CHAPTER 8: What if Analysis for Linear

Programming
Wyndor (Before What-If Analysis)

Figure 8.1 The spreadsheet model and its optimal solution for the original Wyndor
problem before beginning what-if analysis.

So if di niyo maalala kung paano nagkaroon ng values yung yellow and orange cells
1. Set niyo muna yung given (lagay yung unit profit, values nung sa plant chuchu
ganon)
2. Then, under hours used, input niyo =SUMPRODUCT(Hours used per unit
produced, Units produced)
3. Sa total profit, =SUMPRODUCT(Unit profit, units produce)
4. solver
5. CLICK SOLVE then, okay

Ito naman yung nagbago na ng values si sir, tas gumamit na siya ng sensitivity analysis

Using the Spreadsheet to do Sensitivity Analysis

 • The profit per door has been revised from $300 to $200. No change occurs in the
optimal solution.

Figure 8.2 The revised Wyndor problem where the estimate of the unit profit for doors has
been decreased from P = $300 to P = $200, but no change occurs in the optimal
D D

solution.

Using the Spreadsheet to do Sensitivity Analysis

• The profit per door has been revised from $300 to $200. No change occurs in the
optimal solution.

Figure 8.3 The revised Wyndor problem where the estimate of the unit profit for doors has
been increased from P = $300 to P = $500, but no change occurs in the optimal
D D

solution.
 • The profit per door has been revised from $300 to $1,000.
• The optimal solution changes.

Figure 8.4 The revised Wyndor problem where the estimate of the unit profit for doors has
been increased from P = $300 to P = $1,000, which results in a change in the optimal
D D

solution.
Setting up a Parameter Analysis Report 1

Parang mula dito, hindi na naturo ni sir

 • Select D4 and choose Optimization under the Parameters menu.

Figure 8.5 The parameter cell dialog box for P specifies here that this parameter cell for
D

the Wyndor problem will be systematically varied from $100 to $1,000.

Setting up a Parameter Analysis Report
 • Under the Reports menu on the Analytic Solver tab, choose
Optimization>Parameter Analysis.
• Specify which parameters to vary and which results to show.

Figure 8.6 The dialog box for the parameter analysis report specifies here for the Wyndor
problem that the UnitProfitPerDoor parameter cell will be varied and that results from all
the changing cells (DoorsProduced and WindowsProduced) and the objective cell
(TotalProfit) will be shown.

The Parameter Analysis Report

Figure 8.7 The parameter analysis report that shows the effect of systematically varying
the estimate of the unit profit for doors for the Wyndor problem.

Using the Sensitivity Report to Find the Allowable Range

Figure 8.8 Part of the sensitivity report generated by the Excel Solver for the original
Wyndor problem, where the last three columns enable identifying the allowable ranges for
the unit profits for doors and windows.

Graphical Insight into the Allowable Range

 • The two dashed lines that pass through the solid constraint boundary lines are the
objective function lines when

(the unit profit for doors) is at an endpoint of its allowable range,

Figure 8.9 The two dashed lines that pass through the solid constraint boundary lines are
the objective function lines when P (the unit profit for doors) is at an endpoint of its
D

allowable range, 0 ≤ P ≤ 750. Therefore, either line or any objective function line in
D

between still yields (D, W) = (2, 6) as an optimal solution for the Wyndor problem.

Using the Spreadsheet to do Sensitivity Analysis

• The profit per door has been revised from $300 to $450.
• The profit per window has been revised from $500 to $400.
• No change occurs in the optimal solution.
Figure 8.10 The revised Wyndor problem where the estimates of the unit profit for doors
and windows have been changed to P = $450 and P = $400, respectively, but no
D W

change occurs in the optimal solution.

Using the Spreadsheet to do Sensitivity Analysis

• The profit per door has been revised from $300 to $600.
• The profit per window has been revised from $500 to $300.
• The optimal solution changes.
Figure 8.11 The revised Wyndor problem where the estimates of the unit profit for doors
and windows have been changed to P = $600 and P = $300, respectively, which results
D W

in a change in the optimal solution.

Setting up a Two-Way Parameter Analysis Report

• Select C4 and choose Optimization under the Parameters menu. (Unit Profit per
Door to be varied from $300 to $600)
• Select D4 and choose Optimization under the Parameters menu. (Unit Profit per
Window to be varied from $100 to $500)
Figure 8.12 The dialog box for the parameter analysis report specifies here that the
UnitProfitPerDoor and UnitProfitPerWindow parameter cells will be varied and results
from the objective cell (TotalProfit) will be shown for the Wyndor problem.

Two-Way Parameter Analysis Reports

Total Profit
Doors Produced

Windows Produced

Figure 8.13 The parameter analysis report that shows how the optimal total profit
changes when systematically varying the estimate of both the unit profit for doors and the
unit profit for windows for the Wyndor problem.

Figure 8.14 The pair of parameter analysis reports that show how the optimal number of
doors to produce (top report) and the optimal number of windows to produce (bottom
report) change when systematically varying the estimate of both the unit profit for doors
and the unit profit for windows for the Wyndor problem.

The 100 Percent Rule

• The 100 Percent Rule for Simultaneous Changes in Objective Function
Coefficients
• If simultaneous changes are made in the coefficients of the objective function,
calculate for each change the percentage of the allowable change (increase or
decrease) for that coefficient to remain within its allowable range. If the sum of the
percentage changes does not exceed 100 percent, the original optimal solution
definitely will still be optimal. (If the sum does exceed 100 percent, then we cannot
be sure.)

Graphical Insight into 100 Percent Rule

The estimates of the unit profits for doors and windows change to

which lies at the edge of what is allowed by the

100 percent rule.

Figure 8.15 When the estimates of the unit profits for doors and windows change to P = D

$525 and P = $350, which lies at the edge of what is allowed by the 100 percent rule, the
W

graphical method shows that (D, W) = (2, 6) still is an optimal solution. In addition, every
other point on the line segment between this solution and (4, 3) also is optimal.

Graphical Insight into 100 Percent Rule

When the estimates of the unit profits for doors and windows change to

(half their original values), the graphical

method shows
that the optimal solution still is (D, W) = (2, 6) even though the 100 percent rule says that
the optimal solution might change.
Figure 8.16 When the estimates of the unit profits for doors and windows change to P = D

$150 and P = $250 (half their original values), the graphical method shows that the
W

optimal solution still is (D, W) = (2, 6). This occurs even though the 100 percent rule says
that the optimal solution might change.

Using the Spreadsheet to do Sensitivity Analysis

• The hours available in plant 2 have been increased from 12 to 13.

• The total profit increases by $150 per week.
Figure 8.17 The revised Wyndor problem where the hours available in plant 2 per week
have been increased from 12 to 13, which results in an increase of $150 in the total profit
per week.

Using the Spreadsheet to do Sensitivity Analysis

• The hours available in plant 2 have been further increased from 13 to 18.
• The total profit increases by $750 per week ($150 per hour added in plant 2).

Figure 8.18 A further revision of the Wyndor problem to further increase the hours
available in plant 2 from 13 to 18, which results in a further increase in total profit of $750
(amounting to $150 per hour added in plant 2).

Using the Spreadsheet to do Sensitivity Analysis

• The hours available in plant 2 have been further increased from 18 to 20.
• The total profit does not increase any further.

Figure 8.19 A further revision of the Wyndor problem to further increase the hours
available in plant 2 from 18 to 20, which results in no change in total profit because the
optimal solution cannot make use of these additional hours.

Parameter Analysis Report for Hours Available in Plant 2

Figure 8.20 The parameter analysis report that shows the effect of varying the number of
hours of production time being made available per week in plant 2 for Wyndor’s new
products.

Using the Sensitivity Report

Figure 8.21 The complete sensitivity report generated by the Excel Solver for the original
Wyndor problem.

• final value is yun amount of doors/windows that are the best to maximize profit, for
the variable cells table
• objective coefficient is yun profit per unit for doors and windows
• tapos yun allowable increase/decrease, that means yan lang pwede mong
mabawasan or madagdagan sa objective coefficient to still maintain the optimal
solution of 2 doors and 6 windows
• 1E+30 - infinite
• Constraint - ito na yung pinaka sagad chuchu ganon which is yung given
• If sinabay pinalit yung values, may times na the optimal solution remains the
same parin and all kasi u may be like touching the optimal solution point parin but
with a different line.\
• objective/Max of increase/decrease = percentage

Graphical Interpretation of the Allowable Range

Figure 8.22 A graphical interpretation of the allowable range 6 ≤ RHS ≤ 18, for the right-
2

hand side of Wyndor’s plant 2 constraint.

Using the Spreadsheet to do Sensitivity Analysis

One available hour in plant 3 has been shifted to plant 2.

The total profit increases by $50 per week.
Figure 8.23 The revised Wyndor problem where column G has been changed by shifting
one of the hours available in plant 3 to plant 2 and then re-solving.

Spreadsheet to Generate a Parameter Analysis Report

 • By inserting a formula into cell G8 that keeps the total number of hours available
in plant 2 and 3 equal to 30, it will be possible to generate a one-way parameter
analysis report that shows the effect of shifting more and more of the hours from
plant 3 to plant 2.

Figure 8.24 By inserting a formula into cell G8 that keeps the total number of hours
available in plant 2 and 3 equal to 30, it will be possible to generate a one-way parameter
analysis report that shows the effect of shifting more and more of the hours from plant 3
to plant 2.

Parameter Analysis Report

• This parameter analysis report shows the effect of shifting more and more of the
hours available from plant 3 to plant 2 for the Wyndor problem.

Figure 8.25 The parameter analysis report that shows the effect of shifting more and
more of the hours available from plant 3 to plant 2 for the Wyndor problem.

The 100 Percent Rule

• The 100 Percent Rule for Simultaneous Changes in Right-Hand Sides
• The shadow prices remain valid for predicting the effect of simultaneously
changing the right-hand sides of some of the functional constraints as long as the
changes are not too large. To check whether the changes are small enough,
calculate for each change the percentage of the allowable change (decrease or
increase) for that right-hand side to remain within its allowable range. If the sum of
the percentage changes does not exceed 100 percent, the shadow prices
definitely will still be valid. (If the sum does exceed 100 percent, then we cannot
be sure.)

Robust Optimization
• It is often not possible to estimate parameters with as much accuracy as desired.
• The seriousness of the consequences depends somewhat on whether there is
any latitude in the functional constraint.
• A soft constraint is a constraint that can be violated a little bit without
serious complications.
• A hard constraint is a constraint that must be satisfied.
 • The goal of robust optimization is to find a solution for the model that is
guaranteed to remain feasible and near optimal for all plausible combinations of
the actual values of the parameters. Such a solution is called a robust solution.

Robust Optimization with Independent Parameters

Assumptions:
• Each parameter has a range of uncertainty surrounding its estimated value.
• This parameter can take any value between the minimum and maximum specified
by this range of uncertainty.
• This value is uninfluenced by the values taken on by the other parameters.
• All the functional constraints are in either ≥ or ≤ form.

To guarantee that the solution will remain feasible regardless of the values taken on by
the parameters, assign the most conservative value within the range of uncertainty to
each uncertain parameter, and then find the optimal solution for the revised problem

Example
What happens if the production rates of doors and windows at plant 3 are uncertain?

production hours required per door in plant 3

production hours required per window in plant 3

The initial estimates of could be off by as much as

half an hour.

Range of uncertainty for

Range of uncertainty for

What is the most conservative estimate for

within the range of uncertainty?

Solution to Example

Figure 8.26 Applying robust optimization to the Wyndor problem, each uncertain
parameter has been set to its most conservative value in its range of uncertainty: H =D3

3.5 and H = 2.5. Running Solver then yields this robust solution.
D3

The General Procedure for Robust Optimization

 • For each functional constraint in ≤ form, use the maximum value for each
uncertain coefficient on the left of the ≤ and the minimum value for an uncertain
right-hand-side.
• For each functional constraint in ≥ form, use the minimum value for each
uncertain coefficient on the left of the ≥ and the maximum value for an uncertain
right-hand-side.
• For an objective function in maximization form, use the minimum value of each
uncertain coefficient.
• For an objective function in minimization form, use the maximum value for each
uncertain coefficient.

Chance Constraints with Analytic Solver

Two shortcomings of robust optimization are
• it can be extremely conservative.
• it can be difficult to accurately identify an upper and lower bound for an uncertain
parameter.

• A chance constraint only requires that the original constraint will be satisfied with
some very high probability while leaving a small chance that it will be violated a
little bit.
• Chance constraints are useful when dealing with soft constraints.
• Analytic Solver includes the ability to define uncertain parameters and also can
include chance constraints.

Example
What happens if the production rates of doors and windows at plant 3 are uncertain?

Range of uncertainty for

Range of uncertainty for

Where

production hours required per door in plant 3

production hours required per window in plant 3

Assume any value within these ranges is equally likely.

The Analytic Solver function PsiUniform(Min, Max) is used to specify that a value should
follow the uniform distribution of the range from Min to Max.

Solution to Example (Before Optimizing)

Figure 8.27 A spreadsheet model for applying chance constraints to the Wyndor problem
before finding a final solution. The hours used per door and per window produced have
been specified to follow the uniform distribution in cells C9 and D9, respectively.

The Chance Constraint

Figure 8.28 This add constraint dialog box specifies a chance constraint that E9 is
required to be less than or equal to G9 with probability 0.95.

Auto Adjust Chance Constraints

Setting the Auto Adjust Chance Constraints option to True results in a better solution
while still meeting the requirements of the chance constraint.

Figure 8.29 The Platform tab of Analytic Solver’s Model pane that shows the Auto Adjust
Chance Constraints option set to True.
Solution to Example (After Optimizing)

Compare to the robust optimization solution which yields a more conservative solution
(0.857 doors and 6 windows) and a profit of $3,257.
Figure 8.30 The spreadsheet obtained after solving the Wyndor problem with Analytic
Solver to maximize the Total Profit (G12) while meeting the hard constraints (E7:E8 ≤
G7:G8) and having at least a 95% chance of satisfying the original constraint (E9 ≤ G9).

Solution to Example (After Optimizing)

 • Compare to the robust optimization solution which yields a more conservative
solution (0.857 doors and 6 windows) and a profit of $3,257.

Figure 8.30 The spreadsheet obtained after solving the Wyndor problem with Analytic
Solver to maximize the Total Profit (G12) while meeting the hard constraints (E7:E8 ≤
G7:G8) and having at least a 95% chance of satisfying the original constraint (E9 ≤ G9).

Chance Constraints with the Normal Distribution

The robust optimization procedure discussed in the text requires that the uncertain
parameters have a specified range of uncertainty (a minimum and a maximum).
• The uniform distribution meets this criterion.
• Many other distributions do not. For example, the normal distribution has long tails
with no minimum and no maximum.
Chance constraints can still be used even for distributions that do not have a specified
range of uncertainty.

Example:
Suppose the hours used per door and window follow the normal distribution, with a
standard deviation of 0.5 hours around their original estimates of 3 hours and 2 hours,
respectively.

Solution to Example with Normal Distributions

Figure 8.31 The spreadsheet obtained after solving the Wyndor problem with a chance
constraint for plant 3 when the hours used per door and per window produced have been
specified to follow the normal distribution.