UNIT 1&2 (OR)

Literally, ‘Operation’ be defined as some

action that we apply to some problems or
hypothesis and the word ‘research’ is an
Operations organised process of seeking out facts about
Research the same.
O.R. is a scientific approach to problem solving
for executive management.
 a) Decision-making. Primarily, O.R. is
addressed to managerial decision-making
or problem-solving.
It consists of the following steps
i. Define a problem and define a criterion to
Features of be used.
O.R. ii. Select the alternative courses of actions
for consideration.
iii. Determine the model to be used and the
values of the parameters involved.
iv. Solve the model to choose the best
(optimal) alternative.
 b) Scientific-approach. O.R. employs scientific methods
for the purpose of solving problems. It is a formalised
process of reasoning.
c) Objective O.R. attempts to locate the best or optimal
solution to the problem under study.

Features of d) Inter-disciplinary team approach. O.R. is

interdisciplinary in-nature and requires a team
O.R. approach to a solution to a problem. Managerial
problems have economical, physical, psychological,
(Cont…) biological, sociological and engineering aspects. This
requires a blend of people with expertise in the areas
of mathematics, statistics, engineering, economics,
management, computer science and so on.
e) Digital computer. Use of digital computer has become
an integral part of the O.R. approach to decision
making.
Models of Operations Research

Management Computer
Physical Scaled Analog Mathematical
Games Simulation

Exactness Abstraction
Models are representative of real systems. The models may be,
a. Iconic (made to look like a real system)
b. Abstract
c. Somewhere in between Iconic and Abstract
Iconic Model

Scaled-up model Scaled-down model

Aerospace Booster Pump: Scaled-up
model Wax effigy: Iconic Model
Blueprint of an
Institution
Scaled down model
Regardless of the type of the model used, modelling include the
following,
i. Defining the problem and gathering the data
ii. Constructing a model of the system
iii. Deriving a solution
iv. Testing the model and solution (is the model valid? i.e. does it do
what it is designed to do?
v. Implementing the solution.
Use of O.R. in real life
O.R. techniques are used to find the optimal solution to a given
problem.
The problem is confronted with several limitations.
Researchers find best, most economical solution to a problem within all
limitations or constraints.
Many fields use linear programming to make the process more
efficient.
Linear programming overview
• Requires defining variables
• Finding constraints
• And defining objective function in smallest possible way.
• The problem can be solved by graph or by manual calculations.
Areas in which the O.R. is helpful
• Transportation problem
• Assignment problem
• Linear programming problem
• Replacement problem
• Sequencing problem
• Project scheduling
 • In case of decision-making under uncertainty the
probabilities of occurrence of various states of nature are
not known.
• When these probabilities are known or can be estimated,
Decision the choice of an optimal action, based on these
probabilities, is termed as decision making under risk.
making • Risk implies a degree of uncertainty and an inability to
fully control the outcomes or consequences of such an
under risk action.

and • However, in some instances the elimination of one risk

may increase some other risks. Effective handling of a
uncertainty risk requires its assessment and its subsequent impact on
the decision process.
• The decision process allows the decision-maker to
evaluate alternative strategies prior to making any
decision.
 The decision making process is as follows,
1. The problem is defined and all feasible
alternatives are considered. The possible
outcomes for each alternative are evaluated.
2. Outcomes are discussed based on their monetary
The decision payoffs or net gain in reference to assets or time.

making 3. Various uncertainties are quantified in terms of

probabilities.
process 4. The quality of the optimal strategy depends upon
the quality of the judgments. The decision-maker
should identify and examine the sensitivity of the
optimal strategy with respect to the crucial
factors.
Example
The payoffs (in Rs) of three Acts A1, A2 and A3 and the possible states of nature S1, S2 and S3 are given below :

Acts

States of nature

-20 -50 200

200 -100 -50

400 600 300

The probabilities of the states of nature are 0.3,0.4 and 0.3 respectively. Determine the optimal act.
Act A will be
optimum act as the
EMV is maximum.
The problem can alternatively be solved as
above.
Decision • Maximin Criteria

making •
•
Maximax Criteria
Regret Criterion

under •
•
Hurwicz Criterion
Laplace Criteria

uncertainty
Maximin Criteria
Maximax Criteria
Regret Criterion
Hurwicz Criterion
Laplace Criterion
Decision Tree
Problem
A manager has a choice between,
i. A risky contract promising Rs. 7 lakhs with probability 0.6 and Rs. 4
lakhs with probability 0.4, and
ii. A diversified portfolio consisting of two contracts with independent
outcomes each promising Rs. 3.5 lakhs with probability 0.6 and Rs.
2 lakhs with probability 0.4.
iii. Construct a decision tree for using EMV criteria. Can you arrive at
the decision using EMV criteria?
 0.6
y 7 lakhs
risk
o ose ract
Ch ont 0.4
c
4 lakhs

Investment

Ch
o
os
e 0.6
po dive 3.5 lakhs
rtf rsi
oli fie
o d

0.4
2 lakhs
Transportation
Problem
Red circles are the locations of
manufacturing units. The locations are
New Delhi, Kolkata, Mumbai and
Chennai.
Black circles are the locations of the
destinations, where the demand of the
product is supposed to be satisfied.
The destinations are Aligarh, Ajmer,
Guwahati and Bangalore
Transportation Problem (Cont….)
Transportation Problem
Availabilit
Aligarh Ajmer Guwahati Bangalore
y
Delhi

Kolkata

Mumbai

Chennai
Requirem
ent
General form of a Transportation Problem
……………
Availability

……………

……………

Requirement ……………
Amazon FCs
Transportation problem
(defined)
The transportation problem is one of the subclasses of LPP, in
which the objective is to transport various quantities of a
single homogenous commodity, that are initially stored at
various sources (origins) to different destinations in such a
way that the total transportation cost is minimised.
• To achieve this objective we must know the amount and
location of available supplies and the quantities demanded.
• In addition we must know the costs that result from
transporting one unit of commodity from various origins to
various destinations.
Minimising the total cost of transportation

Solution of a transportation Problem

Finding the Initial Basic Feasible Solution

Finding the optimal solution

Finding an Initial Basic
Feasible Solution
There are several methods available to obtain the initial basic
feasible solution. However, the most used three are as
follows,
1. North-West Corner Rule
2. Least-Cost Method
3. Vogel’s Approximation Method
Assignment Problem
 The Assignment problem is a special case of
Transportation Problem in which the objective is
to assign a number of resources to equal number
of activities at a minimum cost or a maximum
profit.
Assignment problem is completely degenerate
Assignment form of a transportation problem. The units
available at each origin (resource) and units
Problem demanded at each destination (activity) are equal
to one.
That means exactly one occupied cell in each row
and each column of the transportation matrix, i.e.
only ‘n’ occupied (basic) cells in place of the
required
 Available

…………
1

…………
1

………… ………… ………… ………… …………

…………

…………
1

…………
Required 1 1 1
This cost matrix is same as that of a Transportation matrix except that
availability at each of the resources and the requirement at each of the
destinations is unity (due to the fact that assignments are made on
one-to-one basis)
Let denote the assignment of resource to activity, such that,
Problem
A departmental head has four subordinates, and four tasks to be
performed. The subordinates differ in efficiency, and the tasks differ in
their intrinsic difficulty. His estimate of the time each man would take to
perform each task is given in the matrix below. How should the tasks be
allocated, one to a man, so as to minimise the total man-hours?
Men

Tasks E F G H

A 18 26 17 11
B 13 28 14 26

C 38 19 18 15

D 19 26 24 10
Problem
A pharmaceutical company is producing a single product and is selling through five
agencies located in different cities. All of a sudden, there is a demand for the
product in another five cities not having any agency of the company. The company
is faced with the problem of deciding on how to assign the existing agencies to
dispatch the product to needy cities in such a way that the travelling distance is
minimised. The distance between the surplus and the deficit cities (in km) is given
in the table below. Determine the optimum assignment schedule.
Deficit cities
a b c d e
A 85 75 65 125 75
B 90 78 66 132 78
Surplus
cities C 75 66 57 114 69
D 80 72 60 120 72
E 76 64 56 112 68
Problem
A departmental head has four tasks to be performed and three
subordinates, the subordinates differ in efficiency. The estimates of the
time, each subordinate would take to perform, is given below in the
matrix. How should he allocate the tasks one to each man, so as to
minimise the total man-hours?
Task Men
1 2 3
I 9 26 15
II 13 27 6
III 35 20 15
IV 18 30 20
Problem
To stimulate interest and provide an atmosphere for intellectual discussion, a
finance faculty in a management school decides to hold special seminars on four
contemporary topics. Such seminars should be held once per week in the
afternoons. However, scheduling these seminars (one for each topic, and not more
than one seminar per afternoon) has to be done carefully so that the number of
students unable to attend is kept to a minimum. A careful study indicates that the
number of students who cannot attend a particular seminar on a specific day is
given in the following table. Find optimal schedule of the seminar.
Leasing Portfolio Private mutual Swaps &
Management fund Options
Monday 50 40 60 20
Tuesday 40 30 40 30
Wednesday 60 20 30 20
Thursday 30 30 20 30
Friday 10 20 10 30
Problem
The marketing director of a multi-unit company is faced with a problem
of assigning 5 senior managers to six zones. From the past experience
he knows that the efficiency percentage judged by sales, operating cost
etc. depends on manager-zone combination. The efficiency of different
managers is given the following table. Find out which zone will be
managed by a junior manager due to non availability of senior manager.

Manager Zone
I II III IV V VI
A 73 91 87 82 78 80
B 81 85 69 76 74 85
C 75 72 83 84 78 91
D 93 96 86 91 83 82
E 90 91 79 89 69 76
Problem
A student has to select one and only one elective in each semester and
the same elective should not be selected in different semesters. Due to
various reasons, the expected grades in each subject if selected in
different semesters, vary and they are given below:
Semester Analysis Statistics Graph Theory Algebra
I F E D C
II E E C C
III C D C A
IV B A H H

The grade points are: H=10, A=9, B=8, C=7, D=6, E=5 and F=4. How will
the student select the electives in order to maximise the total expected
points and what will be his maximum expected total points.
Problem
Solve the following assignment problem to find the maximum total
expected sale
Salesman Area
I II III IV
A 42 35 28 21
B 30 25 20 15
C 30 25 20 15
D 24 20 16 12