LJMBA

MBA I Semester II
Subject: Quantitative Analysis-II

General Guidelines

Prepared by Dr. Anitha Sunil, Associate Professor, L.J. Institute of Management Studies[Type text] Page 1
 MODULE-I (CHAPTER 1 &2)
Chapter-1 Introduction to OR (only theory)

1) Briefly discuss the history of Operations Research. Also discuss the nature
and characteristics of OR.
Refer Page no 6, point 1.2.1 and 1.2.2

Discuss Significant features-

a) Decision Making
b) Scientific Approach
c) Objective
d) Inter-disciplinary team Approach
e) Digital Computer

2) Define quantitative analysis and explain quantitative analysis approach.

Refer Page no 4, Topic 1.2

Quantitative factors are data that can be accurately calculated. Examples include:
Interest rates, Inventory levels Demand, Labor cost etc
Qualitative factors are more difficult to quantify but affect the decision process.
Examples include: weather, Technological breakthroughs.

3) Define Operations Research (OR). Identify the steps in solving OR problem.

(IMP)
Operations research (OR) is an analytical method of problem-solving and decision-
making that is useful in the management of organizations. In operations research,
problems are broken down into basic components and then solved in defined steps
by mathematical analysis. Analytical methods used in OR include linear
programming, simulation, network analysis, queuing theory, game theory etc.

Typically, applications of OR deal with decisions involved in planning the efficient

allocation of scarce resources - such as material, skilled workers, machines, money
and time - to achieve stated goals and objectives under conditions of uncertainty and
over a span of time.

Refer page no 7, topic 1.2.3, Draw Fig 1.1 on page 8

Steps of OR:
1) Problem Formulation
2) Model Building
3) Obtaining Input data
4) Solution of Model
5) Model Validation
6) Implementation

Chapter-2 LPP Formulation &Graphical Solution (Sums priority)

Theory

1. Depict your understanding for Linear Programming Program. Discuss the

application of LPP in Operations Research.

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 OR
Identify the three components of a Linear Programming Problem. Explain
different applications of Linear Programming Problem.
Refer page 20 topic 2.1 & 2.2

Linear Programming:
It is a mathematical technique for choosing the best alternative from a set of feasible
alternatives in situation where the objective function as well as the constraints can be
expressed as linear mathematical functions.

Requirements of LPP
All problems seek to maximize or minimize some quantity (the objective
function).
Restrictions or constraints that limit the degree to which we can pursue our
objective are present.
There must be alternative courses of action from which to choose.
The objective and constraints in problems must be expressed in terms of
linear equations or inequalities.

Three Components of Linear Programming:

The Objective Function
Constraints
Non-negativity Constraint
Applications of LPP
Production management
A company can produce several products with each requiring the use of
certain resources. It is formulated, determining the number of units to be
produced, with an objective- maximisation of profits or minimisation of cost
with constraints in the form of resources.(Eg Page 59, Practice problem 2, 3)
Financial management
Portfolio selection dealing with choosing of investment option with an
objective to maximise the total expected return or minimising risk. (eg. Page
60, Problem 7)
Marketing Management
Determining the advertising media mix so as to maximise effective exposure,
subject to limitation of budget and specified exposure rates. (Eg. Page 41,
example 2.12)
Personnel Management
Allocation of manpower to minimise cost. ( Eg. Page 61, problem 10)

2. Discuss the assumptions of linear programming

Refer page 24, point 2.5
1. Proportionality
2. Additivity
3. Continuity
4. Certainity
5. Finite Choices
3. Explain the following concepts (with an example) in context to LPP. (IMP)

a. Objective Function
The objective function of LPP is expressed in terms of decision variables to
optimise the criterion of optimality such as profit, cost, time, distance etc.
b. Convex Polygon

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 If any two points are selected in feasible region and the line segment formed
by joining these two points lies completely in this region , including boundary,
then this represents a convex set.
c. Infeasibility in LPP
Infeasibility is a condition when there is no solution satisfying all the
constraints and the non negativity conditions, simultaneously. Such a
condition happens when the constraints are inconsistent and conflicting with
each other.
d. Unboundedness in LPP
For a maximisation type of linear programming, unboundedness occurs when
there is no restriction on the solution so that one or more of the decision
variables can be increased indefinitely without violating any of the constraints.
e. Binding Constraints
A constraint is termed as binding if the left-hand side and right-hand side of it
are equal when optimal values of the decision variables are substituted into
the constraint.
f. Iso-profit /Iso Cost Line
All points on an iso-profit line yield the same profit. Similarly all points on an
iso-cost line yield the same cost.
g. Redundant Constraint
When a constraint is plotted and does not form part of the boundary making
the feasible region of the problem, the constraint is said to be redundant. The
inclusion or exclusion of a redundant constraint obviously does not affect the
optimal solution to the problem.
Note: As a example sketches as discussed in the class should be drawn

Sums to practice
1. Solved: Example 2.8 page no 37, example 2.12 page no 41. Example 2.17, page no 48
2. Unsolved: Practical problems 1,2,3,4,6,7,8,10,20,21,22,23,24,29,30,31,34,42

MODULE-II (CHAPTER 4 & 7)

Chapter-4 Duality and Sensitivity Analysis

Theory

1. What do we mean by Duality? Write some important features of Primal &

Dual problem.
The concept of duality describes that linear programming problems exists in pairs, so
that corresponding to every given linear programming problem, there is another LPP.
Important features- Mention point 4.2.1, page no 145 & chart no 4.1 ( how dual is
represented). Also refer Chart no 4.2, page 149.

2. Discuss economic interpretation of Dual with example.

Dual prices/ indicate the worth of the resources they present. Dual price of a
constraint is the improvement in the objective function value that results from one-
unit increase in the amount of that resource.
For Example a Maximisation problem

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 Maximise Z=40x1+35 x2 profit
Subject to
2x1+3x2 60 Raw material constraint
4x1+3x2 96 Labour hours constraint
x1,x2 0
The optimal solution is producing 18 units of A(x1=18) and 8 units 0f B(x2=8), with a
profit of 1000.
Dual
Minimise G=60y1+96y2
Subject to
2y1+4y2 40 -----------(i)
3y1+3y2 35 -----------(ii)
y1,y2 0
where y1 and y2 are the dual prices, which means the worth i.e. rate per kg of raw
material and rate per hour of labour hours.

The optimal solution of the above dual, when solved graphically gives values of y1
and y2 as Rs 10/3 per kg and Rs 25/3 per hour. These imputed prices or shadow
prices indicate the worth of resources. The total imputed cost of the resources used
in making a unit of the product A would be as follows:

Based on equation (i)

2 kg @ Rs 10/3 per kg = Rs 20/3

4 hours @ Rs 25/3 per hour = Rs 100/3
Total = Rs 120/3=Rs 40

The total imputed cost of producing one unit of product A equals the unit profit
obtainable from it. Similarly from each unit of product B, the total imputed cost of
resources employed would be

Based on equation (ii)

3 kg @ Rs 10/3 per kg = Rs 10
3 hours @ Rs 25/3 per hour = Rs 25
Total = Rs 35

This obviously equals the profit per unit of the product. The imputed value of the
resources should be matching with the profit realisable from the decision variable to
be part of the solution.( here x1=18 and x2=8, both are part of the solution)

The shadow prices are also known as marginal value or marginal profitability of the
resources. Thus if there were a market for renting material and labour hours, the firm
would be willing to take the materials if the price of the material were less than Rs
10/3 per kg and labour hours, if the price payable is less than Rs25/3 per hour. This
is because an additional kg of raw material would add Rs 10/3 to the profit. Similarly
an addition of one labour hour would cause the profit to increase by Rs 25/3

3. Explain the basic concepts of Sensitivity Analysis. What are the different
factors affecting the given solutions and how do we resolve them? Give a brief
comment on each of them.(IMP)
OR
Write short note on Sensitivity analysis.
OR

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 Why sensitivity analysis is known as post optimality analysis? Also discuss
the importance of sensitivity analysis in LPP.
OR
Describe sensitivity analysis. Explain the basic concepts of Sensitivity
Analysis.

Sensitivity analysis also known as post-optimality analysis is a systematic study how

sensitive is the optimal solution to changes in profits, resources or other input
parameters. For eg. if a company realises that profit per unit is not Rs 40 as
estimated but instead closer to 45, how with the final solution mix and the total profit
change?

Such analyses are used to examine the effects of changes in three areas:

1. Changes in Objective Function coefficients

2. Changes in RHS values of constraints
3. Changes in the technological coefficients

There are two approaches to determining how sensitive an optimal solution is to

changes. The first is simply a trial and error approach.. This approach usually
involves resolving the entire problem, preferably by computer, each time one input
data item or parameter is changed. It can take a long time to test a series of possible
changes in this way.

The second approach is analytic post-optimality method. After an LP problem has

been solved, a range of changes in problem is determined that will not affect the
optimal solution or change the variables in solution. This is done without resolving the
whole problem

Let us understand the concept by using a small production mix problem. An ABC
company manufactures quality compact disc players and stereo receivers. The firm
formulates the following LP problem in order to determine the best production mix of
CD players (x1) and receivers(x2)

Maximise profit= 50x1+ 120 x2

Sub to 2x1+4x2 80 (hours of electricians time)

3x1+1x2 60 (hours of audio technicians time)

x1,x2 0

The optimum solution solution is x1=0 x2=20 for a weekly profit of Z= 2400

For optimal solution( 0,20) electrician hours

L.H.S=2x1+4x2=2(0) + 4(20) =80

As this equals to the amount available( L.H.S=R.H.S), so there is no

slack for this constraint. Thus it is a binding constraint. If a constraint is binding,
obtaining additional units of that resource will usually result in higher profits.

The audio technician hours used in the optimal solution are

3x1+1x2=3(0) + 1 (20) = 20

But the hours available are 60(RHS). Thus there is a slack of 60-20=40 hours. As
LHSRHS, this is a non-binding constraint. For a nonbinding constraint , it means

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 that extra hours are available that are not being used, so obtaining additional units of
that resource will not result in higher profits and will only increase the slack.

Changes in Objective Function Coefficient

In real life problems, contributions rates( usually profit or cost) in the objective
functions fluctuate periodically, as do most of a firms expenses. Graphically it means
that although the feasible solution region remains exactly the same, the slope of the
iso-profit or iso-cost line will change.

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 If for this example, profit of x2 is changed to 150, it is observed that optimal solution
remains the same, i.e x1=0 and x2=20, with a new profit of 3000= 50(0) + 150
(20).However if the profit is reduced to 80, the optimal solution (OS) changes with
x1=1 and X2=12 ( z= 50 (16) + 80 ( 12)=1760.

This illustrates that we can increase or decrease the objective function coefficient (
profit) of any variable and the current corner point of feasible region may remain
optimal if the change is not too large. However, if we increase or decrease this
coefficient by too much, then the OS would be at a different corner point of feasible
region. How much can the objective function coefficient change before another
corner point becomes optimal? The answer to this question can be obtained using
QM for Windows/Excel

From the below computer output, program 7.5 B, we see the profit on CD players
was 50, which is indicated as the original value in the output. This objective function
coefficient has a lower bound of negative infinity and an upper bound of 60. This
means the current OS will remain optimal as long as the profit on CD players does
not go above 60.The lower bound as negative infinity is logical because currently
there are no CD players being produced because the profit is too low

This range in which the OS remain unchanged is defined by a lower limit called lower
bound and a upper limit known as Upper bound.

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 The profit of receivers has an upper bound of infinity and a lower bound of 100, which
means if the coefficient is reduced below 100, then only the OS will change. The
upper and lower bound s relate to changing only one coefficient at a time. If two or
more coefficients are changed simultaneously, then the problem should be solved
again.

Changes in Technological Coefficients

If fewer or more resources are required to produce a product as CD [player or

receiver, coefficients in the constraints equations change. These changes will have
no effect on the objective function of an LPP, but they can produce a significant
chage in the shape of the feasible region and hence in the optimal profit or cost.

Changes in RHS Values

The RHS values represents the resources available to the firm. As in this example
there are two resources- hours available of electricians time and audio technicians
time. If additional hours are available, a higher profit could be realised. Sensitivity
analysis will give answers to questions like

1. How much should the company be willing to pay for additional hours/
2. Is it profitable to have more electrician hours?
3. Should we be willing to pay more technicians time?

As we earlier found that electrician hours is a binding constraint, which means there
is no slack for this constraint.

Equation 2x1 + 4x2 80

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 If we increase the electrician hours to 100, we can make 5 addition units of x2( 100-
80/4 which can be sold at a profit of additional profit of 600(5*120). It means
additional 20 hours of electricians time resulted in an increase in profit of 600 or
600/20= 30 per hour. This 30 per hour is the change in profit that resulted from a
change in the hours available is called the dual price or dual value.

The Dual Price for a constraint is the improvement in the objective function value
that result from a one unit increase in the right hand side of the constraint. This value
can be obtained from program 7.5 B. The dual value for electrician hours constraint is
given as 30, lower bound is zero and the upper bound is 240. This means that each
additional hour of electrician time up to a total of 240 hours will increase the profit by
30. Similarly if it is decreased, the profit will decrease by 30 per hour until the
available time is decreased to the lower bound of 0.

4. What do you understand by cost coefficients, and technological coefficients in

LPP? In which situation 100 % rule is applicable in multiple parameter changes
in cost coefficients? Briefly discuss the rule. (optional)

Cost Coefficients: Cj
Profit/cost associated with decision variables OR
coefficients in the objective function

Technological Coefficients:aij
Consumption of resources per unit on decision variables OR
Coefficient of decision variables on the left-hand side of constraints

For Eg.

Maximise profit= 50x1+ 120 x2

Sub to 2x1+4x2 80 (hours of electricians time)

3x1+1x2 60 (hours of audio technicians time)

x1,x2 0

where 50 and 120 are cost coefficients(Cj) and 2, 4 are technological coefficients( aij)

Sensitivity Analysis with Multiple Parameter Changes

Earlier sensitivity analysis is discussed with only one change under consideration.
The case where more than one parameter is changed at a time is discussed below

Changes in the objective function coefficients/Cost coefficients

Such changes can be divided into two categories
1. All the variables whose coefficients , Cjs are changed are those with non-zero j
values.
2. Of the variables whose coefficients , Cjs are changed, at least one is such which
has j=0.

Explaining j: Each value of j signifies the amount of increase in the objective

function that would occur if one unit of the variable were introduced into the
solution
In the first case the current solution will remain optimal if all the coefficients of each
variable are within allowable limits as determined in the sensitivity analysis. However

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 if the co-efficient of some variable changes beyond the allowable limits, solution
changes.

In category 2, the current solution remains optimal by what is known as 100% rule.

Let Cj: the coefficient of the variable xj in the objective function

Cj: the change in the coefficient and equal to difference between the new
and old values.
Ij: the maximum allowable increase in Cj (Upper bound - Old value of cost
coefficient)
Dj: the maximum allowable decrease in Cj (Old value of cost coefficient -
Lower bound)
rj: Ratio of actual change to maximum allowable change.

The 100% rule says, in case of multiple changes in the objective function coefficients,
if the summation of all rjs does not exceed 1(i.e. 100%0, then the current basis shall
remain altered, while if it exceeded 1, then the current basis may or may not hold
valid.

Sums to practice
1. Page no 146, Example 4.2, 4.3, 4,4
2. Unsolved: Practical problems 1 to 8

Chapter-7 Integer & Goal Programming

Theory

1. Discuss Integer linear programming. Give an example each of a pure and a

mixed integer linear programming problem.
Integer Programming Problems(IPP) are a special class of linear programming
problems where all or some of the variables in the optimal solution are restricted to
non-negative integer values. In LPP decision variables are continuous, which means
they can take fractional values. Yet a large number of business problems can be
solved only if the variables have integer values. For a production scheduling problem
a firm cannot decide to produce 4.4 units; it must order 4,5,6,7 or some integer
amount. Hence there is a need for restricting variables to assume only integer values
and integer programming. The linear programming problems with variables restricted
to non-negative integers are called pure, all-integer or mixed-integer problems,
respectively, on whether all or some of the variables are restricted to integer values.

An integer programming problem in which all variables are required to be integers is

called a pure or all- integer programming problem. For example

Maximise profit= 20x1+ 60 x2

Sub to 7x1+6x2 55

3x1+4x2 60

x1,x2 0 & x1,x2 integer

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 An IPP in which only some of the variables are required to be integers is known as a
mixed integer programming problem. For example,

Maximise profit= 20x1+ 60 x2

Sub to 7x1+6x2 55

3x1+4x2 60

x1,x2 0 & x1 integer

2. What is integer programming? List down three types of integer programming

problems. (IMP)
OR
Discuss three types of integer programming problems with application.

An integer programming model is a model that has constraints and an objective

function identical to that formulated by LP. The only difference is that one or more of
the decision variables can take on an integer value in the final solution. There are
three types of integer programming problems:

1. Pure Integer Programming problems are those in which all variables are required
to have integer values.
An electric company produces two products-lamps and fans. Both require a two
step production process involving wiring and assembly. It takes about 2 hours to
wire a lamp and 3 hours to wire a fan. Final assembly of lamp and fan requires 6
and 5 hours respectively. The production capacity is such that only 12 wiring
time and 30 hours assembly time are available. Each lamp and fan is sold at a
profit of 7 and 6 respectively.
Production Mix decision can be formulated as follows:
Maximise Profit = 7x1 +6x2
Sub to 2x1 + 3x2 12 ( wiring hours)
6x1 + 5x2 12 ( assembly hours)

x1,x2 0 & x1,x2 integer

2. Mixed-interger programming problems are those in which some, but not all of the
decision variables are required to have integer values.
An application
A firm produces two industrial chemicals. The first product X must be produced in
50 kg bags; the second product Y is sold by kg in dry bulk and hence can be
produced in any quantity. Both X and Y are composed of three ingredients-A,B,C
as follows:
Ingredients Amount per 50 Kg Amount per Amount of ingredients
bag of X Kg of Y available
A 30 0.5 2000 kg
B 18 0.4 800 kg
C 2 0.1 200 kg
The firm sells 50 kg bags of X for Rs 85 and Y in any weight for 1.50 per kg.

Formulation:
Let x1 be the number of 50 kg bags of X produced and x2 be the number of kgs of Y
produced

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 Maximise Profit = 85 x1+1.50 x2
Sub to 30x1+0.5 x2 2000
18x1+0.4 x2 2000
2x1+0.1 x2 2000

x1, x2 0 and x1 Integer

3. Zero-one integer programming problems are special cases in which all the
decision variables must have integer solution values of 0 or 1.

Assignment problem can be discussed, where decision variables take 1, if an

assignment is made and 0 if assignment is not made. Refer page no 338,
example 7.2

3. Write differences between the linear programming and goal programming.

(IMP)
Give a brief about each of the methods and then show the differences

LPP GPP
LPP have single goal GPP have multiple goals
It optimises, which means LPP tries to It satisfies, which means it tries to come
find the best possible outcome for a as close as possible to reaching goals
single objective
The objective is to maximise or minimise The objective is to minimize deviations
between the set goals and what we can
actually achieve within the given
constraints
The objective function is a linear function Objective function contains deviational
of decision variables variables that represent each goal

4. Explain salient features of Goal Programming.

Firms often have more than one goal. In linear and integer programming methods the
objective function is measured in one dimension only. It is not possible for LP to have
multiple goals unless they are all measured in the same units, and this is a highly
unusual situation. An important technique that has been developed to supplement LP
is called goal programming.

Typically goals set by management can be achieved only at the expense of other
goals. A hierarchy of importance needs to be established so that higher-priority goals
are satisfied before lower-priority goals are addressed. It is not always possible to
satisfy every goal so goal programming attempts to reach a satisfactory level of
multiple objectives. The main difference is in the objective function where goal
programming tries to minimize the deviations between goals and what we can
actually achieve within the given constraints.

Refer page 362, point 7.4 also

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 5. What is a travelling salesmans problem? How is it different from assignment
problem? (IMP)
Refer page 354, point 7.3.4

Sums to practice
1. Solved: Page no 374 Example 7.13, page 395, example 7.20, 7.21
2. Unsolved: Page no 410, 20,21,22

MODULE-III (CHAP- 5, 6 & 11(HAMDY TAHA/BARRY

RENDER)
Chapter-5 Transportation

Theory

1. What is balanced and unbalanced transportation problem? Describe the

approach you would use to solve an unbalanced problem.
Page no 224, point 5.4.1

2. What is degeneracy? How does the problem of degeneracy arise in a

transportation problem? How can we deal with this problem? (IMP)
OR
What is Degeneracy in Transportation problem solution? Explain the whole
process of removing degeneracy from the solution.

A basic feasible solution of a transportation problem has m+n-1 basic variables,

which means that the number of occupied cells in such a solution is one less than the
number of rows plus the number of columns, It may happen sometimes that the
number of occupied cells is smaller than m+n-1. Such a solution is called a
degenerate solution.
Degeneracy in a transportation problem can figure in two ways:
1) While obtaining Initial feasible Solution
2) While Revising the solution

When a solution is degenerate, the difficulty is that it cannot be tested for optimality.

To overcome degeneracy, an infinitesimally small amount , close to zero to one( or

more, as needed) empty cell and treat the cell as an occupied cell. This is
represented by greek letter (epsilon). Some mathematical operations with epsilon

k+ =k; k- = k; 0+ = ;
+ = ; - =0; k* =0.

It is important to remember that an epsilon cannot be placed in any randomly

selected unoccupied cell.
I. While obtaining Initial feasible Solution
An epsilon is inserted in the least cost independent cell. An independent cell
is one from which a closed loop cannot be traced. It may be further noted that
if a given problem requires two (or more) epsilons, then a cell in which an
epsilon has already been placed will be treated as occupied while determining
independence of cells for inserting an epsilon subsequently.

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 II. While Revising the solution
When the problem becomes degenerate at the solution-revision stage,
epsilon ()is placed in one (or more, if required) of the recently vacated cells
with the minimum cost. And then we proceed with the problem in the usual
manner.
Page no 227, point 5.4.4

3. Discuss the various methods of finding initial feasible solution of a

transportation problem.
Briefly mention North-West corner method, Least Cost & Vogel Approximation
Method (VAM)

Refer page no 208 point 5.3.2

Sums to practice
1. Solved: Page no 206 Example 5.1, & Example 5.2,5.3,5.4,5.6,.5.8,5.11
2. Unsolved: Page no 273, problem no 6,7, 8,13, 22

Chapter-6 Assignment & Travelling Salesman Problem

Theory

1. What is an unbalanced assignment problem? How is the Hungarian

Assignment Method applied in respect of such problem? (IMP)
Refer page no 299,point 6.4.1 & page no 293, point 6.3.4 (steps)

Sums to practice
1. Solved: Page no 295 Example 6.3, 6.4,6.5,6.6,6.7, 6.10, 6.12, 6.13, 6.14
2. Unsolved: Page no 325, problem no 3, 10,11,12,17,18

Chapter-6 Network models (HamdyTaha)

Theory

1. What are network models? Explain various types of network models. (IMP)
All types of networks use a common terminology. The points on a network are called
nodes and may be represented as circles of squares. The lines connecting the nodes
are called arcs. There are basically three network models:

Minimum spanning Tree: The minimum spanning tree technique determines the
path through the network that that connects all the points while minimising total
distance. When the points represent houses in a subdivision, the minimal spanning
tree technique can be used to determine the best way to connect all of the houses to
electrical power, water systems and so on, in a way that minimises the total distance
or length of power lines or water pipes. There is no origin or destination, the objective
is interconnectivity.
Shortest-Route Technique: This technique finds the shortest path through a
network. There is an origin and a destination. For example, this technique can find
the shortest route from one city to another through a network of roads.

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 Maximum Flow technique: The maximal-flow technique finds the maximum flow of
any quantity or substance through a network. This technique can determine for
example, the maximum number of vehicles( cars, trucks and so forth) that can go
through a network of roads from one location to another.

2. Discuss the application of minimum spanning tree technique.

The minimum spanning tree technique involves connecting all the points of a network
together while minimising the distance between them. For example A construction
company is developing a luxurious housing project in Ahmedabad. They must
determine the least expensive way to provide water and power to each house. A
minimum spanning tree technique can be used to determine the minimal distance
that can be used to connect all of the nodes: The approach is outlined as follows:
Steps:
1. Select any node in the network( normally one which is alphabetically or
numerically ahead)
2. Connect this node to the nearest node that minimises the total distance
3. Considering all of the nodes that are now connected, find and connect the
nearest node that is not connected. If there is a tie for the nearest node, select a
node alphabetically or numerically.
4. Repeat the third step until all nodes are connected.

Sums to Practice:
Assignments given

MODULE-IV (CHAP 10, 14 & 17)

Chapter-10 Queuing

Theory

1. Why is it important to study queuing system in Management discipline?

Discuss various types of queuing systems in brief. (IMP)

Queuing theory is the study of waiting lines. It is one of the oldest and most widely
used quantitative analysis techniques. The three basic components of a queuing
process are arrivals, service facilities, and the actual waiting line. Analytical models
of waiting lines can help managers evaluate the cost and effectiveness of service
systems. Most waiting line problems are focused on finding the ideal level of service
a firm should provide. In most cases, this service level is something management
can control. When an organization does have control, they often try to find the
balance between two extremes.

There is generally a trade-off between cost of providing service and cost of waiting
time. A large staff and many service facilities generally results in high levels of
service but have high costs. Having the minimum number of service facilities keeps
service cost down but may result in dissatisfied customers. service facilities are
evaluated on their total cost which is the sum of service costs and waiting costs.
Organizations typically want to find the service level that minimizes the total expected
cost.

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 Various types of Queuing System:
A Single Service facility
Multiple Parallel Facilities with Single Queue
Multiple Parallel Facilities with Multiple Queue
Service Facilities in a Series

Page no 524, part of point 10.2. draw the figures 10.2(a), (b), (c), (d).

2. What is queuing theory? In what type of problem situation can it be applied

successfully? Discuss giving examples.
Queuing theory is the study of waiting lines. It is one of the oldest and most widely
used quantitative analysis techniques. Waiting lines are an everyday occurrence,
affecting people shopping for groceries, buying petrol, making a bank deposit or
waiting to buy movie tickets.

The theory is applicable to situations where the customers arrive at some service
station for some service; wait (occasionally not); and then leave the system after
getting the service. In such arrival and departure problems, the customers might be
people waiting to deposit their electricity bills at a cash counter, machines waiting to
be repaired in a factorys repair shop, patients in a hospital who need treatment and
so onThe service stations in such problems are the cash counters in the electricity
office, repairman in shop and doctors attending the patients respectively.

The waiting lines develop because the service to a customer may not be rendered
immediately as the customer reaches the service facility. Thus lack of adequate
service facility would cause waiting lines of customers to be formed. The only way
that the service demand can be met with ease is to increase the service capacity to a
higher level. But that will mean higher cost of servicing. A manager therefore, has to
decide on an appropriate level of service which is neither too low nor too high.

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 Refer page no 522, write the examples from Table 10.1.

3. What is queuing problem? What are the basic characteristics of queuing

system? (IMP)
Already discussed above
Basic Characteristics:
Queue Length
System Length
Waiting time in the queue
Total time in the system
Server idle time.
Refer page no 526, point 10.3 for details.

4. Discuss various structures of Queuing system with real life examples.

Refer page no 523, point 10.2. Sketch fig 10.1 and 10.2 while discussing in detail.

Sums to practice
1. Solved: Page no 528 Example 10.1 to 10.6 &10.9 to 10.15
2. Unsolved: Page no 561, problem no 1 to 16

Chapter-14 Markov Chains

Theory

1. What is Markov analysis? List the assumptions that are made in Markov
analysis.
OR
What is Markov processes? Discuss the following assumptions in relation to
the Markov chains. (IMP)
1) Finite states
2) First order process
3) Stationary of transition probabilities
4) Uniform time periods

Markov analysis is a technique that deals with the probabilities of future occurrences
by analysing presently known probabilities. The technique has numerous applications
in business including market share analysis, bad debt prediction, university
enrolment predictions and determining whether a machine will break down in the
future. Markov analysis makes the assumption that the system starts in an initial
state or condition. The probabilities of changing from one state to another are called
a matrix of transition probabilities.

For assumptions, refer page no 764, point 14.3.1 ( figures 14.2 & 14.3)

2. What do you understand by Markov process? In what areas of management

can it be applied successfully?
Markov process is explained above.

Applications in Management:
1) Predict the future market shares.
Given the vector of state probabilities and the matrix of transitional probabilities, it is
not very difficult to determine the state probabilities at a future date. This type of
analysis allows the computation of the probability that a person will be at one of the

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 grocery stores in the future. Since this probability is equal to market share, it is
possible to determine the future market shares of the grocery stores. Can also
discuss brand switching example here ( page 762, point 14.2)

2) Predicting machine operations

For example a company has recorded the operation of his milling machine for several
years. Over the past two years, 80% of the time the milling machine functioned
correctly for the current month if it had functioned correctly during the preceding
month.90% of the time the machine remained incorrectly adjusted if it had been
incorrectly adjusted in the preceding month.

Based on this following transition probability matrix can be developed:

P = 0.8 0.2

0.1 0.9

Using markov analysis questions like- What is the probability that the machine will
be functioning correctly one month from now? Or what is the probability that the
machine will be functioning correctly in two months? ; can be answered.

3. Discuss the concept of Brand Switching with an example. What is steady state
condition in Markov Analysis?
Brand switching example ( page 762, point 14.2)
Steady State probabilities: A significant property of the Markov chains is that the
process tends to stabilize in long run. A stabilized system is said to be in a steady
state or in equilibrium, so that the systems operating characteristics can become
independent of time. The phenomenon of equilibrium can be expressed symbolically
as Q(k)=Q(k-1)----(i), so that the state probabilities of period k are the same as in the
previous period.

Formula for specific state is

Q(k )= Q(k-1) * P ---------(ii)

= Q(0)* PK

Putting the equation (i) in equation (ii), the formula for steady state is derived as
follows:

Q(k)= Q(k) * P

Sums to practice
1. Solved: Page no 775 Example 14.4, 14.5,14.7,14.8,14.10
2. Unsolved: Page no 789, problem no 3, 5 to 14

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Chapter-17 Simulation Modelling

Theory

1. What is simulation? What are the advantages and limitations of simulation?

OR
What is simulation? Discuss Monte Carlo simulation with example.
OR
What is simulation? Describe the simulation process. What are the advantages
and limitations of simulation?
OR
What is Simulation? Describe Monte Carlo Simulation. Explain applications of
simulation in business environment. (IMP)

Simulation is one of the most widely used quantitative analysis tools. To simulate is to try
to duplicate the features, appearance, and characteristics of a real system. We will build
a mathematical model that comes as close as possible to representing the reality of the
system. Physical models can also be built to test systems.

Advantages of simulation are:

1. It is relatively straightforward and flexible.
2. Recent advances in computer software make simulation models very easy to
develop.
3. Can be used to analyze large and complex real-world situations.
4. Allows what-if? type questions.
5. Does not interfere with the real-world system.
6. Enables study of interactions between components.
7. Enables time compression.
8. Enables the inclusion of real-world complications.

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 Disadvantages of simulation are:

1. It is often expensive as it may require a long, complicated process to develop

the model.
2. It does not generate optimal solutions; it is a trial-and-error approach.
3. It requires managers to generate all conditions and constraints of real-world
problem.
4. Each model is unique and the solutions and inferences are not usually
transferable to other problems.

Monte Carlo Simulation

When systems contain elements that exhibit chance in their behavior, the Monte Carlo
method of simulation can be applied. The basis of the Monte Carlo simulation is
experimentation on the probabilistic elements through random sampling.

Some examples/Applications are:

1. Inventory demand.
2. Lead time for inventory.
3. Times between machine breakdowns.
4. Times between arrivals.
5. Service times.
6. Times to complete project activities.
7. Number of employees absent.
Note: Applications can be explained in detail, writing a brief about any example
which was discussed in class.

Steps of Monte Carlo Simulation

1. Establishing a probability distribution for important variables.

2. Building a cumulative probability distribution for each variable.
3. Establishing an interval of random numbers for each variable.
4. Generating random numbers.
5. Actually simulating a series of trials.

Sums to practice
1. Solved: Page no 889 Example 17.3, 17.4, 17.5, 17.6, 17.8
2. Unsolved: Page no 907, problem no 2,3,7

***********

NOTE: All page numbers are from N.D VOHRA, 4th Edition

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