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Linear Optimisation

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12 views14 pages

Linear Optimisation

Uploaded by

abdulraqeeb alareqi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Prescriptive Analytics – Linear

Optimization
Optimization
• Optimization is the process of selecting values of decision
variables that minimize or maximize some quantity of
interest.
• Optimization models have wide applicability in operations
and supply chains, finance, marketing, and other
disciplines.
• There are three types of optimization models: Linear,
Integer and Nonlinear
Linear Optimization Models
• A linear optimization model (often called a linear
program, or LP) has two basic properties.

1. The objective function and all constraints are linear


functions of the decision variables.
– This means that each function is simply a sum of
terms, each of which is some constant multiplied by a
decision variable.

2. All variables are continuous.


– This means that they may assume any real value
(typically, nonnegative).
Integer Linear Optimization Models
• In an integer linear optimization model (also called an
integer program, or IP model), some of or all the
variables are restricted to being whole numbers.
– A special type of integer problem is one in which
variables can be only 0 or 1.
• More difficult to solve, but have important applications in
scheduling and supply chains.
Nonlinear Optimization Models
• Whenever either the objective function or a constraint is
not linear, we have a nonlinear optimization model (also
called a nonlinear program, or NLP model).
– The objective function and/or constraint functions are
nonlinear functions of the decision variables.
Generic Examples of Linear
Optimization Models (1 of 2)
Type of model Decisions Objective Typical Constraints

Product mix Quantities of product to Maximize contribution Resource limitations (for


produce and sell to profit example, production
time,
labor, material);
minimum sales
requirements; maximum
sales
potential
Process selection Quantities of product to Minimize cost Demand requirements;
make using alternative resource limitations
processes
Blending Quantity of materials to Minimize cost Specifications on
mix to produce one unit acceptable
of output mixture
Portfolio selection Proportions to invest in Maximize future Limit on available funds;
different financial return or minimize risk sector
instruments exposure requirements or
restrictions; proportional
relationships on
investment mix
Generic Examples of Linear
Optimization Models (2 of 2)
Type of model Decisions Objective Typical Constraints

Transportation Amount to ship between Minimize total Limited availability at


sources of supply and transportation cost sources;
destinations required demands met at
destinations
Multiperiod production Ouantities of product to Minimize total production Limited production rates;
planning produce in each of several and inventory material balance
time costs equations
periods; amount of
inventory
to hold between periods
Multiperiod financial Amount to invest in short Maximize cash on hand Cash balance equations;
management term instruments required cash obligations

Production/Marketing Allocations od advertising Maximize profit Budget limitation;


expenditures;production production
quantities Iimitations; demand
requirements
Developing Linear Optimization
Models
1. Identify the decision variables - the unknown values that the model
seeks to determine.
2. Identify the objective function - the quantity we seek to minimize or
maximize.
3. Identify all appropriate constraints - limitations, requirements, or
other restrictions that are imposed on any solution, either from
practical or technological considerations or by management policy.
4. Write the objective function and constraints as mathematical
expressions.
5. Implement the mathematical model.
Developing a Mathematical Model
• Represent decision variables by descriptive names,
abbreviations, or subscripted letters.
( X 1 , X 2 , etc.)
– For mathematical formulations involving many
variables, subscripted letters are often more
convenient.
– In spreadsheet models, we recommend using more
descriptive names to make the models and solutions
easier to understand.
Translating Constraints Mathematically

• Constraints are expressed as algebraic inequalities or equations, with


all variables on the left side and constant terms on the right.
• Look for key words in word statements of constraints:

– “Cannot exceed” translates mathematically as ""

– “At least,” would translate as ""

– “Must contain exactly,” would specify an “= ” relationship.


• All constraints in optimization models must be one of these three
forms.
Constraint Functions
• A constraint function is the left-hand side of a constraint.
– E.g.: Total labor-hours used in fabrication cannot
exceed the amount of labor hours available.
Methods to solve linear optimization
model

1. Graphical method
2. Simplex algorithm
• A firm plans to purchase at least 200 quintals of scrap
containing high quality metal X and low quality metal Y. It
decides that the scrap to be purchased must contain at
least 100 quintals of metal X and not more than 35
quintals of metal Y. The percentage of X and Y metals in
terms of weight in the scrap supplied by A and B is as
follows:
Metals Supplier A Supplier B
X 25% 75%
Y 10% 20%
• The price of A’s scrap is Rs. 200 per quintal and that of B
is Rs. 400 per quintal. The firm wants to determine the
quantities that it should buy from the two suppliers so that
the total cost is minimised.
Copyright © 2021 Pearson Education Ltd. Slide - 14

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