Lesson Plan

• Solutions for Homework 1

• Group Assignment
• Lecture 3 Integer Linear Programming

Slide 1
 Lecture 3 Integer Linear Programming
• Types of Integer Linear Programming Models
• Graphical and Computer Solutions for an All-Integer Linear
Program
• Applications Involving 0-1 Variables
• Modeling Flexibility Provided by 0-1 Variables

• An LP in which all the variables are restricted to be integers is

called an all-integer linear program (ILP).
• The LP that results from dropping the integer requirements is
called the LP Relaxation of the ILP.
• If only a subset of the variables are restricted to be integers, the
problem is called a mixed-integer linear program (MILP).
• Binary variables are variables whose values are restricted to be
0 or 1. If all variables are restricted to be 0 or 1, the problem is
called a 0-1 or binary integer linear program.
Slide 2
 Example
Eastborne Realty has $2m available for the purchase of new rental
property. The alternatives are townhouses and apartment buildings. Each
townhouse cost $282,000, and five are available. Each apartment building
cost $400,000 and there is no limit in supply.
Eastborne’s property manager can devote up to 140 hrs per month to
these new properties. Each townhouse requires 4 hrs per month whereas
each apartment building 40 hrs per month. The net annual cash flow, after
deducting expenses, is $10,000 per townhouse and $15,000 per
apartment. Eastborne’s owner would like to determine the number of
townhouses and the number of apartment buildings to purchase to
maximise annual cash flow.
Solution: First, construct the LP model:
Let T = number of townhouse
A = number of apartment buildings.

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 Example
LP model:
The objective function for cash flow is (in $1000) is:

s.t.

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 Graphical Solution of the LP Relaxation

If we relax the non-negative constraints to T,A ≥0, we will have the

optimal solutions T=2.479, A= 3.252, with Max cash flow = 10(2.479) +
15(3.252) = $73.574K. Is that valid?
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 Example
If we round to the nearest number, T=2.479≈ 2., A= 3.252 ≈3,
a. Is this point still in the feasible region?
b. The Max cash flow = 10(2) + 15(3) = $65K. Is this the max cash flow
with integer solution?

Lets check by graphical means:

The optimal solution is

T=
A=

Max cash flow =

10( ) + 15 ( )=$

Hence, we cannot use rounding off solution for non integer LP solutions.6
 Formulation and solution of Integer LP model

Eastborne’s Max
of cash flow
problem

The MS Solution tells us that:

Max cash flow =
happens when _____ townhouses and
_________ apartment buildings are
purchased.
For C1, ___________ are unused.
___________________ are used.

For C2: ________ hrs are still available.

_______________ hrs are used.
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For C3. __ townhouses are not purchased.
 Applications involving 0-1 variables
Section 7.3 Capital Budgeting

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 Applications involving 0-1 variables

In a capital budget problem, the company’s objective is to maximise the

net present value (NPV) of the projects.
The LP model (with dollars in thousands) is:

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 Applications involving 0-1 variables
Part of the MS solution is:

Interpretation:
The maximum NPV is ___________.
The company shall fund the _____________, _____________ & _________.
The values of slacks shows that the company will have remaining $5K in Yr1,
$15K in Yr 2 and $11K in year 4. Check the available fund again.
Which year can Research project be funded? _____________
Which year cannot? What is the shortage? ________________________
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 Fixed Cost
In many cases, the cost of production has two components: a setup cost,
which is a fixed cost, and a variable cost which is directly related to the
production quantity. The use of 1-0 variables makes including the setup
cost possible in a model for a production application.
Example (Pg 328): RMC is a manufacturer. Three raw materials are
used to produce three products: A fuel additive, a solvent base, and a
carpet cleaning fluid.

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 Fixed Cost Example using 1-0 Variable
Without considering fixed cost, a LP model would be:

The solution
from MS is:

The maximum profit is $1850, achieved by an optimal solution of 27.5 tons

of fuel additive, 0 tons of solvent base and 15 tons of carpet cleaning fluid.
For S to be part of the solution, its profit must be:___________________
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 Fixed Cost Example using 1-0 Variable
If there are fixed costs in the production setup and maximum
production quantity constraints are imposed as follow:

Using these variables, the setup cost is:

The net profit: Gross profit – total set up cost=

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Production capacity constraint for fuel additive:
Fixed Cost Example using 1-0 Variable
Production capacity constraint for solvent:
Production capacity constraint for carpet cleaning product:
The complete LP model with setup cost:

The MS solution is shown:

Max profit = $1350, optimal solution is 25 tons of fuel additive and 20 tons of
solvent base. No carpet cleaning fluid produce. Total set up cost=
The dropping of carpet cleaning compare to earlier solution (w/o setup cost) 14 is
because ___________________
 Modeling Flexibility Provided by 0-1 Variables
• When xi and xj represent binary variables designating whether
projects i and j have been completed, the following special
constraints may be formulated:
– At most k out of n projects will be completed: xj < k
More than k out of n projects will be completed: xj < (k+1)
E.g Multiple choice question, choose 1 out of 5, then k=1
x1+x2+x3+x4+x5=1
– Project j is conditional (dependent) on project i : (xj can only
=1 when xi =1, i.e. if xi =0 then xj =0; if xi =1 then xj =0 or 1)
xj < xi => xj - xi < 0, e.g. _____________

– Project i is a corequisite for project j (i.e. both i & j have same

state): xj - xi => xj - xi = 0, e.g._____________

– Projects i and j are mutually exclusive (either, but not both one
exit): xi + xj < 1 e.g. ______________________
Slide 15
 Modeling Flexibility Provided by 0-1 Variables

Project z conditional on project i or project j

Project z conditional on project i and project j

Slide 16
 Distribution System Design

Martin Beck (MB) Company operates a plant in St. Louis with an annual
capacity of 30,000 units. Product is shipped to regional distribution centres
in Boston, Atlanta and Houston. MB plans to increase capacity by
constructing a new plant in one or more of the following cities: Detroit,
Toledo, Denver or Kansas City. The estimated annual fixed cost and the
annual capacity for the four proposed plants are:

The company’s long-range planning group develop forecasts of the

anticipated annual demand at the distribution centres as follows:

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18
 Distribution System Design

The shipment cost per unit from each plant to the distribution centre is:

What is the objective function (O.F.)? To max profit or min cost?

What are the cost components?

Transportation cost:
Annual operation (fixed) cost:

The 0-1 variables can be used to solve this distribution system design.
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y1= 1 if a plant is constructed in Detroit; 0 if not
y2= 1 if a plant is constructed in Toledo; 0 if not
y3= 1 if a plant is constructed in Denver; 0 if not
y4= 1 if a plant is constructed in Kansas; 0 if not

xij= the units shipped in thousand from plant i to distribution centre j

i= 1,2,3,4,5 and j= 1,2,3
The annual transportation cost in thousand of dollars is:
_________________________
The annual fixed cost of operating the new plant(s) in thousand dollars is:
_________________________
Capacity constraint, e.g. Detroit: __________________________

Do the same constraint inequality for Toledo, Denver & Kansas

How about capacity for St. Louis? _____________________
The demand constraint for Boston: ____________________
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Do the same constraint for Atlanta and Houston
Model for MBC

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 MS Solution for MBC

Interpretation:
The min. cost is _______ thousand
Which plant need to be built?
Ans:________

Is the annual cost of Kansas included

in the total cost? *Yes/No

What is the number of units from

Kansas(i=4) to Atlanta (j=2)?
Ans:_______

If MBC decides that Detroit (y1) or

Toledo (y2) cannot both have planted
build because they are too close, what
additional constraint you will add?

Ans: ____________
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Product Design and Market Share Optimisation

• Conjoint analysis
• Part-worth
• Refer Textbook Pg 338 to 342
• Demonstrate using Excel Solver

Slide 23
 When do you use Integer Linear Programming

• What is more real? ILP or LP?

• Which is preferred? ILP or LP?
• Why?

• _______ need to relax to ______

• So when do you use LP?
• When solution is large/small?
• When coefficient is large/small?

Slide 24
 Cautionary Note About Sensitivity Analysis
• Sensitivity analysis often is more crucial for ILP problems
than for LP problems.
• A small change in a constraint coefficient can cause a
relatively large change in the optimal solution.
• Recommendation: Resolve the ILP problem several
times with slight variations in the coefficients before
choosing the “best” solution for implementation.

• How do you do sensitivity analysis if your variables are

integer? Any suggestion?

Slide 25
 Class Activity 1: Tina’s Tailoring

Tina's Tailoring has five idle tailors and four

custom garments to make. The estimated time (in
hours) it would take each tailor to make each garment
is shown in the next slide. (An 'X' in the table indicates
an unacceptable tailor-garment assignment.)

Tailor
Garment 1 2 3 4 5
Wedding gown 19 23 20 21 18
Clown costume 11 14 X 12 10
Admiral's uniform 12 8 11 X 9
Bullfighter's outfit X 20 20 18 21
Note: use xij, where xij =1 if garment i is assigned to tailor j ;
0 otherwise 26
 Example: Tina’s Tailoring
Formulate an integer program for determining
the tailor-garment assignments that minimize
the total estimated time spent making the four
garments. No tailor is to be assigned more than one
garment and each garment is to be worked on by only
one tailor.
--------------------
This problem can be formulated as a 0-1 integer
program. The LP solution to this problem will
automatically be integer (0-1).

Procedure:
Define variables
Define Objective Function
Define constraints
Construct 27
 Class Activity 2: Metropolitan Microwaves
Metropolitan Microwaves, Inc. is planning to
expand its sales operation by offering other electronic
appliances. The company has identified
seven new product lines it can carry.
Relevant information about each line
follows on the next slide.
Initial Floor Space Exp. Rate
Product Line Invest. (Sq.Ft.) of Return

1. TV/VCRs $ 6,000 125 8.1%

2. TVs 12,000 150 9.0 %
3. Projection TVs 20,000 200 11.0 %
4. VCRs 14,000 40 10.2 %
5. DVD Players 15,000 40 10.5 %
6. Video Games 2,000 20 14.1 %
7. Home Computers 32,000 100 13.2 %
Slide 28
 Metropolitan Microwaves
Metropolitan has decided that they should not stock projection
TVs unless they stock either TV/VCRs or TVs. Also, they will
not stock both VCRs and DVD players, and they will stock video
games if they stock TVs. Finally, the company wishes to
introduce at least three new product lines.
If the company has $45,000 to invest and 420 sq. ft. of floor
space available, formulate an integer linear program for
Metropolitan to maximize its overall expected return.

Procedure:
• Define variables
• Define Objective Function
• Define constraints
• Construct the LP model
• Use Software to solve the model
• Interpret the results
Slide 29