Linear Programming On Computer - Ch78

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php
To accompany Quantitative Analysis for Management, 9e by Render/Stair/Hanna
7-1
Learning Objectives
YOU will be able to: 1. Understand the basic assumptions and properties of linear programming (LP). 2. Solve any LP problem using Excel Solver. 3. Understand special issues in LP such as infeasibility, un-boundedness, redundancy, and alternative optimal solutions.
7-2
Introduction
Linear programming (LP) is a widely used mathematical modeling technique designed to help managers in planning and decision making relative to resource allocation. LP is a technique that helps in resource allocation decisions. Programming refers to modeling and solving a problem mathematically.
7-3
Examples of Successful LP Applications

1. Development of a production schedule that will
satisfy future demands for a firms production while minimizing total production and inventory costs 2. Selection of product mix in a factory to make best use of machine-hours and labor-hours available while maximizing the firms products
7-4
2006 by Prentice Hall, Inc. Upper Saddle River, NJ 07458
Examples of Successful LP Applications (continued)

3. Determination of grades of petroleum products to
yield the maximum profit 4. Selection of different blends of raw materials to feed mills to produce finished feed combinations at minimum cost 5. Determination of a distribution system that will minimize total shipping cost from several warehouses to various market locations
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LP Problem Statement- Example

Hal has enough clay to make 24 small vases or 6 large vases. He only has enough of a special glazing compound to glaze 16 of the small vases or 8 of the large vases.
Let X1 the number of small vases and X2 the number of large vases.
The smaller vases sell for $3 each, while the larger vases would bring $9 each.
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4 Properties of LP
All LP problems have 4 properties in common: All problems seek to maximize or minimize some quantity (the objective function). The presence of restrictions or constraints limits the degree to which we can pursue our objective. There must be alternative courses of action to choose from. The objective and constraints in linear programming problems must be expressed in terms of linear equations or inequalities. 2A + 5B = 10 2A2 + 5B3 + 3AB = 10
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Formulating a linear program involves developing a mathematical model to represent the managerial problem. Once the managerial problem is understood, begin to develop the mathematical statement of the problem. The steps in formulating a linear program follow on the next slide.
Formulating Linear Programming Problems
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Formulating Linear Programming Problems

(continued)
Steps in LP Formulations 1. Completely understand the managerial problem being faced. 2. Identify the objective and the constraints. 3. Define the decision variables. 4. Use the decision variables to write mathematical expressions for the objective function and the constraints.
7-9
Applications we will be studying

Marketing Applications Manufacturing Applications Employee Scheduling Applications Financial Applications Transportation Applications Ingredient Blending Applications
Marketing Applications
Linear programming models have been used in the advertising field as a decision aid in selecting an effective media mix. Media selection problems can be approached with LP from two perspectives.
- The objective can be to maximize audience exposure or to minimize advertising costs.
8-11
The Win Big Gambling Club Their Marketing Budget per week is 8000$ The table on the following slide presents the number of potential gamblers reached by making use of an advertisement in each of four media. It also provides the cost per advertisement placed and the maximum number of ads that can be purchased per week.
Media Selection: Win Big Gambling Club
Medium Audience Reached Per Ad 5,000 8,500 2,400 2,800 Cost Per Ad($) 800 925 290 380 Maximum Ads Purchased Per Week 12 5 25 20
TV spot (1 minute) Daily newspaper (full page ad) Radio spot (30 seconds, prime time) Radio spot (1 minute, afternoon)
The Win Big Gambling Club The contractual arrangements require that at least five radio spots be placed each week. Management insists that no more than $1,800 be spent on radio advertising every week. The problem can be stated as follows Let X1 = # of 1-minute TV spots each week X2 = # of daily paper ads each week X3 = # of 30-second radio spots each week X4 = # of 1-minute radio spots each week
Win Big Gambling Club LP Equations

TIP: All the science lies here, so practice formulating these from word problems
8-15
Win Big Gambling Club Solver in Step-1: Write Variable in Step 5: Put Excel Step 2:
Objective (Minimize or Maximize) Sumproduct formula here & insert Sign each column Solution is displayed here in bold. Step 3: start by putting in 0 for each required Variable
Step 6: Input in Solver & Solve
Step 4: Write Constraint name here in each row of first column & add constraints
Step 6: Input in Solver & Solve
Win Big Gambling Club Solver in Excel Solution is

displayed here in bold.
Win Big Gambling Club Solver in Excel

The parameter solution produces an audience exposure of 67,240 contacts. Because X1 and X3 are fractional, Win Big would probably round them to 2 and 6, respectively. Problems that demand all integer solutions are discussed in detail in Chapter 11.
X1 = 1.97 X2 = 5 X3 = 6.2 X4 = 0 TV spots newspaper ads 30-second radio spots 1-minute radio spots
Linear programming has also been applied to marketing research problems and the area of consumer research. The next example illustrates how statistical pollsters can reach strategy decisions with LP.
8-19
MSAs goal is to meet the sampling requirements at the least possible cost.
Management Sciences Associates (MSA)
1. 2.
3. 4. 5. 6.
The MSA determines that it must fulfill several requirements in order to draw statistically valid conclusions: Survey at least 2,300 U.S. households. Survey at least 1,000 households whose heads are 30 years of age or younger. Survey at least 600 households whose heads are between 31 and 50 years of age. Ensure that at least 15% of total surveyed live in a state that borders on Mexico. Ensure that max 20% 51 Years old live in a state that borders on Mexico out of all those surveyed who are 51 years of age. MSA decides that all surveys should be conducted in person.
Management Sciences Associates (MSA)
MSA estimates that the costs of reaching people in each age and region category are as follows:
Let: X1 = # of 30 or younger & in a border state X2 = # of 31-50 & in a border state X3 = # 51 or older & in a border state X4 = # 30 or younger & not in a border state X5 = # of 31-50 & not in a border state X6 = # 51 or older & not in a border state
8-21 2006 by Prentice Hall, Inc. Upper Saddle River, NJ 07458
Note that the variables in the constraints are moved to the lefthand side of the inequality.
Answer: The computer solution to MSAs problem costs $15,166 and below:
Manufacturing Applications
Production Mix
A fertile field for the use of LP is in planning for the optimal mix of products to manufacture. A company must meet a myriad of constraints, ranging from financial concerns to sales demand to material contracts to union labor demands. Its primary goal is to generate the largest profit possible.
Fifth Avenue Industries Four varieties of ties produced: 1. one is an expensive, all-silk tie, 2. one is an all-polyester tie, and 3. two are blends of polyester and cotton. The table on the following slide illustrates the cost and availability (per monthly production planning period) of the three materials used in the production process
To accompany Quantitative Analysis for Management, 9e by Render/Stair/Hanna 8-25 2006 by Prentice Hall, Inc. Upper Saddle River, NJ 07458
Fifth Avenue Industries
Monthly cost & availability of material
The table on the next slide summarizes the contract demand for each of o the four styles of ties, o the selling price per tie, and o the fabric requirements of each variety.
8-26
Fifth Avenue Industries
Fifth Avenues goal is to maximize its monthly profit. It must decide upon a policy for product mix.
Let X1 = # of all-silk ties produced per month X2 = # polyester ties X3 = # of blend 1 poly-cotton ties X4 = # of blend 2 poly-cotton ties
To accompany Quantitative Analysis for Management, 9e by Render/Stair/Hanna 2006 by Prentice Hall, Inc. Upper Saddle River, NJ 07458
8-27
Calculate profit for each tie: Profit = Sales price Cost per yard x Yards per tie
8-28
Manufacturing Applications: Product Mix
3 Types of Constraints in this case: Material Availability Meeting Contract Maximum Demand
3 Types of Constraints: Material Availability Meeting Contract Maximum Demand
Manufacturing Applications Fifth Avenue
8-31
Production Scheduling
This type of problem resembles the product mix model for each period in the future. The objective is either to maximize profit or to minimize the total cost (production plus inventory) of carrying out the task. Production scheduling is well suited to solution by LP because it is a problem that must be solved on a regular basis. When the objective function and constraints for a firm are established, the inputs can easily be changed each month to provide an updated schedule.
8-32
Production Scheduling
Setting a low-cost production schedule over a period of weeks or months is a difficult and important management problem. The production manager has to consider many factors:
o o o o o labor capacity, inventory and storage costs, space limitations, product demand, and labor relations.
Because most companies produce more than one product, the scheduling process is often quite complex.
8-33
Manufacturing Applications Greenberg Motors Production Scheduling

Greenberg Motors, Inc., manufactures two different electrical motors for sale under contract to Drexel Corp., a well-known producer of small kitchen appliances. Its model GM3A is found in many Drexel food processors, and its model GM3B is used in the assembly of blenders. Three times each year, the procurement officer at Drexel contracts Irwin Greenberg, the founder of Greenberg Motors, to place a monthly order for each of the coming four months. Drexels demand for motors varies each month based on its own sales forecasts, production capacity, and financial position. Greenberg has just received the JanuaryApril order and must begin his own four-month production plan. The demand for motors is shown
Meet Demand 8 plus 2
Inventory Cost

Production costs are currently $20 per unit for the GM3A and $15 per unit for the GM3B. However, each of these is due to increase by 10% on March 1 as a new labor agreement goes into effect.
Increase in Production Costs
Man-Hours, 4 Max plus 4 Min
Goal is to minimize Costs.
Warehouse Storage Capacity, 4 (1 each month)

To start with: We have 8 Variables:
A1 B1
A2 B2
A3 B3
A4 B4
Objective is to minimize Costs So what are our Costs?

Production Costs Inventory Costs So Lets represent Inventory Costs.
iA1 iB1 iA2 iB2 iA3 iB3 iA4 iB4

Production Costs Inventory Costs So Lets represent Inventory Costs.
iA1 iB1 iA2 iB2 iA3 iB3 iA4 iB4

Total Variables now are:
A1 B1 A2 B2
16
A3 B3 A4 B4
iA1 iB1
iA2 iB2
iA3 iB3
iA4 iB4

Solution:
Financial Applications
Portfolio Selection The selection of specific investments from a wide variety of alternatives is a problem frequently encountered by
o o o o managers of banks, mutual funds, investment services, and insurance companies.
The managers overall objective is usually to maximize expected return on investment

o given a set of legal, policy, or risk restraints.
8-49
Portfolio Selection
International City Trust (ICT) ICT has $5 million available for immediate investment and wishes to do two things:
(1) maximize the interest earned on the investments made over the next six months, and (2) satisfy the diversification requirements as set by the board of directors.
Portfolio Selection International City Trust (ICT)
The specifics of the investment possibilities are as follows:
Also, the board specifies that at least 55% of the funds invested must be in gold stocks and construction loans, and that no less than 15% be invested in trade credit.
Portfolio Selection
International City Trust (ICT)
Formulate ICTs decision as an LP problem. Let X1 = dollars invested in trade credit X2 = dollars invested in corporate bonds X3 = dollars invested in gold stocks X4 = dollars invested in construction loans
The objective function formulation is presented on the next slide.
Employee Scheduling Applications

Assignment Problems
Assignment problems involve finding the most efficient assignment of
o o o o people to jobs, machines to tasks, police cars to city sectors, salespeople to territories, and so on.
The objective might be

o to minimize travel times or costs or o to maximize assignment effectiveness.
Employee Scheduling Applications HSBC Problem

Hong Kong Bank of Commerce and Industry is a busy bank that has requirements for between 10 and 18 tellers, depending on the time of day. The lunch time, from noon to 2 PM is usually heaviest. The bank now employs 12 full-time tellers, but many people are on its roster of available part-time employees. A part-time employee must put in exactly four hours per day but can start anytime between 9 AM and 1 PM.

Part-timers are a fairly inexpensive labor pool, since no retirement or lunch benefits are provided for them. Full-timers, on the other hand, work from 9 to 5 but are allowed 1 hour for lunch. (Half of the full-timers eat at 11AM, the other half at noon.) Full-timers thus provide 35 hours per week of productive labor time.

By corporate policy, the bank limits part-time hours to a maximum of 50% of the days total requirement. Part-timers earn $8 per hour (or $32 per day) on average, and full-timers earn $100 per day in salary and benefits, on average. The bank would like to set a schedule that would minimize its total personnel costs. It will release one or more of its full-time tellers if it is profitable to do so.

There is a constraint for each hour of the day, stating that the number of people working at the bank during that hour should be at least the minimum number shown in Table, so there are eight of these constraints.
Another constraint will limit the total number of full-time workers to be no more than 12. In formulating this as a linear program, the objective is to minimize cost. The last constraint will specify that the number of part-time hours must not exceed 50% of the total hours.

The bank must decide how many full-time tellers to use, so there will be one decision variable for that. Similarly, the bank must decide about using part-time tellers, but this is more complex as the part-time workers can start at different times of the day while all full-time workers start at the beginning of the day Thus, there must be a variable indicating the number of parttime workers starting at each hour of the day from 9AM until 1PM. Any worker who starts at 1PM will work until closing, so there is no need to consider having any part-time workers start after that.
IMPORTANT: Alternate Optimal Solutions

Alternate optimal solutions are common in many LP problems. The sequence in which you enter the constraints into QM for Windows can affect the solution found. No matter the final variable values, every optimal solution will have the same objective function value.
Truck Loading Problem

The truck loading problem involves deciding which items to load on a truck so as to maximize the value of a load shipped. As an example, we consider Goodman Shipping, an Orlando firm owned by Steven Goodman. One of his trucks, with a capacity of 10,000 pounds, is about to be loaded.* Awaiting shipment are the following items:

The objective is to maximize the total value of the items loaded onto the truck without exceeding the trucks weight capacity.

The objective is to maximize the total value of the items loaded onto the truck without exceeding the trucks weight capacity.
Truck Loading Problem Integer Programming
Diet Problems
The diet problem, one of the earliest applications of LP, was originally used by hospitals to determine the most economical diet for patients.
Known in agricultural applications as the feed mix problem, the diet problem involves specifying a food or feed ingredient combination that satisfies stated nutritional requirements at a minimum cost level.
Diet Problems Whole Food Nutrition

The Whole Food Nutrition Center uses three bulk grains to blend a natural cereal that it sells by the pound. The cost of each bulk grain and the protein, riboflavin, phosphorus, and magnesium units per pound

On the packaging for each of its products, Whole Food indicates the nutritional content in each bowl of cereal when eaten with 0.5 cup of milk. The USRDA (U.S. Recommended Dietary Allowance) and the more recent DRI (Dietary Reference Intake) were consulted to establish recommended amounts of certain vitamins and minerals for an average adult. Based on these figures and the desired amounts for labeling on the package, Whole Food has determined that each 2-ounce serving of the cereal should contain 3 units of protein, 2 units of riboflavin, 1 unit of phosphorous, and 0.425 units of magnesium.

In modeling this as a linear program, the objective is to minimize cost.
There will be four constraints (One each for) stipulating that the number of units must be at least the minimum amount specified. 1. 2. 3. 4. protein riboflavin phosphorous magnesium
Since these requirements are for each 2 ounce serving, the last constraint must say that the total amount of the grains used will be 2 ounces, or 0.125 pounds.

In defining the variables, notice that the cost is expressed per pound of the three grains.
Thus, in order to calculate the total cost, we must know the number of pounds of the grains used in one serving of the cereal. Also, the numbers in Data Table are expressed in units per pound of grain, so defining variables as the number of pounds of the grains makes it easier to calculate the amounts of protein, riboflavin, phosphorous, and magnesium. Let XC = pounds of grain C in 0.125 pounds or 2-Oz serving of cereal XB = pounds of grain B in 0.125 pounds or 2-Oz serving of cereal
XA = pounds of grain A in 0.125 pounds or 2-Oz serving of cereal
Ingredient Mix and Blending Problems

Diet and feed mix problems are actually special cases of a more general class of LP problems known as ingredient or blending problems.
Blending problems arise when a decision must be made regarding the blending of two or more resources to produce one or more products. Resources, in this case, contain one or more essential ingredients that must be blended so that each final product contains specific percentages of each ingredient.
Ingredient Mix and Blending Problems Low Knock Oil Company

The Low Knock Oil Company produces two grades of cut-rate gasoline for industrial distribution. The grades, regular and economy, are produced by refining a blend of two types of crude oil, type X100 and type X220. Each crude oil differs not only in cost per barrel, but in composition as well. The following table indicates the percentage of crucial ingredients found in each of the crude oils and the cost per barrel for each:

Weekly demand for the regular grade of Low Knock gasoline is at least 25,000 barrels, and demand for the economy is at least 32,000 barrels per week. At least 45% of each barrel of regular must be ingredient A. At most 50% of each barrel of economy should contain ingredient B. While the gasoline yield from one barrel of crude depends on the type of crude and the type of processing used, we will assume for the sake of this example that one barrel of crude oil will yield one barrel of gasoline.
Low Knock Oil Company
Low Knock Oil Company
Shipping Applications
The transportation or shipping problem involves determining the amount of goods or items to be transported from a number of origins (or sources) to a number of destinations. The objective usually is to minimize total shipping costs or distances. Constraints in this type of problem deal with capacities at each origin and requirements at each destination.
Shipping Applications Top Speed Bicycle Company

The Top Speed Bicycle Co. manufactures and markets a line of 10-speed bicycles nationwide. The firm has final assembly plants in two cities in which labor costs are low, New Orleans and Omaha. Its three major warehouses are located near the large market areas of New York, Chicago, and Los Angeles.
Shipping Applications Top Speed Bicycle Company

The sales requirements for the next year at the New York warehouse are 10,000 bicycles, at the Chicago warehouse 8,000 bicycles, and at the Los Angeles warehouse 15,000 bicycles. The factory capacity at each location is limited. New Orleans can assemble and ship 20,000 bicycles; the Omaha plant can produce 15,000 bicycles per year. The cost of shipping one bicycle from each factory to each warehouse differs, and these unit shipping costs are
Top Speed Bicycle Company
a network representation of this problem

The company wishes to develop a shipping schedule that will minimize its total annual transportation costs. Each circle or node represents a source or a destination in this problem. Each source and destination is numbered to facilitate the variable definitions. Each arrow indicates a possible shipping route, and the cost per unit to ship along each of these is shown also in Figure below

When formulating a linear program for this, the objective is to minimize the transportation costs. There are two supply constraints (one for each source):
(1) No more than 20,000 can be shipped from New Orleans. (2) No more than 15,000 can be shipped from Omaha.
There are three demand constraints (one for each destination):

(1) The total number shipped to New York must equal 10,000. (2) The total number shipped to Chicago must equal 8,000. (3) The total number shipped to Los Angeles must equal 15,000.
The company must decide how many bicycles to ship along each of the shipping routes (i.e., from each source to each destination).

In Figure the arrows indicate where the items originate and where they are delivered, and the shipping cost per unit is shown next to the arrow. The decisions are the number of units to ship along each of these shipping routes. In defining the variables, it is easiest to use double subscripts. Let Each source and destination is numbered to facilitate the variable definitions. Each arrow indicates a possible shipping route, and the cost per unit to ship along each of these is shown also in Figure below
Application Types covered in this Chapter

1. 2. 3. 4. 5. 6. Marketing Applications Manufacturing Applications Employee Scheduling Applications Financial Applications Transportation Applications Ingredient Blending Applications
5 Basic Assumptions of Linear Programming

1. Certainty:
numbers in the objective and constraints are known with certainty and do not change during the period being studied
2. Proportionality:
exists in the objective and constraints constancy between production increases and resource utilization if production of 1 unit of a product uses 3 hours, production of 10 units would use 30 hours.
7-94
5 Basic Assumptions of Linear Programming (continued)

3. Additivity:
the total of all activities equals the sum of the individual activities If the production of one product generated $3 profit and the production of another product generated $8 profit, the total profit would be the sum of these two, which would be $11.
4. Divisibility:
solutions need not be in whole numbers (integers) solutions are divisible, and may take any fractional value
5. Non-negativity:
all answers or variables are greater than or equal to () zero negative values of physical quantities are impossible
7-95
TIPS
Practice making constraints! Practice solving on excel!
Practice & Practice!
7-96

Linear Programming On Computer - Ch78

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Download Excel Solver for windows from LMS or: http://www.solver.com/dwnxls.

Examples of Successful LP Applications

To accompany Quantitative Analysis for Management, 9e by Render/Stair/Hanna

2006 by Prentice Hall, Inc. Upper Saddle River, NJ 07458

Examples of Successful LP Applications (continued)

To accompany Quantitative Analysis for Management, 9e by Render/Stair/Hanna

2006 by Prentice Hall, Inc. Upper Saddle River, NJ 07458

LP Problem Statement- Example

To accompany Quantitative Analysis for Management, 9e by Render/Stair/Hanna

2006 by Prentice Hall, Inc. Upper Saddle River, NJ 07458

Formulating Linear Programming Problems

Formulating Linear Programming Problems

Applications we will be studying

To accompany Quantitative Analysis for Management, 9e by Render/Stair/Hanna

2006 by Prentice Hall, Inc. Upper Saddle River, NJ 07458

Win Big Gambling Club LP Equations

2006 by Prentice Hall, Inc. Upper Saddle River, NJ 07458

Step 6: Input in Solver & Solve

Step 6: Input in Solver & Solve

Win Big Gambling Club Solver in Excel Solution is

Win Big Gambling Club Solver in Excel

To accompany Quantitative Analysis for Management, 9e by Render/Stair/Hanna

2006 by Prentice Hall, Inc. Upper Saddle River, NJ 07458

Management Sciences Associates (MSA)

Monthly cost & availability of material

2006 by Prentice Hall, Inc. Upper Saddle River, NJ 07458

To accompany Quantitative Analysis for Management, 9e by Render/Stair/Hanna

2006 by Prentice Hall, Inc. Upper Saddle River, NJ 07458

Manufacturing Applications: Product Mix

3 Types of Constraints: Material Availability Meeting Contract Maximum Demand

Manufacturing Applications Fifth Avenue

To accompany Quantitative Analysis for Management, 9e by Render/Stair/Hanna

2006 by Prentice Hall, Inc. Upper Saddle River, NJ 07458

To accompany Quantitative Analysis for Management, 9e by Render/Stair/Hanna

2006 by Prentice Hall, Inc. Upper Saddle River, NJ 07458

To accompany Quantitative Analysis for Management, 9e by Render/Stair/Hanna

2006 by Prentice Hall, Inc. Upper Saddle River, NJ 07458

Manufacturing Applications Greenberg Motors Production Scheduling

Manufacturing Applications Greenberg Motors Production Scheduling

Meet Demand 8 plus 2

Manufacturing Applications Greenberg Motors Production Scheduling

Man-Hours, 4 Max plus 4 Min

Goal is to minimize Costs.

Warehouse Storage Capacity, 4 (1 each month)

Manufacturing Applications Greenberg Motors Production Scheduling

Manufacturing Applications Greenberg Motors Production Scheduling

Manufacturing Applications Greenberg Motors Production Scheduling

Objective is to minimize Costs So what are our Costs?

Manufacturing Applications Greenberg Motors Production Scheduling

Manufacturing Applications Greenberg Motors Production Scheduling

Manufacturing Applications Greenberg Motors Production Scheduling

Manufacturing Applications Greenberg Motors Production Scheduling

Manufacturing Applications Greenberg Motors Production Scheduling

Manufacturing Applications Greenberg Motors Production Scheduling

Manufacturing Applications Greenberg Motors Production Scheduling

Manufacturing Applications Greenberg Motors Production Scheduling

Manufacturing Applications Greenberg Motors Production Scheduling

The managers overall objective is usually to maximize expected return on investment

To accompany Quantitative Analysis for Management, 9e by Render/Stair/Hanna

2006 by Prentice Hall, Inc. Upper Saddle River, NJ 07458

Employee Scheduling Applications

The objective might be

Employee Scheduling Applications HSBC Problem