QUANTITATIVE

ANALYSIS IN
MANAGEMENT
DECISIONS
Dr. B Dayal
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2
CHAPTER
TWO
Linear Programming
Mathematical Modelling
Chapter:2
Linear Programming Mathematical Modelling

● Phases of quantitative analysis

● Quantitative Analysis Models
● Methodology of Quantitative Analysis
● Linear Programming Problem
● Structure of Mathematical Model
● Basic Assumptions of Linear Programming
● Procedure of Mathematical formulation
● Solved problems
● Applications of Linear Programming Models
PHASES OF QUANTITATIVE
ANALYSIS
Judgement phase.
● Determination of the operation.
● Establishment of the objectives and values related to the operation.
● Determination of the suitable measures of effectiveness.
● Formulation of the problem related to the objectives.
Research phase.
● Operation and data collection for a better understanding of the problems.
● Formulation of hypothesis and model
PHASES OF QUANTITATIVE
ANALYSIS
● Observation and experimentation to test the hypothesis on the basis of
additional data.
● Analysis of the available information and verification of the hypothesis using
pre-established measures of effectiveness.
● Prediction of various results and consideration of alternative methods.
Action Phase.
● It consists of making recommendations for the decision process by those who
first posed the problem for consideration or by anyone in a position to make a
decision, influencing the operation in which the problem is occurred.
QUANTITATIVE ANALYSIS
MODELS
● What is a model?

○ A model is a representation of the reality.

○ Objective is to identify significant factors and their inter-relationship.
○ Helps in decision making.
○ Major advantage is it does not interfere with real system.
CLASSIFICATION OF
MODELS
● Physical models.
● Mathematical or symbolic models
● Models by nature of environment
● Models by the extent of generality.
CLASSIFICATION OF
MODELS
Physical models
● Include all forms of diagrams, graphs and charts.
● Designed to deal with specific problems.
● Brings out significant factors and inter-relationship in pictorial form so as to
facilitate analysis.
Iconic models
● Is an image of an object or system, represented on a small scale. These models
can simulate the actual performance of a product.
Analog models.
● Are small physical systems that has similar characteristics and work like an
object it represents. Eg: TOY
CLASSIFICATION OF
MODELS
PHYSICAL MODELS

Actual object: A Honda car; Model : 0.120 kg

Weight: 984.3 kg
CLASSIFICATION OF
MODELS
Mathematical models

● Employ a set of mathematical symbols to represent the decision variables of the

system. The variables are related by mathematical system. eg: allocation,
sequencing, replacement models
V = U + ft
F = Mf
f = µg
Where, V = Final speed
F = Frictional force
µ = Friction coefficient
U = initial speed
t = Time in second
g = Gravitational acceleration
CLASSIFICATION OF
MODELS
Models by nature of environment

● Deterministic models.
Every thing is defined and the results are certain. Eg: EOQ MODEL

● Probabilistic models.
The input and output variables follow a probability distribution. Eg; GAME THEORY.
CLASSIFICATION OF
MODELS
Models by nature of environment
● Deterministic models.
Every thing is defined and the results are certain. Eg: EOQ MODEL
● Probabilistic models.
The input and output variables follow a probability distribution. Eg; GAME THEORY.
Models by extent of generality
● General models. Can be applied in general and does not pertain to one
problem only. e.g.: Linear programming
● Specific models. Applicable under specific conditions only. eg; Sales response
curve or equation as a function of advertising is applicable to marketing
function alone.
METHODOLOGY OF QUANTITATIVE
ANALYSIS
● Adaptation of scientific methodology
● The scientific method translates a real given problem into a mathematical
representation which is solved and re-transformed into the original context.

Steps
● Definition of the problem.
● Construction of the model
● Solution of the model.
● Validation of the model.
● Implementation of the final result.
METHODOLOGY OF QUANTITATIVE
ANALYSIS
Definition of the problem

The root problem should be identified properly and understood. The major aspects
are:-
● A description of the goal or objective of the study.
● Identification of the decision variables to the system.
● A recognition of the limitation, restrictions and requirements of the system.
 QUESTION TIME
Which one of the following describes models of
quantitative analysis?

a.A model is a representation of the reality.

b. Observation and experimentation to test the hypothesis on
the basis of additional data.
CREDITS: This presentation template was created by
c. Objective is to identify
Slidesgo, including iconssignificant factors
by Flaticon, and their
infographics &
inter-relationship.
images by Freepik
d. Helps in decision making.

16
METHODOLOGY OF QUANTITATIVE
ANALYSIS
Construction of the model
Decide on the most suitable model for representing the system.

● Model should specify quantitative expressions for the objective and the
constraints of the problem in term of decision variables.
● If the resulting model fits into one of the common mathematical models, a
convenient solution may be obtained by using mathematical techniques.
● If the mathematical relationship of the model are too complex, a simulation
model may be more appropriate.
METHODOLOGY OF QUANTITATIVE
ANALYSIS
Solution of the model
Solution and interpretation of the solution in the context of given problem.

● Solution implies determination of a specific set of decision variables that would

yield an optimum solution.

● An optimum solution is one which maximises or minimises the performance of

any measure in a model subject to the conditions and constraints imposed on
the model.
METHODOLOGY OF QUANTITATIVE
ANALYSIS
Validation of the model

● A common method for testing the validity of a model is to compare its

performance with some past data available for the actual system.
● The model will be valid if under similar conditions of input, it can reproduce the
past performance of the system.
● The problems:
○ There is no assurance that future performance will continue to duplicate
past behaviour.
○ Data may not be available since non-existence of the system previously.
○ Since the model is based on careful examination of the past data, it will
always reveal favourable results.
METHODOLOGY OF QUANTITATIVE
ANALYSIS
Implementation of the final result

● The optimal solution obtained from a model should be applied to improve the
performance of the system and the validity of the solution should be verified
under changing conditions.
● It involves translation of these results into detailed operating instructions
issued in an understandable form to the individuals who will administer and
operate the recommended system.
● The interaction between the operations research team and the operating
personnel will reach its peak in this phase.
LINEAR PROGRAMMING
● An optimisation problem, in which both the objective function and the constraints are
represented in linear forms in a problem is called as linear programing problem.
● Linear programming (LP) is a mathematical technique designed to help managers in
their planning and decision making. It is usually used in an organization that is trying
to make most effective use of its resources. Resources typically include machinery,
manpower, money, time, warehouse space, or raw materials.
Properties of an LP problem
● All LP problems seek to maximize or minimize some quantity (usually profit or cost).
We refer to this property as the objective of an LP problem.
● The second property that LP problems have in common is the presence of
restrictions, or constraints, that limit the degree to which we can pursue the
objective. Therefore maximization or minimization of a quantity (the objective
function) subject to limited resources (the constraints) is the requirement
LINEAR PROGRAMMING
● An optimisation problem, in which both the objective function and the constraints are
represented in linear forms in a problem is called as linear programing problem.

Requirements of linear programming problem

● Decision variables and their relationship

● Well defined objective function
● Existence of alternative courses of action.
● Non-negative conditions on decision variables.
Structure of Mathematical model
● Decision variables and parameters.

Decision variables are the unknowns to be determined from the solution of the
model. The parameters represent the controlled variables of the system.

● Objective Function

The objective function defines the measures of effectiveness of the system as a

mathematical function of its variables. The optimal solution to the model is obtained
when the corresponding values of the decision variables yield the best value of the
objective function while satisfying all constraints. Therefore, the objective function
acts as an indicator for the achievement of the optimal solution.
Structure of Mathematical model
● Objective Function

While formulating a problem, the desire of decision maker is expressed as a function

of ‘n’ decision variables. This function is the objective function of the linear
programming problem that is each of its items will have only one variable raised to
the power one. Some of the objective functions in practice are:
● Maximization of contribution or profit
● Minimization of costs
● Maximization of production rate or minimization of production time
● Minimization of labour turnover.
● Minimization of overtime
● Maximization of resource utilization
● Minimization of risk to environment or factory etc.
Structure of Mathematical model
Constraints.

Constraint can be defined as the physical limitation of the system, which limits the decision
variables to their feasible range or permissible values. These are expressed in the form of
constraining mathematical functions.
E.g.: To determine values of decision variables Xj, J=1, 2, 3, ----N, which will optimize Z = f
(X1, X2, ---- Xn)
Subject to the constraints:
Gi (X1, X2, ------Xn) ~bi, i = 1, 2,----- m and XJ ≥ 0 j = 1, 2, 3,---- n where ~ is ≤, ≥, or =.
BASIC ASSUMPTIONS OF LINEAR
PROGRAMMING
● Linearity: Both objective function and constraints must be expressed as linear
inequalities.
● Deterministic: All coefficient of decision variables in the objective and constraint
expressions should be known and finite.
● Additivity: The value of objective function for the given values of decision variables
and the total sum of the resources used, must be equal to sum of the contribution
earned from each decision variables and the sum of the resources used by the
decision variables respectively.
● Divisibility: The solution of the decision variables and resources can be any
non-negative values including fractions.
LINEAR PROGRAMMING
The linear programming problem (LPP) is a class of mathematical programming in which
the functions representing the objectives and the constraints are linear.
The general linear programming model is usually defined as follows:-
Maximise or minimise
Z= C1 X1 + C2 X2 + -------CN XN
Subject to the constraints:
a11 X1 + a12 X2 + ------- a1n Xn ~ b1
a21 X1 + a22 X2 + ------- a2n Xn ~ b2
---------------------------------------------
am1 X1 + am2 X2 + ------ amn Xn ~ bn
Where CJ , bj and aij (I = 1,2,3-----m, j = 1,2,3 -----n) are constants. XJ (j = 1,2,3 -----n) are the
decision variables. Here ~ is either ≤, = or ≥.
LINEAR PROGRAMMING
Step 1 - Study the given situation to find the key decisions to be made

Step 2 - Identify the variables involved and designate them by symbols Xj (j = 1, 2, ........n )

Step 3 - State the feasible alternatives which generally are Xj ≥ 0, for all j

Step 4- Identify the constraints in the problem and express them as linear inequalities or
equations. LHS of which are linear functions of the decision variables.

Step 5- Identify the objective function and express it as a linear function of the decision
variables
PROBLEM 1
Vitamin – A and vitamin - B are found in food -1 and food -2. One unit of food -1 contains 5
units of vitamin - A and 2 units of vitamin - B. One unit of food - 2 contains 6 units of vitamin
- A and 3 units of vitamin - B. The minimum daily requirement of a person is 60 units of
vitamin - A and 80 units of vitamin - B. The cost per unit of food - 1 is Birr 5 and one unit of
food - 2 is Birr 6. Assume that any excess units of vitamins are not harmful. Find the
minimum cost of the mixture (food - 1 and food - 2) which meets the daily minimum
requirements of vitamins.
Solution: Formulation of the mathematical model
Suppose X1 = the number of units of food - 1 in the mixture
X2 = the number of units of food - 2 in the mixture
 QUESTION TIME
Which one of the following is a requirement
of linear programing?

a. Decision variables and their relationship

b. Well defined objective function
c. Existence of alternative courses of action.
CREDITS: This presentation template was created by
d. Non-negative
Slidesgo,conditions on decision
including icons variables.
by Flaticon, infographics &
e. All of the above images by Freepik

30
PROBLEM 1
Vitamin – A and vitamin - B are found in food -1 and food -2. One unit of food -1 contains 5
units of vitamin - A and 2 units of vitamin - B. One unit of food - 2 contains 6 units of vitamin
- A and 3 units of vitamin - B. The minimum daily requirement of a person is 60 units of
vitamin - A and 80 units of vitamin - B. The cost per unit of food - 1 is Birr 5 and one unit of
food - 2 is Birr 6. Assume that any excess units of vitamins are not harmful. Find the
minimum cost of the mixture (food - 1 and food - 2) which meets the daily minimum
requirements of vitamins.
Solution: Formulation of the mathematical model
Suppose X1 = the number of units of food - 1 in the mixture
X2 = the number of units of food - 2 in the mixture
PROBLEM 1
Solution (contd)
Formulation of constraints:
● For vitamin – A:
Since each unit of food-1 contains 5 units of vitamin A, we have that X1 units of food-1
contains 5X1 units of vitamin A. (1)
Since each unit of food-2 contains 6 units of vitamin A, we have that X2 units of food-2
contains 6X2 units of vitamin A. (2)
Therefore, the mixture contains 5X1 + 6X2 units of vitamin A (1 + 2)
Since the minimum requirement of vitamin A is 60 units, we can say that
5X1 + 6X2 ≥ 60 (3)
PROBLEM 1
Solution (contd)
Formulation of constraints:
For vitamin – B:
Since each unit of food-1 contains 2 units of vitamin B, we have that X1 units of food-1
contains 2X1 units of vitamin B. (4)
Since each unit of food-2 contains 3 units of vitamin B, we have that X2 units of food-2
contains 3X2 units of vitamin B. (5)
Therefore, the mixture contains 2X1 + 3X2 units of vitamin B (4 + 5)
Since the minimum requirement of vitamin B is 80 units, we can say that 2X1 +
3X2 ≥ 80 (6)
PROBLEM 1
Solution (contd)
Formulation of objective function:
Given that the cost of one unit of food-1 is Birr 5 and one unit of food-2 is Birr 6, therefore
X1 units of food-1 costs Birr 5X1 and X2 units of food-2 costs Birr 6X2.
Therefore, the cost of mixture is given by cost = 5X1 + 6X2
If we write Z for the cost function, then
Z = 5X1 + 6X2
Since the number of units X1 and X2 are always non-negative, therefore, we have
X1 ≥ 0, X2 ≥ 0
PROBLEM 1
Solution (contd)
Therefore, the mathematical model becomes:
Minimize Z = 5X1 + 6X2
Subject to the constraints:
5X1 + 6X2 ≥ 60 (vitamin A constraint)
2X1 + 3X2 ≥ 80 (Vitamin B constraint)
And X1 ≥ 0, X2 ≥ 0
PROBLEM 2
A company has three operational departments (weaving, processing and packing) with
capacity to produce three different types of cloths namely, suiting, shirting and woolens
yielding a profit of birr 2, birr 4 and birr 3 per meter respectively. One meter of suiting
requires 3 minutes in weaving, 2 minutes in processing and 1 minute in packing. Similarly
one meter of shirting requires 4 minutes in weaving, 1 minute in processing and 3 minutes
in packing. One meter of woolen requires 3 minutes in each department. In a week, total
run time of each department is 60, 40 and 80 hours for weaving, processing and packing
respectively.
Formulate the linear programming problem to find the product mix to maximise the profit.
Solution: Formulation of the mathematical model
Suppose X1 = the production of suiting in m
X2 = the production of shirting in m
X3 = the production of woolens in m
PROBLEM 2
Solution (contd)
Formulation of constraints:
For weaving:
One meter of suiting requires 3 minutes of weaving. The quantity being X1 meters,
the requirement for suiting alone will be 3X1 units. Similarly, X2 meters of shirting and
X3 meters of woolen will require 4X2 and 3X3 minutes respectively. Thus the total
requirement of weaving will be 3X1 + 4X2 + 3X3, which should not exceed the
available 3600 minutes. So the man-hour constraint for weaving becomes:
3X1 + 4X2 + 3X3 ≤ 3600 (1)
PROBLEM 2
Solution (contd)
Formulation of constraints:
For Processing and packing:
Similarly, the constraints for the processing department and packing departments
are:
2X1 + X2 + 3X3 ≤ 2400 (2)
X1 + 3X2 + 3X3 ≤ 4800 (3)
PROBLEM 2
Solution (contd)
Formulation of objective function:
The objective is to maximize the total profit from sales. Assuming that whatever is
produced is sold in the market, the total profit is given by the linear relation
Z = 2X1 + 4X2 + 3X3
Since the number of units X1, X2 and X3 are always non-negative, therefore, we have
X1 ≥ 0, X2 ≥ 0 and X3 ≥ 0
PROBLEM 2
Solution (contd)
Therefore, the mathematical model becomes:
Maximize Z = 2X1 + 4X2 + 3X3
Subject to the constraints:
3X1 + 4X2 + 3X3 ≤ 3600 (Weiving constraint)
2X1 + X2 + 3X3 ≤ 2400 (processing constraint)
X1 + 3X2 + 3X3 ≤ 4800 (Packing constraint)

And X1 ≥ 0, X2 ≥ 0 and X3 ≥ 0
CASELET
● An automobile company has two units x and y, which manufactures three
different models of cars – A, B, and C. The company has to supply 1500, 2500
and 3000 cars of type A, B and C respectively per week (6 days). It costs the
company birr 100,000 and birr 120,000 per day to run unit x and y respectively.
On a day unit x manufactures 200, 250 and 400 cars and unit y manufactures
180, 200 and 300 cars of A, B, and C respectively per day. The operations
manager has to decide on how many days per week should each unit be
operated to meet the current demand at minimum cost.
● The operations manager along with his team uses a LPP model to arrive at
minimum cost solution.
CASELET
● An automobile company has two units x and y, which manufactures three different
models of cars – A, B, and C. The company has to supply 1500, 2500 and 3000 cars of
type A, B and C respectively per week (6 days). It costs the company birr 100,000 and
birr 120,000 per day to run unit x and y respectively. On a day unit x manufactures
200, 250 and 400 cars and unit y manufactures 180, 200 and 300 cars of A, B, and C
respectively per day. The operations manager has to decide on how many days per
week should each unit be operated to meet the current demand at minimum cost.
● The operations manager along with his team uses a LPP model to arrive at minimum
cost solution. Car A Car B Car C Run cost/ day

200 250 400 100,000

Unit X – X
1

180 200 300 120,000

Unit y – X
2
supply 1500 2500 3000
CASELET
● An automobile company has two units x and y, which manufactures three different models
of cars – A, B, and C. The company has to supply 1500, 2500 and 3000 cars of type A, B and
C respectively per week (6 days). It costs the company birr 100,000 and birr 120,000 per day
to run unit x and y respectively. On a day unit x manufactures 200, 250 and 400 cars and unit
y manufactures 180, 200 and 300 cars of A, B, and C respectively per day. The operations
manager has to decide on how many days per week should each unit be operated to meet
the current demand at minimum cost.
● The operations manager along with his team uses a LPP model to arrive at minimum cost
solution.
Car A Car B Car C Run cost/ day

200 250 400 100,000

Unit X – X
1
180 200 300 120,000
Unit y – X
2
supply 1500 2500 3000
CASE STUDY 1
● A firm engaged in producing 2 models, viz, model A and model B, performs only 3
operations painting, assembly and testing. The relevant data are as follows:

● Total numbers of hours available each week are for assembly 600, painting 100,
testing 30. The firm wishes to determine the weekly product mix so as to maximize
revenue.
CASE STUDY 1

Maximize:
Z = 50X1 + 80X2
Subject to the constraints:
1.0X1 + 1.5X2 ≤ 600 (assembly constraint)
0.2X1 + 0.2X2 ≤ 100 (painting constraint)
0.0X1 + 0.1X2 ≤ 30 (Testing constraint)
And X1 and X2 ≥ 0
APPLICATION OF LPP
● Finance
● Production and operation management
● Human resources
● Marketing
● Distribution
THANK YOU!