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Introduction to Decision Sciences and Linear Programming

Importance of Decision Sciences

 Definition: A multidisciplinary field that integrates quantitative

techniques, analytical methods, and data analysis to support decision-
making.

 Role in Management:

 Enhances decision-making quality.

 Optimizes resource allocation.

 Improves operational efficiency.

 Facilitates strategic planning and forecasting.

Role of Quantitative Techniques in Decision Making

 Statistical Analysis: Helps in understanding data trends and making

predictions.

 Mathematical Modeling: Represents real-world problems in mathematical

terms for analysis.

 Optimization Methods: Identifies the best solution from a set of feasible

solutions.

Linear Programming (LP)

 Concept: A mathematical method for determining a way to achieve the

best outcome in a given mathematical model.

 Formulation:

 Objective Function: A linear function to be maximized or minimized

(e.g., Maximize Z = c1x1 + c2x2).

 Decision Variables: Variables that decision-makers will decide the

values of (e.g., x1, x2).
  Constraints: Linear inequalities that restrict the values of the
decision variables (e.g., a11x1 + a12x2 ≤ b1).

 Graphical Solution:

 Feasible Region: The area that satisfies all constraints.

 Vertices: Points where the objective function is evaluated to find the

optimal solution.

Applications in Management

 Production Planning: Optimizing the production schedule to meet

demand.

 Resource Allocation: Efficiently distributing resources among competing

activities.

 Transportation and Logistics: Minimizing costs in shipping goods.

 Workforce Scheduling: Assigning employees to shifts to maximize

productivity.

Special Cases

 Multiple Optimal Solutions: Occurs when the objective function is parallel

to a constraint line.

 Infeasibility: No solution exists that satisfies all constraints.

 Unbounded Solution: The objective function can increase indefinitely

without reaching a maximum.

2. Transportation Problems

Concept

 Definition: A type of linear programming problem that focuses on finding

the most cost-effective way to transport goods from multiple suppliers to
multiple consumers.
 Formulation

 Objective Function: Minimize total transportation cost.

 Constraints: Supply and demand constraints for each source and

destination.

Basic Initial Solutions

1. North West Corner Rule:

 Start from the top-left corner of the cost matrix.

 Allocate as much as possible to the cell, then move either down or

right.

2. Least Cost Method:

 Identify the cell with the lowest cost.

 Allocate as much as possible, then adjust supply and demand.

3. Vogel’s Approximation Method (VAM):

 Calculate penalties for not using the least cost routes.

 Allocate based on the highest penalty to minimize costs.

Optimal Solution

 Modified Distribution Method (MODI):

 Used to adjust allocations to find the optimal solution by minimizing

costs further.

Special Cases

 Balanced vs. Unbalanced:

 Balanced: Total supply equals total demand.

 Unbalanced: Total supply does not equal total demand; dummy

variables may be added.
 Restrictions and Prohibited Routes: Constraints can limit certain routes,
affecting the solution.

 Maximization: Can be transformed into a minimization problem by

adjusting the cost matrix.

Concept of Degeneracy

 Definition: Occurs when there are fewer allocations than the number of
rows plus columns minus one, leading to multiple optimal solutions.

3. Assignment Problems

Concept

 Definition: A special type of linear programming problem where the goal is

to assign resources to tasks in a way that minimizes cost or maximizes
efficiency.

Flood’s Technique/Hungarian Method

 Steps:

1. Create a cost matrix.

2. Subtract row and column minima.

3. Cover all zeros with the minimum number of lines.

4. Adjust the matrix and repeat until an optimal assignment is found.

Special Cases

 Multiple Solutions: Occurs when there are several equally optimal

assignments.

 Maximization Case: Transform the problem into a minimization problem

by subtracting costs from a large constant.
 Unbalanced Case: When the number of resources does not equal the
number of tasks, dummy assignments are added.

 Restrictions on Assignment: Constraints can limit certain assignments,

requiring adjustments to the matrix.

4. Decision Theory

Concept

 Definition: A framework for making choices under uncertainty and risk.

Decision Making Under Uncertainty

 Maximin: Choose the option with the best worst-case scenario.

 Maximax: Choose the option with the best possible outcome.

 Minimax Regret: Minimize the maximum regret for not choosing the best
option.

 Hurwicz Principle: A weighted average of the best and worst outcomes,

reflecting a decision-maker's optimism or pessimism.

 Laplace Principle: Assume equal probabilities for all outcomes, leading to

an average outcome calculation.

Decision Making Under Risk

 Expected Monetary Value (EMV): Calculate the average outcome based

on the probabilities of different scenarios.

 Expected Value of Perfect Information (EVPI): The value of having

complete information before making a decision, calculated as the
difference between the EMV with perfect information and the EMV
without it.

Game Theory
 Concept: A mathematical approach to analyze competitive situations
where the outcome depends on the actions of multiple decision-makers.

 Two-Person Zero-Sum Games: A situation where one player's gain is

exactly balanced by the losses of the other player, resulting in a total
payoff of zero.

 Maximin and Minimax Principle:

 Maximin: Strategy to maximize the minimum gain (worst-case

scenario).

 Minimax: Strategy to minimize the maximum loss.

 Games without Saddle Point: In cases where there is no pure strategy

solution, mixed strategies can be employed, involving randomization of
choices to make the opponent indifferent among their strategies.

 Dominance Rule: This rule allows for the elimination of dominated

strategies, simplifying the game matrix and making it easier to find optimal
strategies.

 Reduction of m x n Game: Simplifying the game matrix by removing

dominated strategies until a smaller matrix is left, which can be solved
more easily.

 Solution of 2x2 Games: For a simple 2x2 game, the optimal strategies can
be determined by analyzing the payoffs and finding the mixed strategy
equilibrium.

5. PERT & CPM

Concept

 Definition: Program Evaluation and Review Technique (PERT) and Critical

Path Method (CPM) are project management tools used to plan, schedule,
and control complex projects.
 Drawing Network Diagram

 A visual representation of project activities and their dependencies,

showing how tasks are interconnected.

Identifying Critical Path

 The critical path is the longest path through the project network,
determining the shortest time to complete the project. Any delay in the
critical path activities will directly impact the project completion time.

Network Calculations

 Earliest Start Time (EST): The earliest time an activity can start based on
its predecessors.

 Latest Start Time (LST): The latest time an activity can start without
delaying the project.

 Earliest Finish Time (EFT): The earliest time an activity can finish.

 Latest Finish Time (LFT): The latest time an activity can finish without
delaying the project.

 Slack: The amount of time that an activity can be delayed without

affecting the project completion time.

 Floats: Similar to slack, it refers to the total time that a task can be delayed
without delaying the project.

Programme Evaluation and Review Technique (PERT)

 PERT is particularly useful for projects with uncertain activity durations,

using probabilistic time estimates to analyze the project timeline and
identify potential delays.