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Session 11 &12 Excel Optimization Software

This document discusses an optimization problem involving determining the optimal production quantities of tables and chairs. It provides the components of the optimization problem including decision variables, objective function and constraints. It then formulates the specific problem involving maximizing total profit from producing tables and chairs given constraints on available materials and labor hours. The optimal solution is found using Excel solver and sensitivity analysis is performed to determine how changes to constraints impact the optimal solution.

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sagar
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92 views

Session 11 &12 Excel Optimization Software

This document discusses an optimization problem involving determining the optimal production quantities of tables and chairs. It provides the components of the optimization problem including decision variables, objective function and constraints. It then formulates the specific problem involving maximizing total profit from producing tables and chairs given constraints on available materials and labor hours. The optimal solution is found using Excel solver and sensitivity analysis is performed to determine how changes to constraints impact the optimal solution.

Uploaded by

sagar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Quiz

1.Data collection methods for business analytics include all of the following
EXCEPT: 
a)Market research
b)Analyst data
c)Present sales performance
d)Market growth
2.Examples of business analytics include all of the following EXCEPT: 
a)Multiple regression analysis
b)Future value analysis
c)Activity based costing
d)Market

3.What is Data Science?


Excel Optimization
Software

• Optimization-
• Find the best set of decisions for a particular measure of performance
• Includes:
• The goal of finding the best set
• The algorithms (procedures) to accomplish this goal
Learning Objectives

• Decision-making situations - that may benefit from an optimization


modeling approach
• Interpret the results of models and perform basic sensitivity analysis.
Optimization Problem
Components

• Decision Variables
• Objective Function (to maximize or minimize)
• Constraints (requirements or limitations)
Business Analyst
Excel Optimization Software

• Solver
• Standard with Excel
• Analytic Solver Platform
• Comes with text – install off text CD
• More advanced than standard solver
• Is preferred tool throughout text
Decision Variables

• Levers used to improve performance


• Want to find the best values for the variables
• Finding these best values can be challenging
• Need Solver’s sophisticated software
• Still relatively easy to construct models beyond Solver’s
capabilities
Formulation

• Decision variables
• What must be decided? Be explicit with units
• Objective function
• What measure compares decision variables?
• Use only one measure (as a “yardstick”) – put in target cell
• Constraints
• What restrictions limit our choice of decision variables?
Interpreting Results

• Optimal values of decision variables


• Best course of action for the model
• Optimal value of objective function
• Best level of performance possible
• Constraint outcomes
• Throughout optimization, generally only some constraints are binding
Programming Examples

• Facility location
• Revenue maximization
• Maximize revenue in the presence of a demand curve
• Curve fitting
• Fit a function to observed data points
• Economic Order Quantity
• Trade-off ordering and carrying costs for inventory
Problem

• A company produces tables & chairs.


• To produce table company requires 3 kg material & 6 minutes labour
• To produce chair company requires 4kg material & 3 minutes of labour
• Profit for table = Rs. 2
• Profit for chair = Rs. 1.5
• 1000 kg of material & 1200 Hours labour are available
• Due to more inventory of table production manager has decided limit the
production of table no more than 180
• Solve the given problem perform sensitivity
Problem

Decision Variables x1 x2 Constraint


Quantity produced
Profit 2 1.5
Material 3 4 <=1000
Labour 6 3 <=1200
Table 1 <=180
Problem

• Mathematical Model Formulation


Problem

• Solver Method
Problem

• Add Solver
Problem

• Target cell-I8
• Max
• Changing Cell-G6:H6
• Constraint
• <=
• Subject to the constraint
• I9:I11<=K9:K11
• Solve
Solution

• Answer
Sensitivity
Analysis

• The technique used to determine how independent variable values will impact a
particular dependent variable under a given set of assumptions is defined
as sensitive analysis.

• It’s usage will depend on one or more input variables within the specific
boundaries

• It is also known as the what – if analysis.

• It helps in analyzing how sensitive the output is, by the changes in one input while
keeping the other inputs constant.
Sensitivity Analysis

• Principles
• Change the model and observe the behavior
• Experimental design: It includes combination of parameters that are to be varied
• What to vary:
• The different parameters that can be chosen to vary in the model could be: 
a) the number of activities
b) the objective in relation to the risk assumed and the profits expected
c) technical parameters
d) number of constraints and its limits
• What to observe:
a) the value of the objective as per the strategy
b) value of the decision variables
c) value of the objective function between two strategies adopted
Methods of Sensitivity Analysis

• There are different methods to carry out the sensitivity analysis:


• Modeling and simulation techniques
• Scenario management tools through Microsoft excel

• There are mainly two approaches to analyzing sensitivity:


• Local Sensitivity Analysis
• Global Sensitivity Analysis
Techniques of Sensitivity Analysis

• Correlation analysis helps in defining the relation between independent and


dependent variables.

• Regression analysis is a comprehensive method used to get responses for


complex models.

• Subjective sensitivity analysis: In this method the individual parameters are


analyzed. This is a subjective method, simple, qualitative and an easy method to
rule out input parameters.
Uses of Sensitivity Analysis

• To indicate the sensitivity of simulation to uncertainties in the input values


of the model.
• They help in decision making
• Sensitivity analysis is a method for predicting the outcome of a decision if
a situation turns out to be different compared to the key predictions.
• It helps in assessing the riskiness of a strategy.
• Helps in identifying how dependent the output is on a particular input
value.
• Helps in taking informed and appropriate decisions
• Aids searching for errors in the model
Conclusion

• Sensitivity analysis is one of the tools that help decision makers with more than a
solution to a problem.

• It provides an appropriate insight into the problems associated with the model
under reference.

• Finally the decision maker gets a decent idea about how sensitive is the optimum
solution chosen by him to any changes in the input values of one or more
parameters.
Sensitivity Report

• Report
Business Analyst
Answer

• 1-c
• 2-d
• 3- Defined as an interdisciplinary field about scientific methods, processes and
systems to extract knowledge or insights from data in various forms, either
structured or unstructured
Data Science

Application programming
interface

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