about an individual’s history if he or she logged into a website making that information identifiable, within the privacy provisions
and terms of use of the site.
The company’s goal is to buy ads to present to specified size batches of people who are browsing. The linear program would assign
ads and batches of people to view the ads using an objective function that seeks to maximize advertising response modelled using
the propensity scores. The constraints are to stay within the restrictions of the advertising budget.
Loans
A car manufacturer sells its cars though dealers. Dealers can offer loan financing to customers who need to take out loans to
purchase a car. Here we will consider how car manufacturers can use linear programming to determine the specific characteristics
of the loan they offer to a customer who purchases a car. In a future chapter we will learn how to do the financial calculations
related to loans.
A customer who applies for a car loan fills out an application. This provides the car dealer with information about that customer. In
addition, the car dealer can access a credit bureau to obtain information about a customer’s credit score.
Based on this information obtained about the customer, the car dealer offers a loan with certain characteristics, such as interest rate,
loan amount, and length of loan repayment period.
Linear programming can be used as part of the process to determine the characteristics of the loan offer. The linear program seeks
to maximize the profitability of its portfolio of loans. The constraints limit the risk that the customer will default and will not repay
the loan. The constraints also seek to minimize the risk of losing the loan customer if the conditions of the loan are not favorable
enough; otherwise the customer may find another lender, such as a bank, which can offer a more favorable loan.
Production Planning and Scheduling in Manufacturing
Consider the example of a company that produces yogurt. There are different varieties of yogurt products in a variety of flavors.
Yogurt products have a short shelf life; it must be produced on a timely basis to meet demand, rather than drawing upon a stockpile
of inventory as can be done with a product that is not perishable. Most ingredients in yogurt also have a short shelf life, so can not
be ordered and stored for long periods of time before use; ingredients must be obtained in a timely manner to be available when
needed but still be fresh. Linear programming can be used in both production planning and scheduling.
To start the process, sales forecasts are developed to determine demand to know how much of each type of product to make.
There are often various manufacturing plants at which the products may be produced. The appropriate ingredients need to be at the
production facility to produce the products assigned to that facility. Transportation costs must be considered, both for obtaining and
delivering ingredients to the correct facilities, and for transport of finished product to the sellers.
The linear program that monitors production planning and scheduling must be updated frequently - daily or even twice each day -
to take into account variations from a master plan.
Bike Share Programs
Over 600 cities worldwide have bikeshare programs. Although bikeshare programs have been around for a long time, they have
proliferated in the past decade as technology has developed new methods for tracking the bicycles.
Bikeshare programs vary in the details of how they work, but most typically people pay a fee to join and then can borrow a bicycle
from a bike share station and return the bike to the same or a different bike share station. Over time the bikes tend to migrate; there
may be more people who want to pick up a bike at station A and return it at station B than there are people who want to do the
opposite. In chapter 9, we’ll investigate a technique that can be used to predict the distribution of bikes among the stations.
Once other methods are used to predict the actual and desired distributions of bikes among the stations, bikes may need to be
transported between stations to even out the distribution. Bikeshare programs in large cities have used methods related to linear
programming to help determine the best routes and methods for redistributing bicycles to the desired stations once the desire
distributions have been determined. The optimization model would seek to minimize transport costs and/or time subject to
constraints of having sufficient bicycles at the various stations to meet demand.
This page titled 4.1: Introduction to Linear Programming Applications in Business, Finance, Medicine, and Social Science is shared under a CC
BY 4.0 license and was authored, remixed, and/or curated by Rupinder Sekhon and Roberta Bloom via source content that was edited to the style
and standards of the LibreTexts platform.
4.1.3 https://math.libretexts.org/@go/page/37868
