Sensitivity Analysis Example

· In LP, the parameters (input data) of the model can change within JOBCO produces two products on two machines:
certain limits without causing the optimum solution to change.
· Sensitivity analysis is concerned with how changes in an LP’s
· A unit of product 1 requires 2 hours on machine 1 and 1
parameters affect the optimal solution. hour on machine 2.
· For product 2, a unit requires 1 hour on machine 1 and 3
hours on machine 2.
Graphical Sensitivity Analysis:
· The revenues per unit of products 1 and 2 are $30 and $20,
· Two cases will be considered: respectively.
1. Case 1: Sensitivity of the optimum solution to the changes in the · The total daily processing time available for each machine
available resources, i.e., the right-hand side of the constraints. is 8 hours.
2. Case 2: Sensitivity of the optimum solution to the changes in JOBCO wants the optimum mix of products 1 and 2 that
unit profit or unit cost, i.e., the coefficients of the objective maximizes their profit
function.
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Example Example
· Let:
· ‫ݔ‬1 = the daily number of units of products 1
· ‫ݔ‬2 = the daily number of units of products 2
· The LP model is given as:
Maximize
z = 30‫ݔ‬1 + 20 ‫ݔ‬2
Subject to
2‫ݔ‬1 + ‫ݔ‬2 ≤ 8 (Machine 1)
‫ݔ‬1 + 3‫ݔ‬2 ≤ 8 (Machine 2)
‫ݔ‬1, ‫ݔ‬2 ≥ 0
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 Case 1 - RHS Case 1 - RHS
Changes in resources of machine 1
· If the daily capacity of machine 1 is increased from 8 hours
to 9 hours, the new optimum will occur at point G.
· The rate of change in optimum z resulting from changing
machine 1 capacity from 8 hours to 9 hours can be computed
as follows:

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Case 1 - RHS Feasibility Range

Shadow Price
· Dual or shadow price/unit worth of resource: is the The dual price of $14.00/hr
change in the optimal objective value per unit change in remains valid for changes
the availability of the resource. (increases or decreases) in
machine 1 capacity that
· e.g. a unit increase (decrease) in machine l capacity will move its constraint parallel
increase (decrease) revenue by $14.00 to itself to any point on the
line segment BF

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 Feasibility Range Feasibility Range
· Minimum machine 1 capacity [at B = (0, 2.67)]
= 2 × 0 + 1 × 2.67 = 2.67 hr
The dual price for machine
· Maximum machine 1 capacity [at F = (8, 0)] 2 capacity is $2.00/hr and it
= 2 × 8 + 1 × 0 = 16 hr remains valid for changes
(increases or decreases) that
· The dual price of $14.00/hr will remain valid for the range
move its constraint parallel
2.67 hr ≤ Machine 1 capacity ≤ 16 hr to itself to any point on the
· Changes outside this range will produce a different dual line segment DE.
price.

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Feasibility Range Case 1 - RHS

· Minimum machine 2 capacity [at D = (4, 0)] · Question 1: If JOBCO can increase the capacity of both
machines, which machine should receive priority?
= 1 × 4 + 3 × 0 = 4 hr
· Each additional hour of machine 1 increases revenue by $14, as
· Maximum machine 2 capacity [at E = (0, 8)] opposed to only $2 for machine 2
= 1 × 0 + 3 × 8= 24 hr · The priority should be given to machine 1
· The dual price of $2.00/hr for machine 2 will remain · Question 2 Is it advised to increase the capacities of Machines
applicable for the range 1 and 2 at the cost of $10/hr?
4 hr ≤ Machine 2 capacity ≤ 24 hr · Additional net revenue per hour is 14 - 10 = $4, and for machine 2,
· The computed limits for machine 1 and 2 are referred to as the the net is $2 - $10 = - $8.
feasibility ranges. · Only machine 1 should be considered for capacity increase.
· Question 3 If the capacity of machine 1 is increased from 8 to
13 hrs., how will this increase impact the optimum revenue?

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 Case 1 - RHS Case2 - Objective Coefficients
· The dual price for machine 1 is $14 and is applicable in the range · Changes in revenue units
(2.67, 16) hr (objective-function
· The proposed increase to 13 hrs. falls within the feasibility range. coefficients) will change the
· Hence, the increase in revenue is $14(13 – 8) = $70, which means slope of z.
that the total revenue will be increased from $128 to $198. · The optimum solution will
· Question 4: Suppose that the capacity of machine 1 is remain at point C so long as
increased to 20 hrs., how will this increase affect the optimum the objective function lies
revenue? between lines BF and DE,
the two constraints that
· The proposed change is outside the feasibility range (2.67, 16) hr.
define the optimum point.
· We can only make an immediate conclusion regarding an increase
up to 16 hrs.
· Beyond that, further calculations are needed to find the answer?
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Case2 - Objective Coefficients Case2 - Objective Coefficients

· We write the objective function in the general format · If the unit revenue of product 2 is fixed at its current value
Maximize z = c1 ‫ݔ‬1 + c2 ‫ݔ‬2 of c2 = $20.00, the associated range for c1:
(1/3) × 20 ≤ c1 ≤ 2 × 20 or
· The optimum solution will remain at point C so long as
z = c1 ‫ݔ‬1 + c2 ‫ݔ‬2 lies between the two lines 6.67 ≤ c1 ≤ 40
· Similarly, if we fix the value of c1 at $30.00
‫ݔ‬1 + 3‫ݔ‬2 = 8
(30/2) ≤ c2 ≤ 30 × 3 or
2 ‫ݔ‬1 + ‫ݔ‬2 = 8 15 ≤ c2 ≤ 90
· This means that the ratio c1/c2 can vary between 1/3 and · Suppose that the unit revenues for products 1 and 2 are
2/1, which yields the following optimality range: changed to $35 and $25, respectively. Will the current
(1/3) ≤ (c1/c2) ≤ (2/1) optimum remain the same?
· c1/c2 = 35/25 = 1.4 remains within the optimality range.
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