Course Standardization

Management Science
Course Code: MGT 691

Revised
September 2015

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
- Management Scientist
- MS Excel

On Line Quizzes: - First quiz after three sessions

- Second quiz after five sessions
- Third quiz after nine session
Midterm Exam:

It will not be software based exam and will be conducted in

regular classrooms.

Final Exam:

It will be software based exam and will be conducted in lab.

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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 and case studies given at the end of chapter 2
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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 methods discussed in first week.

02.3. Discuss the concept of achievement of the target and 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:
Paint-I
Viscosity
Chemical-A
Chemical-B

400
20
20

Paint-II
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 gallon and Cost = $ 4.80}

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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. Resolve students quarries.

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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 a dining tables and chairs. A
set consist of 5 chairs and a table. Develop a constraint.
C > = 5T
ii. A furniture manufacturer is producing a dining tables and chairs. A
set consist of 5 chairs and a table. Historical data reveals that
demand for extra chairs is 15 per cent. Develop a constraint.
C > = 5T + 0.15(5T)

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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
iv. And few more examples.
03.3.4

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.
Its 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 on exercise of chapter two.

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

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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.
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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 Mid-Term Examination.
Note: It will not be software based exam and will be conducted in regular
classrooms.
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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:
D-1
41
28
41

D-2
32
15
40

D-3 D-4 D-5

Supply
S-1
23
24
31
5,250
S-2
34
19
25
7,800
S-3
43
38
28
13,400
Dema
10,35
24,950\26,
nd
1,000 1,200
0
4,500 7,900 450
Solution:
Optimal
cost =
$682850
S-1
S-2
S-3

D1

D-2

D-3
5,250

D-4

D-5

1,00
0
1,200 1,100 4,500
4,000
7,900

Dummy

1,500

Discuss the concept of dummy destination

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ii. Demand > Supply

Problem

S1
S2
S3
Deman
d

D-1
61
44
28
29.66
6

D-2
47
24
18
22.98
7

D-3
16
34
65
105.46
5

D-4
61
61
11
60.33
2

D-5
Supply
23
65.988
37
119.325
44
14.365
17.36 235.815\199.6
5
78

Solution:
Optimal cost
= $5655.17

D-1

D-2

D-3

22.9
90

65.9
90
39.4
80

S-1
29.6
70

S-2
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.

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

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Week 7
07.1. Problem Variation or Restrictions
07.1.1

Discuss the following situations:

i.
ii.
iii.

07.1.2

Maximization objective.
Route capacities or route minimums.
Unacceptable routes.

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

Students should be encouraged to enter data in Excel and then

copy/paste it to QM.

07.2.5

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

below:
Route

Sept., 2015

From

To

Units
Shipped

.
.
.

.
.
.

.
.
.

Cost per
Unit

Total Cost

.
.
.

.
.
.

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07.3. Another example.

07.3.1

Problem:
Customer
-1
11
32
26
2,700

Plant Plant Plant Dema

Customer
-2
10
23
14
22,500

Customer
-3
25
15
20
8,900

Customer
-4
45
38
34
4,980

Supply
12,500
18,180
4,350
39,080\35,

It is further given that;

- 100 per cent demand of Customer2 should be met as he is a priority
customer.
- Supply from Plant1to Customer-3 should not be more than 50% of
its production.
07.3.2

1
2
3
4

Solution

Plant Plant Plant Dumm

Dema

07.3.2.1

1
Customer
-1
11
32
26
0
2,700

2
Customer
-2
10
23
14
0
22,500

3
Customer
-3
25
15
20
0
8,900

Supply
12,500
18,180
4,350
4,050

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

+ 15X23 + 38X24 + 26X31 + 14X32 + 20X33 +
34X34
s.t. X11 + X12 + X13 + X14 <= 12500
X21 + X22 + X23 + X24 <= 18180
X31 + X32 + X33 + X34 <= 4350
X41 + X42 + X43 + X44 <= 4050
X11 + X21 + X31 + X41 >= 2700
X12 + X22 + X32 + X42 >= 22500
X13 + X23 + X33 + X43 >= 8900
X14 + X24 + X34 + X44 >= 4980

Sept., 2015

4
Customer
-4
45
38
34
0
4,980

---------- 1
---------- 2
---------- 3
---------- 4
---------- 5
---------- 6
---------- 7
---------- 8
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07.3.2.2

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X42
X13
Results

=0
<= 6250
Route

From
Plant 1
Plant 1
Plant 1
Plant 1
Plant 2
Plant 2
Plant 2
Plant 2
Plant 3
Plant 3
Plant 3
Plant 3

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

---------- 9
---------- 10

Units
Cost per
Shipped
unit
11
0
10
6250
25
6250
45
0
32
0
23
10550
15
2650
38
4980
26
0
14
4350
20
0
34
0
35,030

Total Cost
0
62500
156250
0
0
242650
39750
189240
0
60900
0
0
751,290

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

Given:

X31

M
DEMAN
D

Sept., 2015

C31

Xm
1

C22

X22

C32

X32

Cm
1

D1

Xm2

Cm2

D2

C23

X23

C33

X33
Xm3

Cm3

D3

N
C1n

X1n

X2n

X3n

Xmn

C2n
C3n

Cmn

S1
S2
S3

III

C21

X21

SUPPL
Y

II

X11

C11

FACTORIES

CUSTOMERS
II
III
C12
C13
X12
X13

Sm

Dn

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MGMT 691

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

Demand Constraints
m

Xij Dj

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

i=1

i=1

Where j = 1,2,3,,n

.
.
.
m

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

i=1

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

m

Min. : C= cijXij
i=1 j=1

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

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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
(intermediat
e

To
(Final)

Units
Shipped

Cost per Unit

Total Cost

.
.
.

.
.
.

.
.
.

.
.
.

.
.
.

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

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Week 9
09.1. Assignment Models (Section 6.2)
Discuss the concept of 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 =======

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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

0.2 0.3 0.5

T = 0.9 0.1 0.0
0.7 0.2 0.1

Find 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 =======
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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 ] where p 1 p 2 are steady state prob .

0.12 0.88

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

0.08p1 + 0.88p2 = p2 ------------------ 2
p1 + p2 = 1
------------------ 3
Solve eq 1 and 3 simultaneously (or eq 2 and 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 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:

# of
Sept., 2015

Popul

Mart n

Excelle
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Management Science

Popular
Store
Mart n
Mart
Excellent

MGMT 691

Custom
ers
5,500

ar
Store

Mart

0.94

0.03

0.03

0.05
0.11

0.93
0.08

0.02
0.81

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:
Results with the initial transition matrix:

Ending number (given initial)

Steady State probability

Popular
Store
17,940
0.52

Mart n
Mart
12,420
0.36

Excellen
t
4,140
0.12

Mart n
Mart
10792
0.31

Excellen
t
12263
0.36

Results with the new transition matrix:

Ending number (given initial)

Steady State probability

Popular
Store
11445
0.33

Estimated increase in number of customers due to new strategy would

be 8,123 (12,263 4,140).
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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/=
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 =======

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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. Exercise: Problem number 10 14 and case problem given at the end of
chapter 16.
======= End of the session =======

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Week 13
13.1. Project Scheduling (PERT/CPM) Chapter 9
Discuss the basic concept of project scheduling.
13.2. Discuss the example given at 9.1
Example must be solved on QM
13.3. Resolve students quarries.
======= End of the session =======

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Week 14
14.1 Discuss the example given at 9.2. It should be solved on QM
14.2 Statistical inference on project scheduling through QM.
Following example is advised:
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 =======

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Week 15
15.1 Discuss project scheduling with time the concept of crashing activities.
This must be solved on QM
15.2 Discuss the concept of determining least increase in cost over the normal
cost in order to complete the project in the crash time.
15.3 Discuss the concept of time and budget.
15.4 An example
Activit
y

Activit
y time

Crash
time

Normal
Cost

Crash
Cost

Predecessor
1

Predecesso
r2

18

14

15000

19000

18000

22500

2500

3200

4500

5700

6000

7500

3500

3500

15

12

12800

16100

15.5 Overall review of the course.

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

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24