QTM (KMB-206), MBA – II Sem, Compiled by Dr.

Ritesh Singhal 1

Name of the Student.....................................................................................................

UNIT - 1

1. Describe the applications and limitations of operation research in

managerial decision making.

Answer: Operation Research is a tool employed to increase effectiveness of managerial decisions

as an objective supplement to the subjective feeling of the decision –maker. Managerial decision
making is a process by which the management, when faced with a problem, chooses a specific
course of action from a set of possible option.

In making a decision, a business manager attempts to choose the most effective course of action in
the given circumstances in attaining the goal of the organization.

Following are the application of operation research in managerial decision making:

1) Better exploration and understanding of the trigger of the problem

2) Generate more and efficient alternatives.
3) Generating a knowledge base from the surrounding which can help in the validation of
constraints.
4) Using the existing Knowledge for choosing the optimum solution from the available solution.
5) To find optimal solution for a problem.

Example- A company’s decision to introduce a new product will be influenced by such

consideration as market condition, labour rates and availability of funds . The decision will be of
multidimensional response, including the production methodology, cost and quality of product,
price, package design, marketing and advertisement strategy. The result of decision would
conceivably affect every segment of the organisation.

OR applications can be extended to all functions of management –

Finance, Marketing, Operations, Information Technology, and Human Resource by using-

• Linear Programming Problem (LPP)

• Transportation Problem
• Assignment Problem
• Game theory
• Queuing theory
• Job sequencing
• Replacement model
• Project Scheduling (using PERT/CPM)
• Optimization techniques

Limitations of use of OR in decision making

1) A model is constructed only to understand the problem and attempt to solve problem. They
are not to be considered as the real problem or system.
2) It is difficult to study the changes in the operation of the system
3) The model building is very costly for some type of system.
4) Many times it is difficult to perform experiments on these models.
QTM (KMB-206), MBA – II Sem, Compiled by Dr. Ritesh Singhal 2

5) OR model are primarily for quantitative variables.

It should always be kept in mind that OR alone cannot make the final decision. It is just a tool and
simply suggests best alternatives but in the final analysis many business decision will involve
human element. Thus, OR is at best a supplement to rather than a substitute for management.

2. Linear programming is one of the most frequently & successfully used OR

technique to managerial & business decisions. Explain.

Answer: Linear Programming (LP) is a mathematical modelling technique useful for the allocation of
‘scarce’ or ‘limited’ resources, such as labour, material, machine, time, warehouse space, capital, energy,
etc., to several competing activities, such as products, services, jobs, new equipment, projects, etc., on the
basis of a given criterion of optimality. The phrase scarce resources mean resources that are not available in
infinite quantity during the planning period. The criterion of optimality generally is either performance,
return on investment, profit, cost, utility, time, distance, etc.

Assumptions of LP Model:

• Certainty
• Additivity
• Linearity (or proportionality)
• Divisibility (or continuity)

Advantages Linear Programming

• Linear programming helps in attaining the optimum use of productive resources.
• Linear programming technique improves the quality of decisions.
• Linear programming technique provides possible and practical solutions since there might be other
constraints operating outside the problem which must be taken into account.

In general, a LPP can be written as

Maximize z = c1x1+c2x2+…………. cn xn (objective function.)
Subject to (Constraints)
a11 x1 + a12 x2 + ………..+ a1n xn ≤ b1
a21 x1 + a22 x2 + ………..+ a2n xn ≤ b2
---
am1 x1 + am2 x2 + …….+amn xn ≤ bm
x1, x2 ….xn ≥0 (Non –Negativity Restriction)
QTM (KMB-206), MBA – II Sem, Compiled by Dr. Ritesh Singhal 3

Where cj, aij, bi (i =1,2…m ; j = 1,2,…n) are known as

xj are Decision Variables
cj are Profit Coefficients
aij are Technological Coefficients
bi are Resource Values
Use of LPP in Management
1) Finance: The technique of linear programming is very important in finance sector. A
finance manager can use linear programming to make an optimum use of finance resources.
2) Industrial: with the help of linear programming, the production costs can be minimized.
Though there are various constraints with a manufacturing concern but linear programming finds
the best solution under the prevailing constraint.
3) Administrative: In this sector, the technique of linear programming can be used to get
maximum efficiency.
4) Defence: The linear programming can also be used in defence sector to make an optimal
utilization of limited defence resources to get the goal.
5) Trade: In this sector, the linear programming can be used widely, with the help of linear
programming estimation of demand; price, etc can be made.

Mostly all problems in OR can be solved by using LPP (Graphical and Simplex) whether it is
Transportation, assignment, game theory etc.
Note: Student may add a sample LPP for example.

3. Explain following term in content of OR.

i) Scope:
Decision-making in today’s social and business environment has become a complex task. High costs of
technology, materials, labour, competitive pressures and so many different economic, social as well as
political factors and viewpoints greatly increase the difficulty of managerial decision-making. Knowledge
and technology are changing rapidly, the new problems with little or no precedents continually arise. Well-
structured problems are routinely optimized at the operational level of organizations, and increased attention
is now focused on broader tactical and strategic issues.

To effectively address these problems and provide leadership in the advancing global age, decision-makers
cannot afford to make decisions by simply applying their personal experiences, guesswork or intuition,
because the consequences of wrong decisions are serious and costly. Hence, an understanding of the
applicability of quantitative methods to decision-making is of fundamental importance to decision-makers.
For example, entering the wrong markets, producing the wrong products, providing inappropriate services,
etc., will have worst consequences for organizations.

Operations research facilitates the comparison of every possible alternatives (courses of action or acts) to
know the potential outcomes, permits examination of the sensitivity of the solution to changes or errors in
numerical values, and encourages rational decision-making based on the best available approaches and/or
techniques.

1) Business and society: operation research is directly applicable to business and society.

2) Industry: In the field of industrial management, there is a chain of problems starting from the
purchase of raw material to the dispatch of finished goods/

ii) Necessity in industry

QTM (KMB-206), MBA – II Sem, Compiled by Dr. Ritesh Singhal 4

1) Complexity: In a big industry, the number of factors influencing a decision have increased
situation has become big and complex because these factors interact with each other in a
complicated manner.
2) Scattered responsibility and authority: In a big industry, responsibility and authority of
decision making is scattered throughout the organization.
3) Conflicting multiple objectives: In most of the situation organization may be facing
multiple objectives that may be conflicting also. Use LPP in this case.
4) Competitive business situations: Use game theory.
5) Increasing Customer expectation: Use queuing theory.
6) Project Management
7) Replacement Model

iii) Interdisciplinary Approach in Nature & Team approach of OR

Operation Research is not very old subject; it was developed during World
War-II. The experts of different field sit together and develop it by
incorporating concepts of various other disciplines.
• Operation research is inter-disciplinary in nature and requires a team approach to a solution
of the problem. Managerial approaches have economic, physical, psychological, biological,
sociological and engineering aspect. This requires a blend of people with expertise in areas of
mathematics, statistics, engineering, economics, management, computer science and so on.
• OR utilizes a planned approach following a scientific method and an interdisciplinary team,
in order to represent complex functional relationship as mathematical models for the purpose of
providing a quantitative basis for decision-making and uncovering new problems for quantitative
analysis.
• Interdisciplinary Approach: Interdisciplinary teamwork is essential because while
attempting to solve a complex management problem, one person may not have the complete
knowledge of all its aspects (such as economic, social, political, psychological, engineering, etc.).
This means we should not expect a desirable solution to managerial problems. Therefore, a team of
individuals specializing in mathematics, statistics, economics, engineering, computer science,
psychology, etc., can be organized so that each aspect of the problem could be analyzed by a
particular specialist in that field in order to arrive at an appropriate and desirable solution of the
problem. However, there are certain problem situations which may be analyzed even by one
individual.

4) Explain phases of operation research.

Judgment Phase: This phase includes

Identification of the real-life problem
Selection of an appropriate objective and the values of various variables related to this
objective,
Application of the appropriate scale of measurement, i.e. deciding the measures of
effectiveness (desirability) and formulation of an appropriate model of the problem, abstracting the
essential information, so that a solution to the decision-maker’s goals can be obtained.
QTM (KMB-206), MBA – II Sem, Compiled by Dr. Ritesh Singhal 5

Research Phase: This phase is the largest and longest among other two phases. However, the
remaining two are also equally important as they provide the basis for a scientific method. This
phase utilizes:
observations and data collection for a better understanding of the problem
formulation of hypothesis and model,
observation and experimentation to test the hypothesis on the basis of additional data
analysis of the available information and verification of the hypothesis using pre-established
measures of desirability
prediction of various results from the hypothesis, and
Generalization of the result and consideration of alternative methods.

Action Phase: This phase consists of making recommendations for implementing the decision by
an individual who is in the position to implement results. This individual must be aware of the
environment in which the problem occurred, objective, assumptions and omissions of the model of
the problem.
QTM (KMB-206), MBA – II Sem, Compiled by Dr. Ritesh Singhal 6

UNIT 2

1) Define steps involved in simplex method in solving LPP.

Answer:
i) Convert the in inequality explicit constraints to equations by adding slack variables. Enter
the numerical coefficient and variables in the simplex table.
ii) Calculate Cj and Zj Values.
iii) Determine the optimum column or entering variable by choosing the most positive values in
the Cj – Zj row.
iv) Divide the quantity column by non zero and non negative entries in the optimum column.
The smallest quotient belongs to the pivot row.
v) Compute the values for the replacing row by dividing all entries by the pivot. Enter the
result in the next table.
vi) Compute the new entries for the remaining rows by reducing the optimum column entries to
zero.
vii) Calculate Cj and Zj values
viii) If there is a positive entry in the Cj – Zj row, return to step 5. The final solution has been
obtained if there is no positive value in the Cj –Zj row.

2) Explain duality with suitable example.

QTM (KMB-206), MBA – II Sem, Compiled by Dr. Ritesh Singhal 7

The theory of duality is a very elegant and important concept within the field of operations
research.. This theory was first developed in relation to linear programming, but it has many
applications, and perhaps even a more natural and intuitive interpretation, in several related areas
such as nonlinear programming, networks and game theory.

• The notion off duality within linear programming asserts that every linear program has
associated with it a related linear program called its dual.. The original problem in relation to
its dual is termed the primal.
primal
• It is the relationship between the primal and its dual,, both on a mathematical and economic
level that is truly the essence of duality theory.
• Dual offers other additional information that helps in decision making.
• Student may add an example by converting primal into dual.

3) Dual of Dual is primal? Explain.

Answer: In the context of linear programming, duality implies that each linear programming
problem can be analysed in two different ways but having equivalent solutions.

Each linear programming problem a state in its original form has associated with another
ano liner
programming problem, which is unique based on the same data.

In general, it is irrelevant which of the two problems is called primal or dual, since dual of dual is
primal.

The solution of primal & the solution of dual is same, but the objective is to minimize the complex
calculation.

Primal Dual

The above table shows primal and dual relationship, therefore one can easily understand that dual of dual is
primal. (Student can take a sample LPP from
f QP and convert it into dual)

4) What is dual in LPP? Write the role of dual in managerial decision

making.
Significance in managerial decision-making
decision
It is advantageous to solve the dual of a primal having less number of constraints, because the number of
constraints usually equals the number of iterations
iterations required to solve the problem.
 QTM (KMB-206), MBA – II Sem, Compiled by Dr. Ritesh Singhal 8

It avoids the necessity for adding surplus or artificial variables and solves the problem quickly (the
technique is known as the primal-dual method). In economics, duality is useful in the formulation of the
input and output systems. It is also useful in physics, engineering, mathematics, etc.

The dual variables provide an important economic interpretation of the final solution of an LP problem.

It is quite useful when investigating changes in the parameters of an LP problem (the technique is known
as the sensitivity analysis).

Duality is used to solve an LP problem by the simplex method in which the initial solution is infeasible
(the technique is known as the dual simplex method).

Economic Interpretation of Dual

For the unit of measurement to be consistent, the dual variable (yi) must be expressed in terms of return
(or worth) per unit of resource i and is called dual price (simplex multiplier or shadow price) of resource
i. In other words, optimal value of a dual variable associated with a particular primal constraint gives the
marginal change (increase, if positive or decrease, if negative) in the optimal value of the primal
objective function from increasing (or decreasing) in the right-hand side value (resource) of a
constraint.

5) Write a note on sensitivity analysis.

It is also known as “Post-Optimality analysis”, refers to how the solution would be affected if we
make some changes in the existing problem. This will be supported by dual and “shadow price”
obtained from dual solution.
The changes may be of two types:
i) Structural changes:
>> Addition/deletion of constraint
>> Addition/deletion of variable.
ii) Parametric changes:
>> Changes in the parameter such as bi, cj or aij of the problem.
ii) It will be appreciated that it would be a lot advantageous if we could obtain this information
directly from the table containing the final solution rather than change the LPP and resolve it.
6) Explain Transportation problem with example.
Sol. It is special type of LPP and can be described as follows:

Suppose that the factories Fi (i=1,2…m) called the origin or source produce non-negative quantities ai
(i=1,2…m) of a product and the destination Wj required the non-negative quantities bj (j=1,2…n) of the same
product at other n places, called destination, such that the total quantity produced is equal to the total
quantity required

Σai = Σbj

Also suppose that Cij is the cost of transportation of a unit from ith source to jth destination. Then the
problem is to determine Xij, the quantity transported from ith source to jth destination in such a way that the
total transportation cost

ΣΣ Cij. Xij is minimum

The initial basic feasible solution of a transportation problem can be obtained by the following methods:

North-West Corner Rule (NWC)

Least Cost Method (LCM)

QTM (KMB-206), MBA – II Sem, Compiled by Dr. Ritesh Singhal 9

Vogel’s Approximation Method (VAM)

After Obtaining the initial basic feasible solution the next step is to test whether the solution is optimal or
not. The method which is used for this purpose is called MODI method. It is based on the concept of dual
variable that are used to evaluate empty cells & their opportunity cost which indicates that the solution is
optimal or not. For example

Stores
Factories 1 2 3 4 Supply
P 2 4 6 11 50
Q 10 8 7 5 70
R 13 3 9 12 30
S 4 6 8 3 35
Demand 25 35 105 20

7) Show that assignment problem model is a special case of transportation

problem.

There are many situations where the assignment of people or machine may be required. e.g. assignment
of workers to machine, clerks to counters & salesman to different sales areas.

The assignment is a problem because people having different ability for performing different jobs and
therefore the cost of performing the jobs by different person are different.

Thus in an assignment problem, the question is how should assignment be made in order that the total
cost involved would minimizes or maximize (in case of profit). It has two assumptions:

1. No. of rows or column must be equal.

2. The optimal sol would be always such that only one assignment is given in a particular row or
column.

Assignment problem is a special case of transportation problem e.g.:

The table shows how an assignment problem can be rewritten as transportation problem.

JOBS

Workers A B C D Supply

1 45 40 51 67 1

2 57 42 63 55 1

3 49 52 48 64 1

4 41 45 60 55 1

Demand 1 1 1 1

Similar to transportation problem, Assignment problem also has special cases:

• Unbalance situation
• Prohibited route
QTM (KMB-206), MBA – II Sem, Compiled by Dr. Ritesh Singhal 10

• Minimization and maximization

Method Used in Assignment Problem:

• Complete Enumeration Method

• Hungarian Assignment Method
• Transportation methods(NWC, LCM, VAM)
• Simplex Method (LPP)
Method Used in Transportation Problem:

• North West Corner Rule

• Least Cost Method
• Vogel’s Approximation Method
• Simplex Method (LPP)
• MODI Method for Optimality test

8) What is degeneracy in transportation problem?

In a transportation problem, degeneracy occurs when the number of Allocations are less than
(Rows +Columns – 1), where
M= number of rows
N=number of columns
This is also called as Rim condition. If rim condition is satisfied, the solution is not degenerate.
But if number of allocations are less than (m + n – 1), then the solution is degenerate. To remove
degeneracy, we need to take Epsilon Є which is an imaginary allocation almost equal to zero.

9) Define MODI method.

* After Obtaining the initial basic feasible solution the next step is to test whether the solution is
optimal or not.
* The method which is used for this purpose is called MODI (Modified Distribution) method.
* It is based on the concept of dual variable that are used to evaluate empty cells & their
opportunity cost which indicates that the solution is optimal or not.
Steps are as follows
i) Add to TP table a column on RHS (ui) and a row in bottom (vj)
ii) Select a ui=0 or vj=0 for which corresponding row or column having max no of allocated
cells.
iii) Complete all the values of ui & vj such that
Cij = ui +vj (Allocated cells).
iv) Calculate the cell evaluation dij for each unallocated cell by using
dij =Cij – (ui +vj) (Unallocated cells)
v) If all dij>0, then solution is optimal.
vi) If any dij=0, Multiple optimal solution may exist.
vii) If any dij<0, then solution is not optimal.

10) How to deal with unbalanced problem in transportation?

Answer: If in any problem Σai ≠ Σbj this condition is known as “Unbalanced”. In this case there is
two possibility

Demand ≠ Supply
QTM (KMB-206), MBA – II Sem, Compiled by Dr. Ritesh Singhal 11

For solving such problems we introduce dummy row (s) or column (s) whichever is required with
their cost element as zero & then solve the problem as usual.

Example (Unbalanced)

W1 W2 W3 W4 Supply

F1 11 20 7 8 50

F2 21 16 10 12 40

F3 8 12 18 9 70

Demand 30 25 35 40

Here supply > demand so we will add a column.

W1 W2 W3 W4 W5 Supply

F1 11 20 7 8 0 50

F2 21 16 10 12 0 40

F3 8 12 18 9 0 70

Demand 30 25 35 40 30
QTM (KMB-206), MBA – II Sem, Compiled by Dr. Ritesh Singhal 12

UNIT 3

1) Explain travelling salesman problem.

Answer: A salesman is assigned ‘n’ cities to visit. He is given distances between all pairs of cities
and instructed to visit each of the cities once in a continuous trip and return to the origin, using the
shortest route. In this context, we define the visit to the cities in a sequence, ending at the same city
where it begins including a visit to each of the cities only once.

Example-

A B C D E

A ---- 4 7 3 4

B 4 ---- 6 3 4

C 7 6 ---- 7 5

D 3 3 7 ---- 7

E 4 4 5 7 ----

2) What do you mean by pure & mixed strategy in Game Theory?

Answer: Pure Strategy: It is a decision rule which is always used by the player to select the
particular course of action. Thus each player known in advance of all strategies out of which he
always selects only one particular strategy irrespective to the strategy other may choose and the
objective of the players to maximize gains or minimize losses. Pure strategy situation always
have a saddle point of the pay-off matrix.

When the player is using the same strategy again and again, the strategy is known as pure strategy

Mixed Strategy: Instead of playing with one strategy, if the player is using more than one
strategies to win the game, the strategy is known as mixed strategy. Mixed strategy situation
does not have a saddle point of the pay-off matrix.

It is an active randomization which gives probabilities that determines player’s decision, when both
the players are guessing as to which course of action is to selected on a particular occasion with
some fixed probability, it is a mixed strategic game . Thus, there is a probabilistic situation and
objective of the player is to maximize expected losses by making a solution among pure strategies
with fixed probabilities.

Note: Student may use an example with dummy values to show saddle point.

3) What is Game Theory? Explain the assumptions of Game Theory.

QTM (KMB-206), MBA – II Sem, Compiled by Dr. Ritesh Singhal 13

Answer: Game Theory is concerned with the study of decision making in situations where two or
more rational opponents are involved under conditions of competition and conflicting interests.
This type of model is called two-person-zero-sum game. Here the objective is to find out the best
strategies of the player and value of the game. There are two types of game situation such as: Pure
strategy game and mixed strategy game.

Assumptions of Game

i) Each player has available to him a finite number of possible courses of action.
ii) Player A attempts to maximize gains and player B minimize losses.
iii) The decisions of both players are made individually prior to the play with no
communication between them.
iv) The decisions are made simultaneously so that neither player has an advantage resulting
from direct knowledge of the other player’s decision.
Method of Solving Game Theory
a) Saddle Point
b) Dominance Rule
c) Graphical Method
d) LPP Method

4) Explain the following terms.

i) Two person zero sum game : In such situations there are only two players and the algebraic
sum of gains and losses of all the players is zero, i.e., the amount won by one player is exactly equal
to the amount lost by other.

ii) Saddle point : A saddle point ( or Equilibrium point ) of a payoff matrix where the maximum
of row minima coincides with the minimum of the column maxima. The payoff at the saddle point
is called the value of the game and is obviously equal to maximax values of game.

Rule to Determine Saddle Point

a) Select the minimum element in each row of the payoff matrix and write them under row
minima heading. Then select the largest element among these elements and enclose in a rectangle.
b) Select the maximum element in each column of the payoff matrix and write them under
column maxima then select the lowest element among these elements and enclose in a circle.
c) Find out the element which same in the circle as well as rectangle and mark the position of
such element in the matrix.

iii) Principle of dominance : The dominance principles are used to reduce the size of pay-off
matrix for two person zero-sum games without saddle point .By doing so if one can obtain a 2*2
game, one can solve it with the help of the algebraic method.

It can be used as :

a) If all elements of a column (say 1st column) are greater than or equal to the corresponding
element of any other column (say 2nd column), then 1st column is dominated by the 2nd column .The
1st column is hence removed from the payoff table.
QTM (KMB-206), MBA – II Sem, Compiled by Dr. Ritesh Singhal 14

b) If all elements of a row (say 1st row) are greater than or equal to the corresponding element
of any other row (say 2nd row), then 1st row is dominates the 2nd row .The 2nd row is hence
removed from the payoff table.

c) It is also possible that a particular row (column) dominates the average of two other rows
(columns).In that case, one will delete any one row (column), which was involved in finding the
average.

iv) Graphical method :

The solution of ‘2xn’ or ‘mx2’ game can be solved by using this method.

That is when either of the player has only two strategies.

This method can reduce the game to the order of ‘2x2’ which can be solved by using analytical
method.

• When player A having two strategy and player B is having more than two then we find the
“highest point of the lowest boundary”.
• When player B having two strategy and player A is having more than two then we find the
“lowest point of the highest boundary”.
QTM (KMB-206), MBA – II Sem, Compiled by Dr. Ritesh Singhal 15

UNIT 4 & 5

1) Sequencing problem in Johnson method : A procedure that minimizes the time

taken when scheduling a group of jobs on two workstations.

Step 1. Find the shortest processing time among the jobs not yet scheduled. If two or
more jobs are tied, choose one job arbitrarily.

Step 2. If the shortest processing time is on workstation 1, schedule the

corresponding job as early as possible. If the shortest processing time is on
workstation 2, schedule the corresponding job as late as possible.

Step 3. Eliminate the last job scheduled from further consideration. Repeat steps 1
and 2 until all jobs have been scheduled.

2) What is the dummyy activity in a network diagram?

diagram
An artificial activity with zero time duration that only shows a precedence relationship among activities, are
called dummy activity. A dummy activity is used when two or more activities have same initial and terminal
events. The dummy activity does not consume time or resource. Dummy activity usually shown by arrows
with dashed lines.

Dummy activities are also very useful in establishing proper logical relationship in the network which
cannot, otherwise be adequately represented.

Dummy are of various type:

• Identity dummy
• Logical dummy
• Redundant dummy

3) What is queuing theory?? Explain various queue system & characteristics.

The theory is used in situations where customer arrives at some service station for some service; wait (if
required) get the service and leave the system. This situation may occur when customer deposit electricity
elec
bill, machine waiting for repair, aircraft waiting for take off/land, patient waiting at hospital etc.

The capacity might be build to such a high level as it can always meet the peak demand with no queue. But
adding to capacity may be a costly affair
affair and uneconomic after a stage. Thus the goal of queuing models is
the achievement of an economic balance between the cost of providing service and the cost associated with
the wait required for that service.

According to Kendall, Queuing models can be

b classified as following:
A/B/C : ∞ /FCFS
QTM (KMB-206), MBA – II Sem, Compiled by Dr. Ritesh Singhal 16

Such as M/M/I : ∞ /FCFS shows

M - Poisson arrival
M - Poisson departure
I – Single Server
∞ - Customer base
FCFS – First Come First Serve
Characteristics of queuing system are

Queue Length (Lq): The average number of customers in the queue waiting to get service.

System Length (Ls): The average number of customers in the system.

Waiting time in the queue (Wq): The average time that a customer has to wait in the queue to get
service.

Total Time in the system (Ws): The average time that a customer has to wait in the system.

Server busy Time (ρ): Time when the server is busy.

Server Idle Time (1-ρ): The probability when server is idle.

4) How PERT & CPM technique are useful in managerial decision making?

Network Analysis plays an important role in project management. By analyzing a network, which is a
graphic depiction of ‘activities’ and ‘event’, the planning, scheduling and control of a project become
much easier.

Program Evaluation & Review Technique (PERT)

Critical Path Method (CPM)

Similarities between PERT and CPM:

1. Both follow the same steps and use network diagrams
2. Both are used to plan the scheduling of individual activities that make up a project
3. They can be used to determine the earliest/latest start and finish times for each activity

Differences between PERT and CPM:

1. PERT is probabilistic whereas CPM is deterministic
2. In CPM, estimates of activity duration are based on historical data
3. In PERT, estimates are uncertain and we talk of ranges of duration and the probability that activity
duration will fall into that range.
4. CPM concentrates on Time/Cost trade off.

5. CPM uses a single time whereas PERT uses three different timings Optimistic, Most likely and
pessimistic.

CPM PERT

CPM uses activity oriented network. PERT uses event oriented Network.

Durations of activity may be estimated with a fair Estimate of time for activities are not so accurate
degree of accuracy. and definite.

It is used extensively in construction projects. It is used mostly in research and development

projects, particularly projects of non-repetitive
nature.

Deterministic concept is used. Probabilistic model concept is used.

QTM (KMB-206), MBA – II Sem, Compiled by Dr. Ritesh Singhal 17

CPM can control both time and cost when PERT is basically a tool for planning.
planning.

In CPM, cost optimization is given prime
importance. The time for the completion of the
project depends upon cost optimization. The cost
is not directly proportioned to time. Thus, cost is
the controlling factor.
In PERT, it is assumed that cost varies directly
with time. Attention is therefore given to
minimize the time so that minimum cost results.
Thus in PERT, time is the controlling factor.

5) Determine crashing in project management

Crashing is employed to reduce the project completion time by spending extra resources (cost). The
reduction in normal time of completion will increase the total budget of the project.

However, beyond a certain point cost increases more quickly when time is reduced. Similarly, beyond a
point B, the time increases while cost decreases.

Time may not reduce indefinitely; therefore we call this limit crash point. There is also a cost efficient
duration called normal point.

6) How do you use Gantt chart for solving sequencing problem?

A Gantt chart, commonly used in project management, is one of the most popular and useful ways of
showing activities (tasks or events) displayed against time. On the left of the chart is a list of the activities
and along the top is a suitable time scale. Each activity is represented by a bar; the position and length of the
bar reflects the start date, duration and end date of the activity. This allows you to see at a glance:

• What the various activities are

• When each activity begins and ends
• How long each activity is scheduled to last
• Where activities overlap with other activities, and by how much
• The start and end date of the whole project

To summarize, a Gantt chart shows you what has to be done (the activities) and when (the schedule).
QTM (KMB-206), MBA – II Sem, Compiled by Dr. Ritesh Singhal 18

A simple Gantt chart

Gantt chart tools can be used as the single entity for managing small projects. For small projects, no other
documentation may be required; but for large projects, the Gantt chart tool should be supported by other
means of documentation. For large projects, the information displayed in Gantt charts may not be
sufficient for decision making.

7) Write a short note on replacement problem.

Sol. It is concerned with the equipment an machinery that deteriorates with time. Many people feel that
equipment should not be replaced until it is physically worn off. But, it is not correct, preferable equipment
must be constantly renewed and updated otherwise it will be in the risk of failure or it may become obsolete.
Reasons for replacement

1. Deterioration

2. Obsolescence

3. Technological development

4. Inadequacy

Deterioration is the decline in the performance of the equipment as compared to the new equipment. It may
occur due to wear and tear. Due to this

i. Increase in the maintenance cost.

ii. Reduces the product quality
iii. Decreases the rate of production
iv. Increases the labor cost
v. Reduces the efficiency of the equipment

Types of Failure

Gradual failure:

It is progressive in nature. That is, as the life of an item increases, its operational efficiency
also deteriorates that results in-

Increase maintenance & operating cost.

Decrease in productivity
Decrease in resale or salvage value
Sudden failure:

This type of failure occurs after some period of giving desired service rather than
deterioration while in service

Progressive failure
Retrogressive failure
Random failure
Inputs:

Purchase cost, C
Scrap value at the end of t years, St
QTM (KMB-206), MBA – II Sem, Compiled by Dr. Ritesh Singhal 19

Maintenance cost in year t = Mt

Total Cost,

Average cost (n) = T (n)/n

Decision: Choose n which has least average cost. It gives optimal replacement interval

Assumption: There is no time value of money

8) Explain expected time in PERT.

Answer:

First of all we need to convert three timings into one single time using PERT Weighted Average (expected
time) (mean):

Te = (a+4m+b)/6

Variance = {(b-a)/6}2

Where,

a – Optimistic Time,

m – Most Likely,

b – Pessimistic Time

9) Characteristics of (M/M/k) : (∞/FCFS).

Answer:

i) First ‘M’ denotes Poisson arrival (λ)

ii) Second ‘M’ denotes exponential departure (µ)
iii) No of channels (server) = k
iv) Infinite customer base
v) Queue Discipline : FCFS

Characteristics of queuing system are

Queue Length (Lq): The average number of customers in the queue waiting to get service.

System Length (Ls): The average number of customers in the system.

Waiting time in the queue (Wq): The average time that a customer has to wait in the queue to get
service.

Total Time in the system (Ws): The average time that a customer has to wait in the system.

Server busy Time (ρ): Time when the server is busy.

Server Idle Time (1-ρ): The probability when server is idle.
Also write formula of each characteristic.
10) Explain how to process n jobs on ‘2’ and ‘3’ machines
Johnson’s rule: A procedure that minimizes the time taken when scheduling a group of ‘n’ jobs on
‘2’ machines (workstations).

Step 1. Find the shortest processing time among the jobs not yet scheduled. If two or more
jobs are tied, choose one job arbitrarily.
QTM (KMB-206), MBA – II Sem, Compiled by Dr. Ritesh Singhal 20

Step 2. If the shortest processing time is on workstation 1, schedule the corresponding job as
early as possible. If the shortest processing time is on workstation 2, schedule the
corresponding job as late as possible.

Step 3. Eliminate the last job scheduled from further consideration. Repeat steps 1 and 2
until all jobs have been scheduled.

Johnson’s rule: A procedure that minimizes the time taken when scheduling a group of ‘n’ jobs on
‘3’ machines A, B & C (workstations).

Domination – Largest on B is not greater than smallest on A or C. Domination guarantees

optimality (i.e Min A ≥ Max B or Min C ≥ Max B)

Conversion – Convert into a 2 M/C problem as M1 = A + B, M2 = B + C

Find optimal sequence for this 2 machine problem

Schedule on 3 machines based on the sequence above

11) Rules of drawing network diagram

Each activity is represented by only one arrow.

The arrow indicate logical precedence

The length of the arrow does not depend on duration

The direction of arrow is important

An activity can start only after previous activity finishes

Looping is not permitted

Network should be neat & clear however, a network may take any shape.

Dummy activity may be used (with dotted line) whenever required.

********