Linear Programming

Applications

Learning Objectives

1. Model a wide variety of medium to large LP

problems.

2. Understand major application areas, including

marketing, production, labor scheduling, fuel
blending, transportation, and finance.

3. Gain experience in solving LP problems with Excel

Solver software.

8-2
 Chapter Outline

1 Introduction

2 Marketing Applications

3 Manufacturing Applications

4 Employee Scheduling Applications

5 Financial Applications

6 Ingredient Blending Applications

7 Transportation Applications

8-3

Mathematical conditions for a LP

 All equations are linear

 Decision variables are continuous

 Decision variables are non-negative

 Only one objective function

 Parameters are deterministic

 At least one constraint

Nombre del profesor XX de XXXXXXXX del 2011

Marketing Applications

 Linear programming models have been used in the

advertising field as a decision aid in selecting an
effective media mix.

 Media selection problems can be approached with

LP from two perspectives:
 Maximize audience exposure.

 Minimize advertising costs.

8-5

Win Big Gambling Club

 The Win Big Gambling Club promotes gambling junkets to the

Bahamas.

 It has $8,000 per week to spend on advertising.

 Its goal is to reach the largest possible high-potential audience.

 Media types and audience figures are shown in the following

table.

 It needs to place at least five radio spots per week.

 No more than $1,800 can be spent on radio advertising each

week.

8-6
 Win Big Gambling Club

Advertising options

AUDIENCE COST PER MAXIMUM ADS

MEDIUM REACHED PER AD AD ($) PER WEEK
TV spot (1 minute) 5,000 800 12
Daily newspaper (full-
8,500 925 5
page ad)
Radio spot (30
2,400 290 25
seconds, prime time)
Radio spot (1 minute,
2,800 380 20
afternoon)

8-7

Win Big Gambling Club

The problem formulation is

X1 = number of 1-minute TV spots each week
X2 = number of daily paper ads each week
X3 = number of 30-second radio spots each week
X4 = number of 1-minute radio spots each week

Objective:
Maximize audience coverage = 5,000X1 + 8,500X2 + 2,400X3 + 2,800X4

Subject to X1 ≤ 12 (max TV spots/wk)

X2 ≤5 (max newspaper ads/wk)
X3 ≤ 25 (max 30-sec radio spots ads/wk)
X4 ≤ 20 (max newspaper ads/wk)
800X1 + 925X2 + 290X3 + 380X4 ≤ $8,000 (weekly advertising budget)
X3 + X4 ≥5 (min radio spots contracted)
290X3 + 380X4 ≤ $1,800 (max dollars spent on radio)
X1, X2, X3, X4 ≥0
8-8
Win Big Gambling Club Solution

Program 8.1

8-9

Management Sciences Association

 Management Sciences Associates (MSA) is a marketing

research firm.

 MSA determines that it must fulfill several requirements

in order to draw statistically valid conclusions:
 Survey at least 2,300 U.S. households.

 Survey at least 1,000 households whose heads are 30 years of age or

younger.

 Survey at least 600 households whose heads are between 31 and 50

years of age.

 Ensure that at least 15% of those surveyed live in a state that borders
on Mexico.

 Ensure that no more than 20% of those surveyed who are 51 years of
age or over live in a state that borders on Mexico.

8-10
Management Sciences Association

 MSA decides that all surveys should be conducted in

person.

 It estimates the costs of reaching people in each age

and region category are as follows:

COST PER PERSON SURVEYED ($)

REGION AGE ≤ 30 AGE 31-50 AGE ≥ 51
State bordering Mexico $7.50 $6.80 $5.50
State not bordering Mexico $6.90 $7.25 $6.10

8-11

Management Sciences Association

 MSA’s goal is to meet the sampling requirements at the

least possible cost.

 The decision variables are:

X1 = number of 30 or younger and in a border state

X2 = number of 31-50 and in a border state
X3 = number 51 or older and in a border state
X4 = number 30 or younger and not in a border state
X5 = number of 31-50 and not in a border state
X6 = number 51 or older and not in a border state

8-12
 Management Sciences Association

Objective function

Minimize total
interview costs = $7.50X1 + $6.80X2 + $5.50X3
+ $6.90X4 + $7.25X5 + $6.10X6

subject to

X1 + X2 + X3 + X4 + X5 + X6 ≥ 2,300 (total households)

X1 + X4 ≥ 1,000 (households 30 or younger)
X2 + X5 ≥ 600 (households 31-50)
X1 + X2 + X3 ≥ 0.15(X1 + X2+ X3 + X4 + X5 + X6) (border states)
X3 ≤ 0.20(X3 + X6) (limit on age group 51+ who can live in
border state)
X 1 , X2 , X 3 , X 4 , X 5 , X 6 ≥ 0

8-13

MSA Solution

Program 8.2

8-14
 Management Sciences Association

 The following table summarizes the results of the MSA

analysis.

 It will cost MSA $15,166 to conduct this research.

REGION AGE ≤ 30 AGE 31-50 AGE ≥ 51

State bordering Mexico 0 600 140

State not bordering Mexico 1,000 0 560

8-15

Manufacturing Applications

 Production Mix
 LP can be used to plan the optimal mix of products to
manufacture.

 Company must meet a myriad of constraints, ranging from

financial concerns to sales demand to material contracts to
union labor demands.

 Its primary goal is to generate the largest profit possible.

8-16
Fifth Avenue Industries

 Fifth Avenue Industries produces four varieties of

ties:
 One is expensive all-silk

 One is all-polyester

 Two are polyester and cotton blends

 The table on the below shows the cost and availability

of the three materials used in the production process:
MATERIAL AVAILABLE PER
MATERIAL COST PER YARD ($) MONTH (YARDS)
Silk 24 1,200
Polyester 6 3,000
Cotton 9 1,600

8-17

Fifth Avenue Industries

 The firm has contracts with several major department

store chains to supply ties.

 Contracts require a minimum number of ties but may be

increased if demand increases.

 Fifth Avenue’s goal is to maximize monthly profit given

the following decision variables.

X1 = number of all-silk ties produced per month

X2 = number all-polyester ties
X3 = number of blend 1 polyester-cotton ties
X4 = number of blend 2 silk-cotton ties

8-18
Fifth Avenue Industries Data

MATERIAL
SELLING MONTHLY REQUIRED
VARIETY OF PRICE PER CONTRACT MONTHLY PER TIE MATERIAL
TIE TIE ($) MINIMUM DEMAND (YARDS) REQUIREMENTS
All silk 19.24 5,000 7,000 0.125 100% silk

All polyester 8.70 10,000 14,000 0.08 100% polyester

Poly – cotton 50% polyester –

9.52 13,000 16,000 0.10
blend 1 50% cotton

Silk-cotton 60% silk - 40%

10.64 5,000 8,500 0.11
blend 2 cotton

8-19

Fifth Avenue Industries

 Fifth Avenue also has to calculate profit per tie for

the objective function.

SELLING MATERIAL MATERIAL

PRICE REQUIRED PER COST PER COST PER PROFIT
VARIETY OF TIE PER TIE ($) TIE (YARDS) YARD ($) TIE ($) PER TIE ($)
All silk $19.24 0.125 $24 $3.00 $16.24
All polyester $8.70 0.08 $6 $0.48 $8.22
Poly-cotton
$9.52 0.05 $6 $0.30
blend 1
0.05 $9 $0.45 $8.77
Silk – cotton
$10.64 0.06 $24 $1.44
blend 2
0.06 $9 $0.54 $8.66

8-20
Fifth Avenue Industries

The complete Fifth Avenue Industries Model

Objective function
Maximize profit = $16.24X1 + $8.22X2 + $8.77X3 + $8.66X4
Subject to 0.125X1+ 0.066X4 ≤ 1200 (yds of silk)
0.08X2 + 0.05X3 ≤ 3,000 (yds of polyester)
0.05X3 + 0.044X4 ≤ 1,600 (yds of cotton)
X1 ≥ 5,000 (contract min for silk)
X1 ≤ 7,000 (contract min)
X2 ≥ 10,000 (contract min for all polyester)
X2 ≤ 14,000 (contract max)
X3 ≥ 13,000 (contract mini for blend 1)
X3 ≤ 16,000 (contract max)
X4 ≥ 5,000 (contract mini for blend 2)
X4 ≤ 8,500 (contract max)
X 1 , X2 , X 3 , X 4 ≥ 0

8-21

Fifth Avenue Solution in Excel 2010

Program 8.3

8-22
Manufacturing Applications

 Production Scheduling
 Setting a low-cost production schedule over a period of weeks
or months is a difficult and important management task.

 Important factors include labor capacity, inventory and storage

costs, space limitations, product demand, and labor relations.

 When more than one product is produced, the scheduling

process can be quite complex.

 The problem resembles the product mix model for each time
period in the future.

8-23

Greenberg Motors

 Greenberg Motors, Inc. manufactures two different electric

motors for sale under contract to Drexel Corp.

 Drexel places orders three times a year for four months at a

time.

 Demand varies month to month as shown below.

 Greenberg wants to develop its production plan for the next

four months.

MODEL JANUARY FEBRUARY MARCH APRIL

GM3A 800 700 1,000 1,100
GM3B 1,000 1,200 1,400 1,400

8-24
Greenberg Motors

 Production planning at Greenberg must consider four

factors:

 Desirability of producing the same number of motors

each month to simplify planning and scheduling.

 Necessity to keep inventory carrying costs down.

 Warehouse limitations.

 Its no-lay-off policy.

 LP is a useful tool for creating a minimum total cost schedule

the resolves conflicts between these factors.

8-25

Greenberg Motors

Ai = Number of model GM3A motors produced in month i (i = 1, 2, 3, 4

for January – April)

Bi = Number of model GM3B motors produced in month i

 It costs $20 to produce a GM3A and $15 to produce a GM3B

 Both costs increase by 10% on March 1, thus

Cost of production = $20A1 + $20A2 + $22A3 + $22A4

+ $15B1 + $15B2 + $16.50B3 + $16.50B4

8-26
Greenberg Motors

 We can use the same approach to create the portion of the

objective function dealing with inventory carrying costs.

IAi= Units of GM3A left in inventory at the end of month i (i = 1, 2, 3, 4 for

January – April)

IBi= Units of GM3B left in inventory at the end of month i (i = 1, 2, 3, 4 for

January – April)

 The carrying cost for GM3A motors is $0.36 per unit per month and the
GM3B costs $0.26 per unit per month.
 Monthly ending inventory levels are used for the average inventory level.

Cost of carrying inventory = $0.36IA1 + $0.36IA2 + $0.36IA3 + 0.36IA4

+ $0.26IB1 + $0.26IB2 + $0.26IB3 + $0.26IB4

8-27

Greenberg Motors

We combine these two for the objective function:

Minimize total cost = $20A1 + $20A2 + $22A3 + 22A4

+ $15B1 + $15B2 + $16.50B3 + $16.50B4
+ $0.36IA1 + $0.36IA2 + $0.36IA3 + 0.36IA4
+ $0.26IB1 + $0.26IB2 + $0.26IB3 + $0.26IB4

End of month inventory is calculated using this relationship:

Inventory Current
Inventory at Sales to
at the end month’s
of last + production – the end of = Drexel this
this month month
month

8-28
Greenberg Motors

 Greenberg is starting a new four-month production cycle with a

change in design specification that left no old motors in stock
on January 1.

 Given January demand for both motors:

IA1 = 0 + A1 – 800
IB1 = 0 + B1 – 1,000

 Rewritten as January’s constraints:

A1 – IA1 = 800
B1 – IB1 = 1,000

8-29

Greenberg Motors

Constraints for February, March, and April:

A2 + IA1 – IA2 = 700 February GM3A demand

B2 + IB1 – IB2 = 1,200 February GM3B demand
A3 + IA2 – IA3 = 1,000 March GM3A demand
B3 + IB2 – IB3 = 1,400 March GM3B demand
A4 + IA3 – IA4 = 1,100 April GM3A demand
B4 + IB3 – IB4 = 1,400 April GM3B demand

And constraints for April’s ending inventory:

IA4 = 450
IB4 = 300

8-30
Greenberg Motors

 We also need constraints for warehouse space:

IA1 + IB1 ≤ 3,300

IA2 + IB2 ≤ 3,300
IA3 + IB3 ≤ 3,300
IA4 + IB4 ≤ 3,300

 No worker is ever laid off so Greenberg has a base employment

level of 2,240 labor hours per month.
 By adding temporary workers, available labor hours can be
increased to 2,560 hours per month.
 Each GM3A motor requires 1.3 labor hours and each GM3B
requires 0.9 hours.

8-31

Greenberg Motors

Labor hour constraints:

1.3A1 + 0.9B1 ≥ 2,240 (January min hrs/month)

1.3A1 + 0.9B1 ≤ 2,560 (January max hrs/month)
1.3A2 + 0.9B2 ≥ 2,240 (February labor min)
1.3A2 + 0.9B2 ≤ 2,560 (February labor max)
1.3A3 + 0.9B3 ≥ 2,240 (March labor min)
1.3A3 + 0.9B3 ≤ 2,560 (March labor max)
1.3A4 + 0.9B4 ≥ 2,240 (April labor min)
1.3A4 + 0.9B4 ≤ 2,560 (April labor max)
All variables ≥0 Nonnegativity constraints

8-32
Greenberg Motors Solution

Program 8.4

8-33

Greenberg Motors

Solution to Greenberg Motors Problem

PRODUCTION SCHEDULE JANUARY FEBRUARY MARCH APRIL

Units GM3A produced 1,277 223 1,758 792

Units GM3B produced 1,000 2,522 78 1,700

Inventory GM3A carried 477 0 758 450

Inventory GM3B carried 0 1,322 0 300

Labor hours required 2,560 2,560 2,355 2,560

 Total cost for this four month period is $169,294.90.

 Complete model has 16 variables and 22 constraints.

8-34
Employee Scheduling Applications

 Labor Planning
 These problems address staffing needs over a particular time.
 They are especially useful when there is some flexibility in
assigning workers that require overlapping or interchangeable
talents.

8-35

Hong Kong Bank of Commerce and Industry

 Hong Kong Bank of Commerce and Industry has requirements for

between 10 and 18 tellers depending on the time of day.
 Lunch time from noon to 2 pm is generally the busiest.
 The bank employs 12 full-time tellers but has many part-time
workers available.
 Part-time workers must put in exactly four hours per day, can start
anytime between 9 am and 1 pm, and are inexpensive.
 Full-time workers work from 9 am to 5 pm and have 1 hour for
lunch.

8-36
Hong Kong Bank of Commerce and Industry

Labor requirements for Hong Kong Bank of Commerce and Industry

TIME PERIOD NUMBER OF TELLERS REQUIRED

9 am – 10 am 10
10 am – 11 am 12
11 am – Noon 14
Noon – 1 pm 16
1 pm – 2 pm 18
2 pm – 3 pm 17
3 pm – 4 pm 15
4 pm – 5 pm 10

8-37

Hong Kong Bank of Commerce and Industry

 Part-time hours are limited to a maximum of 50% of the day’s total

requirements.
 Part-timers earn $8 per hour on average.
 Full-timers earn $100 per day on average.
 The bank wants a schedule that will minimize total personnel
costs.
 It will release one or more of its part-time tellers if it is profitable to
do so.

8-38
Hong Kong Bank of Commerce and Industry

Let

F = full-time tellers
P1 = part-timers starting at 9 am (leaving at 1 pm)
P2 = part-timers starting at 10 am (leaving at 2 pm)
P3 = part-timers starting at 11 am (leaving at 3 pm)
P4 = part-timers starting at noon (leaving at 4 pm)
P5 = part-timers starting at 1 pm (leaving at 5 pm)

8-39

Hong Kong Bank of Commerce and Industry

Objective:
Minimize total daily
personnel cost = $100F + $32(P1 + P2 + P3 + P4 + P5)

subject to:
F + P1 ≥ 10 (9 am – 10 am needs)
F + P1 + P2 ≥ 12 (10 am – 11 am needs)
0.5F + P1 + P2 + P3 ≥ 14 (11 am – noon needs)
0.5F + P1 + P2 + P3 + P4 ≥ 16 (noon – 1 pm needs)
F + P2 + P3 + P4 + P5 ≥ 18 (1 pm – 2 pm needs)
F + P3 + P4 + P5 ≥ 17 (2 pm – 3 pm needs)
F + P4 + P5 ≥ 15 (3 pm – 4 pm needs)
F + P5 ≥ 10 (4 pm – 5 pm needs)
F ≤ 12 (12 full-time tellers)
4P1 + 4P2 + 4P3 + 4P4 + 4P5 ≤ 0.50(112) (max 50% part-timers)
P1, P2, P3, P4, P5 ≥ 0

8-40
Hong Kong Bank of Commerce and Industry

 There are several alternate optimal schedules Hong Kong Bank

can follow:
 F = 10, P2 = 2, P3 = 7, P4 = 5, P1, P5 = 0
 F = 10, P1 = 6, P2 = 1, P3 = 2, P4 = 5, P5 = 0
 The cost of either of these two policies is $1,448 per day.

8-41

Labor Planning Solution

Program 8.5

8-42
Financial Applications

 Portfolio Selection
 Bank, investment funds, and insurance companies often have
to select specific investments from a variety of alternatives.

 The manager’s overall objective is generally to maximize the

potential return on the investment given a set of legal, policy,
or risk restraints.

8-43

International City Trust

 International City Trust (ICT) invests in short-term

trade credits, corporate bonds, gold stocks, and
construction loans.

 The board of directors has placed limits on how much

can be invested in each area:

INTEREST MAXIMUM INVESTMENT

INVESTMENT EARNED (%) ($ MILLIONS)
Trade credit 7 1.0
Corporate bonds 11 2.5
Gold stocks 19 1.5
Construction loans 15 1.8

8-44
International City Trust

 ICT has $5 million to invest and wants to accomplish

two things:
 Maximize the return on investment over the next six months.

 Satisfy the diversification requirements set by the board.

 The board has also decided that at least 55% of the

funds must be invested in gold stocks and construction
loans and no less than 15% be invested in trade credit.

8-45

International City Trust

The variables in the model are:

X1 = dollars invested in trade credit
X2 = dollars invested in corporate bonds
X3 = dollars invested in gold stocks
X4 = dollars invested in construction loans

8-46
International City Trust

Objective:

Maximize
dollars of
interest = 0.07X1 + 0.11X2 + 0.19X3 + 0.15X4
earned

subject to: X1 ≤ 1,000,000

X2 ≤ 2,500,000
X3 ≤ 1,500,000
X4 ≤ 1,800,000
X3 + X 4 ≥ 0.55(X1 + X2 + X3 + X4)
X1 ≥ 0.15(X1 + X2 + X3 + X4)
X1 + X 2 + X3 + X 4 ≤ 5,000,000
X 1 , X2 , X 3 , X4 ≥ 0

8-47

International City Trust

 The optimal solution to the ICT is to make the following

investments:

X1 = $750,000

X2 = $950,000

X3 = $1,500,000

X4 = $1,800,000

 The total interest earned with this plan is $712,000.

8-48
ICT Portfolio Solution in Excel 2010

Program 8.6

8-49

Truck Loading Problem

 Truck Loading Problem

 The truck loading problem involves deciding which items to
load on a truck so as to maximize the value of a load shipped.

 Goodman Shipping has to ship the following six items:

ITEM VALUE ($) WEIGHT (POUNDS)

1 22,500 7,500
2 24,000 7,500
3 8,000 3,000
4 9,500 3,500
5 11,500 4,000
6 9,750 3,500

8-50
Goodman Shipping

 The objective is to maximize the value of items loaded

into the truck.

 The truck has a capacity of 10,000 pounds.

 The decision variable is:

Xi = proportion of each item i loaded on the truck

8-51

Goodman Shipping

Objective:

Maximize $22,500X1 + $24,000X2 + $8,000X3

load value = + $9,500X4 + $11,500X5 + $9,750X6

subject to
7,500X1 + 7,500X2 + 3,000X3
+ 3,500X4 + 4,000X5 + 3,500X6 ≤ 10,000 lb capacity
X1 ≤1
X2 ≤1
X3 ≤1
X4 ≤1
X5 ≤1
X6 ≤1
X 1 , X2 , X 3 , X4 , X 5 , X 6 ≥0

8-52
Goodman Truck Loading Solution in Excel

Program 8.7

8-53

Goodman Shipping

 The Goodman Shipping problem raises an interesting

issue:
 The solution calls for one third of Item 1 to be loaded on the truck.

 What if Item 1 cannot be divided into smaller pieces?

 Rounding down leaves unused capacity on the truck and

results in a value of $24,000.

 Rounding up is not possible since this would exceed the

capacity of the truck.

 Using integer programming, in which the solution is required to

contain only integers, the solution is to load one unit of Items
3, 4, and 6 for a value of $27,250.

8-54
Ingredient Blending Applications

 Diet Problems
 This is one of the earliest LP applications, and is used to determine the
most economical diet for hospital patients.

 This is also known as the feed mix problem.

8-55

Whole Food Nutrition Center

 The Whole Food Nutrition Center uses three bulk grains

to blend a natural cereal.

 It advertises that the cereal meets the U.S.

Recommended Daily Allowance (USRDA) for four key
nutrients.

 It wants to select the blend that will meet the

requirements at the minimum cost.

NUTRIENT USRDA
Protein 3 units
Riboflavin 2 units
Phosphorus 1 unit
Magnesium 0.425 unit

8-56
Whole Food Nutrition Center

Let

XA = pounds of grain A in one 2-ounce serving of cereal

XB = pounds of grain B in one 2-ounce serving of cereal

XC = pounds of grain C in one 2-ounce serving of cereal

Whole Food’s Natural Cereal requirements:

COST PER PROTEIN RIBOFLAVIN PHOSPHOROUS MAGNESIUM
GRAIN POUND (CENTS) (UNITS/LB) (UNITS/LB) (UNITS/LB) (UNITS/LB)
A 33 22 16 8 5
B 47 28 14 7 0
C 38 21 25 9 6

8-57

Whole Food Nutrition Center

The objective is:

Minimize total cost of

= $0.33XA + $0.47XB + $0.38XC
mixing a 2-ounce serving

subject to
22XA + 28XB + 21XC ≥ 3 (protein units)
16XA + 14XB + 25XC ≥ 2 (riboflavin units)
8XA + 7XB + 9XC ≥ 1 (phosphorous units)
5XA + 0XB + 6XC ≥ 0.425 (magnesium units)
XA + XB + XC = 0.125 (total mix, in pounds)
XA, XB, XC ≥ 0

8-58
Whole Food Diet Solution in Excel 2010

Program 8.8

8-59

Ingredient Blending Applications

 Ingredient Mix and Blending Problems

 Diet and feed mix problems are special cases of a more general
class of problems known as ingredient or blending problems.

 Blending problems arise when decisions must be made

regarding the blending of two or more resources to produce
one or more product.

 Resources may contain essential ingredients that must be

blended so that a specified percentage is in the final mix.

8-60
 Low Knock Oil Company

 The Low Knock Oil Company produces two grades of

cut-rate gasoline for industrial distribution.

 The two grades, regular and economy, are created by

blending two different types of crude oil.

 The crude oil differs in cost and in its content of crucial

ingredients.

CRUDE OIL TYPE INGREDIENT A (%) INGREDIENT B (%) COST/BARREL ($)

X100 35 55 30.00
X220 60 25 34.80

8-61

Low Knock Oil Company

 Weekly demand for the regular grade of Low Knock gasoline is at least
25,000 barrels

 demand for the economy is at least 32,000 barrels per week.

 At least 45% of each barrel of regular must be ingredient A. At most 50%

of each barrel of economy should contain ingredient B.

 While the gasoline yield from one barrel of crude depends on the type of
crude and the type of processing used, we will assume for the sake of
this example that one barrel of crude oil will yield one barrel of gasoline

Nombre del profesor XX de XXXXXXXX del 2011

Low Knock Oil Company

The firm lets

X1 = barrels of crude X100 blended to produce the refined
regular
X2 = barrels of crude X100 blended to produce the refined
economy
X3 = barrels of crude X220 blended to produce the refined
regular
X4 = barrels of crude X220 blended to produce the refined
economy

The objective function is

Minimize cost = $30X1 + $30X2 + $34.80X3 + $34.80X4

8-63

Low Knock Oil Company

Problem formulation
At least 45% of each barrel of regular must be ingredient A
(X1 + X3) = total amount of crude blended to produce the
refined regular gasoline demand

Thus,
0.45(X1 + X3) = amount of ingredient A required
But:
0.35X1 + 0.60X3 = amount of ingredient A in refined regular gas

So
0.35X1 + 0.60X3 ≥ 0.45X1 + 0.45X3
or
– 0.10X1 + 0.15X3 ≥ 0 (ingredient A in regular constraint)

8-64
 Low Knock Oil Company

Problem formulation

Minimize cost = 30X1 + 30X2 + 34.80X3 + 34.80X4

subject to X1 + X3 ≥ 25,000
X2 + X4 ≥ 32,000
– 0.10X1 + 0.15X3 ≥0
0.05X2 – 0.25X4 ≤ 0
X1, X2, X3, X4≥ 0

8-65

Low Knock Oil Solution

8-66
Transportation Applications

 Shipping Problem
 The transportation or shipping problem involves determining the amount of
goods or items to be transported from a number of origins to a number of
destinations.

 The objective usually is to minimize total shipping costs or distances.

 This is a specific case of LP and a special algorithm has been developed to

solve it.

8-67

Top Speed Bicycle Company

 The Top Speed Bicycle Co. manufactures and markets a line of

10-speed bicycles.

 The firm has final assembly plants in two cities where labor
costs are low.

 It has three major warehouses near large markets.

 The sales requirements for the next year are:

 New York – 10,000 bicycles

 Chicago – 8,000 bicycles

 Los Angeles – 15,000 bicycles

 The factory capacities are:

 New Orleans – 20,000 bicycles

 Omaha – 15,000 bicycles

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Top Speed Bicycle Company

The cost of shipping bicycles from the plants to the

warehouses is different for each plant and warehouse:

TO
FROM NEW YORK CHICAGO LOS ANGELES
New Orleans $2 $3 $5

Omaha $3 $1 $4

The company wants to develop a shipping schedule that will

minimize its total annual cost.

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Top Speed Bicycle Company

Network Representation of the Transportation Problem with Costs,

Demands, and Supplies

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Top Speed Bicycle Company

The double subscript variables will represent the origin factory and
the destination warehouse:
Xij = bicycles shipped from factory i to warehouse j

So:
X11 = number of bicycles shipped from New Orleans to New York

X12 = number of bicycles shipped from New Orleans to Chicago

X13 = number of bicycles shipped from New Orleans to Los Angeles

X21 = number of bicycles shipped from Omaha to New York

X22 = number of bicycles shipped from Omaha to Chicago

X23 = number of bicycles shipped from Omaha to Los Angeles

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Top Speed Bicycle Company

Objective:

Minimize
total
shipping = 2X11 + 3X12 + 5X13 + 3X21 + 1X22 + 4X23
costs

subject to X11 + X21 = 10,000 (New York demand)

X12 + X22 = 8,000 (Chicago demand)
X13 + X23 = 15,000 (Los Angeles demand)
X11 + X12 + X13 ≤ 20,000 (New Orleans factory supply)
X21 + X22 + X23 ≤ 15,000 (Omaha factory supply)
All variables ≥ 0

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Top Speed Bicycle Company Solution in Excel 2010

Program 8.10

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Top Speed Bicycle Company

Top Speed Bicycle solution:

TO
FROM NEW YORK CHICAGO LOS ANGELES
New Orleans 10,000 0 8,000
Omaha 0 8,000 7,000

 Total shipping cost equals $96,000.

 Transportation problems are a special case of LP as the

coefficients for every variable in the constraint equations equal
1.

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