QUANTITATIVE TECHNIQUES OF MANAGEMENT

LAKSHAY PAWAR BBS 2-C

50284

ACKNOWLEDGEMENT
Firstly, we would like to thank our supervisor of this project, Mr. Abhishek Tandon for his expert guidance and support. He continuously motivated us to work for this project and make it a success. His willingness to inspire us contributed tremendously in its completion. He had been very kind and patient while suggesting us the outlines of this project and correcting our doubts. Also, we would like to thank the Delhi University and Shaheed Sukhdev College of Business Studies for providing us with a platform and environment to work and nurture our talents. We would like to extend heartfelt thanks to our Principal, Ms. Poonam Verma for her invaluable support. We would also like to express our gratitude towards our parents for their kind co-operation and encouragement that helped us in completion of this project. Our thanks and appreciations also go to our batch mates in developing the project and people who have willingly helped us out with their abilities.

TABLE OF CONTENTS:
S. NO PARTICULARS
1 2 3 4 5 6 7 8 TRANSPORTATION PROBLEM (INTRO) NORTH WEST CORNER METHOD APPLYING MODI METHOD VOGEL APPROXIMATION METHOD APPLYING MODI METHOD DEGENERACY MULTIPLE OPTIMAL SOLUTIONS SOME MORE SPECIAL CASES

PAGE NO.
4 7 10 17 19 24 25 26

TRANSPORTATION PROBLEM
One of the most important and successful applications of quantitative analysis to solving business problems has been in the physical distribution of products, commonly referred to as TRANSPORTATION PROBLEM.

Basically, the purpose is to minimize the cost of shipping goods from one location to another so that the needs of each arrival area are met and every shipping location operates within its capacity.

SPECIMEN OF A TRANSPORTATION TABLE: From To City 1 City 2 City 3 City 4 Supply (Million kwh) 35 50 40

Plant 1 Plant 2 Plant 3 Demand (Million kwh)

$8 $9 $14 45

$6 $12 $9 20

$10 $13 $16 30

$9 $7 $5 30

FORMULATION OF A LPP:
Min Z = 8X11+6X12+10X13+9X14+9X21+12X22+13X23+7X24+14X31+9X32+16X33+5X34

S.T.: X11+X12+X13+X14 <= 35 X21+X22+X23+X24 <= 50 X31+X32+X33+X34 <= 40

(Supply Constraints)

X11+X21+X31 >= 45 X12+X22+X32 >= 20 X13+X23+X33 >= 30 X14+X24+X34 >= 30

(Demand Constraints)

Xij >= 0 (i= 1, 2, 3; j= 1, 2, 3, 4)

TRANSPORTATION PROBLEM is a special branch of LPP problem. These problems are solved by transportation method. 1. Obtain the initial solution North West Corner Method (NWC method) Vogel Approximation Method (VAM method) 2. Ascertain whether the solution is optimal or not Modify Distribution Method (MODI method) 3. If solution is optimal we stop, otherwise we revise the solution.

1. North West Corner Method (NWC method)Begin in the upper left (northwest) corner of the transportation table and set x11 as large as possible (here the limitations for setting x11 to a larger number, will be the demand of demand point 1 and the supply of supply point 1. Your x11 value can not be greater than minimum of these 2 values).

According to the explanation above we can set x11=3 (meaning demand of demand point 1 is satisfied by supply point 1).

2 6 2

After we check the east and south cells, we saw that we can go east (meaning supply point 1 still has capacity to fulfill some demand).

X 6 2

After applying the same procedure, we saw that we can go south this time (meaning demand point 2 needs more supply by supply point 2).

2 3

X 3 2

Continuing the same procedure we will get:3 2 3 2 X 1 2 X X X 3

2 3 2 1

X X 2

2 3 2 1 2

X X X

x11=3, x12=2, x22=3, x23=2, x24=1, x34=2

Applying MODI METHOD for optimal solution:-

By following the similar procedure, we assign the values as:-

Cost comes out to be

Similarly, we found out all the rest of the values:-

Now we find out the opportunity cost of all uncovered cells as:-

We get the optimal solution when opportunity cost of all the uncovered cells comes out to be negative. But here, since all the opportunity costs are positive we will go to the next stage i.e. making loops. Following are the conditions for making a loop: Loop will start from the cell having maximum opportunity cost with a positive sign Always in a clockwise direction Cover even number of cells, of which only 1 cell will be uncovered cell No single row or column will have similar signs

Again we follow the same procedure:

By following the same procedure again and again we will ultimately reach the optimal solution wherein all the opportunity costs become negative:

The least cost comes out to be:

$6,250

2. Vogel Approximation Method (VAM Method):Begin with computing each row and column a penalty. The penalty will be equal to the difference between the two smallest shipping costs in the row or column. Identify the row or column with the largest penalty. Find the first basic variable which has the smallest shipping cost in that row or column. Then assign the highest possible value to that variable, and crossout the row or column as in the previous methods. Compute new penalties and use the same procedure. Step 1: Compute the penalties.
Supply 6 7 8 10 15 80 78 15 Demand Column Penalty 15 15-6=9 5 80-7=73 5 78-8=70 78-15=63 7-6=1 Row Penalty

Step 2: Identify the largest penalty and assign the highest possible value to the variable.
Supply 6 5 15 80 78 15 Demand Column Penalty 15 15-6=9 X _ 5 78-8=70 78-15=63 7 8 5 8-6=2 Row Penalty

By following same procedure we get tables as:

Supply 6 5 15 80 7 5 78 15 Demand Column Penalty 15 15-6=9 X _ X _ _ 8 0 _ Row Penalty

Supply 6 0 15 5 80 7 5 78 15 Demand Column Penalty 15 _ X _ X _ 8 X

Row Penalty _

Supply 6 0 15 15 Demand Column Penalty X _ X _ X _ 5 80 7 5 78 X 8 X

Row Penalty _

Applying MODI METHOD for optimal solution:-

Since SS>DD, the problem is an UNBALANCED

PROBLEM.

So we first balance the problem by introducing a dummy column as follows:

Highest of all calculated penalty costs is for S3. Therefore, allocation is to be made in row of source S3. The route (or cell), which one must select, should be the lowest cost of this row. Route S3D5. Hence, first allocation is as follows.

Now, with the first allocation, destination D5 is consumed. We exclude this column and work on the remaining matrix for calculating the penalty cost. We get the following matrix. Now for this, source S1 has highest penalty cost. For this row, the least cost route is S1D1. Hence, next assignment is due in this route:

After second allocation, since destination D1 is consumed, we leave this column and proceed for calculation of next penalty cost.

D2 and S1 is cancelled now, we move further:

Column D4 is consumed. In the only left column D3, the allocations of 100 units and 150 units are done in route S2D3 and S4D3 respectively. Thus, we get the following allocations in the Vogels approximation method.

The initial cost for this allocation is (13 100 + 16 150 + 16 100 + 15 100 + 17 150 + 0 100) or equal to Rs. 9350.

CHECK FOR DEGENERACY:

(m + n 1) = 7 Number of filled cell = 6, which is one less than (m + n - 1). Hence, go to step 4 for removing the degeneracy. We allocate in the least-cost un-filled cell. This cell is route S1D5 or S2D5. Let us select route S1D5. Thus, we get following matrix after removing degeneracy.

OPPORTUNITY COST:

Unassigned route S1D3 S1D4 S2D1 S2D2 S2D5 S3D1 S3D2 S3D4

Opportunity cost (ui + vj Cij) 0 + 17 19 = 2 0 + 16 17 = 1 1 + 13 17 = 5 1 + 16 19 = 4 1 + 0 0 = 1 0 + 13 15 = 2 0 + 16 17 = 1 0 + 16 16 = 0

Since all opportunity costs are negative or zero, the initial assignment of Vogels solution is optimal with total cost of Rs. 9350. We had 8 uncovered cells, out of which 7 had a negative value and one with a zero. This is a case of MULTIPLE OPTIMAL SOLUTIONS. We make next table, start the loop making process from zero and get that other solution.

SOME MORE SPECIAL CASES:

1. PROHIBITED ROUTE:It is a special case of transportation problem wherein there is a restriction in the supply of a commodity from a given source to a destination. In such a case a large cost of M is entered for the restriction. This discourages the solution from using such cells.

Rest of the question is solved in the same manner as discussed above.

2. MAXIMISATION PROBLEM:If we are given a maximization type of problem, then we first need to convert it in a minimization problem. To convert it, we subtract all the values of the table from the maximum value of the table. Then solve the question accordingly and in the same manner as discussed earlier.