STAT2306 Business Logistics
9/1/2011
Business Logistics
Operations Research Model
STAT 2306 Business Logistics
Managerial Decision Making
Decision Analysis
Ms Olivia T.K. Choi
1
STAT2306 Business Logistics
5-week business commitment between Hong
Kong (HK
Ch Decision Theory
Ch.7 Decision Theory
Decision Making
Sensitivity Analysis
1
Introduction
What is involved in making a good decision?
Decision theory is an analytic and systematic
approach to the study of decision making
A good decision is one that is b
Ch Decision Theory
Ch.7 Decision Theory
Decision Tree
Utility Theory
1
Decision Trees
Any problem that can be presented in a decision table can also
be graphically represented in decision tree
be graphically represented in a decision tree
Decision trees a
Ch
Ch 8 Project Management - I
Program Evaluation and Review Technique
Critical
Critical Path Method
1
Introduction
Introduction
Most realistic projects are large and complex
Tens of thousands of steps and millions of dollars may
be involved
Managing larg
Ch
Ch. 8 Project Management - II
PERT/Cost
Monitor and Control
1
How to Find the Critical Path
Fi th
General Foundrys critical path
A
0
0
2
2
2
C
2
2
2
4
4
F
4
10
E
4
4
Start
B
0
1
3
3
4
D
3
4
4
7
8
3
7
13
4
8
8
H
13
13
G
8
8
2
15
15
Finish
5
13
13
Figure
Ch
Ch.8 Project Management - III
Project Crashing
1
Project Crashing
Projects will sometimes have deadlines
that are impossible to meet using normal
procedures
procedures
By using exceptional methods it may be
possible to finish the project in less time
t
Ch 2 Simplex Method
2.7 Dual Problems
1
Instructor: Olivia Choi
The Dual
2
Every LP problem has another LP problem associated with it
called the dual problem
The first way of stating a problem (what we have done so far) is
called the primal problem
The so
Ch 2 Linear Programming
2.6 Applications
1
Instructor: Ms. Olivia Choi
Introduction
2
The graphical method of LP is useful for
understanding how to formulate and solve small
LP problems
There are many types of problems that can be
solved using LP
The prin
Ch 2 Simplex Method
Minimization problems
1
Instructor: Ms Olivia Choi
Solving Minimization Problems
2
Many LP problems involve minimizing an objective such as
cost instead of maximizing a profit function
Minimization problems can be solved graphically by
Ch 3 Goal Programming
3.3 Goal Programming
1
Goal Programming
2
Firms often have more than one goal
They may want to achieve several, sometimes
contradictory, goals
In linear and integer programming methods the
objective function is measured in one dimens
Ch 2 Simplex Method
2.3 Special cases
2.4 Sensitivity Analysis
1
2.3 Special Cases
We have seen how special cases arise when
solving LP problems graphically
They also apply to the simplex method
Four special cases are
2
Infeasibility
Unbounded Solutions
D
Ch 3 Integer Programming
3.1 Pure Integer
3.2 Mixed Integer
1
Instructor: Olivia Choi
Integer Programming
2
An integer programming model is one where one or more of the
decision variables has to take on an integer value in the final
solution
There are two
Ch 1 Linear Programming
Graphical Method &
Excel Solver
1
STAT2306 Business Logistics
History of Linear Programming
1911-1991, George Stigler
Nobel Prize in Economics
Diet problems
2
1912-1986, Leonid Kantorovich
Optimal allocation of resources
1914-2005,
Ch.6 Queuing Theory
Simulation Modeling
1
6.11 Simulation
Simulation is useful because
1. It is relatively straightforward and flexible
2. Recent advances in computer software make simulation
models very easy to develop
3. Can be used to analyze large and
Ch Queuing Theory
Ch.6 Queuing Theory
Multi-channel
Constant Service
Finite Population Model
1
2
6.7 Multichannel Model, Poisson Arrivals,
Exponential Service Times (M/M/m)
Assumptions of the model
3
Arrivals are served on a FIFO basis
FIFO
No balking or
Ch Queuing Theory
Ch.6 Queuing Theory
Queuing System
Single-Channel Model
1
Introduction
Queuing
Queuing theory is the study of waiting lines
waiting
It is one of the oldest and most
It is one of the oldest and most widely used quantitative
analysis techn
Ch. 2 Simplex Method
Maximization problems
1
Introduction
With only two decision variables it is possible to use graphical
methods to solve LP problems
But most real life LP problems are too complex for simple
graphical procedures
We need a more powerful
Ch Simplex Method
Ch 2 Simplex Method
Maximization problem
Reddy Mikks Example
1
Reddy Mikks Model
Reddy Mikks produces both interior and
exterior paints from two raw materials M1
M1
and M2
Tons of raw material per ton of
Raw Material
Interior paint
M1
6
Ch 2 Simplex Method
Minimization problems
1
Instructor: Ms Olivia Choi
Solving Minimization Problems
Many LP problems involve minimizing an objective such as
cost instead of maximizing a profit function
Minimization problems can be solved graphically by f
Ch Simplex Method
Ch 2 Simplex Method
2.3 Special cases
2.4 Sensitivity Analysis
1
Instructor: Ms. Olivia Choi
2.3 Special Cases
We have seen how special cases arise when
solving LP problems graphically
LP
They also apply to the simplex method
Four specia
Ch Linear Programming
Ch 2 Linear Programming
2.6 Applications
1
Instructor: Ms. Olivia Choi
Introduction
The graphical method of LP is useful for
The graphical method of LP is useful for
understanding how to formulate and solve small
LP problems
Th
There
Ch Simplex Method
Ch 2 Simplex Method
2.5 Dual Problems
1
Instructor: Olivia Choi
The Dual
Every LP problem has another LP problem associated with it
called the dual problem
called the dual problem
The first way of stating a problem (what we have done so
Ch Integer Programming
Ch 3 Integer Programming
3.1 Pure Integer
3.2 Mixed Integer
1
Instructor: Olivia Choi
Integer Programming
An integer programming model is one where one or more of the
decision variables has to take on an integer value in the final
d
Ch Goal Programming
Ch 3 Goal Programming
3.3 Goal Programming
1
Instructor: Olivia Choi
Goal Programming
2
Firms often have more than one goal
They may want to achieve several, sometimes
contradictory, goals
In linear and integer programming methods the
Ch. 4 Transportation Problem
Northwest Corner Rule
Stepping-stone Method
MODI
1
Introduction
Transportation model
2
The transportation problem deals with the distribution of
goods from several points of supply (sources) to a
number of points of demand (de
Ch. 4 Transportation Problem
Vogels Approximation
1
4.4 Vogels Approximation Method:
Another Way To Find An Initial Solution
Vogels Approximation Method (VAM) is not as simple as the
northwest corner method, but it provides a very good initial
solution, o
Ch. 4 Transportation Problem
Unbalanced problems
Degeneracy
Facility Location Analysis
1
4.5 Unbalanced Transportation Problems
In real-life problems, total demand is frequently not equal to
total supply
These unbalanced problems can be handled easily by
Ch Assignment Problem
Ch.5 Assignment Problem
The Hungarian Method
Unbalanced Assignment Problems
Assignment Problems
Maximization Problems
Employee Scheduling Applications
1
Assignment Model Approach
2
Involve determining the most efficient way to assign
Ch. 4 Transportation Problem
Vogels Approximation
1
4.4 Vogels Approximation Method:
Another Way To Find An Initial Solution
2
Vogels Approximation Method (VAM) is not as simple as the
northwest corner method, but it provides a very good initial
solution,