Optimization

Techniques
BBA : 3 Year
BY : Dr Yoginder arun
Syllabus
 Unit – I: Nature, Definition & characteristics
of operations research, Methodology of OR,
Models in OR; OR & managerial Decision
making, OR techniques.
 Unit – II: Linear programming: Introduction,

Advantages of Linear Programming,

Applications areas of Linear Programming.
LPP-problem formulation, Graphic Method,
Simplex Method (including Big M method)
Syllabus
 Unit – III: Transportation-North West Corner
Rule, Method of matrix Minima & VAM
Methods, Degeneracy Problems, MODI
Method. Assignment Problems
 Unit – IV: Decision making under

Uncertainty-Criteria of Maxima, Minima,

Minima Regret, Decision making under Risk-
Criteria of EMV & EOL, Decision Tree
approach & its applications.
Syllabus
 Unit – V: Job Sequence Analysis PERT &
CPM-Introduction, Network Analysis, Time
Estimates in Network Analysis, Critical Path
Method; Programmer Evaluation & Review
Technique.
Unit : 01
 What is Operations Research:
 Operations Reserch has been variously descirbed as the “science of Use
“"quantitative commonsense", "Scientific approach to decision making
problems". But only a few are commonly used and widely accepted,
namely.
 "O.R. is the art of giving bad answers to problems which otherwise have
worse answers". - T.L. Saaty
 "O.R. is the application of scientific methods, techniques and tools to
problems involving the operations of a system so as to provide those in
control of the system with optimum solutions to the problem" -C.W.
Churchman, R.L. Ackoff
 "O.R. is a scientific approach to problems solving executive
management". -
H.M. Wagner
 "O.R. is a scientific method of providing executive departments with
quantitative basis for decisions regarding the operations under their
control. " Morse and
Kimball
The Essential Characteristics of
Operations Research
 The significant features of O.R. are given below:
 1. Decision Making: A major premise of O.R. is
that decision-making, irrespective of the
situation involved, can be considered as a
general systematic process.
 2. Scientific Approach: O.R. employs scientific
methods for the purpose of solvist problems. It
is a formalised process of reasoning.
 3. Objective: O.R. attempts to under
consideration. locate the best or optimal
solution to the problem under Consideration .
Next tow point
 Inter-Disciplinary term Approcach : O.R is inter-
disciplinary in nature and requires a team approach
to a solution of the problem. Managerial problems
havd economic, physical, biological and engineering
aspects. This requires a blend of people with
expertise in the areas of Mathematics, statistics,
engineering, economics management, computer
science and so on.
 5. Digital Computer: Use of digital computer has
become an integral part of O.R.. approach to
decision-making. The computer may be required due
to complexity of the model, volume of data required
and the computations to be made.
Modelling in Operations
Research
 By building a model, the uncertainties and complexities of a decision-
making problem can be changed to a logical structure that is amenable
to formal analysis. Such as model specifies the decision alternatives and
their anticipated consequences for all possible events that may occur,
indicates the relevant data for analysing the alternatives and leads to
meaningful and informative managerial conclusions. In short we may say,
modelling is a means of providing a clear structural framework to the
problem for purposes of understanding and dealing with reality. Following
are the main characteristics of good modelling the the
 1. A good model should be capable of taking into account new
formulations without having any significant change in its frame. off 2.
Assumptions made in the model should be as small as possible. ner ions
 3. The number of variables must be less.
 4. The good model should be simple and coherent. ar Questions simple
way all.
 5. It should not take much time in its construction for any problem
Advantages and Limitations of
a Model
 Advantages of a Model
 1. Through a model, the position under

consideration becomes controllable.

 2. It help in finding evenues for few

research and improvements in a system

 3. It indicates the limitations and scope of

an activity.
 4. It provide some logical and systematic

approach to the problem.

Limitations of a Model
Models are only an attempt in
understanding operations and should never
be considered as absolute in any sense.
 2. Validity of any model with regard to

corresponding operation can only be

verified by carrying the experiment and
relevant data characteristics. 8
Classification Schemes of
Models
 Although the classification of models is a subjective problem they may be
distinguished as follows:
 1. Models by Degree of Abstraction: These models based on past data or
information of problem under consideration and can be classified into
 (i) Language models
 (ii) Case studies
 2. Models by Function: These models consist of
 (1) Descriptive models
 (ii) Predictive models
 (iii) Normative models
 Descriptive models : describe explain and predict facts and relationships
among the various activities of the problem. These are used to describe
mathematically some particular aspects of the system being modeled.
 Predictive models : indicate 'if this occurs, then what will follow. They
relate dependent and independent variables and permit trying out, 'what if
questions. We can say that these models are used to predict the out comes
due to a given set of alternatives for the problem. These models do not
have an objective function as a part of the model to evaluate decision
alternatives.
 Normative or optimization models are prescriptive in nature and develop objective
decision rules or criteria of optimum solutions.

 3. Models by Structure: These modes are represented by

 (i) Iconic models
 (ii) Analogue models
 (iii) Symbolic models
 Iconic or physical models are pictorial representation of real systems and have the
appearance of the real thing, example of such models are:
 City maps, houses blue prints, globe and so on
 . An iconic model is said to be scaled-down or scaled up' according as the dimensions of the
model are smaller or greater than those of the real item. Iconic models are easy to observe,
build and describe, but are difficult to manipulate and not ver useful for the purpose of
prediction. Hence we can say these models representa static event.
 Analogue models are more abstract than the iconic ones for there is no look alike
correspondence between these models and real life items. They are built by utilizing one set
of properties to represent another set of properties
 . Mathematical or symbolic models are more abstract in ogethematical symbol to
represent the components of the real system. Thes nature. They employ as Systech are most
general and precise. However it is not possible to depict a rel Syndin mathematical
formulation. Sometime it easier to used to mathematic symbol for describing the relationship
of the component.
4. Model by Nature of the Environment: These
model can be classified into
 (i) Deterministic models, and
 (ii) Probabilistic models.
 In deterministic models, all the parameters

and functional relationships are assumed to

be known with certainly when the decision
is to be made. Linear programming and
break even models are the examples of
deterministic models.
Limitations of Operations
Research
 1. Mathematical models which are essences of O.R. do not
take into account quantitative factors or emotional factors
which are quite real. All influencing factors which cannot be
quantified find no place in mathematical models.
 2 Mathematical models are applicable to only specific
categories of problems.
 3. Being the new field there is resistance from the
employees to the new proposals.
 4. Management, who has to implement the advised
proposals, may itself offer a lot of resistance due to
conventional thinking.
 5. Young enthusiasts, overtaken by its advantages and
exactness generally forget that O.R. is meant for men and
not that men are meant for it.
Management Applications of
Operations Research
 Some of the areas of management decision making, where the
'tools' and 'techniques' of O.R. are applied, can be outlined as
follows:
 1. Finance, Budgeting and Investments
 (i) Cash-flow analysis, long range capital requirements, dividend
policies. investment portfolios.
 (ii) Credit policies, credit risks and delinquent account
procedures. (iii) Claim and complaint procedure.
 2. Purchasing, Procurement and Exploration
 (i) Rules for buying, supplies and stable or varying prices.
 (ii) Determination of quantities and timing of purchases.
 (iii) Bidding policies.
 (iv) Strategies for exploration and exploitation of raw material
sources.
 (V) Replacement policies.
 Production Management
 (i) Physical Distribution
 (a) Location and size of warehouses distribution centres and retail
outlets.
 (b) Distribution policy.
 (ii) Facilities Planning
 (a) Numbers and location of factories, warehouses, hospitals etc. (b)
Loading and unloading facilities railroads and tracks determining the
transport schedule.
 (iii) Manufacturing
 (a) Production scheduling and sequencing.
 (b) Stabilization of production and employment training, layoffs and
optimum product mix.
 (iv) Maintenance and Project Scheduling
 (a) Maintenance policies and preventive maintenance.
 (b) Maintenance crew siges.
 (c) Project scheduling and allocation of resources.
 4. Marketing
 (i) Product selection, timing, competitive actions.
 (ii) Number of salesman, frequency of calling on accounts percent of time
spent on prospects.
 (iii) Advertising media with respect to cost and time.
 5. Personnel Management
 ( i) Selection of suitable personnel on minimum salary.
 (ii) Mixes of age and skills.
 (iii) Recruitment policies and assignment of jobs.
 6. Research and Development
 (i) Determination of the areas of concentration of research and
development.
 (ii) Project Selection
 (iii) Determination of time cost trade-off and control of development
projects.
 (iv) ( Reliability and alternative design. From all above areas of application
we may conclude that O.R. has replaced management by personality.
Techniques Used in Operations
Research
 The following techniques used in Operations Research.
 1. Linear Programming: It is used in the solution of problems concerned
with assignment of personal, blending of materials, distribution and
transportation and investment properties.
 2. Dynamic Programming: It is used in such area as planning advertising
expenditures distributing sales effort and production scheduling ete
 3. Queuing Theory: It is used in solving problem concern with traffic,
servicing machines subject to break down, air traffic scheduling, production
scheduling. hospital operations, determining optimum number of
replacement for a group of machines.
 4. Inventory Theory: In determing when and how much a production or
purchase. 5. Game Theory: The primary objective of game theory is to
develop rational criteria for selecting a strategy.
 6. Simulations: The technique of simulation is an important tools of the
designer in stimulating airplane flight in a wind tunnel, simulating lines of
communication with an organization chart. With the advent of the high speed
digital computer with which to conduct simulated experiments, this
technique has become experimental arm of researches.
The Importance of Operations
Research in Decision Theory
 Operations Research uses the method of science to understand
and explain the phenomena of operating systems. It devises the
theories (models) to explain these phenomena. Uses these
theories to describe what takes place under altered conditions,
and checks these predictions against new observations. Thus,
operations research may be regarded as a tool employed to
increase the effectiveness of managerial decisions as an objective
supplement to the subjective feelings of the decision maker. O.R.
may suggest alternative courses of action when a problem is
analysed and solution is attempted. However, the study of
complex problems by O.R. techniques becomes useful only when
a choice between two or more courses of action is possible. O.R.
may be regarded as a tool that enables the decision-maker to be
objective in choosing an alternative from among many that he
can conceive of. Following are the salient advantages of an
operations research study approach in decision-making:.
 1.Better Decisions: O.R. models frequently yield actions that do
improve on Bettetive decision making. A situation may be so complex
that the human mind can never hope to assimilate all the significant
factors without the aid of O.R. guided computer analysis.
 2. Better Coordination: Sometimes, operations research has been
instrumental in bringing order out of chaos. For instance, an O.R.-oriented
planning model becomes a vehicle for coordinating marketing decisions
within the limitations imposed on manufacturing capabilities.
 3. Better Control: The management of large organizations recognize
that it is extremely costly to provide continuous executive to devote his
attention to mort pressing matters. The most frequently adopted
application in this category ded with production scheduling and inventory
replenishment.
 4. Better Systems: Often an O.R. study is initiated to analyse a
particular decision- problem, such as whether to open a new warehouse.
Afterwards, the approach is further developed into a system to be
employed repeatedly. Thus, the cost of undertaking the first application
may produce benefits
 Unit : 01
 Q1: Write any two characteristics of operation Research .
 Answer : 1. Quantitative Analysis 2. Interdisciplinary 3.
Decision Support 4. Optimization 5. Problem –Solving 6.
Model Building 7 . Experimetnation
 Q2 : Write any two application area of operation research .
 Answer : 1. Scheduling and time management
 2. Urban and agricultural planing
 3. Enterprise resource planning (ERP) and supply chain
management (SCM).
 4. Inventory management.
 5. Network optimization and engineering.
 6. Packet routing optimization.
 7. Risk management
 Q 3: What is operation Research ? Discuss
the nature. Characteristics and application
of operation Research .