Bagcat, Joseph

September 13, 2022

Define the following:

Linear programming- Linear programming (LP), also called linear optimization, is a method to achieve
the best outcome (such as maximum profit or lowest cost) in a mathematical model whose
requirements are represented by linear relationships.

Example problem:

If there are two decision variables in a linear programming problem then the
graphical method can be used to solve such a problem easily.
Suppose we have to maximize Z = 2x + 5y.
The constraints are x + 4y ≤ 24, 3x + y ≤ 21 and x + y ≤ 9
where, x ≥ 0 and y ≥ 0.
To solve this problem using the graphical method the steps are as follows.
Step 1: Write all inequality constraints in the form of equations.
x + 4y = 24
3x + y = 21
x+y=9
Step 2: Plot these lines on a graph by identifying test points.
x + 4y = 24 is a line passing through (0, 6) and (24, 0). [By substituting x = 0
the point (0, 6) is obtained. Similarly, when y = 0 the point (24, 0) is
determined.]
3x + y = 21 passes through (0, 21) and (7, 0).
x + y = 9 passes through (9, 0) and (0, 9).
Step 3: Identify the feasible region. The feasible region can be defined as the
area that is bounded by a set of coordinates that can satisfy some particular
system of inequalities.
Any point that lies on or below the line x + 4y = 24 will satisfy the constraint x
+ 4y ≤ 24.
Similarly, a point that lies on or below 3x + y = 21 satisfies 3x + y ≤ 21.
Also, a point lying on or below the line x + y = 9 satisfies x + y ≤ 9.
The feasible region is represented by OABCD as it satisfies all the above-
mentioned three restrictions.
Step 4: Determine the coordinates of the corner points. The corner points are
the vertices of the feasible region.
O = (0, 0)
A = (7, 0)
B = (6, 3). B is the intersection of the two lines 3x + y = 21 and x + y = 9.
Thus, by substituting y = 9 - x in 3x + y = 21 we can determine the point of
intersection.
C = (4, 5) formed by the intersection of x + 4y = 24 and x + y = 9
D = (0, 6)
Step 5: Substitute each corner point in the objective function. The point that
gives the greatest (maximizing) or smallest (minimizing) value of the objective
function will be the optimal point.

Corner Points Z = 2x + 5y

O = (0, 0) 0
A = (7, 0) 14

B = (6, 3) 27

C = (4, 5) 33

D = (0, 6) 30

33 is the maximum value of Z and it occurs at C. Thus, the solution is x = 4

and y = 5.

Transportation problem- Transportation problem works in a way of minimizing the cost function. Here,
the cost function is the amount of money spent to the logistics provider for transporting the
commodities from production or supplier place to the demand place.

Example problem:

b) Transportation Problem: (Least Cost Cell Method)

The North-West Corner method has been discussed in the previous session. In this session,

the Least Cost Cell method will be discussed.

Solution: According to the Least Cost Cell method, the least cost among all the cells in the table has

to be found which is 1 (i.e. cell (O1, D2)).

Now check the supply from the row O1 and demand for column D2 and allocate the smaller value to

the cell. The smaller value is 300 so allocate this to the cell. The supply from O1 is completed so

cancel this row and the remaining demand for the column D2 is 350 – 300 = 50.

Now find the cell with the least cost among the remaining cells. There are two cells with the least

cost i.e. (O2, D1) and (O3, D4) with cost 2. Lets select (O2, D1). Now find the demand and supply

for the respective cell and allocate the minimum among them to the cell and cancel the row or

column whose supply or demand becomes 0 after allocation.

Queing theory -Queuing theory is the study of the movement of people, objects, or information through
a line. Queuing theory aims to achieve a balance that is efficient and affordable.

Example problem:
The GI/M/1 queueing system is another important model for which the embedded Markov chain
technique enables us to obtain useful results. For this model we assume that the interarrivai times are
independent identically distributed random variables. (Such an arrival pattern is called a renewal
process.) We represent the system state by the number of customers in the system at the instant of a
customer arrival. This yields a stochastic process {Xn}, where Xn is the number of customers in the
system when the nth customer arrives. By proceeding much as we did in Section 5.3.1, it can be shown
that {Xn} is a Markov chain, and that, if p < 1, then a steady state probability distribution {π„} exists
where nn = P[an arrival finds n customers in the system], n = 0, 1, 2, .... For the details see Kleinrock [10]
or Gross and Harris [6]. It is also shown in the above references that πΠ = π 0 (1-π 0 ) " , η = 0,1,2,... ,
(5.3.49) where, of course, π0 is the probability that an arriving customer finds the system empty.
Furthermore, π0 is the unique solution of the equation 1 - π0 = Λ*(μπ0), (5.3.50)

We give the equations for the most common types of M/G/1 queue ing systems, called nonpreemptive
(HOL), and preemptive resume. In both cases each of the priority classes has a Poisson arrival pattern
with average arrival rate Xh and a general independent service time distribution with average value EfsJ
= ί/μ^ Thus, by Section 3.1.4, the total arrival rate to the system has a Poisson distribution with average
rate λ = λ, +λ2 + ..- + λΗ. (5.4.1) By the law of total expectation, Theorem 2.8.1, E[s] = ^ E[Sl] + ^ E[s2] + -
+ £ E[sn], (5.4.2) and, by the law of total moments, Φ 2 ] = j Φι 2 ] + j Φ22 ] + - + j Φ Λ (5.4.3) for both
queueing systems. The remainder of the equations for the HOL queueing system are given in Table 18,
Appendix C, while those for the preemptive resume queueing system are given in Table 19. We illustrate
the effects of priority queueing by the following example.

Decision theory - Decision theory is the study of a person or agents' choices. It helps us understand the
choices professionals, consumers, or even voters make when coming to a decision.

Example problem:

Let U(x) denote the patient’s utility function, where x is the number of months to live. Assuming that
U(12) = 1.0 and U(0) = 0, how low can the patient’s utility for living 3 months be and still have the
operation be preferred? For the rest of the problem, assume that U(3) = 0.8. Solution: The operation
would be preferred as long as U(3) < 0.7. max(U(3),0.7) op 0.7 U(3) no op live (0.7) 1 0 die (0.3)

Simulation- A simulation is a model that mimics the operation of an existing or proposed system,
providing evidence for decision-making by being able to test different scenarios or process changes.

Example problem:

Example : An ice-cream parlor's record of previous month’s sale of a particular variety of ice
cream as follows (see Table).
Simulation of Demand Problem
Simulate the demand for first 10 days of the month

Solution: Find the probability distribution of demand by expressing the frequencies in terms
of proportion. Divide each value by 30. The demand per day has the following distribution
as shown in table.
Probability Distribution of Demand

Find the cumulative probability and assign a set of random number intervals to various
demand levels. The probability figures are in two digits, hence we use two digit random
numbers taken from a random number table. The random numbers are selected from the
table from any row or column, but in a consecutive manner and random intervals are set
using the cumulative probability distribution as shown in Table.

Cumulative Probability Distribution

To simulate the demand for ten days, select ten random numbers from random number
tables. The random numbers selected are, 17, 46, 85, 09, 50, 58, 04, 77, 69 and 74 The first
random number selected, 7 lies between the random number interval 17-49 corresponding
to a demand of 5 ice-creams per day. Hence, the demand for day one is 5. Similarly, the
demand for the remaining days is simulated as shown in Table.

Demand Simulation

Inventory management- Inventory management helps companies identify which and how much stock to
order at what time.

Example problem:

Lack of Inventory Visibility

If you’re unable to locate or identify stocks in your inventory, shipping products on time becomes very
difficult, and this can dent your business reputation.

Inventory that is incomplete, difficult to find, or erroneous, is sure to hamper your bottom line.

In fact, the most common reason for delayed, wrong, or partial shipments is the difficulty of locating or
identifying inventory in the warehouse.
Receiving in finding the correct stock is critical for ensuring warehouse efficiency, as well as good
experiences for the customer.

Solution: Real-time inventory management system

When you implement a real-time inventory management system like Tranquil ERP, you will have all the
accurate details regarding location data, and stock availability.

This will help in the easy location of stocks, which ultimately translates to better order fulfilment and
customer satisfaction.