each
branch represents an activity. Each node represents an event, which is a specific
definable accomplishment recognizable at a particular instant of time. The arrow-
heads indicate the sequence in which events must be achieved. Thus an event is the
completion of all the activities leading into that node and this event must precede
the initiation of the activity leading out of the node.
54
Figure 7.1:
Table 7.2: Preparation of a production budget

Job identification Alternate Job description Department
A 1-2 Forecasting sales Sales
B 2-4 Pricing sales Sales
C 2-3 Preparing Engineering
production
schedule
D 3-4 Costing the Costing
production
E 4-5 Preparation of President
budget
An arrow diagram represents a project graph. An arrow connecting two nodes,

representing two events, represents each activity. The head of the arrow identifies
the start of the activity.
Example . A company is interested in preparing a budget. The details of the
activities and the departments involved are given in 7.2
Solution:
The project of budgeting can be displayed in a network or project graph by an
arrow diagram. Jobs are shown as arrows leading from one node to the other as in
the figure below.
From the arrow diagram 2, we infer that activity A is the first job. Jobs B and C
start only after A is over. A is called the predecessor of B and C and B and C the
successors of A.
Figure 7.2:
55
7.1.2. Rules for Construction of Network

a) Each activity is represented by one and only one arrow. This means that no
single activity can be represented twice in a network.
b) No two activities can be identified by the same end events. This means that
there should not be loops in the network.
c) Time follows from left to right. All the arrows point in one direction. Arrows
pointing in opposite direction must be avoided.
d) Arrows should not cross each other.
e) Every node must have at least one activity preceding it and at least one activity
following it, except for the nodes at the very beginning and at the very end of
the network.
7.2. Critical Path Method (CPM)

After listing all the activities with their precedence relationship we project these
activities in a project graph represented by arrows or Activity On Node diagram
(AON). Now we have to find the minimum time required for completion of the en-
tire project. For this we must find the longest path with the sequence of connected
activities through the network. This is called the critical path of the network and its
length determines the time for completion of the project. The activities in the criti-
cal path are so critical that, if they are delayed, the project completion date cannot
be met and the project finish time will have to be extended. We shall now see how
to identify the critical path, the critical activities and the duration of the project.
The meaning of path and length of a path should first be made clear. Let us take
following example.
NOTE
Remember that a ’network’ is defined as a graphic representation with a flow of
some type in its branches. It represents nodes and branches.
Consider the network shown in the figure 7.3
56
Figure 7.3:
Table 7.3:
Path Time (days)
1-3-4 5+3 = 8 days
1-2-3-4 6+7+3 = 16 days
1-2-4 6+6 = 12 days
We have five activities A, B, C, D and E with the time of completion of the activities
5, 6, 7, 3 and 6 days respectively. We represent the activities in a network shown in
the same figure 7.3.
In this network, there are three ways to get from the starting point at node 1 and
travel through the network to end at node 4. These ways are called paths. Thus,
a path is defined as “a set of nodes connected by lines which begin at the initial
node of a network and end at the terminal node”. In the above figure there are three
paths namely, 1-3-4, 1-2-3-4 and 1-2-4 where the numbers represent the nodes. The
length of a path in a network is the total time it takes to travel along the path. This
time is calculated by adding the individual times between the connected nodes on
the path. A path is called a critical path if it is the longest the path in a project
network. We have the times of the three distinct paths as shown in table 7.3.
The path connecting the nodes 1, 2, 3 and 4 constitutes the longest path and hence
1-2-3-4 is the critical path. The minimum time to complete the project is the time
taken for the longest path namely 16 days. The activities B (1- 2), C (2-3) and
D (3-4) constitute the critical activities. These jobs are critical in determining the
project’s duration.
Example . Consider the following project. Draw an arrow diagram to represent
the project.
57
Activity A B C D F G H I
Precedence - - A A B, C F B, C, D H, G
Solution:
7.3. Pert Model

PERT was developed for the purpose of solving problems in aerospace industries,
particularly in research and development programmes. These programmes are sub-
ject to frequent changes and as such the time taken to complete various activities are
not certain, and they are changing and non-standard. This element of uncertainty
is being specifically taken into account by PERT. It assumes that the activities and
their network configuration have been well defined, but it allows for uncertainties in
activity times. Thus the activity time becomes a random variable. If we ask an engi-
neer, or a foreman or a worker to give a time estimate to complete a particular task,
he will at once give the most probable time required to perform the activity. This
time is the most likely time estimate denoted by tm . It is defined as the best possible
time estimate that a given activity would take under normal conditions which often
exist.
But he is also asked to give two other time estimates. One of these is a pessimistic
time estimate. This is the best guess of the maximum time that would be required
to perform an activity under the most adverse circumstances like
1. Supply of materials not in time
2. Non-cooperation from the workers
3. The transportation arrangements not being effective etc.
Thus the pessimistic time estimate is the longest time the activity would require
and is denoted by t p . On the other hand if everything goes on exceptionally well
or under the best possible conditions, the time taken to complete an activity may
58
be less than the most likely time estimate. This time estimate is the smallest time
estimate known as the optimistic time estimate and denoted by to .
Thus, given the three time estimates for an activity, we have to find the expected
duration of an activity or expected time of an activity as a weighted average of
the three time estimates. PERT makes the assumption that the optimistic and pes-
simistic activity (to and t p ) are occur. It also assumes that the most probable activity
time tm, is four times more likely to occur than either of the other two. This is
based on the properties of Beta distribution. Beta distribution was chosen as a rea-
sonable approximation of the distribution of activity times. The Beta distribution is
uni-model, has finite non-negative end points and is not necessarily symmetrical-all
of which seen desirable properties for the distribution of activity times. The choice
of Beta distribution was not based on empirical data. Since most activities in a
development project occur just once, frequency distribution of such activity times
cannot be developed from past data.
So, if we follow Beta distribution with weights of 1, 4, 1 for optimistic, mostly
likely and pessimistic time estimates respectively a formula for the expected time
denoted by te can be written as;
to + 4tm + t p
te =
6
For example if we have 2, 5 and 14 hours as the optimistic (to ), most likely (tm ) and
pessimistic (t p ) time estimate then the expected time for the activity would be;
te = 2+4(5)+14
6 = 366 = 6hrs
If the time required by an activity is highly variable (i.e) if the range of our time
estimates is very large, then we are less confident of the average value. We calculate
them if the range were narrower. Therefore it is necessary to have a means to
measure the variability of the duration of an activity. One measure of variability
of possible activity times is given by the standard deviation of their probability
distribution.
PERT simplifies the calculation of standard deviation denoted by St as estimated by
the formula,
t p − to
St =
6
St is one sixth of the difference between the two extreme time estimates, namely
59
pessimistic and optimistic time estimates. The variance Vt of expected time is cal-
culated as the square of the deviation i.e
2
t p − to
Vt =
6
In the above examle;
St = 14−2
6 = 2hrs
14−2 2
= 4hrs2

Vt = 6
7.4. Resource Scheduling in a Network

In scheduling projects using PERT or CPM, we have assumed that the only con-
straint for an activity is to fix the starting date and the finishing date. An activity
may be started as soon as all its predecessors have been completed. Thus we have
an early start schedule for all the activities. In such scheduling procedures it is as-
sumed that the resources required to perform activities are available to any unlim-
ited extent or at least sufficient resources are available for the activity to be started
sometime between earliest and latest start dates. But we come across situations
where the project managers have to face the problem of limited or fixed resources
like manpower availabilities, machine availabilities and capital mobilization. Ac-
tivities, which occur on parallel paths through network, may compete for the same
resource.
Recently considerable work is in progress in developing heuristic programmes for
solving large combinatorial problems, A heuristic can be defined as a guide or
method of reducing search in a problem-solving situations. It gives a rule of thumb.
Businessmen employ heuristics quite often for their problems. As an example we
consider the classic management rule, “Handle only exceptional problems and let
the subordinates decide on routine matters” as a heuristic. Sometime a simple rule
of thumb may not be enough, but other rules are also to particular problem is re-
ferred to as ’heuristic programme’ requiring a computer for complex problems. A
number of different heuristic programmes for scheduling projects with limited re-
sources have been developed recently. These programmes are classified in any one
of the two following forms.
1. Resource leveling programmes: These programmes seek an attempt to re-

duce peak resource requirements and smooth out period to period assign-
60
ments with a restriction on project duration. In other words, in these pro-

grammes the resource requirements (manpower or money power) are kept at
a constant level by altering the start time of the different activities. But at the
same time, the project duration and the sequence are not violated. Resource
leveling programmes are most appropriate to situations where we maintain a
relatively stable employment levels and utilize the resources at a more con-
stant rate. If the levels change either way the expenses are involved in hiring,
training, firing, unemployment insurance and so on. The activity slack is a
measure of flexibility in the assignment of activity start times. We may use
activity slack as a means to smoothing peak resource requirements. The pro-
cedure involves preparing an early-start early-finish schedule for the project
on time scale and then plotting a resource-loading chart for the schedule. The
activities are shifted suitably to reduce the peak resource requirements with-
out violating the sequence and preserving the finish date.
2. Resource allocation programmes: These programs make an attempt to allo-

cate the available resources (manpower, machine hours, money) to project ac-
tivities and to find the shortest project schedule consistent with fixed resource
limits. The following articles deal with these types of heuristic programmes.
In many cases the scheduling problem does not involve only smoothing of require-
ments but also allocation of resources. Almost there are some constraints, which
may be in the form of limited men, machines or finance. The various activities
have to work at their optimum taking into considerations these restrictions. The
resource-leveling model could be modified to give us the desired results. The con-
straint of the fixed due date would have to be removed and concentrate on pushing
down the trigger levels until peak requirements are all under resource limits. If the
limits are confining, the jobs will be pushed to the right, thereby delaying the project
due date on the schedule graph. The constraints cannot be based both on project
due date and resource limits. Resources are allocated on a period-by-period basis
to accommodate some available job, after their predecessors have been completed.
The essential elements are determining which jobs are to be scheduled and which
are to be postponed. The slack is usually the basis on which priority is accorded to
various job. Hence, the jobs, which are most critical, will be scheduled first. In any
problem on resource allocation, the following three rules may be applied.
61
i) The resources are to be allocated in the order of time i.e. start on the first day
and schedule all possible jobs then the second day etc.
ii) When several jobs compete for the same resources preference should be given
to the job with least slack.
iii) The non-critical jobs should be rescheduled so that resources would be free
for scheduling the critical jobs.
E XERCISE 9. ......
62
LESSON 8
Network Optimization Models
8.1. Introduction
Networks arise in numerous settings and in a variety of guises. Transportation,
electrical, and communication networks pervade our daily lives. Network represen-
tations also are widely used for problems in such diverse areas as production, dis-
tribution, project planning, facilities location, resource management, and financial
planning to name just a few examples. In fact, a network representation provides
such a powerful visual and conceptual aid for portraying the relationships between
the components of systems that it is used in virtually every field of scientific, social,
and economic endeavor.
One of the most exciting developments in operations research (OR) in recent years
has been the unusually rapid advance in both the methodology and application of
network optimization models. A number of algorithmic breakthroughs have had
a major impact, as have ideas from computer science concerning data structures
and efficient data manipulation. Consequently, algorithms and software now are
available and are being used to solve huge problems on a routine basis that would
have been completely intractable two or three decades ago.
Many network optimization models actually are special types of linear program-
ming problems. For example, both the transportation problem and the assignment
problem have network representations.
Some applications of network models include
1. Designing a natural gas pipeline
2. Determining the maximum capacity of a pipeline
3. Determining the shortest route through cities
4. Determining the time schedule of activities in a project
5. Determining the minimum cost ow schedule from oil fields to refineries through
a pipeline network.
In this section, we discuss four important kinds of network problems and some
basic ideas of how to solve them. These are:-
63
1. The shortest-path problem (algorithm)
2. The minimum spanning tree problem (algorithm)
3. The maximum ow problem (algorithm)
4. The minimum cost ow problem (algorithm)
Each of the first three types have a very specific structure that arises frequently in
applications. The fourth type provides a unified approach to many other applica-
tions because of its far more general structure.
8.2. Terminologies used in Networks

A network consists of a set of nodes linked by arcs or branches and the notation
used is (N,A) where N is the set of nodes and A is the set of arcs.
diagram
Where N = {1; 2; 3; 4; 5}
and A = {(1; 2); (1; 3); (2; 3); (2; 4)(2; 5); (3; 4); (3; 5); (4; 5)}
Arcs are labeled by naming the nodes at either end; for example, AB is the arc
between nodes A and B where in our case A could be 1 and B could be 2.
Associated with each network is a ow of some type through the arcs.
A directed arc is one which allows positive ow only in one direction and zero ow
in the opposite direction e.g a one way street.
An undirected arc is one which allows ow in either direction e.g. a pipeline.
A directed network is a network that has only directed arcs.
An undirected network is a network that has only undirected arcs.
A path between two nodes is a sequence of distinct arcs connecting these nodes
through other nodes regardless of the direction of the ow in ach arc.
A path forms a cycle or a loop if it connects a node to itself through other nodes.
Two nodes are said to be connected if the network contains at least one undirected
path between them. (Note that the path does not need to be directed even if the
network is directed.) A connected network is a network where every pair of nodes
is connected.
A tree is a cycle free connected network comprised of a subset of all the nodes.
a diagram
64
A spanning tree is one that connects all nodes in the network. If a connected net-
work has n nodes, every spanning tree has exactly n − 1 arcs
a diagram
The example below will be used subsequently to illustrate the approach to the first
three of these problems.
Nairobi National Park has recently been set aside for a limited amount of sight-
seeing and backpack hiking. Cars are not allowed into the park, but there is a
narrow, winding road system for trams and for jeeps driven by the park rangers.
This road system is shown in the Figure below, where location O is the entrance into
the park; other letters designate the locations of ranger stations (and other limited
facilities). The numbers give the distances of these winding roads in miles. The park
contains a scenic wonder at station T. A small number of trams are used to transport
sightseers from the park entrance to station T and back. The park management
currently faces three problems.
1. To determine which route from the park entrance to station T has the small-
est total distance for the operation of the trams.(This is an example of the
shortest- path problem)
2. Telephone lines must be installed under the roads to establish telephone communi-
cation among all the stations (including the park entrance). Because the in-
stallation is both expensive and disruptive to the natural environment, lines
will be installed under just enough roads to provide some connection be-
tween every pair of stations. The question is where the lines should be laid
to accomplish this with a minimum total number of miles of line installed.
(This is an example of the minimum spanning tree problem)
3. More people want to take the tram ride from the park entrance to station T
than can be accommodated during the peak season. To avoid unduly dis-
turbing the ecology and wildlife of the region, a strict ration has been placed
on the number of tram trips that can be made on each of the roads per day.
(These limits dier for the dierent roads, as we shall see later) Therefore, dur-
ing the peak season, various routes might be followed regardless of distance
to increase the number of tram trips that can be made each day. The question
pertains to how to route the various trips to maximize the number of trips
65
that can be made per day without violating the limits on any individual road.
(This is an example of the maximum ow problem)
diagram
8.3. The Shortest Path Problem

Consider an undirected and connected network with two special nodes called the
origin and the destination. Associated with each of the links (undirected arcs) is
a non-negative distance. The objective is to find the shortest path (the path with
the minimum total distance) from the origin to the destination. The essence of this
procedure is that it fans out from the origin, successively identifying the shortest
path to each of the nodes of the network in the ascending order of their (shortest)
distances from the origin, thereby solving the problem when the destination node is
reached. As a linear program, the problem is given as:-
xni j= the amount of ow in arc(i,j)
1,if arc(i,j)is the shortest route
0 otherwise
ci j= the length of arc(i, j)
and the objective is to
maximize Z = ∑ ci j xi j
all defined arcs (i, j)
The constraints represent the conservation of flows equations at each node.
Applying this algorithm to the Nairobi National Park problem gives:- After the
work shown above, the shortest path from the destination to the origin can be traced
back through the last column of table 5.1 as either T ! D ! E ! B ! A ! O or T ! D !
B ! A ! O. Therefore, the two alternates for the shortest path from the origin to the
destination have been identified as O ! A ! B ! E ! D ! T and O ! A ! B ! D ! T, with
a total distance of 13 miles on either path.
table 5.1
8.4. The Minimum Spanning Tree Problem

It deals with linking nodes of a network directly or indirectly using the shortest
total length of connecting branches, e.g. the construction of paved roads between
66
two towns may pass through one or more other towns. The most economical design
of the road system would call for minimizing the total miles of paved roeds.
For the minimum spanning tree problem, if we consider the problem of the Nairobi
National Park, the required property is that the chosen links must provide a path
between each pair of nodes.
The minimum spanning tree problem can be summarized as follows.
1. You are given the nodes of a network but not the links. Instead, you are given
the potential links and the positive length for each if it is inserted into the
network.(Alternative measures for the length of a link include distance, cost,
and time.)
2. You wish to design the network by inserting enough links to satisfy the re-
quirement that there be a path between every pair of nodes.
3. The objective is to satisfy this requirement in a way that minimizes the total
length of the links inserted into the network.
A network with n nodes requires only (n=1) links to provide a path between each
pair of nodes. No extra links should be used, since this would needlessly increase
the total length of the chosen links. The (n = 1) links need to be chosen in such a
way that the resulting network (with just the chosen links) forms a spanning tree.
Therefore, the problem is to find the spanning tree with a minimum total length
of the links. So the figure below illustrates this concept of a spanning tree for the
Nairobi National Park problem. This network is a feasible solution (with a value of
24 miles for the total length of the links)
diagram
8.5. The Maximum Flow Problem

Now recall that the third problem facing the Nairobi National Park management
during the peak season is to determine how to route the various tram trips from the
park entrance (station O) to the scenic wonder (station T) to maximize the number
of trips per day.
(Each tram will return by the same route it took on the outgoing trip, so the analysis
focuses on outgoing trips only.) To avoid unduly disturbing the ecology and wildlife
of the region, strict upper limits have been imposed on the number of outgoing trips
67
allowed per day in the outbound direction on each individual road. For each road,
the direction of travel for outgoing trips is indicated by an arrow in the figure below.
The number on the arrow gives the upper limit on the number of outgoing trips
allowed per day.
diagram
Given the limits, one feasible solution is to send 7 trams per day, with 5 using the
route O → B → E → T, 1 using O → B → C → E → T and 1 using O → B → C →
E → D → T. However, because this solution blocks the use of any routes starting
with O → C (because the E → T and E → D capacities are fully used), it is easy
to find better feasible solutions. Many combinations of routes (and the number of
trips to assign to each one) need to be considered to find the one(s) maximizing
the number of trips made per day. This kind of problem is called a maximum ow
problem.
In general terms, the maximum ow problem can be described as follows.
1. All ow through a directed and connected network originates at one node,

called the source, and terminates at one other node, called the sink. (The
source and sink in the Nairobi National Park problem are the park entrance at
node O and the scenic wonder at node T, respectively.)
2. All the remaining nodes are transshipment nodes. (These are nodes A, B, C,
D, and E in the Seervada Park problem.)
3. Flow through an arc is allowed only in the direction indicated by the arrow-
head, where the maximum amount of ow is given by the capacity of that arc.
At the source, all arcs point away from the node. At the sink, all arcs point
into the node.
4. The objective is to maximize the total amount of ow from the source to the
sink. This amount is measured in either of two equivalent ways, namely,
either the amount leaving the source or the amount entering the sink.
8.6. The Minimum Cost Flow Problem

The minimum cost ow problem holds a central position among network optimiza-
tion models, both because it encompasses such a broad class of applications and
because it can be solved extremely efficiently. Like the maximum ow problem, it
68
considers ow through a network with limited arc capacities. Like the shortest-path
problem, it considers a cost (or distance) for ow through an arc. Like the trans-
portation problem or assignment problem, it can consider multiple sources (supply
nodes) and multiple destinations (demand nodes) for the ow, again with associated
costs. In fact, all four of these previously studied problems are special cases of the
minimum cost ow problem, as we will demonstrate shortly. The reason that the
minimum cost ow problem can be solved so efficiently is that it can be formulated
as a linear programming problem so it can be solved by a streamlined version of the
simplex method called the network simplex method.
The minimum cost ow problem is described below.
1. The network is a directed and connected network.
2. At least one of the nodes is a supply node.
3. At least one of the other nodes is a demand node.
4. All the remaining nodes are transshipment nodes.
5. Flow through an arc is allowed only in the direction indicated by the arrow-
head, where the maximum amount of ow is given by the capacity of that arc.
(If ow can occur in both directions, this would be represented by a pair of
arcs pointing in opposite directions.)
6. The network has enough arcs with sufficient capacity to enable all the ow
generated at the supply nodes to reach all the demand nodes.
7. The cost of the ow through each arc is proportional to the amount of that ow,
where the cost per unit ow is known.
8. The cost of the ow through each arc is proportional to the amount of that ow,
where the cost per unit ow is known.
9. The objective is to minimize the total cost of sending the available supply
through the network to satisfy the given demand. (An alternative objective is
to maximize the total profit from doing this.)
69
8.7. PERT/CPM Models for Project Management

A project such as construction of a bridge, highway, power plant, repair and main-
tenance of an oil refinery or an air plane design, development and marketing a new
product, research and development etc., may be defined as a collection of interre-
lated activities (or tasks) which must be completed in a specified time according
to a specified sequence and require resources such as personnel, money, materials,
facilities etc.
The growing complexities of todays projects had demanded more systematic and
more effective planning techniques with the objective of optimizing the efficiency
of executing the project. Efficiency here implies effecting the utmost reduction
in the time required to complete the project while accounting for the economic
feasibility of using available resources.
Project management has evolved as a new field with the development of two ana-
lytic techniques for planning, scheduling and controlling projects. These are the
Critical Path Method (CPM) and the Project Evaluation and Review Technique
(PERT). PERT and CPM are basically time-oriented methods in the sense that they
both lead to the determination of a time schedule.
8.7.1. Basic difference between PERT and CPM

Though there are no essential differences between PERT and CPM as both of them
share in common the determination of a critical path and are based on the network
representation of activities and their scheduling that determines the most critical
activities to be controlled so as to meet the completion date of the project.
PERT (Program Evaluation Review Technique)
1. Since PERT was developed in connection with R and D work, it had to cope
with the uncertainties associated with R and D activities. In PERT, total
project duration is regarded as a random variable and therefore associated
probabilities are calculated so as to characterize it.
2. It is an event-oriented network because in the analysis of network emphasis

is given an important stages of completion of task rather than the activities
required to be performed to reach to a particular event or task.
3. PERT is normally used for projects involving activities of non-repetitive na-

ture in which time estimates are uncertain.
70
4. It helps in pin pointing critical areas in a project so that necessary adjustment

can be made to meet the scheduled completion date of the project.
CPM (Critical Path Method)
1. Since CPM was developed in connection with a construction project which

consisted of routine tasks whose resource requirements and duration was
known with certainty, it is basically deterministic.
2. CPM is suitable for establishing a tradeoff for optimum balancing between

schedule time and cost of the project.
3. CPM is used for projects involving activities of repetitive nature.
8.7.2. PERT/CPM Network Components And Precedence Relationship

PERT/CPM networks consists of two major components as discussed below:
Events: which are points in time that signify the completion of some activities
and the beginning of new ones. The beginning and end points of an activity is
thus described by 2 events usually known as the Tail and head events. Events are
commonly represented by nodes in the network diagram. They do not consume
time and Resource.
Activities: which represent project operations or tasks to be conducted. An arc is
commonly used to represent an activity, with its head indicating the direction of
progress in the project. Activities originating from a certain event cannot start until
the activities terminating at the same event have been completed. They consume
time and Resource.
Events in the network diagram are identified by numbers. Numbers are given to
events such that arc head number must be greater than arc tail number. Activities
are identified by the numbers of their starting (tail) event and ending (head) event.
An arc (i; j) extends between two events, the tail event i representing the start and
the head event j represents the completion of the activity as shown below.
diagram
The figure below shows another example, where activities (1; 3) and (2; 3) must be
completed before activity (3; 4) can start.
diagram
The rules for constructing the network diagram are as follows:
71
1. Each activity is represented by one and only one arrow in the network.
2. No two activities can be identified by the same head and tail events.
3. To ensure the correct precedence relationship in the arrow diagram, the fol-
lowing questions must be answered as every activity is added to the network:
(a) What activities must be completed immediately before these activity can
start ?
(b) What activities must follow this activity ?
(c) What activity must occur concurrently with this activity ?
Example 5.1. VIVA company is planning to move their operations from Nairobi
to Kisumu. The manager in charge of planning the move, wants to ensure that
everything comes o according to plan, and making sure that the deadline is met.
Table 5.2 shows a list of all the activities the manager plans.
table 5.2
NOTE The numbers assigned to the nodes are arbitrary. They are simply used
to identify events and do not imply anything about precedence relationships. In
the network diagram each activity must start at the node in which its immediate
predecessors ended. Dummy activities can also be included to avoid problems of
hanging events when drawing the network diagram. A dummy activity in a project
network analysis has zero duration.
The network diagram is as below:
diagram
8.7.3. Critical Path Calculations

The application of PERT/CPM should ultimately yield a schedule specifying the
start and completion time of each activity. The arc diagram is the first step towards
achieving that goal. The start and completion times are calculated directly on the
arc diagrams using simple arithmetic. The end result is to classify the activities as
critical or non critical. An activity is said to be critical if a delay in the start of that
course makes a delay in the completion time of the entire project. A noncritical
activity is such that the time between its earliest start and its latest completion time
is longer than its actual duration. A noncritical activity is said to have a slack or oat
time.
72
8.7.4. Determination of the Critical Path

A critical path defines a chain of critical activities that connects the start and end
events of the arc diagram. In other words, the critical path identifies all the critical
activities of the project. The critical path calculations include two phases.
The first phase is called the Forward Pass where all calculations begin from the start
node and move to the end node. At each node a number is computed representing
the earliest occurrence time of the corresponding event. These numbers are shown
in squares . In forward pass we note the number of heads joining the event. We take
the maximum earliest timing through these heads.
The second phase called the Backwards Pass, begins calculations from the \end"node
and moves to the \start"node. The number computed at each node is shown in a tri-
angle near end point which represent the latest occurrence time of the corresponding
event.
Let ESi be the earliest start time of all the activities emanating from event i, i.e. ESi
represents the earliest occurrence time of event i, if i = 1 is the \start"event then
conventionally, for the critical path calculations, ESi = 0. If Di j be the duration of
the activity (i, j). Then the forward pass calculations are given by the formula:
ESi = max ESi +Di j
for all defined (i, j)activities with ESi = 0. Thus in order to compute ES j for event
j, ESi for the tail events of all the incoming activities (i, j) must be computed first.
With the computation of all ES j , the forward pass calculations are completed.
The backward pass starts from the \end"event. The objective of this phase to cal-
culate LCi , the latest completion time for all the activities coming into the event i.
Thus if i = n is the end event LCn = ESn initiates the backward pass. In general for
any node i,
LCi = min LC j +Di j
for all defined activities are calculated, which ends the calculation of backward
pass.
The critical path activities can now be identified by using the results of the forward
and backward passes. An activity (i, j) lies on the critical path if it satisfies the
following conditions.
73
1.
ESi = LCi
2.
ES j = LC j
3.
ES j − ESi = LC j − LCi
These conditions actually indicate that there is no oat or slack time between the
earliest stand and the latest start of the activity. Thus the activity must critical.
Example 5.2. Consider a network which stands from node 1 and terminate at node
6, the time required to perform each activity is indicated on the arcs.
diagram
Let us start with forward pass with ES1 = 0
Since there is only one incoming activity (1, 2) to event 2 with D12 = 3.
ES2 =ES1 + DS2 = 0 + 3 = 3
Let us consider the end 3, since there is only one incoming activity (2, 3) to event
3, withD23 = 3
ES3 =ES2 + D23 = 3 + 3 = 6
To obtain ES4 , since there are two activities (3, 4) and (2, 4) to the event 4 with
D24 = 2and D34 = 0.
ES4 = maxi=2,3 {ESi + De4}

= maxES2 + D24 , ES3 + D34
= max{3 + 2, 6 + 0} = 6
Similarly ES5 = 13 andES5 = 19 Which completes the first phase.

In the second phase we have
74
LC6 = 19 = ES6
LC6 = 19 − 6 = 13
LC4 = min j=5,6 LCJ − D4J } = 6
LC3 = 6, LC2 = 3and LC1 = 0 and hence activities (1, 2), (2, 3) (3, 4) (4, 5) (5, 6)
are critical and (2, 4) (4, 6), (3, 6), are non-critical. Thus the activities (1, 2), (2,
3) (3, 4) (4, 5) (5, 6) define the critical path which is the longest possible time to
complete the project.
8.7.5. Project Management PERT

The analysis in CPM does not take into the case where time estimates for the differ-
ent activities are probabilistic. Also it does not consider explicitly the cost of sched-
ules. Here we will consider both probability and cost aspects in project scheduling.
Probability considerations are incorporated in project scheduling by assuming that
the time estimate for each activity is based on 3 different values. They are:-
a= The optimistsic time, which will be required if the execution of the project goes
extremely well.
b= The pessimistic time, which will be required if everything goes bad.
m= The most likely time, which will be required if execution is normal.
The expected duration of each activity
a +¯ b + 4m
D=
6
This estimate can be used to study the single estimate D in the critical path calcula-
tion. The variance of each activity denoted by V is defined by
2
b−a
V=
6
The earliest expected times for the node i denoted by E(κi) for each node i is obtained
by taking the sum of expected times of all activities leading to the node i, when
more than one activity leads to a node i, then greatest of all E(κi) is chosen. Let
75
κi be the earliest occurrence time of the event i, we can consider κi as a random

variable. Assuming that all activities of the network are statistically independent,
we can calculate the mean and the variance of the κi as follows:- E(κi) = ESi and
Var[κi] = ∑ X kVk , Where K defines the activities along the largest path leading to
i. For the latest expected time, we consider the last node.
Note: The probability distribution of times for completing an event can be approx-
imated by the normal distribution due to central limit theorem. Since i represents
the earliest occurrence time, event will meet a certain schedule time STi (specified
by an analyst) with probability

√ i ] ≤ STi −E[µ
prob (µi ≤ STi ) =prob µi −E[µ Vi
√
Vi
i]
= prob (Z ≤ Ki )
where
Z ∼ N (0, 1)and Ki = STi −E[µ
√
V
i]
i
76
Revision Questions
Example . ...
Solution:
for revision
E XERCISE 10. ...
77
LESSON 9
Simulation
Simulation deals with the study of (dynamic) systems over time. There are three
types of simulations
• Analogue
• Continuous
• Discrete
In analogue models, the physical (original) system is replaced by a model using

analogy, which is easier for manipulation.
Continuous models represent the system undergoing smooth changes in the char-
acteristic over a certain time period. If the system is simulated with a model and
observed it only at selected points in time, we have discrete model.
These time points coincide with the occurrence of certain events, which play an
important role to effect the changes in the performance of a system
Monte Carlo Simulation is the code name given by Von Neumann to the technique
of solving problems too expensive for experimental solutions and too complicated
for analytical treatment. If the model involves random sampling from a known
probability distribution, the procedure is called Monte Carlo Simulation.
9.1. Game Theory

Learning Outcomes
• Understand game theory and simulation as applicable in research operations
78
9.2. Introduction
Many conflicting situations are found in everyday life, in economic, social, polit-
ical, military, battles, advertising and marketing campaign by competing business
firms. In these situations two or more individuals have to take decisions that involve
conflicting interests.
A basic feature in many of these situations is that the final result depends primarily
on the combination of strategies selected by the person’s involved, called adver-
saries. Game theory handles such situations. Von Neumann originally developed
the Game Theory.
The following properties hold good for a competitive game.
1. There are finite number of competitors
2. Each of the competitors has a finite list of possible courses of actions known
as strategy. The number of strategies need not be the same for each competi-
tor.
3. A play of the game results when each of the competitors chooses a single
course of action from the list of strategies available to him. The choices are
assumed to be made simultaneously so that no competitor knows his oppo-
nent’s choices until he is already committed to his own.
4. The outcome of a play depends on the strategies undertaken by the com-

petitors. Each outcome determines the set of payments to be made to each
competitor.
An objective of the game theory is to develop a rational criterion for selecting a

strategy. This is done under the assumption that both players are rational and each
will uncompromisingly attempt to do as well as possible, relative to his opponent.
Game theory assumes that both players are actively trying to improve their own
welfare in opposition to that of opponent. There are different types of games and
they may be classified indifferent ways. Some of them are,
• Two-Person Zero-sum game
• Games with mixed strategies
• Games with Dominance, and so on
79
Revision Questions
Example . ...
Solution:
for revision
E XERCISE 11. ...
80
LESSON 10
Waiting Line Theory or Queuing Model
Here customer or element represents a person or machine or any other thing, which
is in need of some service from servicing point and service represents any type of
attention to the customer to satisfy his need. For example,
1. Person going to hospital to get medical advice from the doctor is an element
or a customer,
2. A person going to railway station or a bus station to purchase a ticket for the
journey is a customer or an element,
3. A person at the ticket counter of a cinema hall,
4. A person at a grocery shop waiting to purchase consumables,
5. A bank pass book tendered to a bank clerk for withdrawal of money,
6. A machine break down and waiting for the attention of a maintenance crew.
7. Vehicles waiting at a traffic signal,
In the above cases, the service means,
1. Doctor is a service facility and medical care is a service,
2. Ticket counter is a service facility and issue of ticket is service.
3. Ticket counter is a service facility and issue of ticket is service.
4. Shop owner is a service facility and issue of items is service.
5. Bank clerk is a service facility and passing the cheque is service.
6. Maintenance crew is service facility and repairing the machine is service.
7. Traffic signals are service facility and control of traffic is service.
81
In general we can say that a ow of customers from infinite or nite population towards
the service facility forms a queue or waiting line on account of lack of capability to
serve them all at once.
Queues or waiting lines stand for the number of customers waiting to be served.
Queue does not include the customer being served. The process or system that
performs the services to the customer is termed as service channel or service facility.
10.1. Queuing system or process

When we speak of queue, we have to deal with two elements, i.e. Arrivals and
Service facility. the entire queuing system can be completely described by:
1. The input (Arrival pattern)
2. The service mechanism or service pattern,
3. The queue discipline and
4. Customer behavior.
Components of the queuing system are arrivals, the element waiting in the queue,
the unit being served, the service facility and the unit leaving the queue after service.
10.1.1. Input Process

This describes the way in which the customers arrive and join the system. In general
customer arrival will be in random fashion, which cannot be predicted, because the
customer is an independent individual and the service organization has no control
over the customer.
The input process is described by the following characteristics
• Size of arrivals: This greatly depends on the nature of size of the population,
which may be infinite or nite. The arrival pattern can be more clearly de-
scribed in terms of probabilities and consequently the probability distribution
for inter-arrival times i.e. the time between two successive arrivals or the dis-
tribution of number of customers arriving in unit time must be defined. Here
we assume that customers arrive in Poisson or Completely random fashion.
82
• Inter-arrival time: The period between the arrival of individual customers

may be constant or may be scattered in some distribution fashion. Most queu-
ing models assume that the some inter-arrival time distraction applies for all
customers throughout the period of study. Here we assume distribution of
service time follows a negative exponential distribution
• Capacity of the service system: In queuing context the capacity refers to

the space available for the arrivals to wait before taken to service. The space
available may be limited or unlimited. When the space is limited, length of
waiting line crosses a certain limit; no further units or arrivals are permitted
to enter the system till some waiting space becomes vacant.
• Customer behavior: The length of the queue or the waiting time of a cus-
tomer or the idle time of the service facility mostly depends on the behavior
of the customer. Here the behavior refers to the impatience of a customer
during the stay in the line. Customer behavior can be classified as:
1. Balking: This behavior signifies that the customer does not like to join the
queue seeing the long length of it. This behavior may effect in loosing a
customer by the organization. Always a lengthy queue indicates insufficient
service facility and customer may not turn out next time.
2. Reneging: In this case the customer joins the queue and after waiting for
some time looses his patience and leaves the queue. This behavior of the
customer may also cause loss of customer to the organization.
3. Collusion: In this case several customers may collaborate and only one of
them may stand in the queue. One customer represents a group of customer.
Here the queue length may be small but service time for an individual will be
more. This may break the patience of the other customers in the waiting line
and situation may lead to any type of worst episode.
4. Jockeying: If there are number of waiting lines depending on the number of

service stations, for example gas stations, Cinema theatres, etc. A customer
in one of the queue after seeing the other queue length, which is shorter, with
a hope of getting the service, may leave the present queue and join the shorter
queue. Perhaps the situation may be that other queue which is shorter may be
83
having more number of Collaborated customers. In such case the probability

of getting service to the customer who has changed the queue may be very
less. Because of this character of the customer, the queue lengths may goes
on changing from time to time.
10.1.2. Service Mechanism or Service Facility

Service facilities are arranged to serve the arriving customer or a customer in the
waiting line is known as service mechanism. We consider
Service facility design: Arriving customers maybe asked to form a single line
(Single queue) or multi line (multi queue) depending on the service need. When
they stand in single line it is known as Single channel facility when they stand in
multi lines it is known as multi channel facility.
1. Single channel queues: Only one unit can be served at a time, hence arriving
customers form a queue near the facility. The next element is drawn into
service only when the service of the previous customer is over.
2. Multi Channel queues: When the input rates increases, and the demand for
the service increases, the management will provide additional service facil-
ities to reduce the rush of customers or waiting time of customers. In such
cases, different queues will be formed in front of different service facilities.
Queue discipline or Service discipline: When the customers are standing in a

queue, they are called to service depending on the nature of the customer. The
order in which they are called is known as Service discipline. There are various
ways in which the customer called to serve. They are:
1. First In First Out (FIFO) or First Come First Served (FCFS). We are quite
aware that when we are in a queue, we wish that the element which comes
should be served first, so that every element has a fair chance of getting ser-
vice. Moreover it is understood that it gives a good morale and discipline in
the queue.
2. Last in first out (LIFO) or Last Come First Served (LCFS). In this system, the
element that arrived last will have a chance of getting service first. In general,
this does not happen in a system where human beings are involved. But this
84
is quite common in Inventory system. This can also be written as First In Last
Out (FILO).
3. Service In Random Order (SIRO). In this case the items are called for service
in a random order. The element might have come first or last does not bother;
the servicing facility calls the element in random order without considering
the order of arrival. This may happen in some religious organizations but
generally it does not followed in an industrial / business system.
4. Service By Priority. Priority disciplines are those where any arrival is chosen
for service ahead of some other customers already in queue. As an exam-
ple, in a doctors clinic, when the doctor is treating a patient with stomach
pain, suddenly a patient with heart stroke enters the clinic, the doctor asks the
patient with stomach pain to wait for some time and give attention to heart
patient. This is the rule of priority.
10.2. Queuing problems

The most important information required to solve a waiting line problem is the
nature and probability distribution of arrivals and service pattern. The answer to
any waiting line problem depends on finding:
1. Queue length: The probability distribution of queue length or the number

of persons in the system at any point of time. Further we can estimate the
probability that there is no queue.
2. Waiting time: This is probability distribution of waiting time of customers in

the queue. That is we have to nd the time spent by a customer in the queue
before the commencement of service, which is called his waiting time in the
queue. The total time spent in the system is the waiting time in the queue plus
the service time. The waiting time depends on various factors, such as:
(a) The number of units already waiting in the system,

(b) The number of service stations in the system,
(c) The schedule in which units are selected for service,
(d) The nature and magnitude of service being given to the element being
served.
85
3. Service time: It is the time taken for serving a particular arrival.
4. Average idle time or Busy time distribution: The average time for which the
system remains idle. We can estimate the probability distribution of busy
periods. If we suppose that the server is idle initially and the customer ar-
rives, he will be provided service immediately. During his service time some
more customers will arrive and will be served in their turn according to the
system discipline. This process will continue in this way until no customer
is left unattended to and the server becomes free again after serving all the
customers. At this stage we can conclude, that the busy period is over.
10.3. Symbols used in queuing models

A queue is designated or described as shown below: A model is expressed as
A=B=S : (d=f) where,
• A: Arrival pattern of the units, given by the probability distribution of inter-

arrival time of units. For example, Poisson distribution, and inter arrival time
is 1 minute or 10 units arrive in 30 minutes etc.
• B: The probability distribution of service time of individual being actually

served. For example the service time follows negative exponential distribu-
tion and 10 units are served in 10 minutes or the service time is 3 minutes,
etc.
• S: The number of service channels in the system. For example the item is
served at one service facility or the person will receive service at 3 facilities
etc.
• d: Capacity of the system. That is the maximum number of units the system
can accommodate at any time. For example, the system has limited capacity
of 40 units or the system has infinite capacity etc.
• f: The manner or order in which the arriving units are taken into service i.e.
FIFO / LIFO / SIRO /Priority.
86
10.3.1. Notations
• X: Inter arrival time between two successive customers (arrivals).
• Y : The service time required by any customer.
• w: The waiting time for any customer before it is taken into service.
• v: Time spent by the customer in the system.
• n: Number of customers in the system, (in the waiting line) at any time,
including the number of customers being served.
87
Revision Questions
Example . ...
Solution:
for revision
E XERCISE 12. ...
88
Solutions to Exercises
Exercise 3. for revision Exercise 3
89

Hepm3203 Operations Research

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JOMO KENYATTA UNIVERSITY

SCHOOL OF OPEN, DISTANCE &

HEPM 3203 OPERATIONS RESEARCH

P.O. Box 62000, 00200

1. Understand operations research techniques.

2. Solve linear programming and optimization problems.

3. Use operations research techniques to solve practical problems in business

2. Terry Lucey. Quantitative Techniques, 6th edition, (2002).

3. N.K Tiwari, Shishir K. Shandilya Operations Research.

• 20% of marks from two (2) assignments

• 60% of marks from written Examination to be administered at JKUAT main

3 Linear Programming (cont’d) 18

4 The Concepts of Inventory and Inventory Management 23

4.5 Inventory Costs These can broadly be categorized into 4 groups. . . 29

8 Network Optimization Models 63

8.7.5 Project Management PERT . . . . . . . . . . . . . . . . . . 75

10 Waiting Line Theory or Queuing Model 81

• Operations Research uses Scientific Methods for making decisions.

• It is interdisciplinary approach for solving problems and it uses the knowl-

• As operations research has scientific approach, it improves the quality of an-

• Operations research provides a scientific base for decision-making and pro-

1. Operations Research is an interdisciplinary team approach.

2. Operations Research increases the creative ability of the decision maker.

3. Operations Research is a systems approach.

1.2. History of operations Research

1.3. The Nature of Operations Research

just a few. Therefore, the breadth of application is unusually wide.

1. Define the problem of interest and gather relevant data.

2. Formulate a mathematical model to represent the problem.

3. Develop a computer-based procedure for deriving solutions to the problem

4. Test the model and refine it as needed.

5. Prepare for the ongoing application of the model as prescribed by manage-

1.4. Operations Research Models

1. What are the decision alternatives?

2. Under what restrictions is the decision made?

3. What is the appropriate objective criterion for evaluating the alternatives?

These three alternatives can be considered:

1. Buy five regular NBI-KSM-NBI for departure on Monday and return on

• Alternative 1 cost = 5 x 8,000 = kes 40,000

• Alternative 2 cost = (0:75 x 2 x 8,000) + (4 x 0.8 x 8,000) = kes 37,600

• Alternative 3 cost = 5 x 0.8 x 8,000 = kes 32,000

Option 3 looks like the best choice in this case.

1. Length + width of rectangle= Half the length of the wire.

2. Length and width cannot be negative.

Algebraically, these restrictions can be translated as;

1.5. Solving the OR Model

1. Linear Programming Model - This model is used for resource allocation

• A manufacturing company wants to use their resources optimally and

All the above-discussed models are Linear Programming Models.

2. Sequencing Model-When a manufacturing rm has some job orders, which

4. Replacement Model-Any capital item, which is continuously used for pro-

5. Inventory Models-Any manufacturing rm has to maintain stock of materials

E XERCISE 1.  Explain ...

1. The problem must be capable of being stated in numeric terms.

2. All factors involved in the problem must have a linear relationship.

3. The problem must permit a choice or choices between alternative courses of

4. There must be one or more restrictions in the factors involved.

The programming part of a LP refers to the solution method.

2.2. Basic Assumptions

1. The decision maker here is completely certain (i.e., deterministic conditions)

4. The profit contribution of a product remains constant, irrespective of level of

5. The decision variables are continuous meaning companies can manufacture

E XERCISE 1. Explain ...

Example . Discuss discrete event simulation and its application

E XERCISE 2. Explain the components in discrete-event simulation models