Product Mix Example

This part of our Solver Tutorial takes you step by step through the process of creating a Solver
model, using a Product Mix example. We'll first show you how to define the problem and write
out formulas for the objective and constraints.  Then we'll walk you through two ways to define
and solve your model -- in an Excel spreadsheet, or in a Visual Basic program. 

The Example Problem

Imagine that you manage a factory that produces four different types of wood paneling. Each
type of paneling is made by gluing and pressing together a different mixture of pine and oak
chips. The following table summarizes the required amount of gluing, pressing, and mixture of
wood chips required to produce a pallet of 50 units of each type of paneling:

  Resources Required per Pallet of Paneling

Type
  Tahoe Pacific Savannah Aspen
Glue (quarts) 50 50 100 50
Pressing (hours) 5 15 10 5
Pine chips 500 400 300 200
(pounds)
Oak chips (pounds) 500 750 250 500
 

In the next production cycle, you have 5,800 quarts of glue; 730 hours of pressing capacity;
29,200 pounds of pine chips; and 60,500 pounds of oak chips available. Further assume that
each pallet of Tahoe, Pacific, Savannah, and Aspen panels can be sold for profits of $450,
$1,150, $800, and $400, respectively.

Writing the Formulas

Before we implement this problem statement in either Excel or Visual Basic, let's write out
formulas corresponding to the verbal description above. If we temporarily use the symbol X 1 for
the number of Tahoe pallets produced, X2 for the number of Pacific pallets produced, and
X3 for the number of Savannah pallets produced, and X4 for the number of Aspen pallets
produced, the objective (calculating total profit) is:

         Maximize: 450 X1 + 1150 X2 + 800 X3 + 400 X4

A pallet of each type of panel requires a certain amount of glue, pressing, pine chips, and oak
chips. The amount of resources used (calculated by the left hand side of each constraint)
depends on the mix of products built, and we have a limited amount of each type of resource
available (corresponding to the constraint right hand side values).  The constraints for this
problem are expressed as follows:

         Subject to:

         50 X1 + 50 X2 + 100 X3 + 50 X4 <= 5800 (Glue)

           5 X1 + 15 X2 + 10 X3 + 5 X4 <= 730 (Pressing)
          500 X1 + 400 X2 + 300 X3 + 200 X4 <= 29200 (Pine chips)
         500 X1 + 750 X2 + 250 X3 + 500 X4 <= 60500 (Oak chips)

Since the number of products built cannot be negative, we'll also have non-negativity
conditions on the variables:

         X1, X2, X3, X4 >= 0.

Now, we'll take you step by step through implementing and solving this optimization model
using Excel's built-in Solver 

To define an optimization model in Excel you'll follow these essential steps:

1. Organize the data for your problem in the spreadsheet in a logical manner.

2. Choose a spreadsheet cell to hold the value of each decision variable in your model.
3. Create a spreadsheet formula in a cell that calculates the objective function for your
model.
4. Create a formulas in cells to calculate the left hand sides of each constraint.
5. Use the dialogs in Excel to tell the Solver about your decision variables, the
objective, constraints, and desired bounds on constraints and variables.
6. Run the Solver to find the optimal solution.

Within this overall structure, you have a great deal of flexibility in how you choose cells to hold
your model's decision variables and constraints, and which formulas and built-in functions you
use.  In general, your goal should be to create a spreadsheet that communicates its purpose in
a clear and understandable manner.

Creating an Excel Worksheet

Assuming that you have organized the data for the problem in Excel, the next step is to create
a worksheet where the formulas for the objective function and the constraints are calculated. 
Because decision variables and constraints usually come in logical groups, you'll often want to
use cell ranges in your spreadsheet to represent them.  

In the worksheet below, we have reserved cells B4, C4, D4 and E4 to represent our decision
variables X1, X2, X3, and X4 representing the number of pallets of each type of panel to produce.
The Solver will determine the optimal values for these cells.   (Click on the worksheet for a full-
size image.)
Notice that the profit for each pallet of panels ($450, $1,150, $800 and $400) was entered in
cells B5, C5, D5 and E5, respectively. This allows us to compute the objective in cell F5 as:

         Formula for cell F5:    =B5*B4+C5*C4+D5*D4+E5*E4

or equivalently,

         Formula for cell F5:    =SUMPRODUCT(B5:E5,B4:E4)

In cells B8:E11, we've entered the amount of resources needed to produce a pallet of each

type of panel. For example, the value 15 in cell C9 means that 15 hours of pressing is required
to produce a pallet of Pacific style panels. These numbers come directly from the formulas for
the constraints shown earlier. With these values in place, we can enter a formula in cell F8 to
compute the total amount of glue used for any number of pallets produced:

        Formula for cell F8:    =SUMPRODUCT(B8:E8,$B$4:$E$4)

We can copy this formula to cells F9:F11 to compute the total amount of pressing, pine chips,
and oaks chips used. (The dollar signs in $B$4:$E$4 specify that this cell range stays constant,
while the cell range B8:E8 becomes B9:E9, B10:E10, and B11:E11 in the copied formulas.)
The formulas in cells F8:F11 correspond to the left hand side values of the constraints. 

In cells G8:G11, we've entered the available amount of each type of resource (corresponding
to the right hand side values of the constraints). This allows us to express
the constraints shown earlier as:

        F8:F11<=G8:G11

This is equivalent to the four constraints: F8<=G8, F9<=G9, F10<=G10, and F11<=G11. We
can enter this set of constraints directly in the Solver dialogs along with the non-negativity
conditions: 

        B4:E4 >= 0
 Understanding the Excel Solver Dialogs
To let the Excel Solver know which cells on the worksheet represent the decision variables,
constraints and objective function, we click Solver button on the Excel Data tab, or the Premium
Solver button on the Add-Ins tab, which displays the Solver Parameters dialog. In the Set Objective
(or Set Target Cell) edit box, we type or click on cell F5, the objective function. In the By Changing
Variable Cells edit box, we type B4:E4 or select these cells with the mouse.

To add the constraints, we click on the Add button in the Solver Parameters dialog and select cells
F8:F11 in the Cell Reference edit box (the left-hand side), and select cells G8:G11 in the Constraint
edit box (the right-hand side); the default relation <= is OK.

We choose the Add button again (either from the Add Constraint dialog above, or from the main
Solver Parameters dialog) to define the non-negativity constraint on the decision variables.
(Alternatively, we can check the Make Unconstrainted Variables Non-Negative option in the Solver
Parameters dialog.)
When we've completely entered the problem, the Solver Parameters dialog appears as shown
below. This is the Excel Solver dialog from Excel 2010; the Solver in earlier versions of Excel have
similar elements. Frontline's Premium Solver products can emulate either style, and they also offer a
new Ribbon-based user interface.

Finding and Using the Solution

To find the optimal solution, we simply click on the Solve button. After a moment, the Excel Solver
returns the optimal solution in cells B4 through E4. This means that we should build 23 pallets of
Tahoe panels, 15 pallets of Pacific panels, 39 pallets of Savannah panels, and 0 pallets of Aspen
panels. This results in a total profit of $58,800 (shown in cell F5).
The message "Solver found a solution" appears in the Solver Results dialog, as shown above. (Click
on the image to see it full size). We now click on "Answer" in the Reports list box to produce an
Answer Report, and click OK to keep the optimal solution values in cells B4:E4.

After a moment, the Solver creates another worksheet containing an Answer Report, like the one
below, and inserts it to the left of the problem worksheet in the Excel workbook
Answer Report

This report shows the original and final values of the objective function and the decision variables, as
well as the status of each constraint at the optimal solution. Notice that the constraints on glue,
pressing, and pine chips are binding and have a slack value of 0.

The optimal solution would use up all of these resources; however, there were 28,000 pounds of oak
chips left over. If we could obtain additional glue, pressing capacity, or pine chips we could further
increase total profits, but extra oak chips would not help in the short run.