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Course Outline
Operations Research is the science of decision making and the art
of decision modelling. It is a set of quantitative tools used by the
managers to take decisions and formulate their business
strategies.
The basic objective of this course is to provide an understanding of
the important techniques used in decision making. A certain level
of mathematical hands-on expertise will be required to ensure
understanding of the tools in operations research. While
quantitative tools will be used to develop the understanding of the
complex business situations, the course will aim to develop the
management decision-making ability. The implementation of these
tools has been facilitated considerably by the development of
spreadsheet-based software package; we will make liberal use of
spreadsheet models.
Course Schedule
Session Topic
1. Linear Optimization - Introduction
2. Geometry and visualization of linear
programming
3. Linear Programming Solver
4. Linear Programming Sensitivity Analysis
5. Transportation problem Formulation and
Solutions
6. Transportation problem Formulation and
Solutions Quiz
7-10 Linear Programming Case Study
Course Evaluation
Quiz 30%
Project 30%
End Term
40%
The manager of an oil refinery must decide on the optimum mix of two
possible blending processes of which the input and output production
runs as follows:
Input Output
2 5 6 6 5
The maximum amount available of crudes A and B are 250 units and
200 units respectively. Market demand shows at least 150 units of
gasoline X and 130 units of gasoline Y must be produced. The profit
per production run from process 1 and process 2 are Rs. 5 and Rs. 7
respectively. Formulate the problem to maximize profit.
Hard Drivers Inc. manufactures computer hard drives.
Because demand has seasonal variations it is difficult
to schedule production to keep costs to a minimum.
Next year, management estimates that the demand
for a 10-GB hard drive will be 50,000 units in the rst
quarter followed by 100,000, 50,000 and 200,000 in
the second, third and fourth quarters. Because the
companys production capacity is 125,000 units per
quarter, during the slow seasons the company must
produce extra hard drives and store them in inventory
to help meet demand during the high seasons,
particularly during the fourth quarter because
Christmas sales makes the highest sales quarter of the
year. The production cost of a hard drive is Rs. 25 per
unit and company policy is to charge an inventory
holding cost of Rs. 1 per hard drive per quarter for
each unit in inventory at the beginning of a quarter.
Assume the company starts off the rst quarter with
10,000 units in inventory and wishes to end the last
quarter with 20,000 units in inventory. Formulate a linear
programming to determine how many hard drives should be
produced in each quarter in order to minimize total cost.
Portfolio Selection
Problem..
International City Trust (ICT) invests in large cap
stocks, corporate bonds, precious metal stocks,
mortgage-backed securities, and construction loans.
ICT has Rs. 5 million available for immediate
investment and wishes to maximize the interest
earned on the investments over the next year.
To encourage a diversied portfolio, the board of
directors has placed several limits on the amount
that can be committed to any one type of
investment: (i) no more than 25% of the total
amount invested may be in any single type
investments, (ii) at least 30% of the funds invested
must be in precious mode, (iii) at least 45% invested
in large cap stocks and corporate bonds, and (iv) the
average risk score of the total investment must be 2
or less.
For each type of investment, the following table
shows the expected return over the next year as
well as a score that indicates the risk associated
with the investment
Investment Int. earned Risk Score
Large Cap Stocks 19% 1.7
Corporate Bonds 10% 1.2
Gold Stocks 18% 3.7
Platinum Stocks 12% 2.4
Mortgage Securities 8% 2