KRUPANIDHI COLLEGE OF MANAGEMENT

QUANTITATIVE TECHNIQUES AND OPERATIONS RESEARCH

MODULE 1

Syllabus

Introduction to OR, Importance of OR, Scope of OR in business activities, Optimization

concept, OR Models: Linear programming, Introduction to LP, Problem formulation, product
mix and various managerial applications and Graphical method of problem solving, Alternate
solution of LP, Duality in LP, Formulation of dual problems, advantages, its economics
interpretation, Sensitivity analysis only just to know no problems need be worked out and
software packages to be used to solve LP models.
TRANSPORTATION MODELS
Nature and scope of transportation and allocation models, Methods of allocation, different
methods for finding initial solution – VAM, N-W Corner Rule, and other methods, degeneracy.
Finding optimal solution, Tests for optimality, Imbalance in total availability and total
allocation – impossible shipments, Alternate methods of solutions, and maximization as
objective Scope of transportation models.
ASSIGNMENT PROBLEMS
Traveling salesman problem, Row Minimum, Column Minimum, Iteration, Balanced,
Unbalanced, Infeasible, Maximization.
Introduction
“Operation Research” is also called as “Management Science”, “Optimization Techniques” etc. This
new science came into existence in military context. This main origin of operations research was during
the second world-war. At that time military management called on scientists from various disciplines
and organized them into teams to assist in solving strategic and tactical problems. Since they were
having limited military resource, it was necessary to decide upon the most effective utilization of them.
E.g. the efficient ocean transports effective bombing optimal allocation of scarce resources etc.
British scientists were increasingly asked to help the military in using radar to locate enemy aircraft.
This group of scientists is considered to be the nucleus of the first operations research group. The term
“operations Research” was first coined by Mccloskey and Trafethen in 1940. British scientists, from
various disciplines suggested certain approaches and solved the typical problems of military. This new

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approach to systematic and scientific study of the operations of the system was called “Operations
Research” or “Operational Research” (abbreviated as O.R)
The members of the team were not actually engaged in military operations and in fighting the war; but
they were giving valuable suggestions and advices to win the war. Hence O.R can be associated with an
art of winning the war without actually fighting it.”
At the end of world war, the success of military teams attracted the attention of industrial managers.
They were seeking solutions to their complex executive-type problems. During the year 1950 O.R was
organized as a subject in the universities.
Since then the subject has gained more and more importance for the students of management,
mathematics, statistics, economics, commerce, engineering and computer science.

1. Define O.R.
O.R is a scientific method of providing executive departments with a quantitative basis for
decision regarding the operations under their control.
Morse and Kimbal
O.R is a scientific method of providing executive with an analytical and objective basis for
decisions.
P.M.S Blackett.
O.R is the application of scientific methods, techniques and tools to problems involving the
operations of systems so as to provide these in control of the operations with optimum
solutions to the problem.
Churchman.
O.R is a scientific approach to problem solving for executive management.
H.M Wagner.
O.R is the application of scientific methods to problems arising from operations involving
integrated systems of men, machines and materials. It normally utilizes the knowledge and
skill of an inter-disciplinary research team to provide the managers of such systems with
optimum operating solutions.
Fabrycky and Torgersen.

2. Write the Importance of O.R

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O.R may be regarded as a tool which is utilized to increase the effectiveness of management
decisions. In fact, O.R is the objective supplement to the subjective feeling of the administrator
(decision-maker). Scientific method of OR is used to understand and describe the phenomena
of operating system. O.R models explain these phenomena as to what changes take place under
altered conditions and control these predictions against new observations.
The advantages of OR study approach in business and management decision making may be
classified as follows:
1. Better Control- The management of big concerns finds it much costly to provide continuous
executive supervisions over routine decisions. An OR approach directs the executives to devote
their attention to more pressing matters.
2. Better coordination - OR has been very useful in maintaining the law and order situation out
of chass. For example, an OR model becomes a vehicle for coordinating marketing decisions
with the limitations imposed on manufacturing capabilities.
3. Better System - OR study is also used to analyze a particular problem of decision making
such as establishing a new warehouse. Later OR approach can be further developed into a
system to be employed repeatedly. Consequently, the cost of undertaking the first application
may improve the profits.
4. Better Decisions -OR models frequently yield actions that do improve an intuitive decision
making. Sometimes, a situation may be so complicated that the human mind can never hope to
assimilate all the important factors without the help of OR and computer analysis.
3. Explain Optimization Concept.
In many economic activities, we often face the problem of optimization.
Optimization means either maximization or minimization. In some situations, we need
maximization; for example, maximizing the profit, sales etc.
In some situations, we need minimization; for example, minimizing loss, cost etc.

4. Define LPP.

Linear programming problem (LPP) is a mathematical programming technique to

optimize performance (e.g. profit or cost ) under a set of resource constraints (e.g.
machine-hours, man-hours, money, materials, etc.) as specified by an organization. It
was in 1947 that George Dantzig and his associates introduced linear programming

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technique of solving problems concerning military activities. A sample list of

applications of LPP is presented below.

1. Product mix problem

2. Diet planning problem
3. Cargo loading problem
4. Capital budgeting problem
5. Manpower planning problem

The linear programming problem is thought of as a resource allocation model where the
objective is to maximize revenue or profit subject to limited resources. The associated dual
problem offers interesting economic interpretations of the LP resource allocation model.
Consider a representation of the general primal and dual problems where primal takes the role
of a resource allocation model.

5. Write the characteristics of standard form of LPP.

The characteristics of the standard form of LPP are:

1. All constraints are equations except for the non-negativity condition, which remain
inequalities (³, 0) only.
2. The right-hand side element of each constraint equation is non-negative.
3. All the variables are non-negative.
4. The objective function is of maximization or minimization type.
6. Define slack, surplus and artificial variables.
You can change the inequality constraints of equations by adding or subtracting the left hand
side of each such constraint by a non-negative variable. The non-negative variable that has to be
added to a constraint inequality of the form ≤ to change it to an equation is called a
slack variable.
The non-negative variable subtracted from a constraint inequality of the form ≥ to change it to
an equation is called a surplus variable.

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Consider a LPP when at least one of the constraints is of type =. While expressing in the
standard form, add a non-negative variable to each of such constraints. These variables are
called artificial variables
7. What is dual problem of LPP?
Every linear programming problem (LPP) is associated with another linear programming
problem involving the same data and optimal solutions. Such two problems are said to be duals
of each other. One problem is called the primal; while the other problem is called the dual. The
dual formulation is derived from the same data and solved in a manner similar to the original
µprimal formulation. In other words, you can say that dual is the inverse of the primal
formulation because of the following reasons. If the primal objective function is maximization
function, then the dual objective function is minimization function and vice-versa. · The column
co-efficient in the primal constraint is the row co-efficient in the dual constraint.
8. What is sensitivity analysis?
The coefficients in the primal objective function are the RHS constraint in the dual constraint. ·
The RHS column of constants of the primal constraints becomes the row of co-efficient of the
dual objective function. The concept of duality is useful to obtain additional information about
the variation in the optimal solution. These changes could be affected in the constraint co-
efficient, in resource availabilities and/or objective function co-efficient. This effect is termed as
post optimality or sensitivity analysis.
9. Write the importance of duality concept.

The importance of duality concept is due to two main reasons:

i. If the primal contains a large number of constraints and a smaller number of
variables, the labour of computation can be considerably reduced by converting it
into the dual problem and then solving it.
ii. ii. The interpretation of the dual variable from the loss or economic point of view
proves extremely useful in programming future decisions in the activities
10. Write the economic interpretation of duality.

The linear programming problem is thought of as a resource allocation model where the
objective is to maximize revenue or profit subject to limited resources. The associated dual
problem offers interesting economic interpretations of the LP resource allocation model.

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Consider a representation of the general primal and dual problems where primal takes the role
of a resource allocation model.

11. Write the Scope of O.R

In its recent years of organized development OR has entered successfully many different areas
of research for military, government and industry. OR is useful in the following various
important fields.
1. In Agriculture - With the explosion of population and consequent shortage of food, every
country is facing the problem of-
i) Optimum allocation of land to various crops in accordance with the climatic conditions; and
ii) Optimum distribution of water from various resources like canal for irrigation purposes.
Thus there is a need of determining best policies under the prescribed restrictions. Hence a good
amount of work can be done in this direction.
2. In Finance - In these modern times of economic crisis, it has become very necessary for
every government to have a careful planning for the economic development of the country.
OR-techniques can be fruitfully applied:
i) To maximize the per capita income with minimum resources.
ii) To find the profit plan for the company.
iii) To find the best replacement policies.
iv) Cash-flow analysis, long range capital requirements, dividend policies, investment
portfolios.
3. In Marketing - With the help of OR techniques a Marketing Administrator can decide:
i) Where to distribute the products for sale so that the total cost of transportation is minimum.
ii) The minimum per unit scale price.
iii) The size of the stock to meet the future demand.
iv) How to select the best advertising media with respect to time, cost, etc..
v) How, when and what to purchase at the minimum possible cost.
4. In Personal Management - A personnel manager can use O.R techniques:
i) To appoint the most suitable persons on minimum salary.
ii) To determine the best age of retirement for the employees.
iii) To find out the number of persons to be appointed on full time basis when the workload is
seasonal (not continuous).

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5. In Production Management - A production manager can use OR techniques:

i) To find out the number and size of the items to be produced.
ii) In scheduling and sequencing the production run by proper allocation of machines.
iii) In calculating the optimum product mix; and
iv) To select, locate, and design the sites for the production plants.
6. In Industry - OR is useful to the industry director in deciding optimum allocation of various
limited resources such as men, machines, material, money, time, etc., to arrive at the optimum
decision.
7. In L.I.C - OR approach is also applicable to enable the L.I.C. officials to decide:
i) What should be the premium rates for various modes of policies?
ii) How best the profits could be distributed in the cases of with profit policies?
Etc. Finally we can say: Wherever there is a problem, there is O.R. The applications of O.R
cover the whole extent of anything. A recent
Methodology of O.R
Various steps involved are as follows:
i) Understand the actual real situation, capture them and define the problem.
ii) Formulate a mathematical model.
iii) Develop a mathematical solution.
iv) Interpret the solution and translate it into decision.
v) Implement the decision to the real situation.
vi) Verify the results.
vii)If the solution is not satisfactory then modify the model.
viii) Again, the cycle is repeated until we get the perfect solution.

12. Explain briefly about O.R models

A model is defined as a representation of an actual object or situation. It shows the relationships

(direct or indirect) and interrelationships of action and reaction in terms of cause and effect.
Models can be classified according to the following characteristics:
a) Classification by structure

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i) Iconic Models: These models represent the system as it is by scaling it up or down (i.e., by
enlarging or reducing the size). In other words, it is an image.
For example, a toy aero plane is an iconic model of a real one. Other examples are photographs,
drawings, maps, etc.
ii) Analogue models: The models, in which one set of properties is used to represent another
set of properties, are called analogue models. After the problem is solved, the solution is re
interpreted in terms of the original system. For example, graphs are analogues because distance
is used to represent the properties such as: time, number, percent, age, weight and many other
properties.
iii) Symbolic models: The symbolic or mathematical model is one which employs a set of
mathematical symbols to represent the decision variables of the system. These symbols are
related together by means of mathematical equations to describe the behavior of the system.
b) Classification by purpose
Models can also be classified by purpose of its utility. The purpose of a model may be
descriptive, predictive or prescriptive.
i) Descriptive Models: This model simply describes some aspects of a situation based in
observations, survey, questionnaire, etc.
ii) Predictive: Such models can answer “What if” type of questions. They can make predictions
regarding certain events. Eg:- Television networks explain and predict the election results
before all the votes are actually counted.
iii) Prescriptive models: When a predictive model has been repeatedly successful, it can be
used to prescribe a source of action. For example linear programming is a prescriptive model
because it prescribes what the managers ought to do.
c) Classification by nature of Environment
There are mainly two types:
i) Deterministic models: Such models assume conditions of complete certainty and perfect
knowledge. For example, linear programming, transportation and assignment models.
Probabilistic (or Stochastic) models: These models are used in such situations in which the
consequences of managerial actions cannot be predicted with certainty. For example, insurance
companies are willing to insure against risk of fire, accidents, sickness and soon.
d) Classification by Behavior

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i) Static Models: These models, time is considered as one of the important variable and admits
the impact of changes generated by time.
e) Classification by method of solution:
i) Analytic models: These models have a specific mathematical structure and thus can be
solved by analytical or mathematical techniques. Ex: Transportation problem’s model.
ii) Simulation Models: These models are also having mathematical structure but cannot be
solved by purely mathematical techniques.
f) Classification by use of Digital computers
The development of the digital computer has led to the introduction of the following types of
models in O.R.
i) Analogue and mathematical models combined.
ii) Function models.
iii) Quantitative models.
iv) Heuristic models.
Function models are grouped on the basis of the function being performed.
• Quantitative models are used to measure the observations.
• Heuristic models are mainly used to explore alternative strategies that were over
looked previously.

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