Operations Management

Chapter 4 : Allocating Resources to Strategic Alternatives

Allocation Decisions in Operations Strategy
Components of Constrained Optimization Models
Merits and Demerits of Constrained Optimization Models
Linear Programming in Operations Management
Assumptions of Linear Programming
Characteristics of Linear Programming
Formulation of Linear Programming Problems
Identify the decision variables
Define the objective function
Identify and express relevant constraints- Solution of Linear Programming Problems
Graphical Method
Simplex Method
The Transportation problem in linear programming
North-west corner method
Least cost method
Vogel's approximation method
Stepping stone method

Chapter Summary

The availability of several resources of production systems like materials and supplies, cash and capital funds, machinery and equipment, manpower and expertise, utilities, and others, are limited in nature. So the operations manager should assign these resources to the strategic alternatives carefully.

Operations managers use constrained optimization models in order to attain their objectives such as profit maximization or cost minimization. Linear programming is one of the most important constrained optimization models. The first step in solving a problem using linear programming is to formulate the model.

Then the objective function is written as a linear function of the decision variables. Then constraints are developed on the basis of the practical limitations. The objective function is optimized subject to these constraints. The linear programming problems can be solved by the graphical method or by the simplex method.

In practice, managers prefer the simplex method to the graphical method as the latter can be used to solve only those problems that consist of only two decision variables. The transportation model is a special case of linear programming and it is applied to optimize the distribution system.

The initial feasible solution can be developed by using any of the three methods: North-West corner method, least cost method and Vogel's approximation method. The stepping stone method is subsequently used to check whether the solution obtained by the above methods is optimal.

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