Quantitative tools

MODULE 2/2A/2A.1
II. QUANTITATIVE TOOLS

► Quantitative tools are the techniques in quantitative

analysis (or management science) that we usually use in
solving decision-making problems. Some of these
techniques are the following: Linear Programming,
Network Models, Project Scheduling, Inventory Models,
Queueing Models, Decision Analysis, Forecasting, and
Markov-Analysis Models.
A. LINEAR PROGRAMMING

► A.1 Linear Programming Models and Model Formulation

Definition. Linear Programming. Linear programming is a
problem-solving approach that has been developed for situations
involving maximizing or minimizing a linear function subject to
linear constraints that limit the degree to which the objective can
be pursued. It was developed to help managers make decisions.
 Below are some situations where linear programming is typically applied

1. A company has warehouses in a number of locations throughout the United States.

Given a set of customer demands for its products, the company would like to determine which
warehouse should ship how much product to which customers in order to minimize total
transportation costs.
2. A marketing manager wants to determine how best to allocate a fixed advertising
budget among alternative advertising media such as radio, television, newspaper, and
magazine. The manager would like to determine the media mix that maximizes advertising
effectiveness.
3. A financial analyst must select an investment portfolio from a variety of stock and bond
investment alternatives. The analyst would like to establish the portfolio that maximizes the
return of investment.
You will notice that these examples of the application of linear
programming deals with just two things, either to maximize or to minimize
a certain quantity. What we want in example 1 is to minimize total
transportation costs, example 2 is to maximize advertising effectiveness
and example 3 is to maximize the return of investment. Thus, in every
linear programming problems, the maximization or minimization of some
quantity is the objective.
 So one property of a linear programming problem is objective. The second
property is the so-called restrictions or constraints that limit the degree to which
the objective can be pursued. In the transportation problem, the minimum-cost
shipping schedule is constrained by the supply of product available at each
warehouse, while the marketing manager’s media selection is restricted by a
fixed advertising budget and the availability of the various media. The last
example about the financial analyst’s portfolio problem is said to be constrained
by the total amount of investment funds available and the maximum amount
that can be invested in each stock or bond. Thus, constraints are another
general feature of every linear programming problem.
 (1.a) A Simple Maximization Problem

The Reddy Mikks Company owns a small paint factory that

produces both interior and exterior home paints for wholesale
distribution. Two basic raw materials, A and B, are used to
manufacture the paints. The maximum availability of A is 6 tons
a day; that of B is 8 tons a day. The daily requirements of the
raw materials per ton of interior and exterior paints are
summarized in the following table.
 Table 2
Data For The Raw Materials Of Exterior And
Interior Paints
Tons of Raw Material per Ton
of Paint Maximum
Availability (tons)
Exterior Interior

Raw Material A 1 2 6

Raw Material B 2 1 8
A market survey has established that the daily demand for
interior home paint cannot exceed that of exterior home paint
by more than 1 ton. The survey also shows that the maximum
demand for interior paint is limited to 2 tons daily. The
wholesale price per tons is $3000 for exterior paint and $2000
for interior paint. How much interior and exterior paints should
the company produce daily to maximize gross income?
This is a typical optimization problem which can be solved using
linear programming models. In this particular problem what we
are trying to find is the maximum gross income of the Reddy
Mikks Company. That is why, we consider this particular problem
as a maximization problem. Take a look at how we will construct
the linear programming model.
Constructing the Mathematical Model

► What does the model seek to determine? What are the

unknowns of the problem?
► What restrictions must be imposed on the variables to
satisfy the limitations of the modeled system?
► What is the goal that needs to be achieved to determine a
best solution from among all the possible values of the
variables?
 How can we answer this questions effectively?

Let us employ the 4-step Polya’s strategy in solving this linear

programming problem. First step is we have to summarize to have a clear
understanding of the problem. Starting with the requirement of the
problem, Reddy Mikks Company wants to obtain the amounts of interior
and exterior home paints to be produced to maximize the total gross
income while satisfying the restrictions of demand and raw materials.
Secondly, enumerate the steps to be taken in solving the problem.
Let’s list down the given information: Refer to the table above. Use
variables to represent the unknown quantities.
 Variables. To find the amounts of paints (interior and
exterior) to be produces, let the variables of the model be
defined as
xE = tons produced daily of exterior paint
xI = tons produced daily of interior paint
Objective Function. The gross income for selling xE tons is 3xE (in thousand
dollars) since each ton of exterior paint sells for $3000. The same thing is
true for the gross income from xI tons of interior paint is 2xI in thousand
dollars. The total gross income will come from the sum of the two
revenues. Now, we let the variable z be equal to the total revenues (in
thousand dollars) so we can form the so-called objective function z = 3xE +
2xI. The goal is to determine the (feasible) values of xE and xI that will
maximize this criterion.
Constraints. The restrictions imposed by the company on the usage of raw
materials and on demand. Let’s take a look verbally we have
(usage of raw material by both paints) ≤ (maximum raw material availability)

Symbolically, we write this statement as (refer to the table above for the
data)
xE + x I ≤ 6 (raw material A)
xE + x I ≤ 8 (raw material B)
As for the restrictions imposed on the demand verbally we have
(excess amount of interior over exterior paint) ≤ 1 ton per day
(demand for interior paint) ≤ 2 ton per day

Mathematically we write these statements as

xI – x E ≤ 1 (excess of interior over exterior paint)
xI ≤ 2 (maximum demand for interior paint)
 This last set of restrictions is an implicit constraint. We understand that
the amount of production of each exterior and interior paints cannot be
negative. In order for this solution not to happen we will impose the
nonnegativity constraints, which are written in these forms

xE ≥ 0 (Exterior paint)
xI ≥ 0 (Interior paint)
 In this particular problem, whatever production combinations we obtained for the
variables xE and xI are all part of the so-called feasible solution of the problem. Below
is the mathematical model of the Reddy Mikks Company problem.

Determine the tons of interior and exterior paints, xI and xE , to be be produced to

Maximize z = 3xE + 2xI (objective function)
Subject to
xE + x I ≤ 6
xE + x I ≤ 8
-xE + xI ≤ 1 (constraints)
xI ≤ 2
xE ≥ 0, xI ≥ 0
Properties of Linear Programming

Aside from the fact that in linear programs all its functions (objective
function and constraints) are linear, its linearity implies that both the
proportionality and additivity properties are satisfied.
1. Proportionality requires that the contribution of each variable in the
objective function or its usage of the resources be directly proportional to
the level or level of the variable.
2. Additivity requires that the objective function be the direct sum of the
individual contributions of the different variables. Similarly, the left side of
each constraint must be the sum of the individual usages of each variable
from the corresponding resource.
 GRAPHICAL SOLUTION OF LP MODELS

The graphical solution is a method for solving linear programming problems involving two
decision variables. The procedure below in finding the feasible solution space may be followed in
solving maximization problems: (Explore the GeoGebra or Desmos as graphing tools)
1. Prepare a graph of the feasible solution(s) using each of the constraints.
2. Determine the feasible region by identifying the solutions that satisfy all the constraints
simultaneously.
3. Draw an objective function line showing the values of x1 and x2 variables that yield a
specified value of the objective function.
4. Move the parallel objective function lines toward larger objective function values until
further movement would take the line completely outside the feasible region.
5. Any feasible solution on the objective function linen with the largest value is an optimal
solution.
 Graphical method in solving Reddy Mikks’ Problem

Maximize z = 3xE + 2xI (objective function)

Subject to
xE + x I ≤ 6 (1) Raw material A
xE + x I ≤ 8 (2) Raw material B
-xE + xI ≤ 1 (3) Excess of interior over exterior paint (constraints)
xI ≤ 2 (4) Maximum demand for interior paint
xE ≥ 0, xI ≥ 0 (5) Nonnegativity conditions
1. Prepare a graph of the feasible solutions for each of the
constraints.

1.1 Graph of constraint (a)

Test if (0, 0) satisfies the inequality.
1.2 Graph of constraints (a) & (b)

1.2 Graph of constraint (a) & (b)

Test if (0, 0) satisfies the inequality (b).
1.3 Graph of constraints (a), (b), & (c)

1.3 Graph of constraint (a), (b), & (c)

Test if (0, 0) satisfies the inequality (c).
1.4 Graph of constraints (a) – (d)

1.4 Graph of constraint (a) – (d)

Test if (0, 0) satisfies the inequality (d).
1.5 Graph of all constraints

1.5 Graph of all constraints.

There’s no need to test these nonnegativity
constraints since it’s understood that they represent
the first quadrant.
2. Determine the feasible region by identifying the solutions that
satisfy all the constraints simultaneously.

Here, we will find the area of the feasible

region bounded by the points of intersection of
the lines.

I encircled the points of intersection of the

lines which constitute the vertices of the feasible
region.
2. Determine the feasible region by identifying the solutions that
satisfy all the constraints simultaneously.

Here, we will find the area of the feasible

region bounded by the intersections of the lines.

It’s clear that the origin is one of the vertices

of the feasible region.

Aside from (0, 0) the other vertices are the points

of intersection of the y-axis & line (c), lines (c) &
(d), lines (a) & (d), lines (a) & (b), and the x-axis
& line (b).
2. Determine the feasible region by identifying the solutions that
satisfy all the constraints simultaneously.

Aside from (0, 0) the other vertices are

the points of intersection of the y-axis &
line (c), lines (c) & (d), lines (a) & (d), lines
(a) & (b), and the x-axis & line (b).
All you need now is to solve the
equations simultaneously to find the
intersection od the corresponding lines.
It’s easy to find the x- & y-intercepts for
the 2nd and last points of intersection,
likewise the 3rd point. You only need to
solve algebraically for the 5th point.
4. Move the parallel objective function lines toward larger objective
function values until further movement would take the line completely
outside the feasible region.
5. Any feasible solution on the objective function lines with the
largest value is an optimal solution.

Optimal
Solution
 Exercise

Identify the solution space and the optimal solution for the Reddy Mikks problem
if each of the following changes is effected separately,. Assume that each change
replaces, rather than augments, an existing condition in the model and that the
remaining information of the model remains unchanged.
(1) The maximum demand for interior paint is 3 tons daily.
(2) Demand for interior paint is at least 2 tons daily.
(3) Demand for interior paint is exactly 1 ton higher than for exterior paint.
(4) Daily availability of raw material B is at least 8 tons.
(5) availability of raw material B is at least 8 tons per day and the demand for
interior paint exceeds that of exterior by at least 1 ton.