Operations Research

(As Per the Revised Syllabus 2016-17 of Mumbai University for

T.Y. BMS, Semester VI)

Dr. (Mrs.) Abhilasha S. Magar

M.Sc. (MATHS), B.Ed., Dip. C.P., Ph.D.
Annasaheb Vartak College
Vasai Road (West), Thane

Dr. (Mr.) Shashikant Magar

M.Com, MBA, AICWAI, SET, NET, M.Phil, Ph.D

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© Authors
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 Dedicated to My Parents
and
All our Respected Teachers
“Who has always been our greatest source of
INSPIRATION and COURAGE”
 PREFACE

It gives me immense pleasure to present the book on “Operations Research” to students and
teachers of T.Y. BMS course of Mumbai University. This book is prepared exactly as per the syllabus
prescribed by the University.

I have made humble attempts to fill up the gap and help the students and teachers community by
giving them a suitable textbook catering to their special need with sufficient number of solved
problems on every topic and ready assignments at the end of the book.

Suggestions and recommendations are most welcome for further improvement and quality
delivery of the desired content from everyone who refers the book. Because this is not the end but the
beginning of the journey. To deliver quality at reasonable cost is our main moto.

I cannot ignore Dr. Keshav N. Ghorude, Principal of Vartak College, Vasai (W) for giving
necessary guidance and help, as and when it was required for completing the book.

Special thanks to my husband Dr. Shashikant Magar, family members and friends for always
standing by me. Last but not the least, sweet thanks to my loving sons SHAURYA and SAMARTH.

Authors
magar_a47@yahoo.com
 SYLLABUS

Operations Research
Sr. No. Modules No. of Lectures
1 Introduction to Operations Research and Linear Programming 15
2 Assignment and Transportation Model 15
3 Network Analysis 15
4 Decision Theory, Sequencing and Theory of Games 15
Total 60
Objectives
Sr. No. Objectives
1 To help students to understand operational research and methodologies
2 To help students to solves various problems practically
3 To make students proficient in case analysis and interpretation

Sr. No. Modules units

1 Introduction to Operations Research and Linear Programming
(a) Introduction to Operations Research:
Operations Research: Definition, Characteristics of OR, Models, OR Techniques,
Areas of Application, Limitations of OR.
(b) Linear Programming Problems: Introduction and Formulation
Introduction to Linear Programming.
Applications of LP.
Components of LP.
Requirements for Formulation of LP Problem.
Assumption Underlying Linear Programming.
Steps in Solving LP Problems.
LLP Formulation (Decision Variables, Objective function, Constraints, Non-
negativity Constraints).
(c) Linear Programming Problems: Graphical Method
Maximization and Minimization Type Problems (Max Z and Min Z).
Two Decision and Variables and Maximum Three Constraints Problems.
Constraints can be “Less than or Equal to”, “Greater than or Equal to” or a
Combination of Both Types, i.e., Mixed Constraints.
Concepts Feasible Region of Solution, Unbounded Solution, Redundant
Constraint, Infeasible Solution, Alternative Optima.
(d) Linear Programming Problems: Simplex Method
Only Maximization Type Problems (Only Max Z). No Minimization Problem
(No Min Z).
 Two or Three Decision Variables and Maximum Three Constraints
Problem (Up to Maximum Two Iteration).
All Constraints to be “Less or Equal to” Constraints. (“Greater than or Equal to”
Constraints Not Included.
Concepts: Slack Variables Surplus Variables, Artificial Variables, Duality,
Product Mix and Profit, Feasible and Infeasible Solution, Unique or
Alternate Optimal Solution, Degeneracy, Non-degenerate, Shadow Price of
Resources, Scarce and Abundant Resources, Utilized and Unutilized
Capacity of Resources, Percentage Utilization of Resources, Decision for
Introduction of a New Product.
Notes:
1. Surplus Variable, Artificial Variable and Duality to be covered only at
Conceptual level for Theory Questions only and not included in Numerical
2. Sensitivity Analysis including Profit Range and Capacity Range is not
included.
2 Assignment and Transportation Problem
(a) Assignment Problem – Hungarian Method
Maximization and Minimization Type Problems.
Balanced and Unbalanced Problems.
Prohibited Assignment Problems, Unique or Multiple Optimal Solutions.
Simple Formulation of Assignment Problems.
Maximum 5 × 5 Matrix up to Maximum Two Iterations after Row and
Column Minimization.
Notes:
1. Travelling Salesman Assignment Problem is not included.
(b) Transportation Problems
Maximization and Minimization Type Problems.
Balanced and Unbalanced Problems.
Prohibited Transportation Problems, Unique or Multiple Optimal Solutions.
Simple Formulation of Transportation Problems.
Initial Feasible Solution (IFS) by:
(a) North West Corner Rule (NWCR)
(b) Least Cost Method (LCM)
(c) Vogel’s Approximation Method (VAM)
Maximum 5 × 5 Transportation Matrix.
Finding Optimal Solution by Modified Distribution (MODI) Method. (u, v and ∆)
Maximum Two Iterations (i.e., Maximum Two Loops) after IFS.
Notes:
1. Production Scheduling Problem is not included.
2. Time Minimization Problem is not included.
3. Degeneracy concept to be covered only at Conceptual Level. Not to be included.
3 Network Analysis
(a) Critical Path Method (CPM)
Concepts: Activity, Event, Network Diagram, Merge Event, Burst Event.
Concurrent and Burst Activity.
 Construction of a Network Diagram. Node Relationship and Precedence
Relationship.
Principles of Constructing Network Diagram.
Use of Dummy Activity.
Numerical Consisting of Maximum Ten (10) Activities.
Critical Path, Sub-critical Path, Critical and Non-critical Activities, Project
Completion Time.
Forward Pass and Backward Pass Methods.
Calculation of EST, EFT, LST, LFT, Head Event Slack, Tail Event Slack, Total
Float, Free Float, Independent Float and Interfering Float.
(b) Project Crashing
Meaning of Project Crashing.
Concepts: Normal Time, Normal Cost, Crash Time, Crash Cost of Activities.
Cost Slope of an Activity. Costs Involved in Project Crashing: Direct, Indirect,
Penalty and Total Costs.
Time-Cost Trade-off in Project Crashing.
Optimal (Minimum) Project Cost and Optimal Project Completion Time.
Process of Project Crashing.
Numerical Consisting of Maximum Ten (10) Activities.
Numerical based on Maximum Four (04) Iterations of Crashing.
(c) Program Evaluation and Review Technique (PERT)
Three Time Estimates of PERT: Optimistic Time (a), Most Likely Time (m) and
Pessimistic Time (b).
Expected Time (te) of an Activity using Three Time Estimates.
Difference between CPM and PERT.
Numerical Consisting of Maximum Ten (10) Activities.
Construction of PERT Network using the Values of All Activities.
Mean (Expected) Project Completion Time.
Standard Deviation and Variance of Activities.
Project Variance and Project Standard Deviation.
Meaning, Objectives, Importance, Scope, RORO/LAS.
4 Decision Theory, Sequencing and Theory of Games
(a) Decision Theory
Decision Environments – Risk and Uncertainty, Payoff Table, Regret Table.
Decision Making under Uncertainty.
▪ Maximin and Maximax Criteria
▪ Minimax Regret Criterion
▪ Laplace Criterion
▪ Hurwicz Criterion
▪ Expected Monetary Value Criterion
▪ Expected Value of Perfect Information (EVPI)
▪ Expected Opportunity Loss (EOL).
(b) Job Sequencing Problem
Processing Maximum 9 Jobs through Two Machines only.
 Processing Maximum 6 Jobs through Three Machines only.
Calculations of Idle Time, Elapsed Time, etc.
(c) Theory of Games
Introduction
Terminology of Game Theory: Players, Strategies, Play, Payoff, Payoff Matrix,
Maximin, Maximax, Saddle Point.
Types of Games.
Numericals based on:
▪ Two Person Zero Sum Games
▪ Pure Strategy Games (Saddle Point).
 PAPER PATTERN

Duration: 2.5 Hours Max. Marks: 75 Marks

N.B.: 5 questions of 15 Marks each.
All questions are compulsory.

Q.1. Attempt any two:

(a) 7.5 Marks
(b) 7.5 Marks
(c) 7.5 Marks

Q.2. Attempt any two:

(a) 7.5 Marks
(b) 7.5 Marks
(c) 7.5 Marks

Q.3. Attempt any two:

(a) 7.5 Marks
(b) 7.5 Marks
(c) 7.5 Marks

Q.4. Attempt any two:

(a) 7.5 Marks
(b) 7.5 Marks
(c) 7.5 Marks

Q.5. Case Study 15 Marks

 CONTENTS

Chapter No. Chapter Pages

1 Introduction 1–5

2 Linear Programming Problem (LPP) – I

[Formulation and Graphical Method] 6 – 25

3 Linear Programming Problem (LPP) – II

[Simplex Method] 26 – 53

4 Transportation Problems 54 – 103

5 Assignment Problems 104 – 127

6 Network Analysis 128 – 163

7 Decision Theory 164 – 198

8 Job Sequencing Problem 199 – 209

9 Theory of Games 210 – 224

Case Studies 225 – 230

University Question Paper 231 – 248

Table 249
 1
Introduction

1.1 INTRODUCTION
Managers are evaluated primarily on the result of their decisions and successful managers use
quantitative approaches to decision making. These approaches are also known as “Operation Research
or Management Science or Decision or Quantitative techniques for Management or Quantitative
Analysis for Management”.
Management Science or Operation Research is the application of the scientific approach to
solving management problems in order to help managers to make better decisions. This scientific
approach to solving managerial problems makes extensive use of quantitative analysis.
Quantitative methods or approaches to decision making are used when:
1. The problem is complex.
2. The problem involves many variables.
3. There are data which describe the decision environment.
4. There are data which describe the value or utility of the different possible alternatives.
5. The goals of the decision maker in his/her organization can be described in quantitative
terms.
6. Workable models are available for these situation.
Operation research deals with quantitative models which can be applied under various problem
situations. It provides a manager necessary quantitative tools to make a better decisions.

1.2 DEFINITIONS OF OPERATION RESEARCH

1. “Operation Research is concerned with scientifically deciding how to best design and
operate man-machine system usually requiring the allocation of scarce resources”.
– Operation Research Soc. America.
2. “Operation research has been described as a method, an approach, a set of techniques, a term
activity, a combination of many disciplines, an extension of particular disciplines
(Mathematics, economics, engineering) a new discipline, a vocation even a religion. It is
perhaps some of all these things ”.
– S.L. Cook 1977.
3. “Operation Research is a scientific approach to problem solving for negative management”.
– H.M. Wagner.
4. “Operation Research is essentially a collection of mathematical techniques and tools which
in conjunction with a system approach are applied to solve practical decision problems of an
economic or engineering nature”.
– Dallenback and George 1978.
2 Operations Research

5. “Operation Research is a scientific method of providing executive departments with a

quantitative basis for decision under their control”.
– P.M. Morse and G.E. Kimball.

1.3 HISTORY OF DEVELOPMENT OF QUANTITATIVE APPROACH

(or OPERATION RESEARCH)
Operation Research originated in Great Britain during World War II to bring mathematical or
quantitative approaches to bear on military operation. Thus, operation research is concerned with
research on operations and the word “Research” means that mathematical methods are used to conduct
rigorous scientific analysis of complex problems
Since its birth in the 1940s Operation Research has been widely recognized as an important
approach to decision making in the management of all aspects of an organization.
Hence, the word “Operation” should be interpreted broadly as any operation that requires the
efficient allocation of limited sources. Specific areas of application include for example manufacturing,
transportation and distribution, finance, marketing, health care and telecommunication.
The mathematical methods most widely used in Operation Research include mathematical
programming, probability and statistics and computer science. Some areas of application of Operation
Research such as inventory and production control, querying theory, scheduling theory and simulation
have in fact grown into sub disciplines in their own right.

1.4 MODELS IN OPERATION RESEARCH

The essence of Operation Research lies in the construction and use of models. A model in the
sense intended in operations research is just a simplified representation of something real.
A model is constructed to analyze and understand the given system for the purpose of improving
its performance.
These modules discussed below:

1. Models Based on Function:

(a) Descriptive Models are those which simply describe some aspects of a situation, based on
observation, survey, questionnaire results or other variable data concerned with a situation.
(b) Predictive Models are those which indicate “if something happen, what will follow” the
relationship between dependent and independent variables.
(c) Optimization Models are those which provide the “best” or “optimal” solution to problems
subject to certain limitations on the use of resources.

2. Models Based on Structure:

(a) Physical Models: These models provides a physical representation of the real object under
study in a scaled model.
(b) Symbolic Models are those used to represent actual problems using symbols, i.e., letter,
number to represent variable and their relationship to describe the properties of the system.
Introduction 3

3. Models Based on time Reference:

(a) Static Models represent a system at some specified at some specified time and do not accent
for change over time. E.g., EOQ model.
(b) Dynamic Models which considers time as one of the variables and allows the impact of
changes due to change in time.

4. Models Based on Degree of Certainty:

(a) Deterministic Models in which all the parameters, constants and functional relationship are
assumed to be known with certainty when the decision is taken.
(b) Probabilistic Models are those in which at least one parameters or decision or variable is a
random variable.
E.g., models representing insurance against risk of fire, accidents, sickness of employees, etc.

5. Models Based on Quantification:

(a) Qualitative Models which are descriptive models – mental or verbal description is used to
represent the situation.
(b) Quantitative Models
(i) Heuristic models employ some set of roles which though not optimal, do facilitate
problems solving when applied consistently.
(ii) Analytical model which have a specific mathematical structure and can be solved using
analytical, e.g., LLP optimal product mix.
(c) Simulation Models are those that have mathematical structure but are not solved using
mathematical techniques. They use essentially a computer-assisted experimentation of a
mathematical models of real life problem.
Apart from the above models, operation research models can be either general or specialized
models based on degree of generality, either two dimensional or multidimensional based on
dimensionality and either closed or open, based on the degree of closure.

1.5 THE OPERATION RESEARCH MODELING APPROACH

In addition to formulation of a model, the Operation Research approach involves several
additional steps.
Thus, the basic steps in the Operation Research modeling approach are :
Step I: Define the problem.
Step II: Observe the problem and collect data.
Step III: Formulate a model.
Step IV: Verify the model and use the model for prediction.
Step V: Select the suitable alternative.
Step VI: Present the results of the study to the organization.
Step VII: Implement and evaluate recommendation.
4 Operations Research

Verify Select Present

Define Observe Evaluate
Formulate Suitable
Model Result
Problem System Alternative

Possible feedback loops

Fig. 1.1: Seven Step Modeling Process

1.6 DIFFERENT MODELING TECHNIQUES

1. Linear Programming: To optimize profit or cost satisfying certain restriction. This kind of
problem is known as product mixproblem.
2. Transportation Technique: To find transportation schedule for minimum cost. Each source
may have limited goods available and each destination may have limited demand for goods.
3. Assignment Technique: To find assignment schedule so as to maximize profit contribution,
response, sales/minimize cost, distance, time.
4. Network Analysis: Application of CRM and PERT to find time estimates for project. These
network technique can help managers plan the best way to accomplish each of the tasks in
the projects so that it will take the shortest amount of time possible.
5. Decision Theory: To find the best course of action out of the available course of action.
6. Inventory Modules: To minimize the overall cost procurement and inventory carrying cost.
7. Querying Theory: It is used to study waiting lines. Study random arrives at service and
match them with available facilities.

1.7 SCOPE OR APPLICATION OF OPERATION RESEARCH

1. Finance:
 Building cash management modules.
 Forecasting long range capital needs.
 Budget allocation.
2. Marketing:
 Determining the best product mix to market.
 Finding least cost shipping arrangements from plant to customers.
 Locating warehouses to minimize distribution cost.
 Finding the best time to introduce new product.
3. Accounting:
 Forecasting cash flows.
 Developing standard costs.
 Deciding which customers to give credits and how much.
4. Production/Operation:
 Balancing plant capacity with market requirements.
 Minimizing in process inventory.
Introduction 5

Scheduling job steps to improve capacity.

 Choosing the best size for a new plant or warehouse.
5. Organizational Development/Human Resources:
 To design training programme.
 For recruitments and selection.
 Designing organization structures more effectively.

1.8 CHARACTERISTICS OF OPERATION RESEARCH

1. Operation Research uses mixed team approach to find out optimum solution.
2. Operation Research uses scientific methods to arrive at the optimum solution.
3. Operation Research uses new problem revealed.
4. Operation Research provides quantitative answers.
5. Operation Research deals more in experiments and induction rather than in analysis and
deduction.

1.9 ADVANTAGES OF OPERATION RESEARCH

1. Increases the effectiveness of the decision.
2. Permits a thorough analysis of a large number of alternative option.
3. Enables the best solution to be identified quickly.
4. Better control on system/problem.
5. Help communication within the organization.

1.10 LIMITATIONS OF OPERATION RESEARCH

1. Time consuming.
2. Difficulty in assessing uncertainties.
3. Lack of acceptance by decision makers.
4. It can point out gaps in the data.
5. Quantitative techniques are costly to use between manger and operation research.

REVIEW QUESTIONS

1. What is Operation Research?

2. Explain the History of Operation Research?
3. What do you mean by model in Operation Research? Discuss the type of Operation Research
models.
4. What are the characteristics of Operation Research?
5. What are the limitations of Operation Research?

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