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Session 8, Sensitivity Analysis

SENSITIVITY ANALYSIS SESSION8

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82 views18 pages

Session 8, Sensitivity Analysis

SENSITIVITY ANALYSIS SESSION8

Uploaded by

abhdon
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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The Role of Sensitivity Analysis of

the Optimal Solution


Is the optimal solution sensitive to changes in
input parameters?
Possible reasons for asking this question:
Parameter values used were only best
estimates.
Dynamic environment may cause changes.
What-if analysis may provide economical
and operational information.
This includes analyzing changes in:
- An Objective Function Coefficient (OFC)
- A Right Hand Side (RHS) value of a
constraint
A.K.Singh, IMI, Delhi
Graphical Sensitivity Analysis

We can use the graph of an LP to see


what happens when:

1. An Objective Function Coefficient


(OFC) changes
2. A RHS changes (Shadow Price)

A.K.Singh, IMI, Delhi


Example: Flair Furniture
Problem
Max 7T + 5C (profit)
Subject to the constraints:
3T + 4C < 2400 (carpentry hrs)
2T + 1C < 1000 (painting hrs)
C < 450 (max # chairs)
T > 100(min # tables)
T, C > 0 (nonnegativity)

A.K.Singh, IMI, Delhi


Example: Flair Furniture
C
500
Solution
450
400
Optimal
350
Corner
300
(T=320,
250
C=360)
200
150
100 Feasibl
50 e
0
Region
0 100 200 300 400
500 T
A.K.Singh, IMI, Delhi
Objective Function
Coefficient (OFC) Changes
What if the profit contribution for
tables changed from $7 to $8 per
table?

8X
Max 7 T + 5 C (profit)
Clearly profit goes up, but would we
want to make more tables and less
chairs?
(i.e. Does the optimal solution
A.K.Singh, IMI, Delhi
Characteristics of OFC Changes
There is no effect on the feasible
region

The slope of the level profit line


changes

If the slope changes enough, a


different corner point will become
optimal

A.K.Singh, IMI, Delhi


C
Original
Objective Optimal
Function 500 Corner
7T + 5 C =
(T=320,
$4040
Revised 400 C=360)
Objective Still optimal
Function 300
8T + 5 C =
$4360 200
Feasibl
100 e
Region
0

0A.K.Singh,100
IMI, Delhi 200 300 400
C
1000
What if the OFC
became higher? Both have new
Or lower? optimal corner
points
11T + 5C = 600
$5500 450
Optimal Solution
(T=500, C=0)

3T + 5C = $2850 Feasible
Optimal Solution 0 Region
(T=200, C=450)
0 100 500 800 T

A.K.Singh, IMI, Delhi


There is a range for each OFC where
the current optimal corner point
remains optimal.

If the OFC changes beyond that


range a new corner point becomes
optimal.

Excels Solver will calculate the OFC


range.
A.K.Singh, IMI, Delhi
Right Hand Side (RHS)
Changes
What if painting hours available
changed from 1000 to 1300?
1300
X
2T + 1C < 1000 (painting hrs)

This increase in resources could allow


us to increase production and profit.
Characteristics of RHS Changes
The constraint line shifts, which could
change the feasible region

Slope of constraint line does not


change

Corner point locations can change

The optimal solution can change


Constraint (R.H.S.)
1200

1000

800

600

400

200

0
0 100 200 300 400 500 600 700 800 900
Old optimal
corner point
C (T=320,C=360)
500 Profit=$4040
Feasible
400 region
becomes
300 larger New optimal
corner point
200 (T=560,C=180)

2T
Profit=$4820

2T
Original
+
100

+
1C
Feasible

1C
=

=
0 Region 10

13
00

00
0 100 200 300 400 500
600 T
Effect on Objective Function
Value
New profit = $4,820
Old profit = $4,040
Profit increase = $780 from 300 additional
painting hours

$2.60 in profit per hour of painting

Each additional hour will increase profit by


$2.60
Each hour lost will decrease profit by
$2.60
Shadow Price
The change is the objective
function value per one-unit
increase in the RHS of the
constraint.

Will painting hours be worth $2.60


per hour regardless of many
hours are available ?
Range of Shadow Price
Validity
Beyond some RHS range the value of
each painting hour will change.

While the RHS stays within this range,


the shadow price does not change.

Excel will calculate this range as well


as the shadow price.
Eli Orchid can manufacture its newest pharmaceutical product
in any of three processes. One costs $14,000 per batch,
requires 3 tons of one major ingredient and 1 ton of the other,
and yields 2 tons of an output product. The second process
costs $30,000 per batch, requires 2 and 7 ton of the
ingredients, respectively, and yields 5 ton of the product. The
third process costs $11,000 per batch, requires 9 and 2 tons of
the ingredients, respectively, and yields 1 ton of the product.
Orchid wants to find the least costly way to produce at least 50
ton of the product, given that there are 75 tons of ingredient 1
and 60 tons of ingredient 2 on hand.
The following LP model solves the problem
Min 14x1 + 30x2 + 11x3
S.T.
2x1 + 5x2 + x3 >= 50
3x1 + 2x2 + 9x3 <= 75
x1 + 7x2+ 2x3 <= 60
x1, x2, x3 >= 0
A.K.Singh, IMI, DELHI
Answer each of the following sensitivity
questions after running the model in SOLVER
What is the marginal cost of production per ton of output? [by how much is the
total cost going to increase if one more ton of the product is produced?], 7.56
How much would it cost to produce 70 tons of the new pharmaceutical
products? 20*7.56
How much would it cost to produce 100 tons of the new pharmaceutical
products? Canot go beyound 70.26
How much should Orchid be willing to pay to obtain additional 20 tons of
ingredient 1? How about ingredient 2? Nil, 1.11*10
How cheap would the third process have to become before it might be used in
an optimal solution? 5.67
How much would the cost of the 50 tons of product increase if process 2
actually cost
(i) $ 32,000 per batch? 2000*7.78
(ii) $ 39,000 per batch? 5000*7.78
How much would the cost of the 50 tons of product decrease if process 1 cost
$13,000 per batch? If it cost $10.000 per batch? 5.56, Cant Tell
If additional 10 tons of ingredient 1 and 5 tones of ingredient 2 become
available, what will happen to the total cost? 5*1.11

A.K.Singh, IMI, DELHI

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