ADDIS ABABA SCIENCE

AND TECHNOLOGY
UNIVERSITY

College of Architecture and Civil Engineering

Postgraduate Program under Construction Technology and
Management

System Analysis and Management Techniques CENG6105)

Semister Assignment

Prepared by :-1 SOLOMON KASSA ……. GSR 0083/16

2. BEALU GIRMA ………..GSR 0095/16

Submitted to:- Dr. Habtamu Hailu

Submission Date:- March17,202

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Chapter 1. Concepts of System and System Analysis

1. What are system and system analysis?

ANS.

A system is a set of interrelated and interconnected components working together to achieve a common
goal or objective. It can be physical or conceptual and can range from simple systems like a bicycle to
complex systems like an organization or an information system.

System analysis, on the other hand, is the process of examining a system to understand its components and
their interactions in order to improve its efficiency, effectiveness, and overall performance. It involves

studying the system's structure, function, and processes to identify opportunities for enhancement or
optimization

The goal of system analysis is to understand the overall structure, functionality, and performance of a
system, as well as to identify opportunities for improvement and optimization. This often involves working
with stakeholders to gather requirements, define goals, and create specifications for the system's operation.

System analysis is an essential part of many fields, including business management, computer science,
software engineering, and information technology. It plays a key role in understanding how systems work,
how they interact with other systems, and how they can be designed and improved to meet evolving needs
and requirements.

In summary, a "system" is a set of interconnected components working together, while "system analysis"
involves studying, understanding, and optimizing these systems to ensure they meet the intended objectives
and requirements.

2. Why system analysis is required in the construction industry? Explain your answer with
examples?

ANS.

S22ystem analysis is vital in the construction industry for several reasons, including the need to optimize
project performance, improve processes, and ensure the successful completion of construction projects. Here
are some key reasons why system analysis is crucial in the construction industry:

1. Project Planning and Management:- System analysis helps in developing effective project plans and
optimizing resource allocation. By analyzing the requirements, constraints, and objectives of a construction
project, system analysis can aid in scheduling, task allocation, and overall project management, thus
improving efficiency and reducing costs.

2. Risk Assessment and Mitigation:- System analysis allows for the identification and assessment of
potential risks and challenges within construction projects. This proactive approach helps in developing
mitigation strategies and contingency plans, ultimately reducing the likelihood of project delays, cost
overruns, and other negative impacts.

3. Process Improvement:-The construction industry can benefit from the systematic evaluation and
improvement of processes related to materials management, workforce scheduling, and equipment
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utilization. System analysis helps in identifying bottlenecks and inefficiencies, leading to streamlined
workflows and improved project execution.

4. Quality Control and Assurance:- Through system analysis, construction companies can implement
robust quality control measures to ensure that projects are completed in accordance with regulatory
requirements, industry standards, and client expectations. This involves the evaluation of construction
processes, materials, and workmanship to maintain high quality standards.

5. Integrated Information and Communication:-System analysis enables the integration of information

systems and the use of communication technologies, leading to improved collaboration, coordination, and
data management across construction teams, suppliers, and stakeholders.

6. Resource Optimization:- By analyzing the use of materials, labor, and equipment, system analysis can
optimize resource utilization and reduce waste, leading to cost savings and improved sustainability in
construction projects.

7. Automation and Technology Integration:- System analysis facilitates the integration of technology
solutions, such as Building Information Modeling (BIM) and construction management software, to enhance
planning, design, and execution of construction projects.

In summary, system analysis is crucial for the construction industry as it provides a systematic approach to
project planning, risk assessment, process improvement, quality control, and resource optimization. By
embracing system analysis methodologies, construction companies can enhance project management,
mitigate risks, improve efficiency, and ensure successful project delivery.

3. What are the application areas of resource management techniques? Note: Don’t copy from the
lecture note?

ANS.

Resource management techniques are applied across a wide range of industries and fields to optimize the
allocation and utilization of various resources, including human resources, financial resources, physical
assets, and time. Here are some key application areas of resource management techniques:

1. Project Management: Resource management techniques are widely used in project management to
effectively plan, allocate, and optimize the use of human resources, equipment, and materials. By efficiently
managing resources, project managers can ensure that project tasks are completed on time and within
budget.

2. Human Resource Management: In the domain of human resources, resource management techniques
are used to streamline various HR processes such as workforce planning, talent acquisition, training and
development, performance management, and succession planning. This ensures that organizations have the
right people with the right skills in the right roles at the right time.

3. Financial Resource Management: In finance and accounting, resource management techniques are
utilized to effectively manage financial resources, including budgeting, cash flow management, and financial
forecasting. These techniques help organizations make informed financial decisions, optimize funding
allocation, and maintain financial stability.

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4. Operations Management: Resource management techniques are applied to optimize production
processes, inventory management, and supply chain operations. By efficiently managing production
resources, organizations can minimize waste, reduce costs, and improve overall operational efficiency.

5. Information Technology (IT) Management: In the field of IT, resource management techniques are
used to allocate and manage IT infrastructure, software licenses, and human resources to support IT projects
and operations. This includes managing server capacity, software resources, and IT project manpower.

6. Energy Management: Resource management techniques are employed in energy management to

optimize the use of energy resources, minimize waste, and reduce environmental impact. This includes
energy audits, energy efficiency improvement programs, and the implementation of renewable energy
technologies.

7. Environmental Resource Management: Resource management techniques are utilized in environmental

management to optimize the sustainable use of natural resources, management of ecosystems, and
conservation of biodiversity. This includes sustainable land use planning, wildlife management, and
conservation initiatives.

8. Healthcare Resource Management: In the healthcare sector, resource management techniques are
applied to optimize patient scheduling, staff allocation, and medical equipment utilization to ensure efficient
patient care delivery and hospital operations.

In summary, resource management techniques find broad applications across diverse industries and
domains, improving operational efficiency, optimizing resource utilization, and enabling effective decision-
making for the allocation of various resources.

4. What are the necessary steps to follow for successful resource management?

To successfully manage resources, a set of necessary steps can be taken to ensure effective planning,
allocation, and optimization of resources. Here are the fundamental steps for successful resource
management:

1. Define Objectives: Clearly define the objectives and goals of resource management. Understand the
strategic and operational needs of the organization, and align resource management efforts with these
objectives.

2. Assess Needs and Requirements: Conduct a comprehensive assessment of resource needs, including
human resources, financial resources, materials, and equipment. This involves understanding demand,
analyzing capacity, and identifying gaps in resource availability.

3. Identify Resources: Determine the type and quantity of resources required to meet project or
organizational objectives. This involves identifying the specific skills, competencies, technology, and
physical assets needed to achieve desired outcomes.

4. Establish Priorities: Prioritize resources based on their importance and criticality to achieving
organizational or project objectives. Assign priority levels to different resources to guide decision-making
and resource allocation strategies.

5. Develop a Resource Plan: Create a resource management plan that outlines how resources will be
allocated, utilized, and managed. The plan should detail resource requirements, availability, assignment,
monitoring, and reporting mechanisms.
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6. Allocate Resources: Allocate resources based on the resource plan, ensuring a proper match between
resource availability and project requirements. This involves assigning the right resources to the right tasks
at the right time.

7. Monitor Resource Allocation: Continuously monitor and track resource allocation to ensure that
resources are being used effectively and efficiently. Monitor progress against the resource plan and make
adjustments as needed.

8. Optimize Resource Utilization: Continuously seek ways to optimize resource utilization. This can
involve identifying opportunities to improve efficiency, reduce waste, and streamline resource allocation
processes.

9. Adapt to Changes: Stay flexible and be prepared to adapt to changes in resource requirements and
availability. Agile resource management processes can help organizations adjust to changing project needs,
unexpected challenges, or external factors.

10. Evaluate Performance: Regularly evaluate resource management performance against predefined
objectives and key performance indicators (KPIs). Use performance data to analyze the effectiveness of
resource management efforts and identify areas for improvement.

11. Continuous Improvement: Strive for continuous improvement in resource management processes.
Embrace feedback, learn from experiences, and implement changes to refine resource management
practices.

By following these necessary steps, organizations can ensure successful resource management, which leads
to optimized resource utilization, improved operational efficiency, and effective project execution.

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Chapter 2. Linear Programming Problem
1. Make a review from digital sources on the application areas of linear programming model
in the construction industry by supporting them with examples. Note: Don’t copy from the
lecture note.

ANS.

Linear programming (LP) finds broad applications in the construction industry by enabling the optimization
of resource allocation, cost management, and project scheduling. Here's how LP is applied in various areas
of the construction industry, along with specific examples:

1. Resource Allocation and Management:

Example: A construction company uses LP to optimize the allocation of labor, materials, and equipment to
different projects. By formulating a LP model, the company can determine the best allocation of resources to
meet project demands, minimize costs, and improve productivity.

2. Project Planning and Scheduling:

Example: A construction project management team employs LP to create construction schedules that
minimize delays and resource conflicts. By optimizing the usage and allocation of construction equipment
and personnel, they can ensure timely project completion and optimal resource utilization.

3. Cost Management and Budgeting:

Example: A contractor uses LP to develop optimal material procurement plans for a large construction
project. By optimizing the purchasing and allocation of construction materials to construction sites, the
contractor minimizes inventory levels, reduces holding costs, and ensures timely supply to project sites.

4. Crew Management and Assignment:

Example: A construction project manager applies LP to assign crews to construction tasks on a large-scale
project. By optimizing worker assignments and schedules, the manager ensures that the right skills are
deployed to the right tasks at the right time, thus improving efficiency.

5. Supply Chain Management:

Example: A construction materials supplier uses LP to optimize production and distribution schedules for
different construction materials. The LP model helps the supplier efficiently manage raw material inventory,
production schedules, and delivery routes, resulting in cost savings and improved customer service.

6. Equipment Utilization and Maintenance:

Example: A construction equipment rental company relies on LP to optimize their equipment rental and
maintenance scheduling. The LP model helps balance rental demand with maintenance requirements,
leading to improved equipment utilization and cost management.

7. Facility Layout and Design:

Example: A construction company performs facility layout optimization through LP, determining the
optimal placement of workstations, storage areas, and materials handling equipment within a construction
site for maximum efficiency and productivity.
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8. Risk Management:

Example: A construction firm utilizes LP to identify and mitigate risks in construction project planning,
including resource constraints, schedule conflicts, and budget limitations. The LP model helps in analyzing
"what-if" scenarios and developing contingency plans, thereby improving project resilience.

In summary, Linear programming provides valuable decision support in various areas of the construction
industry, allowing construction companies to optimize resource allocation, project scheduling, cost
management, and risk mitigation. These examples illustrate how LP techniques help construction firms
improve operational efficiency, reduce costs, and enhance project outcomes.

2. Medroc Cement company plans to build a maximum of 11 new stores in Addis Ababa and
Nazareth. The company will build these stores in one of three sizes - a small store, medium
store, and large sized store. The small sized store requires birr 4.125 million to build and 30
employees to operate. The medium sized store requires birr 8.25 million to build and 15
employees to operate. The large sized store requires birr 12.375 million to build and 45
employees to operate. The corporation can dedicate birr 82.5 million in construction
capital, and 300 employees to staff the stores. On the average, the small store nets birr1.2
million annually, the medium store nets birr 2 million annually, and the large store nets
birr 2.6 million annually. If the company wants to maximize revenue, formulate the
problem as a linear programming model.

ANS.

To solve this problem, we can formulate a linear programming model to maximize revenue, subject to the
given constraints. Let's define the decision variables, the objective function, and the constraints.

Decision Variables:
Let:
- x1 = number of small sized stores to build
- x2 = number of medium sized stores to build
- x3 = number of large sized stores to build
Objective Function: The objective is to maximize the total annual revenue, which is the sum of the net
income from each store:

Maximize Z = 1.2x1 + 2x2 + 2.6x3 (Total revenue)

Subject to the constraints:

1. Capital Constraint:

4.125x1 + 8.25x2 + 12.375x3 ≤ 82.5 (Total capital)

2. Employee Constraint:

30x1 + 15x2 + 45x3 ≤ 300 (Total employees)

3. Number of Stores Constraint:

X1 + x2 + x3 ≤ 11 (Total number of stores)

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4. Non-negativity Constraint:

X1, x2, x3 ≥ 0 (Non-negative number of stores)

The linear programming model can be represented as follows:

Maximize Z = 1.2x1 + 2x2 + 2.6x3

Subject to the constraints:

4.125x + 8.25y + 12.375z ≤ 82.5 (Capital constraint)

30x1 + 15x2 + 45x3 ≤ 300 (Employee constraint)

X1 + x2 + x3 ≤ 11 (Number of stores constraint)

x, x2, zx3≥ 0 (Non-negativity constraint)

By solving this linear programming model, the company can determine the optimal number of small,
medium, and large stores to build in order to maximize revenue while respecting the available capital,
staffing, and business size constraints.

3. The total cost (fixed + variable cost) of constructing a ground water reservoir is given as a
function of its capacity, A is as follows.
Fixed cost = 20birr
Variable cost:

2 birr per m2of land for 0<A≤10M2

3 birr per m2of land for 10<A≤14M2

4 birr per m2of land for 14<A≤19M2
Formulate a linear programming problem to minimize the total cost of construction
ANS.
To minimize the total cost of construction for the ground water reservoir, we can formulate a linear
programming problem considering the fixed cost and variable costs corresponding to different ranges of
reservoir capacity. Let's define the decision variable, the objective function, and the constraints.

Decision Variable:
Let xi = capacity of the reservoir in m^2

Objective Function:
Minimize Z = 20 + 2x1 + 3x2 + 4x3 (Total cost = Fixed cost + Variable cost)

Subject to the constraints:

1. Capacity Constraints:
0 < x1 ≤ 10 (for 2 birr per m^2)
10 < x2 ≤ 14 (for 3 birr per m^2)
14 < x3 ≤ 19 (for 4 birr per m^2)
The linear programming model can be represented as follows:
Minimize Z = 20 + 2x1 + 3x2 + 4x3

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Subject to the constraints:
0 < x1 ≤ 10
10 < x2 ≤ 14
14 < x3 ≤ 19

By solving this linear programming model, the optimization task becomes finding the optimal reservoir
capacity within each range of costs. This ensures that the total cost of construction is minimized under
the given constraints for reservoir capacity.

This linear programming model allows the company to determine the best options for constructing the
ground water reservoir while minimizing the total cost of construction based on the variable cost rates
and capacity constraints.
4. A construction site requires a minimum of 10,000 cubic meters of sand and gravel mixture.
The mixture must contain no less than 5,000 cubic meters of sand and no more than 6,000
cubic meters of gravel. Materials may be obtained from two sites: 30% of sand and 70%
gravel from site 1 at a delivery cost of $5.00 per cubic meter and 60% sand and 40% gravel
from site 2 at a delivery cost of $7.00 per cubic meter.
a) Formulate the problem as a LP model
b) Solve the problem using graphical technique.

a) Formulation of the LP Model:

To formulate the linear programming model, let's define the decision variables, objective function, and
constraints based on the given problem.
Decision Variables:
Let's denote:
X1 = the amount of material (in cubic meters) obtained from site 1
X2 = the amount of material (in cubic meters) obtained from site 2
Objective Function:
Minimize Z = 5x1 + 7x2 (Total delivery cost)
Subject to the constraints:
1. The total amount of material required should be at least 10,000 cubic meters:
X1 + x2 ≥ 10,000
2. The mixture should contain at least 5,000 cubic meters of sand:
0.3x1 + 0.6x2 ≥ 5,000
3. The mixture should contain no more than 6,000 cubic meters of gravel:
0.7x1 + 0.4x2 ≤ 6,000
4. Non-negativity constraint:
x, x2 ≥ 0

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b) Graphical Solution:
We can graphically solve this problem by mapping out the feasible region defined by the constraints and
then identifying the optimal solution.
By finding the intersection points of the boundary lines of the feasible region, we can identify the optimal
values of x and y that minimize the total delivery cost while satisfying all the constraints. This solution
finds by QMS software.

Variable Value
X1 2,500.00
X2 10,625.00
Optimal Value (Z) 86,875.00

5. Serawit Advertising Agency, promoting new Brands of Concrete Mixers, wants to get the
best exposure possible for the product within the 1000,000 birr advertising budget ceiling
placed upon it. To do so, the agency needs to decide how much of the budget to spend on
each of its two most effective media: (1) Television spots on Fana Broadcasting during the
evening hours and (2) large ads in the Sunday’s Reporter newspaper. Each television spot
costs 30,000 birr; and each newspaper ad 2 costs 12,500 birr. The expected exposure, based
on industry ratings is 350,000 viewers for each TV commercial and 200,000 readers for
each newspaper advertisement. The agency director, Mr. Serawit, knows from experience
that it is important to use both media in order to reach the broadest spectrum of potential
customers. He decides that at least 5 but no more than 25 television spots should be
ordered; and that at least 10 newspaper ads should be contracted. How many times should
each of the two media be used to obtain maximum exposure while staying within the
budget? Use linear programming to solve.

To solve this problem using linear programming, we can start by defining the decision variables,
formulating the objective function, and expressing the constraints based on the given information.

Let's define the decision variables:

Let x1 = number of television spots
Let x2 = number of newspaper ads

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Objective function:
The objective is to maximize the overall exposure, which is determined by the combined viewership of
the TV commercials and readership of the newspaper ads.
The total exposure can be calculated as:
Exposure = 350,000x1 + 200,000x2
With this setup, the goal is to maximize the total exposure by determining the optimal distribution of the
advertising budget between television spots and newspaper ads.

Subject to the constraints:

1. The total cost of advertising must not exceed the budget ceiling of 1,000,000 birr:
30,000x1 + 12,500x2 ≤ 1,000,000
2. The number of television spots should be between 5 and 25:
5 ≤ x1 ≤ 25
3. At least 10 newspaper ads should be contracted:
X2 ≥ 10
Now, we can use a linear programming solver to find the values of x1 and x2 that optimize the exposure
while staying within the budget and meeting the specified requirements for the number of television
spots and newspaper ads. By excel solvers
 No of television spot is =5 times
 Number of news paper =68 times
 Optimal revenues= 15,350,000.00

6. Consider the structural system shown below, in which wires 1 and 2 can support loads up to 300lb
each; wires 3 and 4 up to 100 lb each; wires 5 and 6 up to 50lb each. Neglect the weight of beams and
wires, and assume weights W1, W2 and W3 at the positions indicated. What is the maximum total
load, W1+W2+W3 that the structure can support?

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Solution

Using force balance Equation and torque balance equationfor each beam ,find forces Fi excreted by wire
I as function of weights w1,w2,and w3

These force turn out to be:-

F1=(2/7)w1+(5/7)w2+(3/7)w3,

F2=(5/7)w1+(2/7)w2+(4/7)w3,

F3= 0w1+(2/3)w2+(4/7)w3,

F4=0w1+(1/3)w2+(4/9)w3,

F5=0w1+0w2+(2/3)w3,

F6=0w1+0w2+(1/3)w3,

The problem is maximizing problem the linear functions

Max.Weight=w1+w2+w3

Subjected to:-

(2/7)w1+(5/7)w2+(3/7)w3<=300 w1 w2 w3
360 150 0
(5/7)w1+(2/7)w2+(4/7)w3 <=300

(2/3)w2+(4/7)w3<=100
Objective function
(1/3)w2+(4/9)w3<=100 w1 w2 w3 z
1 1 1 510
2/3)w3<=50

1/3)w3<=50

And w1,w2 and w3 >=0

Application of simplex method gives the solution

W1=360Ib, w2=150Ib , w3=0Ib and w=weight=510Ib

7. Do sensitivity analysis on the following LPP.

Max. Z = 100x1+300x2 +50x3
subject to
300x1+ 1200x2 +120x3<=93000
0.5x1+ x2 + 0.5x3<= 101
and x1, x2 , x3>=0

Sensitivity analysis is a valuable method for understanding how changes in the coefficients of the objective
function or the right-hand side values of the constraints affect the optimal solution and the associated
optimal objective value. This analysis provides insights into the stability and reliability of the optimal
solution under varying conditions.

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To conduct sensitivity analysis on this linear programming problem, we first need to find the optimal
solution. Once we have the optimal solution, we can assess the changes in the objective function coefficient
and the right-hand side values of the constraints to see how they influence the optimal objective value and
the values of the decision variables.

Let's start by solving the given linear programming problem to obtain the optimal solution.

The given linear programming problem is:

Maximize Z = 100x1 + 300x2 + 50x3

subject to

300x1 + 1200x2 + 120x3 <= 93000

0.5x1 + x2 + 0.5x3 <= 101

x1, x2, x3 >= 0

To solve this linear programming problem using the Simplex method, we will first convert the problem into
standard form by introducing slack variables. Then we can proceed with solving the LP problem to find the
optimal solution.

Next, once we obtain the optimal solution, we can perform sensitivity analysis by considering the following
scenarios

1. Objective Function Coefficient Changes:

We will analyze how changes in the coefficients of the objective function (100, 300, and 50) impact the
optimal solution and the optimal objective value.

2. Right-hand Side Changes:

We will examine the impact of changes in the right-hand side values of the constraints on the optimal
solution and the optimal objective value.

By conducting sensitivity analysis, we can gain valuable insights into the robustness of the

Once we have the optimal solution, we can then delve into the sensitivity analysis to explore the effects of
changes in the objective function coefficients and the constraint right-hand side values.

X1 X2 X3
94 54 0
100 300 50 25600
300 1200 120 93000 ≤ 93000
0.5 1 0.5 101 ≤ 101

After calculation the x1,x2,and x3 value is 94,54,and 0 respectively. And for those values z=25600

Let us check the value of z after increasing X1, X2 , and X3 by 50

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Increase X2 by Increase X1 by
Increase X3 by 50 50 50
Z 28100 40600 30600
increament 2500 15000 5000
X2 has more increament on Z value from the other two.

Therefore, we can conclude the output is more sensitive at X2

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Chapter 3. Transportation and Assignment Models

1. What are the basic differences between transportation and assignment models?

The transportation and assignment models are both fundamental problems in the field of operations
research and optimization. While they share some similarities, they are primarily used for different types
of optimization scenarios. Here are the basic differences between transportation and assignment
models:E

Transportation Model:
1. Nature of Problem:
- The transportation model deals with the allocation of goods from several supply sources to
multiple demand destinations, aiming to minimize the total transportation cost.
- It is applicable to scenarios such as distribution of products from multiple warehouses to multiple
customers, allocation of resources, and logistics optimization.
2. Decision Variables:
- In the transportation model, the decision variables represent the quantities of goods to be
transported from each source to each destination. For example, xij denotes the quantity of goods
transported from source i to destination j.
3. Objective Function:
- The objective of the transportation model is to minimize the total transportation cost, which is
typically a linear combination of the quantities of goods shipped and the transportation costs per unit.
4. Constraints:
- Constraints in the transportation model ensure that the supply from each source matches the
demand at each destination and that capacity limitations at sources and/or destinations are not
exceeded.

5. Application:
- The transportation model is widely used in supply chain management, logistics, and distribution
network optimization.
Assignment Model:
1. Nature of Problem:
- The assignment model addresses the problem of assigning a set of tasks to a set of agents
(workers, machines, etc.) in a way that minimizes the overall cost or time required.
- It is applicable to scenarios such as job assignment, task allocation, and workforce scheduling.
2. Decision Variables:
- In the assignment model, the decision variables represent the assignment of tasks to agents. For
example, xij = 1 if task i is assigned to agent j; otherwise, xij = 0.
3. Objective Function:
- The objective of the assignment model is to minimize the total cost or time required to complete
all tasks, which is typically a linear combination of the assignment variables and the costs associated
with each assignment.
4. Constraints:
- Constraints in the assignment model ensure that each task is assigned to exactly one agent and
that each agent can handle at most one task.

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5. Application:
- The assignment model is commonly used in project management, personnel scheduling, and
production planning.

In summary, while both the transportation and assignment models are concerned with optimization, the
transportation model deals with the allocation of goods to minimize transportation cost, whereas the
assignment model focuses on task assignments to minimize overall cost or time. Each model has its specific
application domain and distinct characteristics tailored to the optimization requirements of different real-
world scenarios.

2. A cement factory produces Portland cement in 50kg pack. The company ships the packs from
the production facilities to its three warehouses. The packs are distributed directly to four
project sites from the warehouses. The table below shows costs per pack to ship to the four
warehouses. Find the initial feasible solution using: a) Northwest corner method; b) Minimum
cost method; c) Vogal’s Approximation method

TO
project project project project
From 1 2 3 4 Supply (packs)
Warehouse 1 8 6 10 9 40
Warehouse 2 9 12 13 7 50
Warehouse 3 14 9 16 5 45
Demand
(packs) 45 25 30 35
Th company needs to minimiz the cost of shiping. So, It is a minimization problem
a) Northwest corner method
 Start in the upper left-hand corner, “northwest corner” of the schedule and place the largest
amount of capacity and demand available in that cell. demands 45 and capacity of 40.
project project
From project 1 project 2 3 4 Supply (packs)
Warehouse 1 8(40) 6 10 9 X
Warehouse 2 9 12 13 7 50
Warehouse 3 14 9 16 5 45
Demand (packs) 45 25 30 35
 Since Warehouse 1 capacity is deleted move down to repeat the process for the Warehouse 2 to
project 1 cell. Warehouse 2 has sufficient capacity but project 2 can only take another 5 packs of
demand.

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TO
project project
From project 1 project 2 3 4 Supply (packs)
Warehouse 1 8(40) 6 10 9 X
Warehouse 2 9(5) 12 13 7 45
Warehouse 3 14 9 16 5 45
Demand
(packs) X 25 30 35

TO
project project
From project 1 project 2 3 4 Supply (packs)
Warehouse 1 8(40) 6 10 9 X
Warehouse 1 9(5) 12(25) 13 7 20
Warehouse 1 14 9 16 5 45
Demand
(packs) X X 30 35

TO
project project
From project 1 project 2 3 4 Supply (packs)
Warehouse 1 8(40) 6 10 9 X
Warehouse 1 9(5) 12(25) 13(20) 7 X
Warehouse 1 14 9 16 5 45
Demand
(packs) X X 10 35

TO
From project 1 project 2 project 3 project 4 Supply (packs)
Warehouse 1 8(40) 6 10 9 X
Warehouse 1 9(5) 12(25) 13(20) 7 X
Warehouse 1 14 9 16(10) 5 35
Demand
(packs) X X X 35

TO
project project
From project 1 project 2 3 4 Supply (packs)
Warehouse 1 8(40) 6 10 9 X
Warehouse 1 9(5) 12(25) 13(20) 7 X
Warehouse 1 14 9 16(10) 5(35) X
Demand
(packs) X X X X
Tc=8*40+9*5+12*25+13*20+16*10+5*35=1260

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MINIMUM COST METHOD
TO
project project project project
From 1 2 3 4 Supply (packs)
Warehouse 1 8 6 10 9 40
Warehouse 1 9 12 13 7 50
Warehouse 1 14 9 16 5(35) 10
Demand (packs) 45 25 30 X

TO
project project project project
From 1 2 3 4 Supply (packs)
Warehouse 1 8 6(25) 10 9 15
Warehouse 1 9 12 13 7 50
Warehouse 1 14 9 16 5(35) 10
Demand (packs) 45 X 30 X

TO
project project project project
From 1 2 3 4 Supply (packs)
Warehouse 1 8(15) 6(25) 10 9 X
Warehouse 1 9 12 13 7 50
Warehouse 1 14 9 16 5(35) 10
Demand (packs) 30 X 30 X

TO
project project project project
From 1 2 3 4 Supply (packs)
Warehouse 1 8(15) 6(25) 10 9 X
Warehouse 1 9(30) 12 13 7 20
Warehouse 1 14 9 16 5(35) 10
Demand (packs) X X 30 X

TO
project project project project
From 1 2 3 4 Supply (packs)
Warehouse 1 8(15) 6(25) 10 9 X
Warehouse 1 9(30) 12 13(20) 7 X
Warehouse 1 14 9 16 5(35) 10
Demand (packs) X X 30 X

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TO
project project project project
From 1 2 3 4 Supply (packs)
Warehouse 1 8(15) 6(25) 10 9 X
Warehouse 1 9(45) 12 13(5) 7 X
Warehouse 1 14 9 16(10) 5(35) X
Demand (packs) X X 30 X
Tc= 8*15+6*25+9*45+13*5+16*10+5*35 =1135

VOGEL'S APPROXIMATION METHOD

TO
project project Supply
From 1 project 2 project 3 4 (packs) ROW PENALITY
Warehouse 1 8 6 10 9 40 9-6=3
Warehouse 1 9 12 13 7 50 9-7=2
greatest
Warehouse 1 14 9 16 5(35) 10 9-5=4 penalty
Demand
(packs) 45 25 30 X

COLUMN
PENALITY 9-8=1 9-6=3 13-10=3 7-5=2

TO
project project Supply
From 1 project 2 project 3 4 (packs) ROW PENALITY
Warehouse 1 8 6 10 9 40 8-6=2
Warehouse 1 9 12 13 7 50 12-9=3
greatest
Warehouse 1 14 9(10) 16 5(35) X 14-9=5 penalty
Demand
(packs) 45 15 30 X

COLUMN
PENALITY 9-8=1 9-6=3 13-10=3

TO
project project Supply
From 1 project 2 project 3 4 (packs) ROW PENALITY
Warehouse 1 8 6(15) 10 9 25 8-6=2
Warehouse 1 9 12 13 7 50 12-9=3
Warehouse 1 14 9(10) 16 5(35) x
Demand
(packs) 45 x 30 X

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COLUMN
PENALITY 9-8=1 12-6=6 13-10=3
greatest
penalty
TO
project project Supply
From 1 project 2 project 3 4 (packs) ROW PENALITY
Warehouse 1 8 6(15) 10 9 25 10-8=2
Warehouse 1 9(45) 12 13 7 5 12-9=3
Warehouse 1 14 9(10) 16 5(35) x
Demand
(packs) x x 30 X

COLUMN
PENALITY 9-8=1 13-10=3

TO
project project Supply
From 1 project 2 project 3 4 (packs) ROW PENALITY
Warehouse 1 8 6(15) 10(25) 9 X 10
Warehouse 1 9(30) 12 13 7 5 13
Warehouse 1 14 9 16 5(35) 10
Demand
(packs) X X 5 X
COLUMN
PENALITY 13-10=3

TO
project project Supply
From 1 project 2 project 3 4 (packs)
Warehouse 1 8 6(15) 10(25) 9 X
Warehouse 1 9(45) 12 13(5) 7 X
Warehouse 1 14 9(10) 16 5(35) X
Demand
(packs) X X X X
Tc=6*15+10*25+9*45+13*5+9*10+5*35=1075

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3. Some Building Brick Company (BBC) has orders for 80 tons of bricks at three locations in Yeka
S/C, Kolfe-Keranio S/C and Nifas Silk Lafto S/C. The requirements in their order are 25 tons, 45
tons, and 10 tons. BBC has two plants. Plant 1 produces 50 and plant 2 produces 30 tons per week.
End of week shipments is to be made given the following delivery cost (in x100birr) per ton. Find
the optimal solution to this TP using MoDI technique.

plant sub city suply

nefas
yeka kolfe keraniyo silk
1 24 30 40 50
2 30 40 42 30
deman 25 45 10

The initial feasible solution by NWC method becomes

plant sub city suply
nefas
yeka kolfe keraniyo silk
1 24(25) 30(25) 40 50
2 30 40(20) 42(10) 30
deman 25 45 10
The total shipping cost for this solution = 24*25+30*25+40*20+42*10=2570

Optimal Solution to TP – MODI Method

Stage A.
 As a rule, there should always be m + n – 1 full cells occupied by the variables that are
currently in the solution.  Here m=3 and n=2. Therefore m+n-1 = 4. As we can see 4 cells are
occupied.
Stage B.
 Determination of Entering Variable:  For each variable Xij that is in the current solution,
the multipliers Ui and Vj must satisfy the following equation: Ui + Vj = Cij (Note: For all
variables that are in the solution)  These equations yield m+n-1 equations with m+n
unknowns.  The values of the multipliers can be determined by simply assuming an arbitrary
value for any one of the multipliers.  In practice, we usually set U1 = 0. And then we solve all
other values (U2, V1, etc.).

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plant sub city suply
nefas
yeka kolfe keraniyo silk
1 25 25 50
2 20 10 30
deman 25 45 10

MODI
FOR OCCUPIED CELLS Let u1=0
X11: U1+V1=24 V1=24-0=24
X12: U1+V2=30 V2=30-0=30
X22: U2+V2=40 U2=40-30=10
X23: U2+V3=42 V3=42-10=32
Next, the evaluation of each variable Xij that is not currently in the solution (non-basic) is made
by using the following equation: kij = Cij – (ui + vj).(For all variables that are not in the
solution)
K13=C13-(U1+V3)=40-(0+32)=8
K21=C21-(U2+V1)=30-(10+24)=-4
Determination of Leaving Variable
 In order to determine a leaving variable, we construct a closed loop. o The Loop starts and
ends at the entering variable (x21 in this case) o It visits only the Xij’s that are currently in the
solution. o It forms a rectangular shape. o It must be drawn so as to reach the end point at the
Shortest possible path. o Put a + sign in the entering cell and mark the remaining corners of the
loop alternately with – and + signs.

plant sub city

nefas
yeka kolfe keraniyo silk
1 (-)25 (+)25
2 (+) (-)20 10

 In each row and column there should be equal number of + and – signs.
 The leaving variable is selected from among the variables that have (-ve) signs. In this
case x1 or x22 can be selected.
 Usually the leaving variable is one of these (-) signed variables having the smallest
value. In this case all x22 have the smallest value of 20.
 Therefore, x22 is selected.
 Now, we will form the new solution by changing the places in the table as follows:
 The cell value corresponding to the entering variable x21 and x12 is increased by The
value of the leaving variable x22, which is 20.

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new
plant sub city
nefas
yeka kolfe keraniyo silk
1 5 45

2 20 10

Here, only the place of Leaving Variable (x22) is emptied.

According to this new solution, the total shipping cost becomes.
((5x24)+(45x30)+(20*30)+(42x10))*100 = 249,000 birr
OCCUPIED CELLS Let u1=0
U1+V1=24 V1=24-0=24
U1+V2=30 V2=30-0=30
U2+V1=30 U2=30-24=6
U2+V3=42 V3=342-6=6
UNOCCUPIED CELLS
K13=C13-(U1+V3)=40-(0+32)=8
K22=c22-(U2+V2)=40-(6+30)=4

no negative result so our optimal solution becomes

TC =(5*24+45*30+20*30+10*42)*100=249,000 birr

4. A Contractor is organizing the supply of ready-mix concrete to four sites. He estimates that the total
daily requirements of the four sites amount to 24 lorry loads and he finds three suppliers who are
able to meet this demand between them. The separate amounts available from the suppliers are (in
lorry loads) are S1: 4; S2: 8; S3:12 and the quantities needed for the four sites are A: 5 , B: 2, C:10,
D:7. In the price negotiation it was agreed that transport costs will be charged to the contractor in
proportion to mileage incurred. The distances involved are:

It is required for the contractor to determine the minimum total distance to be traveled and
corresponding supply arrangement from each supplier to each site.
a) Formulate the problem as a LPP.

let xi, j be the quantity shipped from factory i to warehouse j

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decision variables

S1=X1

S2=X2

S3=X3

Objectives functions

minimize 6X1,A + 12X 1,B + 2X 1,C + 5X 1,D + 8X 2,A + 21X 2,B + 13X 2,C + 12 X 2,D
11X3,A + 16X 3,B + 5X 3,C + 16 X 3,D

Supply Constraints (rows)

Subject to

X1,A+ X1,B+ X1,C+ X1,D ≤ 4

X2,A+ X2,B+ X2,C+ X2,D ≤ 8

X3,A+ X3,B+ X3,C+ X4,D ≤ 12

Demand Constraints (columns)

Subject to

X1,A+ X2,A+ X3,A ≥ 5

X1,B+ X2,B + X3,B ≥ 2

X1,C+ X2,C+ X3,C ≥ 10

X1,D+ X2,D+ X3,D ≥7

The complete formulation of the TP is, therefore,

Min Z = 6X1,A + 12X 1,B + 2X 1,C + 5X 1,D + 8X 2,A + 21X 2,B + 13X 2,C + 12 X 2,D
11X3,A + 16X 3,B + 5X 3,C + 16 X 3,D

Subject to

X1,A+ X1,B+ X1,C+ X1,D ≤ 4

X2,A+ X2,B+ X2,C+ X2,D ≤ 8

X3,A+ X3,B+ X3,C+ X4,D ≤ 12

X1,A+ X2,A+ X3,A ≥ 5

X1,B+ X2,B + X3,B ≥ 2

X1,C+ X2,C+ X3,C ≥ 10

X1,D+ X2,D+ X3,D ≥7

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and Xij ≥ 0 (i=123; j=A, B, C, D)

b) Solve it using excel solver.

Constriant
DEMAND
SUPPLY A B C D SUPPLY 4 EQ 4
S1 0 0 4 0 4 8 EQ 8
S2 2 0 6 0 8 12 EQ 12
S3 3 2 0 7 12
DEMAND 5 2 10 7 5 EQ 5
2 EQ 2
10 EQ 10
A B C D 7 EQ 7
S1 6 12 2 5
S2 8 21 13 12 OBJ.FUN=Z 229
S3 11 5 16 12

5. EEPCo has proposed three Micro hydropower plants that supply the electric needs of four
major towns of the country. The associated supply of each plant and demand of each town is
given in table 1. The cost of sending 1MWH of electricity from a plant to a town depends on the
distance the electricity must travel. Find an optimal solution using LPP.

decision variables

PLANT1 =X1

PLANT2=X2

PLANT3 =X3

A=TOWN 1

B= TOWN 2

C= TOWN 3

D= TOWN 4

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Objectives functions

minimize 8X1,A + 6X 1,B + 10X 1,C + 9X 1,D + 9X 2,A + 12X 2,B + 13X 2,C + 7X 2,D
14X3,A + 9X 3,B + 16X 3,C + 5X 3,D

Supply Constraints (rows)

Subject to

X1,A+ X1,B+ X1,C+ X1,D ≤ 35

X2,A+ X2,B+ X2,C+ X2,D ≤ 50

X3,A+ X3,B+ X3,C+ X4,D ≤ 40

Demand Constraints (columns)

Subject to

X1,A+ X2,A+ X3,A ≥ 45

X1,B+ X2,B + X3,B ≥ 20

X1,C+ X2,C+ X3,C ≥ 30

X1,D+ X2,D+ X3,D ≥30

The complete formulation of the TP is, therefore,

Min Z = 8X1,A + 6X 1,B + 10X 1,C + 9X 1,D + 9X 2,A + 12X 2,B + 13X 2,C + 7X 2,D 14X3,A
+ 9X 3,B + 16X 3,C + 5X 3,D

Subject to

X1,A+ X1,B+ X1,C+ X1,D ≤ 35

X2,A+ X2,B+ X2,C+ X2,D ≤ 50

X3,A+ X3,B+ X3,C+ X4,D ≤ 40

X1,A+ X2,A+ X3,A ≥ 45

X1,B+ X2,B + X3,B ≥ 20

X1,C+ X2,C+ X3,C ≥ 30

X1,D+ X2,D+ X3,D ≥30

and Xij ≥ 0 (i=123; j=A, B, C, D)

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Constriant
TO
From A B C D SUPPLY 35 EQ 35
plant 1 0 10 25 0 35 50 EQ 50
plant 2 45 0 5 0 50 40 EQ 40
plant 3 0 10 0 30 40
DEMAND 45 20 30 30 45 EQ 45
20 EQ 20
30 EQ 30
A B C D 30 EQ 30
S1 8 6 10 9
S2 9 12 13 7 OBJ.FUN=Z 1020
S3 14 9 16 5

The optimal solution is 1020

6. Five managers who differ in ability and experience are to be placed in charge of five projects which
are different in type and value. The suitability of each manager for each project is assessed on a
numerical scale with a maximum of twenty points. The results are shown below. To which project
should each manager be assigned in order to obtain the highest total points score for the firm? Find
using LPP.

Solutions
This is assignment problem withing QMS software we have the result of the followings

Optimal solution value = 70 project1 Project2 project3 project 4 Project 5

Project Manager 1(A) 18 16 11 Assign 19 5
Project Manager 2(B) Assign 14 10 15 8 6
Project Manager 3(C) 9 Assign 13 8 8 6
Project Manager 4(D) 15 14 10 12 Assign 10
Project Manager 5(E) 11 11 Assign 14 10 8

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Assignment
JOB Assigned to Profit
Project Manager 1(A) project 4 19
Project Manager 2(B) project1 14
Project Manager 3(C) Project2 13
Project Manager 4(D) Project 5 10
Project Manager 5(E) project3 14
Total 70

7. The following table shows the performance ratings of teachers out of 100 in teaching various
subjects in a High School in Ghana

Assign the teachers to the right subjects so as to enhance the quality of education in the school.

Solution

SUBJECT
TEACHER SOCIAL SCIENCE ENGLISH MATHS BIOLOGY PHYSICS
A 87 78 81 79 84 80
B 82 83 76 82 78 73
C 80 78 77 76 83 69
D 86 81 87 70 77 78
E 79 86 83 75 85 77
F 83 77 82 80 84 76

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MAXIMIZATION PROBLEM
ROW
SUBJECT
TEACHER SOCIAL SCIENCE ENGLISH MATHS BIOLOGY PHYSICS
A 0 9 6 8 3 7
B 1 0 7 0 4 10
C 3 5 6 7 0 14
D 1 6 0 17 10 9
E 7 0 3 11 1 9
F 1 7 2 4 0 8

COLUMN

SUBJECT
TEACHER SOCIAL SCIENCE ENGLISH MATHS BIOLOGY PHYSICS
A 0 9 6 7 3 0
B 1 0 7 0 4 3
C 3 5 6 6 0 7
D 1 6 0 16 10 2
E 7 0 3 10 1 2
F 1 7 2 3 0 1

SUBJECT
TEACHER SOCIAL SCIENCE ENGLISH MATHS BIOLOGY PHYSICS
A 0 9 6 7 3 0
B 1 0 7 0 4 3
C 2 4 6 5 0 6
D 0 5 0 15 10 1
E 7 0 3 10 1 2
F 1 6 2 2 0 0

A 0 9 6 7 3 0
B 1 0 7 0 4 3
C 2 4 6 5 0 6
D 0 5 0 15 10 1
E 7 0 3 10 1 2
F 1 6 2 2 0 0

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A SOCIAL 87
B MATHS 82
C BIOLOGY 83
D ENGLISH 87
E SCIENCE 86
F PHYSICS 76
TOTAL 501

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Chapter 4 Dynamic Programming
1. What is the application of dynamic programming in the construction industry? Support it with
examples. Note: Don’t copy from the lecture note.

Dynamic programming, a method for solving complex problems by breaking them down into simpler
sub problems, has numerous applications in the construction industry. It is used to optimize decision-
making processes related to resource allocation, scheduling, project management, and cost optimization.
Here are some specific applications of dynamic programming in the construction industry, along with
examples:

1. Resource Allocation:

- Application: Optimal allocation of resources (e.g., labor, machinery, materials) across

construction projects to maximize efficiency and minimize costs.
- Example: Consider a construction company with multiple ongoing projects. Dynamic
programming can be employed to allocate labor and equipment efficiently across these projects to
minimize idle time and maximize productivity. The goal is to optimize the allocation of resources
while considering project deadlines and resource availability.

2. Project Scheduling:

- Application: Developing efficient project schedules by determining the best sequence of activities
to minimize project duration or cost.
- Example: Dynamic programming can be used to create an optimal schedule for a construction
project by sequencing activities, considering dependencies, resource limitations, and project goals.
For instance, in building a residential complex, dynamic programming can help determine the most
efficient sequence for tasks such as foundation laying, framing, electrical, plumbing, and finishing,
considering various constraints and objectives.

3. Optimal Cut and Fill Operations:

- Application: Optimizing earthwork operations by determining the most cost-effective cut and fill
volumes for excavation and embankment activities on a construction site.
- Example: In road construction, dynamic programming can be applied to determine the most
efficient cut and fill operations for earthwork. By analyzing the topography, soil conditions, and
project requirements, the method can identify the optimal balance between excavation and backfill,
minimizing material movement and associated costs.

4. Resource Leveling:

- Application: Balancing resource demand to reduce over allocation and under allocation of
resources, leading to smoother and more efficient project execution.
- Example: Dynamic programming can help in leveling resources across multiple construction
projects, preventing resource shortages and excesses. For instance, a construction firm may use
dynamic programming to schedule labor and equipment across projects to maintain a consistent
workload, avoiding overloading or underutilizing resources.

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5. Equipment Replacement and Maintenance:

- Application: Optimizing decisions regarding equipment replacement, maintenance scheduling,

and fleet management to minimize downtime and maintenance costs.
- Example: A construction company operating a fleet of heavy equipment can use dynamic
programming to determine optimal schedules for equipment maintenance and replacement. By
considering equipment usage, age, maintenance costs, and downtime, the method can help in making
decisions that minimize maintenance expenditures and maximize equipment availability.

6. Project Cost Optimization:

- Application: Determining optimal strategies for cost control, budget allocation, and resource
utilization to minimize construction project costs.
- Example: Dynamic programming can aid in optimizing cost management for construction
projects. For instance, in a large-scale infrastructure project, dynamic programming can be used to
allocate project budgets across various components, subcontractors, and suppliers in a manner that
ensures cost efficiency and adherence to budget constraints.
In each of these applications, dynamic programming provides a systematic and efficient approach to
decision-making in the construction industry, helping to optimize resource utilization, project
scheduling, cost management, and earthwork operations. By breaking down complex problems into
smaller subproblems and leveraging optimal substructure, dynamic programming offers valuable
insights and solutions for improving construction processes and project outcomes.
2. What is Bellman’s principle of optimality?
Bellman's principle of optimality is a fundamental concept in the field of dynamic programming.
Formulated by Richard Bellman, this principle serves as a guiding philosophy for solving
optimization problems, particularly those that can be decomposed into subproblems through a
process of recursion and overlapping substructure. The principle is central to understanding the
nature of optimal solutions in dynamic programming.

Bellman's principle of optimality can be succinctly stated as follows:

"In an optimal sequence of decisions, every subsequence of decisions must also be optimal."
Understanding the Principle:

1. Optimal Substructure:- The principle presupposes that if an overall solution to a problem is

optimal, then every subproblem within that solution must also be optimal. In other words, the
optimal solution can be divided into optimal subproblems. This property is often referred to as
"optimal substructure."

2. Recursive Structure:- The principle provides a foundation for breaking down complex problems
into simpler subproblems. By identifying the optimal solutions to these subproblems and
progressively building upon them, one can arrive at the optimal solution for the original problem.
3. Application in Dynamic Programming: - Bellman's principle of optimality is particularly
relevant in the context of dynamic programming, where problems can be decomposed into smaller
subproblems. It guides the formulation of recursive relationships and enables the development of
efficient algorithms for finding optimal solutions to problems exhibiting overlapping substructure.

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Relating to Dynamic Programming:

In the context of dynamic programming, Bellman's principle of optimality offers insights into the
nature of optimal solutions and guides the design and implementation of algorithms. Dynamic
programming algorithms leverage this principle to efficiently solve problems by breaking them down
into simpler subproblems, solving these subproblems just once, and then reusing the solutions as
needed.
By establishing that optimal solutions exhibit the property of "optimal substructure," Bellman's
principle helps dynamic programming algorithms avoid redundant calculations and leads to more
efficient and systematic problem-solving approaches. This principle is foundational to formulating
recursive relationships and identifying patterns that allow for the effective computation of optimal
solutions to a wide range of problems in various domains such as economics, engineering, operations
research, and more.

In summary, Bellman's principle of optimality provides a powerful conceptual basis for solving
optimization problems using dynamic programming, supporting the development of algorithms that
efficiently compute optimal solutions by exploiting the recursive and overlapping nature of
subproblems.
3. . Derive the stepwise equations of a four-stage dynamic programming problem using the
backward recursion method

Dynamic programming is a powerful technique used to solve complex optimization problems by

breaking them down into simpler subproblems and solving them iteratively. When dealing with dynamic
programming problems, the backward recursion method is a key approach to determining the optimal
solution step by step.

Let's consider a simplified example of a four-stage dynamic programming problem to illustrate the
backward recursion method. In this example, we aim to maximize a certain objective function over four
stages, with each stage having a set of decisions or choices to make.

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Problem Setup:

 F4 (S4) = NB1(X4) ---------------------Stage 4

F*4 (S4) = Max (NB4 (X4)
F*4(S3 -X3) = Max (NB4(X4))
 F3 (S3) = NB3(X3) +Max (NB4(X4) ---------------Stage 3
F3 (S3) =NB3(X3) +F4*(S3- X3)
F3* (S3) =Max (NB3(X3) +F4*(S3- X3)
F3* (S2 -X2) = Max (NB3 (X3) +F*4 (S3 -X3) )
 F2 (S2) = NB2(X2) + Max (NB3(X3) + Max (NB4(X4) --------------Stage 2
F2 (S2) = NB2 (x2) + F*(S3)
F*2 (S2) = Max (NB2(X2) +F*3 (S3)
F*2 (S2) = Max (NB2(X2) +F*3 (S2 -X2) )
 F1 (S1) = NB1 (X1) + Max (NB2 (X2) +Max (NB3(X3)) + Max (NB4 (X4) ...Stage1
F1 (Q) = NB1 (X1) +F2*(S2)
F1 (Q) = NB1 (X1) + F2*(Q-X1)
F1* (Q) = Max (NB1 (X1) +F2* (Q-X1)
4. Find the minimum cost of travel from start to End. The Petrol and the hotel costs are given.
Stage 1:
S1 : Node in stage 1
x1 : node from which S1 is reached
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d(x1 ,S1 ) : distance between nodes x1 and
S1 f*1 (S1 ) : Minimum distance from source node A to node S1
: min[d(x1 ,S1 )]

stage 1

S1 X1 C(s1,x1) f*(s1) x1*

A START 92 92 START
B START 88 88 START
C START 92 92 START

Stage 2:
S2: Node in stage 2 X2: node from which S2 is reached
C(x2, S2): cost used between nodes x2 & S2
f* 2(S2): Minimum cost from source node A to node S2: min[C(x2, S2) + f1* (x2)]

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stage 2
S2 X2 C(S2,X2) f1*(x2) C(x2,s2)+f1*(x2) f2*(s2) x2*
D A 58 92 150 150 A
B 75 88 163
C 63 92 155
E A 80 92 172 168 B
B 80 88 168
C 83 92 175
Stage 3:-

S3: Node in stage 3 X3: node from which S3 is reached

C(x3, S3): cost used between nodes x3 & S3

f* 3(S3): Minimum cost from source node A to node S3: min[C(x3, S3) + f2 * (x3)]

stage 3
S3 X3 C(S3,X3) f2*(x3) C(x3,s3)+f2*(x3) f3*(s3) x3*
F D 75 150 225 225 D
E 62 168 230
G D 100 150 250 248 E
E 80 168 248
H D 88 150 238 238 D
E 78 168 246
I D 87 150 237 235 E
E 67 168 235

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Stage 4:-

S4: Node in stage 4 X4: node from which S4 is reached

C(x4, S4): cost used between nodes x4 & S4

f* 4(S4): Minimum cost from source node A to node S4: min[C(x4, S4) + f3 * (x4)]

stage 4
S4 X4 d(S4,X4) f3*(x4) d(x4,s4)+f3*(x4) f4*(s4) x4*
J F 78 225 303 300 I
G 58 248 306
H 70 238 308
I 65 235 300
K F 83 225 308 308 F
G 100 248 348
H 80 238 318
I 80 235 315
L F 75 225 300 300 F
G 70 248 318
H 70 238 308
I 67 235 302

Therefore the minimum cost route will be

Start -A-D-H-L=0+22+70+8+50+18+7010+60=300

OR

START-B-E-I-J=0+8+80+10+70+7+70+15+50=300

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5. . The Ethiopian government is planning to implement a mix of four prioritized developmental

projects with 3 million euros obtained from funds. The profits that can be gained by
implementing the projects with 1 to 3 million euros allocated are shown below. What is the mix
of projects to develop so that the return will be maximized?

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S1 X1 NB1(X1) f1*(s1) X1*
0 0 0 0 0
0 0
1 1 2 2 1
0 0
1 2
2 2 8 8 2
0 0
1 2
2 8
3 3 9 9 3

Stage 2
f*2(s2) =max [NB2(x2)+f*1(s2-x2)]
0 ≤x2≤s2
0≤s2≤B
S2=amount of budget allocate for project 2
NB= total budget for whole projects
B= total budget for whole projects
X2= amount of budget exactly allocated for project 2
NB2= total benefit gained from project 2

(S2- f1(S2- F2(S2)=NB2(X2)+f1(S2-

S2 X2 NB2(X2) X2) X2) X2) f2*(S2) X2*
0 0 0 0 0 0 0 0
0 0 1 2 2
1 1 5 0 0 5 5 1
0 0 2 8 8
1 5 1 2 7
2 2 6 0 0 6 8 0
0 0 3 9 9
1 5 2 8 13
2 6 1 2 8
3 3 7 0 0 7 13 1

Stage 3
F3* (s3) =Max [B3(x3) + f*2(s3-x3)]
0 ≤x3≤s3
0≤s3≤B
S3=amount of budget allocate for project 3
NB= total budget for whole projects
X3= amount of budget exactly allocated for project 3
NB3= total benefit gained from project 3

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(S3- f2(S3- F3(S3)=NB3(X3)+f2(S3-
S3 X3 NB3(X3) X3) X3) X3) f3*(S3) X3*
0 0 0 0 0 0 0 0
0 0 1 5 5
1 1 4 0 0 4 5 0
0 0 2 8 8
1 4 1 5 9
2 2 4 0 0 4 9 1
0 0 3 13 13
1 4 2 8 12
2 4 1 5 9
3 3 4 0 0 4 13 0

(S3- f2(S3- F3(S3)=NB3(X3)+f2(S3-

S3 X3 NB3(X3) X3) X3) X3) f3*(S3) X3*
0 0 3 13 13
1 2 2 9 11
2 4 1 5 9
3 3 5 0 0 5 13 0

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6. A total of 6units of water is to be allocated optimally to three users. The allocation is made in
discrete steps of one unit ranging from 0 to 6. With the three users denoted as user 1, user 2
and user 3 respectively. The returns obtained from the users for a given allocation are given in
the following table. Find allocations to the three users so that the total return is maximized.

We‟ve used backward recursion to find the solution.

Step 1- Sub Optimization for User 3

NB3(X3)
S3 X3 0 1 2 3 4 5 6 F3(S3) X3*
0 0 0 0
1 0 7 7 1
2 0 7 12 12 2
3 0 7 12 15 15 3
4 0 7 12 15 16 16 4
5 0 7 12 15 16 15 16 4
6 0 7 12 15 16 15 12 16 4
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Step 2- Sub Optimization for User 2 and User 3

(S2- f3(S2- F2(S2)=NB2(X2)+f3(S2-

S2 X2 NB2(X2) X2) X2) X2) f2*(S2) X2*
0 0 0 0 0 0
0 0 1 7 7
1 1 5 0 0 5 7 1
0 0 2 12 12
1 5 1 7 12
2 2 6 0 0 6 12 0,1
0 0 3 15 15
1 5 2 12 17
2 6 1 7 13
3 3 3 0 0 3 17 1
0 0 4 16 16
1 5 3 15 20
2 6 2 12 18
3 3 1 7 10
4 4 -4 0 0 -4 20 1
0 0 5 15 15
1 5 4 16 21
2 6 3 15 21
3 3 2 12 15
4 -4 1 7 3
5 5 -15 0 0 -15 21 1
0 0 6 12 12
1 5 5 15 20
2 6 4 16 22
3 3 3 15 18
4 -4 2 12 8
5 -15 1 7 -8
6 6 -30 0 0 -30 22 2

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Step 3- Considering all the three stages together

f1(s1)=nb1(x1)+f2(Q-
S1- X1 NB1(X1) (Q-X1) f2(Q-X1) X1) f1*(x1) X1*
0 0 6 22 22
1 5 5 21 26
2 8 4 20 28
3 9 3 17 26
4 8 2 12 20
5 5 1 7 12
6 6 0 0 0 0 28 2

Tracking back the above three tables,

the Optimal allocation of water for user 1, X1*=2 & S1=6……. Table3

Thus, S1-X1=S2=6-2=4, S2=4

Optimal allocation of water for user 2, X2*=1 for S2=4… ........... Table 2

Thus S3=S2-X2=4-1=3

Optimal allocation water for user 3, X3*=3 for S3=3… ................. Table 1

Therefore, X1*=2 unit, NB1=8

X2*=1 unit, NB2=5

X3*=3 unit, NB3=15

The maximum return from the three users will be 8+5+15=28

7. You are asked for an advice to find the mix of development of urban area with proposed
projects of housing, retail, office and hotel areas. The available total area is 7ha. Rental income
(in x10,000birr) is a function of the floor areas allocated to each activity. What is the mix of
development that will maximize the return?

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We‟ve used forward recursion to find the solution.
Step 1- Considering housing as a first stage
f1* (s1) =Max (R1(x1)),
0 ≤x1≤s1, 0≤s1≤H
S1=amount of areas allocate for housing
H= total area
X1= amount of areas exactly allocated for housing
R1= total rent gained from housing

S1 X1 R1(x1) f1*(x1) X1*

0 0 0 0 0
0 0
1 2 1
1 2
0 0
2 1 2 4 2
2 4
0 0
1 2
3 6 3
2 4
3 6

0 0

4 1 2 8 4
2 4
3 6
4 8

0 0

10` 5
1 2
5
2 4
3 6
4 8
5 10
0 0
1 2
2 4
6 3 6 12 6
4 8
5 10
6 12

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0 0
1 2
2 4
3 6
7 14 7
4 8
5 10
6 12
7 14

Step 2:
Considering housing and retail as a second stage
f2*(s2) =Max (R2(x1) +f1*(s2-x2)), 0 ≤x2≤s2, 0≤s2≤H

S2=amount of areas allocate for

retail H=totalarea

X2= amount of areas exactly allocated for

retail

R2= total rent gained fromretail

f2*(x2)=
f1*(s2- R2(x+2)+
S2 X2 R2(x2) S2-x2 f2*(x2) X2*
x2) f1*(s2-
x2)
0 0 0 0 0 0 0
0 0 1 2 2 6 1
1
1 6 0 0 6
0 0 2 4 4
2 1 6 1 2 8 9 2
2 9 0 0 9
0 0 3 6 6
1 6 2 4 10
3 2 9 1 2 11 11 2
3 9 0 0 9
0 0 4 8 8
4 1 6 3 6 12 13 2
2 9 2 4 13
3 9 1 2 11
4 10 0 0 10
0 0 5 10 10
1 6 4 8 14

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2 9 3 6 15
5 3 9 2 4 13 `15 2
4 10 1 2 12
5 11 0 0 11
0 0 6 12 12
1 6 5 10 16
2 9 4 8 17
3 9 3 6 15
6 4 10 2 4 14 17 2
5 11 1 2 13
6 12 0 0 12
0 0 7 14 14
1 6 6 12 18
2 9 5 10 19
3 9 4 8 17
7 4 10 3 6 16 19 2
5 11 2 4 15
6 12 1 2 14
7 13 0 0 13
Step 3:
Considering housing, retail and office as a third stage
f3*(s3) =Max [R3(x3) +f2*(s3-x3)],
0 ≤x3≤s3,
0≤s3≤H
S3=amount of area allocate for office H= total area
X3= amount of areas exactly

allocated for office R3= total rent

gained from office

f3*(x3)=
f2*(s3- R3(x3)+
S3 X3 R3(x3) S3-x3 f3*(x3) X3*
x3) f2*(s3-
x3)
0 0 0 0 0 0 0
0 0 1 6 6
1 6 0
1 1 0 0 1
0 0 2 9 9
2 9 0
1 1 1 6 7
2 1 0 0 1
0 0 3 11 11
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1 1 2 9 10
3 2 1 1 6 7 11 0
3 2 0 0 2
0 0 4 13 13
1 1 3 11 12
4 2 1 2 9 10 13 0
3 2 1 6 8
4 1 0 0 1
0 0 5 15 15
1 1 4 13 14
2 1 3 11 12
`1
5 3 2 2 9 11 0,5
5
4 1 1 6 7
5 15 0 0 15
0 0 6 17 17
1 1 5 15 16
2 1 4 13 14
3 2 3 11 13
6 4 1 2 9 10 21 5
5 15 1 6 21
6 12 0 0 12
0 0 7 19 19
1 1 6 17 18
2 1 5 15 16
3 2 4 13 15
7 4 1 3 11 12 24 5
5 15 2 9 24
6 12 1 6 18
7 20 0 0 20

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Step 4: Considering the whole
areas as one stage f4*(s4) =Max
[R4(x4) +f3*(s4-x4)], 0
≤x4≤s4, S4=H
S4=amount of areas allocate for hotel H= total area

X3= amount of areas exactly allocated for hotel R3= total rent gained from hotel

f3*(s4- f4*(x4)= R4(x4)+ X4

S4 X4 R4(x4) S4-x4 f4*(x4)
x4) f3*(s4-x4) *
0 0 7 24 24
1 8 6 21 29
2 12 5 15 27
7 3 20 4 13 33
4 16 3 11 27 33 3
5 12 2 9 21
6 10 1 6 16
7 4 0 0 4

When we see back to the tables the areas for hotel purpose is i. e x4* =3 ha And s4=7
then s3=s4-x4; 7-3=4
When the value of s3=4 then x3*=0 (office)
S2=s3-x3; s2=4-0=4
When s2=4 then x2*=2 (Retail)
S1=s2-x2; s1=4-2=2
When s1=2 then x1*=2(housing)
Therefore:
X1*=2ha with a return of 40,000br
X2*=2ha with a return of 130,000br
X3*=0ha with a return of 130,000br
X4*=3ha with a return of 330,000br
Total maximum return= (40+130+130+330)*10,000br = 6,300,000br

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Chapter 5 Queuing Model
1. What is the application of queuing model in the construction industry? Support it with examples

Queuing models, a class of mathematical models used to analyze and optimize waiting lines and service
systems, have several practical applications in the construction industry. By analyzing the flow of resources,
materials, and labor, queuing models help in improving construction processes, optimizing resource
allocation, and minimizing waiting times. Here are some applications of queuing models in the construction
industry, along with examples:

1. Equipment Utilization:

- Application: Analyzing the utilization of construction equipment and optimizing the allocation of
machinery to different tasks.

- Example: Consider a construction site with multiple excavators, loaders, and dump trucks. Queuing
models can be applied to analyze the flow of resources, minimizing the idle time of equipment and ensuring
optimal utilization across different tasks, such as excavation, material handling, and earthworks.

2. Material Supply Chain Management:

- Application: Optimizing material delivery processes and inventory management to reduce waiting times
and improve overall efficiency.

- Example: In a large-scale construction project, queuing models can be used to analyze the flow of
materials such as concrete, steel, and lumber. By optimizing the scheduling of material deliveries and
managing inventory levels, queuing models can reduce delays and minimize the time that workers spend
waiting for essential materials.

3. Worker Scheduling and Allocation:

- Application: Optimizing labor allocation and scheduling to minimize waiting times and improve the
flow of work on a construction site.

- Example: Queuing models can be employed to optimize the deployment of workers across different
tasks, such as concrete pouring, framing, and finishing. By analyzing the flow of labor and minimizing
waiting times, queuing models can improve the overall productivity and efficiency of the construction site.

4. Traffic Flow and Access Management:

- Application: Analyzing the movement of vehicles and optimizing access points to construction sites to
minimize congestion and waiting times.

- Example: In large infrastructure projects, queuing models can be used to optimize traffic flow and
manage access points for vehicles delivering materials, equipment, and personnel. By minimizing
congestion and queuing at access points, queuing models improve overall efficiency and safety on
construction sites.

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5. Service System Optimization:

- Application: Applying queuing models to optimize the layout and design of service systems within
construction projects, such as material receiving areas, tool dispensing areas, or equipment maintenance
zones.

- Example: On a high-rise construction project, queuing models can be used to optimize the layout of
material receiving areas to minimize waiting times for delivery trucks, as well as to optimize the layout of
tool dispensing areas to ensure efficient access for workers.

6. Resource Allocation for Multiple Projects:

- Application: Optimizing the allocation of resources and labor across multiple construction projects to
minimize waiting times and improve overall resource utilization.

- Example: Construction companies operating on multiple projects can use queuing models to ensure
efficient allocation of labor and equipment across different sites, minimizing waiting times and maximizing
resource utilization.

By applying queuing models in these and other scenarios, the construction industry can optimize processes,
minimize waiting times, and enhance overall efficiency in resource allocation and utilization, leading to
improved productivity and cost-effectiveness.

2. . What is Kindall’s notation ?

Kendall‟s notation is a mathematical notation used to describe and classify queuing systems. It consists of a
series of letters and numbers that represent different characteristics of the system, such as arrival process,
the service time distribution, the number of servers, and the queue discipline. The notation is named after
David G. Kendall, who developed it in the 1950s. Its‟ general form can be described by:

a/b/c : d/e

Where,
a is arrival rate,
b is service rate,
c is no. of service stations,
d is capacity, and
e is queue discipline
3. Explain the multi service model [(M/M/S):/FCFS)] with examples.

The multi-service model, denoted as M/M/S:/FCFS, is a queuing model used to analyze systems where there
are multiple parallel servers attending to arriving customers, and the arrival process and service times follow
exponential probability distributions. In the notation M/M/S:/FCFS:

- M represents the exponential probability distribution of inter-arrival times.

- S represents the number of servers.

- FCFS represents First-Come, First-Served, which indicates the queuing discipline where the customer who
has been waiting the longest is served first.

Key Characteristics of M/M/S: FCFS Model:

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1. Exponential Arrival and Service Times:

- Inter-arrival times (times between consecutive customer arrivals) and service times at each server follow
exponential distributions.

2. Number of Servers (S):

- The system has a fixed number of S parallel servers to serve arriving customers.

3. First-Come, First-Served (FCFS):

- When multiple servers are idle, arriving customers are served by the first available server. In the case of
multiple waiting customers, the one who arrived first is served first.

Applications of M/M/S: FCFS Model:

- The M/M/S: FCFS model has various real-world applications, including call centers, customer service
desks, and computer or telecommunication networks, where customers or tasks arrive at random times and
are served by multiple available servers.

Example:

Let's consider a customer service department with three service representatives attending to customer
inquiries. The arrival time of new customer inquiries follows an exponential distribution with a mean arrival
rate of 4 customers per hour. The service times for each representative also follow an exponential
distribution, and each representative can serve an average of 5 customers per hour.

Characteristics of the M/M/S: FCFS model in this example:

- M (Exponential Arrival): Inter-arrival times between customer inquiries follow an exponential distribution.

- S (Three Servers): There are three service representatives available to handle customer inquiries
simultaneously.

- FCFS (First-Come, First-Served): When a customer inquiry arrives, it is directed to the first available
service representative. If multiple representatives are available, the longest waiting customer is served first.

Queuing Model Analysis:

Using the M/M/S: FCFS model, one can analyze various performance metrics, including the average number
of customers in the system, the average time a customer spends in the system, the probability of a customer
having to wait before service, and the average number of customers being served.

By applying the M/M/S: FCFS model to this example, one can assess the efficiency and performance of the
customer service system, optimize the number of service representatives based on arrival rates and service
times, and make informed decisions related to resource allocation and customer wait times.

This model provides a structured approach to understanding and optimizing service systems where multiple
parallel servers attend to arriving customers, based on the assumptions of exponential arrival and service
time distributions and a First-Come, First-Served queuing discipline.

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4. In the traffic light system, derive that the optimal green time, go is expressed as:

go = ρ * R / (1 - ρ)

Where, ρ is the traffic intensity and r is the effective red time

ANS.

To derive the expression for the optimal green time (go) in a traffic light system, we can use the concept of
traffic intensity (ρ) and the effective red time (r). The objective is to find the optimal green time that
maximizes traffic flow through an intersection. Using the concept of traffic intensity and effective red time,
we can express the optimal green time (go) as:

If we consider the triangle ABC in the figure,

 Vehicles arrive during time period r+go
 Vehicles depart during time period go
Thus, the total number of vehicle arrivals equals the total number of vehicle departures

(r+ g0)=µ g0

ʎr+ʎ g0=µ g0

µ g0-ʎ g0=ʎr

g0 (µ-ʎ)=ʎr

g0=ʎr/(µ-ʎ)

ρ=ʎ/µ

ʎ=ρ*µ

g0=( ρ*µ)r/(µ- ρ*µ)

g0=µρr/(µ(1-ρ))

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g0=ρr/(1-ρ)

5. The Cycle length at the signalized intersection is 120seconds. The considered approach has the
saturation flow of 3500 vehicles per hour, the green time duration of 65 seconds, and flow rate of
800 vehicles per hour. Analyze the traffic conditions in the vicinity of the intersection. Assume
that M/D/1 queueing system adequately describes the considered intersection approach. Calculate
the total average delay per vehicle using M/D/1 approach.
Solution:
Given
Cycle length, c =120sec.
green light, g = 65ec.
R=red time
The flow rate ,  and the service rate,  are:
µ=3500v/h
ʎ=800v/h

c=g+r

r=c-g=120-65=55sec

ʎ=800v/h=800/(60*60)=0.222v/s

µ=3500v/h=800/(60*60)=0.972v/s

ρ=ʎ/µ=0.222/0.972=0.23

flow condition

ʎc≤µg

0.222*120≤0.972*65

26.64≤63.2 the traffic condition is unsaturated

Average delay

D=r^2/(2*c(1-ρ))

D=55^2/(2*120(1-0.23)

D=16.33sec

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Chapter 6 Inventory model
1. What is the purpose of inventory model in the construction industry? Note: Don’t copy from the
lecture note.

The purpose of inventory models in the construction industry is to optimize the management of construction
materials and supplies, ensuring that the right amount of inventory is available at the right time to support
construction projects. Inventory models help construction firms strike a balance between having enough
materials to avoid delays and excess stock, which can tie up capital and increase holding costs. Here are the
key purposes and benefits of using inventory models in the construction industry:

1. Optimizing Material Availability:

- Inventory models help construction firms determine the optimal quantity of materials to keep in stock,
considering factors such as lead time, usage rates, and project schedules. This optimization ensures that
materials are available when needed, reducing project delays.

2. Minimizing Holding Costs:

- By optimizing inventory levels, construction firms can minimize holding costs associated with excess
stock. Holding costs may include storage costs, obsolescence, and the cost of capital tied up in inventory.

3. Preventing Stockouts:

- Inventory models help in avoiding stockouts, where materials are not available when needed, potentially
causing delays and added costs to construction projects.

4. Balancing Multiple Projects:

- Construction firms often work on multiple projects simultaneously. Inventory models assist in balancing
inventory across projects, ensuring that the right materials are allocated to each project without excess stock.

5. Synchronizing Supply Chain:

- Inventory models help synchronize material procurement activities with project schedules, enabling just-
in-time replenishment and reducing the need for long-term storage of materials.

6. Cost Control:

- By managing inventory effectively, construction firms can control and reduce overall project costs. This
is achieved by avoiding rush orders, minimizing storage costs, and preventing underutilization of capital due
to excess stock.

7. Improved Project Planning:

- Inventory models contribute to more accurate project planning by ensuring that materials required for
construction activities are available as scheduled, reducing uncertainty and enabling better project execution.

8. Supplier Management:

- Inventory models enable construction firms to work closely with suppliers to optimize material delivery
schedules, providing benefits such as reduced lead times and improved collaboration.

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9. Risk Mitigation:

- Optimized inventory levels help mitigate the risk of shortages, supplier issues, and unforeseen delays,
thereby improving project risk management.

10. Sustainability and Environmental Impact:

- Efficient inventory management reduces waste and minimizes the environmental impact associated with
excess materials and disposal. It aligns with sustainability goals by optimizing material usage and
minimizing excess inventory.

By employing inventory models, construction firms can effectively manage materials and supplies, ensuring
that construction projects proceed smoothly, within budget, and without delays caused by stockouts or
excess inventory. These models contribute to cost optimization, improved project planning, and overall
efficiency in the construction industry.

2. R & B Beverage Company has a soft drink product that has a constant annual demand rate of 3600
cases. A case of the soft drink costs $3. Ordering costs are $20 per order and holding costs are 25%
of the value of the inventory. R & B has 250 working days per year, and the lead time is 5 days.
Identify the following aspects of the inventory policy: a) Economic order quantity b) Reorder point
c) Cycle time d) Total annual cost

SOLUTION

Given:

Annual Demand, D = 3600 cases

Ordering cost, S = $20

Holding cost, H = 0.25*$3 = $0.75

Working days per year = 250 days

Lead time, L=5days

Solution:

a) Economic order quantity,

=

=438 cases

b) Reorder point,

d =3600/250 = 14.4

R= 14.4*5 =72 cases

c) Cycle time,

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N=3600/438=8.22

T=250/8.21=31 days

d) Total annual cost,

Ordering cost, OC=3600*20/438=$164.38

Holding cost, HC = 438*0.75/2= $164.25

Total cost, TC= 164.38+164.25 = $329

3. The demand for a product is normally distributed, but all other EOQ assumptions are met. The
annual demand is 10,000 units, and there are 250 working days per year. The ordering cost is $48 per
order and the holding cost is $6 per unit per year. Sales during the 6-day lead time are normally
distributed with a mean of 240 units and a standard deviation of 80units. A service level of 90% has
been established based on holding costs and stock out costs.
a) How many units should be ordered to minimize cost?
b) How much safety stock should be carried?
c) What is the reorder point?

SOLUTION

Given:
Annual Demand, D =
10,000 units
Ordering
cost, S = $48
Holding
cost, H = $6
Working days per year
= 250 days Lead
time, L= 6 days
Average lead time demand, DL = 240

Standard deviation, s=80

a)

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b) Reorder
level,

RL=0.9*400=3
60
SS=360-

c) Reorder point,
d =10,000/250 = 40

R= 40*6 =240 unit

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Chapter 7 Decision Model

1. What are the elements for rational decision making?

When it comes to making rational decisions, there are several key elements to consider. Here are
the essential components of rational decision making:

1. Clear Goal-Setting: Define the specific goals or objectives you aim to achieve through the
decision-making process. Clarity in goal-setting helps in aligning your decisions with desired
outcomes.

2. Gathering Information: Collect relevant and reliable information pertaining to the decision
at hand. Comprehensive data assists in making informed choices and understanding the
implications of different options.

3. Identifying Alternatives: Generate and evaluate multiple alternatives or courses of action.

Considering different options allows for a comprehensive assessment of possible solutions.

4. Assessing Consequences: Analyze the potential consequences and outcomes associated with
each alternative. Evaluate the risks, benefits, costs, and impacts of different choices on achieving
your goals.

5. Considering Constraints: Take into account any constraints or limitations, such as resource
constraints, time constraints, or external factors that may influence the decision-making process.

6. Evaluating Preferences: Assess personal preferences, values, and priorities to ensure that the
decision aligns with your values and long-term objectives.

7. Risk Management: Evaluate and manage risks associated with each option. Assess the
likelihood of success and potential drawbacks of each alternative to make informed risk-adjusted
decisions.

8. Quantitative Analysis: Utilize quantitative tools like cost-benefit analysis, decision trees, or
scenario analysis to quantify and compare the potential outcomes of different choices.

9. Consultation and Collaboration Seek input from relevant stakeholders, experts, or advisors
to gain diverse perspectives, insights, and expertise that can inform the decision-making process.

10. Emotional Intelligence: Acknowledge and manage emotional biases and influences that
may impact decision making. Emotional intelligence plays a crucial role in maintaining
rationality and objectivity.

11. Monitoring and Reviewing Continuously monitor the outcomes of your decisions and be
willing to adapt and adjust based on feedback and new information. Regular review helps in
assessing the effectiveness of decisions and making improvements.
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58

By incorporating these elements into the decision-making process, individuals and organizations
can enhance their rationality, improve decision outcomes, and navigate complex problems more
effectively. Rational decision making involves a systematic and logical approach that balances
analysis, introspection, and objective evaluation to achieve optimal results.

2. Why decisions are hard?

Decisions can often be challenging due to a variety of factors that introduce complexity and
uncertainty into the decision-making process. Here are some reasons why decisions can be hard:

1. Information Overload: In our information-rich world, the abundance of data and choices can
overwhelm decision-makers, making it difficult to sift through relevant information and make a
confident choice.

2. Uncertainty and Risk: Decisions often involve an element of uncertainty and risk. Predicting
future outcomes or assessing all potential consequences can be daunting, especially when
outcomes are uncertain.

3. Conflicting Goals and Priorities: When decision-makers have to balance multiple objectives
or deal with conflicting priorities, it can be challenging to prioritize goals and make choices that
satisfy all stakeholders.

4. Complexity of the Problem: Some decisions involve intricate or multifaceted issues that are
not easily understood or solved. The complexity of the decision problem can make it hard to
identify the best course of action.

5. Emotional and Cognitive Biases: Cognitive biases, emotions, and personal preferences can
cloud judgment and lead to irrational decision-making. Overcoming these biases requires self-
awareness and introspection.

6. Time Constraints: Making decisions under time pressure can add stress and hinder the
thorough evaluation of alternatives. Quick decisions may not always be the most effective in
complex situations.

7. Fear of Failure: The fear of making the wrong choice or facing negative consequences can
paralyze decision-makers, making it hard to commit to a particular course of action.

8. Limited Resources: Constraints such as budget, time, or resources may restrict decision
options, forcing decision-makers to prioritize and make trade-offs.

9. Group Dynamics and Consensus Building: Decision-making in group settings requires

navigating interpersonal dynamics, diverse opinions, and reaching consensus, which can
complicate the process.

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59

10. Unforeseen Events: External factors, unexpected events, and changing circumstances can
introduce new variables into the decision-making process, requiring adaptability and flexibility.

11. Ethical Considerations: Ethical dilemmas can make decisions difficult, especially when
choices involve moral complexities and conflicting ethical principles.

12. Long-Term Impact: Decisions with long-term consequences require careful consideration
and the ability to foresee future implications, adding pressure to make the right choice.

Navigating these challenges often requires a systematic approach, critical thinking, and a balance
between analytical reasoning and intuition to arrive at well-considered decisions. Embracing the
complexity of decision-making and being open to learning and adaptation can help in addressing
the difficulties inherent in making choices.

3. What is a good decision?

A good decision is one that is well-thought-out, aligns with your goals and values, and leads
to positive outcomes. Here are some key characteristics of a good decision:

1. Informed: A good decision is based on accurate and relevant information. It involves

thorough research, analysis, and understanding of the available data and factors influencing the
decision.

2. Goal-Oriented: A good decision is aligned with your objectives and aspirations. It moves you
closer to your goals and helps you achieve the desired outcomes.

3. Rational: Good decisions are made through a rational thought process, considering logical
reasoning, evidence, and sound judgment. Emotions are acknowledged but not the sole driver of
the decision.

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60

4. Balanced: A good decision takes into account various perspectives, risks, benefits, and
possible consequences. It involves weighing trade-offs and considering the impact on all
stakeholders.

5. Timely: Timing plays a crucial role in decision-making. A good decision is made promptly
when needed, considering deadlines, opportunities, and the context in which the decision needs
to be made.

6. Ethical: Ethical considerations are integral to good decision-making. A good decision aligns
with ethical principles, values honesty, fairness, and integrity, and considers the impact on others
and the broader community.

7. Adaptable: Good decisions are flexible and adaptable when circumstances change. They
allow for adjustments based on new information, feedback, or evolving situations.

8. Risk-Aware: A good decision acknowledges and manages risks effectively. It involves

evaluating potential risks, implementing risk mitigation strategies, and being prepared for
uncertainties.

9. Clear Communication : Communicating decisions clearly and effectively is key to their

success. A good decision is communicated to all relevant stakeholders, ensuring shared
understanding and alignment.

10. Reflective: Reflecting on past decisions and learning from both successes and failures is
essential for making good decisions in the future. Continuous learning and improvement are
integral to the decision-making process.

11. Impactful: A good decision has a positive impact on the individual, team, organization, or
community. It leads to favorable outcomes, resolves issues effectively, and contributes to long-
term success.

12. Accountable: Taking ownership and being accountable for decisions, including their
outcomes and consequences, is a hallmark of good decision-making. Accountability fosters
responsibility and credibility in decision-makers.

By embodying these characteristics and principles, individuals and organizations can

enhance their decision-making processes and make choices that are ethical, effective, and
align with their long-term objectives.

4. A real estate company is planning to construct luxury condominiums on its site. The company
has a capacity to construct up to 250 condominium blocks. The financial success of the project
depends upon the number of condominium blocks to be constructed and the chance event
concerning the demand for the condominiums. The decision problem is to select the number of
condominium blocks to be constructed that will lead to the largest profit given the uncertainty
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concerning the demand for the condominiums. The cost and revenue of construction per block
are 6000 and 14000 (in x1000)birr, respectively. Find an optimal decision based on:

a) Maxmin Criterion

b) Minimax Regret Criterion

c) Maximax Criterion

d) Principle of Insufficient Reasoning

ANSWER

a) Maxmin
Criterion
pick the min Choice
Low Low Low value of among (prick maxi
(50units) (100units) (150units) each alternatives from the
min value
Build 50 400,000 400,000 400,000 400,000
select
100,000
Build 100 100,000 800,000 800,000

Build 150 200,000 500,000 1,200,000 200,000

b) Maxmin Criterion
Low Low Low
Choice
(50units) (100units) (150units)
Build
400,000 400,000 400,000
50
Build
100,000 800,000 800,000
100
Build
200,000 500,000 1,200,000
150
Max 400,000 800,000 1,200,000

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Regrate table
pick the min
Low Low Low value of
Choice
(50units) (100units) (150units) among each
alternatives
Build
0 400,000 800,000
50 800,000
Build
300,000 0 400,000
100 400,000
Build
200,000 300,000 0
150 300,000 Select

c) Max max Criterion

pick the max

Low Low Low
value of among Choice
(50units) (100units) (150units)
each alternatives
Build 50 400,000 400,000 400,000 400,000
Build 100 100,000 800,000 800,000 800,000
Build 150 200,000 500,000 1,200,000 1,200,000 select

d) Principle of Insufficient Reasoning

sum of paypoff
for each
Low Low Low
alternative and Choice
(50units) (100units) (150units)
select the
maxiumium
Build 50 400,000 400,000 400,000 1,200,000
Build 100 100,000 800,000 800,000 1,700,000
Build 150 200,000 500,000 1,200,000 1,900,000 select

Low (50 unit Low (100 unit equal

) ) Low (150 unit ) realism choice likelihood choice
A 400000 400000 400000 400000 1200000
B 100000 800000 800000 660000 1700000
C 200000 500000 12000000 9640000 SELECT 12700000 SELECT
α 0.8

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alternative
actions state of nature Criteria
demand
Low (50 unit Low (100 unit
) ) Low (150 unit ) minmax choice
A 0 400000 11600000 11600000
B 300000 0 11200000 11200000
C 200000 300000 0 300000 SELECT

alternative
actions state of nature Criteria
demand
Low (50 unit Low (100 unit
) ) Low (150 unit ) EV choice
A 400000 400000 400000 400000
B 100000 800000 800000 590000
C 200000 500000 12000000 2710000 SELECT
pro 0.3 0.5 0.2

ERPI 2920000
EV 2710000
EVPI 210000

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