Teaching Excel Solver to All Business School Majors

by
Dr. Robert G. Stoll
Assistant Professor Operations & Supply Chain Management
Department of Business Management
Dauch College of Business and Economics
Ashland University
401 College Avenue
Ashland, OH 44805
419-289-5905
rstoll2@ashland.edu
Dr. Joseph R. Muscatello
Associate Professor Business Management and Technology
Kent State University at Geauga
14111 Claridon-Troy Road
Burton, OH 44021
440 834-4187
jmuscate@kent.edu

Abstract
Many business schools have a required course in Operations Management for
all business majors. Within the Operations Management course,
spreadsheets have become the primary software application for teaching
decision models in most business schools. The most popular software for
analyzing and solving optimization models is Excel Solver. While there are
other programs such as LINDO, Excel is the most popular due to the
prevalence and popularity in the business world. Excel Solver is especially
useful for interdisciplinary courses involving optimization problems. This
article summarizes the use of Excel Solver in spreadsheet modeling and
solving linear programming problems in an introductory Operations
Management course. It is shown how to use and teach spreadsheet modeling
using Excel Solver for solving linear problems. Examples from different areas
such as, transportation, manufacturing, and product mix are discussed to
demonstrate the use and teaching methods of Excel Solver. This article
provides guidelines for teaching Excel Solver and offers simple examples that
can easily be incorporated into the classroom.

key words: excel solver; spreadsheet implementation; optimization

models; analysis
Introduction
Linear programming is a mathematical model used for solving linear
optimization problems through minimization or maximization of a linear
function subject to linear constraints. Optimization problems are real world
problems encountered in many areas such as mathematics, engineering,
science, business and economics. The optimal is the most efficient way of
using limited resources to achieve the objective of the problem. In business,
optimization usually means maximizing the profit or minimizing the cost.
For example, in blending gasoline and other petroleum products, many
intermediate distillates may be available. Prices and octane ratings as well
have upper limits on capacities of input materials that can be used to
produce various grades of fuel are given. The problem is to blend the various
inputs in such a way that cost will be minimized and therefore profits will be
maximized, specified optimum octane ratings will be met and the need for
additional storage capacity will be avoided. In Excel, the model consists of
the three following components:
1. The decision variables or changing cells. These changing cells are
allowed to freely change and cannot contain formulas. The decisions of
the problem are represented using symbols such as X and Y or X 1, X2,
X3,..Xn. These variables represent unknown quantities such as the
number of items to produce, etc.
2. The objective function or objective cell contains the objective to be
minimized or maximized. The objective may be maximizing the profit,
minimizing the cost, distance, time, etc.,
3. The constraints imposed restrictions on the values in the changing
cells. These limitations are expressed as inequalities or equations in
decision variables.
If the model consists of a linear objective function and linear constraints in
decision variables, it is called a linear programming (LP) model. A nonlinear
programming model consists of a nonlinear objective function and nonlinear
constraints will be discussed in a future teaching forum. Linear programming
is a method used to solve models by the Simplex Algorithm developed by
Dantzig (1963). This technique can be used to solve problems in two or more
factors. The paper by Fylstra et al. (1998), which comprehensively describes
how Solver was designed and developed, addresses other practical issues
associated with using Excel Solver.
Model Development

The first part of solving an optimization problem is model development,

consuming most of the effort. Here the student decides what the decision
variables are, what the objective is, what the constraints are and how it all
fits together.
The second step is to optimize. Excel solver performs the optimization by
making the objective as large (for maximization) or small (for minimization)
while satisfying all of the constraints. If all of the constraints are satisfied, the
student has achieved a feasible solution. If any constraint is violated, the
solution is infeasible and is not allowed. Three examples follow.
Targeting a forced solution
Consider the problem X + Y = 10. If one attempts to solve this equation, it
can be shown that there are an infinite number of solutions. For example, if X
= 1, then Y = 9 or if X = 2, then Y = 8, etc. Therefore, we will add constraints
(or conditions). The constraints are X > 5 and X must be a positive integer.
Now the solution set, while still large, has been limited. For example, if X = 6,
then Y = 4 or if X = 10, then Y = 0, etc. Adding more constraints such as Y >
3 and Y must be a positive integer limits the problem to only one feasible
solution; X = 6 and Y = 4. What was just performed was the process of
solving equations. In Excel, the following is performed:

In cells B1 & B2, arbitrary numbers have been inserted. Cell B3 is the sum B1
& B2. Cell B3 is the objective cell or target cell. Now click on the Data Tab
and choose solver. The changing cells are B1 & B2. The constraints (X > 6, Y
> 3, X and Y are integers) must be added. The optimal solution will be
presented in cells B1 & B2.

Product Mix Problem (Profit Maximization)

ABC Corporation wishes to produce two products, Product A and Product B.
Product A results in a $6.00 profit and Product B results in a $4.00 profit.
Product A requires 4 minutes on Machine 101 and 6 minutes on Machine 102.
Product A requires 4 minutes on Machine 101 and 2 minutes on Machine 102.
There are 24 minutes available on Machine 101 and 16 minutes available on
Machine 102. How much of Product A and Product B should ABC make to
maximize its profit?
Table 1
Machine 101
Machine 102
Profit/Unit

Product A
4 minutes
4 minutes
$6.00

Product B
6 minutes
2 minutes
$4.00

Time Available
24 minutes
16 minutes

Maximize Profit (Objective function) $6.00x + $4.00y.

Subject to The following constraints 4x + 6y 24 and 4x + 2y 16 and x
0 and y 0.
The changing cells are x is units produced of Product A and y is units
produced of Product B.
The solution shows that it is optimal to produce 3 units of Product A and 2
units of Product B for a maximum profit of $26.00 using all of the capacity.

Shipping Cost Problem (Cost Minimization)

ABC Industries has two Manufacturing plants in Cleveland and Cincinnati. The
Cleveland plant has a production capacity of 450 while the Cincinnati plant
has a capacity of 150. There are two warehouses for the U.S. East and West.
The customer demand for the east is 350 units and customer demand for
the west is 250. This is a classic supply and demand problem with the supply
coming from the manufacturing plants and the demand coming from the
warehouses. The unit shipping costs are found in the Table 2. For example,
the cost to ship a product from the Cleveland plant to the Western
warehouse is $278. The objective is to find the least cost method of shipping
product from the plants to the warehouses that maintains plant capacities
and meets regional demand.
Table 2

Cleveland
Plant
Cincinnati
Plant
Demand

Warehouse East
(shipping costs /
units)
325 / X1

Warehouse West
(shipping costs /
units)
278 / X2

Capacity

290 / X3

295 / X4

150

350

250

600

450

Minimize Cost (Objective function) 325X1 + 278X2 + 290X3 + 295X4

Subject to the following constraints:

o Number sent out of each plant Plant capacity
X1 + X2 450 and X3 + X4 150
o Number sent to each warehouse Demand
X1 + X3 350 and X2 + X4 250
The changing cells are X1, X2, X3 and X4 the number of products sent
from each plant to each warehouse.

The solution shows that it is optimal to send 350 units from Cleveland to East
Warehouse and 100 units from Cleveland to West Warehouse. There will not
be any units sent from Cincinnati to East Warehouse and 150 units from
Cincinnati to West Warehouse. The minimum cost to ship is $185,800.00
while meeting supply and demand constraints.
Conclusion
Optimization problems in nearly all educational fields can be modeled and
solved using Excel Solver. It does not require knowledge of complex matrix
algebra behind the solution algorithms. Therefore, this method is useful for
students to solve real world problems who lack the overall mathematical
skills. It would be very helpful to begin teaching these basic Solver skills in
high school prior to admission to a comprehensive university.
References

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