transportation problem in general are concerned with distributing any commodity from any group of supply centers, called sources, to any group of receiving centers, called destinations, in such a way as to minimize the total distribution cost. Assumptions: Requirement assumption: each source has a fixed supply of units, where this entire supply must be distributed to the destinations. similarly, each destination has a fixed demand for units, where this entire demand must be received from the source.
Assignment problem ASSIGNMENT PROBLEM
Cost assumption: the cost of distributing units from any particular source to any particular destination is directly proportional to that number of units distributed.therefore,this cost is just the unit cost of distribution times the number of units distributed. The feasible solutions property: A transportation problem will have feasible solutions if and only if the sum of its supplies equals the sum of its demands.
Assignment problem ASSIGNMENT PROBLEM
The model:
The linear programming model has constraints for supply at each source and demand at each destination. All constraints are equalities in a balanced transportation model where supply equals demand. Constraints contain inequalities in unbalanced models where supply does not equal demand.
Assignment problem ASSIGNMENT PROBLEM
Shipping goods Assigning plants to product Profit maximization problem Overtime production Production scheduling
ASSIGNMENT MODEL
Assignment model is generally made on one-to-one basis & if there are more jobs to do than can be done, one can decide which job to leave undone and what resource to add. In assignment model number of source is equal to number of destination ,supply at each source is unity(1) & demand at each destination is also unity(1), it is different from transportation problem. Unit allocated to cell is either 1 or 0 ,it is also different from transportation model However transportation algorithm is not very useful to solve this model because of degeneracy.
Assignment problem ASSIGNMENT PROBLEM
Assignment problem is completely degenerate form of transportation model. In n*n assignment problem, there will be n assignment instead of 2n-1 assignment in transportation model. Special structure of assignment model allows a more convenient and simple method of solution than transportation model.
Represent the assignment of n facilities to n jobs.Cij is cost of assigning ith facility to jth job and Xij represents the assignment of ith facility to jth job. If ith facility can be assigned to jth job, xij=1,otherwise 0. The objective is to make assignment that minimize the total assignment cost or maximize the total associated gain.
Assignment problem ASSIGNMENT PROBLEM
Xij=0,if ith facility is not assigned to j th job, Xij=1, if the ith facility is assigned to jth job. Then the model is given by Minimize z=
J=1 i=1 n n n
CijXij
job is assigned to ith facility) n Xij=1,j=1,2,3,..n(one facility i=1 assign to Jth job.
Assignment problem ASSIGNMENT PROBLEM
& Xij=0 or 1.
Jobs 1 1 2 n
facilities
:
1 :
n 1
Hungarian method
Step 1: prepare the assignment table. Step 2: convert assignment table into balanced problem by add dummy row or column if it is not balanced problem. Step 3:convert problem into minimization problem by subtracting all the elements from the largest element if it is maximization problem. Obtain reduced cost table: (a) Subtract the minimum element in each row from all the elements of that row and then (b) Subtract the minimum element in each column from all the elements of that column.
Assignment problem ASSIGNMENT PROBLEM
Hungarian method
Step 5:Draw minimum number of lines to cover all the 0s in the table. Step 6:check the lines drawn equal to the orders of the matrix or not. if not then, subtract the smallest uncovered elements from all the uncovered elements and add it to intersection of line. keep the remaining elements unchanged & go to step 5 & then 6. Step 7:get the optimum solution.
Assignment problem ASSIGNMENT PROBLEM
EXAMPLE-TRANSPORTATION PROBLEM
A machine tool company decides to make four subassemblies through four contractors. each contractor is to receive only one sub assembly. the cost of each subassembly is determined by the bids submitted by each contractor and is show in table in hundreds of rupees.
EXAMPLE-TRANSPORTATION PROBLEM
Contractors
1 2 3 4
S u b a s s e m b li e s
15 11
13 12 12 17
14 15 10 14
Assignment problem ASSIGNMENT PROBLEM
17 13 11 16
13 15
EXAMPLE-TRANSPORTATION PROBLEM
Step 1: key decision is what to whom i.e. which subassembly be assigned to which contractor or what are the n optimum assignments on 1-1 basis. Step 2: Objective is to minimize the total cost involved, n n i.e., minimize z= CijXij.
i=1 J=1 Assignment problem ASSIGNMENT PROBLEM
EXAMPLE-TRANSPORTATION PROBLEM
Step III: (a) constraints on subassemblies are X11+x12+x13+x14=1 X21+x22+x23+x24=1 X31+x32+x33+x34=1 X41+x42+x43+x44=1 (b) constraints on contractors are: X11+x21+x31+x41=1 X12+x22+x32+x42=1 X13+x23+x33+x43=1 X14+x24+x34+x44=1
Assignment problem ASSIGNMENT PROBLEM
A school bus has to start from the school located at A and return after picking up children from B,C,D and E .the table below shows distances between various pick-up points on different routes.the distance from A to B is 8 KM but from B to A is 6 KM Because of one way streets and other restrictions on movement between points. as no of movement is possible from a destination to itself, these cells are marked with dash.
Assignment problem ASSIGNMENT PROBLEM
A school bus has to start from the school located at A and return after picking up children from B,C,D and E .the table below shows distances between various pick-up points on different routes.the distance from A to B is 8 KM but from B to A is 6 KM Because of one way streets and other restrictions on movement between points. as no of movement is possible from a destination to itself, these cells are marked with dash.
Assignment problem ASSIGNMENT PROBLEM
TO A A FROM B C D E 6 15 9 7 B 8 11 5 3 C 7 11 6 6 D 9 5 6 4 E 5 5 14 8 -
Problem with dummy row or column Five workers are available to work with five machines. the respective cost associated with each worker and machine assignment is given in the table below. a sixth machine is available to replace one of the existing machines and its associated costs are also given. (a) determine, whether the new machine can be accepted. (b) determine the optimal assignment and saving in cost.
Assignment problem ASSIGNMENT PROBLEM
Maximization problem
A company has a team of four salesmen and there are four districts where the company wants to start its business. after taking into account the capabilities of salesman and the nature of district, the company estimates that the profit per day in rupees for each salesman in each district is as below.
Assignment problem ASSIGNMENT PROBLEM
Maximization problem
DISTRICT
SALESMAN
A B
C D
1 16 14 15 13
2 10 11 15 12
3 14 15 13 14
4 11 15 12 15
Find the assignment of salesmen to various district which will yield maximum profit?
Maximization problem-2
A small garment making unit has five tailors switching five different types of garments. the output per day per tailor and the profit for each type of garment are given below garments
tailors
7 4 8 6 7 2
9 9 5 5 8 3
4 5 2 8 10 2
8 7 9 10 9 3
6 8 8 10 9 4
Maximization problem-2
1. Which type of garment should be assigned to which tailor in order to maximize profit, assuming that there are no other constraints? 2. If tailor D is absent for a specified period and no other substitute tailor is available, what should be the optimal assignment?
Finally the decision-maker will choose criterion which results in largest payoff. the criterion may be economic, quantitative or qualitativeetc.
- in this environment, only one state of nature exists for each alternative i.e., there is complete certainty about the future. it is easy to analyze the situation and make good decisions. - Decision-maker has perfect knowledge about the future outcomes, he simply choose the alternative having optimum pay-off.
MACHINES M1 M2
Let x be the number of units of k1 and y be the number of units k2 that can be manufactured. then, as per the given data we have the following simultaneous equation: 3x+y=480 X+2y=410 Solving we get x=110,y=150 Therefore 110 units of product k1 and 150 units of product k2 can be manufactured.
Example: Linear programming when resources required, resources available, cost or profit per unit of the product are know with certainty.
Here, more than one states of nature exist but the decision-maker lacks sufficient knowledge to allow him assign probabilities to the various states of nature. Under conditions of uncertainty, a few decision criteria are available which could be of help to the decisionmaker and a choice among them is determined by the companys policy and attitude of the decision maker.
10
STATE OF NATURE MODERATE Rs.25000 30000 15000 LOW -Rs.25000 -40000 -1000 NIL -Rs.45000 -80000 -10000
11
Maximum of rows
50000
70000
30000
12
When dealing with costs ,the minimum of each alternative is considered and the alternative which minimizes the above minimum costs is selected. this is called minimin criterion.
13
To use this criterion, the decision-maker maximizes his minimum possible payoffs. ALTERNATIVES HIGH EXPAND CONSTRUCT SUBCONTRACT Rs.50000 70000 30000 STATE OF NATURE MODERATE Rs.25000 30000 15000 LOW -Rs.25000 -40000 -1000 NIL -Rs.45000 -80000 -10000
14
Minimum of rows
-45000
-80000 -10000
15
This criterion developed by L.J.Savage. Minimize our maximum regret. ALTERNATIVES HIGH EXPAND CONSTRUCT SUBCONTRACT Rs.20000 0 40000 STATE OF NATURE MODERATE Rs.5000 0 15000 LOW Rs.24000 39000 0 NIL 35000 70000 0
16
Maximum of row
35000
70000 40000
Assignment problem DECISION THEORY
17
Hurwicz criterion (criterion of Realism) This is also called as a weighted average criterion This concept allow decision maker to take into account both the maximum and minimum for each alternative and assign them weights according to his degree of optimism. =degree of optimism
18
Step 1:choose appropriate degree of optimism Step 2:Determine the maximum as well as minimum of each alternative and obtain P=.maximum+(1-).minimum
19
maximum of row
minimum of row
This criterion assigns equal probabilities to all the events of each alternative decision and selects the alternative associated with the maximum expected payoff. If n denotes the number of events and Ps denote the payoffs, then expected value for strategy, say S1 is 1/n[p1+p2++Pn].
Assignment problem DECISION THEORY
21
Expected payoff
1000/4[50+25-25-45]=-1250
-5000 85000
22
Most business decisions may have to be made under conditions of risk. here more than one states of nature exist and the decision-maker has sufficient information to assign probabilities to each of these states.
These probabilities could be obtained from the past records or from simply the subjective judgment
23
Expected monetary value or expected value criterion This criterion requires the calculation of the expected value of each decision alternative which is the sum of the weighted payoffs for that alternative ,where the weights are the probabilities assigned to the states of nature that can happen. Step 1: construct a conditional payoff table listing the alternative decisions and the various states of nature. Enter the conditional profit for each decision-event combination along with the associated probabilities. Step 2: calculate the EMV for each decision alternative by multiplying the conditional profits by assigned probabilities and adding the resulting conditional values. Step 3: select alternatives that yields the highest EMV.
Assignment problem DECISION THEORY
24
A news paper boy has the following probabilities of selling a magazine: No. of copies sold probabilities 10 .10 11 .15 12 .20 13 .25 14 .30 Cost of a copy is 30 paise and sale price is 50 paise.he cannot return unsold copies.how many copies should he order?
Assignment problem DECISION THEORY
25
13
14
0.25
0.3
200
200
220
220
240
240
260
260
230
280
26
14
total expected profit
0.3
60
66
72
78
84
200
215
222.5
220
205
27
The newsboy must, therefore, order 12 copies to earn the highest possible average daily profit of 222.5 paise
28
29
probabilities
80 130 180
13
14
0.25
0.3
200
200
220
220
240
240
260
260
230
280
30
probabilities
10 11 12 13 14
0 20 40 60 80
30 0 20 40 60
60 30 0 20 40
90 60 30 0 20
120 90 60 30 0
31
probabilities
10 11 12
0 3 8
3 0 4
6 4.5 0
9 9 6
12 13.5 12
13
14
0.25
0.3 EOL
15
24 50
10
18 35
5
12 27.5
0
6 30
7.5
0 45
32
33
possible demand
10 11 12 13 14
34
market size
(no. of copies 10 11 12 13 14
expected profit
with perfect information
20 33 48 65 84 EPPI=250
35
36
An ice-cream retailer buys ice cream at a cost of Rs.5 per cup and sells it for Rs. 8 per cup; any remaining unsold at the end of the day can be disposed of at a salvage price of Rs.2 per cup. past sales have ranged between 15 and 18 cups per day; there is no reason to believe that sales volume will take on any other magnitude in future. find the EMV if the sale history has the following probabilities: Market size: 15 16 17 18 Probability: 0.1 0.2 0.4 0.3
36
If CP denotes conditional profit. S the quantity in stock and D the market demand, then CP=(8-5)S,WHEN D=>S AND CP=8D-5S+2(S-D),WHEN D<S
37
15 15 0.1 45
16 42
18 36
16
17 18
0.2
0.4 0.3
45
45 45
48
48 48
42
48 54
38
probabilities 15
0.1 0.2 0.4 0.3 4.5 9 18 13.5 45
16
4.2 9.6 19.2 14.4 47.4
17
3.9 9 20.4 15.3 48.6
18
3.6 8.4 19.2 16.2 47.4
39
Example
GM of calcutta motor is planning staffing of the dealershipps garage facilities in Ahmedabad. from information provided by the manufacturer and from other nearby dealership, he has estimated the number of annual mechanic hours that the garage will be likely to needed Hours 10000 12000 14000 16000 Probability 0.15 0 .25 0.4 0.2 The manager plans to pay each mechanic Rs.9 per hour and to charge customer Rs.16. mechanics will work a 40 hours per week and get an annual 2 week vacation. Determine how many mechanics Calcutta motor should hire? Calculate EOL and EVPI also?
Assignment problem DECISION THEORY
40
DECISION TREES
The decision problems discussed so far with only single stage decision making. we now consider situations that involve multiple stages. they are characterized by a sequence of decision with each decision influencing the next. such problems, called sequential decision problems, are analyzed best with the help of decision trees.
Assignment problem DECISION THEORY
41
DECISION TREES
A client asks an estate agent to sell three properties A,B and c for him and agrees to pay him 5% commission on each sale. he specifies certain conditions. the estate agent must sell property A first, and this he must do within 60 days. if and when A is sold, the agent receives his 5% commission on that sale. he can then either back out at this stage or nominate and try to sell one of the remaining two properties within 60 days. if he does not succeed in selling the nominated property in that period, he is not given the opportunity to sell the other. if he does sell it in the period, he is given the opportunity to sell the third property on the same conditions. The following table summarizes the prices, selling cost and the estate agents estimated probability of making a sale.
Assignment problem DECISION THEORY
42
DECISION TREES
Property
A B
C
43
DECISION TREES
Mr Sinha had to decide whether or not to drill a well on his farm. in his village, only 40% of the wells drilled were successful at 200 feet of depth. some of the farmers who did not get water at 200 feet, drilled further upto 250 feet but only 20% struck water at 250 feet. cost of drilling is Rs.50 per foot. Mr. Sinha estimated that he would pay Rs.18,000 during a 5year period in the present value terms, if he continues to buy water from the neighbor rather than go for the well which would have a life of 5 years. Mr. Sinha has three decision to make:(a)should he drill up to 200 feet and (b) if no water is found at 200 feet, should he drill up to 250 feet?(c) should he continue to buy water from his neighbor?
44
probabilities used in the expected value criterion are usually obtained from the past historical data. these probabilities are called prior probabilities and the analysis that uses them to find expected payoffs is known as prior analysis. If the prior analysis results in high expected opportunity loss (EOL) or EVPI,it may be desirable to obtain additional information through sampling or experimentation or test research. prior probabilities may then be revised in the light of this additional information by using bayes theorem to yield posterior probabilities or bayes probabilities. Revised analysis of the problem using these probabilities is called posterior analysis or bayesian analysis. this analysis gives a revised value of EMV which is expected to be better than the EMV based on prior Assignment problem DECISION THEORY analysis. the difference between the two should at least be equal to the 45
UTILITY THEORY
Think about the situation in which you have two option:(1)Get 10000 rupees fix (2)5% chance of getting Rs.250000 and 95% chance of getting nothing
What is your answer? The worth of money is different for different people and is also different in different situations. Each rupee is not equally valuable to an individual. The determination of utility is subjective.it depends upon our attitude of accepting risk.
The utility theory approach attempts to determine a utility function or a utility curve for a decision maker.
46
UTILITY THEORY
Here function converts money into an arbitary utility measure. Risk avoider: slope decrease as money values increase. firm with unsound finansial position. Risk neutral:expected utility give the same results as expected return(EMV) analysis. EXAMPLE:LARGE COMPANIES & GOVERNMENT. Risk taker:curve increase faster than the money value. In practice utility curve is a combinetion of risk taker and risk avoider
47