OPERATIONS RESEARCH

SECOND EDITION

R. PANNEERSELVAM
Professor and Head
Department of Management Studies
School of Management
Pondicherry University

NEW DELHI-110001
2009
OPERATIONS RESEARCH, Second Edition
R. Panneerselvam

2006 by PHI Learning Private Limited, New Delhi. All rights reserved. No part of this book may
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Fifteenth Printing (Second Edition) ... ... ... July 2009

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 To
My Grandparents
CONTENTS

Preface xi
1. OVERVIEW OF OPERATIONS RESEARCH 18
1.1 Introduction 1
1.2 Concept of a Model 2
1.2.1 Steps of Modelling 3
1.3 Important Topics of Operations Research 3
1.4 Scope of Operations Research 4
1.5 Operations ResearchA Tool for Decision Support System 6
1.6 Operations ResearchA Productivity Improvement Tool 7
1.6.1 Increased Output for the Same Input 7
1.6.2 Decreased Input for the Same Output 7
1.6.3 Increase in the Output is more than the Increase in the Input 7
1.6.4 Decrease in the Input is more than the Decrease in the Output 8
1.6.5 Increase in the Output with Decrease in the Input 8
Questions 8

2. LINEAR PROGRAMMING 970

2.1 Introduction 9
2.2 Concept of Linear Programming Model 9
2.2.1 Product Mix Problem 9
2.2.2 Assumptions in Linear Programming 12
2.2.3 Properties of Linear Programming Solution 12
2.3 Development of LP Models 13
2.4 Graphical Method 21
2.5 Linear Programming Methods 25
2.5.1 Simplex Method 25
2.5.2 Big M Method 30
2.5.3 Dual Simplex Method 34
2.5.4 Two-phase Method 38
2.6 Special Cases of Linear Programming 40
2.6.1 Identification of Special Cases from Simplex Table 46
2.7 Duality 47
2.7.1 Formulation of Dual Problem 47
2.7.2 Application of Duality 53
2.8 Sensitivity Analysis 56
2.8.1 Changes in the Right-hand Side Constants of Constraints 57
v
vi Contents

2.8.2 Changes in the Objective Function Coefficients 59

2.8.3 Adding a New Constraint 61
2.8.4 Adding a New Variable 63
Questions 65

3. TRANSPORTATION PROBLEM 71126

3.1 Introduction 71
3.2 Mathematical Model for Transportation Problem 72
3.3 Types of Transportation Problem 74
3.3.1 Balanced Transportation Problem 74
3.3.2 Unbalanced Transportation Problem 74
3.4 Methods to Solve Transportation Problem 76
3.4.1 Finding the Initial Basic Solution 77
3.4.2 Optimizing the Basic Feasible Solution Applying UV Method 78
3.5 Transshipment Model 106
3.5.1 Transshipment Problem with Sources and Destinations Acting as
Transient Nodes 106
3.5.2 Transportation Problem with some Transient Nodes between
Sources and Destinations 111
3.6 Modelling the Transportation Problem with Quantity Discounts 115
3.6.1 Model for AQDS 117
3.6.2 Model for IQDS 118
Questions 122

4. ASSIGNMENT PROBLEM 127153

4.1 Introduction 127
4.2 Zero-One Programming Model for Assignment Problem 128
4.3 Types of Assignment Problem 130
4.4 Hungerian Method 130
4.5 Branch-and-Bound Technique for Assignment Problem 147
Questions 151

5. NETWORK TECHNIQUES 154195

5.1 Introduction 154
5.2 Shortest-path Model 154
5.2.1 Systematic Method 154
5.2.2 Dijkstras Algorithm 163
5.2.3 Floyds Algorithm 171
5.3 Minimum Spanning Tree Problem 174
5.3.1 PRIM Algorithm 175
5.3.2 Kruskals Algorithm 181
5.4 Maximal Flow Problem 186
5.4.1 Linear Programming Modelling of Maximal Flow Problem 186
5.4.2 Maximal Flow Problem (MFP) Algorithm 188
Questions 193
 Contents vii

6. INTEGER PROGRAMMING 196229

6.1 Introduction 196
6.2 Integer Programming Formulations 197
6.3 The Cutting-plane Algorithm 201
6.4 Branch-and-Bound Technique 209
6.5 Zero-One Implicit Enumeration Algorithm 219
6.5.1 Generalized 0-1 Programming Problem 221
6.5.2 Zero-One Implicit Enumeration Technique 221
Questions 228

7. INVENTORY CONTROL 230274

7.1 Introduction 230
7.2 Models of Inventory 230
7.2.1 Purchase Model with Instantaneous Replenishment and without
Shortages 231
7.2.2 Manufacturing Model without Shortages 236
7.2.3 Purchase Model with Instantaneous Replenishment and with Shortages 238
7.2.4 Manufacturing Model with Shortages 241
7.3 Operation of Inventory System 245
7.4 Quantity Discount 247
7.5 Implementation of Purchase Inventory Model 250
7.5.1 Fixed Order Quantity System (Q System) 250
7.5.2 Periodic Review System (P System) 251
7.6 Multiple-item Model with Shortage Limitation 254
7.7 Purchase Model of Inventory for Multi-item with Inventory Carrying Cost
Constraint 256
7.8 EOQ Model for Multi-item Joint Replenishment 258
7.8.1 Purchase Model of Inventory for Multi-item Joint Replenishment
without Shortages 259
7.8.2 Manufacturing Model of Inventory with Multi-item Joint Replenishment
without Shortages 262
7.9 EOQ for the Purchase Model of Inventory for Multi-item Joint Replenishment
with Space Constraint 265
7.10 Determination of Stock Level of Perishable Items under Probabilistic
Condition 269
Questions 272

8. DYNAMIC PROGRAMMING 275297

8.1 Introduction 275
8.2 Application of Dynamic Programming 276
8.2.1 Capital Budgeting Problem 276
8.2.2 Reliability Improvement Problem 278
8.2.3 Stage-coach Problem (Shortest-path Problem) 281
8.2.4 Cargo Leading Problem 284
8.2.5 Minimizing Total Tardiness in Single Machine Scheduling Problem 286
8.2.6 Optimal Subdividing Problem 290
viii Contents

8.2.7 Solution of Linear Programming Problem through Dynamic

Programming 292
Questions 295

9. QUEUEING THEORY 298354

9.1 Introduction 298
9.2 Terminologies of Queueing System 299
9.3 Empirical Queueing Models 300
9.3.1 (M/M/1) : (GD//) Model 301
9.3.2 (M/M/C) : (GD//) Model 305
9.3.3 (M/M/1) : (GD/N/) Model 309
9.3.4 (M/M/C) : (GD/N/) Model (for C N) 313
9.3.5 (M/M/C) : (GD/N/N) Model (for C < N) 318
9.3.6 (M/M/1) : (GD/N/N) Model (for N > 1) 322
9.4 Simulation 325
9.4.1 Need for Simulation 325
9.4.2 Types of Simulation 326
9.4.3 Major Steps of Simulation 327
9.4.4 Simulation using High-level Languages 327
9.4.5 General Purpose Simulation System (GPSS) 337
Questions 352

10. PROJECT MANAGEMENT 355408

10.1 Introduction 355
10.2 Phases of Project Management 358
10.3 Guidelines for Network Construction 359
10.4 Critical Path Method (CPM) 359
10.5 Gantt Chart (Time Chart) 365
10.6 Project Evaluation and Review Technique (PERT) 368
10.7 Crashing of Project Network 375
10.7.1 General Guidelines for Network Crashing 376
10.7.2 Crashing of Project Network with Cost Trade-off 377
10.8 Project Scheduling with Constrained Resources 390
10.8.1 Resource Levelling Technique 390
10.8.2 Resource Allocation Technique 398
Questions 404

11. DECISION THEORY 409423

11.1 Introduction 409
11.2 Decision under Certainty (Deterministic Decision) 409
11.3 Decision under Risk 409
11.3.1 Expected Value Criterion 410
11.3.2 Expected Value Combined with Variance Criterion 411
11.4 Decision under Uncertainty 411
11.4.1 Laplace Criterion 412
11.4.2 Maximin Criterion 413
 Contents ix

11.4.3 Minimax Criterion 414

11.4.4 Savage Minimax Regret Criterion 414
11.4.5 Hurwicz Criterion 416
11.5 Decision Tree 417
Questions 421

12. GAME THEORY 424470

12.1 Introduction 424
12.1.1 Terminologies of Game Theory 424
12.2 Game with Pure Strategies 426
12.3 Game with Mixed Strategies 428
12.4 Dominance Property 430
12.5 Graphical Method for 2 n or m 2 Games 440
12.6 Linear Programming Approach for Game Theory 453
Questions 467

13. REPLACEMENT AND MAINTENANCE ANALYSIS 471493

13.1 Introduction 471
13.2 Types of Maintenance 471
13.3 Types of Replacement Problem 472
13.4 Determination of Economic Life of an Asset 472
13.4.1 Basics of Interest Formulae 473
13.4.2 Examples of Determination of Economic Life of an Asset 475
13.5 Simple Probabilistic Model for Items which Completely Fail 485
Questions 492

14. PRODUCTION SCHEDULING 494537

14.1 Introduction 494
14.2 Single-machine Scheduling 494
14.2.1 Measures of Performance 495
14.2.2 Shortest Processing Time (SPT) Rule to Minimize Mean Flow Time 496
14.2.3 Weighted Shortest Processing Time (WSPT) Rule to Minimize
Weighted Mean Flow Time 497
14.2.4 Earliest Due Date (EDD) Rule to Minimize Maximum Lateness 498
14.2.5 Model to Minimize Total Tardiness 499
14.2.6 Introduction to Branch-and-Bound Technique to Minimize
Mean Tardiness 502
14.2.7 Model to Minimize Sum of Weighted Number of Early and Tardy
Jobs 512
14.3 Flow Shop Scheduling 515
14.3.1 Johnsons Algorithm for n Jobs and Two Machines Problem 517
14.3.2 Extension of Johnsons Algorithm for n Jobs and Three Machines
Problem 519
14.3.3 Branch-and-Bound Method for n Jobs and m Machines 521
x Contents

14.4 Job Shop Scheduling 532

14.4.1 Two Jobs and m Machines Job Shop Scheduling 533
Questions 535

15. GOAL PROGRAMMING 538548

15.1 Introduction 538
15.2 Simplex Method for Solving Goal Programming 541
Questions 547

16. PARAMETRIC LINEAR PROGRAMMING 549561

16.1 Introduction 549
16.2 Changes in Objective Function Coefficients (Cj Values) 550
16.3 Changes in Right-hand Side Constants (Bi Values) of Constraints 554
16.4 Introduction to Changes in Resource Requirements Vector(s), Pj 559
Questions 560

17. NONLINEAR PROGRAMMING 562590

17.1 Introduction 562
17.2 Lagrangean Method 562
17.3 KuhnTucker Conditions 569
17.4 Quadratic Programming 572
17.5 Separable Programming 581
17.6 Chance-constrained Programming or Stochastic Programming 585
Questions 589
Appendix 591

Suggested Further Reading 593594

Answers to Questions 595604

Index 605608
PREFACE

An organizational system consists of various subsystems. The most ideal approach to optimize the
performance of a system is to consider different subsystems as an integrated single unit. In some
reality, integrating all the subsystems as a single unit will make the problem-solving process more
complex, because of its size and different constraints. Under such situation, it is inevitable to
optimize the performance of each subsystem. Operations research consists of topics to achieve
each of these objectives depending on the reality.
Based on the feedback from academicians, I have revised this book in the following lines.

l Inclusion of quantity discount models for transportation problem.

l Inclusion of more worked-out examples in many chapters. This will help the students to
have enhanced understanding of the concepts and techniques, which are discussed in
different chapters.
l Inclusion of additional topics in dynamic programming and inventory control.
l Inclusion of chapter-end questions for the additional topics, which are included in this
edition.

The quantity discount in transportation problem can be classified into all quantity discount
scheme (AQDS) and incremental quantity discount scheme (IQDS). A mathematical model and a
numerical illustration for each of these two quantity discount schemes are presented at the end of
the chapter on transportation problem.
The chapter on dynamic programming contains an additional topic on minimizing total
tardiness in single machine scheduling problem. Here, the single machine scheduling problem is
mapped in such a way that the dynamic programming technique is applied to it for minimizing the
total tardiness.
Under inventory control, the following topics have been included:

l Multiple-item model with storage limitation.

l Purchase model of inventory for multi-item with inventory carrying cost constrains.
l EOQ model for multi-item joint replenishment without shortages for purchase model of
inventory as well as for manufacturing model of inventory.
l EOQ for the purchase model of inventory for multi-item joint replenishment with space
constraint.

The methods/models in each of the additional topics are illustrated with suitable worked-out
examples.

xi
xii Preface

I express my profound gratitude and appreciation to academic colleagues who gave valuable
feedback about the first edition of this text which helped me to improve its content.
My heartfelt thanks are due to the editorial and production teams of Prentice-Hall of India for
their meticulous processing of the manuscript of this second edition.
Any suggestions to further improve the contents of this edition would be warmly
appreciated.

R. PANNEERSELVAM
OVERVIEW OF
OPERATIONS RESEARCH 1
1.1 INTRODUCTION
Operations research is a scientific approach to problem solving for executive decision making
which requires the formulation of mathematical, economic and statistical models for decision and
control problems to deal with situations arising out of risk and uncertainty. In fact, decision and
control problems in any organization are more often related to certain daily operations such as
inventory control, production scheduling, manpower planning and distribution, and maintenance.
According to Operations Research Society of America (ORSA), it is a tool which is concerned
with the design and operation of the man-machine system scientifically, usually under conditions
requiring the optimum allocation of limited resources.
As per the Operations Research Society of Great Britain, operations research is the
application of the scientific methods to complex problems arising in the direction and management
of large systems of men, machines, materials and money in industry, business and government.
The origin and development of operations research can be studied under the following
classification:
1. Pre-World War II developments
2. Developments during World War II
3. Post-World War II developments
4. Computer era
5. Inclusion of uncertainty models.

Pre-World War II developments

Many of the techniques of todays operations research have been actually developed and used
even before the term operations research was coined. Some of the techniques are: inventory
control, queueing theory, and statistical quality control.
In 1915, Ford Harris developed a simple EOQ (economic order quantity) model to optimize the
total cost of inventory system, which was eventually analyzed in 1934 by R.H. Wilson. Around the
same time (1916), A.K. Erlang, a Danish telephone engineer, was responsible for many of the early
theoretical developments in the area of queueing theory.
In the early 1900s, routine quality checks conducted by inspectors were not found to be
satisfactory for some companies. The problem was analyzed in the inspection engineering
department of Western Electrics Bell Laboratory by Shewhart who ultimately designed control
charts in 1924. These are called as the first Shewhart control charts. During the period 192526, the
Western Electric Company defined various terminologies associated with acceptance sampling of
1
2 Operations Research

quality control that was used as a tool for controlling attributes of raw materials/components/
finished products. The terminologies include consumers risk, producers risk, probability of
acceptance, operating characteristics (OC) curve, lot tolerance percent defective (LTPD), double
sampling plan, type I error, type II error and so on. In 1925, Dodge introduced the basic concept of
sampling inspection. Ten years later, Pearson developed the British Standard Institution Number
600, entitled Application of statistical method to international standardization and quality control.
In 1939, H. Roming presented his work on variable sampling plan in his Ph.D. dissertation.

Developments during World War II

During the World War II, the effective utilization of scarce resources was the top-most concern of
the military in Britain. So, in Britain, scientists from different fields were jointly directed to do
research on military operations for improving its effectiveness with the limited resources. Later on,
this scientific and interdisciplinary approach became an important problem-solving aspect of
operations research methodologies.

Post-World War II developments

After the World War II, the industries in America and Britain concentrated in applying the
operations research methodologies to industrial problems for maximizing the profitability with limited
resources.
In 1947, Dantzig, developed simplex method to solve linear programming problem. Thereafter
the Operations Research Society of America, and the Institute of Management Science were
founded in 1952 and 1953, respectively.

Computer era
Many of the operations research techniques involve complex computations and hence they take
longer time for providing solutions to real life problems. The developments of high speed digital
computers made it possible to successfully apply some of the operations research techniques to
large size problems. The developments of recent interactive computers make the job of solving large
size problems even more simple because of human intervention towards sensitivity analysis.

Inclusion of uncertainty models

The use of probability theory and statistics to tackle undeterministic situations made the operations
research techniques more realistic.

1.2 CONCEPT OF A MODEL

Model is an abstraction of reality. Some examples of models are road map of a city to trace the
shortest route from a given source to a given destination, three-dimensional view of a factory to
plan the material movements in its shop floor, electrical network to compute the current flow in a
particular arc, and linear equation to forecast the demand of a product.
An operations research model is defined as an idealized (simplified) representation of a
real-life system. Operations research uses a number of models to obtain solutions of various
realistic problems.
 Operations Research

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