DECISION SCIENCE

Golden Rule to Succeed in anything

related to mathematics (decision science
included)
 You can’t learn to swim without getting wet!
 PRACTICE……..
 MORE PRACTICE……..
 & SOME MORE PRACTICE……..
 ………………………………………..
 ……………………………………………….
 THE MORE THE BETTER ……………………………

Prepared by Prof.Dr Ajay Parulekar

Reference Books
 Quantitative Techniques in Management,
N.D.Vohra, 4th Edition, Tata Mcgraw Hill
Publishing
 Operations Research – Theory and Applications,
J.K.Sharma, 4th / 5th Edition, Macmillan
Publishers

Prepared by Dr Ajay Parulekar

Prepared by Dr Ajay Parulekar
Introduction to Decision Sciences
 Decision Sciences is concerned with the study and
application of various data analysis, modeling and
optimization tools and techniques that are useful in the real
world decision making situations in various areas of
management
 It covers a wide range of Topics including statistical tools and
models, mathematical programming including linear, integer
and non-linear programming, combinatorial optimization,
models based on fuzzy sets and systems, and simulation
models
 These models find useful applications in such wide-ranging
areas as production and operations management, distribution
and logistics, marketing research and financial modeling

Prepared by Dr Ajay Parulekar

Role of Quantitative techniques
 Increased business complexity as a result of factors like
intense competition, reduced product life cycles, increased
customer awareness and so on, has greatly increased the
complexity of managerial decision making
 Decision makers can’t take decisions just on the basis of their
personal experience, intuition or guesswork as the
consequences of any wrong decision can be serious and costly
 Quantitative analysis provides a scientific approach to
decision making
 The quantitative technique approach helps in comparison of
all possible alternatives (courses of action) with reference to
their potential outcomes
Prepared by Dr Ajay Parulekar
Role of Quantitative techniques
 It also provides the sensitivity analysis of the solution to
changes (kind of what if)
 In short the quantitative techniques use interdisciplinary,
scientific, holistic and objective oriented approach to
decision making
 Use of quantitative techniques in decision making helps
resolve the conflicts of interest among various sections of the
organization and seeks to find the optimal solution that is in
the interest of the organization as a whole
 However please note: Quantitative Technique provides an aid
to the decision maker’s judgment and its not a substitute for
the same (AI anybody?)
Prepared by Dr Ajay Parulekar
Prepared by Dr Ajay Parulekar
Topic Objectives
 To get acquainted with the basic terminology of linear
programming
 To understand fundamental concepts and general
mathematical structure of a linear programming model
 To learn graphical method of solving linear
programming problems
 To learn applications of linear programming through real
life business problems

Prepared by Dr Ajay Parulekar

Introduction
 Limited Resources ------ Unlimited uses. Hence a
conflict. How to ensure optimum utilization of available
resources? While there are many management tools
available, a prominently used tools to achieve this is
‘Linear Programming’
 Linear Programming is a mathematical technique
useful for allocation of ‘limited’ resources to several
competing activities / demands, on the basis of a
given criterion of optimality
 Basic underlying assumption is of linear relationship

Prepared by Dr Ajay Parulekar

Introduction

Prepared by Dr Ajay Parulekar

LP - Terminology
i. Decision Variables: They are the unknowns to be determined
in order to find solution to the problem. For e.g. In case of
finding out optimum product mix solution for a firm, the
quantities of products to be produced / sold for each variety
shall represent decision variables. For using LP, the decision
variables should be linearly related & they should be inter
related in terms of consumption of resources
ii. Constraints: A constraint is nothing but a limitation on
resource adequacy which is represented mathematically in LP.
Thus solution to the problem has to be found out within the
limits as defined by the constraints
iii. Objective function: It represents, the mathematical equation
for the desired objective (optimization) in terms of decision
variables

Prepared by Dr Ajay Parulekar

LP - Terminology
iv. Linear Relationships: LP deals with problems in which the
objective function as well as constraints can be expressed as
linear mathematical functions
v. Non negativity restrictions: Essentially value of decision
variables must be either zero or positive. Since LP deals with
real life problems, negative value of decision variable is non
existent
vi. Feasible solution: A set of values of decision variables which
satisfies all the constraints and non negativity restriction is
called feasible solution. There are usually large number of
feasible solutions to a LP problem
vii. Optimal solution: A feasible solution which optimizes the
objective function is called optimal solution. Thus optimal
solution provides the best feasible choice of values
Prepared by Dr Ajay Parulekar
LP – Problem identification / formulation & solving
 Problem Identification: It involves specifying the problem,
identification of available alternatives, establishing the relationship
between the variables, specifying the constraints etc.
 Problem Formulation: Involves construction of a mathematical
model from the given data. It requires identification of decision
variables, specifying the objective, setting up mathematical
equations for the constraints & the objective
 Problem Solving: Involves selection of the appropriate method,
obtaining initial feasible solution followed by testing the solution
for optimality & finally finding out the optimal solution
LP problem can be solved by ‘Graphical method’ or by
‘Simplex Method’. Graphical Method is suitable for up to
2 variables. For complicated LP problems involving 2 or more
variables ‘Simplex Method’ is suitable
Prepared by Dr Ajay Parulekar
Example 1
An Advertising agency is planning a media campaign for a client, who is
a two wheeler manufacturer. Total budget allotted by the client manager
for this campaign is Rs.90 lakh. Promotional media as shortlisted by the
client are local newspapers, radio & prime time television. The client
wishes to promote its newly launched 125 cc fuel efficient motorcycle
which is primarily targeted at youth. Agency’s own research data on cost
effectiveness of advertising media reveals following,

The client wishes that at least 10 million youth should be exposed to t.v.
advertising. Also the total expenses on radio advertising should not
exceed Rs. 12,00,000. Formulate the problem as LP

Prepared by Dr Ajay Parulekar

 Model Answer
What is asked?.....decision about the mix of advertising media
So let,
x₁ = number of newspaper advertising units to be bought
x₂ = number of radio advertising units to be bought
x₃ = number of prime time t.v. advertising units to be bought
thus x₁, x₂ and x₃ become our decision variables
What is to be achieved?...... Objective is to Maximize the total number of
youth to be exposed to the advertisement.
Let Z denote Objective function.
Hence, Maximize Z = 1,00,000x₁ + 10,00,000x₂ + 20,00,000x₃
What are the constraints under which the objective function is to be achieved?
i) Non negativity constraint:
x₁, x₂, x₃ ≥ 0

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 Model Answer
ii) Total budget for ad campaign,
50,000x₁ + 2,00,000x₂ + 6,00,000x₃ ≤ 90,00,000
i,e. x₁ + 4x₂ + 12x₃ ≤ 180

iii) Total exposure through t.v. advertisement,

20,00,000x₃ ≥ 10,000,000
i.e. x₃ ≥5

iv) Total expense on radio advertisement

2,00,000x₂ ≤ 12,00,000
i.e. x₂ ≤6
Prepared by Dr Ajay Parulekar
 Model Answer
Thus LP model can be formulated as,

Maximize Z = 1,00,000x₁ + 10,00,000x₂ + 20,00,000x₃

Subject to,
x₁ , x₂ , x₃ ≥ 0
x₁ + 4x₂ + 12x₃ ≤ 180
x₃ ≥ 5
x₂ ≤ 6

Prepared by Dr Ajay Parulekar

Example 2
A small scale unit employs 5 skilled men & 10 semi-skilled
men. It manufactures an articles in two qualities ‘deluxe
model’ & ‘ordinary model’. The making of deluxe model
requires 2 hrs work by a skilled man & 2 hrs work by a semi-
skilled man. The ordinary model requires 1 hr work by a
skilled man and 3 hrs work by a semi-skilled man. As per
company rule, no man can work for more than 8 hrs per day.
The entrepreneur earns a clear profit of Rs.100 on ‘deluxe
model’ & Rs.80 on ‘ordinary model’. Formulate the model
of the problem.
Model Answer
→
Let x₁ be per day production of ‘deluxe’ model & x₂ be
per day production of ‘ordinary’ model. Hence objective
is to maximize profit by way of deciding the right
production mix.

Hence, Maximize Z = 100 x₁ + 80x₂

Non negativity constraint implies x₁ , x₂ ≥ 0.
Available Manufacturing hours constraints,
For, skilled workers = 40 hrs…………. 2x₁ + x₂ ≤ 40
For, unskilled workers = 80 hrs. ……. 2x₁ + 3x₂ ≤ 80

Prepared by Dr Ajay Parulekar

Example 3
A farmer has a 100 acre farm. He can sell the tomatoes, lettuce or radishes he can raise in the
farm. The price he can obtain is Rs.10 per Kg for tomatoes, Rs.9 a head for lettuce & Rs. 8 per
Kg for radishes. The average yield per acre is 2000 Kg for tomatoes, 3000 heads of lettuce and
1000 Kg of radishes. Fertilizer is available at Rs.5 per Kg and the amount required per acre is
100 Kg each for tomatoes and lettuce and 50 Kg for radishes. Labour required for sowing,
cultivating & harvesting per acre is 5 man-days each for tomatoes and radishes & 6 man-days
for lettuce. A total of 400 man-days of labour is only available at Rs. 200 per man-day.
Formulate LP model for this problem in order to maximize farmer’s total profit.
→
Decision variables are x₁ (amount of acreage for tomatoes) , x₂ (amount of acreage for lettuce)
& x₃ (amount of acreage for radishes).

Per acre profitability for tomatoes = 10 X 2000 – 5 X 100 – 5 X 200

= 18,500
Per acre profitability for lettuce = 9 X 3000 – 5 X 100 – 6 X 200
= 25,300
Per acre profitability for radish = 8 X 1000 – 5 X 50 – 5 X 200
= 6,750
Linear Programming
Hence Objective function is,
Maximize Z = 18,500 x₁ + 25,300 x₂ + 6,750 x₃

Constraints:
i) x₁, x₂, x₃ ≥ 0
ii) Man-days are limited to 400,
5x₁ + 6x₂ + 5x₃ ≤ 400
iii) Total land availability is 100 acre,
x₁ + x₂ + x₃ ≤ 100
Example 2 ( Contd.)

A small scale unit employs 5 skilled men & 10 semi-skilled

men. It manufactures an articles in two qualities ‘deluxe
model’ & ‘ordinary model’. The making of deluxe model
requires 2 hrs work by a skilled man & 2 hrs work by a semi-
skilled man. The ordinary model requires 1 hr work by a
skilled man and 3 hrs work by a semi-skilled man. As per
company rule, no man can work for more than 8 hrs per day.
The entrepreneur earns a clear profit of Rs.100 on ‘deluxe
model’ & Rs.80 on ‘ordinary model’. Formulate the LP
problem & solve it graphically.
Model Answer
→
Let x₁ be per day production of ‘deluxe’ model & x₂ be
per day production of ‘ordinary’ model. Hence objective
is to maximize profit by way of deciding the right
production mix.

Hence, Maximize Z = 100 x₁ + 80x₂

Non negativity constraint implies x₁ , x₂ ≥ 0.
Available Manufacturing hours constraints,
For, skilled workers = 40 hrs…………. 2x₁ + x₂ ≤ 40
For, unskilled workers = 80 hrs. ……. 2x₁ + 3x₂ ≤ 80

Prepared by Dr Ajay Parulekar

Example 4
A company has 2 grades of inspectors 1 & 2, who are to be
assigned for quality control inspection. Requirement is to inspect
2000 pieces at least per 8 hour shift. A grade 1 inspector can
check at the rate of 40 pieces per hour, with an accuracy of 97%.
A grade 2 inspector can check at the rate of 30 pieces per hour,
with an accuracy of 95%.
The wage rate of grade 1 inspector is ₹5 per hour while that of
grade 2 inspector is ₹4 per hour. An error made by inspector
costs ₹3 per piece. There are only 9 grade 1 inspectors and 11
grade 2 inspectors available. The company wishes to assign work
to the available inspectors so as to minimize the total cost of
inspection. Formulate the problem as LP
Example 5
A cold drink company has 2 bottling plants. Each plant produces
3 different drinks A,B & C. Plant capacities (in number of bottles
per day) are as below,
Plant Drink A Drink B Drink C
I 3,000 1,000 2,000
II 1,000 1,000 6,000

A market survey indicates that during any particular month,

there will be demand of 24000 bottles of A, 16000 bottles of B
and 48000 bottles of C. The per day operating costs of running
plant I & II are ₹ 6000 and ₹ 4000 respectively. How many does
per month should the company run each plant so that the
production cost is minimised while still meeting the market
demand? Formulate LP & solve graphically.
 LP Special Cases
 Unbounded Solution (Example 6)
Maximize Z = 4x₁ + 5x₂
Subject to,
x₁ , x₂ ≥ 0
x₁ + x₂ ≥ 1
2x₁ - x₂ ≥ -1
4x₁ - 2x₂ ≤ 1

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 LP Special Cases
 Infeasible Solution (Example 7)
Minimize Z = 10x₁ + 7x₂
Subject to,
x₁ , x₂ ≥ 0
x₁ + x₂ ≥ 5
x₁ + 2x₂ ≤ 4

Prepared by Dr Ajay Parulekar

Example 8 (HomeWork)
A company produces 2 types of pencils, A & B. Pencil A is of
superior quality and B is of lower quality. Per unit profit for
pencil A is ₹5 and for B its ₹3. Raw material required for
each pencil A is twice as much as that of pencil B. The supply
of raw materials is sufficient only for 1000 pencils of type B
per day. Pencil A requires a special clip and only 400 clips
are available per day. For pencil B, only 700 clips are
available per day. Find the product mix for the company that
maximizes its profits by using graphical method.