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Sensitivity Analysis: Meaning of Sensitivity Anlysis

Sensitivity analysis investigates how changes in input data impact the optimal solution obtained from linear programming (LP) models. The optimal solution assumes input values like resource availability and costs remain constant, but in reality they fluctuate. Sensitivity analysis determines how sensitive the optimal solution is to changes in these input values. An example is provided of a manufacturing company producing three products using three machines. The time each product takes on each machine and the machine capacities are given. The profit per unit for each product is also provided. Sensitivity analysis is then conducted to analyze how changes impact the optimal solution, such as: (1) the range of profit changes for each product that maintains optimality; (2) the range of changes to machine capacity that

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Sutirtha Roy
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55 views1 page

Sensitivity Analysis: Meaning of Sensitivity Anlysis

Sensitivity analysis investigates how changes in input data impact the optimal solution obtained from linear programming (LP) models. The optimal solution assumes input values like resource availability and costs remain constant, but in reality they fluctuate. Sensitivity analysis determines how sensitive the optimal solution is to changes in these input values. An example is provided of a manufacturing company producing three products using three machines. The time each product takes on each machine and the machine capacities are given. The profit per unit for each product is also provided. Sensitivity analysis is then conducted to analyze how changes impact the optimal solution, such as: (1) the range of profit changes for each product that maintains optimality; (2) the range of changes to machine capacity that

Uploaded by

Sutirtha Roy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Sensitivity Analysis

MEANING OF SENSITIVITY ANLYSIS


The solution obtained form graphical (or simplex) method of LP is based on the
assumption that inputs such as resource availability, resource consumption, equipment
capacity, market demand etc. as well as their relevant costs are known with certainty and
stay constant over the period. However, in reality it is no so. Resource availability varies
from time to time! Equipment utilisation fluctuates from period to period! Material costs
rise! Labour costs do not remain stationary! Market demand of course changes! This
implies that the optimal solution obtained on the basis of single estimate may not
represent reality. Since uncertainty is inherent in business, the management is usually
interested in knowing the impact of the change in the values of inputs on the final
solution and the validity of the optimal solution for the range of each value of resource
input. The investigations related to the above aspect are known as sensitivity analysis.
Since analysis is conducted after the optimal solution has been obtained, it is also called
post optimality analysis. The analysis helps to determine as to how sensitive the optimum
solution is to making certain changes in the input data.
AN EXAMPLE ON SENSITIVITY ANALYSIS
Wadlhwa Engg. Works manufacturing three products P1, P2 and P3.All these
products pass through three machines M1,M2 and M3 The time required to process
each unit of the products on each machine and the available capacity of the
machines is as under:
Product
Time required per unit (minutes)
M1
M2
M3
P1
4
3
2
P2
4
4
1
P3
4
3
1
Available
1200
900
400
capacity
Perweek (minutes)
The profit per unit to be realized from the manufacture of the products are Rs. 20, Rs.12
and Rs.8 respectively.
How many units of each product be produced to maximize profit?
(a)
Within what range of profit of each product the solution will remain optimal?
(b)
Within what range of capacity of machine M3 the solution will remain optimal?
(c)
If the manufacturer can sell antoher product P4 which requires 3 minutes of
(d)
machine M1 and 5minutes each on machine M2 and M3, would it be worthwhile
manufacturing P4.
Discuss the effect on product mix if product P1,P2 or P3 is dropped?
(e)
What reduction in the consumption per unit of non-basic variable will bring it
(f)
into the basis?

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