Course Standardization

Management Science
Course Code: MGT 691

Revised
September 2016

Management Science

MGMT 691

Text Book:

An Introduction to Management Science, 13th Edition by David

R. Anderson, Dennis J. Sweeney Thomas A Williams, Jeffrey D
Camm & Kipp Martin, South-Western Cengage
Learning.
{Soft copy is available at elibrary\gabbas\MS

Software:

- POM-QM Ver 4
- MS Excel

On Line Quizzes:
Examinations:

Sept 2016

First quiz
after three sessions
Second quiz after five sessions
Third quiz after nine sessions
Fourth quiz after twelve sessions

All examinations will be conducted in lab on software (POMQM and Excel).

Management Science

MGMT 691

Week 1
01.1

Introduction
Give a brief introduction of the subject

01.2

Review of Basic Math

01.2.1

Graph of a linear equation downward sloping and upward sloping

lines, horizontal and vertical lines and line passing through origin.

01.2.2

Concept of =, and region

01.2.3

Point of intersection

01.3

Linear Programming

01.3.1

Introduction (Chapter 2)

01.3.2

Discuss a maximization example (an example given at section 2.1 is

advised).

01.3.3

Discuss two basic assumptions of LP:

i. All relationships are linear
ii. Non-negativity constraint

01.3.4

Problem should be solved manually by Graphic Method.

01.3.5

For optimal solution use Corner Point Method. Isoprofit Line Solution
Method is not advisable. However, it is an option for the faculty.

01.4

Discuss the concept of utilization and un-utilization (slack) of a

resource.

01.5

Exercise: All the questions & case studies given at the end of chapter-2
======= End of the session =======

Sept 2016

Management Science

MGMT 691

Week 2
02.1.

Discuss a minimization example. Following example is advised:

Nutrients
Calcium
Protein
Vitamin
Price

Contents per unit

Food
Food I
II
10
4
5
5
2
6
Rs.6/= Rs.10/=

Minimum
Requirements
20
20
12
-

02.2

It should be solved as per the method discussed in first week.

02.3

Discuss the concept of target, achievement, and the surplus.

02.4

Introduce software POM-QM for Windows.

02.5

Discuss few more examples. Following examples are advised:

02.5.1

An example with = constraint

A homeowner wants to paints her house. The paint must possess a
viscosity of at least 200 centipoises. For the desired level of brilliance
and durability, there must be at least 14 grams of a chemical-A and 30
grams of chemical-B in each gallon of paint.
There are two kinds of paint (I and II) available to her. Type I cost $6
and II cost $4 per gallon. Per gallon specifications of paints are as
follows:
Viscosity
Chemical-A
Chemical-B

Paint-I

Paint-II

400
20
20

100
10
60

The homeowner decides to blend I and II in order to meet the three

requirements at a minimum cost. How much of I and II should be used
in each gallon of the blend in order to minimize cost.
{Solution: Paint I = 0.4 gallons, Paint II = 0.6 gallons and Cost =
$4.80}
Sept 2016

Management Science

02.5.2

MGMT 691

An example with multiple feasible regions

A business firm is planning to advertise a special anniversary sale on
radio and TV during a particular week. For that, a maximum budget of
$16,000 is approved. It is found that radio commercial cost $800 per
spot with a minimum contract of five spots. TV commercial cost
$4,000 per spot. Because of heavy demand, only four TV spots are
available in the designated week. A study reveals that a TV spot is six
times effective as a radio spot in reaching potential customers. How
should the firm allocate its advertising to attract the largest possible
number of potential customers?
{Solution: On Radio zero spots and on TV four spots and PC = 24
units}

02.6.

Sept 2016

Resolve students quarries.

======= End of the session =======

Management Science

MGMT 691

Week 3
03.1

Further example:
A company has two grades of inspectors I and II, who are to be
assigned for a quality control inspection. It is required that at least
1,800 pieces be inspected per day (8 hours). Grade-I inspector can
check 25 pieces per hour with an accuracy of 98%. Grade-II can check
15 pieces per hour with an accuracy of 95%.
The hourly wage rate of Grade-I and II is $4 and $3 respectively. Each
time an error is made, the cost to the company is $2. The company has
available for the inspection job eight grade-I and ten grade-II
inspectors. The company wants to determine optimal number of
inspectors to be appointed for the job with objective to minimize total
cost.
{Solution: Number of Grade I Inspectors = 8 and Grade II inspectors
= 1.67 and minimum cost = Rs.380}

03.2

Discuss third basic assumption of linear programming all variables

are continuous.

03.3

Various Situations:

03.3.1

Infinite solution.

03.3.2

Feasible region is only a Point

03.3.3

Lines do not intersect.

03.3.4

No feasible region.

03.3.5

Discuss few situations for positive slope.

i. A furniture manufacturer is producing dining sets. A set consist of
five chairs and a table. Develop an LP constraint.
C > = 5T
ii. A furniture manufacturer is producing dining sets. A set consist of
five chairs and a table. Historical data reveals that demand for extra
chairs is six per cent of the total chairs. Develop an LP constraint.

Sept 2016

Management Science

MGMT 691

C > = 5T + 0.06(5T)
iii. A button manufacturer has one machine which can produce 65
buttons of type A or 45 buttons of type B in one minutes. Company
has two hours. Develop a constraint.
X/65 + Y/45 <= 120
03.3.6

Few more examples.

A company produces two types of shirts, half sleeves and full sleeves.
If all resources are diverted to ward half sleeves shirt, company can
produce 1200 shirts. It is further given that time required to produce
full sleeves shirt is twice of time required for half sleeves shirts.
Develop a constraint.
Assumption:

Time required for a half sleeves shirt is one hour.

Consequences: i. We have 1200 hours.

ii. Time required for a full sleeves shirt is two hours.
X + 2Y <= 1200
03.4

Resolve students quarries.

03.5.

A quiz is advised.
======= End of the session =======

Sept 2016

Management Science

MGMT 691

Week 4
04.1.

Sensitivity Post Optimal Analysis (Chapter 3)

04.1.1

Discuss only maximization problem with resource constraints ( type

constraints).

04.1.2

Sensitivity should include following:

i. Right Hand Side Sensitivity Analysis.
ii. Development of Priority List (concept of unit worth).
iii. Changes in coefficients of objective function.

04.1.3

To develop the concepts, a small problem may be solved manually,

however, ultimately it should be solved through QM.

04.2

Give examples with more than two variables.

04.3.

Resolve students quarries.

======= End of the session =======

Sept 2016

Management Science

MGMT 691

Week 5
05.1.

Linear Programming Applications with more than two variables

(Chapter 4)
Discuss following examples:
i.
ii.
iii.
iv.
v.
vi.

Media Selection (4.1)

Marketing Research (4.1)
Portfolio Selection (4.2)
Financial Planning (4.2)
Ch04.ppt
Handout LP (elib.:gabbas\MS)

05.2

Resolve students quarries.

05.3.

A quiz is advised.

05.4.

This completes the course for the Mid-Term Examination.

======= End of the session =======

Sept 2016

Management Science

MGMT 691

Week 6
06.1.

Transportation Models (Chapter 6)

Discuss the concept of transportation problem

06.2.

Discuss example given at section 6.1 and solve it through

transportation module of QM.

06.3.

Problem Variation - Unbalanced Models

06.3.1

Discuss the concept of unbalanced model.

06.3.2

Following examples are advised:

i. Demand < Supply
Problem:
S-1
S-2
S-3
Dema
nd

D-1
41
28
41
1,00
0

D-2
32
15
40
1,20
0

D-3
23
34
43
10,3
50

D-4
24
19
38
4,50
0

D-5
Supply
31
5,250
25
7,800
28
13,400
7,90 24,950\26,
0
450

Solution:
Optimal
cost =
$682850

D-1

D-2

D-3

D-4

1,20
0

5,25
0
1,10
0
4,00
0

4,50
0

S-1
S-2

1,00
0

S-3

D-5

7,90
0

Dum
my

1,500

Discuss the concept of dummy destination

ii. Demand > Supply
Sept 2016

Management Science

MGMT 691

Problem
S-1
S-2
S-3
Dema
nd

D-1
61
44
28
29.6
66

D-2
47
24
18
22.9
87

D-3
16
34
65
105.4
65

D-4
61
61
11
60.3
32

D-1

D-2

D-3

22.9
90

65.9
90
39.4
80

D-5
Supply
23
65.988
37
119.325
44
14.365
17.3 235.815\199.
65
678

Solution:
Optimal cost
= $5655.17
S-1
S-2

29.6
70

S-3
Dummy

D-4

D-5

9.83
0
14.3
70
36.1
40

17.3
70

Discuss the concept of dummy source.

06.4

Sept 2016

Discuss the copy/paste operation from Excel to QM and vice versa.

======= End of the session =======

10

Management Science

MGMT 691

Week 7
07.1.

Problem Variation or Restrictions

07.1.1

Discuss the following situations:

i.
ii.
iii.

Route capacities or route minimums.

Unacceptable routes.
Priority customers A specific quantity must be sent.

07.1.2

Because of the restrictions, transportation module of QM will not work

and we need to transform a transportation problem to a linear
programming model.

07.2.

Transformation of Transportation Model to Linear Model.

07.2.1

Discuss the transformation of the transportation models to a linear

model and solving it through linear programing module of QM.

07.2.2

Example given at section 6.1 is advised.

07.2.3

Solve it through linear programming module of QM.

07.2.4

Output of LP module should be presented as per the following format:

Route
From
To
.
.
.

Units
Shipped

Cost per
Unit

Total
Cost

.
.
.

.
.
.

.
.
.

.
.
.

Sum

07.3.

Another example.

07.3.1

Problem:
Plant 1
Plant 2

Sept 2016

Cus-1

Cus-2

Cus-3

Cus-4

Supply

11

10

25

45

12,500

32

23

15

38

18,180
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Management Science

MGMT 691

Plant 3
Dema
nd

26

14

20

34

2,700

22,500

8,900

4,980

4,350
39,080\35,
030

It is further given that;

- 100 per cent demand of Customer4 should be met as he is a priority
customer.
- Plant1 must send at least 50% of its production to Customer3.
07.3.2

Solution

07.3.2.1

Introduce dummy plant

1 Plant 1
2 Plant 2
3 Plant 3
4 Dumm
y
Dema
nd
07.3.2.2

2
Cus-2

3
Cus-3

4
Cus-4

Supply

11

10

25

45

12,500

32

23

15

38

18,180

26

14

20

34

4,350

4,050

2,700

22,500

8,900

4,980

Model: Min.: C = 11X11 + 10X12 + 25X13 + 45X14 + 32X21 + 23X22

+ 15X23 + 38X24 + 26X31 + 14X32 + 20X33 +
34X34
s.t.

Sept 2016

1
Cus-1

X11 + X12 + X13 + X14 <= 12,500 ---------- 1

X21 + X22 + X23 + X24 <= 18,180---------- 2
X31 + X32 + X33 + X34 <= 4,350---------- 3
X41 + X42 + X43 + X44 <= 4,050---------- 4
X11 + X21 + X31 + X41 >= 2,700 ---------- 5
X12 + X22 + X32 + X42 >= 22,500---------- 6
X13 + X23 + X33 + X43 >= 8,900---------- 7
X14 + X24 + X34 + X44 >= 4,980---------- 8
X44
=
0
---------- 9
12

Management Science

MGMT 691

X13

07.3.2.3

>= 6,250

---------- 10

Results
Route
From

To

Plant 1
Plant 1

Customer - 1
Customer - 2

Plant 1

Customer - 3

Plant 1
Plant 2

Customer - 4
Customer - 1

Plant 2

Customer - 2

Plant 2

Customer - 3

Plant 2

Customer - 4

Plant 3
Plant 3
Plant 3
Plant 3

Customer - 1
Customer - 2
Customer - 3
Customer - 4

Units
Shippe
d
0
6,250
6,250
0
0
10,550
2,650
4,980
0
4,350
0
0

Cost per
unit

Total
Cost

11
10

0
62,500
156,25
0
0
0
242,65
0
39,750
189,24
0
0
60,900
0
0
751,29
0

25
45
32
23
15
38
26
14
20
34

35,030
07.4.

Derive a general linear programming model as given on page 262.

Given:

I
I

Sept 2016

X11

C11

CUSTOMERS
II
III
X12 C12 X13 C13

SUPPL
Y

N
X1n

C1n

S1

13

DEMAN
D

Xm
1

C32

X32

Cm
1

D1

Xm2

C33

X33

Cm2

Xm3

D2

Cm3

D3

C2n

X2n

X3n

Xmn

S2

C3n

S3

C31

C23

X23

X31

C22

X22

III

C21

X21

MGMT 691

II

FACTORIES

Management Science

Cmn

Sm

Dn

Derivation
n

Supply Fac I : X 11+ X 12+ + X 1 n S 1 X 1 j S 1

j=1

Supply Constraints
n

Xij Si

Supply Fac II : X 21+ X 22+ + X 2 n S 2 X 2 j S 2

j=1

j=1

Where i = 1,2,3,,m

.
.
.
n

Supply Fac M : Xm 1+ Xm 2++ Xmn Sm Xmj Sm

j=1

Received by Cus I : X 11 + X 21++ Xm 1 D1 Xi 1 D1

I=1

Received by Cus II : X 12+ X 22+ + Xm 2 D2 Xi 2 D 2

i=1

.
.
.

Demand Constraints
m

Xij Dj
i=1

Where j = 1,2,3,,n

Received by Cus N : X 1 n+ X 2 n++ Xmn Dn Xim Dm

i=1

Objective function: Min.: C = c11X11 + c12X12 + + cmnXmn

Sept 2016

14

Management Science

MGMT 691
m

Min. :C= cijXij

i=1 j=1

======= End of the session =======

Sept 2016

15

Management Science

MGMT 691

Week 8
08.1.

Transshipment Models (section 6.3)

Discuss the concept of transshipment.

08.2

Transshipment module is not available in QM, therefore, transshipment

problem will be solved through linear programming model.

08.3

Discuss the example given at section 6.3

08.4

Problem variations as discussed in transportation problem may also be

discussed here.

08.5.

Output of LP module should be presented as per the formats given

below:
Route
From

To
(intermediate
)

Units
Shipped

Cost per
Unit

Total Cost

.
.
.

.
.
.

.
.
.

.
.
.

.
.
.

Sub - Total
Route
From
(intermediate
)

To
(Final)

Units
Shipped

Cost per Unit

Total Cost

.
.
.

.
.
.

.
.
.

.
.
.

.
.
.

Sub Total
Total Cost of Transshipment
======= End of the session =======

Sept 2016

16

Management Science

MGMT 691

Week 9
09.1

Assignment Models (Section 6.2)

09.1.1

Discuss the concept of Assignment model.

09.1.1

Discuss few scenarios where we can apply assignment model.

09.2

Solve the example given at section 6.2 through assignment module of

QM.

09.3

Discuss balance as well as unbalance models.

09.4

A quiz is advised.

09.5

Resolve students quarries.

======= End of the session =======

Sept 2016

17

Management Science

MGMT 691

Week 10
10.1.

Review of Matrix algebra

10.1.1

Discuss matrix multiplication

10.1.2

Discuss matrix multiplication on Excel.

10.1.3

Solve following example on Excel:

Given: A 0= [ 10 20 18 ] and
Find

0.2 0.3 0.5

T = 0.9 0.1 0.0
0.7 0.2 0.1

A1 Where A1 = A0T
A2 Where A2 = A1T
.
.
.

A50 Where A50 = A49T

10.1.4

A 1=[ 32.60 8.60 6.80 ]

A 2=[ 19.02 12.00 16.98 ]

Solution:
.
.
.

A 50=[ 23.85 10.90 13.25 ]

10.2.

Markov Analysis (Chapter 16)

10.2.1

Discuss basic concept of Markov analysis.

10.2.2

Discuss the basic assumptions of Markov analysis

10.3.

Steady State Probabilities

10.3.1

Discuss the concept of stead state probabilities

10.3.2

Discuss the example given at section 16.1.

10.4.

A quiz is advised.
======= End of the session =======

Sept 2016

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Management Science

MGMT 691

Week 11
11.1.

Solve Markov problems through Excel.

11.2.

Solve Markov problem through QM.

11.3.

Discuss the calculations of steady state probabilities manually (only

two states) See page 768 and 769.
Example:

[ p 1 p 2 ] 0.92 0.08 = [ p 1 p 2 ]
0.12 0.88

where p 1p 2 are steady state prob .

0.92p1 + 0.12p2 = p1 ------------------ 1

0.08p1 + 0.88p2 = p2 ------------------ 2
p1 +
p2 = 1 ------------------ 3
Solve eq 1 and eq 3 simultaneously (or eq 2 and eq 3)
Result: p1 = 0.6 and p2 = 0.4
Verify the answer through QM
Note: eq 1 and eq 2 are the same equations, therefore, we need
eq 3 to solve the system.
11.4.

Steady state probabilities with more than two states should be solved
through QM.

11.5.

An application - following example is advised:

11.5.1

Problem:
We have three super stores in a region; Popular Store, Mart n Mart and
Excellent Mart. A market research (sponsored by Excellent Mart) was
conducted to study the brand switching behavior of the consumers.
Consultant gave the distribution of customers and a transition matrix
which is as follows:

Sept 2016

19

Management Science

Popular
Store
Mart n
Mart
Excellent

MGMT 691

# of
Custom
ers
5,500

Popul
ar
Store

Mart n
Mart

0.94

0.03

0.03

0.05
0.11

0.93
0.08

0.02
0.81

Excelle
nt

7,800
21,200

The General Manger, marketing of Excellent Mart have realized the

issue and planned a new marketing strategy. He estimate a new
transition matrix which is as follows:
Popular
Store
Popular
Store
Mart n
Mart
Excellent

Excelle
Mart n Mart
nt

0.91

0.03

0.06

0.05
0.04

0.90
0.06

0.05
0.90

The cost of new strategy is Rs.63/= million per month and expected
revenue per month is Rs.8,000/=.
Should we employ new strategy? Support your answer.
11.5.2

Solution:

11.5.2.1

Results with the initial transition matrix:

Ending number (given initial)

Steady State probability
11.5.2.2

Mart n
Mart
12,420
0.36

Excelle
nt
4,140
0.12

Mart n
Mart
10,792
0.31

Excelle
nt
12,263
0.36

Results with the new transition matrix:

Ending number (given initial)

Steady State probability

Sept 2016

Popula
r Store
17,940
0.52

Popula
r Store
11,445
0.33

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Management Science

MGMT 691

Estimated increase in number of customers due to new strategy would

be 8,123 (12,263 4,140).
Additional Revenue = 8,123 x Rs.8,000 =
Rs.64,984,000
Cost of New Strategy = Rs.63,000,000/=
Net Benefit
= Rs.1,984,000/=
11.5.2.3

Conclusion: Yes, we should go for new strategy.

11.6.

Exercise: Problem number 1 9 given at the end of chapter 16

======= End of the session =======

Sept 2016

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MGMT 691

Week 12
12.1

Resolve students quarries.

12.2

Discuss the concept of absorbing state probabilities.

12.3

Discuss the example 16.2; Account Receivable Analysis. This should

be solved on QM. Manual solution is an option for the faculty.

12.4

Discuss few more examples.

12.5

Exercise: Problem number 10 14 and case problem given at the end

of chapter 16.
======= End of the session =======

Sept 2016

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MGMT 691

Week 13
13.1.

Project Scheduling (PERT/CPM) Chapter 9

Discuss the basic concept of project scheduling.

13.2.

Program Evaluation and Review Technique (PERT) Model

13.2.1

Discuss basic concept of PERT.

13.2.2

Discuss a, m & b and mean and standard deviation of activity.

13.2.3

Example 9.2 is advised.

13.2.4

It must be solved on QM

13.3.

Resolve students quarries.

======= End of the session =======

Sept 2016

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Management Science

MGMT 691

Week 14
14

Statistical inference on project scheduling through QM.

14.1

Discuss mean, variance standard deviation and probability.

14.2

Discuss following example:

An average completion time of a project, based on PERT model, is
estimated at 36.82 months with the standard deviation of 2.58 months.
i.

Determine the probability of completing the project within 40

months.
{Solution: 89.12 %}

ii. Determine the time by which the management can be 95 per cent
confident of completing the project?
{Solution: 41.06 months}
iii. What is the chance that project will take at least 35 months?
{Solution: 75.96%}
======= End of the session =======

Sept 2016

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MGMT 691

Week 15
15.1

Critical Path Method (CPM) Model

Discuss project scheduling with time the concept of crashing
activities and relationship (inverse) between time and cost.

15.2

Solve the following example on QM

15.3

An example
Time (week)

Cost

Activiti
es

Normal

Crash

Norma
l

Crash

A
B
C
D
E
F
G

10
14
14
25
30
20
80

5
10
8
14
25
13
40

6,950
13,800
8,500
18,250
29,350
16,800
15,600

9,450
15,200
10,600
21,000
30,725
20,300
21,200

Immedia
te
Predeces
sor
A
A, B
C
D
E
A

15.3

Discuss the concept of determining least increase in cost over the

normal cost in order to complete the project in the crash time.

15.4

Discuss the concept of time and budget.

15.5

Resolve students quarries and overall review of the course.

15.6

Sectional marks must be finalized before the end of last session.

======= End of the session =======

Sept 2016

25