In this chapter, the following content will be discussed: Transportation modeling, developing an initial solution, the Northwest-corner rule, the intuitive lowest cost method, the stepping-stone method, special issues in modeling, demand not equal to supply, degeneracy. | LSM733-PRODUCTION OPERATIONS MANAGEMENT By: OSMAN BIN SAIF LECTURE 27 1 Summary of last Session Total Productive Maintenance Techniques for Enhancing Maintenance 2 2 CHAPTER : Decision Modeling Decision Making & Models. Decision Tables. Decision making under uncertainty. Decision making under risk. Expected value of perfect information (EVPI). Summary of last Session (Contd.) 3 Agenda for this Session Decision Trees CHAPTER : TRANSPORTATION MODELING Transportation Modeling Developing an Initial Solution The Northwest-Corner Rule The Intuitive Lowest Cost Method 4 Agenda for this Session (Contd.) The Stepping-Stone Method Special Issues in Modeling Demand Not Equal to Supply Degeneracy 5 Graphical display of decision process. Used for solving problems with several sets of alternatives and states of nature (sequential decisions). Decision tables can not be used for more than one decision. Expected Value criterion is used. Decision Trees 6 6 Using Decision Trees Define the problem. Draw | LSM733-PRODUCTION OPERATIONS MANAGEMENT By: OSMAN BIN SAIF LECTURE 27 1 Summary of last Session Total Productive Maintenance Techniques for Enhancing Maintenance 2 2 CHAPTER : Decision Modeling Decision Making & Models. Decision Tables. Decision making under uncertainty. Decision making under risk. Expected value of perfect information (EVPI). Summary of last Session (Contd.) 3 Agenda for this Session Decision Trees CHAPTER : TRANSPORTATION MODELING Transportation Modeling Developing an Initial Solution The Northwest-Corner Rule The Intuitive Lowest Cost Method 4 Agenda for this Session (Contd.) The Stepping-Stone Method Special Issues in Modeling Demand Not Equal to Supply Degeneracy 5 Graphical display of decision process. Used for solving problems with several sets of alternatives and states of nature (sequential decisions). Decision tables can not be used for more than one decision. Expected Value criterion is used. Decision Trees 6 6 Using Decision Trees Define the problem. Draw the decision tree. Assign probabilities to all states of nature. Estimate payoffs for each combination of alternatives and states of nature. Solve the problem: Compute expected values for each state-of-nature node moving right to left. Select decisions that maximize expected value. 7 7 Decision Theory Terms: Alternative: Course of action or choice. State of nature: An occurrence over which the decision maker has no control. Symbols used in decision tree: A decision node from which one of several alternatives may be selected. A state of nature node out of which one state of nature will occur. 8 8 Decision Tree 1 2 State 1 State 2 State 1 State 2 Alternative 1 Alternative 2 Decision Node Outcome 1 Outcome 2 Outcome 3 Outcome 4 State of Nature Node 9 Decision Tree for Example Favorable Mkt () Build Large Build Small Unfavorable Mkt () $200,000 Favorable Mkt () Unfavorable Mkt () -$180,000 $100,000 -$20,000 $0 Do nothing 10 Decision Tree for Example - Solution Favorable Mkt .
