Course Name – Optimization Methods in Management

Science-1
Module 2-Linear Programming Problems
Basic Terminology

• Linear Programming decisions are made obviously under certainty conditions i.e., when the
existing situation and the variables are known.
• The results obtained will be either optimal or nearly optimal.
• It even helps in cross verification of the results obtained through the process of mere intuition and
the one arrived at with the use of Linear Programming technique while an optimum solution is
being anticipated.
• The word ‘linear’ is used to describe the relationship among two or more variables which are
directly or precisely proportional.
• Programming’ means the decisions which are taken systematically by adopting alternative courses
of action.
Basic Terminology

Basic Requirements and their Relationships

• Decision Variables and their Relationships: The decision variable refers to any candidate (person, service,
projects, jobs, tasks) competing with other decision variables for limited resources. These variables are
usually interrelated in terms of utilization of resources and need simultaneous solutions, i.e., the relationship
among these variables should be linear.

• Objective function: The Linear Programming Problem must have a well defined objective function to
optimize the results. For instance, minimization of cost or maximization of profits. It should be expressed as
linear function of decision variables (Z = X + X„ where Z represents the objective, i.e., minimization/
maximization, X, and X2 are the decision variables directly affecting the Z value).
Basic Terminology

• Constraints: There would be limitations on resources which are to be allocated among various competing
activities. These must be capable of being expressed as linear equalities or inequalities in terms of decision
variables.

• Alternative Courses of Action: There must be presence of alternative solutions for the purpose of choosing the
best or optimum one.

• Non-Negativity Restrictions: All variables must assume non-negative values. If any of the variable is
unrestricted in sign, a tool can be employed which will enforce the negativity without changing the original
information of a problem.
Basic Terminology

• Linearity and Dirisibifity: All relationships (objective function and constraints) must
exhibit linearity i.e., relationship among decision variables must be directly
proportional. It is assumed that decision variables are continuous, i.e., fractional values
of variables must be permissible in obtaining the optimum solution.

• Deteritiinistic: In Linear Programming it is assumed that all model coefficients are

completely known. For example: profit per unit.
Application of Linear Programming

• LP is a widely used technique of OR in almost every decision of a business and management.

• However, Linear Programming is exclusively used in the following areas:

• Production Management
• Personnel Management
• Financial Management
• Marketing Management
Application of Linear Programming

Production Management: In the area of production management, Linear Programming is used in the field of:
• Product planning
• Research and development
• Product portfolio management
• Line expansion and contraction decision
• Longevity of product life cycle.

Personnel Management: In this area, LP is used in the field of:

• Recruitment and staffing decisions
• Wage or salary management
• Job evaluation and allocation
• Employee benefits and welfare
• Overtime and related decisions.
Advantages and Limitations of Linear Programming

The LP technique has several

advantages and at the same time,
it is not free from unmixed
blessings.
Formulation of LP Models

Linear Programming Family

• The family of LP consists of:

• Formulation of Linear Programming Problems. (LPP)
• LP – Graphical Solutions
• LP – Simplex Solutions
• LP – Assignment Problems
• LP – Transportation Problems.
Formulation of LP Models

Steps for Formulating LPP

• Identify the nature of the problem (maximization/minimization problem).

• Identify the number of variables to establish the objective function.
• Formulate the constraints.
• Develop non-negativity constraints.
Maximization Cases with Mixed Constraints

Example: The management of xyz corporation is

currently faced with the problem of determining its
product mix for the coming period. Since, the
corporation is one of the few suppliers of
transformers for laser cover units, only liberal sales
ceilings are anticipated. The corporation should not
plan on selling transformers more than 200 units of A
type, 100 units of B type and 180 units of C type.
Contracts call for production of at least 20 units of A
type and 70 units of C type. Within these bounds,
management is free to establish units production
schedules. These are subject to the capacity of the
plant to produce without overtime.
Graphical Solutions under Linear Programming

• Linear programming problems with two variables can

be represented and solved graphically with ease.
• Though in real-life, the two variable problems are
practiced very little.
• The interpretation of this method will help to
understand the simplex method.
• Following is the portrayal of Cartesian plane.
Steps

• Consider each inequality constraint as an equation.

• Plot each equation on the graph as each will geometrically represent a straight line.
• Plot the feasible region, every point on the line will satisfy the equation on the line.
• If the inequality constraint corresponding to that line is less than or equal to, then the region below the line
lying in the 1st quadrant (as shown in above graph) is shaded (due to non-negativity of variables); for the
inequality constraint with greater than or equal to sign, the region above the line in the 1st quadrant is shaded.
• The points lying in common region will satisfy all the constraints simultaneously. Hence, it is called feasible
region.
• Identify the co-ordinates of the corner points.
Minimization Cases of LP

Example: A rubber company is engaged in producing 3 different kinds of tyres A, B and C. These
three different tyres are produced at the company’s 2 different plants with different production
capacities. In a normal 8 hrs working day plant 1 produces 50, 100 and 100 tyres of A, B and C
respectively. Plant 2 produce 60, 60 and 200 tyres of type A, B and C respectively. The monthly
demand for tyre A, B and C is 2,500, 3,000 and 7,000 units respectively. The daily cost of
operation of plant 1 and 2 is ` 2,500 and ` 3,500 respectively. Find the minimum number of days of
operation per month at 2 different plants to minimize the total costs while meeting the demand.
Minimization Cases of LP
Minimization Cases of LP
Minimization Cases of LP

Inference
Thus, the rubber company can minimize its total cost to ` 1,24,990
by producing 10 units of product in plant 1 and 33.33 units in plant
2.
Minimization Cases of LP

Example: A firm that makes products x and y has a total production capacity of 9 tonnes
per day, x and y requiring the same production capacity. The firm has a permanent contract
to supply at least 2 tonnes of x and 3 tonnes of y per day to another company. Each one of x
requires 20 machine hrs. Production time and y requires 50 machine hrs production time.
The daily maximum possible number of machine hours available is 360. All the firm’s
output can be sold, and the profit set is ` 80 per tonne of x and ` 120 per tonne of y. You are
required to determine the production schedule to maximize the firm’s profit.
Minimization Cases of LP
Minimization Cases of LP