BBA III

Subject: Operations Research

General Guidelines
 TEXT BOOK: OPERATION RESEARCH: TECHNIQUES FOR
MANAGEMENT BY V. K. KAPOOR (S. CHAND PUBLICATION, 7TH
ED)

MODULE-I

Chapter-1 Introduction to OR (only theory)

1) Briefly discuss the history of Operations Research. Also discuss the nature and
characteristics of OR. (IMP)
Discuss the history and explain following:

Discuss Significant features-

a) Decision Making
b) Scientific Approach
c) Objective
d) Inter-disciplinary team Approach
e) Digital Computer

2) Define quantitative analysis and explain quantitative analysis approach.

Quantitative factors are data that can be accurately calculated. Examples include:
Interest rates, Inventory levels Demand, Labor cost etc
Qualitative factors are more difficult to quantify but affect the decision process.
Examples include: weather, Technological breakthroughs.

3) Define Operations Research (OR). Identify the steps in solving OR problem.

(IMP)
Operations research (OR) is an analytical method of problem-solving and decision-
making that is useful in the management of organizations. In operations research,
problems are broken down into basic components and then solved in defined steps by
mathematical analysis. Analytical methods used in OR include linear programming,
simulation, network analysis, queuing theory, game theory etc.

Typically, applications of OR deal with decisions involved in planning the efficient

allocation of scarce resources - such as material, skilled workers, machines, money
and time - to achieve stated goals and objectives under conditions of uncertainty and
over a span of time.

Steps of OR:
1) Problem Formulation

2) Model Building
 (a)Physical
i. Iconic Models (Building)
ii. Analogue Models(Barometer, Thermometer)
iii. Digital Models (Watch)
(b) Scale (Pilot Models on Paper)
(c) Schematic (Graphical Representation)
i.e. Pictures, Drawings etc.

(d) Mathematical or Symbolic Models

i. Deterministic Models – with certainty

i.e. Machine X produces 500 and Y produces 150 units. So total is X+Y = 650

ii. Probabilistic Models – with uncertainty

Product is 70% successful so 0.70X + o.30X = 1

3) Obtaining Input data : Garbage in - Garbage Out

4) Solution of Model
a) Feasible & Infeasible Solutions
b) Optimal & Non-Optimal Solutions
c) Unique & Multiple Solutions

5) Model Validation

6) Implementation

4) Why Operation research is needed?

 For the best use of available resources
 Organizations, whether public or private, need to provide products and services as
effectively and efficiently as possible.
 This requires careful planning and analysis – the hallmarks of good OR.

5) Advantages of Mathematical Model in Operation Research?

 Accurate representation of reality
 Decision maker can formulate problems easily
 It gives proper information
 It can save time and money in decision making and problem solving
 Able to solve complex problems in a timely fashion
 Used to communicate problems and solutions to others easily

6) Explain Practical Applications of Operation Research?

 Health Care Management: Bad Allocation, Capacity Planning, Appointment
Scheduling, Queue design for stochastic demand
 Scheduling: of aircrews and the fleet for airlines, of vehicles in supply chains, of
orders in a factory and of operating theatres in a hospital.
  Facility planning: computer simulations of airports for the rapid and safe processing
of travelers, improving appointments systems for medical practice.
 Planning and forecasting: identifying possible future developments in
telecommunications, deciding how much capacity is needed in a holiday business.
 Yield management: setting the prices of airline seats and hotel rooms to reflect
changing demand
 Credit scoring: deciding which customers offer the best prospects for credit
companies.
 Marketing: evaluating the value of sale promotions, developing customer profiles and
computing the life-time value of a customer.

MODULE-III

Chapter: Transportation

Theory
1. What is balanced and unbalanced transportation problem? Describe the
approach you would use to solve an unbalanced problem.

2. What is degeneracy? How does the problem of degeneracy arise in a

transportation problem? How can we deal with this problem? (IMP)
OR
What is Degeneracy in Transportation problem solution? Explain the whole
process of removing degeneracy from the solution.

A basic feasible solution of a transportation problem has m+n-1 basic variables,

which means that the number of occupied cells in such a solution is one less than the
number of rows plus the number of columns, It may happen sometimes that the
number of occupied cells is smaller than m+n-1. Such a solution is called a degenerate
solution.
Degeneracy in a transportation problem can figure in two ways:
1) While obtaining Initial feasible Solution
2) While Revising the solution

When a solution is degenerate, the difficulty is that it cannot be tested for optimality.

To overcome degeneracy, an infinitesimally small amount , close to zero to one( or

more, as needed) empty cell and treat the cell as an occupied cell. This is represented
by greek letter ϵ(epsilon). Some mathematical operations with epsilon

k+ ϵ=k; k- ϵ= k; 0+ ϵ= ϵ;
ϵ + ϵ = ϵ; ϵ- ϵ =0; k* ϵ =0.

It is important to remember that an epsilon cannot be placed in any randomly selected

unoccupied cell.
 I. While obtaining Initial feasible Solution
An epsilon is inserted in the least cost independent cell. An independent cell is
one from which a closed loop cannot be traced. It may be further noted that if
a given problem requires two (or more) epsilons, then a cell in which an
epsilon has already been placed will be treated as occupied while determining
independence of cells for inserting an epsilon subsequently.

II. While Revising the solution

When the problem becomes degenerate at the solution-revision stage, epsilon
(ϵ)is placed in one (or more, if required) of the recently vacated cells with the
minimum cost. And then we proceed with the problem in the usual manner.

3. Discuss the various methods of finding initial feasible solution of a transportation

problem.
Briefly mention North-West corner method, Least Cost & Vogel Approximation
Method (VAM)

MODULE-IV

Chapter- Assignment

Theory
1. What is an unbalanced assignment problem? How is the Hungarian Assignment
Method applied in respect of such problem? (IMP)

MODULE-VI

Chapter- Simulation Modelling

Theory
1. What is simulation? What are the advantages and limitations of simulation?
OR
What is simulation? Discuss Monte Carlo simulation with example.
OR
What is simulation? Describe the simulation process. What are the advantages
and limitations of simulation?
OR
What is Simulation? Describe Monte Carlo Simulation. Explain applications of
simulation in business environment. (IMP)

Simulation is one of the most widely used quantitative analysis tools. To simulate is to try
to duplicate the features, appearance, and characteristics of a real system. We will build a
mathematical model that comes as close as possible to representing the reality of the
system. Physical models can also be built to test systems.

Advantages of simulation are:

1. It is relatively straightforward and flexible.
2. Recent advances in computer software make simulation models very easy to
develop.
3. Can be used to analyze large and complex real-world situations.
4. Allows “what-if?” type questions.
5. Does not interfere with the real-world system.
6. Enables study of interactions between components.
7. Enables time compression.
8. Enables the inclusion of real-world complications.

Disadvantages of simulation are:

1. It is often expensive as it may require a long, complicated process to develop
the model.
2. It does not generate optimal solutions; it is a trial-and-error approach.
3. It requires managers to generate all conditions and constraints of real-world
problem.
4. Each model is unique and the solutions and inferences are not usually
transferable to other problems.

Monte Carlo Simulation

When systems contain elements that exhibit chance in their behavior, the Monte Carlo
method of simulation can be applied. The basis of the Monte Carlo simulation is
experimentation on the probabilistic elements through random sampling.

Some examples/Applications are:

1. Inventory demand.
2. Lead time for inventory.
3. Times between machine breakdowns.
4. Times between arrivals.
5. Service times.
6. Times to complete project activities.
7. Number of employees absent.
Note: Applications can be explained in detail, writing a brief about any example
which was discussed in class.

Steps of Monte Carlo Simulation

1. Establishing a probability distribution for important variables.
2. Building a cumulative probability distribution for each variable.
3. Establishing an interval of random numbers for each variable.
4. Generating random numbers.
5. Actually simulating a series of trials.

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