IPS ACADEMY INSTITUTE OF BUISNESS MANAGEMENT

AND RESEARCH INDORE

(UGC Autonomous, NAAC A++ grade Institute)

OPERATIONS RESEARCH ASSIGNMENT

DEPARTMENT – MBA FT

SEMESTER –-2

SUBMITTED TO -: SUBMITTED BY-:

DR. SATYAKAM DUBEY NIKUNJ SHARMA

Q1) Suppose you are being interviewed by the manager of a commercial concern wanting to fill
a research department position dealing with applications in operations research: describe scope
and objectives for methods of operations research, as well as their usefulness to the firm. Tell
some applications of operations research in the real industrial scene. ?

OPERATIONS RESEARCH

Operation research (OR) is a discipline that studies various analytical methods--mathematical

modeling, for instance, statistical analysis, and optimization techniques--to make decisions
effectively by finding an ideal way to allocate resources, schedule tasks, and manage systems.
The essence of Operation Research is basically a systematic approach towards the making of
decisions under the presence of a number of confused variables with more than one constraint.
The history of standards in Operation Research--the study of how to apply assorted techniques to
solve operations problems--can be traced back to World War II with military problems, and such
needs from warfare demanded super-efficient military operations. The army clearly needed
optimization models to provide help in troop and supply movement.

Later on in time, domains such as business, health, transport, and manufacturing applied the
methods of optimization. Most operationally actionable optimization problems would fall under
operation research. The goal here is to select an optimal solution from all possible alternatives
among feasible solutions. These can range from linear programming to integer programming,
nonlinear programming, etc., with linear programming being one of the candidates for the means
to the greatest success. In linear programming, for instance, you are maximizing or minimizing a
linear objective function subject to a mixture of linear constraints. This strategy is utilized among
industries so as to maximize profit or minimize costs. Another area with its greatest attention is
simulation, which permits investigators to construct models of complicated systems and study
the implications of changing factors and scenarios. While setting up the experiment, the analysts
would be able to verify the awaited situation and take logical decisions based upon imitating the
real life one without taking the risks of practically trying out in real life. Besides optimization
and simulation, operation research factors in such other methodologies as queuing-theory, game-
theory, and decision analysis. Queuing theory studies the manner by which organizations manage
and act in regard to waiting lines, and thus applies to service centers like call centers or more
recently hospitals.

But with some strategy formulated on the game theory, strategical interactions whose outcomes
are laid out by such constructions apply directly to competitive settings such as the markets.
Decision analysis lets one settle on the set of structuring evaluations when comparing
alternatives in situations of uncertainty that lend themselves to risk-return considerations.
Applications here cross boundaries. In the transport operations sector, routing and scheduling for
timely delivery services at low cost if the essentials of OR are met. An application of operation
research could carry out routing and flow optimization, maintaining supply inventories for
medical kits, or optimizing treatment in hospital cases.

OR has a proud tradition of assisting industries in many areas by ensuring quality decision-
making. Via mathematical modeling and other analytical techniques, firms can analyze very
complex issues by themselves and thereby enhance their efficiencies to achieve objectives with
precision.

Conducting an interview for the research department manager position with applicants for an
operation research company would have allowed further insight into the design employed, scope,
and purpose of OR techniques. Broadly speaking, Operations Research does enjoy an eminent
status in decision-making, where the processes are optimized with the use of analytical aids. OR
endeavors to systematically approach decision-making to give an organization the best outcome
for its resources. It can be applied to anyone using mathematical or statistical models or
optimization tools that will help them solve practical problems in organizations considering the
uncertainties and different constraints that could be involved.

Operations research has an extremely vast toolbox: linear programming, simulation, queuing
theory, decision analysis, and game theory. Much industrial work is being done on resource
allocation problems, scheduling, inventory control, logistics, and strategic planning using these
platforms.

Remote operational aims at ensuring organizational efficiency, cutting operational cost,

producing quality services, and then maximizing profit. The larger picture is the provision of
insight and inputs that would thus become helpful along with several analytical hardwoods
across the organization in aiding management and resources to take really far-conceived actions
for good measure on behalf of the firm.

Some applications of operations research in the industry are

1. Supply Chain Management: OR techniques seek to optimize the supply chain in all phases
from purchasing to distribution. So linear programming can be applied to minimize
transportation costs with respect to demands and supply constraints.

2. Manufacturing: The main applications of operations research in manufacturing include the

optimization of production scheduling, inventory management, and workflow effectiveness.
Simulation models may be used to test the impact of a change in production processes before any
changes are actually made.

3. Healthcare: The healthcare field utilizes OR methods for the scheduling of patients, allocation
of resources, and optimization of treatment plans. For instance, queueing theory encompasses
operations research and applies to the situation in hospitals for managing patient flow and
minimizing waiting time.

4. Transport: OR techniques are used to find alternative routes and schedules for delivery
companies. For example, the routing for delivery companies solves different classes of vehicle
routing problems, which minimises travel distance and time while acknowledging constraints for
deliveries.

5. Finance is the application of operations research techniques to facilitate decision-making in

the areas of portfolio optimization, risk analysis, and investment. Decision analysis can also be
utilized to measure different investment strategies under uncertain conditions.

These decision-making prescriptive approaches are used by firms to optimize their performance
and acquire strategic competitive advantage in their domains. In a nutshell, operations research
helps companies solve complex problems in a manner that is least obstructive.

Scope of Operation Research -:

1. It help in Problem Identifications.

2. Devlopment in Model.

3. Optimization

4. Simulation

5. Decision Analysis

Characteristics of Operation Research-:

1.Interdisciplinaty of Nature

2. Quatitative Apporach

3. Helps in optimization

4.Model

5. Adaptive and Dynamic.

Q2) How does the problem of degeneracy arise in a transportation problem? Explain how one
can overcome it?

When the number of basic variables corresponding to the occupied cells in the transportation
tableau fails to meet the added summation of states and columns minus one, degeneracy occurs.
This type of degeneracy causes either the existence of many optimal solutions or prevents even a
single feasible solution from being arrived at. Some examples demonstrating degeneracy may
help in finding suitable recovery methods.

The Transport Problem-Definition

Transporting goods under a minimal cost situation imposed by the constraint of supply and
demand is an unexplored field under linear programming referred to as the transportation
problem. The transportation problem describes the cheapest way to move goods from sources to
destinations. The name of the phenomenon is displayed by the costs of the supplier-consumer
routes. These costs are filled in by shipments in cases where total supply equals total demand.

Causes of Degeneracy

Here are some causes of the occurrence of degeneracy on the transportation problems:

1. Inadequate Basic Feasible Solutions: For a transportation problem comprising m suppliers and
n consumers, the total number of basic variables, which are essential for having a feasible
solution, is given by m + n - 1. If the solution is found with fewer basic variables than this
threshold, then it can be termed as degenerate. Assigning ties among transport costs due to
certain peculiarities of demand and supply is a very common cause linked to this case.

2. Tied Costs: There arises a situation where many routes have equal transportation costs, thus
providing an array of choices for the optimal solution. Thus, basic variables may fall short of the
required count.

3. Zero Allocations: Zero allocations create some empty shipment in certain cells while still
satisfying total supply and demand, which is again against the workings of an optimal solution.

Effects of Degeneracy

-Possible multiple optimal solutions: Degeneracy certainly arises here because there exist
multiple optimal solutions, making it difficult to choose anyone to be the best among them.
-Troubled when interacting flexibly: Degeneracies within iterations arise in such configurations
within Simplex or MODI for the selection of the next entering basic variable using pivots when
uniqueness is lacking.

Possible Remedies for Minimizing or Removing Degeneracy

Other forms of handling the transport problem's degeneracy include:

1. Do not allow a non-basic variable to enter the solution; rather, add in the model artificial
variables that might be useful to disentangle a basic feasible solution and enter them with a very
high-cost penalty in the objective function to keep them out of the next iteration.

2. Epsilon perturbation may succeed if a very small positive number added to the costs of the
presently unallocated cells could act as a tie among basic feasible solutions, such that all their
elements would have to be basic. From there, the system can...

3. The outcome of an allocation problem is said to be degenerate whenever the MODI method
provides a degenerate solution, and the modifications hence can introduce one or more changes
in the allocation inside the tableau. An increase or a decrease in such allocation can be
appropriately entertained without affecting the overall balance of supply and demand.

4. Blands rule essentially means going for entering and leaving variables, which cannot let the
objective of stopping-cycling-out be realized-a direct outcome of degeneracy. The rule states,
"Let the entering variable be the one with the smallest subscript and let the leaving variable be
the one with the second smallest subscript," thus providing the systematic mechanism that would
prevent indefinite cycling.

5. The assessment of changing route costs would be aimed at rendering the costs more
distinguishable to reduce the probability of tied routes. Based on this assessment of the cost
matrix, then degeneracy may be resolved.
Q3) State and well as describe the techniques for solving an assignment problem. In what aspect
is the Hungarian assignment method superior to the other methods for finding solutions to
assignment problems?

ASSIGNMENT MODEL

Various methods can be adopted for solving assignment problems for example;

1. Brute Force Method- By enumerating all possible feasible assignments, this method finally
selects the assignment with minimum cost. This ensures an optimal assignment; however, on
larger problems, it becomes computationally infeasible because combinatorial problems soon
turn assignments into infeasible assignments.

2. Greedy Method- At every iteration, whatever remains is allowed to be the most hopeful at that
point of time and considers the cheapest assignment in such an iteration while ignoring future
assignments. Thus, we have a faster greedy algorithm but one that does not give an optimal
solution.

3. Linear Programming: Assignment problem actually can be formulated in terms of a linear

programming problem where some variables, constraints and an objective function can be
described and subsequently solvers like Simplex will solve the optimal solution for you.
However this method will become extremely cumbersome and time-consuming at computation
for bigger problems.

4. Hungarian Method- The Kuhn-Munkres algorithm (or Hungarian method) is a combinatorial

optimization algorithm which quite efficiently solves the assignment problem in time
polynomial. The assignment by transforming the cost matrix and passing through some specific
sequential steps is achieved.

The Hungarian Method: Comprehensive Description

The greatest method so far in solving assignment problems is perhaps the Hungary method
which also guarantees that the solution will be optimal. The method popularly known by this
name is in fact an "Hungarian Method" to find the best assignment. What then is an assignment
program? The Hungarian method will in time primal-dual analogues fall under the computational
optimization method whereby it will solve in time polynomial. This term "Hungarian method"
was coined by Harold Kuhn in his 1955 honorarium to two Hungarian mathematicians, Dénes
Kőnig and Jenő Egerváry. "We go then into applying the Hungarian method in a worked
example". The model of the Hungarian method of assignment has a vital and very important
significance and value in resolving transporational problems. Today, they are all using them for
the solving and computing.
The Hungarian method defines steps through the following procedure:

1. Row Minimum Subtraction:- From each row of the cost matrix, the minimum element of that
row is found and subtracted with every entry of that row. The main aim of this step is to ensure
that at least a zero should appear for every row.

2. Column Minimums Subtracted:- For each column after the row reduction, find the minimum
entry from that column and subtract that from every entry in that column; finally, each column
should also have at least one zero.

3. Minimum Covering Zeros with Lines:- Cover all the zeros in the given matrix with a
minimum number of horizontally and vertically drawn lines. If the minimum number of lines
equal the number of rows (or columns), then this means that from the zeros, optimal assignment
can be made.

4. Creation of More Zeros:- When the minimum number of lines is less than the number of rows
(or columns), find and subtract the smallest of all the uncovered elements from all the uncovered
elements and add that value to all the elements covered by two lines. This process continues until
the minimum number of lines equals the number of rows or columns.

5. Optimal Assignment:- The optimal assignment occurs when the minimum number of lines
equals either the number of rows or the number of columns: all the zeros make the optimal
assignment such that each task is assigned to one agent and vice versa.

Hungarian method advantages.

Polynomial time complexity:- The Hungarian method is polynomial where brute force is n
factorial, hence larger problems can be dealt with a time complexity of O(n3).

Guaranteed random answer:- Unlike greedy methods that guarantee only locally optimal
solutions, Hungarian guarantee optimal solutions only.

Systematic approach:- It systematically makes zeros out of the cost matrix so that it is logically
and easy.

Flexibility: - By converting the cost matrix appropriately, the Hungarian method solves
minimization and maximization problems, for example, we may convert a maximization problem
into a minimization problem by subtracting each element from the largest element in the matrix.
Q4) Q4) Is it possible for an assignment problem to have several optimal solutions? If yes,
explain how to determine the existence of multiple solutions in the –

(a) complete enumeration method,

(b) Hungarian assignment method?

Assignment problems are such that they can be phrased as problems having many solutions. This
kind of problem usually deals with assigning a number of tasks to the same number of agents in
such a way that overall cost, time, or maximum profit from doing so is minimized, maximized,
respectively. That assignment may have diverse alternatives for agents to be assigned into tasks
suitable for the same cost or time optimal total. Within this framework, our effort would be
showing through the following two means that there are many optimal solutions: The complete
enumeration method and The Hungarian assignment method.

(a) Complete Enumeration Approach:

Complete enumeration means considering every combination of tasks identified for the agent to
which the assignment task would be made. In the discussion of how this method may be used to
get many optimal solutions, it's features are as follows:

1. Listing all possible assignments: Complete enumeration will give all possible assignments of
tasks into agents. n! assignments exist for n tasks and n agents.

2. For each assignment get a total cost: For each possible assignment, compute the total cost that
each assignment incurs by summing together the costs or times measured for each task-agent
pair.

3. Find the optimal cost: Identify the least total cost (or maximum total profit) among all possible
assignments of all assignments.

4. Search for multiple optimum solutions: Find all those assignments that give that optimum cost.
If more than one assignment leads to that optimal cost, it concludes towards having multiple
optimum solutions.
(b) The Hungarian Assignment Method.

There have been countless optimal solutions to the Hungarian Assignment Method: This method
is to be used for solving the assignment problems in an unusual manner with this algorithm. Let's
see now how we can track multiple optimal solutions using this Hungarian assignment method-

1. Construction of Cost Matrix-constructing a matrix where individual element represents a

complete cost assigned to assigning a particular task to one of the agents.

2. Cost Matrix Reduce: Subtract from all the elements the least elements in that row. After that
subtract from all the elements in that column the smallest every column. This alteration will
create the reduced cost matrix out of the original cost matrix. A minimum number of lines cover
the Zeros.

3. Cover all zeros in the reduced cost matrix with a minimum number of lines in horizontal and
vertical directions. If, however, the number of lines equals the number of tasks i.e. per agent then
go to step 5 and this process should be modified to continue with this circumstance.

4. The Optimal Assignment Determining: Optimal assignment will be by selection zeros and
have every row as well as column have one zero, but minimizing the total cost.

5. Another aspect of Multiple Optimum Solutions Testing is that if any alternative zero sets lead
to an optimal assignment, they must be checked for several-optimum solutions. Therefore, if
there are several ways of placing zeros that give almost similar costs, there are several optimal
solutions.

After the cost matrix is reduced and covers the zeros with minimal lines, an optimum
assignment can be carried through. If there are more than two-optimal solutions, different
combinations of zeros can be generated to arrive at an optimal assignment. In this case, multiple
optimum solutions are identified.
Q5) . Describe how the theory of replacement applies to the following case study:

(1) Replacement of flexible-cost service items across time but within a constant-money value
during the period.

The replacement theory is primarily an evaluation of the decision-making actions involved in

replacement activities and the financial management of any replacement activities. It would also
indicate when, in the life of an asset, the organization could replace it to incur further overhead
costs and use the asset within a resource-efficient manner. Replacement is the replacement of
assets which bear variable maintenance costs over the period of analysis but suppose the value of
the coin remains unchanged during this period: it defines replacement analysis. All machines,
vehicles, and other equipment, found and categorized as assets by an organization, also, have a
maximum service age. Its wear and tear over time require maintenance that costs increasingly
more. Replacement theories are simply ways or techniques that help companies determine, at any
moment, whether they would save more from asset replacement when maintenance costs begin
exceeding the economic limits of usage.

Replacement analysis; other types of costs involved with replacement are better estimated and
evaluated earlier. This would mean all maintenance and operation costs such as labor and
downtime. The biggest advantage of the maintenance cost rating is separating their fix and
variable nature. While a fixed cost does not change according to whether an asset is used or not,
for variable costs, more usage and intensity of use would lead them to increase.

Maintenance per se improves as time goes. The increase in deterioration of the asset concerned,
obsolescence of replacement parts, and increased technical proficiency in repairing the asset
caused this increase in overhead production cost. Such overheads should be monitored very
closely by an organization for some period of time for planning for replacements. Replacement
theory usually requires some economic assessment through some cost-benefit analysis most
often related to that asset that the organization wants to have refurbished or replaced. It seeks out
and derives all costs that would be incurred to keep that old asset functioning for work and
compares that with what it would cost to purchase an entirely new one during the analysis
process. Some of the subjects that will fall under this analysis are:

1. Cost of Replacement- Initial This is the cost of acquiring the new asset. It should solely be put
into consideration at the time when the organization can afford the new acquisition in such a
manner that it would not interfere with the other financial obligations of the organization.

2. Maintenance expenses: These increase with age of the asset. Traditionally, the organization
would rely on those historical records to measure such costs over the estimated life of the asset in
question and then estimate future maintenance costs.
3. Salvage value - Cash earned by the organization as its money realized on the sale of the old
asset and to be purportedly credited against the cost of the new one being acquired.

4. Operating Costs - These will include all costs incurred by the owner(s) for their personal use

(2) Substitution of items whose maintenance cost is time-varying but have a constant rate of
monetary value over time.

Even if hourly maintenance costs keep on rising, that doesn't mean that money has to remain
indifferent. Therefore, the consideration becomes time budgeting of money. Thus, expenditures
in future will have to be discounted to present values before making any decisions on whether to
keep or replace the facility.

The way of analyzing the particular situation is: Future maintenance costs: The method of
estimating future maintenance costs is applied in the present to every year. Anticipated future
maintenance costs THIS would be discounted according to the supposed rate of application and
differ from this first case for the maintenance costs.

Present worth calculation: Present worth was determined by

Present worth = Future costs / (1 + r) ^n.

Accumulated present worth: Now, maintenance costs can be shown in an accumulated present
value table so that the present worth of time is properly accounted.

-The costs of maintenance accumulation are compared to replacement cost: Here, maintenance-
related present worth would have the accumulation of its costs compared against the cost of
purchasing a new asset, given that these amounts are considered constant in this case.

-Opposite replacement point: The opposite replacement point occurs when the cumulative net
present value of all possible future maintenance costs tribute equals or exceeds that of the asset
newly acquired; in other words, this implies that maintaining the old asset will rather be cheaper
than getting a new one.

This statement paints a picture of the money-to-money-highly dynamic value scope that can
render such financial decisions more plausible in the organization. This way also makes a fund
management possible against avoidable expenses to this organization.
(3) Replacement of items that completely fail (Sudden failure).

Sudden failures are those that bring an asset to an uncompromising halt without any prior
warning. Simply put, sudden failure tends to apply more in the case of the critical machines or
equipment, where such failures result in severe losses in downtime and, thus, productivity.

Replacement strategy concerning these assets: The aim, regarding such a replacement strategy, is
to mitigate the impact of such sudden failures: An organization usually considers the following
factors before determining its replacement policy: cost of downtime-These include replacement
costs, loss of production costs and labor costs, along with possible penalties for breaching an
agreed contractual deadline. Secondly, consider the other additional costs related to the suddenly
failures in assets:

The frequency of asset failure: This is an analysis that helps in estimating how often
replacements are going to be an issue for the organization that will need addressing.

The leading time of replacement, i. e., time taken from putting the asset out of service to its
acquisition and installation, greatly affects how failure costs are calculated hence the
organization should have contingencies to combat the downtimes. Here are a few options that
may better customize replacement strategy parameters for items with high probability for sudden
failure: -Spare-on-hand: Keeping spare equipment is meant to reduce the time lost in returning to
service any asset that has suddenly failed. This, therefore, calls for an evaluation on the basis of
cost and benefit, weighing the cost of keeping spare parts against the downtime cost incurred.
Replacement-These organizations must have in mind lead times for replacement.

Predictive maintenance-This means catching most failures before they occur. Predictive
maintenance will facilitate the operations of either replacement or repair before any premature
failure, by stressing on machinery health, which is being monitored by sensors and data analytics
systems.

Here the entire approach to doing a thorough and profound cost benefit analysis of replacement
against maintenance will take into account and examine such things, for example, the cost of
sudden failure-the cost of downtime, repair costs, and possible penalties for failure to meet.