DMBA- CP-202 Management Science

Block 1 Operation Research and/or Decision Making

Unit -1 Introduction to Decision Making
Decision-making process involved in organizations does not consist of making choices among some options but
instead it is a complicated process involving proper analysis and selection.

• The major process by which behaviour is converted into

performance is the decision-making process. Corporate
behaviour is influenced by individual behaviour, group
behaviour and structure behaviour.
• The decision-making process is associated with these
factors.
Performance takes place because of decision.
• An organisation’s decisions pertain to goals and
strategies. Information is needed for the decision-
making process.

1. Information - Information is a crucial starter of all the corporate

activities. It influences the behaviour and decision-making process. For example, the amount of production
is decided by the information collected through marketing research. Knowledge of information decides the
outcome. Information about the future performance also influences the decision-making process. The
information about bad consequences forces the management to decide on the preventive techniques.

2. Decision-making process - After collecting the information, the process of decision-making starts. Several
alternative decisions are taken at a time. Their respective merits and demerits are evaluated. The decisions
having the lowest demerits and highest merits are selected for implementation. While deciding the merits
and demerits, probability is used in many cases. In some cases, pure personal judgement is taken as the
guideline. The non-probability model or judgement method has been used by experts having adequate
experience.

3. Individuals, group and organisation - The corporate decision is influenced by individual decision, group
decision and organisational approach. In many decision-making processes, individuals are given
importance but group decisions have taken the lead. Group thinking and syntality have acquired
prominence in the corporate sector.

Group decision is considered more expert in nature. It avoids the risk of responsibility, because no one will
be responsible for an adverse decision, and pressure cannot be applied on a group to take a decision.
People feel free to take decisions. A group consisting of employees and management will implement the
decision as it is taken jointly by them.

4. Behaviour - Behaviour of individuals, groups and organisations have a great influence on the decision
process because their attitudes, values, beliefs, knowledge, desires, goals and other factors directly affect
the decision-making process. In fact, they are reflected in the process of decision.

5. Performance - The expected performance decides the methods of process. Performance is influenced by
behaviours and decision-making processes of individuals, groups and organisations. The goal-related
performances are guidelines for decision-making.

Needs of Decision – Making

• Decision-making and problem solving are core functions of management because they are an integral part
of all other managerial functions, such as planning, organizing, directing and controlling.
• Decision-making results in a choice from many alternative courses of action, problem solving results in
resolving the disparities between the desired performance and the performance actually obtained.
• Decision-making is a complex mental exercise.

Importance of Models in Decision Making

1. Ecologic and Economic Model - Decisions are based on how far are they economically beneficial. By
incurring a lower cost, maximum benefits are gained. The rationality judged on the basis of means and
ends or costs benefits is considered complete. The alternative decisions are evaluated on this basis and the
alternative having lowest costs and maximum
 benefits is selected as the best on economic grounds. Any decision which considers marginal cost and
marginal revenue equally are considered the best, as stipulated by Herbert A. Simon.

2. Social model - Decisions are the outcome of people’s feelings and emotions. The social model is the
psychological base of analysis. Social influences have a significant impact on the decision-making
behaviour. It is a well-known fact that people may take irrational decisions under social pressure and
psychological instability of feelings and desires. It does not mean that decisions based on social and
psychological factors are irrational and should be ignored. These factors should be considered after
applying the quantification techniques of psychological and social factors.

3. Realistic model - Herbert Simon has presented the realistic model based on both the economic model and
social model. People believe in reality. They like to achieve the best but are unable to achieve much
because of several psychological and social constraints. They are satisfied with the present realistic
decisions because they get the maximum possible revenue within the constraints.

4. Well-managed model - Informal decisions arrived at with the open discussion of employees and
management are considered as a well-managed model. Quantitative techniques and behavioural
techniques are also used for arriving at well-managed decisions. Quantitative techniques have made
important contributions in the corporate decision-making process. Operation research, action research,
market research and financial research have been used in the process of decision-making. These
researches are based mainly on quantitative techniques. Decision process is influenced by the behavioural
pattern of the employees, groups and organisations. The decision-making process also influences their
behaviour. The behaviour may be real, emotional and intellectual. The decision taken only by the superior
is not as much effective as the decision taken jointly by the superior and the subordinates.

Unit 2 Introduction to Operation Research

• The term, operations research was first coined in 1940 by J.F. McCloskey and F.N. Trefethen in a small-town
Bawdsey in the United Kingdom. This new science came into existence in a military context.

• Operations research is the application of scientific knowledge through interdisciplinary team effort for the
purpose of determining the best utilization of limited resources.

Importance of Operational Research:

1. OR provides a tool for scientific analysis: OR provides the executives with a more precise description
of the cause-andeffect relationship and risks underlying the business operations in measurable terms.

2. OR provides solutions for various business problems: OR techniques are being used in production,
procurement, marketing, finance and other allied fields. It can be used to solve problems like how can
managers and executives allocate the available resources to various products so that in a given time the
profits are maximum or the cost is minimum.
3. OR enables proper deployment of resources: OR renders valuable help in proper deployment of
resources. For example, Programme Evaluation and Review Technique (PERT) enables us to determine the
earliest and the latest times for each of the events and activities and thereby helps in identification of the
critical path.

4. OR helps in minimizing waiting and servicing costs: The waiting line or queuing theory helps
management in minimizing the total waiting and servicing costs.

5. OR enables management to decide when to buy and how much to buy: The main objective of
inventory planning is to achieve a balance between the cost of holding stocks and the benefits from stock-
holding.

6. OR assists in choosing an optimum strategy: Game theory is especially used to determine the
optimum strategy in a competitive situation and enables businesspeople to maximize profits or minimize
losses by adopting the optimum strategy.

7. OR renders great help in optimum resource allocation: Linear programming technique is used to
allocate scarce resources in an optimum manner in problems of scheduling, product-mix and so on.
History and Evolution of OR - Operations Research has gained increasing importance since World War II .The
subject of Operations
Research (OR) was developed in military context, pioneered by the British scientists. At that time, the military
management in England appointed a study group of scientists to deal with the strategic and tactical problems
related to air and land defence of the country. It greatly helps in tackling the intricate and complex problems of
modern business and industry.

Unit – 3 Models of Operations Research

A model in OR is a simplified representation of an operation or a process in which only the basic aspects or the
most important features of a typical problem under investigation are considered.

A good model must possess the following characteristics: (i) It should be capable of taking into account new
formulation without having any changes in its frame. (ii) Assumptions made in the model should be as little as
possible. (iii) Variables used in the model must be less in number ensuring that it is simple and coherent. (iv) It
should be open to parametric type of treatment. (v) It should not take much time in its construction of any
problem.

Advantages:

1. Provide a logical and systematic approach to problem.

2. Helps removing wasteful activities.
3. Find solution for research and development.

Classification of Models:

[Link] by Function:

• Descriptive and Predictive Model - These models describe and predict facts and relationships among the
various activities of the problem. In this model, it is possible to get information as to how one or more
factors change as a result of changes in other factors.
• Normative or optimization models: They are prescriptive in nature and develop objective decision-rule for
optimum solutions.

[Link] by Structure:

• Iconic or physical models: These are pictorial representations of real systems and have the appearance of
the real thing. An iconic model is said to be scaled down or scaled up according to the dimensions of the
model which may be smaller or greater than that of the real item, e.g., city maps, blue prints of houses,
globe and so on.
• Analog models: These are abstract than the iconic ones. The models in which one set of properties is used
to represent another set of properties are called analog models.
• Mathematic or symbolic models: These are most abstract in nature in comparison to others. They employ a
set of mathematical symbols to represent the components of the real system. These variables are
connected to each other by means of mathematical equations to describe the behaviour of the system.

[Link] by Environment:

• Deterministic models: In these models, all parameters and functional relationships are assumed to be
known with certainty when the decision is to be made. Linear programming and break-even models are the
examples of deterministic models.
• Probabilistic or stochastic models: These models are those in which at least one parameter or decision
variable is a random variable.

[Link] by extent of generality:

• Specific models: When a model presents a system at some specific time, it is known as a specific model. In
these models, if the time factor is not considered then, they are termed as static models.
• General models: Simulation and heuristic models fall under the category of general models. These models
are used to explore alternative strategies which have been overlooked previously.

Limitations of OR:

1. It concerns with Mathematical expressions, thus can be done by experts.

2. High cost involved.
 3. Doesn’t consider intangible factor.
4. It a tool of analysis not a complete decision making.
5. OR can be biased as it required human to take final decision.

Unit – 4 Linear Programming Problems

The word ‘linear’ means that the relationships are represented by straight lines. The word ‘programming’ means
following a method for taking decisions systematically.

• Identify the objective of the linear programming problem, that is, which quantity is to be optimized. For
example, maximize the profit.
• Identify the decision variables and constraints used in linear programming, for example, production
quantities and production limitations are taken as decision variables and constraints.
• Identify the objective functions and constraints in terms of decision variables using information from the
problem statement to determine the proper coefficients.
• Add implicit constraints such as non-negative restrictions.
• Arrange the system of equations in a consistent form and place all the variables on the left side of the
equations.

LPP Application:

• Linear programming problems are associated with the efficient use of allocation of limited resources to
meet desired objectives. A solution required to solve the linear programming problem is termed as optimal
solution.
• Linear programming problem may be solved using a simplified version of the simplex technique called
transportation method.
• Game method is used to turn a matrix game into a linear programming problem. It is based on the Min-Max
theorem which suggests that each player determines the choice of strategies on the basis of a probability
distribution over the player’s list of strategies.

Limitation of LPP:

• Uncertain factors are not considered

• Complex method
• Integral values are not taken for solution.
• Gives practical valued answer that are not really desirable.

Canonical or standard forms of LPP - The general LPP can be put in either canonical or standard forms. In the
standard form, irrespective of the objective function, namely maximize or minimize, all the constraints are
expressed as equations. Moreover, RHS of each constraint and all variables are non-negative

Playlist - [Link]

Given a system of m linear equations with n variables (m < n), any solution which is obtained by solving m
variables keeping the remaining n – m variables zero is called a basic solution. Such m variables are called basic
variables and the remaining variables are called non-basic variables. In simplex algorithm, the M Method is used to
deal with the situation where an infeasible starting basic solution is given.

Unit 5 – Duality of LPP

Every LPP (called the primal) is associated with another LPP (called its dual). Either problem can be considered as
primal and the other one as dual. The importance of the duality concept is because of two main reasons:

• 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.
• The interpretation of the dual variables from the cost or economic point of view, proves extremely useful in
making future decisions in the activities being programmed.

The dual simplex method is very similar to the regular simplex method. The only difference lies in the criterion
used for selecting a variable to enter and leave the basis. In dual simplex method, we first select the variable to
leave the basis and then the variable to enter the basis. This method yields an optimal solution to the given LPP in
a finite number of steps, provided no basis is repeated.

The dual simplex method is used to solve problems which start as dual feasible (that is, whose primal is optimal
but infeasible). In this method, the solution starts optimum, but infeasible and remains infeasible until the true
optimum is reached, at which the solution becomes feasible.
Important results in duality

• The dual of the dual is primal.

• If one is a maximization problem, then the other is of minimization.
• The necessary and sufficient condition for any LPP and its dual to have an optimal solution is that both
must have feasible solutions.
• Complementary slackness theorem states that: o If a primal variable is positive, then the
corresponding dual constraint is an equation at the optimum and viceversa. o If a primal constraint is a
strict inequality, then the corresponding dual variable is zero at the optimum and viceversa.

Unit – 6 Assignment Problem

The assignment problem is one of the fundamental combinatorial optimization problems. It helps to find a
maximum weight identical in nature in a weighted bipartite graph. The assignment problem is also termed as a
special case of transportation problem.

APPLICATIONS AND SOLUTIONS BY HUNGARIAN METHOD - [Link]

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Job Sequence Problem - Job sequencing is basically the planning of the jobs in sequential manner and is an
essential part of any work. Without proper planning and scheduling one cannot achieve the desired output and
profit. For sequencing a job, generally the two techniques are used termed as Priority Rules and Johnson’s Rules.
Priority rules give the guidelines for properly sequencing the job, whereas Johnson’s rule is used to minimize the
completion time for a set of jobs to be done on two different machines.

Basic characteristics of job sequencing:

• Only one single job should be scheduled for a machine at a time.

• Do not stop the process in between before completion.
• New processing can be started after the completion of the previous processing.
• Any job is scheduled for processing as per the order and due date requirements.
• If the jobs are transferred from one machine to another due to some reason, then the time involved in
transferring the jobs is considered negligible.

Priority Rules: These rules are used to get specific guidelines for job sequencing. The rules do not consider job
setup cost and time while analysing processing times. In it, job processing time and due dates are given
importance because the due dates are fixed to give delivery in time to the customers. The rules are very useful for
processfocussed amenities, for example health clinics, print shops and manufacturing industries. Hence, priority
rules minimize the time for completing a job, sequences the jobs in the organization, checks if any job is late and
maximizes resource utilization. The most popular priority rules are as follows:

• First Come First Serve (FCFS): The job to be processed first is the job that turned up first in the organization.
• Earliest Due Date (EDD): The job to be processed first is the job that has earliest due date.
• Shortest Processing Time (SPT): The job to be processed first and completed is the job that is shortest in
nature;
• Longest Processing Time (LPT): The job to be processed first is the job that is very important or of high
priority though it can take longer processing time.
• Critical Ratio (CR): The job to be processed first is analysed on the basis of critical ratio, which is an index
number calculated from time remaining until due date divided by the remaining work time.

Johnson’s rule This rule is applied to minimize the completion time for a set of jobs that are to be processed on
two different machines or at two consecutive work stations. The main objectives of the rules are,

• To minimize the processing time while sequencing a set of jobs on two different machines or work stations.
• To minimize the complete idle time on the processing machines.
• To minimize the flow time of the job, i.e., from the start of the first job until the completion of the last job.
Variation of Assignment Problem

Any assignment problem is said to be unbalanced if the cost matrix is not a square matrix, i.e., the number of rows
and columns are not equal. To make it balanced, we add a dummy row or dummy column with all the entries as
zero. (Example Pg no. 130 & 131)

Maximization in Assignment Problem - In this, the objective is to maximize the profit. To solve this, we first convert
the given profit matrix into the loss matrix by subtracting all the elements from the highest element. For this
converted loss matrix, we apply the steps in Hungarian method to get the optimum assignment.

First Scheduling Problem - The scheduling of flights and fleet assignment are considered as the two most significant
decisions in airline planning because they help to minimize the costs and revenues of an airline company. The
assignment problem of operations research is considered as the most functional tool for solving and managing
flight schedules. Furthermore, these decisions have to be made 10–12 weeks prior to the flight date so that the
cabin crew scheduling accommodation can be appropriately done.

• The flight scheduling programming model was developed for flight scheduling and fleet assignment where
the fleet personal assigned to each scheduled flight is decided at the first stage.
• Then, the fleet type is assigned to each flight which is decided at the second stage. The third stage is
aircraft scheduling and finally the crew scheduling is done.

Fleet Assignment Problem (FAP) helps in assigning an aircraft model for each scheduled flight based on the
capability of passengers, running cost, and planned revenue of each fleet. This is the most important and essential
work of aircraft scheduling and planning in airlines.

• In production scheduling of airlines, FAP is responsible to assign the most appropriate aircraft type to each
flight. Since the flying performance of different aircraft models are different.

Unit – 7 Transportation Model

The transportation problem, which is a subclass of a Linear Programming Problem (LPP). Transportation problems
deal with the objective of transporting various quantities of a single homogeneous commodity initially stored at
various origins, to different destinations, in a way that keeps transportation cost at minimum.

• The solution of any transportation problem is obtained in two stages, initial solution and optimal solution.
• There are three methods of obtaining an initial solution. These are: North West Corner Rule or NWCR, Least
Cost Method and Vogel’s Approximation Method (VAM). The optimal solution of any transportation problem
is a feasible solution that minimizes the total cost.
• An optimal solution is the second stage of a solution obtained by improving the initial solution.

Block 3 Project Management

Unit 10 Overview of Project Management
Project management can be defined as the discipline of planning, organizing, securing, managing, leading and
controlling resources to achieve specific goals. A project is a duty or task that has a fixed deadline to create a
unique product or service.

• Projects can be classified into various categories on the basis of their characteristics such as time period
and level of risk.
• The success of a project depends on several factors, such as scope, time, cost and the quality of product,
and the availability of resources.
• A project is also a system of people, equipment, materials and facilities put together for a specific
objective. The various techniques and approaches of project management help in developing the systems
approach of a project.
• Usually, modern management techniques are used for project management for directing and coordinating
the human and material resources throughout the project. The main aim of project management is to
achieve the predetermined objectives of scope, cost, time, quality and the satisfaction of the participant.

Characteristics of Project Management:

• The project manager is the single focal point for bringing together all the necessary resources for achieving
the project objectives. He/she formally heads the project organization and operates independently the
normal chain of commands.
• The project manager is responsible for integrating the people from different functional disciplines working
on the project.
• The project manager will negotiate directly with the functional managers for support. The functional
managers are responsible for the activities of the individuals and for the personnel coming under the scope
of their functional groups.
• The project manager focuses on delivering a particular product or service at a certain point of time and
cost to the satisfaction of the technical requirements.
• A project in an organizational structure has two chains of command. One is the vertical, functional
reporting relationship and the other is the horizontal, project reporting mechanism.
• Though the project organization is temporary, the functional units from which it is formed are permanent.
Thus, when a project ends, the project team is scattered and the project personnel either return to their
functional units or they are reassigned to new projects.

Perquisite of Successful Project Management:

• Adequate Project formulation

• Project organization • Availability of fund
• Effective monitoring
• Implementation Planning

Need of Project Management:

• Saving cost
• Improve working condition
• Resolve problem
• Determine risk
• Improve product quality

Evolution of Project Management: Although project management as a concept has only been defined recently, it
has been utilized since ages. Taking the example of pyramids of Egypt around 2500 BC, records prove that there
were managers responsible for each of the four faces of the Great Pyramid. In case of the Great Wall of China too,
the planning was an important part of the whole project.

• In the 19th century, however, construction, manufacturing and transportation demanded better planning
and management. This led to the creation of a more refined approach known as project management.
• With the advent of 20th century, the modern form of project management began to take shape. This was
because of rapid industrialization, which required a revolution in management style.
• Henry Gantt, however, is the father of modern project management. He is responsible for creating
scheduling diagram consisting of a visual timeline to plot tasks as points with durations, and linked them if
they were dependent. This made it easier to see the schedule more clearly.
• The evolution of project management has not ceased to happen currently. It is still evolving, growing,
transforming and revolutionising the industries all across the globe. As long as the need to control or
manage a project will exist, the project management will keep evolving to cater to that need.
Unit 11 – CPM and PERT

CPM and PERT are two methods, which were developed in 1956-58 by a research team to help US navy. It is now
being used in all projects which involves uncertainty in terms of duration.

• The critical path method (CPM) refers to an algorithm for scheduling a set of project activities. It is usually
used in conjunction with the program evaluation and review technique.
• While the Programme Evaluation and Review Technique (PERT) is a statistical tool used in project
management, which was designed to analyse and represent the tasks involved in completing a given
project.

CPM (CRITICAL PATH METHOD) - A CPM schedule simplifies the planning of work assignments in advance and helps
improve communication among those who are responsible for project performance. The CPM also helps in better
project planning by providing evaluations and forecasts the success of alternative plans of action.

• It helps the top management to focus on the critical activities and their timely accomplishment.
• It provides the knowledge of critical and non-critical activities and their completion in time.
• It creates the best way of planning and scheduling a construction project by showing the critical path.
• It provides the complete information about the importance, duration, size and performance of an activity.

Demerits:

• The CPM is based on the estimation of duration of activities which is impractical in real life.
• In case there are changes in the predetermined network, the entire evaluation of the project has to be
repeated and a new critical path is required to be created all over again.
• It does not include statistical analysis in determining the time estimates.
• The CPM can become complicated when it involves larger projects.

PERT and Critical Path Analysis Determination - The PERT was created to handle such projects where the time
estimate of activities is non-deterministic. The PERT is used to organize and coordinate tasks within the project.
The objective of the PERT chart is to determine critical path which comprises critical activities that should be
completed on schedule. This chart is prepared with the help of information generated in project planning activities
such as estimation of effort, selection of suitable process model for software development and decomposition of
tasks into subtasks.

• It represents the project in graphical form.

• It provides information about the expected completion time of the project.
• It describes the probability of completion of the project before the specified date.
• It specifies the activities that form the critical path.
• It specifies the starting and ending dates of activities involved in the project.

PERT Chart (step to create)

• Identify the activities and milestones: In this step, the activities and
milestones that are required to complete the project are described.
• Identify the sequence of activities: In this step, the sequence of
activities is determined. The sequence describes the dependency of
one activity on another.
• Prepare the PERT chart: In this step, the PERT chart is prepared.
• Estimate the time consumed in activities: In this step, the amount of
time consumed in carrying out each activity is specified.
• Determine the critical path: In this step, the critical path for
completion of activities is specified. Critical path determines the
calendar time required to complete a series of activities according to
the project schedule.
• Update the PERT chart: In this step, the PERT chart is modified as changes take place in the project on
completion of each activity.

PERT system of three-time estimates - The PERT is a technique where the activity times are represented by a
probability distribution.
This probability distribution is based upon three different time estimates made for each activity.

• Optimistic time estimate: It refers to the time estimate of an activity when everything is assumed to go
well as per the plan.
 t is the estimate of the minimum possible time which an activity takes to complete under ideal conditions
and is denoted by t 0 or a.
• Most Likely time estimate: It refers to the estimate of the normal time an activity would take to complete.
This assumes normal delays and calculates the time which the activity will take most frequently if
performed a number of times. It is denoted by tm or m.
• Pessimistic time estimate: It refers to the longest time that an activity would possibly take if normal
conditions do not prevail. However, this does not include major catastrophes such as labour strikes, natural
calamities and unrest and is usually denoted by b or t.

Pg no. 237 (PERT Analysis)

Unit 12 Float and Project Scheduling

In project management, float refers to the amount of time that can be passed without causing delay to subsequent
tasks that is, free float and the completion of the whole project that is, total float. Float is essential to critical path
method or CPM for calculating the critical path drag of an activity that is, the amount of time it is adding to the
project’s duration.

1. In case of a project network chart/diagram with four non-critical paths, that project have four total float
values. The total float of a path is the combination of free float values of all activities in a path. It is
representative of the schedule flexibility, which can be measured by subtracting early start dates from late
start dates of path completion.

The procedure of deciding the critical path is executed through the following steps:

• Firstly, the project is categorized into a series of labelled activities.

• All the nodes and activities are then numbered. The time required for each activity is calculated and
indicated in the arrow diagram.
• The earliest start and ending time along with the latest start and finish time are then calculated and jotted
down.
• The total float for each activity is then determined by taking the difference between the earliest and the
latest time for each node.
• The critical activities (zero float activities) are then identified and connected with the beginning and the
ending node in the network diagram by double line arrow. This gives the critical path.
• The total project duration is then calculated. In case the total project duration needs to be reduced, the
critical activities of the network are crashed.

Scheduling Types:

• Multi-level scheduling is more common and desirable. When schedules are prepared at multiple levels, it
is called multilevel scheduling. Three to four level schedules can be prepared depending upon the
requirements, for example:

o Master project schedule is prepared for the top management. This is essentially the milestone
chart which gives a one-glance picture of the total activities.
o Functional area schedules are prepared for the project related activities of each functional
department.
o Schedules of work packages are the detailed schedules for all work packages that form the part of
either the master project schedule or the functional area schedule.
• Multi-project scheduling A firm, handling more than one project simultaneously, may require multi-
project planning and resource allocation. Several resources, including manpower and money, are in
common demand from all projects under construction. In that case, if separate project teams are allowed to
operate independently, there could be conflicts and sub-optimal utilization of resources leaving unutilized
resources some times and scarcity of resources some other times.

In multi-project scheduling, all projects are collectively treated as a single project for the breakdown of
work packages, their sequencing and resource allocation. A firm may avoid difficulties of multi-project
scheduling by scheduling each project independently but the costs and other potential conflicts in this
approach may not be worth taking the risk.
 One more decision is whether to have CATS only, RATS only or both. The
term CATS stands for critical activity time schedule and the term RATS
for realistic activity time schedule. CATS provides more stringent time
standards for project execution, whereas RATS is based on achievable
time schedule.

Both CATS and RATS are time schedules. CATS can be used to provide
stringent time standards for project execution and can be useful for
setting targets for project teams. RATS provide a more realistic time
planning; therefore, it can be used for negotiations with funding
agencies, who would expect timely attainment of major milestones in the
project construction before they would release additional instalment of loan.

A good schedule helps project managers establish achievable and realistic goals in order to fulfil project objectives,
improve credibility, and manage the expectations of clients better. Project managers should deliver results, fulfil
requirements, and adhere to time and cost constraints agreed upon so that their projects are successful.
• When goals are set for projects, the SMART policy should be followed. The goals should not only be Specific
and
Measurable but also Achievable, Realistic and Timed. Wherever the time factor comes in, the significance
of scheduling is highlighted.
• In order to be able to schedule the project properly, the project manager usually keeps track of all the
bullet points mentioned and performs the following:
o Sits with the team and narrows down the objectives to something specific, concrete, measurable
and achievable within a specific time.
o Enters each specific point on the project into the software being used or a general calendar
software. Activates reminder systems to keep track of the progress of the project.
o Allows all members access to the schedule and the progress so that everyone is aware of the effort
required to achieve the goal/deadline.

Unit 13 – Time Cost Relationship

In project management, there exists a relationship between a project’s cost and time to completion. In some cases,
the relationship is in direct proportion, while in others, there is a direct trade-off. Because of these, there is an
optimal project pace for minimal cost. By understanding the time-cost relationship, one is better able to predict the
impact of a schedule change on project cost.

• The CPM or Critical Path Method assumes that the estimated completion time for a project can be
shortened by deploying additional resources for the activities. These additional resources include labour,
equipment, capital or any other resource.
• A very important assumption made in the time-cost relationship is that of linearity. Since you do not know
the actual nature of the time-cost relationship for an activity, a simple linear relationship is assumed. It is
equally important to keep in mind that each activity has its own time-cost relationship.
• By using the CPM, you can determine the optimal time-cost trade-off for each activity in a project so as to
achieve the maximum or desired speed of the project duration at the minimum total direct cost for the
whole project.

Block 4 Game Theory of Decision Making

Unit 14 Theory of Games
Businesses do not work in isolation. There are always a number of competitors and collaborators who work in the
same market area. And since there is an existence of competitors, it is prudent for the managers to be aware of
the market situation and the consequences of how the strategy of one firm affects the business operations and the
conditions of the market. This is where game theory comes of assistance.

• A competitive situation is called a game. The term game represents a conflict between two or more parties.
• The outcome of a game consists of a particular set of courses of action undertaken by the competitors.
Each outcome determines a set of payments (positive, negative or zero), one to each competitor.

Strategy of a player is the decision rule he uses for making a choice, from his list of courses of action.

• A strategy is called pure if one knows in advance of the play that it is certain to be adopted, irrespective of
the strategy the other players might choose.
 • The optimal strategy mixture for each player may be determined by assigning to each strategy, its
probability of being chosen. The strategy so determined is called mixed strategy because it is a
probabilistic combination of the available choices of strategy.

Pay-off is the outcome of playing the game. A pay-off matrix is a table showing the amount received by the player
named at the left-hand side after all possible plays of the game. The payment is made by the player named at the
top of the table.

Use of Game Theory:

• Supply chain: Managers use the game theory to take decisions regarding the efficiency of the supply chain
including questions of capacity, volume, outsourcing, making or buying, etc.
• Products: Game theory is also useful for managers for making product related decisions including questions
like whether to introduce a new product or not, whether to stop a particular product or whether to enter a
market.
• Bargaining and negotiations: It is seen that game theory is a prudent solution in situations which involve
bargaining and negotiation to maintain relationships between the managers and workers’ unions.
• Bids and auctions: Game theory is of great importance to the managers who are trying to understand the
bidders’ behaviour and other related factors which comes into play especially in first-price sealed bids.

Significance of Gaming Theory:

• Knowledge about the competitors

• Mellow the risk
• Improve internal decision making

Evolution of Game Theory: Game theories early traces can be seen in James Waldegrave’s minimax mixed strategy
for two-person games. The invention of game theory in its mathematical application is attributed to the John von
Neumann and Oskar Morgenstern, who popularized the idea between 1928 and 1944. Further, in the 1950s, the
theory of games was developed by Albert W Tucker and the prisoner’s dilemma and the Nash equilibrium. Other
theorist whose contribution to the game theory is regarded considerably includes Martin Shubik. He came up with
the Dollar Auction Game (1971). And more recently in the works of Prajit K. Dutta.

Unit 15 Types of Games

Games can be categorized on the basis of number of players and outcomes. The following are the major types of
games:

• Two-person games and n-person games: In two-person games, the players may have many possible
choices open to them for each play of the game but the number of players remain only two. Hence, it is
called a two-person game.
• Zero-sum game: A zero-sum game is one in which the sum of the payment to all the competitors is zero,
for every possible outcome of the game is in a game if the sum of the points won, equals the sum of the
points lost.
• Two-person zero-sum game: A game with two players, where the gain of one player equals the loss of
the other, is known as a two-person zero-sum game. It is also called a rectangular game because their
payoff matrix is in the rectangular
form.

The Maximin-Minimax Principle - This

principle is used for the selection of optimal
strategies by two players.

• Consider two players A and B. A is a

player who wishes to maximize his
gains, while player B wishes to
minimize his losses. Since A would like
to maximize his minimum gain, we
obtain for player A, the value called
maximin value and the corresponding
strategy is called the maximin strategy.
• On the other hand, since player B
wishes to minimize his losses, a value
called the minimax value, which is the
minimum of the maximum losses is
found. The corresponding strategy is
called the minimax strategy.
 • When these two are equal (maximin value = minimax value), the corresponding strategies are called
optimal strategies and the game is said to have a saddle point. The value of the game is given by the
saddle point.

Saddle point: A saddle point is a position in the payoff matrix where, the maximum of row minima coincides
with the minimum of column maxima. The payoff at the saddle point is called the value of the game.

Games without Saddle Points:

• 2 × 2 Games Without Saddle Point Consider a 2 × 2 two-person zero-sum game without any saddle point,
having the payoff matrix for player A as,

Graphical Method for 2 × n or m × 2 Games – (Pg no. 287 -289)

Unit 16 – Dominance Theory and Sequencing of Jobs

The reactions or counteractions by rival players are crucial in determining whether the pay-off of the strategy of
the player is high or low. A strategic action that yields the best outcome whatever the reaction of the rival firms is
called dominant strategy.

• Sometimes it is observed that one of the pure strategies of either player is always inferior to at least one of
the remaining. The superior strategies are said to dominate the inferior ones. In such cases of dominance, we
reduce the size of the payoff matrix by deleting those strategies, which are dominated by others.
 Example from 294 – 298

Job Sequencing in 2 Machines and 3 Machines - The purpose of job sequencing is to determine an appropriate
order (sequence) for a series of jobs to be done on a finite number of service facilities in some preassigned order,
so as to optimize the total cost (time) involved.

• Suppose there are n jobs (1, 2 ... n), each of which has to be processed one at a time at m machines (A,
B,C ...). The order of processing each job through each machine is given. The problem is to find a sequence
among (n!)m number of all possible sequences for processing the jobs so that the total elapsed time for all
the jobs will be minimum.

Type I: Problems with n Jobs Through Two Machines - The algorithm, which is used to optimize the total
elapsed time for processing n jobs through two machine is called ‘Johnson’s algorithm’ (Pg no. 302 – 305)

Type II: Processing n jobs through three Machines A, B, C Consider n jobs (1, 2 ... n) processing on three
machines A, B, C in the order ABC. The optimal sequence can be obtained by converting the problem into a two-
machine problem. From this, we get the optimum sequence using Johnson’s algorithm.
Unit 17 Elementary Queuing Theory
A flow of customers from finite/infinite population towards the service facility forms a queue (waiting line), on
account of a lack of capability to serve them all at a time. In the absence of a perfect balance between the service
facilities and the customers, waiting time is required either for the service facilities or for the customer’s arrival.

• Queuing System – 4 o Input describes the way in which the customers arrive and join the system. Generally,
customers arrive in a more or less random fashion, which is not worth predicting. Thus, the arrival
pattern can be described in terms of probabilities, and consequently, the probability distribution for
inter-arrival times (the time between two successive arrivals) must be defined.

o The service mechanism - This means, the arrangement of service facility to serve customers. If
there is an infinite number of servers, then all the customers are served instantaneously on arrival,
and there will be no queue. If the number of servers is finite then the customers are served
according to a specific order, with service time as a constant or random variable.

o The queue discipline It is a rule according to which the customers are selected for service when a
queue has been formed. The most common disciplines are: • First come first served (FCFS) • First
in first out (FIFO) • Last in first out (LIFO) • Selection for service in random order (SIRO).

o Customer’s behaviour - The customers generally behave in the following four ways: (i) Balking: A
customer who leaves the queue because the queue is too long and he has no time to wait or due to
impatience. (iii) Priorities: In certain applications some customers are served before others,
regardless of their arrival. These customers have priority over others. (iv) Jockeying: Customers
may jockey from one waiting line to another. This is most common in a supermarket.

• Transient and steady states: A system is said to be in a transient state when its
operating characteristics are dependent on time. A steady state system is the one in which
the behaviour of the system is independent of time.
• Traffic intensity (or utilization
factor): An important
measure of a simple queue is
its traffic intensity given by,

• A queueing model may be completely specified in the following symbol form (a/b/c): (d/e).
Kendall’s Notation for representing queueing models defines the symbols in the queueing
model. (From page no. 318)
 clssmate
Date
Psge

And
araphical
the mamimm
method)
vaue o K= 5X, t 72 CUse

to,

3X+ 8X, < 24

JOX,
lox + 7%, <35
all tae of tdhe conatointa
nequalitis
Ans: Replace
by faming equationwi

3X,+8x, = 24
\Ox,t7X, = 35
pide ea, by
1
4, we qet

4 4

Divide eq by 24, ne qet

3X4 1
24 24
iride eq, (D byy 3S, we
= 1
5
=1
35 35 3.5

Jhe co-srdiatiw pasing thnauyb

Co,4) (4,0)
(o,3) (8,0)
e4, - (3.5,0)
0,5)
 Dote

Page

Pot ta dineo m te gapui

(0,3>.6,2

feasible
Aegon
6

co,0)
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he teaible neaio ia maked below the line

as the
alo
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the OABCD.

Bande ane paints of instuctiens of lined

 adssate
Date

the ordlinal of point B and ei

kets funol

feiint

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c C.6, R.4)
feinbs Value o = 5X + 7 X,
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Cl•6 2.4)
D(O, 3)
2

manimum value
tthee
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value.
anel detmine iit
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-4 4
matu does met

Ans:
uis clen that the the wlAe
Aadle

arei
for the playes
 A, A

=1

21
4-(-4)
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(a +aa)-(Myt ai)

16
=1
P= I-=
2

4-(-4)
4+4 H- 4)
(a+a,)-(ata)
l6 2

fasgtan)tagtaz)
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(4+)-[-4+(-4)1
 LPP 202 Nneeal
Assiarment
Mas value QuestiI.
2= 5
47d
b.4
24
lo t
7a 35

24 2.4 35
35

8 3.5

feasible tegou

(o,3)
(o (One)

A
(o,o) (3.5,0)

aleulet the co- Ondiati;-0

24
Cy 3x, t 2

-24
35
3, + 302 12

=o
:3
3a
2.
4- 2,4,l.

2: 4- 2.3
1.7

.6,2:4)
 olo,o) r O
Al3. 5,o) 5x 3. 5 +D |7.5

B1:7,2.3) = 5x I.7 + 1K2.3=8.5+ l6.] = 24.6

cl·6,2.4)> 5X1.64 72.4 8+ l6. 8

Max alue at [Link] 2 4) and optimal

method
yaphica
lod Quexton
Sulayect o it 22, <40 fapev-04

40
+ 30 15
20
29

()
A

(40,0) O

,240,xAX2
t D
3,
32, + 2-30
M t 2 = 40

5x, 20.
5, 30

30 -3
(20-18;2
l4,1g) 2 2
Mode (aleko

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 202 Naueluala

Quesbonw-3
4ssignment
selatiow for tte
iad ie binitál lasie lasille

jelle twing bianapontotiat pobleme ning 'VAM

D De D3 D4
|4 R50
I6 J4 300
21 24 13 400
450
Remamd200225275250

Ag a: = Sbi= 40, tt prebleww balad and

here

fnst,we ind ktne aud colun pealay

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Ask
Di D2 Da
13 |7 2
300 4
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51
X
penaley io 5, Bo we choose kicst cole

mininum magniade (that ia, Min(Rs0,200)= 200)

 alssmate
Dats

Page

enhausto the Delete

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P emang
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24 13 400 3
275 250
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emanl 275

h Allocatiow

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00
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 Dete
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tufere, auspextatieu Lost,

||X200 + 13xSo +
13x 275 + \ox 125 z l2,O 75

Assignment Queston 420-21

PERT
tthat the
pbyet in completd days
Job
Opfimistic Pessimistic Gepected +me Gtandayd
to tm tp te 2
Deriatin

t=to+ 4tm t tetp-to

6
1-2 1
3 1+4x7+13
6
=7

1-6 2 5 4 6 4

2-3 2 4 26 14 16

2-4 2 5 5
3-5 7 19

4-5 5 5 |7 7
6-7

5-83
s8 5

3
29

4
l6

7-8 I7 32 18
 21 oulial patt
21

value 32
min
14 32 maz valua bet

25 36
36
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value

7 18
|7

ahaw, we will wute te estinato timelte)

event. ot2awrDns
n case
take min value

latat time Backuand pas contatiw Caddi tory

Box

Ealisst tine y foward pans cornputstiw ( minas)

Staking peint fo ealt tume at evet

puent O wfll reo
be

Savtng polnt ko latest tme at event ) wil be &ene

will be

eadist tmet(nthš Qum, ito 36)

Gutcal Aetirity - An astirity

is sad to be cetical t
the total

Gutioal Pat canbe dotuuniedas

as 1-2 - 3-5-8

)brectad Proiect duatianw

Sum of te fo citialpath)
= 7+ 4+l+ 4= 36 days
 alssmste
Dats

Page

haect Length vaouee = 6 4+l6 + 4 +! z 25

(Su

Seawndand deatiow =S =
6=Jt = 5

*
TS 40days

81 estiiatol tme = 34
S S=6e5
= 40- 36 =40-8

A0.8
i53Pz<0.8)
=0.54
o.5 + (o-8)
0.2881
8 = O. 2 881
881 fontasle )
0.7881 Plzsos)0.188tftinert frem
= 78.8I %

te md
l00 tines the
aMne onitine, 9 ill e 78.81 occasins
tor thiu gak to be cempletid
 nd questow- )0-2l

whose motnin
Selre the
B B
A 3
A A -3

B3 Row Minima

Ai 3
-3

Colunn Maama
5

1, -4,-1) = 1
Mazi/ Mimm) = Max

Min& (Maximum) = Mn I,5, )= 1

= = Miminax Voue
Moximin ale Y 1

Hence, Saddte peint exists.

Saddle pont
he value of te_ game s the
is the
chick

sition
tdhe Sadde point and is
 Dats

Od questi
(2920)
A Small s composed o 7actitis whss
ame ae Cuted belen
Tfnedsetion n weeks)

Actiry Opmistie
to tm tp tez totttmttp te-t

|-2 6

-3 4 7
r24-41)T
|-4
2o 2 2+2K4+8E3/-2|
2-5 If4++

3-5 2 14

4-6 2. 5
5-6 15 3+6
6 RH+1SH2:7)
=4

Drar PERTT diagram and nepeseut the poect

Completinw tine!
 Jkcesste
Date
Page

)
6)
()
ouble

tstal
Awps
Showstiial
lloat
is

2ero
mas Valueok
(3)\ 5)

3
12

Gitieal atth = |- 3- 5 -6

Gs peetad frset dunatiow = 4+6t 7=dago vseeks

&o we taw cenelude ttuat poyect pempletto
tie 7 week