Quantitative

Techniques in
Management
ADL-07
(Session – 3)
Arun Sharma
Professor
Amity Institute of Information
Technology
Amity University
---Uttar Pradesh---
arunsharma@aiit.amity.edu
 Linear Programming
Problems (LPP)

(Operations Research / Optimization

Techniques)
 Operations
research
• OR is the systematic method oriented
study of the basic structure,
characteristic, functions and
relationships of an organisation to
provide the executive with a sound,
scientific and quantitative basis for
decision making.

• OR is concerned with scientifically

deciding how to best design and
operate man-machine systems usually
requiring the allocation of resources.
Characteristics of OR
– OR approaches problem solving
and decision making from a total
system’s perspective
– It is interdisciplinary model
– Model building and mathematical
manipulation provide the
methodology .
– OR is for operations economy
– Primary focus on decision making.
Scope of O.R.
• In agriculture
• In Finance
• In Industry
• In Marketing
• In Personnel management
• In Production management
• In Life Insurance
Linear Programming
(LP)
Linear Programming (LP) is a
mathematical modeling technique,
useful for economic allocation of
limited resources, such as labor,
material, machine, time, warehouse
space, capital, energy, etc., to
several competing activities, such as
products, services, jobs, new
equipments, projects, etc., on the
basis of a given criterion of
optimality.
Linear Programming
(LP)
• The word linear refers to linear
relationship among variables in a
model.

• The word programming refers to

modeling and solving a problem
mathematically that involves the
economic allocation of limited
resources by choosing a particular
course of action or strategy among
various alternative strategies to achieve
the desired objective.
What is
optimization?
• Steps involved in mathematical
programming
– Conversion of stated problem into a
mathematical model that abstracts
all the essential elements of the
problem.
– Exploration of different solutions of
the problem.
– Finding out the most suitable or
optimum solution.
The Linear
Programming Model
Let: X1, X2, X3, ………, Xn = decision
variables

Z = Objective function or
linear function
Requirement: Maximization of the linear
function Z.
Z = c1X1 + c2X2 + c3X3 + ………+ cnXn

subject to the following constraints:

where aij , bi, and cj are given constants.

 The Linear
Programming Model
• The linear programming model can
be written in more efficient
notation as:

The decision variables, xI, x2, ..., xn,

represent levels of n competing activities.
Examples of LP
Problems
A Product Mix Problem

• A manufacturer has fixed amounts of

different resources such as raw material,
labor, and equipment.
• These resources can be combined to
produce any one of several different
products.
• The quantity of the ith resource required
to produce one unit of the jth product is
known.
• The decision maker wishes to produce
the combination of products that will
maximize total income.
Examples of LP
Problems
A Transportation Problem

• A product is to be shipped in the amounts al,

a2, ..., am from m shipping origins and received
in amounts bl, b2, ..., bn at each of n shipping
destinations.
• The cost of shipping a unit from the ith origin
to the jth destination is known for all
combinations of origins and destinations.
• The problem is to determine the amount to be
shipped from each origin to each destination
such that the total cost of transportation is a
minimum.
Developing LP Model

• The variety of situations to which linear

programming has been applied ranges from
agriculture to zinc smelting.

• Steps Involved:
– Determine the objective of the problem
and describe it by a criterion function in
terms of the decision variables.
– Find out the constraints.
– Do the analysis which should lead to the
selection of values for the decision
variables that optimize the criterion
function while satisfying all the
constraints imposed on the problem.
Developing LP Model
Example: Product Mix Problem
The ABC Company produces two products: I and II.
The raw material requirements, space needed for
storage, production rates, and selling prices for these
products are given in Table 1.

The total amount of raw material available per day for

both products is 15751b. The total storage space for all
products is 1500 ft2, and a maximum of 7 hours per
day can be used for production.
Developing LP Model

Example Problem

All products manufactured are shipped out of the

storage area at the end of the day. Therefore, the
two products must share the total raw material,
storage space, and production time. The
company wants to determine how many units
of each product to produce per day to
maximize its total income.

The company has decided that it wants to

maximize its sale income, which depends on the
number of units of product I and II that it
produces.
Therefore, the decision variables, x1 and x2 can
be the number of units of products I and II,
respectively, produced per day.

Solution
Developing LP Model

• The object is to maximize the equation:

Z = 13x1 + 11x2
subject to the constraints on storage space,
raw materials, and production time.

• Each unit of product I requires 4 ft2 of storage

space and each unit of product II requires 5 ft2.
Thus a total of 4x1 + 5x2 ft2 of storage space is
needed each day. This space must be less
than or equal to the available storage space,
which is 1500 ft2. Therefore,
4X1 + 5X2 ≤ 1500
• Similarly, each unit of product I and II produced
requires 5 and 3 1bs, respectively, of raw
material. Hence a total of 5xl + 3x2 Ib of raw
material is used.
 Developing LP Model

• This must be less than or equal to the total

amount of raw material available, which is 1575
Ib. Therefore,
5x1 + 3x2 ≤ 1575
• Product I can be produced at the rate of 60 units
per hour. Therefore, it must take I minute or 1/60
of an hour to produce I unit. Similarly, it requires
1/30 of an hour to produce 1 unit of product II.
Hence a total of x1/60 + x2/30 hours is required
for the daily production. This quantity must be
less than or equal to the total production time
available each day. Therefore,
x1 / 60 + x2 / 30 ≤ 7
or x1 + 2x2 ≤ 420
• Finally, the company cannot produce a negative
quantity of any product, therefore x1 and x2 must
each be greater than or equal to zero.
Developing LP Model

• The linear programming model for this

example can be summarized as:
Graphical Solution
to LP Problems
 Graphical Solution
to LP Problems
• An equation of the form 4x1 + 5x2 = 1500
defines a straight line in the x1-x2 plane. An
inequality defines an area bounded by a
straight line. Therefore, the region below and
including the line 4x1 + 5x2 = 1500 in the Figure
represents the region defined by 4x1 + 5x2 ≤
1500.
• Same thing applies to other equations as well.
• The shaded area of the figure comprises the
area common to all the regions defined by the
constraints and contains all pairs of xI and x2
that are feasible solutions to the problem.
• This area is known as the feasible region or
feasible solution space. The optimal solution
must lie within this region.
• There are various pairs of x1 and x2 that satisfy
the constraints such as:
 Graphical Solution to LP
Problems
• Trying different solutions, the optimal solution
will be:
X1 = 270
X2 = 75
• This indicates that maximum income of $4335
is obtained by producing 270 units of product I
and 75 units of product II.
• In this solution, all the raw material and
available time are used, because the optimal
point lies on the two constraint lines for these
resources.
• However, 1500- [4(270) + 5(75)], or 45 ft2 of
storage space, is not used. Thus the storage
space is not a constraint on the optimal
solution; that is, more products could be
produced before the company ran out of
storage space. Thus this constraint is said to
be slack.
 Graphical Solution
to LP Problems

• If the objective function happens to be parallel

to one of the edges of the feasible region, any
point along this edge between the two extreme
points may be an optimal solution that
maximizes the objective function. When this
occurs, there is no unique solution, but there is
an infinite number of optimal solutions.

• The graphical method of solution may be

extended to a case in which there are three
variables. In this case, each constraint is
represented by a plane in three dimensions,
and the feasible region bounded by these
planes is a polyhedron.
 The Simplex
Method

 When decision variables are more than 2, it

is always advisable to use Simplex Method
to avoid lengthy graphical procedure.

 The simplex method is not used to examine

all the feasible solutions.

 It deals only with a small and unique set of

feasible solutions, the set of vertex points
(i.e., extreme points) of the convex feasible
space that contains the optimal solution.
 The Simplex
Method
 Steps involved:
1. Locate an extreme point of the feasible
region.
2. Examine each boundary edge intersecting
at this point to see whether movement
along any edge increases the value of the
objective function.
3. If the value of the objective function
increases along any edge, move along this
edge to the adjacent extreme point. If
several edges indicate improvement, the
edge providing the greatest rate of
increase is selected.
4. Repeat steps 2 and 3 until movement
along any edge no longer increases the
value of the objective function.
The Simplex Method

Example: Product Mix Problem

The ABC Company produces two products: I and II.

The raw material requirements, space needed for
storage, production rates, and selling prices for these
products are given below:

The total amount of raw material available per day for

both products is 15751b. The total storage space for all
products is 1500 ft2, and a maximum of 7 hours per
day can be used for production. The company wants
to determine how many units of each product to
produce per day to maximize its total income.
 The Simplex Method
Solution
 Step 1: Convert all the inequality constraints
into equalities by the use of slack variables.
Let:

As already developed, the LP model is:

The Simplex Method
 Introducing these slack variables into the
inequality constraints and rewriting the
objective function such that all variables are on
the left-hand side of the equation. Equation 4
can be expressed as:

Eq. (5)
The Simplex Method

 Since the coefficients of x1 and x2 in Eq. (A1)

are both negative, the value of Z can be
increased by giving either x1 or x2 some
positive value in the solution.
 In Eq. (B1), if x2 = S1 = 0, then x1 = 1500/4 =
375. That is, there is only sufficient storage
space to produce 375 units at product I.
 From Eq. (C1), there is only sufficient raw
materials to produce 1575/5 = 315 units of
product I.
 From Eq. (D1), there is only sufficient time to
produce 420/1 = 420 units of product I.
 Therefore, considering all three constraints,
there is sufficient resource to produce only
315 units of x1. Thus the maximum value of x1
is limited by Eq. (C1).
 Simplex Tableau for
Maximization
 Step I: Set up the initial tableau using Eq. (5).

In any
iteration, a
variable that
has a
nonzero
value in the
solution is
called a
basic
variable.
Simplex Tableau for
Maximization
 Step II: . Identify the variable that will be
assigned a nonzero value in the next iteration
so as to increase the value of the objective
function. This variable is called the entering
variable.
 It is that nonbasic variable which is
associated with the smallest negative
coefficient in the objective function.
 If two or more nonbasic variables are tied
with the smallest coefficients, select one of
these arbitrarily and continue.

 Step III: Identify the variable, called the leaving

variable, which will be changed from a nonzero
to a zero value in the next solution.
Simplex Tableau for
Maximization
 Step IV: . Enter the basic variables for the
second tableau. The row sequence of the
previous tableau should be maintained, with
the leaving variable being replaced by the
entering variable.
 Simplex Tableau for
Maximization
 Step V: Compute the coefficients for the
second tableau. A sequence of operations will
be performed so that at the end the x1 column
in the second tableau will have the following
coefficients:

The second tableau yields the following feasible

solution:
x1 = 315, x2 = 0, SI = 240, S2 = 0, S3 = 105,
and Z = 4095
Simplex Tableau for
Maximization
 The row operations proceed as fo1lows:
 The coefficients in row C2 are obtained
by dividing the corresponding
coefficients in row C1 by 5.
 The coefficients in row A2 are obtained
by multiplying the coefficients of row C2
by 13 and adding the products to the
corresponding coefficients in row Al.
 The coefficients in row B2 are obtained
by multiplying the coefficients of row C2
by -4 and adding the products to the
corresponding coefficients in row Bl.
 The coefficients in row D2 are obtained
by multiplying the coefficients of row C2
by -1 and adding the products to the
corresponding coefficients in row Dl.
Simplex Tableau for
Maximization
 Step VI: Check for optimality. The second
feasible solution is also not optimal,
because the objective function (row A2)
contains a negative coefficient. Another
iteration beginning with step 2 is
necessary.
 In the third tableau (next slide), all the
coefficients in the objective function (row
A3) are positive. Thus an optimal solution
has been reached and it is as follows:

x1 = 270, x2 = 75, SI = 45, S2 = 0, S3 = 0, and

Z = 4335
TRANSPORTATION
PROBLEM
 Definition:

Transportation Problem is to minimize

the cost of transporting goods from m
origins to n destinations along chosen
direct routes from origin to destination.
The setting is of given demand at each
destination.
 History:

• The origin of transportation methods

dates back to 1941when F.L.
Hitchcock presented a study entitled
‘The Distribution of a Product from
Several Sources to Numerous
Localities.’

• In 1947, T.C. Koopmans presented an

independent study, not related to
Hitchcock’s, called ‘Optimum
Utilization of the Transportation
System.’
Mathematical formulation of
Transportation Problem:
Destination supply
source C11 X11
.. .. C1nX S1
1n

: : :

: : :

Cm1 .. .. Cmn Sm

demand D1 .. .. Dn X
Xm1 mn
Formulation of the
Transportation Problem:
i = index for Source (factory); i = 1 to
m
j = index for Destinations; j = 1 to n
Xij = number of units shipped per route
from origin i to destination j for each
route.
Cij = cost per unit of shipping from
origin i to destination j.
si = supply (capacity) at origin i.
dj = demand at destination j.
Xij ≥ 0
 Continued…

m n

Min Z = Σ Σ CijXij
i=1 j=1

s.t. n
Σ Xij = si (Supply Constraints)
j=1

m
Σ Xij = di (Demand Constraints)
i=1
 Balanced TP

Total Supply = Total Demand

n m

Σ sij = Σ dij
j=1 i=1
 Linear programming
formulation of the
Transportation problem

D1 D2 D3 D4 Supply

S1 19 30 50 10 7

S2 70 30 40 60 9

S3 40 8 70 20 18

Demand 5 8 7 14 34
 Continued…

Min Z = (19X11+30X12+50X13+10X14)
+ (70X21+30X22+40X23+60X24)
+ (40X31+8X32+70X33+20X34)
Subject to-
Capacity constraints:
19X11+30X12+50X13+10X14 = 7
70X21+30X22+40X23+60X24 = 9
40X31+8X32+70X33+20X34 = 18
Demand Constraints:
19X11+70X21+40X31 = 5
30X11+30X12+8X13 = 8
50X11+40X12+70X13 = 7
10X11+60X12+20X13 = 14
 Transportation Technique:
Step I: To determine Initial Basic Solution.
Step II: To determine entering variable among non basic.
Step III: To determine leaving variable among basics.

Note: No of Basic variables = m+n-1

 Initial Basic Solution:

There are Three methods:

1. North-West Corner Method.
2. Least Cost method or Matrix
Minima Method.
3. Vogel’s Approximation
Method (VAM).
North-West Corner
Method
D1 D2 D3 D4 Supply

S1 19 30 50 10 7
5 2 2

S2 70 30 40 60 9
3
6 3
S3 40 8 70 20 18
14 14
4
Demand 5 8 7 14 34

6 4

(S1D1)D1 (S1D2)S1 (S2D2)D2 (S2D3)S2

(S3D3)D3 S3D4
Transportation Cost (NW Corner
Method)
= 19*5 + 30*2 + 30 * 6 + 40*3+
70*4+20*14
= 95 + 60+ 180+120+280+280
=1015
 Least Cost Method:

D1 D2 D3 D4 Supply

S1 19 30 50 10 7
7

S2 70 30 40 60 9
7 2
2

S3 40 8 70 20 18 3

3 8 7 10

Deman 5 8 7 14 34
d
7

(S3D2)D2 (S1D4)S1 (S3D4)D4 (S2D3)D3 …

Transportation Cost (LC Method)
=10*7 + 70*2 + 40*7 + 40*3 +
8*8 + 20*7
= 70+ 140+280+120+64+140
=814
 VAM
D1 D2 D3 D4 Supply

S1 19 5 30 50 10 7 2 9 9
S2 70 30 40 60 9 10 20
S3 40 8 8 70 20 10 1810 12 20
Demand 5 8 7 14 4 34
21 22 10 10
Assignment Problem
 Example

• We must determine how jobs should be

assigned to machines to minimize
setup times, which are given below:

Job 1 Job 2 Job 3 Job 4

Machine 1 14 5 8 7
Machine 2 2 12 6 5
Machine 3 7 8 3 9
Machine 4 2 4 6 10
Problem 1
• A company centre has got four expert
programmers. The centre needs four
application programmes to be
developed. The head of the computer
centre, after studying carefully the
programme’s to be developed, estimate
the computer time in minutes required
by the respective experts to develop the
application programmes as follows.
Program A B C D
mers
1 120 100 80 90
2 80 90 110 70
3 110 140 120 100
4 90 90 80 90
 Hungarian Algorithm

• Two Observations
– Adding a constant to any row or column
does not change the solution  Changing
C
– If C is nonnegative and ∑cijxij = 0 then X is
a solution.

• Let 2 zeroes in C be called independent

if they appear in different rows and
columns.
 Hungarian Algorithm

1. From each line (row or column)

subtract its minimum element.
2. Find a maximum set of N’ mutually
independent zeroes.
3. if N’ = N such zeroes have been
found: output their indices and stop
otherwise: cover all zeroes in W with
N’ lines and find the minimum
uncovered value; subtract it from all
uncovered elements, and add it to all
doubly covered elements; go to 2.
 Example

• We must determine how jobs should be

assigned to machines to minimize
setup times, which are given below:

Job 1 Job 2 Job 3 Job 4

Machine 1 14 5 8 7
Machine 2 2 12 6 5
Machine 3 7 8 3 9
Machine 4 2 4 6 10
 Hungarian Algorithm

• Step 1: (a) Find the minimum

element in each row of the cost
matrix. Form a new matrix by
subtracting this cost from each
row. (b) Find the minimum cost in
each column of the new matrix,
and subtract this from each
column. This is the reduced cost
matrix.
 Example: Step 1(a)

Job 1 Job 2 Job 3 Job 4

Machine 14 5 8 7
1
Machine 2 12 6 5
2
Machine 7 8 3 9
3
Machine 2 4 6 10
4

Job 1 Job 2 Job 3 Job 4

Machine 9 0 3 2
1
Machine 0 10 4 3
2
Row Machine 4 5 0 6
Reductio 3
n Machine 0 2 4 8
4
 Example: Step 1(b)

Job 1 Job 2 Job 3 Job 4

Machine 1 9 0 3 2
Machine 2 0 10 4 3
Machine 3 4 5 0 6
Machine 4 0 2 4 8

Job 1 Job 2 Job 3 Job 4

Machine 1 9 0 3 0
Machine 2 0 10 4 1
Machine 3 4 5 0 4
Machine 4 0 2 4 6

Column
Reduction
 Hungarian Algorithm

• Step 2: Draw the minimum

number of lines that are needed to
cover all the zeros in the reduced
cost matrix. If m lines are
required, then an optimal solution
is available among the covered
zeros in the matrix. Otherwise,
continue to Step 3.

How do we
find the
minimum
number of
lines?!
 Example: Step 2

Job 1 Job 2 Job 3 Job 4

Machine 9 0 3 0
1
Machine 0 10 4 1
2
Machine 4 5 0 4
3
Machine 0 2 4 6
4

We need 3<4
lines, so
continue to Step
3
 Hungarian Algorithm

• Step 3: Find the smallest nonzero

element (say, k) in the reduced
cost matrix that is uncovered by
the lines. Subtract k from each
uncovered element, and add k to
each element that is covered by
two lines. Return to Step 2.
 Example: Step 3

Job 1 Job 2 Job 3 Job 4

Machine 1 9 0 3 0
Machine 2 0 10 4 1
Machine 3 4 5 0 4
Machine 4 0 2 4 6

Job 1 Job 2 Job 3 Job 4

Machine 1 10 0 3 0
Machine 2 0 9 3 0
Machine 3 5 5 0 4
Machine 4 0 1 3 5
Example: Step 2 (again)

Zero
Assignment

Job 1 Job 2 Job 3 Job 4

Machine 10 0 3 0
1
Machine 0 9 3 0
2
Machine 5 5 0 4
3
Machine 0 1 3 5
4

Need 4 lines, so we
have the optimal
assignment and we
stop
Example: Final Solution

Job 1 Job 2 Job 3 Job 4

Machine 10 0 3 0
1
Machine 0 9 3 0
2
Machine 5 5 0 4
3
Machine 0 1 3 5
4

Optimal assignment

x1 2 = 1, x3 3 = 1, x4 1 = 1, x2 4 = 1
How did
we know
which 0’s
to
Thank You