Operations Research

Faculty: P N Ram Kumar

E-mail: ram@iimk.ac.in
Phone Extension: 0495 – 2809 426
 What is Operations Research?

 Operations Research (OR) is the discipline of

applying advanced analytics to help make better

decisions.
 As the name implies, OR involves “research on
operations”

 Nature of the organization is essentially immaterial

Where is OR used?
 OR has been applied extensively in diverse areas such
as:

◦ Manufacturing

◦ Transportation

◦ Construction

◦ Telecommunications

◦ Financial planning

◦ Health care

◦ Military and public services

Specific applications of OR
Why should you learn OR?

 Manager – Dealing with resources

 Scarce resources – Labor, materials, machinery, money…
 Quest for best combination of inputs
 Minimizing costs or Maximizing profits
 Linear Programming (LP) problems
- Linear objective function
- Linear constraints
 Why only LP?
- Majority of real-life problems can be
approximated
- Efficient solution procedures
- Easy Sensitivity Analysis
Careers in OR/Operations
Management
 Plant Manager • Business Analyst
 Production Manager • Quality Control Manager
 Department Store Manager • Hospital Administrator
 Operations Manager • Facilities Manager
 Call center Manager • Production control
analyst
 Supply Chain Manager
• Operations Consultant
 Purchasing Manager
Let us watch a video on Operations Research
for 3 minutes!
What would you learn in OR?
 Linear Programming problems – Formulation, Graphical
method, Solving using Excel Solver

 Transportation, Transshipment and Assignment

problems

 Decision trees and AHP

 Project Management – Critical path computations

Scheme of Evaluation

A. End term: 60%

B. Quizzes: 25%
C. Class Participation: 15%
 Example Problem No. 1
 The Mighty Silver Ball Company manufactures three
kinds of pinball machines, each requiring a different
manufacturing technique.

 The Super Deluxe Machine requires 17 hours of labor,

8 hours of testing, and yields a profit of $300.

 The Silver Ball Special requires 14 hours of labor, 12

hours of testing, and yields a profit of $250.

 The Bumper King requires 10 hours of labor, 15 hours

of testing, and yields a profit of $200.
 Example Problem No. 1
 There are 1000 hours of labor and 600 hours of testing
available.

 In addition, a marketing forecast has shown that the

demand for the Super Deluxe is no more than 25
machines, demand for the Silver Ball Special no more
than 50, and demand for Bumper King no more than 100.

 The manufacturer wants to determine the optimal

production quantities that will maximize his total profit

 Formulate this as a linear programming problem

 Machine Labor Testing Profit / Unit

Super
Deluxe 17 8 $300
Machine
Silver Ball
14 12 $250
Special

Bumper
10 15 $200
King

Availability 1000 hrs 600 hrs

Solution to Example Problem
No.1
1. Decision Variables???

2. Let x1, x2, and x3 be the production quantities of

machines 1, 2, and 3 respectively.

3. Constraints???

4. Hours of Labor and Testing, Upper limit on

production quantities

5. Last, the objective function is to maximize the

profit
 Maximize
Z = 300x1 +250x2 + 200x3 Objective Function

 Subject to

 17x1 + 14x2 + 10x3 < 1000

Constraints
 8x1 + 12x2 + 15x3 < 600
 x1 ≤ 25, x2 ≤ 50, x3 ≤ 100
Non-Negativity
 x1 > 0, x2 > 0, x3 > 0 Constraints

 x1, x2 , x3
Decision Variables
Example Problem No. 2
 An advertising company wishes to plan an advertising
campaign in three different media – television, radio, and
magazines. The purpose of the advertising program is to
reach as many potential customers as possible. Results of
a market study are as follows.
Television Radio Magazines
Daytime Prime Time
Cost of an advertising $40,000 $75,000 $30,000 $15,000
unit
No. of potential 400,000 900,000 500,000 200,000
customers reached per
unit
No. of women 300,000 400,000 200,000 100,000
customers reached per
unit
 Example Problem No. 2
 The company does not want to spend more than $800,000
on advertising. It further requires that

(1) At least 2 million exposures take place among women

(2) Advertising on television be limited to $500,000

(3) At least 3 advertising units be bought on daytime

television, and two units during prime time and

(4) Number of advertising units on radio and magazine

should each be between 5 and 10 (both numbers included)
Solution to Example Problem
No.2
 Decision Variables?
 x1, x2, x3 and x4 (all ≥ 0) be the number of
advertising units bought in daytime television,
prime-time television, radio, and magazines,
respectively.
 Constraints?
 Budget Constraint:
40000x1 + 75000x2 + 30000x3 + 15000x4 <
800000
 Constraint on No. of women customers:
300000x1 + 400000x2 + 200000x3 + 100000x4 ≥ 2000000
Solution to Example Problem
No.2
 Constraints on television advertising:
40000x1 + 75000x2 < 500000
x1 > 3, x2 > 2
 Constraints on radio and magazine:
5≤ x3 ≤ 10
5≤ x4 ≤ 10
Objective Function
Maximize Z = 400000x1 + 900000x2 + 500000x3 +
200000x4
Assumptions of Linear
Programming

 Proportionality - Absence of economies of scale

 Additivity – Absence of interaction b/n variables

 Divisibility – Non-integer values are acceptable

 Certainty – Model parameters are known and

constant
Example Problem No.3
 A financial advisor who recently graduated from
IIMK received a call from a client who wanted to
invest a portion of a $ 150,000 inheritance
 The client wanted to realize an annual income, but
also wanted to spend some of the money
 After discussing the matter, the client and the
adviser agreed that a mutual fund, corporate
bonds, and a money market account would make
suitable investments.
 The client was willing to leave allocation of the funds among
these investment vehicles to the financial adviser, but with
the following conditions:
 At least 25 percent of the amount invested should be in the money
market account
 A maximum of only 35% should be invested in corporate bonds
 The investment must produce at least $ 12,000 annually (ROI)
 The un-invested portion should be as large as possible

 The annual returns would be 11 percent for the mutual fund,

8 percent for the bonds, and 7 percent for the money market

 Formulate an LP model that will achieve the client’s

requests. Ignore transaction costs, the adviser’s fee and so
on.
Solution to Example Problem No.3
 Let x1, x2, x3 be the amounts to be invested in mutual
fund, corporate bonds and money market
 Non-negativity condition: x1, x2, x3 ≥ 0

 At least 25 percent of the amount invested should be in

the money market account

x3 / (x1+x2+x3) ≥ 0.25
 A maximum of only 35% should be invested in corporate

bonds
x2 / (x1+x2+x3) ≤ 0.35
 The investment must produce at least $12,000 annually

(ROI)
0.11x1 + 0.08x2 + 0.07x3 ≥ 12000
Objective Function: Maximize Z = 150,000 – (x 1 + x2 + x3)
 Problem No. 4 - Recruitment
 A hospital administrator has the following minimal daily requirements for
nursing personnel:
Period Clock Time Minimal No. of
nurses
1 6 AM to 10 AM 60
2 10 AM to 2 PM 70
3 2 PM to 6 PM 60
4 6 PM to 10 PM 50
5 10 PM to 2 AM 20
6 2 AM to 6 AM 30

 Nurses report to the hospital wards at the beginning of each period and
work for 8 consecutive hours. The hospital wants to determine the
minimal number of nurses to employ so that there will be a sufficient
number of personnel available for each period.
Problem No. 4 - Solution
 Decision variables: Let xi represent the number of nurses
reporting in period ‘i’ where i varies from 1 to 6 (x i >=0)
 Constraints: x1+x6>=60 (Period 1)
x2+x1>=70 (Period 2)
x2+x3>=60 (Period 3)
x3+x4>=50 (Period 4)
x4+x5>=20 (Period 5)
x5+x6>=30 (Period 6)
 Objective Function: Minimize Z = x1+x2+x3+x4+x5+x6
 Problem No. 5 - Lifeguards
problem
 In the summer, the City of Sunset Beach staffs lifeguard
stations seven days a week.
 Regulations require that city employees (including
lifeguards) work five days a week and be given two
consecutive days off.
 For most city employees, these days are Saturday and
Sunday, but for lifeguards, these are the two busiest days
of the week.
 Insurance requirements mandate that Sunset Beach
provide at least one lifeguard per 8000 average daily
 Problem No. 5 - Lifeguards
problem
 The following table gives the average daily attendance figures
required during the summer months, at Sunset Beach.
 Given the current budget situation, Sunset Beach would like
to determine a schedule that will employ as few lifeguards as
possible Day Average attendance
Sunday 58000
Monday 42000
Tuesday 35000
Wednesday 25000
Thursday 44000
Friday 51000
Saturday 68000
Problem No. 6 - Library problem
 Larry Edison needs to schedule the staffing of a computer
center which is open from 8 am until midnight. Larry
determined that the following number of computer
consultants are required to man the center at various
times of the day
Shift: 1 8 am – noon 4 (Minimum number required on
duty)
2 Noon – 4 pm 8
3 4 pm – 8 pm 10
4 8 pm – midnight 6
Problem No. 6 - Library problem…
 The full-time consultants work for 8 consecutive hours
and are paid $14 per hour.
 Part-time consultants can be hired to work in any of the
four shifts and are paid $12 per hour.
 An additional requirement is that during every time
period, there must be at least 2 full time consultants on
duty for every part time consultant on duty.
 How many full-time and part-time consultants should
work each shift to meet the requirements at minimum
cost?
Problem No. 7 – Quality Control
 A company has two grades of inspectors, 1 and 2,
who are to be assigned for a quality control
inspection.
 Grade 1 inspectors can check pieces at the rate of
25 per hour, with an accuracy of 98%. Grade 2
inspectors check at the rate of 15 pieces per hour,
with an accuracy of 95%.
 Inspectors work exactly 8 hours a day and have to
inspect at least 1800 pieces per day
 Problem No. 7 – Quality
Control…
 The wage rate of a Grade 1 inspector is $4 per hour,
while that of a Grade 2 inspector is $3 per hour. Each
time an error is made by an inspector, the cost to the
company is $2.
 The company has a maximum of eight Grade 1
inspectors and ten Grade 2 inspectors for performing
inspection.
 The company wants to determine the optimal
assignment of inspectors, which will minimize the total
cost of the inspection
Problem No. 7 - Solution

Minimize Z 40 x1  36 x2
Subject to
5x1  3 x2 45
x1 8
x2 10
x1 , x2 0
 x1<=8
x2
B (8,10)
A (3,10)

x2<=10

Feasible
Z(A)=40(3) region
+36(10) 5x1+3x2≥45
Z(A)=480 Feasible
solution

Z(B)=320
+360=680
C (8,5/3)
Z(C)=320
+60=380 x1

Simplex method – George Dantzig

5x1+3x2>=45

X1=0 -> x2=15 (0,15)

X2=0 -> x1=9 (9,0)

C is at the intersection of x1=8 and

5x1+3x2=45

Plug x1=8 in the above equation

3x2=45-40=5
X2=5/3
 Graphical Method,
Working of Simplex method
 Problem 8 - Cargo loading
problem
 A cargo plane has three compartments for storing
cargo: front, centre, and back. These compartments
have capacity limits on both weight and space, as
summarized below:

Compartment Weight Space

capacity capacity
(tons) (Cubic feet)
Front 12 7000
Center 18 9000
Back 10 5000
 Cargo loading problem…
 Furthermore, the weight of the cargo in the respective
compartments must be the same proportion of that
compartment’s weight capacity to maintain the balance of
the airplane.
 Any portion of the following four cargoes can be accepted.
Formulate a linear programming problem to maximize the
total profit for the flight.
Cargo Weight Volume (Cubic Profit ($/ton)
(tons) feet/ton)
1 20 500 320
2 16 700 400
3 25 600 360
4 13 400 290
 Problem No. 9 – Blending (1/3)

 Bharat oil manufactures three grades of gasoline (Regular,

Premium, Super). Each grade is produced by blending
three types of crude oil. Purchase price
Sales price Maximum per barrel
per barrel demand / day
Crude 1 $45
Super $70 1500
Crude 2 $35
Premium $60 3000
Regular $50 2500 Crude 3 $25

 Availability of crude oil is limited to 5000 barrels of each

type of crude oil per day.
 Problem No. 9 – Blending (2/3)

 The three types of gasoline differ in their octane rating

and sulphur content as follows:
Product Specifications
Super Average Octane rating of at least 10
At most 1% Sulphur

Premium Average Octane rating of at least 8

At most 2% Sulphur

Regular Average Octane rating of at least 6

At most 2.5% Sulphur
 Problem No. 9 – Blending (3/3)

 The octane rating and the sulphur content of the three

types of crude oil are as follows:
Octane Rating Sulphur content
Crude Oil 12 0.5%
1
Crude Oil 6 2.0%
2
Crude Oil 8 3.0%
3
 Refining cost is $4 per barrel of gasoline and the refinery
can produce up to 14,000 barrels of gasoline daily.
 Formulate an LP that will enable Bharat Oil to maximize its
daily profits
Problem No. 10 – Mfg
Assembly
 A final product is assembled with 4 units of
component A and 3 units of component B.
 The manufacturing shop runs three different
processes, each of which requires varying amounts
of raw materials and produce different amounts of
A and B.
 Two types of raw materials are used. 100 units of
raw material I (RM I) and 200 units of raw material
II (RM II) are available to the shop each day
 Input per run Output per run
(units) (units)
Shop
RM I RM II A B

I 7 5 6 4

II 4 8 5 8

III 2 7 7 3

100 200

Formulate a linear programme to maximize the

number of completed assemblies produced each
day.
Solution to Problem No.10
 Let x1, x2, x3 be the number of runs of each
process operated per day
 Total quantity of A produced =
 Total quantity of B produced =
 No. of units of finished product??

We have to maximize the above expression. This is

accomplished by formulating the problem as follows: