Decision Sciences

Statistics
Linear Programming and extensions
Linear Programming modelling
Graphical Method to solve a Linear Program
Transportation Problem
Assignment Problem
Introduction to Integer Programming
Introduction to Decision Analysis

Decisions are to be made everywhere.

Data

Information

Decision

Operations Research
During World War II, the military managements in
the U.K and the USA engaged a team of
scientists to study the limited military resources
and form a plan of action or programme to utilize
them in the most effective manner. This was
done under the name 'Operation Research' (OR)
because the team was dealing with research on
military operation.
Research designed to determine most efficient
way to do something
Science of decision making: Mathematical or
scientific analysis of a process or operation, used

Applications of LP
Linear Programming is one of the most widely
used optimization Model
Financial portfolio selection
Production scheduling
Telecommunications
Banking and Finance
Traffic Management
Job assignment
Airline Flight and Crew Scheduling
Shipping and transportation
Military Operations
Many others

Optimization Problem
What is an Optimization Problem all
about??
Minimizing or Maximizing some Objective subject
to certain restrictions.

Why is an Optimization Problem

required??
All problems seek to maximize or minimize some
quantity (the objective function).
The presence of restrictions or constraints, limits
the degree to which we can pursue our objective.
There must be alternative courses of action to
choose from.

Linear Programming Problem

Optimization Problem: (Mathematically)
Return Function (Objective Function)
Constraint Functions

Linear Program
All functions are linear = linear relationship

What do we mean by linear?

Linear:
Things are proportional
Double the production:
Profit gets doubled
Raw material consumption is doubled

An Example
Two Products (A and B)
Each requires two raw materials (P and Q)
One ton of A needs
2 tons of P, 4 tons of Q

One ton of B needs

3 tons of P, 2 tons of Q

Raw material availability is limited

6 tons of P, 9 tons of Q

Each product yields different profit/ton

A: Rs. 400 per ton
B: Rs. 500 per ton

Problem: How much of each product should

be produced so that Total Profit is maximized

Elements of a Linear Programming

Model
Decision Variables
Quantities whose values the management
wants to
decide
x1: tons of product A to produce
x2: tons of product B to produce

Parameters (Problem Data)

Quantities that cannot be changed by
management
Profit per ton
Raw material availability
Qty. of raw material needed per ton of product

 Objective Function
A mathematical function of decision variables,
whose value the management wishes to minimize or
maximize by controlling the values of decision
variables
Maximize 400.x1 + 500.x2

Constraints
Restrictions under which the decision must be
taken
a) Requirement Availability (for each raw

material)
2.x1 + 3.x2 6

(availability of P)

4.x1 + 2.x2 9

(availability of Q)

b) Production Quantities cannot be negative

x1 0, x2 0

Complete Model
Maximize 400.x1 + 500.x2
Subject to:

2.x1 + 3.x2 6

4.x1 + 2.x2 9
x1 , x2 0

The above is an LP Formulation of the problem.

Study and Explore the mathematical structure.
Learn techniques for solving it.
Learn how to formulate real life problems as LPs

Why call it Linear Programming

What do we mean by linear?
Take the constraint 2.x1 + 3.x2 6
Let x1 and x2 be coordinates on a graph paper
Draw a graph of the equation 2.x1 + 3.x2 = 6.

What does that graph look like?

It is a straight line

Programming??
Not to be confused with computer
programming?

Formulation of a Linear Program

Formulation:
To translate a given real world situation into a
mathematical statement.

Identify Decision variables

Identify objective function
Identify constraints

More of an Art than a Science

Takes practice and experience to formulate correctly and
efficiently

Production Planning

Decision Variables:
x1: Number of Product 1
x2: Number of Product 2

Objective:
Maximize 6x1 + 4x2

Constraints:
10x1 + 10x2 100 (Assembly Line 1)
7x1 + 3x2
42 (Assembly Line 2)
x 1, x 2 0

Jewelry Design

Decision Variables:
x1: Number of Necklace
x2: Number of Bracelets

Objective:
Maximize 300x1 + 400x2

Constraints:
3x1 + 2x2 18 (Gold)
2x1 + 4x2 20 (Platinum)
x2 4(Demand)
x 1, x 2 0

Advertising Media Selection

Decision Variables:
x1: Number of television commercials
x2: Number of radio commercials
x3: Number of newspaper ads

Objective:
Maximize 20,000 x1 + 12,000 x2 + 9,000 x3

Constraints:
15,000 x1 + 6,000 x2 + 4,000 x3 100,000
(Budget)
x1 4
x2 10
x3 7
x1 + x2 + x3 15
x1, x2, x3 0

New Venture Finance

Need to raise 50 lakhs

Upto 20 lakhs in bonds @ 12%
Fin. Corp A : 30 lakhs @ 18%
Condition: Bond debt + loan from B loan from A
Fin. Corp. B : (@ 16% )
Condition: loan amt. not to exceed the loan from A

Decision variables: x1: bond debt, x2: loan from A, x3:

loan from B
Objective:
Minimize 12x1+18x2+16x3

Constraints: x1+x2+x3 50

(Required Amount)

x1 20

(Bond Debt)

x2 30

(Loan from A)

x3 x2

(Loan from B)

x1+x3 x2 (Condition of Fin. Inst. A)

Diet Problem

Decision Variables:
x1: Food Type 1
x2: Food Type 2
x3: Food Type 3
x4: Food Type 4
x5: Food Type 5
x6: Food Type 6

Objective:
Minimize x1 + 3x2 + 4x3 + 2x4 + 1.5x5 + 3x6

Constraints:

8x1 + 18x2 + 16x3 + 4x4 + 5x5 + 2.5x6 75 (Proteins)

1.5x1 + 15x2 + 4x3 + 20x4 + 8x5
35x1 + 7x3 + 2.5x4 + 40x5 + 25x6
x1, x2, x3, x4, x5, x6 0

85 (Fats)
300 (Carbo.)

Production/distribution

Decision Variables:
x 1:
x 2:
x 3:
x 4:

Number
Number
Number
Number

of
of
of
of

pounds
pounds
pounds
pounds

of
of
of
of

Super Two at Fresno

Super Two at Dearborn
Green Grow at Fresno
Green Grow at Dearborn

Constraints:

2x1 + 4x2 + 2x3 + 3x4 45,000

(Budget)

x1 + x2 6,000
x3 + x4 7,000
x1 + x3 5,000
x2 + x4 6,000
x1, x2, x3, x4 0

Objective:

Maximize 9x + 9x + 7x + 7x (2x + 4x + 2x

Investment Planning
Scheme A: x1 - x4

$1.4

Scheme B: x5 - x7

$1.4
$1.7

$1.4
$1.7

$1.4

$1.7

Scheme C: x8

$1.9

Scheme D: x9

$1.3

Constraints:
x1+x5
60000
Year 1
x2+x6+x8 60000 - (x1+x5)
Year 2
x3+x7
60000 - (x1+x5+ x2+x6+x8 )+1.4x1
Year 3
x4
60000 - (x1+x5+ x2+x6+x8 + x3+x7 )
x9

+1.4x1 +1.4x2 +1.7 x5

Year 4
60000 - (x1+x5+ x2+x6+x8 + x3+x7 )
+1.4x1 +1.4x2 +1.4x3+1.7 x5+1.7 x6

x1 . x9 0

Year 5