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Management Science

1. The document provides the initial transportation problem tableau and steps to solve it using the transportation method. It shows applying the Northwest Corner Rule, Stepping Stone Method, and Closest Path Method to arrive at the optimal solution. 2. The document asks to solve an assignment problem by determining which salespeople should be sent to which cities to minimize travel costs given a cost matrix. 3. The document presents a decision problem where a grocery receives a weekly egg shipment and must determine how many eggs to order to maximize expected profits given uncertain weekly demand and costs of eggs. It provides a probability distribution of demand and asks to construct a payoff table to determine the optimal order quantity.

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Alison
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© © All Rights Reserved
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34 views

Management Science

1. The document provides the initial transportation problem tableau and steps to solve it using the transportation method. It shows applying the Northwest Corner Rule, Stepping Stone Method, and Closest Path Method to arrive at the optimal solution. 2. The document asks to solve an assignment problem by determining which salespeople should be sent to which cities to minimize travel costs given a cost matrix. 3. The document presents a decision problem where a grocery receives a weekly egg shipment and must determine how many eggs to order to maximize expected profits given uncertain weekly demand and costs of eggs. It provides a probability distribution of demand and asks to construct a payoff table to determine the optimal order quantity.

Uploaded by

Alison
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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1.

Solve the below problem using the Transportation Method (35 pts)

Initial Tableau
AT
FROM Supply
A B C

Warehouse 1 7 5 9 150

Warehouse 2 10 12 10 200

Warehouse 3 6 3 14 50

DEMAND (desktop computers) 100 80 220 400


400

Step 1 : NCR – Northwest Corner Rule


FROM AT
Supply
A B C

Warehouse 1 100 7 5 9 150

Warehouse 2 10 12 10 200

Warehouse 3 6 3 14 50

DEMAND (desktop computers) 100 80 220 400


400
Step 2: SSM – Stepping Stone Method
AT
FROM Supply
A B C

Warehouse 1 100 7 50 5 9 150

Warehouse 2 10 30 12 170 10 200

Warehouse 3 6 3 50 14 50

DEMAND (desktop computers) 100 80 220 400


400

Step 3: CPM – Close Path Method


AT
FROM Supply
A B C

Warehouse 1 100 7 50 5 9 150

Warehouse 2 10 30 12 170 10 200

Warehouse 3 6 3 50 14 50

DEMAND (desktop computers) 100 80 220 400


400
1 to C : 9 – 10 + 12 – 5 = 6
2 to A : 10 – 7 + 5 – 12 = -4
3 to B : 3 – 12 + 10 – 14 = -13 highest negative value

Zoom
AT
FROM Supply
B C

Warehouse 2 30 12 170 10 200

Warehouse 3 3 50 14 50

DEMAND (desktop computers) 80 220 400


400
3 to B : 0 + 30 = 30
2 to B : 30 – 30 = 0
2 to C : 170 + 30 = 200
3 to C : 50 – 30 = 20
Back to Step 3: CPM – Close Path Method
AT
FROM Supply
A B C

Warehouse 1 100 7 50 5 9 150

Warehouse 2 10 12 200 10 200

Warehouse 3 6 30 3 20 14 50

DEMAND (desktop computers) 100 80 220 400


400

1 to C : 9 – 14 + 3 – 5 = -7 highest negative value


2 to B : 12 – 10 + 14 – 3 = 13
3 to A : 6–7+5–3=1

Zoom
AT Supply
FROM
B C

Warehouse 1 50 5 9 150

Warehouse 3 30 3 20 14 50

DEMAND (desktop computers) 80 220 400


400
1 to C : 0 + 20 = 20
3 to C : 20 – 20 = 0
3 to B : 30 + 20 = 50
1 to B : 50 – 20 = 30

Back to Step 3: CPM – Close Path Method


AT
FROM Supply
A B C

Warehouse 1 100 7 30 5 20 9 150

Warehouse 2 10 12 200 10 200

6 3 14
Warehouse 3 50 50

DEMAND (desktop computers) 100 80 220 400


400

2 to A : 10 – 7 + 9 – 10 = 2
2 to B : 12 – 5 + 9 – 10 = 6 Optimal Solution
3 to A : 6–7+5–3=1
3 to C : 14 – 3 + 5 – 9 = 7

Minimum Transportation Cost:


7(100) + 5(30) + 9(20) + 10(200) + 3(50) = 3,180

MTC = $3,180

2. Solve for the optimal solution using the Assignment Method (30 pts)

You work as a manager for a chip manufacturer, and you currently have 3 people
on the road meeting clients. Your salespeople are in Jaipur, Pune and Bangalore,
and you want them to fly to three other cities: Delhi, Mumbai and Kerala. The table
below shows the cost of airline tickets in INR between the cities:

Where would you send each of your salespeople in order to minimize fare?

Delhi Kerala Mumbai


Jaipur 2500 4000 3500
Pune 4000 6000 3500
Bangalore 2000 4000 2500

Delhi Kerala Mumbai


Jaipur 5500 0 1500
Pune 2000 2000 1500
Bangalore 0 0 0

Delhi Kerala Mumbai


Jaipur 5500 0 1500
Pune 500 500 0
Bangalore 0 0 0

Delhi Kerala Mumbai


Jaipur 5500 0 1500
Pune 500 500 0
Bangalore 0 0 0
3. Solve for the optimal solution using the Decision Theory (35 pts)

A grocery receives its weekly supply of eggs every Thursday morning. This
shipment must last until the following Thursday when a new shipment is received.
Any eggs left unsold by Thursday are destroyed. Eggs sell for $10 per hundred and
cost $8 per hundred. The weekly demand for eggs at this grocery varies from week
to week. From past experience, the following probability distribution is assigned
to weekly demand:

This pattern of demand remains stable throughout the year - the demand for eggs
is not seasonal, and the trend is flat. The problem is: How many eggs should be
ordered for delivery every Thursday?

Payoff Table
Actions (hundreds of eggs)
States of Nature Order 10 0rder 11 Order 12 Order 13 Order 14
(hundreds of eggs)
Demand 10 (0.1) 20 12 4 -4 -12
Demand 11 (0.2) 20 22 14 6 -2
Demand 12 (0.4) 20 22 24 16 8
Demand 13 (0.2) 20 22 24 26 18
Demand 14 (0.1) 20 22 24 26 28
Order 10:
• Demand is 10
- Ordered 10 at $8 = $80
- Sold 10 at $10 per hundred = $100
- $100 - $80 = $20
• Demand is 11
- Ordered 10 at $8 = $80
- Sold 10 at $10 per hundred = $100
- $100 - $80 = $20
• Demand is 12
- Ordered 10 at $8 = $80
- Sold 10 at $10 per hundred = $100
- $100 - $80 = $20
• Demand is 13
- Ordered 10 at $8 = $80
- Sold 10 at $10 per hundred = $100
- $100 - $80 = $20
• Demand is 14
- Ordered 10 at $8 = $80
- Sold 10 at $10 per hundred = $100
- $100 - $80 = $20

Order 11:
• Demand is 10
- Ordered 11 at $8 = $88
- Sold 10 at $10 per hundred = $100
- $100 - $88 = $20
• Demand is 11
- Ordered 11 at $8 = $88
- Sold 11 at $10 per hundred = $110
- $110 - $88 = $22
• Demand is 12
- Ordered 11 at $8 = $88
- Sold 11 at $10 per hundred = $110
- $110 - $88 = $22
• Demand is 13
- Ordered 11 at $8 = $88
- Sold 11 at $10 per hundred = $110
- $110 - $88 = $22
• Demand is 14
- Ordered 11 at $8 = $88
- Sold 11 at $10 per hundred = $110
- $110 - $88 = $22

Order 12:
• Demand is 10
- Ordered 12 at $8 = $96
- Sold 10 at $10 per hundred = $100
- $100 - $96 = $4
• Demand is 11
- Ordered 12 at $8 = $96
- Sold 11 at $10 per hundred = $110
- $110 - $96 = $14
• Demand is 12
- Ordered 12 at $8 = $96
- Sold 12 at $10 per hundred = $120
- $120 - $96 = $24
• Demand is 13
- Ordered 12 at $8 = $96
- Sold 12 at $10 per hundred = $120
- $120 - $96 = $24
• Demand is 14
- Ordered 12 at $8 = $96
- Sold 12 at $10 per hundred = $120
- $120 - $96 = $24

Order 13:
• Demand is 10
- Ordered 13 at $8 = $104
- Sold 10 at $10 per hundred = $100
- $100 - $104 = -$4
• Demand is 11
- Ordered 13 at $8 = $104
- Sold 11 at $10 per hundred = $110
- $110 - $104 = $6
• Demand is 12
- Ordered 13 at $8 = $104
- Sold 12 at $10 per hundred = $120
- $120 - $104 = $16
• Demand is 13
- Ordered 13 at $8 = $104
- Sold 13 at $10 per hundred = $130
- $130 - $104= $26
• Demand is 14
- Ordered 13 at $8 = $104
- Sold 13 at $10 per hundred = $130
- $130 - $104= $26

Order 14:
• Demand is 10
- Ordered 14 at $8 = $112
- Sold 10 at $10 per hundred = $100
- $100 - $112 = -$12
• Demand is 11
- Ordered 14 at $8 = $112
- Sold 11 at $10 per hundred = $110
- $110 - $112 = -$2
• Demand is 12
- Ordered 14 at $8 = $112
- Sold 12 at $10 per hundred = $120
- $120 - $112 = $8
• Demand is 13
- Ordered 14 at $8 = $112
- Sold 13 at $10 per hundred = $130
- $130 - $112= $18
• Demand is 14
- Ordered 14 at $8 = $112
- Sold 14 at $10 per hundred = $140
- $140 - $112= $28

Opportunistic Loss (Regret) Table


Actions (hundreds of eggs)
States of Nature Order 10 0rder 11 Order 12 Order 13 Order 14
(hundreds of eggs)
Demand 10 (0.1) 0 8 16 24 32
Demand 11 (0.2) 2 0 8 16 24
Demand 12 (0.4) 4 2 0 8 16
Demand 13 (0.2) 6 4 2 0 8
Demand 14 (0.1) 8 6 4 2 0

Computation of Expected Value Criterion


Actions (hundreds of eggs)
States of Nature Order 10 0rder 11 Order 12 Order 13 Order 14
(hundreds of eggs)
Demand 10 (0.1) 20 12 4 -4 -12
Demand 11 (0.2) 20 22 14 6 -2
Demand 12 (0.4) 20 22 24 16 8
Demand 13 (0.2) 20 22 24 26 18
Demand 14 (0.1) 20 22 24 26 28
20 21 20 15 8
Order 10
0.1 (20) + 0.2 (20) + 0.4 (20) + 0.2 (20) + 0.1 (20) = 20
Order 11
0.1 (12) + 0.2 (22) + 0.4 (22) + 0.2 (22) + 0.1 (22) = 21
Order 12
0.1 (4) + 0.2 (14) + 0.4 (24) + 0.2 (24) + 0.1 (24) = 20
Order 13
0.1 (-4) + 0.2 (6) + 0.4 (16) + 0.2 (26) + 0.1 (26) = 15
Order 14
0.1 (12) + 0.2 (-2) + 0.4 (8) + 0.2 (18) + 0.1 (18) = 8

Computation of Maximax Criterion


Actions (hundreds of eggs)
States of Nature Order 10 0rder 11 Order 12 Order 13 Order 14
(hundreds of eggs)
Demand 10 (0.1) 20 12 4 -4 -12
Demand 11 (0.2) 20 22 14 6 -2
Demand 12 (0.4) 20 22 24 16 8
Demand 13 (0.2) 20 22 24 26 18
Demand 14 (0.1) 20 22 24 26 28

Computation of Maximin Criterion


Actions (hundreds of eggs)
States of Nature Order 10 0rder 11 Order 12 Order 13 Order 14
(hundreds of eggs)
Demand 10 (0.1) 20 12 4 -4 -12
Demand 11 (0.2) 20 22 14 6 -2
Demand 12 (0.4) 20 22 24 16 8
Demand 13 (0.2) 20 22 24 26 18
Demand 14 (0.1) 20 22 24 26 28

Computation of Minimax Criterion


Actions (hundreds of eggs)
States of Nature Order 10 0rder 11 Order 12 Order 13 Order 14
(hundreds of eggs)
Demand 10 (0.1) 0 8 16 24 32
Demand 11 (0.2) 2 0 8 16 24
Demand 12 (0.4) 4 2 0 8 16
Demand 13 (0.2) 6 4 2 0 8
Demand 14 (0.1) 8 6 4 2 0

Summary of each Criteria and Suggested Best Decisions


Actions (hundreds of eggs)
Criterion Order 10 0rder 11 Order 12 Order 13 Order 14 Best
Action
Expected Value 20 21 20 15 8 Order
11
Maximax Criterion 20 22 24 26 28 Order
14
Maximin Criterion 20 12 4 -4 -12 Order
10
Minimax Criterion 8 8 16 24 32 Order
10 or 11

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