Quantitative decision making -masters
Quantitative decision making -masters
Quantitative decision making -masters
Research is a creative and systematic work undertaken to increase the stock of knowledge. It
involves the collection, organization and analysis of evidence to increase understanding of a
topic particular attentiveness to controlling sources of bias and error.
a) Discuss the nature, purpose, importance and application of research in the economic
environment
b) Discuss the key components of a research report
Question two
Linear programming is widely used in mathematics and some other fields such as economics,
business, and telecommunication and manufacturing fields. With view of the above statement,
discuss in details.
Solution to question one
According to (Thyer, 2001), "the word research is composed of two syllables, re and search. re is
a prefix meaning again, anew or over again search is a verb meaning to examine closely and
carefully, to test and try, or to probe. Together they form a noun describing a careful, systematic,
patient study and investigation in some field of knowledge, undertaken to establish facts or
principles.
Characteristics of research:
Generalised: The researcher usually divides the identified population into smaller samples
depending on the resource availability at the time of research being conducted. This sample is
understood to be the appropriate representative of the identified population therefore the findings
should also be applicable to and representative of the entire population. The analytical
information obtained from studying these samples should be give a fair idea of total population
of being follower of particular ideology, beliefs, social stigmas, driving force, etc. E.g. A study
to understand the occupancy statistics and patterns of small hotels and resorts in a given city
would involve the researcher studying selected properties after the city is divided into zones
(East, West, North, South and Central). He may also divide the properties on the basis of number
of rooms for categorisation and selection for study purposes thus ensuring that the findings are
representative of entire city.
Controlled: The concept of control implies that, in exploring causality in relation to two
variables (factors), you set up your study in a way that minimizes the effects of other factors
affecting the relationship. Some variables are classified as controlling factors and the other
variables may be classified as possible effects of controlling factors. Laboratory experiments as
in pure sciences like chemistry can be controlled but any study that involves societal issues
cannot be controlled. E.g. Destination studies are not controllable as they have variables like
geography, climate, accessibility, seasonality, etc but studying the effects of standard operating
procedures in a hotel applied in a particular service can be controlled.
Rigorous: One must be careful in ensuring that the procedures followed to find answers to
questions are relevant, appropriate and justified. Again, the degree of rigor varies markedly
between the physical and social sciences and within the social sciences.
Empirical: The processes adopted should be tested for the accuracy and each step should be
coherent in progression. This means that any conclusions drawn are based upon firm data
gathered from information collected from real life experiences or observations. Empirical nature
of research means that the research has been conducted following rigorous scientific methods
and procedures. Quantitative research is easier to prove scientifically than qualitative research. In
qualitative research biases and prejudice are easy to occur.
Systematic: The procedure or process being developed to undertake a study should be carefully
drafted to ensure that resources utilization is optimized. Chaotic or disorganized procedures
would never yield expected outcomes. The steps should follow a logical sequence to get to the
desired outcome. E.g The meal in a fine dine restaurant at a five star hotel cannot commence
with dessert being served before the starter or soup course.
Reliability: This is a degree to which the result of a measurement, calculation, or specification
can be depended on to be accurate. It is difficult to be measured accurately, but now there are
instruments which can estimate the reliability of a research. It is the extent to which an
experiment, test, measuring procedure, research, research instrument, tool or procedure yields the
same results on repeated trials. If any research yields similar results each time it is undertaken
with similar population and with similar procedures, it is called to be a reliable research.
Validity & Verifiability: It is the extent to which a concept, conclusion or measurement is well-
founded and likely corresponds accurately to the real world. The word "valid" is derived from
the Latin validus, meaning strong. This should not be confused with notions of certainty nor
necessity. The validity of a measurement tool (for example, a test in education) is considered to
be the degree to which the tool measures what it claims to measure. Validity is based on the
strength of a collection of different types of evidence. In terms of research validity is the strength
with which we can make research conclusions, assumptions or propositions true or false.
Validation refers to accuracy of measurement whether or not it measures what it is supposed to
measure. It also ascertains the application of research in finding the solution to an issue in
different conditions. This gives a clear direction to the research activity. The findings of a study
should be verifiable by the researcher as well as anyone else who wants to conduct the study on
similar guidelines/ under similar conditions.
Analytical & Accurate: A research should be focused not only about what is happening but also
on how and why a particular phenomenon, process draws certain conclusions. Any data collected
if does not yield results or is unsuitable to be used for further studies or applications disrupts the
purpose of research. Therefore, data collected should be reasonable and free of errors to be easily
analyzed. Accuracy is also the degree to which each research process, instrument, and tool is
related to each other. Accuracy also measures whether research tools have been selected in best
possible manner and research procedures suits the research problem or not. Selection of
appropriate data collection tools is essential for a research.
Credibility: The extent to which an analysis of finding can be treated to be trustworthy is tremed
as credibility. This can only be assured by the use of the best source of information and best
procedures in research. Researches based on secondary data are not reliable as such data may
have been manipulated or distorted by earlier researchers to suit their work. The availability of
secondary data from public domains is easy but cokes with lots of risks involved. The research
study conducted based on primary data is always reliable and carries more credibility. A certain
percentage of secondary data can be used if the primary source is not available but basing a
research completely on secondary data when primary data can be gathered is least credible.
When researcher gives accurate references in the research the credibility of the research
increases but fake references also decrease the credibility of the research.
Critical: Critical scrutiny of the procedures used and the methods employed is crucial to a
research enquiry. The process of investigation must be foolproof and free from drawbacks. The
process adopted and the procedures used must be able to withstand critical scrutiny.
a. Pure / Basic / Fundamental Research: As the term suggests a research activity taken up to
look into some aspects of a problem or an issue for the first time is termed as basic or pure. It
involves developing and testing theories and hypotheses that are intellectually challenging to the
researcher but may or may not have practical application at the present time or in the future. The
knowledge produced through pure research is sought in order to add to the existing body of
research methods. Pure research is theoretical but has a universal nature. It is more focused on
creating scientific knowledge and predictions for further studies.
b. Applied / Decisional Research: Applied research is done on the basis of pure or fundamental
research to solve specific, practical questions; for policy formulation, administration and
understanding of a phenomenon. It can be exploratory, but is usually descriptive. The purpose of
doing such research is to find solutions to an immediate issue, solving a particular problem,
developing new technology and look into future advancements etc. This involves forecasting and
assumes that the variables shall not change.
c. Explanatory: is the research whose primary purpose is to explain why events occur, to build,
elaborate, extend or test a theory. It is more concerned with showcasing, explaining and
presenting what we already have. It is the process of turning over 100 rocks to find perhaps 1 or
2 precious gemstones. Explanatory survey research may look into the factors that contribute to
customer satisfaction and determine the relative weight of each factor, or seek to model the
variables that lead to people shifting to departmental stores from small shops from where they
have been making purchases till now. An exploratory survey posted to a social networking site
may uncover the fact that an organization‘s customers are unhappy thus helping the organization
take up necessary corrective measures.
d. Exploratory Research: Exploration has been the human kind‘s passion since the time
immemorial. Looking out for new things, new destinations, new food, and new cultures has been
the basis of most tourist and travel journeys. In the subjective terms exploratory research is
conducted to find a solution for a problem that has not been studied more clearly, intended to
establish priorities, develop operational definitions and improve the final research design.
Exploratory research helps determine the best research design, data-collection method and
selection of subjects. For such a research, a researcher starts with a general idea and uses this
research as a medium to identify issues that can be the hub for future research. An important
aspect here is that the researcher should be willing to change his/her direction subject to the
revelation of new data or insight. Such a research is usually carried out when the problem is at a
beginning stage. It is often referred to as grounded theory approach or interpretive research as it
used to answer questions like what, why and how.
In many studies you have to combine both qualitative and quantitative approaches. For example,
suppose you have to find the types of cuisine / accommodation available in a city and the extent
of their popularity. Types of cuisine are the qualitative aspect of the study as finding out about
them entails description of the culture and cuisine. The extent of their popularity is the
quantitative aspect as it involves estimating the number of people who visit restaurant serving
such cuisine and calculating the other indicators that reflect the extent of popularity.
4. Other Types of Research:
(i) Descriptive v/s Analytical: Descriptive research includes surveys and fact-finding enquiries of
different kinds. The major purpose of descriptive research is description of the state of affairs as
it exists at any given time. The term Ex post facto research is used in social sciences and
business research for descriptive research studies. The researcher only reports about the factors
identified and cannot modify the details available thus it makes it clear that he does not have any
control over such variables Most ex post facto research projects are used for descriptive studies
in which the researcher strives to find out information about, for example, frequency of dining
out, preferences of individuals, etc. Ex post facto studies also include attempts by researchers to
discover causes even when they cannot control the variables. The methods of research utilized in
descriptive research are survey methods of all kinds, including comparative and co relational
methods. In analytical research, on the other hand, the researcher has to use facts or information
already available, and analyze these to make a critical evaluation of the material.
(ii) Applied v/s Fundamental: Research can either be applied (or action) research or
fundamental (to basic or pure) research. Applied research aims at finding a solution for an
immediate problem facing a society or an industrial/business organization, whereas fundamental
research is mainly concerned with generalizations and with the formulation of a theory.
(iii) Quantitative v/s Qualitative: Quantitative research is based on the measurement of quantity
or amount. It is applicable to phenomena that can be expressed in terms of quantity. E.g.
Studying the number of enquiries received for room bookings through different modes like
internet, emails, calls, letters, or different sources like travel and tours operators, companies and
government organizations etc. Qualitative research, on the other hand, is concerned with
qualitative phenomenon, i.e., phenomena relating to or involving quality or kind. E.g. studying
the stress levels and reasons for variable performances of staff in different shifts in the same
department of a hotel. The same individuals may perform differently with the change of shift
timings. It can involve performing research about changing preferences of customers as per the
change of season.
(iv) Conceptual vs. Empirical: Conceptual research is associated to some theoretical idea(s) or
presupposition and is generally used by philosophers and thinkers to develop new concepts or to
get a better understanding of an existing concept in practice. On the other hand, Empirical
research draws together the data based on experience or observation alone, often without due
regard for system and theory. It is data-based research, coming up with conclusions which are
capable of being verified by observation or experiment. It is also known as experimental research
as it is essential to get facts firsthand, at their source, and actively to go about doing certain
things to stimulate the production of desired information. Here the researcher develops a
hypothesis and assimilates certain outcomes to start with followed by efforts to get adequate
facts (data) to prove or disprove his hypothesis. An experimental design is then developed based
on variables that can modify or concur the results to prove that he has given a valid statement.
This also affirms that he has a reasonable control over the variables and can get different results
by giving different values to them. Empirical research is appropriate when proof is sought that
certain variables affect other variables in some way. Evidence gathered through experiments or
empirical studies is today considered to be the most powerful support possible for a given
hypothesis.
Importance of research
Discovery of New Knowledge; This involves discovery of new facts, their correct interpretation
and practical application. Though there are other sources of knowledge, research normally seeks
to verify and demonstrate truths and is also the most accurate system of securing useful
knowledge.
Research enables control of phenomenon; This is particularly true in scientific research where
control is the ability to regulate the phenomenon and study many scientific experiments are
designed to achieve this objective. Usually one phenomenon is manipulated in order to exert
control over another one e.g. in a laboratory experiment and drug that suppresses body growth
can be administered to a group of rats to investigate its effect on weight gain in rats. Another
group of rats is fed on normal diet without drugs all other conditions are controlled or held
constant for both groups of rats. After sometime the average weight of rats receiving the drug is
significantly less than the average weight of rats which did not receive the drugs. Then one can
confidently say that drugs control weights.
Part b
The Cover Page; The cover page should have the following: Title/topic of the study, student’s
names and registration number centred below the names, submission purpose; i.e. “A research
report/proposal submitted to the faculty of Business administration and management in partial
fulfilment of the requirements for the award of the bachelor degree (specialisation) of …..
University.
Title/Topic; The title/topic should accurately reflect the scope and content of the study. It should
have a maximum of 20 words including the case study. It should be descriptive yet discrete. The
key words in the topic should be captured.
Table of Contents page; The word TABLE OF CONTENTS is in capital letters and bold print
and centred on top of the page. The page number is justified to the right. The Table of contents
includes lists of all headings, sub-headings (indented below the major headings) and the pages
where they appear in the text.
Background to the study presents the rationale providing evidence and conditions of the existing
situation to make the reader feel the urgency of the problem and the need to study it in order to
solve it or contribute to its solution. It should not exceed one and a half pages. The background
may be funnel- shaped in the sense that it locates the study within the broader global view of the
main variables per say, and narrows it to the regional, national and finally local context. It should
bring out the facts of the problem that leads to the study. Place the study with in the larger
context of the scholarly literature and reach out a specific audience. (Creswell.1994).Work with
in a particular theoretical framework/Line of inquiry to inform you on the rest of the sections in
the study i.e. statement of the problem. Rational for the study, question & hypothesis, selections
of instruments and choice of methods.
A Problem might be an issue that exists in the literature, theory or practice that leads to a need
for the study. The statement of the problem defines the variable(s) and their relationships /
issue(s) to be investigated. This should not exceed half a page. Effective problem statements
should answer the question ‘Why does this research need to be conducted?’’If the researcher is
unable to answer this question clearly, then the statement of the problem will come off as
ambiguous and diffuse. It is the heart of the research. It should show why the candidate is
proposing the study. Some people give the symptoms of the problem and forget to give the real
problem of the research.
Reference should be made to the problem that has been detected and needs a theoretical and
practical solution, the nature of the problem and its known or estimated magnitude or extent
should be clearly stated. Any statistical information or citation used must be brief and specific. It
should be used to highlight the magnitude or extent of the problem, Major previous researches
undertaken on the subject should be briefly cited to indicate where the gaps in the knowledge are
and justify the need for another study. The statement of the problem should be concise. Four
basic qualities of the research problem; researchable, theoretically or practically significant
(should contribute to the improvement of knowledge), clear, ethical and should be emphasised.
To clearly state what is wrong, the word “PROBLEM’’ should not appear anywhere in the text.
General objective or purpose of the study; This should provide a specific and accurate synopsis
(summary) of the overall rationale of the study. The student should make a choice to use either
purpose or general objective but not both of them. A study should be based on a clear
conceptualization of relationship between variables, which define the parameters of the problem
of the study.
Specific Objectives or objectives of the study; The specific objectives arise directly from general
objective of the study. Where a student has used purpose, this section is called objectives and
where general objective has been used, this section becomes the specific objectives. These
should be drawn from the Conceptual Frame work. Each relationship between variables to be
investigated should be spelled out in a specific objective. The number of objectives is therefore
influenced by the conceptualization and the nature of relationships the researcher may be
interested in. The number of specific objectives will influence the volume of the literature review
and data to be collected. At this level one should limit the number of specific objectives to be
investigated preferably 3-4 maximum.
Research Questions
These come from the stated objectives. Research Questions refer to those which a researcher
would like to be answered by undertaking the study (Mugenda & Mugenda, 1999). The research
questions follow immediately after the research objectives. The number of research questions
should correspond with that of research objectives in all cases, at this level preferably 3-4
maximum.
Area and Scope of the study (geographical, time and content scope)
The Scope provides for the boundaries or limits with in which the study needs to be kept in terms
of content (i.e. independent and dependent variables to be investigated), geographical area and
time span of the research. Each of these three aspects should be clearly coded as sub titles, well
explained and justified. This helps the researcher to focus and be exhaustive.
This refers to the relevance of the study in terms of academic contributions and practical use that
of the findings to the organization/sector in which the researcher is based and to the public at
large. Indicate how your research may refine, revise or extend existing knowledge to the
different stakeholder’s i.e. policy makers, practitioners, professional peers, other researchers etc.
The researcher must tell the reader the reasons why and how s/he thinks the findings might
change policies, theory or practice. In short s/he should indicate who will benefit from the
findings of the study and how.
Definition of key terms; One key to setting up and conducting an effective argument is often the
establishment of clear, precise and effective definitions for key terms in the argument, so that
everyone agrees from the start what exactly is under discussion. This requires one to pay close
attention to any definitions, simply because a devious or inadequate or misleading definition can
produce something that looks plausible but which is in fact problematic because the definition is
self-serving or ambiguous. This is not mandatory though important as stated above. It should be
in chronological order.
Theoretical review; This will be the review of literature on the theory or theories, which the
candidate will have identified as being the guiding principle of the study. How the theories will
be used in the study has to be highlighted. By definition, a theory is a set of concepts and
therefore some of the concepts in the conceptual framework may be identified from these
theories.
Actual Literature review; This section deals with a discussion of existing literature on the
subject with the objective of revealing contributions made by earlier scholars, weaknesses and
gaps in existing knowledge and lessons learnt. The literature review should focus on the themes
of the study, then done objective-by-objective. Each objective is given a theme that should
reflect both variables of the study and appropriate literature is reviewed. The conceptual frame
work is also helpful when reviewing the specific elements and measures of the variables in the
literature. The student will decide on sub-headings in accordance with research objectives.
Citation should be included in the text, indicating author and year of publication in accordance
with the approved format e.g. (Mukasa, 2000). Quotations should include the page (s) where the
quotations appear to be direct e.g. (Nuwagaba, 2000, Pg. 3). All other details of the citations are
included in the reference section following the APA STYLE. The review should be critical and
use of current literature especially journal articles rather than textbooks are recommended.
Summary of the literature review; The candidate should critique and identify the key lessons
from the literature review. The gaps that have been identified in the literature have to be
highlighted.
Research Design; This describes the type of research design that will be used (structural
arrangement within which research will be undertaken). Research design, describes the nature
and pattern, which the research intends to follow e.g. whether it is longitudinal or cross-sectional,
descriptive, explanatory or experimental, case based or representative. The choice of research
design depends on the type; e.g. descriptive, a case study design or across- sectional survey
design or a before and after quasi-experimental design could be chosen. The choice of a
particular design needs to be justified and the candidate must state in precise terms which
approach will be used among qualitative and quantitative or whether both will be used. The type
of data to be handled by each design has to be stated with justification by quoting appropriate
authorities.
3.2.0 Study Population; This is the description of the population and its objects/elements from
which samples will be drawn. A distinction or comparison could be made between a target and
accessible population and the researcher must state the exact population from which the sample
will be selected
3.2.1 Sampling techniques; This sub-section describes in detail the sampling techniques that will
be used in selecting the sample to be studied e.g. Probability or non-probability based sampling
(probability based sampling: simple random, systematic random, stratified, random, cluster etc:
Non-probability sampling: purposive, maximum variation, homogenous, show ball, quota,
convenient or accidental etc). It describes in detail the sampling design and procedures used in
selecting the study sample. It also includes the design of the sampling frame, which the
researcher will use to select the actual representative subjects to be included in the sample.
Sample size; This is the description of the actual sample that will be studied and how it will be
selected /calculated. Research on how to come up with a good sample, show how you got it from
the population size and the reference too. Better to use a table to illustrate this clearly.
Data Sources; This includes primary and secondary data. Show the description of these two,
how you plan to use them and why.
Data Collection Methods; This includes the specific techniques to be used in the collection of
data. Methods could include face-to-face interview, key informants interview, focus group
discussion, questionnaire, observation, documentary review, etc Select and describe which of
these you will use and why.
Data quality control and management; Here the researcher talks about the validity and
reliability of the data for suitability and adequacy.
Data processing; After collection of data from the field, give a general description of how you
will process and analyze your data for meaning full interpretation and conclusion.
Data Analysis and procedures; This spells out how the data will be processed and summarized.
It should indicate statistical tests that will be carried out and how the resulting information will
be used for the research report. Where both qualitative and quantitative data is expected, the
student should describe in a detailed way in which the data will be analysed. Procedures require
the researcher to briefly explain the procedures that will be followed in the data collection
exercise.
Anticipated Limitations of the study; These refer to the anticipated constraints imposed by
methods or location or situation of the research. They also consider potential sources of bias in
the proposed study. A limitation is an aspect of research that may influence the results negatively
but over which the researcher has no control. The researcher should indicate what measures s/he
will take to counteract the possible bias or contamination on the data and findings of the study.
Factors which can be controlled by the researcher should not be included as limitations, unless a
good rationale is provided.
Work plan and Timeframe; This is the schedule or timetable of activities and the period in
which the research is to be conducted with due regard to budgetary limitation. It could be
presented in a tabular form indicating activity, duration, and dates. It is preferable on a Gantt
chart. There is need for being realistic with regard to time, dates and durations.
Budget; A budget for conducting the study should be included at the end of the proposal. The
budget consists of amount of activities and items that are necessary to carry out the research.
This is the financial plan and financial resources needed for the implementation of the research.
It should be clear and reasonable (affordable) and preferably activity based. It should be itemized
according to an acceptable format.
References; This is a list of all works cited in the proposal and should be written according to the
APA format, which is summarized in Appendix I. One should include page numbers also for
evidential proof that they actually made reference. Refrain from including references which you
have not referred to.
Linear programming
Linear Programming is a problem solving approach that has been developed to help managers to
make decisions. Linear Programming is a mathematical technique for determining the optimum
allocation of resources and obtaining a particular objective when there are alternative uses of the
resources, money, manpower, material, machine and other facilities.
Linear Programming (LP) is a particular type of technique used for economic allocation of
‘scarce’ or ‘limited’ resources, such as labour, material, machine, time, warehouse space, capital,
energy, etc. to several competing activities, such as products, services, jobs, new equipment,
projects, etc. on the basis of a given criterion of optimally. The phrase scarce resources mean
resources that are not in unlimited in availability during the planning period. The criterion of
optimality generally is either performance, return on investment, profit, cost, utility, time,
distance, etc. Linear programming is a mathematical modeling technique in which a linear
function is maximized or minimized when subjected to various constraints. This technique has
been useful for guiding quantitative decisions in business planning, in industrial engineering, and
to a lesser extent in the social and physical sciences.
Product-Mix; Use in the selection of the product-mix in a factory to make best use of machine
and machine hours available while maximizing profit, that is, to find out which product to
include in production plan and in what quantities that should be produced.
Blending Problems; Use for the selection of different blends of raw materials to produce the best
combinations at minimum cost e.g. food drinks, etc.
Production Scheduled; Use to develop a production scheduled that will satisfy future demands
for a firm’s product and at the same time minimize production and inventory cost.
Production Quantity; Use in determination of how much quantity to produce of different grades
of petroleum product (say) to yield maximum profit.
Distribution System; Use in determining a distribution system that will minimize total shipping
cost from several warehouses to various market locations.
Limited Advertisement; Use in the allocation of limited advertising budget among radio, TV and
newspaper spots in order to maximize the returns on investment.
Investment; Use in selecting investment port-folio from a variety of stocks and bonds available
in such a way as to maximize the returns on investment.
Work Scheduled; Use in the development of a work scheduled that allows a large restaurant to
meet staff needs at all hours of the day, while minimizing the total number of employees.
All linear programming models have four basic properties in common. They are:
i. All LP models seek to maximize or minimize some quantity, usually profit or costs.
ii. All LP models have constraints or limitations that limit the degree to which the objective can
be purse. E.g. deciding how many units of product in a product line to be produced is restricted
to the manpower and machinery available.
iii. There must be alternative course of action to choose from e.g. if there are 4 different product,
management may decide (using LP) how to allocate limited resources among them.
iv. Objectives and constraints in LP model must be expressed in linear equations and
inequalities.
We assume that numbers in the objective and constraints are known with certainty and do not
change during the period being study. The certainty assumption is that each parameter (objective
function coefficient, righthand side, and constraint coefficient) is known with certainty. If we
were unsure of the exact amount of wood used by desks and chairs, the Certainty Assumption
would be violated.
Proportionality
We are sure that proportionality exists in the objective and the constraints. This means that, if
production of one unit of product uses two of a particular scare resource; then making five units
of that product uses ten resources. With linear programs, we assume that the contribution of
individual variables in the objective function and constraints is proportional to their value. That
is, if we double the value of a variable, we double the contribution of that variable to the
objective function and each constraint in which the variable appears. The contribution per unit of
the variable is constant. For example, suppose the variable x j is the number of units of product j
produced and cj is the cost per unit to produce product j. If doubling the amount of product j
produced doubles its cost, the per unit cost is constant and the proportionality assumption is
satisfied.
Additivity
This means that the total of all activities equals the sum of each individual activity. Additivity
means that the total value of the objective function and each constraint function is obtained by
adding up the individual contributions from each variable.
Divisibility
This means that solution may take fractional values and need not be in whole numbers (integers).
If a fraction of a product cannot be produced, integer programming problem exist. The decision
variables are allowed to take on any real numerical values within some range specified by the
constraints. That is, the variables are not restricted to integer values. When fractional values do
not make a sensible solution, such as the number of flights an airline should have each day
between two cities, the problem should be formulated and solved as an integer program.
Non-negativity
We assume that all answers or variables are non-negative. Negative values of physical quantities
are an impossible solution.
Constrained optimization models have three major components: decision variables, objective
function, and constraints.
Decision variables are physical quantities controlled by the decision maker and represented by
mathematical symbols. For example, the decision variable x j can represent the number of pounds
of product j that a company will produce during some month. Decision variables take on any of a
set of possible values.
Objective function defines the criterion for evaluating the solution. It is a mathematical function
of the decision variables that converts a solution into a numerical evaluation of that solution. For
example, the objective function may measure the profit or cost that occurs as a function of the
amounts of various products produced. The objective function also specifies a direction of
optimization, either to maximize or minimize. An optimal solution for the model is the best
solution as measured by that criterion.
Constraints are a set of functional equalities or inequalities that represent physical, economic,
technological, legal, ethical, or other restrictions on what numerical values can be assigned to the
decision variables. For example, constraints might ensure that no more input is used than is
available. Constraints can be definitional, defining the number of employees at the start of a
period t+1 as equal to the number of employees at the start of period t, plus those added during
period t minus those leaving the organization during period t. In constrained optimization models
we find values for the decision variables that maximize or minimize the objective function and
satisfy all constraints.
The main benefit of optimization models is the ability to evaluate possible solutions in a quick,
safe, and inexpensive way without actually constructing and experimenting with them. Other
benefits are as follows.
Increases objectivity; Mathematical models are more objective since all assumptions and criteria
are clearly specified. Although models reflect the experiences and biases of those who construct
them, these biases can be identified by outside observers. By using a model as a point of
reference, the parties can focus their discussion and disagreements on its assumptions and
components. Once the model is agreed on, people tend to live by the results.
Makes complex problems more tractable; Many problems in managing an organization are large
and complex and deal with subtle, but significant, interrelationships among organizational units.
For example, in determining the optimal amounts of various products to ship from
geographically dispersed warehouses to geographically dispersed customers and the routes that
should be taken, the human mind cannot make the billions of simultaneous tradeoffs that are
necessary. In these cases, the decision maker often uses simple rules of thumb, which can result
in less than optimal solutions. Optimization models make it easier to solve complex
organization-wide problems.
Facilitates “what if” analysis; Mathematical models make it relatively easy to find the optimal
solution for a specific model and scenario. They also make “what if” analysis easy. With “what
if” analysis, we recognize that the prices, demands, and product availabilities assumed in
constructing the model are simply estimates and may differ in practice. Therefore, we want to
know how the optimal solution changes as the value of these parameters vary from the original
estimates. That is, we want to know how sensitive the optimal solution is to the assumptions of
the model. “What if ” analysis is also called sensitivity or parametric analysis.
Define the objective function. Determine the criterion for evaluating alternative solutions. The
objective function will normally be the sum of terms made up of a variable multiplied by some
appropriate coefficient (parameter). For example, the coefficients might be profit per unit of
production, distance travel per unit transported, or cost per person hired.
Identify and express mathematically all of the relevant constraints. It is often easier to express
each constraint in words before putting it into mathematical form. The written constraint is
decomposed into its fundamental components. Then substitute the appropriate numerical
coefficients and variable names for the written terms. A common mistake is using variables that
have not been defined in the problem, which is not valid. This mistake is frequently caused by
not defining the original variables precisely. The formulation process is iterative, and sometimes
additional variables must be defined or existing variables redefined. For example, if one of the
variables is the total production of the company and five other variables represent the production
at the company’s five plants, then there must be a constant that forces total production to equal
the sum of the production at the plants.
In commerce, industry, and several other industries, linear programming is the most often
employed decision-making method.
1. Farming applications
These programmes come under the management and agriculture economics areas. At the same
time, the latter is focused on the issues facing a specific farm, and the former deals with the
agricultural economy of a country or area.
Inter-regional rivalry and the best distribution of crop output are topics covered in the study of
agricultural economics. Under restrictions on local land resources and overall demand, a linear
programming model can be used to specify efficient production patterns. In agricultural
planning, linear programming may allocate scarce resources, such as land, labour, water, and
working capital, to maximize net revenue.
Choosing an air weapon system against an adversary to keep them pinned down while reducing
the amount of aviation fuel needed is an issue in military applications. The community defence
against disaster problem, whose solution determines the number of defence units that should be
used in a specific attack to provide the required level of protection at the least expensive cost, are
variations of the transportation problem that maximize the total tonnage of bombs dropped on a
set of targets.
3. Production Control
Product mix: A business may manufacture various goods, but each uses a finite amount of
production resources. In these situations, it is crucial to decide how many of each product to
make while considering its marginal contribution and the amount of resources it uses. Under all
restrictions, the goal is to maximize the overall contribution.
Production planning: This entails determining a minimal-cost manufacturing plan for an item
with varying demand during the planning period while taking beginning inventory levels,
production capacity, production restrictions, labour, and all pertinent cost elements into account.
The goal is to reduce overall operating expenses.
Assembly-line balancing: This issue will likely occur while combining many parts to create a
single object. The assembly procedure needs to follow a specific order (s). The goal is to reduce
the overall amount of time that has passed.
Blending issues: These issues develop when a product may be created using several readily
available raw components, each of which has a unique composition and cost. The goal is to
determine the cheapest cost blend, subject to raw material availability and minimum and
maximum restrictions on specific product elements.
4. Financial Administration
Portfolio selection: This involves deciding which investing activity to engage in out of various
options. The goal is to find the allocation that, within specified constraints, minimizes risk while
maximizing the total projected return.
Profit planning: This entails increasing the profit margin from investments in plant, facilities,
and equipment, as well as cash on hand and inventories.
5. Marketing Administration
Media selection: Using a linear programming technique, the advertising media mix can be
determined to maximize effective exposure, provided that the budget is constrained, that
exposure rates to various market segments are specified, and that the minimum and maximum
number of advertisements in mixed media are specified. The issue with travelling salespeople:
The challenge is to determine the quickest path from a specific location, visit each listed place,
and then make their way back to the starting point. However, no city may be visited twice
throughout the tour. The modified assignment approach can be used to tackle this kind of issue.
Physical distribution: Using linear programming, production facilities and distribution hubs are
situated most economically and effectively possible for physical distribution.
6. Personnel Administration
Staffing issue: To minimize the overall cost of overtime or total workforce, optimal personnel is
assigned to a given work using linear programming.
Calculating equitable pay: Sales incentives and fair compensation have been calculated using
the linear programming approach.
Job assessment and selection: Organizations have used the linear programming approach to
choose the best candidate for a given work and evaluate the job.
Other areas where linear programming is used include administration, education, fleet
management, contracting out work, running hospitals, and capital budgeting.
For example, in finding out how many men and machines would be required to perform a
particular job, a non-integer valued solution will be meaningless. Rounding off the solution to
the nearest integer will not yield an optimal solution. In such cases, integer programming is used
to ensure integer value to the decision variables.
Linear programming model does not take into consideration the effect of time and
uncertainty. Thus, the LP model should be defined in such a way that any change due to
internal as well as external factors can be incorporated.
Sometimes large-scale problems can be solved with linear programming techniques even
when assistance of computer is available. For it, the main problem can be fragmented into
several small problems and solving each one separately.
Parameters appearing in the model are assumed to be constant but in real-life situations, they
are frequently neither known nor constant.
Parameters like human behaviour, weather conditions, stress of employees, demotivated
employee can’t be taken into account which can adversely effect any organization
Only one single objective is dealt with while in real life situations, problems come with
multi-objectives.
References
Eppen, G. D., F. J. Gould, and C. P. Schmidt. Introductory Management Science, 4th ed.,
Upper Saddle River, N.J.: Prentice-Hall, 1993.
Hillier, Frederick S., and Gerald J. Leberman. Introduction to Operations Research, 4th
ed., Oakland, Calif.: Holden-Day, 1986.
Markland, Robert. Topics in Management Science, 3rd ed., New York: Wiley, 1989.
Ravindran, A., Don. T. Philips, and James J. Solberg. Operations Research: Principles
and Practice, 2nd ed., New York: Wiley, 1986.
Winston, Wayne L. Operations Research: Applications and Algorithms, 2nd ed., Boston:
PWS-Kent, 1991