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DECISION MODELING WITH

MICROSOFT EXCEL
Copyright 2001
Prentice Hall Publishers and
Ardith E. Baker
Integer
Optimization
Chapter 6
Integer Linear Programming (ILP) models
are ___models in which some or all of the
variables are required to assume ________
values.
ILP has become an important specialized
area of _______________modeling.
In previous chapters, __________solutions
were allowed and often adapted to the
integer requirement by rounding (called a
________solution). However, a number of
important models require ______solutions.
Introduction
___________________is a general term for
optimization models with ______________
conditions.
The different types of ILP models are
described next.
Types of Integer
Optimization Models
Integrality conditions stipulate that some or
all of the ____________variables must have
integer values.
Classifications of
Integer Optimization Models
All-integer linear program
This is a model in which ______of the
decision variables are required to be
_______________.
Mixed integer linear program (MILP)
This is a model in which __________of
the decision variables are required to
be integers and others can assume any
_______________number (i.e., any
_______________value).
In this model, __________variables are
restricted to the values 0 or 1. The
models may be used to represent
_________________decisions (yes/no
decisions).
Binary (or 0-1) integer linear program
This LP model results when you start
with an _____formulation but then
ignore the integer _____________.
LP relaxation of the ILP model
Graphical Interpretation
Of Integer Models
In this two variable ILP product mix model,
let E and F represent the _____________of
two products to make and sell for a______.
Optimizing a Two Variable ILP Model
Now, assume the < constraints represent
resource ____________and > represents
certain minimum_________________.
s.t.
E 3F < 0 (1)
42.8E + 100F < 800 (2)
20E + 6F < 142 (3)
30E + 10F > 135 (4)
E, F > 0 and integer
Max 18E + 6F
The symbolic model follows:
We will solve this model using the _______
approach following these three steps:
1. Find the ____________set for the LP
____________of the ILP model.
2. Identify the integer points inside the
set determined in step 1.
3. Find, among those points determined
in step 2, one that ______________the
____________function.
We will use the GLP program (covered in
Chapter 4) and Excels Solver to obtain the
solution to the LP relaxation of the ILP.
Here are the
GLP results:
The shaded
region is the
________set
for the LP
relaxation.
The blue
dots are the
_________
points
contained
within the
LP feasible
region.
(3,6) (4,6)
(3,5) (4,5) (5,5)
(4,4) (5,4)
(4,2) (5,2) (6,2)
(4,3) (6,3) (5,3)
Here are the Solver results and parameters:
To ________the model, determine which of
the ILP
feasible
points
yields the
_____ value
of the
objective
function.
To do this, drag the
objective function line in
an _____direction until it
is not possible to move it
farther and still _______
an integer feasible point.
Here are the Solver results and parameters:
Nearest
rounded
solution
(_____)
Optimal
solution to LP
relaxation
(_________)
Only feasible
rounded integer
solution (____)
Optimal
solution
to
ILP (___)
1. In a _______model the OV (optimal
value) of the LP ____________always
provides an upper bound on the OV of
the original ILP. Adding the integer
constraints either ________or leaves
unchanged the OV for the LP. In a Max
model, hurting the OV means making it
_______.
Comments
Graphical Interpretation
Of Integer Models
2. In a ______model, the OV of the LP
relaxation always provides a ________
bound on the OV of the original ILP.
Again, adding the integer constraints
either hurts or leaves ___________the
OV for the LP. In a Min model, hurting
the OV means making it___________.
Graphical Interpretation
Of Integer Models
The optimal solution to the LP relaxation is
E*=5.39 and F*=5.69.
Rounded Solutions
Since each of these variables can be
_________either up or down, there are four
(2
2
) rounded solutions:
(5,5) (5,6)
(6,5) (6,6)
With n _________variables, there would 2
n

rounded points.
Of all the rounded points, (5,5) is the only
_____________point. All other points are
infeasible.
Two important facts about rounded
solutions:
1. A rounded solution need not be
______________.
2. A rounded solution need not be near
the optimal ________solution.
Optimal solution to ILP
Optimal
solution to
the LP
relaxation.
Feasible set for
LP relaxation
Integer
points
Recall that Solvers LP __________method
makes use of the fact that the solution to an
LP always lies on the ___________of the
feasible region.
Enumeration
Graphical Interpretation
Of Integer Models
Thus, Solver never has to consider any
___________points of the feasible region.
For an ILP optimization, Solver might have
to visit many ________points strictly within
the interior of the feasible region, and thus,
the LP simplex method cannot be used.
Once you identify all the integer feasible
_________in ILP, you could solve the model
by complete ___________(i.e., evaluate the
objective function at each integer point and
then select the ________one).
Unfortunately, complete enumeration of all
the feasible integer points is not a
___________procedure for most ILPs.
For example, if you had 20 decision
variables, each of which could take on an
integer value between 1 and 50, then there
would be 50
20
(9.5x10
23
) points to
enumerate and test for_______________.
Applications of
Binary Variables
_______ (0-1) variables make it possible to
incorporate yes/no decisions (called
__________decisions) into an optimization
model.
For example:
1. In a plant _______model, let x
j
= 1 if
we choose to have a plant at location
j and x
j
= 0 if we do not.
2. In a __________model, let x
ijk
= 1 if
truck k goes from city i to city j and
x
ijk
= 0 if it does not.
The use of 0-1 variables allows many
variations of __________conditions in an
optimization model without resorting to any
of Excels =IF() statements (which would
not allow Solver to __________the model).
Applications of
Binary Variables
The capital budgeting decision is a matter of
choosing among n ____________in order to
maximize the return, subject to constraints
on the amount of ______invested over time.
Capital Budgeting:
An Expansion Decision
Applications of
Binary Variables
For example, suppose that AutoPowers
board of directors faces the following data:
Expand Belgian
Plant 400 100 50 200 100 0
Expand Sm. Machine
Capacity in US 700 300 200 100 100 100
Establish New
Plant in Chile 800 100 200 270 200 100
Expand Lg. Machine
Capacity in US 1000 200 100 400 200 200
Capital
Available 500 450 700 400 300
ALTERNATIVE
PRESENT
VALUE OF
NET RETURN
($000s)
CAPTIAL REQUIRED IN YEAR
BY ALTERNATIVE ($000s)
1 2 3 4 5
The Board must select one or more of these
alternatives:
An ILP Model for Capital Budgeting at
AutoPower: This model can be modeled as
an ILP (called a ______or 0-1 ILP model) in
which all the variables are binary variables.
Let x
i
= 1 if project i is accepted and x
i
= 0 if
project i is not___________. The model
becomes:
Max 400x
1
+ 700x
2
+ 800x
3
+ 1000x
4
s.t.
100x
1
+ 300x
2
+ 100x
3
+ 200x
4
< 500
50x
1
+ 200x
2
+ 200x
3
+ 100x
4
< 450
200x
1
+ 100x
2
+ 270x
3
+ 400x
4
< 700
100x
1
+ 100x
2
+ 200x
3
+ 200x
4
< 400
100x
2
+ 100x
3
+ 200x
4
< 300
x
i
= 0 or 1; i = 1, 2, 3, 4
The LP Relaxation: First, approach this
model by solving the LP_______________.
Note that your solution may differ because
the model has _________optimal solutions.
In the LP relaxation model, x
i
was
____________to be less than or equal to 1.
This resulted in _________values (0<x
i
<1)
for the decision variables.
Since we are looking for 1s (yes) and 0s
(no), these fractional values are not
___________. In addition, rounding these
values would not work very well.
Rounding to: x
1
= 1, x
2
= 1, x
3
= 0, x
4
= 1
would result in an ____________solution.
The optimal ILP solution can be obtained
using Solvers __________________option.
The __________Edition Solver for Education
produces a different Solver Results
completion ________for ILPs to remind you
that the ILP solution may not be optimal.
The default ___________field on the Solver
Options dialog (relevant only for ILP
models) is 5%.
This means that the
Solver ILP ____________
procedure is continued
only until the ILP solution
OV is within 5% of the
ILPs optimum_______.
A _______Tolerance speeds
up Solver at the risk of a reported solution
further from the true ILP____________.
Setting Tolerance to 0% forces Solver to
find the ILP optimum but with much longer
____________times.
An important use of _______variables is to
impose constraints that arise from _______
conditions.
Logical Conditions
Applications of
Binary Variables
No More Than k of n Alternatives:
Let x
i
= 0 or 1, for i = 1, 2, , n
The constraint
x
1
+ x
2
+ + x
n
< k
implies that, at most, k ___________of n
possibilities can be selected (i.e., not
more than k x
i
can equal 1).
For example, adding the _____________:
x
1
+ x
3
< 1
to the previous AutoPower example, implies
that the solution can contain _______one of
the overseas alternatives.
Dependent Decisions: You can use 0-1
variables to force a __________relationship
on two or more decisions.
For example, suppose that AutoPowers
management does not want to select
alternative k unless it first selects
alternative m. The following constraint
enforces this condition:
If alternative m is not selected, then x
m
= 0
which forces x
k
to be 0 (i.e., not selected).
x
k
< x
m
or equivalently x
k
- x
m
< 0
If alternative m is selected, then x
m
= 1 and
x
k
< 1. Solver is then free to select 0 or 1
for x
k
.
Lot Size Constraints: A portfolio manager is
considering purchasing security j. Let x
j
be
the number of shares purchased. Consider
the following constraints:

1. If he purchases security j, he must
purchase at least 200 shares (called a
____________________or batch size
constraint)
2. He may not purchase more than 1000
__________of security j.
200 < x
j
< 1000
These constraints insist that x
j
always be at
least______. We want the conditions to be
either x
j
= 0 or 200 < x
j
< 1000.
To achieve the constraint conditions, use a
_________variable, say y
j
, for security j.
If y
j
= 1, then purchase security j
The constraints are:
x
j
< 1000y
j

x
j
> 200y
j

If y =___, then the above constraints imply
that 200 < x
j
< 1000 (purchase j).
If y =___, then the above constraints imply
that x
j
= 0 (do not purchase j).
If y
j
= 0, do not purchase security j
These 2 constraints
together ________
the minimum lot
size constraint.
K of m Constraints: In general notation, let
the _________ of m constraints on a
models (non-binary) decision variables,
x
i
, be

g
i
(x
1
, , x
n
) < b
i
, for i = 1, , m
Now, introduce m ___________0-1 decision
variables y
i
to the model, and let M be
chosen as a very large number, so large
that, for each i,
g
i
(x
i
, , x
n
) < M
for every x satisfying any set of k
_____________taken from the above m.
The following m + 1 constraints express the
desired condition:
m

i=1
y
i
= k
i

S
This constraint forces ______k of the new y
i

decision variables to have the value____.
g
i
(x
1
, , x
n
) < b
i
y
i
+ M(1- y
i
), i=1, , m
Exactly k of the __________constraints are
equivalent to:
g
i
(x
1
, , x
n
) < b
i

The remaining m-k inequality constraints
are _________to:
g
i
(x
1
, , x
n
) < M
The very large number choice for M causes
each such constraint to be ________and not
affect the models optimal_____________.
K of m Constraints Example: Assume a
company must find production quantities of
three products (x
1
, x
2
, x
3
) as part of a large
LP model.
Within the LP formulation, the company
must choose one or the other (but not both)
of two different production technologies for
the 3 products.
Here are the two constraints:
30x
1
+ 20x
2
+ 10x
3
< 100 (Technology 1)
10x
1
+ 30x
2
+ 5x
3
< 110 (Technology 2)
These constraints cannot be added _______
to the LP model. Instead, add two new
______decision variables (y
1
and y
2
) to the
LP model, making it an ILP model.
y
1
= 1 Solver, choose Technology 1
y
1
= 0 Solver, do not choose Technology 1
y
2
= 1 Solver, choose Technology 2
y
2
= 0 Solver, do not choose Technology 2
The original constraints are then modified:
30x
1
+ 20x
2
+ 10x
3
< 100y
1
+ 999999(1-y
1
)
10x
1
+ 30x
2
+ 5x
3
< 110y
2
+ 999999(1-y
2
)
y
1
+ y
2
= 1
Forces Solver to
choose exactly one
technology option
999999 was chosen
to guarantee that
one or the other
constraint will be
redundant for the
whole LP model
A Fixed Charge Model
In order to __________capital, STECO, an
electronics parts wholesaler, leases regional
warehouses for its use.
The cost per month to lease warehouse i is
F
i
. Warehouse i can load a __________of T
i

trucks per month.
There are four sales districts, and the
typical monthly __________in district j is d
j

truckloads.
The average cost of sending a truck from
_____________i to district j is c
ij
.
STECO wants to know which warehouses to
______and how many trucks to send from
each warehouse to each__________.
STECO pays no _________cost for a given
warehouse unless at least one truck is
___________from it, and then it pays the
full monthly lease amount.
Lot size models incorporating this cost
behavior are common and are called
__________________________.
Here is the network flow diagram:
A B C
1 2 4 3
Leasing cost/mth
for warehouses F
A
F
B
F
C
Capacity (truckloads) T
A
T
B
T
C
Warehouses

Districts

Demands
per month d
1
d
2
d
3
d
4
Here are the data for this model:
A 170 40 70 160 200 7750
B 150 195 100 10 250 4000
C 100 240 140 60 300 5500
Monthly Demand
(truck loads) 100 90 110 60
WAREHOUSE
Monthly
Capacity
(No. of
Trucks)
Cost Per Truck
Sales District ($)
1 2 3 4
Monthly
Leasing
Costs ($)
A Fixed Charge Model
Modeling Considerations:
Define y
i
as a binary ___________variable
and let:
y
i
= 1 if warehouse i ____leased
y
i
= 0 if warehouse i ______leased
Although it may seem ________to treat the
number of trucks sent from a warehouse to
a district as an ________variable, in reality,
there are three arguments as to why we
should not:
1. This is a ___________model, not a
detailed operating model.
2. Treating the number of trucks as
integer variables may make the model
more difficult to_____________.
3. It costs _______to lease one of the
warehouses than to send a truck from
a warehouse to a ________district.
A Fixed Charge Model
The MILP Model
To model STECOs model as an MILP, let
y
i
= 1 if warehouse i is leased, i=A, B, C
y
i
= 0 if warehouse i is not leased
x
ij
= number of trucks sent from
warehouse i to district j
i=A, B, C; j=1, 2, 3, 4
Min 7750y
A
+ 4000y
B
+ 5500y
C
+ 170x
A1
+ + 60x
C4

x
A1
+ x
B1
+ x
C1
> 100 demand at district 1
Demand Constraints:
x
A2
+ x
B2
+ x
C2
> 90 demand at district 2
x
A3
+ x
B3
+ x
C3
> 110 demand at district 3
x
A4
+ x
B4
+ x
C4
> 60 demand at district 4
These four constraints guarantee that
demand will be _________at the respective
sales district.
Objective Function:
x
A1
+ x
A2
+ x
A3
+ x
A4
< 200y
A

or
Capacity Constraints (for each warehouse):
These ____________serve 2 purposes:
x
A1
+ x
A2
+ x
A3
+ x
A4
- 200y
A
< 0
1. It guarantees that capacity at
warehouse i is not____________.
2. It forces STECO to _____warehouse
i if anything is sent out of it.
x
B1
+ x
B2
+ x
B3
+ x
B4
< 250y
B

x
C1
+ x
C2
+ x
C3
+ x
C4
< 300y
C

Here is the Solved spreadsheet model:
Here are the Solver parameters:
In conclusion, the __________solution to
this model with integer supplies and
demands will always include an _________
allocation of trucks.
A Fixed Charge Model
The argument involves two steps:
1. The _________solution must lease
some set of warehouses, and
2. Every possible set of leased
warehouses yields an integer
______________of trucks.
Integer Optimization Methods
Solvers solution procedure for an ILP model
(called________________) is as follows for
a maximization model:
1. Solve the _______ILP formulation as a
relaxed LP.
The OV for the relaxation is the ILP
______________.
If the optimal solution is_________, it
is optimal for the ILP, and so, quit.
2. If the LP relaxation has some _______
variable at a fractional value, form two
sub models from this parent ______so
as to create two new unsolved LP sub-
models (the_____________) with the
property that the optimal solution to
one of the successor ILPs will be the
optimal solution to the _________ILP.
Let x
i
*
be any ________variable of the
optimal solution to the parents
relaxation.
Let [x
i
*
] be the __________of x
i
*
to its
integer part.
Then, [x
i
*
] + 1 is the next integer
_________than x
i
*
.
One successor ___________will be the
parents LP model augmented by the
____________, x
i
< [x
i
*
].
The other successor sub-model is
formed by _____________the parents
LP model with x
i
> [x
i
*
] + 1.
3. Commence with any ___________sub-
model in step 2. And optimize it as a
_________LP sub-model.
If the optimal solution is all-integer,
___________its objective function.
Compare the _____of the best ILP
models solution found so far with this
relaxed sub-models OV.
If the relaxed sub-models OV is _____
than the best ILP solution found so far,
dont_________. Instead, continue
with another____________.
If the relaxed sub-models OV is not
worse than the best ILP _______found
so far, then proceed to eliminate any
other ________variables it may have
using the constraint augmentation
procedure by going back to step_____.
If all remaining relaxed sub-models
have integer solutions, go to step 4;
otherwise, go back to step 2.
4. The optimal solution to the _________
ILP is the all-integer solution of some
sub-model that ____________the best
value of the OV found so far.
In the branch-and-bound method, the
original ILP is ____________into a growing
sequence of LP sub-models.
Solver uses ___________optimizations of
increasingly augmented LP sub-model
_______________to solve a given ILP.
Therefore, it is more time-consuming to
optimize ILPs than_______.
The operation of the branch-and-bound
procedure in Solver displays the following
message in Excels lower left corner:
Branch: 1422 Trial Solution: 11 Set Cell: $39,366
Integer Optimization Methods
Sensitivity Analysis for ILPs
The Solver solution to an ILP does not
contain any ____________information (as
evidenced by the lack of a Sensitivity option
in the ___________________dialog).
An ILP solution does not include _________
that is equivalent to the_______________,
reduced cost and objective coefficient
sensitivity information in an LP.
Solutions to ILPs can be extremely _______
to changes in ___________values. To
illustrate, consider the following capital
budgeting model:
Although this model is easily solved by
____________, consider the following
optimal solution:
Max 10x
1
+ 100x
2
+ 1000x
3

29x
1
+ 30x
2
+ 31x
3
< b
1
x
1
, x
2
, x
3
are binary (0 or 1)

s.t.
x
1
x
2
x
3
29 1 0 0 10
30 0 1 0 100
31 0 0 1 1000
b
1
Optimal
Solution
OV
Here are the sensitivity data for the model:
A change in the ______________side of the
constraint increases the OV by a factor of
1000%.
Integer Optimization Methods
Heuristic Methods:
___________methods are designed to
efficiently produce _______, although not
necessarily optimal, solutions.
These methods will be discussed in a the
next chapter.